HANOI: Vietnam no longer has the biggest trade deficit with China but South Korea, after imports from the latter soared in the first half of this year.
Customs data showed that Vietnam’s imports from South Korea in the first half of 2017 increased by 51 percent from the same period last year, while exports only rose by 27 percent.
That translates to $22.5 billion in imports and $6.5 billion in exports, leaving a deficit of $16 billion, compared to one with China at $13 billion.
Vietnam’s trade deficit with South Korea has been rising steadily from less than $7 billion in 2010. The number reached $20.6 billion last year.
Do Thang Hai, Deputy Minister of Industry and Trade, said large companies from South Korea have made use of the zero import tariff effective from the beginning of this year under the free trade deal between the two countries.
Hai said most of the imports were machines and materials serving production in Vietnam, including at Samsung Electronics, which is Vietnam’s dominant exporter.
Trade officials said the deficit trend is going to continue as Vietnamese exports are mostly cheap agricultural products.
Meanwhile, South Korea’s increasing investment in Vietnam is driving imports of parts and machinery, said Nguyen Duc Thanh, director of Vietnam Institute for Economic and Policy Research.
South Korea registered $4.95 billion of direct investment in Vietnam during the first six months, or a quarter of all pledges, according to figures from the Ministry of Planning and Investment.
Thanh said the deficit does not reflect Vietnam’s reliance on the market as the one with China, so “it’s not worrying yet.”
Experts said Vietnamese businesses need to learn to make use of the trade deal as well and increase their export value to South Korea.