Trade gap with South Korea alarmed

VietNamNet Bridge – The total trade gap in the first two months of the year reached 628 million dollars, or 4.1 percent of the export turnover. Especially, economists have warned that South Korea has become the Vietnamese partner with the second biggest excess of imports over exports, after China.

In the first two months of the year, the trade gap between Vietnam and China was 2.3 billion dollars, while it imported 1.6 billion dollars from South Korea than exported to the country. The figure should be seen as a big worry, if noting that the total trade gap with the ASEAN bloc in a whole was 873.8 million dollars only.

For a long time, Vietnam considered the trade gap with China as the biggest foreign trade problem. And now, another big partner has appeared – South Korea.

In October 2009, Vietnam and South Korea reached an agreement on upgrading the bilateral relation to the strategic partner level, striving to double the bilateral trade turnover to 20 billion dollars by 2015. Since that day, the two way trade has been increasingly rapidly, reaching 17.7 billion dollars in the trade turnover in 2011. The figure shows that the target of 20 billion dollars in turnover by 2015 is within reach.

However, Vietnam has only recently realized that the imports from the trade partner have been increasing more rapidly than previously thought, after analyzing the import and export volume in separation. 

If comparing the trade gap with South Korea with the total excess of imports over exports, one could see that the trade gap with South Korea has been increasing steadily. In 2008, the trade gap with South Korea amounted to 34 percent of the total trade gap, while the figure moved to 37 percent in 2009; then soared to 50 percent in 2010 and 83 percent in 2011. 

Meanwhile, just in the first two months of 2012, the figure was astonishingly high at 250 percent. With the figures, South Korea has been staying firmly as the second biggest partner which has trade relation with Vietnam.

In 2011, the trade gap with China and South Korea was 21.9 billion dollars, a worryingly high volume, which was only eased by the Vietnam’s big exports to other markets.

It is understandable why Vietnam imports more from South Korea than exports to the market. Vietnamese export products to South Korea are mainly raw materials, including coal, coffee, seafood and rubber, and simple processed products with low added value. Meanwhile, it imports finished valuable industrial products, including computers, electronics, cars, car parts and equipments.

Though South Korean goods are believed to be less popular than Chinese products on the domestic market, experts believe that South Korean goods have been more favored by Vietnamese people. Chinese goods have been flooding the Vietnamese market thanks to their low prices, while South Korean goods have been favored thanks to their high quality.

Vietnamese people have got used to many South Korean brands, from ginseng to friendly household goods. Blankets, pillows sourced from South Korea have been sold not only in Vietnamese big cities, but in rural areas as well. Luxurious fashion products still can be selling well in Vietnam, while South Korean style restaurants have been established and prospering.

A lot of Korean people, who were once present in the south of Vietnam in the past, have returned to Vietnam as the businessmen. As they have deep knowledge about Vietnamese taste, they have been successful with their business in Vietnam.

The trade gap increase with South Korea has been facilitated by the ASEAN-Korean free trade agreement AKFTA, which has been valid since September 1, 2009. While the South Korean partner can take full advantage of the agreement to boost its exports to Vietnam, Vietnam’s exports to South Korea remain modest at less than 100 million dollars.

Nguyen Duy Nghia