Korean FDI in Vietnam
South Korean FDI in Vietnam has occurred in three waves. The first wave occurred after the lifting of the US embargo, which focused on labor-intensive sectors such as textiles and garments, followed by Vietnam ascension to the WTO wherein investors focused on the manufacturing of electronic goods. The third wave currently focuses on manufacturing as well as consumer goods, retail, and services.
Cumulative Korean investment in the last 28 years has increased rapidly, rising to US$50 billion as of 2016, accounting for 17.2 percent of the total FDI in Vietnam between 1988 and 2016. Around 12.5 percent of the total FDI was invested in Bac Ninh province, followed by Dong Nai province, and Hai Phong at 10.8 percent and 10.6 percent respectively. Hanoi accounted for 10.5 percent of the total FDI.
Around 5,000 South Korean companies have invested in Vietnam in the last 25 years. According to the Vietnam Chamber of Commerce and Industry, Korean-invested firms in Vietnam in 2016 contributed almost a third of Vietnam’s exports and provided around 700,000 jobs domestically.
In 2016, South Korean investments accounted for a third of the total FDI. The manufacturing sector accounted for 82.3 percent of the investment, led by large-scale investments from Samsung and LG Electronics. Electric and electronic manufacturing accounted for the largest portion of the manufacturing and processing sector at 65 percent, followed by textile and fabric manufacturing at 20 percent.
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Major Sectors
Manufacturing accounts for 70 percent of the cumulative South Korean investments since 1988, followed by real estate management and construction sector at 14.8 percent and 5.4 percent respectively.
Apart from manufacturing, which accounted for 82.3 percent of investments in 2016, there has been a growing interest by South Korean companies in the services and distribution sectors along with, wholesale and retail, culture, and science and technology. In addition, 2017 has seen a considerable interest in the food and finance & banking sectors.
South Korean firms are also looking to increase their investments in the agriculture, forestry, and fishery sectors, taking advantage of the preferential tariffs of VKFTA.
Major Korean Investors
Samsung leads the pack amongst South Korean investors in Vietnam. It manufactures almost half of its smartphones at its two factories in Vietnam. Samsung is also setting up a third complex focusing on home appliances and displays with an investment of US$2.5 billion. Some of the existing production lines in South Korea and Malaysia will also be shifted to Vietnam in the near future. LG, another electronic giant also has setup a production hub in Vietnam to manufacture smartphones and televisions. The company will be spending around US$1.5 billion in the new hub by 2028.
Seoul Semiconductor Co. recently won a license to build a new $300 million semiconductor, while LED manufacturer Lumens will begin manufacturing operations later this year.
CJ Group, a South Korean conglomerate is also in the midst of a large-scale expansion in Vietnam. It’s business interest range from food processing, fertilizer and feed production, TV shopping, film production, and distribution. In 2016, it invested US$500 million into new projects and M&A. Another conglomerate, Lotte Group plans to expand its retail operations five-fold to 60 shopping malls in Vietnam by 2020.
If you want to see more about FDI opportunities in Vietnam, contact us: info@fdi-vietnam.com
"Source: Vietnam-briefing.com"
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