South Korea and Vietnam agreed on Friday to enhance security cooperation, highlighting the nuclear threat from North Korea. They pledged to increase trade and investment between them, despite the recession this year and the tax increases that Vietnam intends to impose on large companies. During his first visit to Vietnam since taking office, South Korean President Yoon Suk-yeol acknowledged the economic challenges but emphasized Vietnam's crucial role in Seoul's growth strategy.
He signed 17 agreements with Vietnamese President Vo Van Thuong covering various areas, from critical minerals to Vietnamese workers in South Korea, stating that Seoul will strengthen cooperation with Vietnam against the nuclear threat from North Korea. The two countries also agreed to bolster relations in the defense industries and security cooperation in the South China Sea.
The leaders reiterated their goal of enhancing bilateral trade despite the ongoing recession since the start of the year, attributed to decreased global demand for smartphones and other electronic goods assembled by Korean companies in Vietnam, many of which have components shipped from Korea. Bilateral trade has dropped by a quarter in the first five months of this year compared to the same period in 2022, with Vietnamese imports of South Korean products declining by nearly 30 percent.
Data from the Vietnamese government showed that investments from Korean companies in Vietnam this year were significantly lower than those from competing companies, with China and Japan easily outpacing them. Several industry and trade sources reported that the reduced demand for electronic goods forced South Korean companies to cut back on their Vietnamese workforce. Complicating matters further, Hanoi is set to impose a new tax from next year on major companies, including large South Korean multinationals, as part of a global overhaul of tax regulations, which may diminish Vietnam's appeal as an industrial hub.
