S.Korean corporate investment in Vietnam plunges 70% in first quarter

South Korean corporate investment in Vietnam, which has led the economic development of the Southeast Asian nation, has plunged this year due to factors like the tendency of major companies to invest the US market in restructuring their supply chains and tighter regulations by the Vietnamese government.

Vietnam's Ministry of Planning and Investment on Monday released foreign investment data saying South Korean investment in this year's first quarter was $474.4 million, a 70.4% dive from $1.6 billion year on year. The number of investment projects also declined 16.9% to 344.

South Korean companies are known to account for up to 35% of Vietnamese exports.

Other countries also slashed investment in Vietnam. Japan's amount dropped 46% to $319.4 million in the first quarter, while China saw a decline of 38.2%, Singapore 26.3% and Hong Kong 22.4%.

A glaring drop in investment was in manufacturing, where foreign companies are most active in Vietnam. Combined investment in the industry fell from $5.3 billion in last year's first quarter to $3.9 billion in this year's.

The nosedive in investment in Vietnam has complex causes. The first is stronger regulations by Vietnamese authorities such as for work permits and approval of firefighting facilities. Another is corporate restructuring of supply chains directing investment in manufacturing more toward the US and Chinese markets, to the detriment of Vietnam's.

Other reasons are lower sales volume due to the global economic downturn and difficulty in raising overseas investment funds due to high interest rates.

Write to Ji-Hoon Lee at lizi@hankyung.com