Cơ cấu thương mại hàng hóa Việt Nam – Hàn Quốc giai đoạn 20012016: Những vấn đề đặt ra và giải pháp tt tiếng anh

VIETNAM ACADEMY OF SOCIAL SCIENCES
GRADUATE ACADEMY OF SOCIAL SCIENCES

TRUONG QUANG HOAN

VIETNAM-KOREA COMMODITY TRADE
STRUCTURE OVER THE PERIOD 2001-2016:
ISSUES AND SOLUTIONS

Major: International Economics
Major Code:
9 31 01 06

SUMMARY OF PHD THESIS IN ECONOMICS

Hanoi - 2019


The PhD Thesis is completed at:
Graduate Academy of Social Sciences
Vietnam Academy of Social Sciences

Supervisors:
1. Assoc. Prof. Dr. Nguyen Duy Dung
2. Assoc. Prof. Dr. Nguyen Huy Hoang
Reviewers:
Reviewer 1: Assoc. Prof. Dr. Ha Van Hoi
Reviewer 2: Assoc. Prof. Dr. Do Huong Lan
Reviewer 3: Assoc. Prof. Dr. Tran Thi Lan Huong

The PhD. Thesis is defended at the PhD. Thesis Evaluation

Council, Graduate Academy of Social Sciences, No. 477
Nguyen Trai Street, Thanh Xuan District, Hanoi

Available at:
- National Library of Vietnam
- Library of Graduate Academy of Social Sciences


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INTRODUCTION
1. The importance of the thesis subject
The rapid growth in commodity trade exchange between Vietnam
and South Korea (hereafter Korea) since the two sides established the
Comprehensive Partnership relation in 2001 has helped Vietnam and
Korea become important trading partners to each other’s.
However, the commodity trade structure between Vietnam and
Korea over the years has revealed many noticeable issues. Vietnam
has always experienced trade deficit with Korea. Especially the
deficit has tended to rapidly increase in recent years. Vietnam’s
exports to Korea are mainly raw materials, or processed and
manufactured goods with low technological content. Additionally,
Vietnam has not exploited comparative advantages, incentives from
regional liberalization, economic integration and growth in attracting
foreign direct investment (FDI) to basically improve the trade
structure with Korea in a positive manner.
Many existing studies have mentioned Vietnam-Korea economic
relations, but still lacked deep and comprehensive works on the
Vietnam - Korea commodity trade structure. In fact, along with the
important role and position of Vietnam-Korea trade for each country,

there are many issues between Vietnam and Korea to consider
regarding economic relations as the whole and trade relations in
particular now and in the coming time. In such a context, it would be
necessary to have in-depth and comprehensive studies on the
Vietnam-Korea commodity trade structure to identify, evaluate the
results and the issues; thereby providing feasible orientations and
solutions to improve the Vietnam-Korea commodity trade structure in
next years.


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2. Research purpose and research task of the thesis
2.1. Research purpose
To analyze the current situation of the Vietnam – Korea
commodity trade structure in the period 2001 - 2016; thereby,
identifying results, limitations and problems, as well as proposing
solutions to improve the Vietnam – Korea commodity trade structure
in the coming years.
2.2. Research task
(i) Systematizing the theoretical basis and building the analytical
framework for evaluating bilateral commodity trade structure.
(ii) Analyzing the current situation of the Vietnam – Korea
commodity trade structure in the period 2001 - 2016; thereby,
pointing out the results and problems.
(iii) Proposing solutions to improve the Vietnam – Korea
commodity trade structure in the coming years.
2.3. Research question
The thesis focuses on answering the following research
questions:
1) What are the theoretical basis and research methods used to

analyze and assess bilateral commodity trade structure?
2) How has the Vietnam – Korea commodity trade structure
changed in the period 2001-2016? What are the achievements and
issues in the changes of the Vietnam – Korea commodity trade
structure?
3) What are the orientations and solutions to improve the
Vietnam - Korea commodity trade structure in the coming time?
3. Research object and scope of the thesis
3.1. Research object
Vietnam-Korea commodity trade structure over the period 2001-2016


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3.2. Scope of research
About space: Vietnam, Korea and some East Asian countries
About time: the 2001 - 2016 period
About content: trade in goods; direct trade between Vietnam and
Korea, commodity export structure, commodity import structure
4. Methodology and research method of the thesis
4.1. Methodology
The thesis uses dialectical materialism, historical materialism as
well as economic theories to explain the changes that have taken
place in the Vietnam – Korea commodity trade structure over 20012016 period.
4.2. Research method
The thesis employs trade pattern indices including trade
complementary index (TCI); trade intensity index (TII); export
concentration index (HHI); intra-industry trade index (IIT); export
product sophistication index (EXPY); and the normalized revealed
comparative advantage index (NRCA). The thesis also uses the
methods of classifying international goods according to the importexport industry; technological content; factor intensity and stages of

production. Finally, the thesis employs OECD’s database of trade in
value added (TiVA).
5. New scientific contribution of the thesis
Firstly, the thesis clarifies theoretical basis for bilateral
commodity trade structure, thereby providing an analytical
framework for researching the Vietnam - Korea commodity trade
structure; Secondly, the thesis clarifies the situation, results and issues
in the Vietnam - Korea commodity trade structure; Thirdly, the thesis
proposes solutions to improve the Vietnam – Korea commodity trade
structure in the coming time.


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6. Theoretical and practical meaning
Theoretically, the thesis adds and completes the general
analytical framework on bilateral commodity trade structure. Thesis’
results provide additional evidence on the shift and its determinants
on trade structure between a developing economy (Vietnam) and a
developed economy (Korea). Practically, thesis’ analyses and
proposed solutions can be the useful reference channel for relevant
Vietnamese organizations in developing appropriate strategies and
measures to enhance trade relations with Korea in future.
7. Thesis outline
Besides the Introduction, List of references and Annexes, the
thesis is divided into 5 chapters as follows:
Chapter 1: Overview of literature related to the thesis theme
Chapter 2: Theoretical basis for bilateral commodity trade
structure
Chapter 3: Research method for bilateral commodity trade
structure

Chapter 4: Current situation of Vietnam-Korea bilateral
commodity trade structure in the period 2001 - 2016
Chapter 5: Orientations and solutions to improve the Vietnam Korea bilateral trade structure
Chapter 1
OVERVIEW OF LITERARURE RELATED TO THE
THESIS THEME
1.1. Studies related to the theoretical basis of commodity trade
Typical studies include: Lall (2000), “The technological
structure and performance of developing country manufactured
exports, 1985‐98”; Gaulier, Lemoine and Ünal-Kesenci (2007),


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“China’s integration in East Asia: Production sharing, FDI & hightech trade”; Hinloopen and van Marrewijk (2008), “Empirical
Relevance of the Hillman Condition for Revealed Comparative
Advantage: 10 Stylized Facts”; Hanson (2010), “Sources of export
growth in developing countries”; Hirschman (1964), “The paternity
of an index”; Balassa (1965), “Trade liberalisation and “revealed”
comparative advantage”; Laursen (2000), “Trade specialisation,
technology and economic growth: Theory and evidence from
advanced countries”; Grubel and Lloyd (1975), “Intra-industry trade:
the theory and measurement of international trade in differentiated
products”; Michaely (1996), “Trade preferential agreements in Latin
America: an ex-ante assessment”; Hausmann, Hwang and Rodrik
(2006), “What you export matters”.
1.2. The studies on Vietnam-Korea trade as part of general
relationship between the two countries or at the wider scope
Typical studies include: Ngo Xuan Binh (2013), “VietnamKorea relations in the new international context”; Nguyen Hoang
Giap, Nguyen Thi Que and Nguyen Van Duong (2011), “VietnamKorea relations from 1992 to now and development prospects until
2020”; Le (2007), “ASEAN-Korea co-operation in the development

of new ASEAN members”; and Steinberg (2010), “Korea’s Changing
Roles in Southeast Asia: Expanding influence and relations”.
1.3. In-depth studies on Vietnam-Korea trade relations
Notable studies include: Nguyen Hong Nhung and Chu Thang
Trung (2005), “The reality of Vietnam - Korea trade relations”; Ngo
Xuan Binh and Dang Khanh Toan (2010), “Promoting economic
relations between Vietnam and Korea”; Nguyen Khanh Doanh
(2011), “Vietnam - Korea trade relations: Prospects and solutions”;
Nguyen Tien Dung (2011), “The impact of ASEAN-Korea free trade
area on Vietnam’s trade”; MUTRAP (2011), “Assessing the impact


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of ASEAN-Korea Free Trade Agreement on Vietnam’s economy”;
Phan and Ji (2012), “An Analysis of Korea-Vietnam Bilateral Trade
Relation”; Phan and Ji (2016), “Potential Economic Impacts of the
Vietnam - Korea Free Trade Agreement on Vietnam”.
1.4. Other in-depth studies on commodity trade
Notable studies include: Nguyen Chien Thang and Tran Van
Hoang (2015), “Vietnam’s trade structure: Long-term challenges”;
Truong (2016), “Technological Structure in Vietnam - Thailand
bilateral trade relations”; PhD thesis of Nguyen Thi Minh Huong
(2012), “Structure of Vietnam - Japan commodity trade in the 20012010 period”; Vo Thy Trang (2016), “Factors affecting internal trade
in agricultural products between Vietnam and APEC”; Vu Thanh
Huong (2016) “Vietnam - EU Free Trade Agreement: Impact on trade
in goods between the two sides and implications for Vietnam”.
1.5. General assessments and issues the thesis focusing on
Firstly, most studies in Vietnam have used a statistically
descriptive approach; Secondly, foreign studies have had more indepth analysis of relations and trade structure between Vietnam and
Korea, between ASEAN and Korea. However, the aspects related to

dynamic comparative advantage, value added, the sophistication of
export products, context analysis and recommendations have not been
addressed specifically and comprehensively.
Inheriting the existing research works, the thesis focuses on
solving the following contents: systematizing and building the
theoretical basis; formulating and applying analytical framework and
research methods to analyze and evaluate the Vietnam - Korea
bilateral commodity trade structure in the 2001 - 2016 period;
thereby, clarifying the results, problems and causes, as well as
proposing solutions to improve.


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Chapter 2
THEORETICAL BASIS FOR BILATERAL COMMODITY
TRADE STRUCTURE
2.1. Basic Concepts
- Inter-industry trade: is understood as commercial activities
taking place in between different industries.
- Intra-industry trade: is the type of trade that a country exports
and imports the same product groups and industries. Intra-industry
trade can be divided into horizontal intra-industry trade and vertical
intra-industry trade.
- The commodity trade structure: is the total value of goods
constituting a country’s trade; those parts are intertwined, interacting
with each other and are consistent with certain economic and social
conditions of the country.
- Appropriate commodity trade structure: is a structure with
harmonious combination of constituent parts, allowing maximum
exploitation of comparative advantages, national resources, and

partner’s strengths; and that contributes to promoting trade, especially
in the export sector, while also creating conditions to quickly and
effectively improve the national trade structure.
- Improving the commodity trade structure: is the structural shift
of components of the national trade in a positive direction, consistent
with the development of social labor division, production resources,
as well as scientific and technological advances of the country, region
and the world.
2.2. Theoretical foundation
A number of important international trade theories that are the
theoretical foundation for analyses of commodity trade structure are
divided as follows: classical and neoclassical international trade


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theories including theory of comparative advantage, theory of factors
of production; and modern trade theories including theory of
economies of scale, theory of production networks and global value
chains, and national competitive advantage theory.
2.3. Basis for evaluating the efficiency of bilateral commodity
trade structure
The dissertation evaluates the efficiency of the Vietnam-Korea
trade structure on the following basis and criteria: effectively
exploiting comparative advantages, national resources and the level
of meeting the demand for input import for production and
consumption; quality and competitiveness of export products; value
added of export products and the level of national participation in
regional and international production networks; and sustainability of
import and export structure.
2.4. Factors affecting bilateral commodity trade structure

2.4.1. Natural conditions of the country
2.4.2. Conditions and strategies of socio-economic development,
and competitiveness of enterprises
2.4.3. National comparative advantage
2.4.4. Relations and policies on trade development of each country
2.4.5. Policies to attract FDI, and business strategy and outward
investment of each country
Chapter 3
RESEARCH METHOD FOR BILATERAL COMMODITY
TRADE STRUCTURE
3.1. Researching bilateral commodity trade structure based on
the use of international commodity classification systems


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3.1.1. Commodity trade structure according to import and export
industry
The thesis uses the classification method of Hanson (2010) to
classify import and export products into the following product
groups: Agriculture, meat, dairy and seafood; Food, beverages,
tobacco, wood, paper; Extracting industries; Chemicals, plastics,
rubber; Textile, apparel, leather and footwear; Iron, steel and other
metals; Machinery, electronics, transport equipment; Other industries.
3.1.2. Commodity trade structure according to stages of production
The thesis uses classification method of Gaulier et al. (2007) to
analyze the trade structure between Vietnam and Korea by following
commodity groups: primary goods; semi-finished products and parts
and components; capital goods and consumption goods.
3.1.3. Commodity trade structure according to technology content
The thesis uses the classification method of Lall (2000) to

analyze Vietnam - Korea trade by following commodity groups:
Primary products; Resource-based manufactures; Low-technology
manufactures; Medium-technology manufactures; High-technology
manufactures; and Non-classified products.
3.1.4. Commodity trade structure according to the contribution of
factors of production
The thesis uses the classification method of Hinloopen and van
Marrewijk (2008) to analyze the Vietnam – Korea commodity trade
by the following production factors: raw products, natural-resource
intensive products, labour-intensive products, technology-intensive
products, human-capital intensive products, and non-classified
products.
3.1.5. Vietnam-Korea commodity trade according to value-added
The thesis uses the OECD’s database of trade in value-added
(TiVA) to analyze the domestic value added in total export products


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between Vietnam and Korea; origin of value-added in exports of
Vietnam and Korea.
3.2. Researching bilateral commodity trade structure based on
the use of trade pattern indices
3.2.1. Trade intensity index (TII)
The thesis uses the TII index to calculate the intensity of exports
and imports between Vietnam and Korea, in relation to each other’s
trade with the rest of the world.
3.2.2. Trade complementary index (TCI)
The thesis employs the TCI index to assess the changes in the
compatibility of import and export structure between Vietnam and
Korea over time.

3.2.3. Export diversification
The thesis uses export concentration index - HHI to analyze the
level of export diversification between Vietnam and Korea in
comparison with other countries in the region.
3.2.4. Intra-industry trade index (IIT)
The thesis uses the IIT index of Grubel – Lloyd (1975) to
analyze intra-industry trade between Vietnam and Korea; and
employs price index to research vertical and horizontal intra-industry
trade between the two countries.
3.2.5. Export product sophistication index (EXPY)
The thesis uses the WITS of the World Bank to calculate the
EXPY index, thereby assessing the sophistication of export products
between Vietnam and Korea, in comparison with some other
countries in the region.
3.2.6. Revealed comparative advantage index (RCA) and
normalized revealed comparative advantage (NRCA)


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The thesis uses RCA and NRCA indices to calculate export
products that Vietnam and Korea have comparative advantages as
well as comparative disadvantages.
Chapter 4
CURRENT SITUATION OF VIETNAM - KOREA
BILATERAL COMMODITY TRADE STRUCTURE IN THE
PERIOD 2001 - 2016
4.1. Overview of trade relations between Vietnam and Korea
4.1.1. Looking back on the history of Vietnam-Korea trade relations
The goods exchange between Vietnam and Korea began at a
modest level when Vietnam decided to implement economic reforms

in the late 1980s. However, it began to expand rapidly when the two
countries established diplomatic relations in 1992. Vietnamese
products exported to Korea in this period were mainly seafood,
vegetables, coffee, clothes and furniture, while imported goods from
Korea principally focused on fabrics and chemicals, petroleum
products, trucks and spare parts.
4.1.2. Export, import and balance of commodity trade between
Vietnam and Korea after the year 2001
Bilateral trade between Vietnam and Korea expanded rapidly
over time, from 2.1 billion USD in 2001 to 65.6 billion USD in 2018.
Exports from Vietnam to Korea increased rapidly from 385 million
USD in 2001 to 18.1 billion USD in 2018; while imports increasing
from 1.7 billion USD in 2001 to 47.5 billion USD in 2018. Vietnam’s
trade deficit with Korea expanded quickly, reaching 20.1 billion USD
and 32.1 billion USD in 2016 and 2017 respectively, before reducing
to 29.2 billion USD in 2018.
4.1.3. The importance of Vietnam-Korea trade to each country


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Vietnam and Korea have become increasingly important
partners of each other, both in terms of export market and import
market. In particular, the importance of Vietnam-Korea trade to each
country increased rapidly after the establishment of the AKFTA and
Vietnam’s participation in the WTO (2006). Nevertheless, Vietnam
still depends on trade with Korea rather than Korea’s dependence on
trade with Vietnam.
4.2. Situation of Vietnam-Korea commodity trade structure
4.2.1. Export-import products and export-import product groups
Export-import structure between Vietnam and Korea has

increasingly focused on the group of machinery, electronics and
transport equipment, especially in Korea’s exports to Vietnam.
However, Vietnam still significantly relies on exports of textiles,
leather goods and footwear embodied with cheap labour cost, which
are also products Vietnam has comparative advantage over Korea and
many other countries.
4.2.2. Stages of production
The research results show that the proportion of intermediate
goods in Vietnam’s exports to Korea increased by about two times,
up to 40.9% in 2016. Meanwhile, imports of Vietnam as well as of
many other East Asian countries from Korea are also mainly
intermediate goods.
4.2.3. Technology content, factors of production and product
sophistication
4.2.3.1. In terms of the technology content
Vietnam’s export structure to Korea has changed in the direction
of reducing the role of primary products and raw materials, while
increasing the share of processing and manufacturing industries.
Meanwhile, Vietnam’s imports from Korea have increasingly
concentrated on high-technological goods. This affirms encouraging


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changes in the quality of Vietnam - Korea trade structure in relation
to the trade between Korea and other countries in East Asia.
4.2.3.2. In terms of the factors of production
From 2010 onwards, Vietnam has strongly reduced the
dependence on exports of raw products to Korea, while increasing the
contribution of technology-intensive products, up to 40% in 2016.
However, Vietnam still depends significantly on labour-intensive

products. Regarding Korea, the share of technology-intensive export
products to Vietnam has more than doubled, reaching 68% in 2016.
4.2.3.3. In terms of the product sophistication
The EXPY value of Vietnam’s exports to the Korean market has
improved significantly, rising from 9.57 to 9.88 in the period 2001 2016. However, the sophistication in Vietnam’s export products to
Korea is much lower than Korea’s export products to Vietnam. In
future, to maintain export growth to the Korean market, Vietnam
needs to continue diversifying its export product portfolio;
meanwhile, Korea can still increase exports to Vietnam by exploiting
its existing product portfolio.
4.2.4. Inter-industry trade, intra-industry trade, vertical intraindustry trade and horizontal intra-industry trade
Over time, the share of inter-industry trade between Vietnam
and Korea has continuously decreased, currently sharing only a small
proportion, whereas intra-industry trade has continuously increased,
which is evidence to the rapid growth of Vietnam-Korea trade as well
as the improvements of diversifying import and export goods. After
the 2001-2007 period of decline, the IIT index between Vietnam and
Korea began to improve drastically after 2013. This indicates that the
structure of import and export goods between Vietnam and Korea is
increasingly similar. However, compared with other countries, except
Indonesia, the IIT values between Korea and Vietnam is still much


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lower than that between Korea with Malaysia, China, Thailand and
the Philippines.
4.2.5. Trade in value-added
The most prominent feature is the domestic value-added in
export between the two sides rapidly expanded in the period of 20062015. In particular, the domestic value added of Vietnam’s exports to
Korea has improved faster than that of exports of many other East

Asian countries. In the period 2001-2015, the value-added of Korean
exports to the world originating from Vietnam increased sharply,
from a few tens of million USD to more than 1.1 billion USD, which
was higher than that of Thailand and the Philippines, but much lower
than those of Malaysia, Indonesia and China. Meanwhile, Korea’s
contribution as the source of value-added in Vietnam’s exports to the
world soared to 5.2 billion USD in 2015, compared with more than
250 million USD in 2001.
4.2.6. Diversity of export products
The concentration of export goods between Vietnam and Korea
fluctuated strongly but in general, the export structure between the
two sides was relatively diverse. The number of exported products
from Vietnam to Korea had increased sharply but still much lower
than the number of Korean exports to Vietnam.
4.2.7. Export comparative advantage
Vietnam has the strong advantage of agricultural and forestry
export products. However, despite the low NRCA value, Vietnam has
begun to enjoy comparative advantages for machinery and electronic
products. Meanwhile, Korea’s export advantage to Vietnam has
shifted sharply from light industrial products, processing industries
such as footwear, cloths, leather and packaging, plastic and rubber to
the technology and human–intensive manufactures such as machinery
and electronics.


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4.2.8. The complementarity in Vietnam - Korea trade
The trade structure between Vietnam and Korea has been mainly
complementary rather than competitive, especially between
Vietnam’s imports and Korea’s exports. This shows that the potential

for expanding Vietnam-Korea trade in the coming time is large if the
two sides continue to fulfill their commitments to opening and
liberalizing the market for each other.
4.3. Results and issues in the Vietnam – Korea commodity trade
structure
4.3.1. Results
- In terms of efficiently exploiting export comparative
advantages and national resources, and the level of meeting the
demand for input imports for production and consumption: In
general, the import and export structure between Vietnam and Korea
is suitable with natural conditions, scientific and technical
development level as well as the quality of human resources of each
country.
- In terms of the quality and competitiveness of goods: Vietnam’s
share of raw materials and resource-intensive exports to Korea fell
sharply, while increasing the proportion of manufactures with hightechnology and capital-human content. Furthermore, the number,
types and competitiveness of export products from Vietnam to Korea
have been improved. Vietnam’s import products from Korea have
higher quality that making certain contributions to improving
Vietnam’s commercial structure with Korea.
- In terms of the value-added of export products and the degree
of national participation in regional and international production
networks: The contribution of the domestic sector to the value
addition in Vietnam’s export goods to Korea has been increasing.
Also, the domestic manufacturing sector of Vietnam integrates deeper


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into the regional production network of the Korean multinational
companies and of other countries.

- In terms of the sustainability of the import and export structure:
The sustainability of Vietnam’s commodity export structure has
improved over time. This improvement is reflected by the increasing
contribution of manufactured products, gradual decrease of raw and
resource-intensive products, which are easily affected by the
disadvantages of the international market.
4.3.2. The issues
- The issues related to improving the efficiency of exploiting
export comparative advantages, national resources and sources of
imported inputs for production and consumption: In the long term,
Vietnam needs to have adjustments to take advantage of the import of
high-technology and human-intensive machinery and transport
equipment from Korea, thereby further improving the production and
export capacity of domestic companies. At the same time, in order to
maintain export growth, Vietnam needs to shift and create
comparative advantages in production and export of goods using
technological and capital-knowledge factors.
- The issue related to improving the quality and competitiveness
of goods: Despite the improved quality and competitiveness of export
products from Vietnam to Korea, there are still significant limitations,
as expressed by the high proportion of low-technology and labourintensive export products. Furthermore, despite the improvement in
the number, models and types, Vietnam’s export products to the
Korean market are still quite monotonous, not creating a strong
attraction for Korean consumers. In the future, to continue
maintaining export growth, Vietnamese enterprises should improve
the scientific and technology content, quality and competitiveness of
export products.


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- The issues related to improving the value-added of export
products and the level of national participation in regional and
international production networks: Vietnam has significantly
improved domestic value added in export to the Korean market but
the contribution of Vietnamese enterprises has remained limited.
Therefore, developing supporting industries, increasing technology
transfer from FDI sector to domestic enterprises, building product
promotion strategies are almost mandatory requirements for
Vietnam’s domestic enterprises to participate in stages of production
with high value addition such as marketing activities and the
production of original equipment and components.
- The issues related to improving the sustainability of import and
export structure: The changes in Vietnam’s trade structure with Korea
are mainly triggered by external factors, rather than the contribution
of internal resources. In the long term, such dependence can create
adverse effects on Vietnam’s foreign trade activities as well as on the
quality of Vietnam’s trade structure with Korea. If Vietnam’s export
structure does not shift to higher production chains, its revenue
growth and value-added exports to the Korean market will be directly
affected in next years.
4.4. Factors affecting the Vietnam-Korea bilateral commodity
trade structure
4.4.1. Positive impact factors
The improvements of the commodity trade structure between
Vietnam and Korea could be explained by the following factors:
First, the Vietnam - Korea cooperation relationship has been
constantly strengthened and developed in all fields; Second, Vietnam
has achieved impressive results in attracting FDI, especially from
Korean enterprises into manufacturing and processing industries;
Third, the Vietnam-Korea economic structure has been mainly

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complementary; Fourth, the natural, socio-economic conditions in
Vietnam and Korea have created a push for trade relations of the two
countries; Fifth, the trend of economic linkages between East Asian
countries has been constantly increasing.
4.4.2. Negative impact factors
Factors negatively affect the shift in the Vietnam-Korea
commodity trade structure including: Firstly, the model of economic
development, production and export in Vietnam has still based on the
advantages of land, natural resources and low-cost labour; Secondly,
business - investment environment and policies as well as
infrastructure system in Vietnam are much improved but still having
considerable limitations; Thirdly, Vietnam is lacking essential
supporting industries; Fourthly, the competitiveness of Vietnamese
enterprises in general and enterprises having trade relations with
Korea in particular has remained low; Fifthly, there are limitations in
Vietnam in taking its advantage from FTAs involving Vietnam and
Korea; Finally, Vietnam faces fierce competition from other
economies of the region.
Chapter 5
ORIENTATIONS AND SOLUTIONS TO IMPROVE THE
VIETNAM - KOREA BILATERAL COMMODITY
TRADE STRUCTURE
5.1. International, regional and domestic contexts affecting
Vietnam-Korea trade relations in the next years
5.1.1. International context
5.1.2. Regional context
5.1.3. Domestic context

5.1.4. Vietnam - Korea free trade agreement


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Domestic, regional and international contexts create advantages
and challenges for promoting trade cooperation between Vietnam and
Korea. However, the advantages are still principal because of the
most following crucial condition: Vietnam and Korea continue to
hold the leading position in the economic policy of each party, in
which Korea is expected to promote investment and industrial
cooperation with Vietnam in future.
5.2. Viewpoints and orientations to improve the Vietnam - Korea
trade structure
5.2.1. In terms of export orientation
The first is focusing on export products to Korea that Vietnam is
having comparative advantage, while identifying and developing
potential products for export expansion in future. The second is
increasing the contribution of products using high technological and
capital-knowledge content. The third is focusing on export products
with high value and creating many jobs for Vietnamese workers. The
fourth is increasing export of capital and intermediate goods, while
reducing export proportion of raw materials, consumption goods with
low value addition. The final is increasing export of products
involving significant participation and contribution of Vietnam’s
domestic business sector; while not encouraging export of products
embodied with cheap labour, environmental pollution, or only
creating benefits for foreign companies.
5.2.2. In terms of import orientation
The first is boosting imports from Korea with modern
machinery, equipment and spare parts, necessary materials, with the

emphasis on exploiting Korea’s production and export advantages.
The second is restricting imports from Korea the products that
Vietnam can produce or luxury goods that have negative impacts on
the environment and health as well as the stability of society. The


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third is flexibly applying restrictions on imports from Korea to
protect domestic production.
5.3. Solution to improve the Vietnam – Korea commodity trade
structure
5.3.1. Building and implementing appropriate import and export
orientation policies for the Korean market
- In terms of export orientation: reducing export products to the
Korean market with low value-added, increasing export products with
high value addition; while restricting the export of unfavoured
products.
- In terms of import orientation: Priority should be given to the
import of capital goods, especially the modern equipment that Korea
has advantages; while restricting the import of second-class and
luxury goods.
5.3.2. Diversifying export products to the Korean market
Vietnam should increase trade in intermediate goods with Korea.
Furthermore, measures to encourage Vietnamese enterprises to
develop new products, or diversify types and models of existing
products, through investment in modern machinery and equipment, as
well as skilled human resources and R&D activities should be
especially priority.
5.3.3. Efficiently exploiting the advantages from VKFTA
Vietnam should continue to disseminate basic information on

the VKFTA for enterprises and people so that they can grasp the core
content of the agreement, the roadmap to implement, commitments
and incentives regarding trade and investment between Vietnam and
Korea. The Vietnamese domestic enterprises should proactively apply
modern quality management systems in order to meet very strict
standards and requirements related to environment and health of the
Korean market in VKFTA.


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5.3.4. Developing priority supporting industries
Vietnam should develop and issue financial supporting policies
for research and development activities, start-up activities of
enterprises, especially small and medium enterprises (SMEs). The
Vietnamese government should also have policies to assist human
resource development in supporting industries. Additionally, in the
context of limited domestic resources, Vietnam needs to attract and
encourage Korean enterprises and other countries having experience
such as Japan, Malaysia and Thailand to invest and develop its
domestic supporting industries.
5.3.5. Enhancing FDI attraction, technology transfer, and
industrial cooperation between Vietnam and Korea
Vietnam should have the appropriate attracting FDI policy
including FDI from Korea to promote export growth, and improve the
production capacity of domestic enterprises. Vietnam should also
encourage and support Korean FDI enterprises to expand links with
domestic enterprises in production and trade, especially supporting
industries.
5.3.6. Promoting and improving the efficiency of trade promotion
activities towards the Korean market

The Vietnamese government can act as an intermediary and
sponsor for trade promotion activities with the Korean market as well
as for similar programs of provinces and associations. For
Vietnamese enterprises, they should enhance activities to help
understand consumption habits, import regulations, distribution
channels and technical standards in the Korean market; while actively
seeking Korean partners through developing marketing strategies,
brand and product positioning, and strengthening trade promotion
activities.


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CONCLUSION
Along with the political, diplomatic and cultural development
since the establishment of official diplomatic relations in 1992, the
Vietnam-Korea trade exchange has achieved a very rapid growth,
especially after the year 2000 when the AKFTA was established and
Vietnam officially became a WTO member. As a result, Korea and
Vietnam have become each other’s important trading partners, both at
regional and international levels. However, Vietnam has often
experienced the huge deficit with Korea, especially when the two
have more opened their market to the other. This has been partly
reducing benefits Vietnam can enjoy from this impressive growth.
When analyzing the Vietnam-Korea commodity trade structure
in the period 2001 - 2016, following conclusions can be drawn: 1)
Vietnam has sharply reduced its exports to Korea over resourceintensive and unskilled labour–intensive products, and at the same
time significantly increased the contribution of products with high
scientific and technological content; 2) The domestic value-added
content in Vietnam’s export products has significantly improved; 3)
The rising intra-industry trade, especially intermediate goods such as

telephone and machinery parts in the total trade between the two
countries indicates that Vietnam has been integrating deeper into the
regional and international production network of Korean
multinational enterprises; 4) Vietnam’s import structure from Korea
has been increasingly focused on the manufactures with high
technology and capital - knowledge content, that has certain positive
effects on improving its production and export capacity.
Improvements in Vietnam’s trade structure with Korea over the past
decade are due to many factors including: (i) the development of
Vietnam-Korea cooperation on all field; (ii) growing FDI attraction,


23
especially from Korea into Vietnam’s manufacturing and processing
industries; (iii) the complementary trade structure between two sides;
(iv) natural, socio-economic conditions of each country; (v)
increasing economic linkages in East Asia region including Vietnam.
Besides positive results, the structural shift of Vietnam-Korea
commodity trade over 2001 - 2016 still has many limitations and
problems including: 1) trade deficit with Korea increases very fast; 2)
the share of low technology-intensive and low-skilled labourintensive products in Vietnam’s export to Korea is still large; 3) The
sustainability of export structure is low when relying heavily on FDI
enterprises, especially Korean enterprises; 4) The domestic business
sector’s participation in the value chain of production and export to
Korea mainly focuses on simple stages such as processing and
assembly; 5) The intra-industry trade ratio between Vietnam and
Korea is low, showing that Vietnam has not yet effectively built and
utilized economies of scale in trade exchange with Korea. The basic
causes of the above limitations and issues are as follows: (i) the
dependence of model of economic development, production and

export on the advantage of cheap labour and natural resources; (ii)
unclear policy environment for business and investment attraction,
and outdated infrastructure; (iii) lack of essential supporting
industries; (iv) weak competitiveness of domestic enterprises, and not
taking advantage of trade and economic agreements with Korea; (v)
lack of separate trade policy for the Korean market; and (vi)
increasing competition in export and attracting investment from
Korea between Vietnam and other countries in the region.
Current and coming domestic, regional and international context
would create many opportunities as well as challenges for the
development of Vietnam - Korea trade relations, but the advantage is
primarily. This is because both enterprises and people of the two