VietNamNet Bridge – Imports from South Korea have been increasing rapidly since the Vietnam-South Korea FTA took effect in late 2015, as Vietnam’s largest trade deficit is now with South Korea, not China.
A report of the General Department of Customs (GDC) shows that South Korea has unexpectedly outstripped the US, the EU and ASEAN to become Vietnam’s second largest trade partner with turnover of $29.12 billion.
China remains the biggest market which Vietnam imports products from, with $27 billion of import turnover in the first half of the year.
The import turnover from South Korea in the first half of the year increased by 51.2 percent, reaching $22.5 billion, while the trade deficit with South Korea soared to $15.99 billion, higher than the $13.72 billion trade deficit with China.
Nguyen Duc Thanh, an economist, called it “unprecedented” in the country’s trade history.
State management agencies have also realized the sharp increase in imports and the trade deficit.
The Ministry of Planning and Invetsment (MPI) said with the 50 percent growth rate in the import turnover, South Korea has become the second largest goods supplier for Vietnam, after China.
However, the imports from South Korea are mostly machines and equipment which serve South Korea-invested factories in Vietnam that make products for export.
The Ministry of Industry and Trade (MOIT) also pointed out that imports from South Korea are mostly machines, equipment and input materials for Samsung’s factories in Vietnam.
The $22.5 billion worth of products imported from South Korea in the first six months of the year included $15 billion worth of machines, equipment, computers, electronics and phones and accessories. The products are closely tied to Samsung’s investment in Vietnam.
Dinh Tuan Minh, CEO of Market Intello, commented that that there was no need to be worried as the imports are mostly machines and equipment, not consumer goods.
“This (the increase in imports from SK) is inevitable,” commented Tran Toan Thang from National Center for Socio-Economic Information and Forecasting, adding that when negotiating for Vietnam-SK FTA, the changes in import structure were anticipated.
In fact, the imports from South Korea help Vietnam diversify markets and ease the reliance on China.
“If we didn’t import products from South Korea, we would have to import them from China. Meanwhile, we are striving to reduce imports from China and trying to diversify supply sources,” he said.
The expert went on to say that Vietnam will still rely on import materials until its support industries can develop well.
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