Situation of Korean’s FDI in Vietnam in the first quarter of 2020
According to reports of the Foreign Investment Agency, Korea was ranked 4th among 87 countries and territories investing in Vietnam with the total registered capital of 708.88 million USD in the first 3 months of 2020. Then this country rose to the 2nd with a total investment of 1.98 billion USD (accounting for 13.6% of the whole country) in the first 4 months of 2020.
In the Central Vietnam (including Highlands), Korea was the largest investment partner in the region with 13 projects and a total registered capital of US $ 70.36 million (accounting for 55.7 million USD). % compared to Area). Korean investors chose Da Nang city and Quang Nam province as the investment location. Da Nang city attracted a great deal with 12/13 projects of this area.
In the first quarter of 2020, ICT VINA II Medical Equipment Manufacturing Factory Project is larges which registered investment capital is 60 million, implemented in the High-Tech Park, Da Nang City. The objective of the project is producing dental CT scanners; Grinding motor for dental; Dental Chair and Implant Artificial Dental Product.
With a registered capital of US $ 07 million, the Adobe Brick Production Plant and SEGI VINA Concrete Mixing Plant Project is the second largest investment project in the region, implemented in Hoa Vang district, Da Nang city. The objective of the project is producing adobe bricks and producing commercial concrete; Retailing cement, bricks, steel and other construction materials produced by the company.
On November 9th 2019, the largest Business and Investment Cooperation Summit between Vietnam’s companies and South Korea’s investors took place in Quang Nam province, expected to contribute to promoting investment relations stronger with each other. Korean’s investors have a strong presence in the North and the South of Vietnam. The Central region has a constantly improved infrastructure, a growing human resource, an improved investment environment (in particular, Danang City is a leading destination to foreign tourism of Koreans), that’s a result to make Korea’s inventors will contribute to promote and attract FDI from Korea in the near future.
Highlight of Korea’s investment in Vietnam.
During the past time, cooperation between Vietnam and Korea has always achieved good results in many fields. South Korea is not only the investor continually having the highest amount of investment capital into Vietnam, but also increasingly affirming its position as an important investment partner of Vietnam when capital flows from this country are in the right direction and suitable with the strategic goal of attracting FDI capital of Vietnam.
Samsung can be seen as a symbol of Korea's OFDI capital into Vietnam. By the end of 2019, Samsung Vietnam disbursed 94% of the total registered capital of US $ 17.3 billion. In March 2020, Samsung started the construction of a Research and Development Center (R&D) in Tay Ho Tay urban area, Hanoi City. The Center has been invested an investment of approximately US $ 220 million, and total construction area is 11,603 m2 with floor area reaches 79,511 m2. When the Center will be completed in late 2022, it’s is expected to be the largest R&D center of Samsung in Southeast Asia area and also the R&D center of the largest foreign corporation in Vietnam ever.
Besides the field of electronic technology, Korean businesses are present in almost all areas of Vietnam's economy. Starting from light industry sectors 25 years ago, gradually expanding and developing into fields that require high scientific and technical qualifications, infrastructure such as energy, logistics, etc. contribute to the restructuring of the economy, exports, creating jobs, jobs and ensuring social security.
In the first months of 2020, in Tam Thang Industrial Park - Quang Nam Province, Hyosung Group of Korea has put into operation the first phase of the project of producing Fiber yarn, Nylon yarn and Steel fiber with an investment capital of 210 million USD (using over 13 hectares) of the total project investment of more than US $ 1.3 billion (on an area of 100 hectares). Together with PANKO Textile Factory (with an investment of US $ 70 million) and Ducksan Vina Textile and Garment Factory (with an investment of US $ 10 million), Hyosung Group has contributed more vividly to the investment environment in Tam Thang which specialized industrial parks textile and garment, and also diversifying investment fields in Quang Nam such as automotive mechanics (THACO), Tourism and Services (VINPERAL South Hoi An), contributing to a strong shift of economic structure.
Besides, it is undeniable that the positive effects from Korea's FDI to the expansion of export markets of Vietnam to extremely strict markets such as the European Union, the United States, else ... The Korea’s FDI enterprises also contributed to stabilizing the domestic market, supplying high quality products produced domestically to the domestic market. Therefore it’s limiting the trade deficit, helping to maintain a stable and beneficial trade balance of Vietnam.
Korean’s enterprises also act as a bridge help to promote Vietnam's cultural identity, human beauty and nature to Koreans, especially the young, and as a result, Vietnam has become destinations chosen by many Koreans in Southeast Asia, promoting the development of domestic tourism.
The COVID 19 pandemic affected the Korean economy
Commencing a strong domestic infection in February 2020, the COVID 19 pandemic caused the Korean people to minimize community activities, including services such as dining, hotels, restaurants, cultural entertainment, consumption of goods such as automobiles and clothing dropped sharply. According to Korea Television Station KBS, the COVID 19 pandemic was the cause of the rare high decline in the private consumption sector (down 6.4% in the first quarter) and led to the economic growth index of South Korea decreased by 3.1%.
According to data released by the Central Bank of Korea (BOK) on April 25, Korea's Gross Domestic Product in the first quarter grew at a negative rate (-1.4%), the lowest in more than 11 years (after -3.3% in the fourth quarter of 2008). BOK predicts that the impact of the 19 COVID pandemic may cause South Korea's economic growth in 2020 to drop by more than 2%.
Equipment investment, construction investment and Government spending increased from 0.2% to 1.3%. Government spending increased by 2.5% in the fourth quarter of last year and is forecast to decrease in the first quarter of this year. However, because the Government disbursed its budget early to cope with the COVID-19 epidemic, government spending increased slightly in the first quarter. In the first quarter, Exporting decreased by 2%, less affected by the COVID-19 epidemic than private consumption. Although exports of automobiles, machinery and chemical products have declined, semiconductor chip exports continue to grow, contributing to mitigate the impact of the COVID-19 epidemic on exports.
“By sector, the service industry suffered the biggest shock from the COVID-19 epidemic, recording a growth of -2% in the first quarter, the deepest decline after -6.2% in the first quarter of 1998, when Asian currency crisis. In particular, the transport sector decreased by 12.6%, retail, restaurants and hotels fell by 6.5%, culture and other services fell by 6.2%, reflecting the impact of the COVID pandemic- 19. Manufacturing increased by -1.8%. Although transport equipment and basic metals have decreased, but the production of semiconductor chips has increased, so the reduction of manufacturing is not large. Actual gross national income (GDI) in the first quarter decreased by 0.6% compared to the previous quarter, a decrease less than real GDP, due to improved trade conditions”- From KBS.
Confidence of growth after the COVID19 pandemic
Bloomberg says that countries based on manufacturing and tech industries are likely to see a V-shaped economic rebound. This is quoted by Citigroup chief economist Catherine Mann, who is also the former chief economist for the Organization for Economic Cooperation and Development or OECD. South Korea and Taiwan are cited as examples of such countries. In contrast, economies heavily dependent on tourism like Thailand and Singapore are expected to slip into an L-shaped recession, where the economy hits the bottom and a long-term slump follows. In other words, countries may see different recovery curves, depending on what their major industries are.
Manufacturing makes up a significant part of Korea’s industrial structure, where service-oriented industries account for a small portion. According to the Ministry of Strategy and Finance, manufacturing accounts for 27.8 percent of Korea’s GDP. The figure is higher than that of Germany and Japan which have industrial structures similar to South Korea’s. Korean exports of ICT products, in particular, have propped up the nation’s outbound shipments, despite unfavorable external conditions. In employment, the manufacturing industry has also endured the COVID-19 crisis relatively well.
Mr.Pham Viet Tuan – Head of Investment Office, Embassy of the S.R of Vietnam to the Republic of Korea said: “In March 2020, the Government of President Moon Jae-in pledged to have the most active, powerful and drastic policies in attracting global FDI and promoting Korean businesses to invest in the country, in order to bring Korea becomes the new, transparent and safest production site in the world. It is expected that in the third quarter of 2020, the Korean government will announce new policy packages to specify the above objective. In addition, the Korean government is likely to set up a special working group with the task of helping to immediately develop and implement policies after each direction of the President”.
Obviously, the above policy will have an impact on the flow of investment from Korea (as well as China) into Vietnam and globally. The consequences of "Broken" the supply chain caused by natural disasters and epidemics will cause multinational corporations to review and re-evaluate their criteria for selecting locations for investment. Along with the current wave of technology 4.0, the criteria for safe and innovative investment locations will be higher than the cheap labor criteria.
This is an opportunity for Vietnam to refer to the development and implementation of Korean investment attraction policies, appropriate conduct at the Government level as well as with Korean businesses.
New era of the global manufacturing
In contrast to the devastating consequences that have caused humanity, the COVID 19 pandemic has helped the world industry as well as Vietnam's Industry 4.0 be more motivated. This will foster rapid nurturing of new manufacturing industries, based on data connectivity and flexible production line transformation. Smart factories combine the Internet of things; The virtual model system that simulates products, services, processes for predicting results, and Artificial Intelligence is the easiest visualization destination for this new manufacturing industry.
The transformation of the production line of telecommunication electronics to manufacturing ventilators in less than 1 month of the VinGroup has shown that Vietnam has a basis for convergence of qualifications, capacity and law to facilitate the access and absorption of global high technology will take place smoothly, with great results.
In general, in terms of attracting investment in the Post-COVID19 period, localities need to redefine the main area for socio-economic development, avoiding the situation of focusing on development based on a single field Best; continue to promote flexible, professional, effective and accessible administrative reform; there is a need for more drastic policies for the sustainable development of supporting industries in the locality and integration with localities and neighborhoods; improve the skills and foreign language skills of workers.
For production and processing projects, the criteria to select investors should be raised, minimizing seasonal projects and production inputs that are too dependent on a certain partner. Besides, the issue of environmental emissions should also be paid more attention.
Phước Ân (IPCC)
Reference source:
- Foreign Investment Agency – Ministry of Planning and Investment;
- Mr. Pham Viet Tuan – Head of Investment Office, Second Secretary, Embassy of the S.R of Vietnam to the Republic of Korea;
- KBS World Radio.