Satvinder Singh, deputy secretary-general for the ASEAN Economic Community, said over a week ago that the bloc is working with South Korea on a plan to upgrade the ASEAN-Korea Free Trade Area, which took effect in 2010.

“The upgrade will pave the way for stronger economic ties between the two sides. Currently, many South Korean groups are looking to diversify from their current operations in North Asia to Southeast Asia,” Singh said.

In the region, Vietnam has become a hotspot for South Korean investments, with Park Hark Kyu, head of Corporate Management at the DX Division of Samsung Electronics, in April told PM Pham Minh Chinh in Hanoi that the group considers the Southeast Asian nation as a global production hub and aims to turn Vietnam into a “hub for its research and development centres” globally. Samsung’s export turnover in 2022 hit $65 billion, down from $65.5 billion in 2021.

The Vietnam-South Korea trade and investment relationship is currently backed by other free trade agreements such as the Korea-Vietnam Free Trade Agreement (KVFTA) and the Regional Comprehensive Economic Partnership.

South Korea also wants to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to which Vietnam is a member. If South Korea becomes a member, exporters from both markets will have an additional option on tariff reductions to apply for.

Hong Sun, chairman of the Korea Chamber of Business in Vietnam, which represents nearly 10,000 South Korean companies in the country, told VIR that a number of big South Korean investors are planning to invest billions of US dollars in Vietnam to take advantage of these trade deals and in anticipation of South Korea’s accession to the CPTPP.

“Many South Korean companies are stepping up investment in Vietnam and if this trend continues, the trade scale between the two countries this year is expected to exceed $100 billion,” Sun said.

According to Vietnam’s Ministry of Planning and Investment, total accumulative registered investment capital into Vietnam from South Korea as of April 20, 2023 hit $81.47 billion, making this Northeast Asian economy the largest foreign investor of Vietnam, followed by Singapore at $73 billion and Japan at $69.5 billion.

Many South Korean companies including LG, Hyosung, Kyobo Life Insurance, GS Engineering & Construction, Lotte, Amore Pacific, and Dongwon also want to continue funding increases in Vietnam.

“LG Group has invested more than $5.3 billion in Vietnam in the sectors of home electronics, camera modules, and electronic devices, and it is expected to invest another sum of over $4 billion into building smartphone manufacturing centres,” Sun said.

In another case, Daewoo E&C Group is also advancing in Vietnam. It is considering new investment in developing an industrial park (IP) and a new urban complex combining education, culture, commerce, and healthcare with a scale of more than three million square metres in the northern province of Bac Ninh.

Last December, ministries, agencies, and enterprises of both countries inked 24 cooperation documents, involving investment worth $15 billion. That same month, Vietnam and South Korea released a joint statement on establishing a comprehensive strategic partnership. The two nations vowed to further cement their bilateral cooperation in all fields, with one of the focuses laid on expanding and sharpening economic, trade, investment, and development cooperation.

“The two countries agree to increase the bilateral trade turnover in a balanced manner, and strive to raise the 2-way trade turnover to $100 billion in 2023 and $150 billion by 2030,” read the statement.

To reach the new trade goal, both sides “agree to contribute to expanding economic and free trade connectivity based on rules in the region via removing import regulations and strengthening cooperation in the tariff sector including the e-exchange of certificates of origin based on the two nations’ agreement on mutual customs support in order to effectively implement bilateral and multilateral economic cooperation mechanisms.”

Especially, both sides agreed to comprehensively boost cooperation in trade, investment, and development cooperation, and tech transfer. South Korea will create additional refinements for Vietnam to increase its exports to its market, and support Vietnamese enterprises to participate deeper in South Korean businesses’ global supply chains.

Meanwhile, Vietnam will make it more favourable for South Korean companies to implement new investments and investment expansions in many sectors such as electronics, infrastructure development, and construction of intensive high technological complexes, green IPs, and smart urban areas.

According to the General Department of Vietnam Customs (GDVC), total trade between Vietnam and South Korea reached $86.7 billion last year, with Vietnamese exports and imports of $24.2 billion and $62.5 billion, respectively. In the first three months of 2023, total trade stood at as much as $18.1 billion, with Vietnamese exports and imports of $5.9 billion and $12.2 billion, respectively.

Under the KVFTA, Vietnam has removed over 30 tariff lines imposed on South Korean electronic products and components.