[Editorial] Expanding to Southeast Asia and beyond

Vietnam and other Southeast Asian countries have become a crucial market for Korea. According to trade data, Korea raked in the biggest trade surplus with Vietnam last year. The black figure reached a whopping $34.25 billion, overwhelming $28 billion surplus in trade with the United States, $10 billion with India, and $1.2 billion with China during the same period. Vietnam has offered the biggest surplus to Korea for the first time since the two countries normalized diplomatic ties in 1992, the same year Korea established diplomatic relations with China.

Vietnam’s dramatic rise is associated with the ongoing realignment in global value chains. Multinationals have been relocating their manufacturing facilities out of China to Vietnam amid an intensifying trade conflict between the U.S. and China. Foreign exodus gained traction due to the rigid zero Covid-19 policy of China. Apple has moved some of its iPad production lines from China to Vietnam. Google is reviewing a similar move with its smartphone lines.

Vietnam has also been passionate in drawing foreign investment. It cut corporate tax, enhanced digital infrastructure, and expanded free trade agreements with other countries. According to the Korea Trade-Investment Promotion Agency, foreign companies accounted for more than 40 percent of Vietnam’s gross domestic product and more than 70 percent of its exports in 2021. Political and social stability as well as a large young population added to the national appeal.

Korea’s export prospects for this year are expected to be tough. Global economy is receding on high interest rates and inflation while trade barriers are getting higher. The government estimates a contraction of 4.5 percent in this year’s exports, the first negative number since the pandemic-stricken year of 2020.

The government and companies must diversify overseas markets. China remains the largest trade partner for Korea, but other Asian markets are expanding fast. Exports to China have been on a losing streak since June. But exports to Vietnam and other Asean member countries and India increased by double digits last year. The time has come for the government to reconsider the direction of its trade policy. It must not rely too much on select countries. Korea must widen inroads into Asean countries and India.

Late last year, the government made its Indo-Pacific strategy official. The vision goes beyond the New South Policy under the last government focused on strengthening economic ties toward reinforcing security ties as well. The Yoon Suk Yeol administration must succeed — and build up — good policies of the past government. The mission to the Asean in Indonesia needs to be elevated. It is time for the government to expand education and cultural exchanges with Indo-Pacific countries.