Is the trade deficit with South Korea a concern for Vietnam?

Last update 16:00 | 09/08/2017

VietNamNet Bridge – Economists have said that the increased trade deficit with South Korea is not expected to lead to changes in Vietnam’s economic structure.

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China remains Vietnam’s biggest supplier of goods, but South Korea has the highest growth rate of exports to Vietnam. In the first six months of the year, Vietnam imported $22.5 billion worth of products from South Korea, an increase of 51.2 percent over the same period last year.

Nguyen Thi Ngoc Linh, secretary general of VEXA (Vietnam Exporters’ Association), commented on Tuoi Tre that while the volume of goods Vietnam exports to SK has increased modestly, the imports have risen sharply.

Bui Trinh, an economist, commenting about the ‘import wave from SK’, noted that the structure of the imports remains unchanged. The only change is that Vietnam now imports more products from South Korea instead of China.

China remains Vietnam’s biggest supplier of goods, but South Korea has the highest growth rate of exports to Vietnam. In the first six months of the year, Vietnam imported $22.5 billion worth of products from South Korea, an increase of 51.2 percent over the same period last year.

“The figures show the changes in Vietnam’s import partners – Vietnam has shifted to importing more from South Korea instead of China – but they don’t mean changes in economic structure,” he said, adding that the imports are still mostly machines, equipment and input materials that serve domestic production.

Some experts think that Vietnam would rather have a trade deficit with SK than with China, Thailand and Malaysia, because South Korea is a member of OECD countries and its products have better quality.

Consumer imports just accounted for 8 percent of the import turnover from the country. However, analysts pointed out that the figure is also on the rise, and this is worrying because the increased supply of money may lead to high inflation and bad debts.

As money doesn’t go to production, but to consumer goods, it will only help the GDP in the short term, and won’t contribute to sustainable economic development.

Dinh Trong Thinh from the Finance Academy said the imports are input materials for domestic production or consumer goods. When trade deficit occurs, the income in foreign currencies is not high enough to cover payments for imports.

However, the high import turnover is unavoidable. Since the domestic support industries remain weak, South Korea-invested enterprises have to import input materials from their home country, rather than look to domestic supply sources.

Samsung, for example, exported $40 billion worth of products last year. It had to import a big volume of input materials, which contributed to Vietnam’s high trade deficit with South Korea.

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This entry was posted in Economics - Kinh tế, Import - Nhập khẩu, South Korea - vietnam relationship and tagged , , by Trần Đình Hoành. Bookmark the permalink.

About Trần Đình Hoành

I am an attorney in the Washington DC area, with a Doctor of Law in the US, attended the master program at the National School of Administration of Việt Nam, and graduated from Sài Gòn University Law School. I aso studied philosophy at the School of Letters in Sài Gòn. I have worked as an anti-trust attorney for Federal Trade Commission and a litigator for a fortune-100 telecom company in Washington DC. I have taught law courses for legal professionals in Việt Nam and still counsel VN government agencies on legal matters. I have founded and managed businesses for me and my family, both law and non-law. I have published many articles on national newspapers and radio stations in Việt Nam. In 1989 I was one of the founding members of US-VN Trade Council, working to re-establish US-VN relationship. Since the early 90's, I have established and managed VNFORUM and VNBIZ forum on VN-related matters; these forums are the subject of a PhD thesis by Dr. Caroline Valverde at UC-Berkeley and her book Transnationalizing Viet Nam. I translate poetry and my translation of "A Request at Đồng Lộc Cemetery" is now engraved on a stone memorial at Đồng Lộc National Shrine in VN. I study and teach the Bible and Buddhism. In 2009 I founded and still manage dotchuoinon.com on positive thinking and two other blogs on Buddhism. In 2015 a group of friends and I founded website CVD - Conversations on Vietnam Development (cvdvn.net). I study the art of leadership with many friends who are religious, business and government leaders from many countries. In October 2011 Phu Nu Publishing House in Hanoi published my book "Positive Thinking to Change Your Life", in Vietnamese (TƯ DUY TÍCH CỰC Thay Đổi Cuộc Sống). In December 2013 Phu Nu Publishing House published my book "10 Core Values for Success". I practice Jiu Jitsu and Tai Chi for health, and play guitar as a hobby, usually accompanying my wife Trần Lê Túy Phượng, aka singer Linh Phượng.

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