South Korea, Vietnam open ‘new era in bilateral relations’ amid rising Sino-US rivalry
- Seoul, Hanoi elevate 30-year ties to ‘comprehensive strategic partnership’, pledge to build supply chains of key minerals and electric power
- Amid uncertainties over China, South Korea and Vietnam can take advantage of their complementary industrial structures to boost direct investment, analyst notes
South Korea and Vietnam elevated three decades of ties to a “comprehensive strategic partnership” on Monday, joining forces to expand contribution to global value chains amid mounting Sino-US rivalry.
Vietnamese President Nguyen Xuan Phuc, on a state visit to Seoul, and his South Korean counterpart Yoon Suk-yeol watched as their government ministers signed a raft of documents which Yoon said would “broaden the horizon” of bilateral cooperation.
“Over the past 30 years, the two countries have successfully built an exemplary win-win cooperation relationship,” Yoon said. “Based on these achievements, we are now opening a new era in bilateral relations by setting up a comprehensive strategic partnership.”
“Remarkable progress” had been made in trade and investment cooperation as the peoples of both countries had become close neighbours and “cousins”, he added.
Nguyen is the first state guest to visit Yoon since he took office in May.
Professor Lee Han-woo, an expert in Vietnamese politics and economy at Sogang University, said the upgrading of bilateral ties to a “comprehensive strategic partnership” meant South Korea had become the fourth country following China, Russia and India to enter Vietnam’s highest-level diplomatic ties.
“South Korea, unlike China, has no source of friction with Vietnam,” Lee said, referring to Beijing and Hanoi’s disputes in the South China Sea.
“It is important for Vietnam to increase Vietnamese companies’ share in the country’s exports as 70 per cent of its total exports are currently made by foreign-invested companies.”
South Korea would work with Vietnam to enhance its capability to enforce maritime laws and expand cooperation in the defence industry, Yoon said. Both sides agreed to strengthen diplomatic and strategic dialogue, and work to maintain regional peace and stability.
The two countries would also bolster cooperation in science and technology, health, infrastructure, finance, information and communication and energy, Yoon said.
The Vietnam-Korea Institute of Science and Technology, which opened in April in Hanoi, was the “cradle of science and technology cooperation” between the two countries, Yoon added.
We are now opening a new era in bilateral relations by setting up a comprehensive strategic partnership
Nguyen said the two presidents had reaffirmed a goal of achieving bilateral trade volume of US$100 billion in 2023 and US$150 billion in 2030 “in a balanced way”, referring to Vietnam’s wish to address its chronic trade deficit with South Korea.
Vietnam welcomed South Korean companies’ investment in electronics, fintech, green industrial complexes and smart cities, he added.
Vietnam’s 2021 trade deficit with South Korea stood at US$32.76 billion and for the first 11 months of this year, it registered US$32.6 billion, according to South Korean government statistics.
The two countries also agreed to expand cooperation in the hi-tech industry, supply chain stabilisation and development of rare earths abundant in Vietnam.
Rare earth is used in rechargeable batteries for electric cars, advanced ceramics, computers, monitors, lasers and fibre optics, among others.
Kwak Sung-il, a senior analyst at the think tank Korea Institute for International Economic Policy (KIEP), said Nguyen’s state visit showed the two countries’ “strong will to upgrade their ties that have so far focused on economic ties to the level of allies that embrace social, cultural, diplomatic and security sectors as well”.
Vietnam was “one of the friendliest countries” towards South Korean businesses and among the most attractive places for South Korea’s direct investment due to the two countries’ “mutually complementary” industrial structures, Kwak said, adding that Hanoi was also seeking to acquire military ships from South Korea, a world leader in shipbuilding.
South Korea’s accumulated foreign direct investment in Vietnam from 1988 to 2021 stood at US$74.6 billion, topping the list of countries directly investing there, government statistics showed.
Bilateral trade volume grew 164 times from less than US$500 million 30 years earlier to US$80.7 billion last year, making Vietnam the third-largest country for South Korean exports and South Korea the fourth-largest importer of Vietnamese products.
Some 4,000 South Korean companies operate in Vietnam, including Samsung Electronics, SK, Hyundai Motor, LG Electronics and Lotte.
Korean companies in Vietnam have been shifting from labour-intensive products such as garments and footwear to high-value-added ones including smartphones and electronic parts for cars.
“Vietnam cannot replace China for South Korea’s exports and direct investment,” Kwak said, citing the difference in size of the Vietnamese and Chinese markets.
“However, Vietnam and South Korea can take advantage of their complementary industrial structures to expand and diversify their contributions to global value chains.”
Under these circumstances, South Korea should seek ways to “expand Vietnam’s participation in Korea’s production networks”, KIEP said in a report published last year.
Lee of Sogang University said Vietnam was especially interested in South Korean businesses’ experiences and technology transfer, while South Korea benefited from Vietnam’s well-educated, highly motivated workers.
“South Korean companies’ interest in Vietnam has also increased due to growing uncertainties over China”, Lee said, referring to China’s Covid-19 lockdowns, Sino-US rivalry and Beijing’s retaliations against South Korean companies over Seoul’s 2017 deployment of Thaad, the highly sophisticated US missile defence system.
Samsung was building a US$220 million research and development centre in Hanoi with a view to completing it by the end of this year, while LG opened its own R&D centre in Da Nang in 2020, he said.
“The new research and development centre … shows Samsung’s will to bring Vietnam beyond the role as a basement of Samsung’s largest global manufacturing facility to become the leading and largest-scale strategic base of Southeast Asia,” said president of Samsung Vietnam Choi Joo-ho in May, according to Viet Nam News.
Source: This Week in Asia