Advantages and disadvantages in exporting Vietnamese goods to South Korea
Advantages
South Korea is the main export market for many key export products of Vietnam such as textiles, footwear, agricultural-forestry-fishery products, mechanical machinery, etc. Although most of these products only account for a very small market share in the total import turnover of the Korean market, the export growth rate of these products has tended to increase in recent years, which shows the potential and room to exploit and increase market share in the Korean market.
In the coming time, Vietnam's exports to South Korea are forecasted to continue to grow thanks to favorable factors such as:
- Under the negative impact of the COVID-19 pandemic, the Korean economy has also been seriously affected according to the general global trend, resulting in a decline in the income of most consumers. Therefore, their demand for more affordable products (especially essential items such as food, clothing, etc.) from developing countries like Vietnam has increased. Meanwhile, Vietnam has the strength to produce these products with prices typically lower than developed countries, and Vietnam also has the advantage of preferential tariffs from FTAs with South Korea.
- The number of Vietnamese studying and working in South Korea has been increasing in recent years. Therefore, the demand for consuming and using Vietnamese products in this country also tends to increase.
- Korean consumers are also becoming more open to consuming imported products (including Vietnamese ones) as long as the product has a clear/reliable origin, good quality, and competitive price. Meanwhile, Vietnam has many advantageous products which Korean consumers have high demand for, such as clothing, footwear, coffee, etc.
- Vietnamese products have increasingly high quality and are gradually conquering tough markets including South Korea. Many large Vietnamese businesses have made methodical and long-term investments in the production and export of high standard goods, in order to export to developed markets with strict requirements on product quality and model. Vietnam also focuses on attracting high-tech investment in potential underdeveloped industries, such as fruits and vegetables, seafood, etc. to improve the quality of exported products.
Disadvantages
- The structure of Vietnam's key export goods is not highly complementary to South Korea's import structure. The top 10 product groups imported the most by Korea in 2022 include: Mineral fuels, mechanical equipment, vehicles, electrical equipment, optical instruments, plastics and plastic products, ores, iron and steel and chemicals. Compared to the Top 10 products exported the most by Vietnam to South Korea in 2022, Vietnam has only gained market share in four product groups: electrical equipment, mechanical equipment, iron and steel and optical instruments. Other main export products of Vietnam such as textiles and footwear, and agricultural products are not South Korea's biggest import demand.
Table - Comparison between the top 10 products imported by South Korea with the top 10 products exported by Vietnam to South Korea in 2022
| Top 10 products imported by South Korea | Top 10 products exported by Vietnam to South Korea | ||
| HS code | Goods description | HS code | Goods description |
| 27 | Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes | 85 | Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles |
| 85 | Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles | 84 | Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof |
| 84 | Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof | 62 | Articles of apparel and clothing accessories, not knitted or crocheted |
| 90 | Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof | 61 | Articles of apparel and clothing accessories knitted or crocheted |
| 26 | Ores, slag and ash | 64 | Footwear, gaiters and the like; parts of such articles |
| 87 | Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof | 44 | Wood and Articles of wood; wood charcoal |
| 28 | Inorganic chemicals; organic or inorganic compounds of precious metals, of rare-earth metals, of radioactive elements or of isotopes | 03 | Fish and crustaceans, molluscs and other aquatic invertebrates |
| 72 | Iron and steel | 72 | Iron and steel |
| 29 | Organic chemicals | 90 | Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus; parts and accessories thereof |
| 39 | Plastics and articles thereof | 63 | Other made up textile articles; sets; worn clothing and worn textile articles; rags |
Source: ITC Trade Map, 2023
- South Korea is a demanding market with many strict import requirements on sanitary and phytosanitary measures, and food safety, especially for agricultural products. According to a report from the Korean Ministry of Food and Drug Safety (MFDS) in 2020, there were up to 37 violations of food safety regulations for processed food shipments imported from Vietnam. According to Korean regulations, if imported shipments are found to contain harmful substances, the importer must have a plan to handle the violating shipment within the prescribed time (recall and destroy the entire quantity of goods being distributed).
Korean consumers themselves also pay great attention to product quality when choosing consumer goods. If there is negative information about the quality and safety of a product, Koreans will boycott that product and brand. Therefore, if Vietnamese products do not ensure stability and consistency in quality, even with preferential tariffs, it will still be difficult for Vietnamese goods to access Korean market.
- Korean consumers are often very interested in the brand, design of products for personal image and social status. In addition, under the huge influence of celebrities, Koreans tend to support brands and products promoted or used by their idols. Meanwhile, most Vietnamese products have not yet been truly focused on branding and design, nor promoted by influential individuals to approach the Korean customers.
- Vietnam's export products are facing fierce competition with many different competitors around the world (FTA partners or GSP partners of South Korea). Among them, there are many large economies with high competitiveness, such as the United States, Japan, EU countries, etc. and many countries in the region with export structures quite similar to Vietnam, such as China and Japan, ASEAN countries, etc. This causes certain difficulties for Vietnamese products to enter South Korea’s market, as Vietnamese products still lag behind competitors to some extent in terms of quality, diversity, and brand image.
Source: Center for WTO and International Trade
