Trade Complementarities between South Korea and Vietnam

Like many other countries around the globe, Vietnam has in recent years integrated with the global economic infrastructure on an increasing scale. Being a regional neighbor and a country that shares many similarities with Vietnam, including geography, culture, among other aspects, South Korea has become a strategic economic partner of Vietnam.Advertising We will write a custom research paper sample on Trade Complementarities between South Korea and Vietnam specifically for you for only $16.05 $11/page Learn More The strategic economical capacity of South Korea to Vietnam has especially been helpful because of her ties with major global economies like the United States. In this sense, it is possible for Vietnam to Integrate with other economies through South Korea. Still, a range of parameters including South Koreas’ policies and interests, among others, have also encouraged the establishment of economic and trade relations between South Korea and Vietnam. These two countries (Vietnam and South Korea) therefore complement each other in many ways, even as they continually build increasing economic and trade relations. The complementarities between South Korea and Vietnam have helped these two countries to boost trade relations; which have grown significantly over the years. Complementarities between South Korea and Vietnam can be seen in the analysis of their history, their geographical location, policy interests among other areas. These complementarities have even been galvanized further by the entry of Vietnam into the ASEAN regional trading block and the WTO. Background Information Many economies in the Asian region have been continually soaring over the past years (Achsani 3). Countries like South Korea, China and Malaysia among others have drawn economic benefits, as their economies have adapted the concept of an open economy (Achsani 3). The so-called Asian tigers have therefore emerged from expanding economies that have been propelled by external investments and therefore, an increase in their capacities to export (Yul 81).Advertising Looking for research paper on international relations? Let's see if we can help you! Get your first paper with 15% OFF Learn More As South Korea and other Asian economies have been benefiting from foreign investments, communist policies in Vietnam, which have existed until the 90’s, and the embargo of western powers like the United States in the same period, have seen the Vietnamese economy lag (Yul 81). With the 1990’s policy reforms however, Vietnam embarked on a process of integrating with other world economies as its economy opened up to foreign investments (Yul 81). Policy changes that are favorable for economic growth and foreign investments have facilitated Vietnam’s economic integration with its regional neighbors and the global economy in general. A trend that has been growing over the years has been an integration of regio nal economies through trade agreements among other policies that have been precisely designed to bring benefits to economies bound by such agreements (Achsani 2). There has been the European Union, the ASEAN, and ECOWAS among others; which have encouraged regional economic integrations. Regional economies like the ASEAN have found a foothold to work their economies in a single direction, as their complements have become more apparent. Following policy changes in Vietnam towards an economy that is open and ready for foreign investments, South Korea and Vietnam have engaged in increasing trade and economic ties (Achsani 2). In one way, as an important ally of the United States, South Korea has acted as a foothold where western economies have been able to integrate with the Vietnamese economy through investments and trade agreements as well (Achsani 3). In the ASEAN region, Japan and South Korea are currently the most important direct investors in Vietnam (Achsani 3). South Korea and V ietnam can therefore be expected to even strengthen their trade and economic relations further, as they rediscover their relatively common history, and as their foreign policies become tailored to benefit each other in a host of ways. In an article in the East Asian Review Journal titled: Towards a Comprehensive Partnership: ASEAN-Korea Economic Cooperation, Kwon Yul analyses the complementarities that have encouraged and sustained economic cooperation between the Association of South East Nations (ASEAN) and South Korea.Advertising We will write a custom research paper sample on Trade Complementarities between South Korea and Vietnam specifically for you for only $16.05 $11/page Learn More Complementarities between South Korea and the ASEAN have seen the establishment of trade agreements as well as investments between the two (Yul 2). ASEAN and South Korea have also been able to create a multidimensional kind of a relationship, which has focused on oth er areas, apart from economic relationships. For example, Summits that have been held between the ASEAN and South Korea have created a framework for dialogue (Yul 4). Closer economic relations between the ASEAN members has compelled Korea to start exploring ways of even strengthening the ASEAN-Korean relations further, as the east Asian region accelerates towards more and more integration (Yul 3). Complementarities in the structure of industries that operate in the ASEAN and South Korea, saw trade from the ASEAN region take 10.4% of South Korea’s trade volume in 2003, becoming its fifth largest trading market (Yul 3). In the same year, ASEAN become South Korea’s third biggest investment market (Yul 3). Trade and Investment between the ASEAN and Korea have always been on an onward trend over the years, except during the East Asian financial crisis period (Yul 2). After the end of the East Asian financial crisis, trade and Investments between ASEAN and South Korea have i ncreased significantly 9 (Yul 2). For example, trade between the ASEAN and South Korea has expanded from about US$24 billion in 1998 to about US$39 billion in 2003. As at 2003, Exports from Korea to the ASEAN stood at 38% totaling to about US$20.3 billion (Yul 2). One challenge that has hindered the growth of better trade relations between South Korea and the ASEAN countries has been a consistent trade surplus from South Korea to the ASEAN; which stood at about US$8 billion at the end of 1997 (Yul 4).Advertising Looking for research paper on international relations? Let's see if we can help you! Get your first paper with 15% OFF Learn More A positive development however has been a continual decrease in South Korea’s trade surplus following the East Asian financial crisis (Yul 4). Trade balance between ASEAN and South Korea is therefore approaching a state of equilibrium. Yul’s study has explored the form and pattern of trade between the ASEAN and South Korea, which has uncovered a complementarily between the two (the ASEAN and South Korea). This complementarily can for instance, be seen in the trading of electrical and machinery items (Yul 5). A trend that has been observed by Yul is an increase in the differentiation of labor, used in the manufacture, production and marketing of electrical and machinery items (Yul 5). An increase in the differentiation of labor between the ASEAN and South Korea as has been evident in the electrical and machinery industries and other industries as well has seen an increase in trading of items within similar industries; in intra-industry trading. Trading records from KOTI S show that in 2003, machinery and electrical appliances contributed to about 43% of total of exports from the ASEAN to South Korea and about 52 percent of imports from South Korea to the ASEAN (Yul 6). Consider KOTIS 2003 trading data with that of 1993, when South Korea’s machinery and electrical exports to the ASEAN contributed to about 41% of total exports while contributing to just 18% of the total volume of machinery and electrical exports from the ASEAN to South Korea (Yul 6). Differentiation of labor leading to an increase in intra-industry trading between South Korea and the ASEAN has also resulted from a direction towards value addition efforts in the ASEAN (Yul 7). During the 1980’s and early 1990’s for example, the major component of exports from the ASEAN to South Korea were mainly mineral exports (Forming about 40% in percentage) however, as of 2003, machineries and electrical appliances have become the major export items from the ASEAN to South Kor ea (Yul 7). Such a significant shift in trading underlies a change in the form and pattern of trade between the ASEAN and South Korea, implying a differentiation of labor between the two parties as intra-industrial trading between the two increases. Yul describes the Investment relationship between South Korea and the ASEAN as one whose history has extended over many years. The first overseas investment by South Korea in the ASEAN region was in 1968, when Korea established a company in Indonesia tasked with the development of forests (Yul 8). Full Direct Investments from South Korea to the ASEAN have significantly increased especially from the 1980’s onwards, as South Korean corporations have recognized the ASEAN’s abundant natural resources and cheap labor (Yul 8). Korean corporations have therefore established bases in the ASEAN that export quality products to developed nations. Initially, in the 1980’s, most of the South Korean corporations that invested in t he ASEAN focused on industries that required large scale labor, like footwear (Yul 8). However, with the emergence of China as a supplier of a large market and cheap labor in the early1990’s, many South Korean corporations preferred investing in China, decreasing South Korean FDI in the ASEAN as a result (Yul 8). The decrease in South Korean investments in the ASEAN reversed in the mid 90’s, when many corporations re-focused in the ASEAN especially in Vietnam and Indonesia (Yul 8). This reversal was mainly catalyzed by a diversification of market needs in the ASEAN (Yul 8). Korean firms were therefore encouraged to tailor their products to the diversified market needs in the ASEAN. As of 2003, full direct investments in the ASEAN from South Korea stood at about US$510 million in about two hundred cases. Currently, most South Korean Investors have focused on manufacturing (Yul 9). Full direct investments on manufacturing from South Korea to ASEAN comprise about 61% of a ll the Investments (Yul 9). Other areas of interest for South Korean companies have been in telecommunication, retail selling, real estate, mining, and also in the construction industry. South Korea and Vietnam have lately established close economic relations in trading and investment. Although Korean Investments in Vietnam did not start earlier than 1992, Vietnam has become the most preferred area for investment in the ASEAN by South Korean corporations (Yul 9). Investments in Vietnam by South Korea comprise about 22% of the value of all the investments in the ASEAN by South Korea (Yul 9). An important dimension where economic relations between South Korea and the ASEAN have focused includes cooperation in the exchange of industrial knowledge and technology (Yul 7). The sharing of industrial knowledge between South Korea and the ASEAN has positively resulted in an array of industries that have helped to galvanize cooperation between South Korea and the ASEAN. The Asian region is qu ickly positioning itself as the largest market in the world. South Korea has therefore been working to create a framework for mutual exploitation of this market, by sharing technology with the ASEAN (Yul 7). An important resource in the ASEAN that has been of enormous benefits to South Korea is energy (Yul 9). Currently, about 67% of all the energy that is consumed in South Korea is obtained from the ASEAN (Yul 9). Available energy resources in the ASEAN will therefore continue to present more opportunities for economic cooperation between the ASEAN and South Korea. Cultural and Geographical factors have also acted to promote the economic cooperation that exists between South Korea and the ASEAN. States in the ASEAN are easily accessible to South Korea. A broad range of cultural aspects that are practiced in the ASEAN exist in South Korea as well. The practice of Buddhism and other forms of lifestyle prevalent in the ASEAN are also predominant in South Korea (Yul 9). Cultural and ge ographical ties between the ASEAN and South Korea have facilitated efforts by South Korea to strategically cooperate with the ASEAN, with an aim of clipping economical gaps between the two. Having gone through an economical struggle experience that is currently predominant in the ASEAN, South Korea has been an important ally to the ASEAN that has shared its experience and lessons with the ASEAN (Yul 9). South Korea gives about 25 percent of its loans and grants to the ASEAN (Yul 9). Since 1987 to 2003, South Korea has given the ASEAN about US$700M loans and grants for development (Yul 9). Most of the money that has been given to the ASEAN by South Korea has focused on manpower development. For example, many trainees have been airlifted to South Korea from the ASEAN to acquire important skills on the experience of South Korea in development. In an article that was published in the European Journal of Social Science, Achsani presents an analysis of similarities among states in the ASE AN to understand the feasibility of a free market in the ASEAN. The ASEAN has been encouraged by the establishment of a free market in Europe through the European Union to try and achieve the same in the ASEAN region. On paper, it is possible for economic integration through a free market to succeed when there is broad uniformity in the concerned economies (Achsani 81). Such economies can even trade by the use one type of currency, as has happened in the European Union. For an economic integration under free market to succeed, Achsani has considered a number of factors that need to be satisfied. First, for the three most stable economies with the lowest rate of inflations, the value of their inflation mean should not be exceeded at any time by more than 1.5% from the other economies (Achsani 82). Besides, for the three most stable economies that have the lowest inflations, their interest rates should not exceed those of other economies by more than 2% (Achsani 82). Moreover, there s hould be an absence of any variations in the structure of the exchange rate from all the concerned economies for at least two years before a free market can exist (Achsani 83). Still, any budget deficits from all the economies that are keen to integrate should not exceed at least 3% the value of each of their gross domestic products (Achsani 83). It is also important that the total vale of debts in each of the economies that are keen to integrate do not surpass at least 60% of their gross domestic products (Achsani 84). For an effective analysis that can detect any instability in the ASEAN economies, Achsani has considered parameters before and after the ASEAN economic crisis. A few years before the 1997 economic crisis in East Asia, the ASEAN economies were the most expanding economies in the world (Achsani 90). This trend was halted however, following the East Asian economic crisis, and in 1998, the worst economic stagnation was witnessed in the ASEAN in the previous thirty years (Achsani 90). Efforts to integrate the ASEAN economies commenced in 1967, following the formation of the Association of South East Asian Nations (Achsani 93). The ASEAN was tasked with the roles of promoting economic growth, cultural ties and peace through unified efforts of members within the ASEAN (Achsani 93). The ASEAN agreement has already succeeded in greatly enhancing economic integration of economies within the ASEAN. In 1992, a framework of progression towards free trade called ASEAN Free Trade Area (AFTA) was established (Achsani 94). The effects of AFTA in promoting trade among the ASEAN are Obvious. Three years after the inception of AFTA, the value of exports within ASEAN doubled to about US$80 billion by the end of 1995 (Achsani 94). Tourism within the ASEAN has greatly grown from the ever increasing number of tourists that travel often within the ASEAN (Achsani 95). Following the footsteps of the European Union, the ASEAN, in 2003, embarked on a journey towards the cr eation of the ASEAN Economic Community (AEC) (Achsani 95). Complete and comprehensive integration within the ASEAN has been scheduled to have been achieved by the year 2020 (Achsani 95). The intention of the AEC is to form a successful and stable economic environment within the ASEAN, where goods, capital, services and other economic materials move freely as poverty within the ASEAN is eliminated to create a society within the ASEAN that is prosperous (Achsani 95). Efforts towards a single market in the ASEAN have been boosted following the willingness of China, South Korea and Japan to join the ASEAN (Achsani 96). The result of such a union would be a very big market comprising of over three billion people. To study key complementarities that are necessary for a free market in the ASEAN to exist, Achsani collected values of some parameters present in the ASEAN economies for analysis (Achsani 96). The parameters that were collected for analysis have already been described and includ e the rate of inflation, the stability of the exchange rate, the proportion of the GDP/budget deficit, the value of the interest rate and the proportion of GDP to national debt (Achsani 96). The values of these parameters were obtained from a number of sources including the United Nations, ministries of finance and the 2007 ASEAN statistical yearbook (Achsani 96). Once the necessary data had been obtained, it was entered to a computer model that employed the Maastricht treaty method to cluster data (Data clustering and analysis is a method whereby groups of data are arranged in sub-groups called clusters by employing a method of determining the disparity in collected data that will occasion grouping in a specific cluster) and then employing the bi-plot approach (a method whereby a number of data sets are approached towards a number of variables in several ways such that the attributes of the sets in relation to the variables can be understood) to distinguish observable characteristi cs before, during and after the East Asian economic crisis (Achsani 97). Following the collection and analysis of the values of parameters that are important in integrating and creating a free economy, Achsani made the following observations in the ASEAN. During the East Asian economic crisis, Brunei and Singapore grouped in a single sub-set (cluster) (Achsani 98). After the economic crisis, Singapore exited its cluster to group with Japan, South Korea, Thailand, Malaysia and China (Achsani 98). The same trend was observed in the case of Laos, which exited its single cluster to group with Vietnam, Indonesia, Philippines, Myanmar and Cambodia. Following the end of the Asian economic crisis, China, South Korea, Thailand, Singapore and Japan merged in a single cluster (Achsani 98). Among the few countries in the ASEAN that displayed stability by remaining in a single sub-set includes Brunei, Vietnam, Philippines and Indonesia (Achsani 98). In summary, an important conclusion that Achsa ni observed was the grouping of advancing economies in single cluster and the economies that are currently developing in another single cluster (Achsani 98). Issues on economical stability, exchange rate, debt burdens among others need therefore urgent address, before the ASEAN economies can successfully integrate and travel on a road towards a free market (Achsani 98). In a Deutsche Bank Research Journal, Trinh has explored the potential of Vietnam to move into economical success and rewrite the history of South Korea, Japan, among other economies in the ASEAN. Vietnam has been taking the right gear towards economical success following policy changes that have allowed and accommodated the concept of a free and competitive economy. These policy changes, tailored to precisely encourage foreign investments and acceptance by the international community, have seen the end to imposed sanctions like the U.S embargo; which ended in 1994 (Trinh). The development of the Vietnamese economy, h owever, has not matched the fast pace of other Asian economies like South Korea, and has therefore been quite disappointing in a way (Trinh). Things might shift for Vietnam, following the increasing level of awareness among Investors on Vietnam’s potential to present its large market and enormous economic resources to investors for exploitation (Trinh). Vietnam has natural resources like oil and gas and is also a top exporter of commodities like rice, coffee and pepper (Trinh). Indeed, many investors predict that the acceleration of the Vietnamese economy is likely to compete with economic growth figures that have been witnessed in China and India beyond the next two decades (Trinh). Increase in Investments is poised to help the Vietnamese economy accelerate. Since Vietnam has close relations with the United States as well as China, its economy is likely to benefit from these two economies through diverse avenues like full direct investments (Trinh). The 2001 agreement betwee n Vietnam and the U.S. has especially soared trading between the two countries, as the Vietnamese economy has continued to expand (Trinh). Moreover, Vietnam’s investors come from a range of countries of which South Korea and Japan are important investors (Trinh). Economic areas that have been of keen interest to invest in, include tourism, information technology, manufacturing, banking as well as in infrastructure (Trinh) The Vietnamese market for goods like machineries has significantly increased in the past years. Following resilient efforts to accelerate the industrialization of the Vietnamese economy, suppliers and manufacturers of manufactured products in developed economies have been investing in Vietnam (Trinh). The current proportion of Investments in 2010 as a segment of the Vietnamese GDP is 33% (Trinh). Investors from South Korea and other developed nations will therefore continue investing in Vietnam as the Vietnamese economy accelerates. In a sense, the political orientation and the culture of the Vietnamese society is similar to the present political style and culture in China (Trinh). In both cases, the government rules through a single party that implements policies that are tailored to achieve set goals like the economic empowerment of the mass (Trinh). Such a cultural and political arrangement, where democracy has been controlled, presents an orderly and stable political environment. Investors that have been establishing bases in China have therefore found Vietnam as a viable option where the same environment that is present in China can be accessed-affordable labor and politically stable. Investors from Countries like South Korea have therefore been building their bases in South Korea to exploit the range of benefits that have been presented by the Vietnamese economy. As has been seen, Vietnam is increasingly integrating with the global economy as its economy expands amid signs of an even better potential (Anbo). South Korea has incre asingly established strong economic ties with Vietnam, especially in the areas of investments and trade. An array of South Korean companies has been moving to Vietnam even as the value of traded items between South Korea and Vietnam has been increasing (Anbo). Increasing economical ties between South Korea and Vietnam have been primarily fueled by a host of complementarities between the two economies. The geography of South Korea and Vietnam has been favorable for trade. Oceanic routes between Vietnam and South Korea are lined with many towns, especially along the coastline of china, where multiple trading can occur, facilitating trading between the two nations. It also means that ship journeys between Vietnam and South Korea are safe, with access to many ports where they can take breaks and even trade (Yeats). Besides, there is no nation in the waterway trade route between South Korea and Vietnam whose interests conflict with the interests of the two nations. In a world where the p ower of nations can suddenly shift and where new interests can emerge, creating new conflicts and hostilities between nations, it is important to broaden and diversify trade markets as much as possible (Yeats). It is therefore economically secure for countries like South Korea as well as Vietnam to increase their volume of trade in the process of diversifying their markets. Diversification of geographical markets needs to be reviewed from a multidimensional view that considers economic implications as well (Yeats). For example, prevailing economic difficulties around a major economy can adversely affect economies that trade with regions around that area. As it has been examined in the Literature Review, Vietnam is becoming a viable option to China as a source of affordable labor. Since the Vietnamese economy is mostly structured like its Chinese counterpart, where a single party government governs the nation with a capacity of implementing policies easily and quickly, Vietnam is con sidered as a politically stable state (Binh). Investors from South Korea have therefore been motivated by these two important factors-political stability and low manpower costs. South Korea has grown steadily over the years to become one of the most important Vietnamese investors (Binh). Sectors requiring intensive manpower like footwear and clothing have especially attracted a range of investors in Vietnam. Many South Korean companies in the manufacturing industry have moved to exploit inexpensive labor that is available in Vietnam by manufacturing a range of components required to complete finished products overseas in Vietnam in order to lower production costs (Yul 4). As the Vietnamese economy has continued to expand, the Vietnamese market has been expanding as well, as a direct result of the increasing economic empowerment and diversification of needs in the Vietnamese market (Binh). South Korean companies have as a result endeavored to invest in products that have been tailore d to meet the expanding and diversifying market needs in Vietnam. The current inexpensive labor in Vietnam has therefore been coupled with political stability to form a major component that has complemented South Korean economical interests to invest and trade with Vietnam (Binh). In several ways, the Vietnamese have a corresponding culture and history to that of South Korea. In both countries, the United States intervened to prevent the two societies from adopting communism in the cold war years (Binh). Thousands of American troops fought in the Korean and Vietnamese wars. Although American efforts of preserving Vietnam from communist ideologies were not as successful as in South Korea, their experiences are similar in some ways. Both wars were based on two competing ideologies-communist and capitalism and many lives were lost in the process. Current societal cultures present in South Korea and Vietnam are similar in a host of ways. For example, in both societies, Buddhism is the p redominant religious practice (Manyin). The presence of a common history and culture, at least in some aspects, have helped South Korea and Vietnam to re-discover their relations, leading to the development of stronger economic, political and cultural ties between the two nations (Manyin). Following significant policy changes in Vietnam that have allowed for an establishment of a free and competitive economy, the U.S has moved to strengthen relations with Vietnam. In 2001, the BTA (Bilateral Trade Agreement) agreement, where the U.S agreed to lower tariffs charged on Vietnamese goods by about 40%, became active (Manyin). The BTA agreements are just one of the important developments that have corresponded with increasing ties between the U.S. and Vietnam. In particular, the BTA agreement alone was directly responsible for a 1% immediate expansion of the Vietnamese GDP, apart from allowing a host of corporations from the United States to invest in Vietnam (Manyin). As an important fri end of the United States, South Korea has always played by the American foreign policies in the Asian region. Friendly relations between the United States and Vietnam have therefore enabled South Korea to likewise improve relations and cooperation with Vietnam. In general, better relations between Vietnam and the United states are helping Vietnam to implement policies and measures like transparency among others that have been helping Vietnam to integrate with the international community (Yeats). Indeed, the BTA has acted as a prelude for Vietnam to join the World Trade Union (Anbo 116). Many American companies operating in South Korea have therefore used South Korea as a foothold to venture into the Vietnamese economy. In 2006, Vietnam began a process of integrating into the World Trade union (WTO) (Anbo 118). Following agreements with the US, integration of Vietnam into the WTO is almost as good as done (Yeats). Entry of Vietnam into the WTO has acted to even strengthen trading rel ations with South Korea in several ways (Manyin). In one way, economic relations between Vietnam and the United States will become more stable and predictable as well. Such a scenario has encouraged South Korea-an ally of the United States, to likewise strengthen economic ties with Vietnam, as the last shreds of the cold war are destroyed. Agreements like the BTA that have been existing between the United states and Vietnam in an environment of improving relations between the two economies have mainly been on a renewable contract basis (Manyin). By entering into the WTO body, Vietnam will be compelled to implement WTO measures like the removal of tariffs, hence, eliminating trade barriers with other countries including South Korea (Manyin). In another way, Vietnam will benefit from protection rules that are applicable within the WTO towards member states, creating a positive and predictable investment environment in Vietnam, an environment especially important for multinational comp anies including those from South Korea. Of particular interest is an expansion of the apparel market for Vietnamese clothing in the United States, which has been continuously expanding in recent years. South Korean companies with an interest in apparel production have therefore expanded their operations in Vietnam as a result (Anbo 118). Moreover, Intellectual rights for these companies and other South Korean companies, which have been poorly protected before, are poised to be protected better under the WTO agreement, enabling South Korean companies and other multinationals to invest in Vietnam with decreased concerns over the protection of their intellectual rights (Manyin). The ASEAN agreement has particularly played a significant role in improving the volume of trade and other economic cooperation between Vietnam and South Korea (Yul 2). The main aim of the ASEAN has been to enhance economic and social development within the ASEAN though efforts by each member country in the ASEA N (Achsani 84). Following the ASEAN agreement, South Korea took steps to invest in the ASEAN, expand trade and import technology to the ASEAN (Binh). As a member of the ASEAN, Vietnam has deducted multiple gains from South Korea as a result. In 2003, the ASEAN embarked on a journey of ultimately crating a free market within the ASEAN by forming the ASEAN Economic Community (AEC) (Achsani 98). Apart from the original members of the ASEAN, Japan, China and South Korea have also been keen to integrate into the AEC (Achsani 98). The formation of the AEC has therefore enhanced trade relations between South Korea and the ASEAN including Vietnam, as South Korea has been moving to implement policies that have been tailored to ultimately create a free market in the ASEAN. Expanding trade and economic relations between South Korea and Vietnam are bringing a range of enormous benefits to both countries. By siphoning investments and trading with South Korea, the Vietnamese economy has significa ntly expanded and the scale of poverty in Vietnam has been mitigated (Nguyen). Key beneficiaries in trade include textile and footwear manufacturers, coffee producers among other investors that operate in the Vietnamese economy (Nguyen). Competition within the Vietnamese economy has increased significantly, as more investors from South Korea and other countries have been flooding into Vietnam (Nguyen). The Vietnamese economy and therefore the Vietnamese society have therefore gained in a host ways following increasing trade and economic relations with South Korea. South Korea has adopted a number of policies that have been helpful in promoting trade and economical ties with Vietnam. One factor that has catalyzed economic relations with the ASEAN including Vietnam has been the increasing trend where regional economies are increasingly integrating (Manyin). To avoid economic isolation in a region where economies are increasingly integrating for two way benefits, South Korea has been c ompelled to strengthen economic ties with the ASEAN in the areas of trade, investment as well as in technological cooperation. After all, integration of economies around an area with similar interests is a trend that has been increasing in pace around the globe. South Korea has also been keen to strengthen relations with the ASEAN in order to tackle the North Korean threat collectively with other economies in the ASEAN. Member states in the ASEAN can be a useful tool in providing a difficult environment for a hostile North Korea to operate (Anbo 143). In the same way, a union of cooperation among the ASEAN would strengthen economical and cultural ties within the ASEAN, mitigating potential intimidation from the ever increasing political and economical power of China (Anbo 144). Moreover, by investing in the ASEAN economies like Vietnam, South Korea not only avoids expanding the increasing Chinese economy, it also increases its economical capacity in a positive way by strengthening a n economy (Vietnam) that appears predictably friendly in the future. Conclusion Following policy changes including those that were tailored to precisely accommodate the free economy concept in Vietnam, the Vietnamese economy has progressively integrated with regional and global economies. In this direction of integrating with economies through increased trade and foreign investments, South Korea has seen a soaring economical relationship with Vietnam. As the shreds of the cold war have continuously dissolved, Increasing economic and political ties between Vietnam and the U.S. have enabled South Korea to adjust policy relations with Vietnam in a positive way. In the process of integrating with the global economy, Vietnam has entered gainful trading agreements particularly the ASEAN and the WTO. The ASEAN and the WTO trade agreements have helped in creating a favorable environment for South Korean companies to invest and operate in Vietnam, as trade barriers decrease and pending prese nt concerns like the protection of intellectual rights become addressed. Moreover, some developments that include the rising economical and political power of China as well as increasing hostilities from North Korea towards South Korea have acted to compel South Korea to develop friendly trading and economical policies towards Vietnam. Works Cited Achsani, Azam. â€Å"Similarity of Economic Structure among Asean+3 Economies: A Multivariate analysis based on Maastricht Treaty Criterion.†Ã‚  Ã‚  European Journal of Social Sciences 16.3 (2003): 81-98. Print Anbo, Oegyo. ASEAN-Korean Relations: Security, Trade and Community Building. Seoul: McMillan, 2006. Print Binh, Nhu. â€Å"Trade Liberalization and Foreign Direct Investments in Vietnam.†Ã‚  The Hanoi university of National Economics. Suffolk University, 12 April 2002. Web. Manyin, Mark, and Cooper J. William. â€Å"Vietnam PNTR Status and WTO Accession: Issues and Implications for the United States.† East Asian Economy. CRS press, 2 Aug. 2006. Web. Nguyen, Quang. â€Å"Vietnam gains Big from Free Trade.† The Vietnamese Ministry of  Culture and Information. Thanh Nien, 9 Oct. 2010. Web. Trinh, Amy. â€Å"Understanding Vietnam: A look Beyond the Facts and Figures.†Ã‚  Ã‚  Deutsche Bank Journal 44.2 (2007): 121-50 Yeats, Alexander. â€Å"Major Trend Trends in East Asia.† World Bank Policy Research. World Bank, 2 Jun. 2003. Web. Yul, Kwon. â€Å"Towards a Comprehensive partnership: ASEAN-Korea Cooperation.†Ã‚  The East Asian Review Journal 16(4), 2004: 2-9. 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