Implications of Changes in the Structure of Trade and Foreign Investment between Korea and Vietnam

As Vietnam has emerged as a post-China magnet for foreign investment where businesses can enjoy low production cost based on abundant and cheap labor, global companies have accelerated their investment in Vietnam recently. The government of Vietnam’s strong willingness for closer integration with the global economy and its political stability will attract more foreign investment to Vietnam.Vietnam has also risen as an economically important partner for Korea. Vietnam ranks the third largest importer to Korea, and Korea is now the largest foreign investor in Vietnam. The volume of trade between the two countries had remarkably increased to 37.6 billion from 13 billion USD over the five years from 2010 to 2015. During the period, characteristics of foreign investment in Vietnam had changed, and the government of Vietnam began striving for industrial development. These changes have influenced the structure of investment and trade between Korea and Vietnam.This report aims to analyze the structural changes in trade and investment between the countries and to provide implications for potential Korean investors. First, this report examines trend of export and import by classifying them into types of goods in different processing stages such as capital goods, consumption goods, and intermediate goods. The changes in major items of export and import between the two countries are analyzed as well. It also reviews the recent trend and changes of Korea’s investment to Vietnam, one of the main factors causing changes in trade. Based on the analysis, it finally provides with implications for Korean potential investors and companies