Vietnam emerges top export market of ROK

The ratio of exports to Vietnam as a percentage of the East Asian country’s total exports for the seven months leading up to August jumped to 6.4%, nearly half (46%) of the 14% ratio for exports to the US.

During the seven months, exports out of the ROK to Vietnam totalled US$18.0215 billion, up 10.1% on-year, while concurrently overall total exports out of the ROK declined by the same 10.1%.

Of the top four export markets for the ROK, only exports to Vietnam showed growth with exports to China, the US and Japan (the first, second and fourth largest export markets) having fallen 13.5%, 5.4% and 12%, respectively.

Last year, Vietnam became the fourth-largest export destination for the ROK by surpassing Japan.

Such a rapid rise in the significance of Vietnam to the ROK economy has to do with the fact that manufacturing giants such as Samsung Electronics and LG Electronics have since 2009 been pumping tens of millions of US dollars of investment into the Southeast Asian nation.

KITA statistics showed that for the period from 2009 to 2014, concurrent with the rise in investment there had been a 17.6% rise in exports of intermediate goods and raw materials to Vietnam.

Commercial trade between the ROK and Vietnam, according to KITA, is likely to continue to increase in light of the fact a free trade agreement between the two countries that came into effect in December of last year has made trade more attractive.

Still, KITA pointed out that ROK companies operating in Vietnam have yet to show adequate rates of return on their investments, particularly in light of the tremendous size of those investments.

According to the Korea Trade-Investment Promotion Agency, ROK companies’ direct investment in Vietnam amounted to US$15 billion last year but their operating profit ratio and current net earnings ratio stood at 2.3% and 0.6%, far below their global averages of 3.2% and 1.7%.