South Korean firms stay put in Vietnam despite rising costs

South Korean firms stay put in Vietnam despite rising costs

South Korean companies operating in Vietnam overwhelmingly plan to stay put, with most citing cost advantages as their main reason for remaining despite rising labour costs and regulatory burdens.

Photo: baodautu.vn

According to a survey released on November 8 by the Korea International Trade Association (KITA), 92 per cent of surveyed South Korean companies said they had no intention of withdrawing from Vietnam, with 87.5 per cent citing "relative cost advantage" as their main reason.

Among them, 87.5 per cent cited that the major reason for them to stay in Vietnam is "cost advantage relative to other countries".

According to KITA’s survey, wages in Vietnam have seen a sharp rise in recent years. Local workers’ average monthly minimum wage increased by more than 4.5 times, from $45.40 in 2010 to $205.30 in 2024. The figure has risen by an annual average of 11.4 per cent over those 14 years, marking the fastest pace of increase among major economies in Asia.

Despite increasing labour costs, companies maintained a positive view of the future outlook of the Vietnamese market. Nearly 60 per cent of companies expected their operations in Vietnam to improve over the next three to five years, far outpacing the 12.4 per cent that expressed a pessimistic outlook.

72 per cent of respondents said that they assess Vietnam as continuing to play the role of a global business hub in the future.

South Korea is currently the leading foreign investor in Vietnam. In the first 10 months, this country ranked second with $5.81 billion, accounting for 18.9 per cent of the total foreign direct investment capital in the country.

The key sector from South Korean firm concentrated in electronics, displays, textiles, petrochemicals, logistics, retail, finance, clean energy, and digital infrastructure.

Samsung has invested over $23 billion and employs some 90,000 workers. LG’s investments exceed $8 billion, anchored by its $5.65 billion display complex in Haiphong. Hyosung has committed $4 billion and pledged an additional $4 billion. Meanwhile, SK is exploring energy investments in central Vietnam, followed by Lotte, CJ, Doosan, and hundreds of supply chain partners.

VIR