2024 Vietnam-South Korea Investment Forum Seeks Greater SME Engagement, R&D Collaboration

November 27, 2024 Posted by Vietnam Briefing Reading Time: 5 minutes

The Vietnam-South Korea Investment Cooperation Forum 2024 discussed expanding SME collaboration and integrating Vietnamese SMEs into global value chains. The Vietnamese government urged South Korean businesses to support this integration and establish R&D centers in Vietnam.

The Vietnam-South Korea Investment Cooperation Forum 2024, held in Hanoi, marked another step in deepening economic and business ties between Vietnam and South Korea. Focused on the theme “Trust and Cooperation: Strategies for Sustainable Development of SMEs”, the forum highlighted the strategic role of small and medium enterprises (SMEs) in fostering innovation, enhancing value chains, and accelerating bilateral trade and investment.

Deputy Prime Minister Nguyễn Hòa Bình reaffirmed Vietnam’s commitment to facilitating South Korean investments in high-priority sectors, such as semiconductors, artificial intelligence, renewable energy, biotechnology, and smart cities. He called on South Korean businesses to support the integration of Vietnamese SMEs into global value chains and to establish research and development (R&D) centers in Vietnam.

The Deputy Prime Minister highlighted Vietnam’s appreciation for South Korea’s expertise and innovation in high-tech industries and SME development, noting the significant potential for collaboration in areas such as technology transfer, production capacity building, and sustainable growth.

Vietnam: A preferred destination for Korean investment

In the first half of 2024 alone, South Korean investors contributed US$1.4 billion, a 16 percent year-on-year increase, making South Korea the fourth-largest investor in Vietnam during the period. Last year, there were around 500 projects from South Korean investors with a total value of over US$5 billion.

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The Foreign Investment Agency anticipates a new wave of South Korean investments worth tens of billions of dollars in the coming years.

Overall, South Korea is among Vietnam’s largest foreign investors, with investments surpassing US$87 billion across nearly 10,000 projects as of June 2024. This accounts for 18 percent of total foreign direct investment (FDI) in Vietnam, reflecting the robust economic partnership between the two nations.

South Korea’s total investments in Vietnam are heavily concentrated in the processing and manufacturing industries, which make up over 70 percent of its investment portfolio. Additionally, the real estate sector has garnered significant interest, accounting for more than 12 percent of the investments. Other sectors attracting South Korean investment include construction, energy, accommodation, and food services, collectively representing around 3 percent.

Beyond FDI, South Korea is a significant contributor to Vietnam’s development through official development assistance (ODA), particularly in urban transport infrastructure, clean energy, education and training, and information technology. Vietnam accounts for 20 percent of South Korea’s global ODA commitments, further cementing the bilateral relationship.

The Vietnam-Korea Free Trade Agreement (VKFTA), effective since December 20, 2015, aims to enhance trade, services, and investment while complementing the ASEAN-Korea Free Trade Agreement (AKFTA). The VKFTA offers detailed rules of origin, including specific regulations for certain goods and exemptions from certificates of origin for low-value imports. It also incorporates commitments such as National Treatment (NT) and Most Favored Nation (MFN) status in trade services, offering broader sector access compared to WTO and AKFTA provisions. In terms of investment, the VKFTA provides protections through NT and MFN treatments and includes mechanisms for dispute resolution via administrative courts and arbitration.

Additionally, the Double Taxation Avoidance Agreement (DTA) between Vietnam and South Korea, effective since September 11, 1994, has facilitated economic cooperation by offering clear tax guidance and eliminating double taxation. The DTA fosters a stable tax environment, promoting cross-border trade and investment while strengthening economic ties between the two nations.

Trade engagement

In 2023, bilateral trade between Vietnam and South Korea totaled US$76 billion, positioning South Korea as Vietnam’s third-largest trading partner, following China and the United States, and its second-largest source of imports. By the first half of 2024, trade turnover between the two countries had already reached US$38.4 billion.

Technological collaboration and value chain integration

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A key highlight of the forum was the Korea-Vietnam Global Technology Transfer initiative, aimed at facilitating the export of South Korean innovation to Vietnamese companies. Supported by platforms like the Global Smart Tech Bridge, the initiative has already connected 53 Korean SMEs with 19 Vietnamese firms, resulting in eight successful partnerships.

Kim Woo Soon, head of the Technology Innovation Policy Division at South Korea’s Ministry of SMEs and Startups, described the initiative as a significant step in revitalizing technology exports.

Deputy PM Nguyễn Hòa Bình emphasized the importance of such collaborations, particularly in sectors like semiconductors, where South Korea holds global leadership. He urged South Korean firms to leverage Vietnam’s youthful, digitally adaptable workforce by investing in talent development and vocational training programs.

SMEs: A pillar of economic growth

The forum placed a strong emphasis on the role of SMEs, which form the backbone of both economies. In Vietnam, SMEs account for 97 percent of businesses, contributing over 40 percent to GDP and employing 60 percent of the workforce. Similarly, in South Korea, SMEs represent 99 percent of enterprises, generate 46 percent of GDP, and employ 81 percent of the workforce.

Nguyễn Văn Thân, Chairman of the Vietnam Association of SMEs, highlighted the opportunities for joint ventures, technological innovation, and mutual capacity building. He noted that collaboration between Vietnamese and South Korean SMEs would unlock immense potential for both nations, creating a sustainable and mutually beneficial partnership.

Successful models and prospects

During the forum, leaders from both nations discussed successful South Korean business models, such as Samsung’s smart factories and farms, which could serve as benchmarks for Vietnamese enterprises.

Kim Ki Mun, Chairman of the Korea Federation of SMEs (KBIZ), emphasized that these models could guide Vietnamese businesses in improving efficiency and embracing innovation. Korean enterprises are ready to transfer technology, share expertise, and invest in joint ventures that promote long-term growth.

The forum also included discussions on Vietnam’s semiconductor ambitions. South Korea’s leadership in semiconductor technology presents an opportunity for collaboration in training Vietnamese talent and establishing domestic production capabilities. Attracting semiconductor investments requires government-to-government cooperation, remarked Kim Ki Mun, emphasizing the need for strategic agreements to address the complexities of the sector.

Strategic agreements and investments

A total of 15 memorandums of understanding (MoUs) were signed during the forum, covering areas like smart technology, production, human resource training, and product distribution; of these, five MoUs were signed between Vietnamese and Korean business associations. These agreements are expected to further deepen bilateral cooperation and encourage South Korean firms to expand their presence in Vietnam.

South Korea’s Deputy Minister of SMEs and Startups, Kim Sung Seop, noted Vietnam’s strategic importance due to its dynamic workforce and adaptability to digital transformation. He expressed optimism about the synergy between SMEs from both countries, calling it a driving force for future economic growth.

Shared vision for the future

Looking ahead, Vietnam and South Korea aim to achieve US$100 billion in bilateral trade in the near term and US$150 billion by 2030. Initiatives like the K-Startup Center in Hanoi and the Global Smart Tech Bridge are expected to play a crucial role in achieving these goals by fostering innovation and strengthening business networks.

The Vietnam-Korea Investment Cooperation Forum 2024 underscored the shared commitment of both nations to fostering harmonious benefits and shared risks, creating a foundation for sustainable economic growth. With strengthened ties and a focus on innovation, Vietnam and South Korea are poised to achieve new milestones in their economic partnership.

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