South Korean firms abandon China for Vietnam amid strained relations

By Ngan Anh   March 27, 2018 | 04:37 pm GMT+7
South Korean firms abandon China for Vietnam amid strained relations
A Lotte Mart is seen closed in Hangzhou, Zhejiang province, China, March 5, 2017. Photo by Reuters/Stringer/File Photo

With rapid economic growth, Vietnam is considered a land of opportunities by S. Korean firms experiencing a boycott in China.

South Korean food and retail companies are leaving China for Vietnam amid tougher business conditions in the world's most populous market, and strained bilateral relations to go with it.

The Chinese government has retaliated against South Korea after Seoul, despite stringent objections from Beijing, deployed an advanced U.S. missile defense system to protect the country against North Korea, Yonhap News Agency reported.

For nearly a year, China-South Korea relations have been tense with Beijing angry about the deployment of the U.S.-made Terminal High Altitude Area Defense (THAAD) anti-missile system in Korea. China claims THAAD’s powerful radar can penetrate deep into its territory.

For much of 2017, South Korea’s tourism, cosmetics and entertainment industries have taken the brunt of a Chinese political backlash against Seoul. In October, the two nations agreed to normalize relations, Reuters reported.

Lotte Group was the biggest victim of Beijing's wrath due to the fact it had signed a deal with the South Korean government to provide land on what was previously a golf course for the U.S. missile defense system.

Lotte has been negotiating the sale of its hypermarket chain in China after suffering major losses. Most of its 99 Lotte Mart discount stores in China have been closed for more than an a year, and Lotte Group has suffered about 1.2 trillion won ($1.1 billion) in lost sales as Chinese authorities tightened safety and sanitary inspections and consumers boycotted them.

Lotte said it aims to raise the number of Lotte Mart outlets in Vietnam to 87 by the end of 2020 from the current 13.

The South Korean conglomerate has also expressed an interest in making fresh investments in Vietnam's agriculture, manufacturing and construction sectors.

Hwang Kag Gyu, vice chairman of Lotte, said the company wants to start a cocoa farm and build a factory to supply components to electronics giant Samsung in Vietnam during a recent meeting with the prime minister in Hanoi.

Other South Korean firms, including EMart, an affiliate of Shinsegae Group, food and entertainment conglomerate CJ Group, and food manufacturer CJ Cheiljedang Corp, also have plans to expand in Vietnam.

CJ Cheiljedang has invested 70 billion won in the construction of a Ho Chi Minh City-based food processing factory, which will be completed in July. After coming into operation, the factory will produce Korean dumplings and other frozen food.

"We expect a growing number of South Korean businesses will expand investment in Vietnam, the land of opportunity," Yonhap quoted an industry source as saying. "Vietnam's economy has been expanding by more than six percent every year, it is a young consumer market whose average age is 30 and hallyu (Korean wave) is gaining popularity."

On March 23, Vietnam and South Korea agreed to seek to boost their bilateral trade to $100 billion by 2020, or 50 percent more than last year’s total, during President Moon Jae-in's official visit to Hanoi.

The visit was part of South Korea's 'New Southern Policy,' which aims to elevate South Korea's relations with ASEAN to the same level as its relations with the U.S., Japan, China and the E.U.

"Vietnam is our largest trading partner in Southeast Asia, and a core partner country for our New Southern Policy," Reuters quoted Blue House spokesman Kim Eui-kyeom as saying.

South Korea is also Vietnam's biggest foreign investor, with its firms investing more than $50 billion in Vietnam between 1988 and 2016.

 
 
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