Tensions on Korean peninsula may hit Vietnam’s economy hard: Moody’s

By Minh Nga   October 4, 2017 | 05:09 pm GMT+7
Tensions on Korean peninsula may hit Vietnam’s economy hard: Moody’s
Workers at a plant of South Korea's LG Electronics in Vietnam. Photo by VnExpress/SH

Vietnam will suffer one way or another through its close business relationship with South Korea.

The escalating military conflict on the Korean peninsula between the U.S. and North Korea will harm not only the two insiders but also others in their economic networks, with Vietnam among those that will be hardest hit, credit rating firm Moody's has said.

The problem for Vietnam will come from its business relationship with South Korea, which is an obvious victim of this ongoing conflict, Nikkei cited Moody’s as saying in its Wednesday report. 

"Vietnam is the most vulnerable to any disruption to the global supply chain caused by a cessation or weakening of production in South Korea," Moody's senior credit officer Martin Petch was quoted in the report as saying.

South Korea is the biggest foreign investor in Vietnam.

According to the Korea Trade Investment Promotion Agency, South Korean firms invested more than $50 billion in Vietnam between 1988 and 2016, making up more than 30 percent of total foreign investment in the country with over 6,000 projects.

Many South Korean companies, such as appliance and cellphone giants Samsung Electronics and LG Electronics, now have their own component supply chains in Vietnam.

Other major Korean companies with a presence in Vietnam include Kumho Construction, Posco Group, Hanjin Logistics and Kumho Tire.

In its updated report on East Asia and Pacific (EAP)’s economy released on Wednesday, the World Bank said “growth prospects for 2017 and 2018 remain positive for developing East Asia and the Pacific.”

It said that economies in the region are expected to expand by 6.4 percent this year and slow slightly to 6.2 percent in 2018, primarily reflecting China’s gradual slowdown.

Yet the bank pointed out that “continued uncertainty about global economic policies and the escalation of geopolitical tensions could jeopardize growth prospects in the region.”

It said escalation of disputes related to North Korea’s testing of nuclear and missile technologies could have serious economic consequences.

Due to the region’s central role in global shipping and manufacturing supply chains, escalation of these tensions could disrupt global trade flows and economic activity, said the bank.

North Korea has launched dozens of missiles this year, several of them flying over Japan, as it accelerates a weapons program aimed at enabling it to target the U.S. with a nuclear-tipped missile, according to Reuters.

The U.S. and South Korea are technically still at war with North Korea because the 1950-53 Korean conflict ended with a truce and not a peace treaty.

The North accuses the U.S., which has 28,500 troops in South Korea, of planning to invade and regularly threatens to destroy it and its Asian allies.

U.S. President Donald Trump told the 193-member U.N. General Assembly last month in New York that if threatened, the U.S. would “totally destroy” the country of 26 million people and mocked its leader, Kim Jong Un, by calling him “rocket man,” Reuters reported.

 
 
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