[Inside Chodong] Focus on Vietnam's Consumer Market as the 'Post-China'

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] "We must pay attention to Vietnam's consumer market as the 'post-China'."

While recently discussing Vietnam with Professor Cho Young-tae, a demographer at Seoul National University, he said this. Professor Cho, who is serving as an advisor on Vietnam's population policy, emphasized, "Success can be achieved by approaching Vietnam not just as a manufacturing factory to replace China but by recognizing its infinite potential as a service market." He advised that if Korea is to find a breakthrough for new growth in the ever-changing Vietnam?where yesterday and today differ, and tomorrow will be even more different?it must view Vietnam not simply as a manufacturing market replacing China but as a new consumer market to find the answer.

Vietnam emerged last year as Korea's largest trade surplus country for the first time. Exports to Vietnam amounted to $60.98 billion, imports were $26.72 billion, resulting in a trade surplus of $34.25 billion (approximately 43 trillion won). China, which was the top surplus country in 2018, fell to 22nd place as exports sharply declined due to strict COVID-19 lockdown policies. While China's zero-COVID policy slowed economic growth and reduced exports to China, imports from China surged due to rising raw material prices, causing Korea's trade surplus with China to plummet outside the top 20. Vietnam's first-time capture of Korea's largest trade surplus country position was also aided by strengthened investment and cooperation between the two countries on the 30th anniversary of diplomatic relations last year.

What is noteworthy is the high likelihood that this trend will continue. Korea's trade balance with China recorded deficits from May to August last year, briefly returned to surplus in September, but then continued a three-month deficit streak from October. Exports to China decreased by 4.4% to $155.81 billion last year, while imports increased by 11.5% to $154.56 billion, raising alarms on the export front. As global economic uncertainties grow, it clearly shows that survival is impossible with an export strategy relying solely on China.

In this urgent situation requiring a breakthrough, Vietnam can be an alternative. Samsung Electronics, which entered Vietnam in 1995, already accounts for more than 20% of Vietnam's total exports, playing a significant role. Especially, Vietnam's rapidly developing IT environment presents an opportunity for Korea, a strong IT nation. Currently, not only Korean large corporations but also numerous startups have entered Vietnam, experiencing trial and error while writing their growth stories. A representative example is 'OKXE,' a widely used used motorcycle trading platform in Vietnam, where over 90% of the adult population uses motorcycles. Kim Woo-seok, CEO of OKXE, who judged that it would be difficult for big tech companies to dominate platform businesses in Korea, turned his eyes to Vietnam and grew the platform to a monthly transaction scale exceeding 30 billion won through a thorough localization strategy.

Vietnam's population structure also shows potential as a consumer market. Approximately 1.5 million people are born annually in Vietnam, more than five times Korea's less than 300,000. Considering that Korea's highest birth rate was during the 1958 'dog year' to 1974, the 1st and 2nd baby boom generations, with about one million births, Vietnam still has a solid population supporting its market. However, Korean companies entering Vietnam remain cautious about excessive optimism. They have seen countless failures in fiercely competitive markets worldwide without thorough localization strategies.

President Yoon Suk-yeol stated in his New Year's address, "I will place all diplomacy at the center of the economy and personally oversee export strategies." To expand Korea's export territory globally, it is essential to systematically review and segment export strategies by country. At a time when the global economic recession is becoming a reality, reshaping export strategies so that crises can become opportunities and listening to and supporting export companies' difficulties are the government's top priorities this year.