Mobile phone factory of RoK's Sumsung Group in Thai Nguyen - Illustrative image (Source: VNA)
 
Seoul (VNA) – Manufacturers from the Republic of Korea have been shifting the focus of their overseas direct investment to Vietnam from China thanks to tax benefits, cheaper labour and other favourable conditions, said a report released by the Federation of Korean Industries on November 22.

According to the report, Korean manufacturing companies’ overseas investment in Vietnam accounted for 17.7 percent of the total in 2017, an impressive rise compared with 3.7 percent in 1990.

Meanwhile, the figure for China reduced significantly to 27.6 percent last year from 44.5 percent in the 2000s.

The RoK’s small- and medium-sized manufacturers moved away from the world’s second largest economy to the Southeast Asian country for direct investment. Their direct investment in Vietnam hit 720 million USD in 2017, compared with 430 million USD for China.

The report showed that large companies’ direct investment in China has been on the wane, but the amount was 2.7 times higher than that in Vietnam last year.

The report said Vietnam's rise as a major destination for Korean manufacturers' investment is attributable to changes in business climates and policies in both countries.

In 2008, China imposed a flat 25 percent corporate tax on both foreign-invested companies and domestic firms, including businesses in some high-tech sectors.

China has also expanded the list of products, in which foreign investment is banned or restricted, while the country's minimum wage has been on the steady rise.

In contrast, Vietnam has exempted foreign-invested high-tech companies from corporate taxes for four years, while lifting the cap on foreign investment.

In addition, Vietnam's minimum wage has been at a level half that in China, serving as a magnet for foreign companies, the report said.-VNA