SEOUL -- South Korean companies doing business in Vietnam have concerns about a potential deterioration in the business environment in the Southeast Asian country, according to a recent survey conducted by the Korea Institute for Industrial Economics and Trade (KIET) and the Korea Chamber of Business in Vietnam (Kocham).
Out of 326 surveyed Korean firms, 49.7 percent said they predict that the business environment there will get worse down the road. And 38 percent of them cited the Vietnamese government's policies as one of the reasons for their negative outlook, while 24 percent and 18 percent put the blame on rising production costs and regulations, respectively.
And 62.8 percent of the respondents said that they have to embrace those negative factors to continue their business there. Asked about what are the most troublesome regulations, 51.5 percent cited the business approval and licensing process, followed by a lack of transparency (48.2 percent) and tax problems (42.5 percent).
The survey also discovered that Korean manufacturing companies were maintaining a trilateral supply chain system in which they procure raw materials and parts from South Korea, Vietnam and China. Their share of procurement from South Korea was estimated at 43.8 percent, while the share of Vietnam and China stood at 30.1 percent and 16.9 percent, respectively.
The manufacturing firms sold 51.3 percent of their products in Vietnam -- 23.4 percent to Korean-invested firms, 11.8 percent to Vietnamese companies and 9.8 percent to local consumers there. And 23.4 percent of their products were sold to South Korea, 9.2 percent to North America, 6.2 percent to Europe, 4.3 percent to Southeast Asia and 2.7 percent to Japan.
Those figures imply that Korean-invested firms have yet to contribute greatly to the development of the Vietnamese economy. The KIET recommended that the two countries should step up mutual cooperation as they upgraded their bilateral ties to "comprehensive strategic partnership" relations last year.
The KIET also called on the Korean government to do more to ask Vietnam to ease some regulations to improve the business environment for Korean firms doing business there.
The think tank suggested that Seoul should discuss with Hanoi how to allow more Vietnamese firms to participate in Korean companies' supply chains. It also emphasized the importance of Korea's efforts to transfer technology to Vietnam and train the Vietnamese workforce to contribute to the economic development of Korea's fourth-largest trading partner.
South Korean firms' cumulative direct foreign investments in Vietnam were estimated at $30.4 billion at the end of 2021. Korea posted an estimated $34.25 billion in trade surplus with Vietnam in 2022, according to the Ministry of Trade, Industry and Energy. The Southeast Asian country topped the list of countries with which South Korea enjoyed a trade surplus.
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