South Korean-made products have been flooding the Vietnamese market thanks to expanded distribution networks.
Go Vap district in HCM City, for example, has seen more shopping malls and supermarkets opened by South Korean retailers Lotte and Emart.
An analyst noted that Vietnam was not only the ‘aiming point' of South Korean manufacturing groups, but it had been eyed by big South Korean retailers.
South Korean foreign direct investment in Vietnam has increased sharply in recent years. The country became the largest foreign direct investor in 2014 with gross registered investment capital of $36.7 billion.
Martin Tricaud, CEO of HSBC South Korea, quoted a South Korean newspaper as saying that Vietnam can be a strategic road which leads South Korea to ASEAN, China, India and free trade agreements.
Meanwhile, a survey of the South Korea International Trade Association found that 49 percent businesses chose Vietnam as their most ideal investment destination.
According to the South Korean Ministry of Finance, in the first six months of 2015, the country invested $17.45 billion overseas, an increase of 12.1 percent over the last year, while investment in Vietnam increased by 82.2 percent. The sharpest investment increase, 83 percent, occurred in distribution (wholesale & retail).
A branding expert said it was understandable why South Korea wanted to expand distribution networks in Vietnam. South Korea has a developed retail industry, while Vietnam is a market with great potential.
Meanwhile, Vietnamese and South Korean cultures have similarities, according to HSBC Vietnam CEO Pham Hong Hai.
Existing South Korean retailers have been expanding their operation in Vietnam. In 2014, Lotte opened its first supermarket in Hanoi. In mid-2015, it announced the deal of buying 70 percent of stake of Diamond Plaza in HCM City.
Most recently, Lotte agreed to pay a deposit and the land rent for Thu Thiem Eco Smart City.
Meanwhile, Emart, the South Korean largest retail brand, belonging to Shinsegae Group, has officially set foot in Vietnam, four years after it began eyeing the market in 2011.
The retailer is moving ahead with its project to develop a hypermarket in Go Vap district in HCM City with estimated investment capital of $60 million.
The branding expert noted that South Korean investors believe now is the right time for them to "dig a distribution channel" in Vietnam, after the Vietnam-South Korea Free Trade Agreement (VSKFTA) was signed in May 2015.
A report of the Foreign Investment Agency (FIA) showed $5.49 billion worth of FDI capital was registered in the first half of 2015. South Korea was the biggest FDI investor with $1.52 billion worth of registered capital, accounting for 27.7 percent.
NCDT
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