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Few Korean businesses in Vietnam mull returning home: survey

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15:09 | 18/06/2020

Few South Korean companies running manufacturing bases in Vietnam mull returning home despite reshoring incentives from the government, citing labor issues and high taxes as major damper, survey found.      

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few korean businesses in vietnam mull returning home survey

Samsung factory in Vietnam

In a poll on 25 entrepreneurs with businesses based in Vietnam by Maeil Business Newspaper, Korea’s biggest investment market after China, only three answered they could consider the move back home if conditions were right. There are over 9,000 Korean businesses active in Vietnam.

The biggest stumbling block to reshoring motivation was labor cost (59 percent in the multiple-answer questionnaire). Another 27.3 percent demanded easing in the rigid labor market, suggesting labor issues pose as the country’s biggest handicap in drawing investment.

Others called for broadening in government reshoring assistance (36.4 percent), support in business networks and opportunities (31.8 percent), greater subsidies for returning companies (18.2 percent), tax breaks (18.2 percent) and easing in the restriction on factory expansion around the capital (4.5 percent.

One CEO said there was no reason to give up the cheap wage and tax levels in Vietnam. Another complained about unsustainable public policy in Korea as it hinges on the ruling power in every five years under a new president.

“Without fundamental address to labor cost and taxing, few Korean companies will likely return home,” said Hong Sun, vice chairman of the Korea Chamber of Business in Vietnam.

In another survey conducted by the Korea Trade and Investment Promotion Agency (KOTRA), up to 93% of Korean firms saying that they are satisfied with investments in Vietnam.

few korean businesses in vietnam mull returning home survey

Vietnam is considered a favourable investment destination, and the RoK’s wave of investment is continuing, KOTRA said.

Analysts explained that Vietnam is an attractive investment destination for companies because the country has a favorable business environment.

Most of the administrative procedures have been reformed, to provide the best conditions for production and business activities, according KOTRA.

Vietnam also has geographical advantages in the region located on the sea route connecting Europe and other Asian countries. Its labor market with young workers is an attractive destination, KOTRA commented.

Korea is the largest foreign investor in Vietnam, with trade volume between the two countries reaching 63.9 billion USD in 2017. After Korea and Vietnam signed the free trade agreement (FTA) in 2015, the volume of trade between the two countries increased by 40%.

Korean companies have entered Vietnam since the 1990s, mainly in Hanoi and Ho Chi Minh City. Since the mid-2000s, Korean investment in Vietnam has changed from light industries, such as textiles, to heavy industries such as electronics.

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