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30 Years of Korea-Vietnam Economic and Social Cooperation 1992-2021: Achievements, Limitations and Suggestions for Further Expansion Economic relations, Economic cooperation

Author KWAK Sungil, BEAK Yong-Hun, LEE Han-Woo, Lê Quốc Phương, Vũ Mạnh Lợi, and Nguyễn Thị Thanh Huyền Series 21-23 Language Korean/Vietnamese Date 2021.12.30

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Korea and Vietnam have achieved remarkable outcomes of cooperation over the past 30 years since establishing diplomatic relations in December 1992. The rapid expansion of cooperation between the two countries is due to their geographical, historical, and cultural similarities and commonalities. Vietnam and Korea are both traditionally agricultural countries that have grown rice since ancient times, and have been influenced by Confucianism. In addition, Korea and Vietnam, which have inherited abundant cultural heritages thanks to their long history, have strong national pride. In particular, many Vietnamese scholars often take Korea as an example when discussing improving national industrial strategies and infrastructure, given that Korea has overcome the ruins of the Korean War and Vietnam is growing over the scars of the Vietnam War.

However, since Vietnam joined the WTO in 2007, cooperation between the two countries has been mainly led by the economic sector. As economic cooperation strengthened, the two countries fell into the illusion that they knew each other well. Delusions often lead to unnecessary misunderstandings. A representative example is the dissatisfaction of Koreans with Vietnam’s quarantine response in the early stages of the 2020 COVID-19 outbreak. Vietnam regarded quarantine as a war situation and controlled it with strong discipline, but foreigners, including Koreans, did not understand this social trend. It was a misunderstanding that could have been avoided if Koreans were a bit more aware about Vietnam’s quarantine situation and culture, and conversely, Vietnamese knew better about Korean society and culture. This study analyzes the performance of cooperation in the economic, social, and cultural sectors over the past 30 years and seeks ways to enhance cooperation in the social and cultural sectors, which are relatively less successful than the economic sector. This is because the sustainable development of their bilateral relations requires not only economic cooperation but also “soft power” cooperation in social and cultural sectors.

Chapter 2 evaluates the achievements of economic cooperation between Korea and Vietnam over the past 30 years. As of 2020, Vietnam is Korea’s third-largest export destination and Korea is Vietnam’s fourth-largest export destination. However, the amount of trade between the two countries, which had soared until 2017, has stagnated since 2018. Efforts between the two countries are needed to expand trade. The revealed comparative advantage index (VRCA) based on value-added exports of both countries was calculated year by year using the ADB-MRIO (ADB Multi-Regional Input-Output Table). Although there has been a change in the structure of the comparative advantage between them, the two countries still show a complementary relationship. The complementary relationship between the two countries is a starting point for expanding trade again. 

In addition, it is necessary to expand trade between the two countries in order to resolve the trade imbalance issue raised as the biggest problem in trade between Korea and Vietnam. The fact that Vietnam’s export intensity index to Korea is lower than that of Korea to Vietnam suggests that Vietnam has room to expand exports to Korea. We need to think about how Vietnam can expand exports to Korea. The expansion of exports of rice, coffee, tea, cashew nuts, and natural rubber to Korea simply based on comparative advantage will be effective in improving the trade imbalance between the two countries in the short term. However, if this trade structure is prolonged, Vietnam will remain a low-value-added primary product exporter.

Vietnam shows lower domestic value-added utilization than neighboring ASEAN member states (AMS) such as Thailand, the Philippines, Malaysia, and Indonesia. This is a chronic problem in the Vietnamese manufacturing industry rather than a problem between Korea and Vietnam. While the Vietnamese government is making various efforts to foster a supporting industry, there are also notable activities by some Korean firms to transfer technologies and build management capacity so that Vietnamese local firms can participate in the production network of Korean firms.

Since 2014, Korea has been Vietnam’s largest foreign direct investment country. Amid a recent surge in Japanese investment on infrastructure construction, Korean firms’ investment on manufacturing sectors is meaningful. According to the Vietnamese government’s long-term development plan until 2045, it plans to attract more than $30 billion in FDI every year. This suggests that Vietnam should become a more open market, which can provide new opportunities for Korean firms. However, Vietnam’s somewhat insufficient measures in the recent COVID-19 pandemic may have created anxiety for Korean firms hoping to secure a stable supply chain. Vietnam itself needs to express a clear principle that guarantees the activities of Korean firms in Vietnam.

Meanwhile, demands for technology transfer from Vietnam are expected to gradually increase. Based on ADB-MRIO data, backward GVC participation rates from 2007 to 2020 are always higher than forward GVC participation rates. In addition, the contribution of domestic value-added contents of exports is decreasing year by year. Therefore, Vietnam will strongly demand technology transfer to increase the domestic contents of exports. In fact, Vietnam has received relatively less technology transfer than other AMS. In particular, given the rate of foreign value-added content of exports to Vietnam’s total gross exports across industries, those of electronic equipment, primary metal, chemical product, and textile products manufacturing sectors, which Korea has mainly invested, are higher than the overall average of all industries. When technology transfer to Vietnamese local firms expands, the Korean and Vietnamese governments need to pay attention to Korean SMEs working in Vietnam so that they can preemptively seek new paths through cooperation with Vietnamese local SMEs. Special attention should be paid to the firms that need business restructuring, in particular, due to the COVID-19 pandemic and the U.S.-China competition.

In addition, Vietnam is less dependent on regional value chains (RVCs) in the ASEAN region than neighboring AMS. The utilization rates of RVC in the ASEAN region is falling every year. 
As uncertainties in supply chains expand due to the U.S.-China competition and the COVID-19 pandemic, the importance of regional supply chains within the ASEAN Economic Community (AEC) has increased further. In particular, not only Vietnam but also all AMS competitively attract multinational firms moving from China to Southeast Asia due to the U.S.-China competition. It is time to coordinate this competition and make efforts to more effectively establish a supply chain in the ASEAN region.

Chapters 3 and 4 evaluate social and cultural cooperation between Korea and Vietnam after diplomatic relations in 1992.  As mentioned earlier, the performance of cooperation in the social and cultural sectors is very insignificant compared to the performance of economic cooperation between the two countries. In addition, in terms of the direction of cooperation, activities from Korea to Vietnam are wider and deeper than those from Vietnam to Korea. It is no exaggeration to say that efforts to resolve this double imbalance began in earnest only after the New Southern Policy was declared in 2017.

Chapter 3 evaluated the performance of social cooperation between Korea and Vietnam. First, the trends in human exchanges (tourism and visits, short-term and long-term stays, etc.) between the two countries and exchanges between institutions (central administrative agencies, local governments, research institutes, etc.) were reviewed.

First, indicators related to human exchange show the justification for improving quality in bilateral cooperation. The Vietnamese society in Korea and Korean society in Vietnam have grown. As of 2019, Vietnam is the country where Koreans visit the most and Koreans stay the most among ASEAN countries. In addition, Vietnamese visited Korea the most and the number of residents in Korea is the largest among Southeast Asians. The number of Vietnamese migrants residing in Korea for labor, marriage, and study abroad has also increased. The increase in visitors and migrants between both the countries suggests that practical and specific cooperation is needed to improve the quality of life, such as health care, along with enhancing mutual understanding.

Since the implementation of the New Southern Policy in 2017, Korea has been implementing regular exchanges between institutions with Vietnam through various methods such as seminars, forums, performances, and exhibitions to promote public diplomacy.  Korea promoted “Hallyu (Korean Wave)” and Korean food through Korean food festivals and K-Pop festivals, and also focused on cultural exchanges such as Taekwondo clubs, volunteer activities, and Korean language education at the central government level. Local governments in Korea are signing sisterhood and exchange agreements with Vietnamese local cities. Local government exchanges are mainly concentrated in the administrative, cultural arts, and economic sectors, while youth-private group exchanges need to be expanded. Exchanges and support between research institutes to foster technical manpower have been steadily conducted. KOICA’s Vietnam-Korea Vocational College of Technology in Bac Giang project (2010-2014), Vietnam-Korea Industrial Technology Vocational College support project (2014-2019), and VKIST establishment project (2014-2020) are representative.

Despite the achievements of social sector cooperation as described above, there is a critical view that unbalanced cooperation has been carried out. Due to the importance of the economic sector, the demand for cooperation in the social and cultural sectors was overlooked. In addition, there is a lack of careful attention and understanding of each other. From this point of view, this study has selected cooperation and conflict cases between Vietnam and Korea, reviewed the context, and analyzed the causes. In particular, in order to find actions for a future-oriented cooperation between them, more attention was paid to conflict cases than cooperation ones.

First of all, annual trend analysis was conducted with key words for cooperation and conflict between Korea and Vietnam. Over time, it was found that key words about cooperation accounted for more weight than conflict. In the case of social conflict between the two countries, keywords related to marriage migrant women, such as “international marriage,” “domestic violence,” “migrant women,” “mother-in-law,” “multicultural families,” “marriage,” “random assault,” “women,” and “communication,” accounted for high weights and frequency. In the case of social sector cooperation, major institutions and persons who signed cooperation agreements between the two countries accounted for high weights and frequencies. Most of the keywords were classified into health, education, social security, environment, and biodiversity.

There are two representative conflict cases as examples between Korea and Vietnam based on the key-words analysis. One is about awareness of multi-cultural families and violence against Vietnamese married migrant women, and the other is a conflict arising from the recent COVID-19 outbreak. 

Both cases show how dangerous the perception of identifying Korea and Vietnam is. It should be recognized that there are differences in social similarities between Korea and Vietnam. Since Koreans’ emotional intimacy with Vietnam is very high, they, facing Vietnam’s reactions that do not meet their expectation, they tend to criticize Vietnam. In addition, there is a lack of effort to understand each other deeply with a vague idea of “it must be similar.” In order for Korea and Vietnam to advance into a sustainable relation, they must acknowledge and sympathize with the subtle differences found in each other.

On the other hand, examples of true reciprocal cooperation between South Korea and Vietnam include Park Hang-seo’s appointment and achievement as the head coach of the Vietnamese national soccer team. Coach Park Hang-seo’s attitude toward the players and the people, the way of communication and leadership, and the attitude of understanding and respecting Vietnam’s history have been talked about by the Vietnamese people. Coach Park Hang-seo’s case is a major example of how to resolve the previous conflict.

Chapter 4 evaluated cultural exchanges between Korea and Vietnam. First of all, the most groundbreaking event in the cultural sector among exchanges between Korea and Vietnam for 30 years after diplomatic relations in December 1992 was the spread of the Korean Wave in Vietnam. The Korean Wave began in Vietnam in the late 1990s with TV dramas and spread to movies and music. Accordingly, cultural exchanges between the two countries expanded, deepening mutual understanding. On the one hand, entrepreneurs proclaimed an “economic Korean Wave” and pursued economic benefits from the spread of the Korean Wave. In addition, consumption of Korean products such as cosmetics, clothing, and food increased, and the number of Korean restaurants increased. After the mid-2000s, the center of the Korean Wave seems to have shifted to Korean popular music (K-Pop). Recently, it is judged that the enthusiasm for K-Pop has exceeded the popularity of TV dramas. Around 2010, K-Pop became a major sector of the Korean Wave in Vietnam.

Chapter 5 presents frameworks and measures to resolve the imbalance in economic, social, and cultural sectors and to enhance bilateral cooperation. This does not mean that economic cooperation should be reduced just because the pace of economic cooperation is fast, but that it is necessary to approach social and cultural cooperation with a more interest and inclusive attitude than now. Deep understanding of each other will eventually help upgrade the level and quality of economic cooperation. 

This study made the purpose of bilateral cooperation as the establishment of a “strategic global future cooperation partnership.” This is because cooperation between the two countries is required as a global partner that can expand bilateral cooperation between Korea and Vietnam to the Mekong subregion, India, and Africa. In order for the two countries to function as global future cooperation partners, a balanced understanding and continuous empathy of each other are required in mutual trust. To this end, four principles of bilateral cooperation are presented. First, rather than pursuing mercantilist interests, it is necessary to lay the foundation for mutually reciprocal development. Second, institutional supplementation is needed to form transparent cooperative relationships. Third, it is necessary to avoid cultural supremacy and strengthen inclusion in mutual culture. Fourth, it is necessary to expand exchanges as responsible partners. Under these four principles, this study proposes ways to cooperate in the economic, social, and cultural sectors.

First, for economic cooperation pursuing win-win prosperity, it is necessary to expand bilateral relations between Korea and Vietnam to trilateral or quadrilateral relations by including other partners. If Korea and Vietnam provide successful economic cooperation experiences together to third-party countries that wish to cooperate, it will be possible to discover new markets. The economic cooperation process between Korea and Vietnam can be modularized and applied together to the development of the Mekong subregion. In particular, if South Korea’s ODA in Vietnam, which is bound to decrease as Vietnam grows, is used to develop the Mekong subregion, Vietnam’s sense of alienation can be reduced.

Second, it is necessary to support the formation of a regional value chain (RVC) in the ASEAN region. In the recent international trade environment, where economic and security issues must be considered together, the establishment of RVC has important implications for Vietnam and Korea in that it can secure a stable supply chain. In particular, building a new supply chain based on its own comparative advantages of each AMS can strengthen the redundancy of their value chains. Meanwhile, institutional supplementation is also needed to establish a stable supply chain. For example, it is necessary to strengthen intellectual property rights and establish a Strategic Trade Controls (STC) system. Third, it is necessary to prepare a cooperative support system between Korean SMEs and Vietnamese SMEs. If technology transfer begins in earnest, Korean SMEs that have entered Vietnam following large companies may feel threatened. Both governments and large firms need to come up with a support system together so that Korean SMEs and Vietnamese SMEs can cooperate. Instead of large companies and Korean SMEs supporting technology and management capabilities for local companies in Vietnam, the Vietnamese government and the Korean government should come up with measures to expand support for Korean SMEs to switch industries or relocate production sites. Fourth, the two countries should support the formation of the Indo-Pacific Food Global Value Chain (IPFGVC). Vietnam has abundant agricultural products that can be processed, and Korea has high processing technology. If Korea and Vietnam can build food GVCs across the Indo-Pacific region together, exports can be expanded to other AMS as well as the United States, Japan, and China. In addition, Korea can free itself at least partially from food security issues in the long run.

Four measures are also proposed for social sector cooperation. First, it is necessary to encourage collaboration between Koreans and Vietnamese and to establish a related support system. As discussed in Chapter 3, although Vietnamese are the second most numerous foreigners to stay in Korea after Chinese, there is still a lack of communication channels between Vietnamese and Koreans in Korea. The ASEAN-Korea Centre, the ASEAN Culture House, and Asia Culture Center can be well-positioned to discover and support programs to promote cooperation among civilians. Second, fact-based information monitoring and information provision channels should be established. As seen in Chapter 3, as online media became more common, there were cases in which some groups’ opinions were misrepresented as if they were true between the two countries. It is necessary to establish a system that responds immediately when exaggerated or incorrect information is distributed through online media. Third, it is necessary to conduct in-depth research related to Vietnam and spread the research results to the public. Koreans often misunderstand that they know Vietnam well. However, in fact, very few Koreans have a deep understanding of Vietnamese society. This is because there is a lack of channels for research results conducted in academia to spread to the general public. Fourth, it is necessary to establish an innovation sharing model between universities in both countries. Vietnam-related departments in Korea are shrinking, but Korea-related departments in Vietnam are rapidly increasing. Cooperation measures should be prepared so that universities in both countries can coexist. Systems such as co-grants of degrees between Vietnamese universities and Korean universities can also be considered.

Finally, to strengthen cooperation in the cultural sector, this study proposes four measures. First, it is proposed to hold a regular Vietnamese film festival. Vietnamese films are being introduced to Korea through the Busan Film Festival or Jeonju Film Festival, but there is little memory of Vietnamese commercial films being released in Korea. As seen in Chapter 4, considering the imbalance in cultural consumption between the two countries, it is required to provide an opportunity to introduce Vietnamese films to Korea. Second, it is necessary to support the translation and publication of Vietnamese literature in Korea. Since diplomatic relations in 1992, there have been only 29 volumes of Vietnamese literature published in Korea. On the other hand, more than 120 books of Korean literature have been published in Vietnam. It is necessary to come up with support measures to resolve the imbalance in the literary sector between the two countries through related civil societies. Third, it is necessary to consider the establishment of a Vietnamese Cultural Center in Korea. As confirmed in Chapter 4, cooperation in the cultural sector between the two countries was very disproportionate. If the two governments together set up a dedicated window for introducing Vietnamese culture to Korea, they can expect to resolve the imbalance in cultural exchanges. Fourth, it is possible to consider supporting the production of online-based bilateral cultural programs. With the recent emergence of new and diverse media that can enjoy culture, the need to utilize them is increasing. Another way is to hold a YouTube content contest every month to introduce the social culture of the other country for Koreans and Vietnamese. As the number of interactive communication media increases, misunderstandings with each other can be reduced, and cooperative relations between Korea and Vietnam can be stably advanced. 

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