Besides, the investment source has also experienced a significant rise thanks to Korean "New Southern Policy”, which aims at deepening ties with Southeast Asia, including Vietnam.
South Korean firms invested US$59 billion in 6,760 projects in Vietnam
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According to the Ministry of Planning and Investment’s Foreign Investment Agency (FIA), South Korea has retained its position as Vietnam’s leading source of foreign direct investment (FDI) in the first quarter of this year.
South Korean firms invested US$1.84 billion in Vietnam in Q1 2018, raising the total investment value to $59 billion at 6,760 valid projects by the end of March, ranking first among 126 countries and territories investing in Vietnam.
Vietnam has become an attractive destination for investment and the production centers of a series of leading Korean businesses such as Samsung, LG, Hyundai Motor, Lotte, POSCO, CJ, Hanwha, Shinhan, and Kumho. More than 4,500 Korean businesses are now operating in Vietnam, showing the fact that Korean enterprises make up a large proportion.
Kwon Yul, head of the Asia-Pacific Department under the Korea Institute for International Economic Policy (KIEP), attributes the growing presence of Korean businesses in Vietnam to the country’s attractive investment incentives and lower labor costs than in China, and improvements in the laws on enterprise and investment in line with the Government’s open-door policy and drastic reforms.
Progressive improvements to the investment environment attract the long-term presence of Korean manufacturers in Vietnam, through which they reduce production costs. As a result, the Southeast Asian country has become an important hub for Korean businesses in the global production system, Yul said.
One of the most evident positive signs is that Korean businesses have recently invested in fields serving the domestic market to tap into the vast numbers of young customers with burgeoning incomes. Typical examples of this trend are the penetration of famous brands like Hyundai, Kia Morning, CGV, Lotte, and Lotteria, as well as the RoK’s biggest retailer – E-mart.
A representative from the Korea Trade-Investment Promotion Agency (KOTRA) says merger and acquisition (M&A) activities from the RoK to Vietnam will follow the course of Korean FDI capital growth.
Many representatives from investment funds in different fields have learnt about investment opportunities through their meetings with local businesses, consultant organizations, and the State Capital Investment Corporation (SCIC). Several M&A transactions are expected to be executed in the coming months as the Korean side has allocated a sizeable budget to its investment funds for M&A activities in Vietnam.
Experts forecast that investments from the RoK into Vietnam will see a continued upsurge in the near future as their trust in the investment environment improves. Greater opportunities for market expansion will open up when Vietnam joins more free trade agreements (FTAs).
In addition to the new investment trend, the coming time will experience an increase in small and medium-sized Korean enterprises in Vietnam, which have rising demands for seeking satellite firms capable of undertaking their outsource, especially when they have gained a relatively firm foothold in the country following a series of large-scale investment projects.
