South Korea–Vietnam–India Trilateral Economic Cooperation: Prospects and Policy Implications

Introduction

The bilateral economic relations between India, Vietnam, and South Korea have grown sharply over the years. In particular, South Korea and Vietnam have become key trade partners with each other, while the trade exchange between Vietnam and India has also increased significantly. Furthermore, there was a notable expansion in the India–South Korea trade exchange in the period of 2021–2022. A large number of studies have explored the bilateral economic relations between South Korea and Vietnam (Baek & Yoon, 2023; Phan & Jeong, 2016; Tran & Heo, 2014; Tran, Lee, & Heo, 2010; Truong, 2023; Truong, Dong, & Nguyen, 2019); between South Korea and India (John, 2020; Kesavan et al., 2020; J. G. Kim, Han, Keum, & Pek, 2022; Kumar, 2015, 2021; Kumarasamy, 2023); and between India and Vietnam (Aswani, Sajith, & Bhat, 2022; Le, 2017; Marwah & Le, 2021; Ngo, 2016; Pulipaka & Garg, 2021). However, only little attention has been paid to the prospects of triangular economic cooperation among the three countries.

This paper suggests that there is a strong potential for triangular economic cooperation between India, Vietnam, and South Korea, given the current bilateral economic relations, the advantages and demand for the cooperation of each party, and external factors. This study investigates the prospects for trilateral cooperation among South Korea, Vietnam, and India in the following dimensions. First, the paper examines the prospects for trilateral cooperation in the areas of production networks and supply chains, the digital economy, and connectivity. The study argues that South Korean companies play a significant role in global value chains (GVCs) for automobiles, semiconductors, smartphones, and other products and that Vietnam and India are favored partners for securing supplies of these minerals and raw materials. Second, the study shows that there are significant opportunities for collaboration between South Korean and Indian companies in Vietnam’s digital economy, including e-commerce, educational technology, the ride-hailing industry, information technology (IT) services, finance, and logistics. The paper also explores the prospect of South Korea–India cooperation in connectivity via Vietnam. Finally, the paper proposes the establishment of a regional trade agreement (RTA) between India, Vietnam, and South Korea. India, Vietnam, and South Korea have existing bilateral trade agreements between two of the three countries, including the Comprehensive Economic Partnership Agreement (CEPA) between South Korea and India and a free trade agreement (FTA) between South Korea and Vietnam. However, no regional integration among the three countries has been discussed specifically. A closer examination of each country’s exports suggests a solid foundation for trilateral trade partnerships among the three economies. Furthermore, with the homogeneity in their domestic economic difficulties and the three countries at different stages of supply chains, India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP), as well as the current trend of regionalization of international production and GVCs, it is necessary for an RTA for starters between the three countries to be mutually beneficial to each corresponding economy. The RTA formation between the three countries is also necessary due to the disruption of supply chains caused by the geopolitical tensions between major powers, the COVID-19 pandemic, and the ongoing Russia–Ukraine conflict.

This paper is structured as follows. Following this introduction, the next section provides the objective and methodology of the study, followed by an overview of the current bilateral economic relations between South Korea, Vietnam, and India. After that, the study decomposes the prospects for trilateral cooperation in supply chains, followed by analyses of cooperation prospects in the digital economy and connectivity. The next section discusses the possibility of forming an RTA between the three countries. The final section provides concluding remarks.

Objective and Methodology of the Research

This paper aims to answer the following questions: (a) What are the motivations for trilateral economic cooperation among South Korea, Vietnam, and India? (b) How are the prospects for South Korea–Vietnam–India trilateral economic cooperation? (c) Which areas should the South Korea–Vietnam–India trilateral economic cooperation focus upon?

The main objective of this paper is to examine the prospects for the South Korea–Vietnam–India triangular economic cooperation in the economic field. First, it investigates the potential for trilateral cooperation in production networks and supply chains in the context of restructuring the production networks and GVCs, focusing on the leading role of South Korean multinational enterprises (MNEs). Next, it examines the trilateral cooperation in the digital economy and connectivity, with a focus on how South Korea and India can collaborate on investment projects in Vietnam. Finally, it discusses the motivation and possibility of establishing an RTA among South Korea, Vietnam, and India in the years to come.

This study mainly employs a qualitative method. In particular, this research uses a material study method. It selects a variety of sources that are representative of the official discourses of a country, including leadership speeches and secondary literature, such as articles and reports. The research uses comparative and case study methods, focusing on production networks and supply chains, the digital economy, connectivity, and trade to analyze the prospects for trilateral economic cooperation among South Korea, Vietnam, and India. Statistical data used in the research are collected from various sources, including international institutions such as the World Bank, the United Nations, and the national statistical agencies of South Korea, Vietnam, and India, as well as from other studies and reports.

Economic Relations Between South Korea, Vietnam, and India

Economic Relations Between South Korea and Vietnam

There have been significant developments in the South Korea–Vietnam relationship over the recent decades, with the two countries elevating their diplomatic ties to a comprehensive strategic partnership in 2022. This partnership has been reflected in expanding economic relations, with the total trade exchange between the two nations increasing from $2 billion in 2010 to $86.5 billion in 2022 (see Figure 1). South Korea and Vietnam have reaffirmed their commitment to increasing the two-way trade to $100 billion by 2023 and $150 billion by 2030. As a result, Vietnam has become South Korea’s third-largest export destination and second-largest import source, while South Korea is Vietnam’s fourth-largest export destination and largest import source (see Tables 1 and 2). However, Vietnam has been struggling with a growing trade deficit with South Korea, particularly after 2010.

The structure of imports and exports between Vietnam and South Korea tends to focus on machinery, electronics, and transportation equipment. Processed data from WITS of the World Bank show that South Korea’s exports to Vietnam significantly focused on machinery and electronic products, increasing from 25.3% in 2010 to 62.6% in 2020. Similarly, the contribution of machinery and electronics to Vietnam’s exports to South Korea expanded from 8.4% to 53.9% during the same period.

The increasing two-way trade and transformation of the trade structure toward manufacturing products between South Korea and Vietnam can be attributed to South Korean outward FDI in Vietnam, which has dramatically widened in recent decades, especially after 2012 (see Figure 2). In 2000, South Korea’s FDI in Vietnam was only $50 million, but this value increased remarkably, reaching $929 million in 2005 and $5.3 billion in 2007. The highest value of South Korea’s FDI in Vietnam was $8.4 billion in 2018.

By the end of 2021, South Korea had 9,223 FDI projects with a total accumulated capital of $74.65 billion in Vietnam, ranking first in terms of accumulated FDI and accounting for 18.29% of total FDI in the Southeast Asian country. Japan followed closely behind with 15.78%, while Singapore, Taiwan (China), and Hong Kong also had a significant presence, accounting for 15.77%, 8.66%, and 6.82%, respectively. As of September 2022, South Korea had 9,438 valid projects worth $80.5 billion in Vietnam, maintaining its position as the top foreign investor in the country (Foreign Investment Agency, 2021). The focus of South Korea’s FDI in Vietnam has shifted over time, moving from manufacturing industries in the 1990s to real estate in the early 2000s and advanced technological equipment production at present. South Korean firms occupy an influential role in the Vietnamese economy, accounting for approximately 30% of the country’s combined export value (Truong, 2023).

Economic Relations Between South Korea and India

The CEPA was signed between India and South Korea on August 7, 2009 and operationalized with effect from January 1, 2010. This agreement was a notable milestone in the bilateral relationship between the two countries. The CEPA covers trade in goods and services, investment, competition, and intellectual property rights (Mukhopadhyay, 2020).

In the trade field, the South Korea–India trade exchange enlarged from $2.31 billion in 2000 to $17.11 billion and $27.8 billion in 2010 and 2022, respectively, with a trade surplus in favor of South Korea (see Figure 3). However, South Korea–India trade volume highly fluctuated during this period and was significantly lower compared with other important trading partners of South Korea, such as the US, EU, Japan, China, and Vietnam. In the opposite direction, data processing from WITS of the World Bank shows that in 2020, India’s major trading partner countries for exports were the US (17.9%), China (6.9%), UAE (6.5%), Hong Kong (3.4%), and Singapore (3%) and for imports, they were China (15.8%), the US (7.2%), UAE (6.5%), Saudi Arabia (4.8%), and Iraq (4.4%). At the same time, South Korea’s shares in India’s exports and imports were modest, accounting for 1.6% and 3.1%, respectively.

In terms of trade structure, data collection from the Observatory of Economic Complexity (OEC) shows that in 2021, South Korea’s main exports to India were integrated circuits ($1.22 billion), refined petroleum ($1.17 billion), and motor vehicles, parts, and accessories ($850 million). India’s main exports to South Korea were refined petroleum ($1.87 billion), raw aluminum ($1.48 billion), and raw lead ($245 million). This reflects each side’s manufacturing and export advantages.

Regarding the investment field, there is a visible gap in terms of value and number of investment projects between South Korea and India (see Table 3). South Korea’s investment in India was four times ($4 billion between 2010 and 2021) higher than India’s investment in South Korea. With respect to investment by sector, South Korean firms in India considerably focused on manufacturing (50%), followed by financial services (20%), and transport and allied services (10%). The prominent South Korean firms in India are Hyundai, POSCO, Samsung, Kia Motors, LG, etc.

Most of India’s investments in South Korea are in the automobile and components sector (33%), services sector (13%), iron and steel (11%), construction (7%), and electrical equipment (5%). Some major Indian investors in South Korea are Novelis Inc., a subsidiary of Hindalco Industries Ltd., Tata Motors Ltd., Mahindra and Mahindra, and Nakhoda Ltd., and Tata Motors Ltd. acquired Daewoo Commercial Vehicle, which is based in Gunsan, South Korea, in 2004. Their cumulative investment in South Korea stands at over $400 million (Das, 2022).

In general, progress in bilateral economic cooperation has been relatively slow given the potential for cooperation between South Korea and India. In comparison to ties with the US, some EU countries, and Japan, South Korea’s relationship with India is weak. Compared to countries that have been engaged in comprehensive cooperation with India through investment, official development assistance, and trade, South Korea has a shorter history of bilateral cooperation and fewer funding capacities (J. G. Kim, 2023). However, South Korea’s diversifying partner strategy and India’s bright economic growth outlook provide opportunities for the South Korea–India economic expansion as well as the two sides’ cooperation with the third countries.

Economic Relations Between India and Vietnam

India and Vietnam have a strong historical relationship and have seen a significant increase in trade over the past two decades. Figure 4 shows that in 2022, two-way commodity trade between India and Vietnam reached $15.05 billion, up from only $230 million in 2000. After a decline in 2020 due to the COVID-19 pandemic, the trade exchange between the two countries rapidly recovered and expanded. In terms of importance level, data from WITS of the World Bank show that in 2020, Vietnam was not among India’s top 10 trading partners. Meanwhile, India was the eighth largest export destination and ninth import source, respectively, sharing 1.86% and 1.72% of Vietnam’s exports and imports.

Regarding the trade structure, data collected from the General Department of Vietnam Customs shows that in 2022, India’s exports to Vietnam primarily consisted of iron and steel (11%), followed by machinery, equipment, tools, and other spare parts (7.7%), and metal products (7.3%). At the same time, India’s main import items from Vietnam were phones and components (nearly 20%), followed by computers, electronic products, and components (13%), and machinery, equipment, tools, and spare parts (10.1%).

Regarding the investment field, statistical data from the Vietnam Foreign Investment Agency show that, as of December 2021, India ranked 25th out of 140 countries and territories investing in Vietnam, with 313 projects and a total registered capital of $910.41 million. The average scale of Indian investment projects was $2.9 million, lower than the national average of $11.8 million. As of March 2022, India had 317 valid projects in Vietnam with a total capital of over $1 billion, primarily focused on processing, manufacturing, electricity distribution, and mining industries. Several major Indian businesses, such as Adani Group, Mahindra, SRF, and Suzlon, have shown interest in investing in Vietnam. Additionally, Tata Coffee, an Indian conglomerate, recently inaugurated a $50 million coffee production plant in Binh Duong Province, Vietnam, while another Indian company, HCL Technology Group, is considering establishing a $650 million technology center in this Southeast Asian country. With the implementation of major infrastructure projects like Tata Power’s Long Phu-II 1,320-MW thermal power project worth $2.2 billion, investment figures are expected to rise significantly (Das, 2021). On the other hand, Vietnam has only six investment projects in India, worth $28.55 million (Aswani et al., 2022). The composition of Vietnamese investments in India is in pharmaceuticals, information technology, chemicals, and building materials.

Vietnam has emerged as an alternative to “China plus one” location for businesses, including Indian investors, to relocate their production hubs. Both countries look to bounce back after the pandemic. In addition, Vietnam remains an important country in India’s Act East Policy. In light of this, the two countries jointly implemented the 2021–2023 Action Program, which aims to develop bilateral ties further and more effectively. Thus, the prospect for the India–Vietnam economic relationship remains highly positive.

Triangular Cooperation in Production Networks and Supply Chains

Global production and supply chains are undergoing drastic transformations. This change has been driven by a push for greater supply chain resilience due to COVID-19, which adds to existing pressures from the technology revolution, growing economic nationalism, geopolitical competition, and the sustainability imperative. Such transformations can occur in the form of reshoring, regionalization, diversification, and replication (Zhan, Bolwijn, Casella, & Santos-Paulino, 2020). Reshoring leads to shorter, less fragmented value chains and a higher geographical concentration of value-added, primarily affecting higher-technology GVC-intensive industries. Regionalization reduces the physical length but not the fragmentation of supply chains. This trend affects regional processing industries, some GVC-intensive industries, and even the primary sector. Diversification leads to a wider distribution of economic activities and primarily influences services and GVC-intensive manufacturing industries. Finally, replication leads to shorter value chains and the re-bundling of production stages. This leads to more geographically distributed activities but more concentrated value-added and is especially relevant for hub-and-spoke and regional processing industries.

Opportunities arising from the transformation of production networks and supply chain investments include attracting investors looking to diversify their supply bases and build redundancy and resilience. Thus, the pool of regional market-seeking investments increases. Shorter value chains bring more investment in distributed manufacturing and final goods production, with broader industrial capacity building and clustering. The imperative of sustainability leads to more green and blue investments and value chains. Challenges caused by the transformation of international production and supply chains include increased divestment, relocations, investment diversion, and a shrinking pool of efficiency-seeking investments, implying tougher competition for FDI. Changes in the locational determinants of investment often negatively affect the chances of developing countries attracting MNE operations (Zhan et al., 2020).

In this context, the prospect of trilateral cooperation between South Korea, Vietnam, and India in building resilient supply chains is promising. South Korean companies are seeking to diversify their supply chains better amidst the US–China competition and COVID-19 pandemic. Thus, Vietnam’s and India’s proximity, comparatively cheaper labor, favorable FDI policies, and strong people-to-people ties make it an attractive place for South Korean firms to relocate and establish their regional offices and manufacturing hubs. Likewise, Southeast Asian countries, such as Vietnam and Indonesia, have emerged as major import routes for India’s intermediate goods (J. G. Kim et al., 2022). Therefore, it is appropriate to link Vietnam’s production bases with India to operate the GVC across Asia. South Korea and India should continue to work together to share this potential. Given their leading role in regional and global markets, this paper analyzes how South Korean MNEs can build and strengthen supply chains with Vietnam and India.

It is interesting to note that, while the number of South Korean enterprises that have established operations in Vietnam continues to grow, the number of new South Korean firms entering China annually peaked in 2006 and has fallen below 500 since 2018 (S. Kim, 2020). South Korean firms play a vital role in Vietnam’s trade activities and GVC participation, particularly in the electronics and semiconductor sectors (Truong, 2022). Vietnam is riding high on semiconductor waves, as the country has risen as the third largest chip exporter to the US. The expansion in semiconductor exports is clear evidence of Vietnam’s strategic importance amidst the US–China competition. Firms affected by semiconductor supply chain transformation have sought refuge in Vietnam amidst geopolitical tensions, while the US companies are equally eager to diversify their chip sources, considering Vietnam as a reliable partner (K. G. Nguyen, 2023). Therefore, Vietnam has attracted the attention of South Korean investors in semiconductor manufacturing. For example, in early October 2022, LS Electric, a leading South Korean electricity company, announced its increasing production capacity with a new factory in Bac Ninh Province, Vietnam. This new investment is expected to generate $45 million annually. Likewise, Samsung intends to invest another $3.3 billion in Vietnam with plans to mass-produce semiconductor parts in Thai Nguyen Province in the country. Samsung plays a vital role in the Vietnamese economy. The conglomerate was responsible for a staggering 20% of Vietnam’s total exports (Oshinishi, 2021). With more than 100,000 employees, Samsung is the largest company in Vietnam in terms of revenue and FDI value (The Economist, 2018). Additionally, Vietnam has outpaced China as the leading manufacturer of Samsung smartphones and tablets, with 50% of these products being manufactured in Vietnam (Mai, 2021).

Samsung began operations in India in 1995 and set up its first research and development (R&D) center in Bengaluru in 1996. It is another company that upholds the banner of “Make in India” and is one of the largest electronics manufacturers in India. Samsung has five R&D units, one design center, and two manufacturing facilities in India. In July 2018, the company inaugurated the world’s largest mobile factory in Noida (Mukherjee, 2019). Likewise, LG began operations in India in 1997, although it had set up its R&D center a year earlier in 1996. This research center, LG Soft India, is now the largest area outside South Korea. LG also has two manufacturing facilities in India: one in Noida and the other in Pune (Joshi, 2020).

Given that, there are many opportunities for exchanges and collaborations between South Korean factories and R&D centers in Vietnam and India in the electronics industry. For example, Indian engineers can be invited to work exchanges in South Korean MNEs’ manufacturing bases in Vietnam, which can help Vietnamese workers improve their skills. In the opposite direction, Vietnamese engineers can be sent to South Korean MNEs’ factories and R&D centers in India for skill training. Another proposal is that South Korean MNEs’ electronics factories in India can increase the purchase of inputs manufactured by South Korean firms and local subsidiaries in Vietnam with lower costs and vice versa.

Under the VKFTA, Vietnam cut tariffs for parts, trucks, or cars of over 3,000cc from South Korea in the automobile industry. This has placed South Korean automobile manufacturers in Vietnam at their advantage. They can import parts/components from their home country at a reduced cost, and then assemble and distribute finished products in Vietnam more competitively. Hyundai, a prominent car manufacturer in South Korea, was among the first to invest in the Vietnamese automobile market. In 2017, Hyundai joined a joint venture with Vietnam’s Thanh Cong Group to assemble and distribute cars and introduced their subsidiary Hyundai Thanh Cong JSC. By 2018, Hyundai Thanh Cong JSC had a large-scale assembly plant in Ninh Binh Province with a capacity of 60,000 units annually. The company completed the construction of a second plant in November 2022. These two plants are projected to have a total capacity of up to 170,000 units annually (Pham, 2022). On the other side, Hyundai began investing in India’s automobiles in 1998. This group is the second-largest car manufacturer in India and is a major exporter of automobiles. Hyundai produces approximately 700,000 cars per annum in its Indian plants and exports more than 150,000 to foreign markets, including Vietnam (Joshi, 2020). In this context, there are significant opportunities for the three countries to cooperate in automobiles, particularly in the manufacturing of electronic cars. For example, South Korea and India may have joint investment projects to produce electric batteries in Vietnam. To capitalize more on the advantages of local production, South Korean factories in Vietnam and India may specialize in different types of cars or parts and components.

In a larger context, the triangular cooperation in supply chains between the three countries should concentrate on how South Korean leading firms can facilitate Vietnamese and Indian companies’ entry into GVCs by improving the drivers of investment, especially the functioning of market institutions, and improving the functioning and quality of the domestic segment of value chains. The three countries should have joint-working groups with the leading role of South Korean MNEs in building resilient supply chains with clear targets and work plans. These working groups will connect various economic actors, including South Korean, Vietnamese, and Indian companies, governments, and institutions. Furthermore, given their skilled labor and advanced technology, South Korea and India can collaborate in training projects and initiatives to help improve Vietnamese firms’ skills, which, in turn, will further strengthen supply chains among the three countries.

There is a scope for investment cooperation in small and medium enterprises (SMEs) between South Korea, Vietnam, and India to address the barriers to trade faced by SMEs and help them integrate into digital and e-commerce platforms and GVCs. India’s and Vietnam’s FDI attraction from South Korean firms should not be limited to large MNEs at the core of GVCs, but should include large supplier firms in upstream industries across the MNEs’ value chains. MNEs at the core GVCs are more likely to assist both local suppliers and foreign firms in their value chains in the early phases of the production process (Amendolagine, Presbitero, Rabellotti, & Sanfilippo, 2019; Truong, 2023). Also, there are other reasons for attracting large (tier-1) suppliers from South Korea. South Korean suppliers provide input in the form of specialized parts, which in turn contain generic and specialized components (Truong, 2022). Given that local firms may not possess the skills to process and produce specialized parts, it is a good choice for Vietnamese and Indian SMEs to focus on producing more generic components before proceeding to the manufacturing of more complicated goods. In addition, Vietnamese and Indian SMEs may gain information embedded in the products supplied by South Korean suppliers regarding foreign customers and preferences.

Other trilateral cooperation in building supply chains between South Korea, Vietnam, and India may focus on establishing mutual recognition agreements (MRAs) and regulation collaborations. The focused areas should include strategic and advanced sectors such as semiconductors, automobiles, pharmaceuticals and healthcare, and IT.

Triangular Cooperation in Digital Trade and Connectivity

Digital connectivity, digital economy, and artificial intelligence are important foundations for the successful implementation of Industrial Revolution 4.0. These are priority areas in the economic development strategies of Vietnam, South Korea, and India. Given South Korea’s leadership in the development of 5G networks and artificial intelligence, and India’s IT advantages, the potential for cooperation among the three countries, particularly in the Vietnamese market, is large.

With a growth rate of 31% in 2022–2025 and of 19% in 2025–2030, Vietnam’s digital economy is forecasted to reach approximately $49 billion by 2025 and between $120 billion and $200 billion by 2030. Vietnam is expected to witness the highest growth during the period 2022–2030 compared with other major economies in Southeast Asia (Google, Temasek, & Bain & Company, 2022). After the pandemic, Vietnam was one of the countries that quickly restored the “new normal” activities. However, some consumption habits and trends formed and promoted during the pandemic have been maintained and continue to develop. E-commerce is driving the growth of Vietnam’s digital economy, and 90% of digital consumers plan to maintain or increase their use of e-commerce platforms within the next 12 months. The majority of consumers focus on “Food Delivery” (60%) and “Online grocery shopping” services (54%) (Google et al., 2022).

There are driving elements for Vietnam to develop its digital economy, such as the relatively high economic growth, government priority on digital transformation, increasing investment in digital infrastructure, increasing capital through FDI, and official development assistance. The country is also applying for loans via fintech platforms and venture capital as well as attractive IT tax incentives. Other favorable conditions are increased exports/new markets, including tourism, more knowledge and technology transfers/jobs and skills, a young population, and a growing domestic middle class (H. T. T. Nguyen & Truong, 2023). Meanwhile, the key challenge for Vietnam in the digital transition will be to sustain the strong macroeconomic fundamentals and keep foreign debt and inflation under control while simultaneously investing efficiently in infrastructure and human capital to unlock the productivity potential. Another obstacle is the lack of coordination among different public agencies in the implementation of the national strategy for the digital economy (H. T. T. Nguyen & Truong, 2023).

On the other hand, South Korea has shown an advantage in developing its digital economy. The country ranked high with the top relevant indicators in 2022, such as digital revenue ($154.4 billion), broadband subscriptions (44.50 per 100 inhabitants), mobile subscriptions (145.4 per 100 inhabitants), and Internet use (92.6% of the population) (Statista, 2023a). South Korea ranked fifth among 132 economies in the Global Innovation Index (GII) 2021 by the World Intellectual Property Organization (WIPO, 2021). Meanwhile, India has also possessed some advances in developing the digital economy, including a competitive IT industry. India’s IT services market is projected to reach $22.41 billion in 2023 and $43.09 billion by 2028, at a compound annual growth rate (CAGR) of 13.97% (Statista, 2023b). In this context, there are substantial cooperation opportunities for South Korea and India to support Vietnam’s digital economy, including e-commerce, educational technology (Edtech), the ride-hailing industry, IT services, finance, banking, and logistics. In e-commerce, cooperation among the three countries should focus on creating e-commerce platforms and digital payment modes, such as e-wallets, in the Vietnamese market. In Edtech, the need for online learning tools in Vietnam after the COVID-19 pandemic has remained high. Thus, South Korean and Indian investors can increase joint investments in Vietnam’s Edtech, such as learning management systems, school administration, enterprise learning, and early childhood education. The ride-hailing field is a relatively nascent industry in Vietnam, so there is significant room for the presence of foreign firms. South Korean and Indian investors may concentrate on associated services, such as food delivery, hiring, and shopping services. In the logistics field, trilateral cooperation among South Korea, Vietnam, and India should focus on investing in technology infrastructure and creating digital logistics maps, centralized data warehouses, and digital platforms linking multimodal transport services, focusing on the Vietnamese market. The next suggestion is that South Korea, Vietnam, and India can establish a trilateral Joint Program of Cooperation in Science and Technology to facilitate collaborative research among the three countries in the fields of science, technology, innovation, and digital transformation.

Besides the digital economy, there is substantial room for trilateral cooperation among South Korea, Vietnam, and India in the connectivity area. Since 2013, India has been regularly engaging with the Association of Southeast Asian Nations (ASEAN) to discuss connectivity initiatives under the ASEAN Connectivity Coordinating Committee (ACCC)–India Meeting. Under this framework, physical and digital connectivity projects are rapidly becoming important aspects of India–Vietnam cooperation (Panda, 2019). As an advanced nation, South Korea can contribute to implementing cooperation programs to develop connectivity in the ASEAN region via Vietnam. South Korea has recently developed a platform for cooperation with the ACCC (Panda, 2020). The future of South Korea–Vietnam connectivity cooperation is also based on the Master Plan on ASEAN Connectivity (MPAC) 2025 (The Korea Herald, 2017), which envisions other countries’ cooperation within and beyond the region where India could emerge as a natural partner. These platforms can discuss forging greater regional connectivity initiatives. In addition, such a partnership between South Korea and India can provide an alternative international cooperation option in the Southeast Asian region. Furthermore, Vietnam is promoting the implementation of structural reforms where infrastructure development is one of its priorities. Both South Korea and India could emerge as possible alternative partners in Vietnam’s search for economic opportunities.

The trilateral connectivity cooperation between the three countries could be enhanced within and outside the ASEAN framework promoted by India and South Korea. South Korea and India can collaborate on infrastructure projects that connect the ASEAN region through Vietnam. India’s future thrust to reach Vietnam by enhancing connectivity cooperation through the framework of CLMV (Cambodia, Laos, Myanmar, and Vietnam) countries, such as the Mekong–Ganga Cooperation Framework, compliments South Korea’s hard and soft connectivity planning under the New Southern Policy and the South Korea–Mekong Partnership. Partnering with Vietnam will undoubtedly enhance this thrust. India’s aim to extend the India–Myanmar–Thailand (IMT) highway to Vietnam via Cambodia and Laos could be a part of the trilateral cooperation where South Korean capital investments may be helpful. In a broader context, for connectivity and infrastructure development, greater regional economic platforms such as the RCEP as well as multilateral frameworks such as the ASEAN Regional Forum (ARF) and ASEAN Defense Ministers Meeting (ADMM) Plus can bring South Korea and India together through ASEAN (Panda, 2020), in which Vietnam plays a crucial intermediator.

South Korea and India can also cooperate in building ports, shipping space, and related industries in Vietnam. South Korea and India are suggested to have financial cooperation in the infrastructure development projects in Vietnam, through which firms and international cooperation agencies from South Korea may contribute higher shares to those projects. South Korea and India may also seek financial sources from regional and international development agencies, such as the Asian Development Bank and the World Bank. Besides infrastructure, South Korea and India could collaborate on various projects that help to increase connectivity in the region via Vietnam, such as those related to trade facilitation, investment and tourism promotion, technical cooperation, and energy resource development. For instance, several South Korean firms have been working to build green energy infrastructure in Vietnam. In January 2022, SK Ecoplant, an affiliate of the SK Group—the third-largest conglomerate in Korea, officially partnered with the Vietnamese energy firm (Nami Solar) in a joint venture of $200 million. The project was set up to generate rooftop solar power of up to 250MWp to meet the demands of domestic businesses. In July 2022, SK Group announced its plan to develop a hydrogen power plant and a hydrogen power supply chain in Can Tho Province (Pham, 2022). All projects can involve Indian contractors, given their skilled labor in the IT sector and advantage in English use.

An Enhancing Regional Trade Agreement Among South Korea, Vietnam, and India

India, Vietnam, and South Korea have bilateral trade agreements between them. However, there is no regional integration among the three countries discussed in specific.

Standard theory on openness and trade agreements suggests that MNEs (especially those from better-developed countries) are more productive and also pay above-market wages (Bernard, Redding, & Schott, 2007). A closer look at each country’s exports suggests a sound basis for the trilateral trade partnerships between South Korea, Vietnam, and India. Statistical data show that electrical appliances were South Korea’s most important exports to Vietnam and India. India’s main export products to South Korea and Vietnam were input materials, such as non-ferrous metals and iron and steel. Vietnam’s export structure to South Korea and India focused largely on telecommunication goods. The traded products vary among the countries, and at the same time suggesting that the three countries are responsible for different stages of production in the value chain (Dhingra, Nam, & Ngo, 2022). Given South Korea, Vietnam, and India at different stages of the supply chain, the three countries are set up for ideal trading relations, capitalizing on each other’s comparative advantage in building resilient supply chains.

In November 2019, India decided to not join the RCEP. Officially, the Indian Prime Minister Narendra Modi said, “The present form of the RCEP Agreement does not fully reflect the basic spirit and the agreed guiding principles of the RCEP” (ET Bureau, 2019). In addition, with the homogeneity in economic difficulties faced domestically by India, Vietnam, and South Korea (such as South Korea’s aging population, India’s labor surplus, and Vietnam’s low-skilled labor), as well as the current trend of regionalization of international production and GVCs, an RTA for starters between the three countries would be mutually beneficial to each of the corresponding economies.

Other factors also demonstrate the necessity of RTA formation. First, geopolitical tensions certainly trigger high risks to the development of regional economies. Competition between China and the US is increasing. China’s growing military prowess is changing the balance between major powers. In response, the US is strengthening alliances focused on the Pacific, most recently with the Australia–UK–US security pact (AUKUS). Competition is also increasing the exercise of soft power, which can be observed during the COVID-19 pandemic (such as China’s vaccine diplomacy). Geopolitical tensions could cause countries to continue the implementation of protectionist policies (as seen during the pandemic), which will be increasingly detrimental to trade and investment activities in the region. As the US–China competition intensifies, the predominance of major powers in South Korean foreign policy not only underserves the country’s global interests and leadership potential but also places South Korea in a difficult position between its closest ally and its largest trading partner. South Korea needs to maintain a balanced status to secure cooperation from China on inter-Korean relations and economic development pursuits while upholding a strong security alliance with its treaty ally, the US. Likewise, India also needs to balance the rivalry between the US and China, as both are important economic and security partners of India. A balanced relationship with China and the US is also one of the main targets in Vietnam’s diplomatic policy. Looking ahead, the most pressing policy challenge for South Korea, Vietnam, and India is how to diversify their economic and strategic partnerships to hedge against these uncertainties. Second, the COVID-19 pandemic has had serious economic consequences and poses significant challenges to the economic integration of countries, including the disruption of supply chain performance, a sharp drop in global consumer demand from large negative wealth effects, the disruption of growth in connectivity, an increase in GVC’s operation cost due to the limited supply of services, the application of restrictive non-tariff measures (NTMs), and financial fragility. The recent slowdown of the Chinese economy due to lockdown policies against the new waves of COVID-19 has affected trade, GVCs, and investment activities in South Korea, Vietnam, and India. Since 2009, China has been the largest trading partner of Vietnam and South Korea. Likewise, in 2021, China remained India’s largest trade partner, and for the first time, the India–China bilateral trade exceeded $100 billion (Outlook Web Desk, 2022). Additionally, the recent Russia–Ukraine conflict has sharply affected commodity prices, particularly the energy prices. A prolonged conflict keeps energy and food prices elevated, causing disruptions to supply chains and GVCs, an increase in inflation, and low private consumption and growth in South Korea, Vietnam, and India.

In response to these challenges, South Korea, Vietnam, and India have enhanced their bilateral relations, particularly in maintaining product supply chains. Over the years, Vietnam has been established as a hub for South Korean trade and investment activities. The economic interactions between Vietnam and India and between South Korea and India have intensified significantly. Vietnam offers Seoul and New Delhi an opportunity to enter the rest of the ASEAN market. This became more imperative in South Korea after the economic retaliation of the travel ban by Beijing in 2016 and 2017 owing to the deployment of the US-operated Terminal High Altitude Area Defense (THAAD) system in South Korea (S. M. Kim, 2018). South Korea is also developing a relationship with India to diversify its economic partners, particularly after the COVID-19 outbreak (Kumar, 2021). It is worth noting that both South Korea and India consider Vietnam an important partner in reducing dependence on China’s economy, diversifying economic partners, and expanding their influence in the region. This increases the importance of working closely between South Korea, Vietnam, and India.

In addition, middle powers have strengths compared to great powers, which are helpful for smaller countries to develop their economies and diversify their partner networks. For example, although South Korea’s quantitative contributions may not match those of China or Japan, its expertise in economic and political development as well as its status as a non-revisionist power have been positively received by Vietnam and other ASEAN countries. Likewise, with a fast-growing economy and the highly skilled labor in the IT sector, India can make a higher contribution to Vietnam’s development and stability. Given the convergence of geopolitical and geo-economic interests, it will be possible for South Korea, Vietnam, and India to work together toward an RTA in the near future.

To realize this ambitious plan, South Korea, Vietnam, and India can establish an intergovernmental dialogue channel for strategic economic cooperation to discuss the possibility and main contents of an RTA between the three countries. Needless to say, the negotiation process will take time with complicated issues as it depends heavily on domestic and external factors in each participating country. One certain thing is that this RTA should not be a simple combination of CEPA between India and South Korea and VKFTA between Vietnam and South Korea, but needs to consider the advantages and the need for cooperation in each party, as well as the future transformation of global supply chains and GVCs. In other words, negotiations need to take into consideration enhancing value chain linkages between South Korea, Vietnam, and India. Thus, it is suggested that South Korea, Vietnam, and India comprehensively adopt an integrated approach in negotiations in terms of trade in goods and services and investment policies to ease and foster the production network and supply chains. RTA negotiations should aim to remove as much as possible the tariff lines and non-tariff barriers. With a more advanced economy, South Korea can consider implementing these measures in a shorter period compared to India and Vietnam. Negotiations should discuss how the South Korean manufacturing companies operating in Vietnam and India use more locally sourced components. Furthermore, RTA negotiations between the three countries are recommended to focus on key industries such as semiconductors, automobiles, digital technologies and trade, and 5G and 6G wireless communications, which have been discussed in previous sections, as well as on labor issues and technology transfer. By implementing these trade liberalization measures, trade and investment activities between the three countries will be further promoted.

Concluding Remarks

In recent years, bilateral economic relations among South Korea, Vietnam, and India have expanded significantly. Given the advantages and demands for the cooperation of each party, the increasing geopolitical and geo-economic competition between major powers, the COVID-19 impact, and domestic factors, there is significant potential for trilateral economic cooperation among South Korea, Vietnam, and India.

This study discussed the prospects for triangular economic cooperation among the three countries in supply chains, particularly regarding electronics, automobiles, and SMEs’ GVC participation, focusing on the leading role of South Korean MNEs. The paper also analyzed trilateral cooperation prospects in the digital economy and connectivity. There is room for South Korea and India to collaborate on investment projects to develop Vietnam’s digital economy. The cooperation prospect between South Korea and India in promoting connectivity with ASEAN via Vietnam is promising, as it aligns with South Korea’s and India’s current connectivity strategies and plans in this region. Finally, the paper discussed the rationale and possibility of forming an RTA between South Korea, Vietnam, and India, which is motivated by three countries at different stages of supply chains, the current trend of regionalization of international production and GVCs, India’s withdrawal from the RCEP, and external factors. The negotiation process, if taken, requires time as it depends heavily on domestic and external factors in each country. Thus, strong commitments are required in South Korea, Vietnam, and India. The three countries are suggested to establish an intergovernmental dialogue channel for strategic economic cooperation to discuss the main contents of an RTA with a detailed negotiation process.

Acknowledgments

The authors would like to thank Prof. Rajiv Kumar and anonymous reviewers for their helpful comments and suggestions on the paper.

ORCID

Hoan Quang Truong   https://orcid.org/0000-0003-4735-4191