Vietnam-Entered Companies Urgently Need to Diversify Export Markets and Supply Chains

[Asia Economy Reporter Hwang Yoon-joo] There is an urgent call for South Korean companies operating in Vietnam to diversify their export markets and supply chains, and to improve the self-sufficiency rate of local intermediate goods.

According to the report "The Impact and Causes of COVID-19 on the Vietnamese Economy," released on the 8th by the Korea International Trade Association's International Trade and Commerce Research Institute, Vietnam's exports, imports, and manufacturing sector suffered significant damage due to the contraction of global demand and supply caused by the COVID-19 pandemic.

Vietnam's exports and imports in April this year decreased by 27.1% and 16.4%, respectively, compared to April last year, and the manufacturing Purchasing Managers' Index (PMI) in April recorded 32.7, the lowest since 2011.

Regarding this, the report explained, "In 2018, Vietnam's trade volume as a percentage of its Gross Domestic Product (GDP) was 198%, the second highest among ASEAN countries after Singapore (215%). Looking deeper, exports are concentrated in large consumer markets such as the United States (23.2%) and the European Union (15.7%), and imports are also concentrated in China (29.8%) and South Korea (18.5%), making it vulnerable to global demand and supply risks."

The report continued, "The proportion of value-added intermediate goods imported by Vietnam, that is, its backward participation in the Global Value Chain (GVC), increased from 24.0% in 2000 to 39.4% in 2017, the largest increase among ASEAN countries. In particular, the proportion of Chinese intermediate goods imports in Vietnam's GDP is as high as 22.5%, making it vulnerable to risks related to China."

Researcher Jeong Gwi-il of the Korea International Trade Association advised, "South Korean companies operating in Vietnam should actively utilize free trade agreements (FTAs) concluded by Vietnam to diversify their export markets and supply chains. It is also necessary to strengthen cooperation with local companies to prepare for supply chain disruptions from China and to increase the self-sufficiency rate of intermediate goods within Vietnam."

This content was produced with the assistance of AI translation services.