LIST OF ABBREVIATIONS FDI Foreign Direct Investment GDP Gross Domestic Product CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership EVFTA European-Vietnam Free
Trang 1UNIVSERSITY OF ECONOMIC AND BUSINESS FACULTY OF INTERNATIONAL BUSINESS AND ECONOMICS
Lecturer: Assoc.Prof, Ph.D Nguyen Thi Kim Anh
Name: Pham Quynh Anh Student code: 17050553 Class: QH-2017-E KTQT CLC 1
Ha Noi, June 2020
Trang 2TABLE OF CONTENTS
LIST OF ABBREVIATIONS 4
LIST OF FIGURES 4
PART 1: INTRODUCTION 5
PART 2: CONTENT 6
Chapter 1: Theoretical and practical framework of FDI in Vietnam 6
1.1 The role of FDI in the country's socio-economic development 6
1.2 Recent situation of FDI registration in Vietnam 8
1.2.1 New registered capital 8
1.2.2 Adjusted capital 8
1.2.3 Contribute capital, buy shares 8
1.2.4 By investment field 9
1.2.5 According to investment partners 10
1.2.6 By investment area 10
1.2.7 Cumulative foreign investment situation till December 2019 11
Chapter 2: Impact of FDI on Vietnam's economic growth period 2010-2019 13
2.1 Situation of FDI attraction in Vietnam 2010-2019 13
2.1.1 Overview 13
2.1.2 Implemented FDI 13
2.1.3 Export and import situation 14
2.2 Impact of the FDI sector on Vietnam's socio-economic development 15
2.2.1 Providing and supplementing important capital sources for development investment 15
2.2.2 Contribute to GDP growth and state budget revenues 16
2.2.3 Increase export share 17
2.2.4 Contribute to labor productivity growth 18
2.2.5 Create technology spillover effects 20
Chapter 3: Solutions to increase FDI attraction into Vietnam 21
3.1 Promote stable and sustainable economic growth 21
Trang 33.2 Maintain a stable political environment 21
3.3 Strengthen inspection and supervision of the process of licensing and managing foreign investment projects 21
3.4 Improve infrastructure, increase planning towards modernization 21
3.5 Invest in education development, improve the qualifications of workers 21
3.6 Priority will be given to attracting some industries and hi-tech products, creating great added value 21
3.7 Proactively selecting green FDI projects 22
3.8 Attracting FDI must be appropriate 22
PART 3: CONCLUSION 23
REFERENCES 24
Trang 4LIST OF ABBREVIATIONS
FDI Foreign Direct Investment
GDP Gross Domestic Product
CPTPP Comprehensive and Progressive
Agreement for Trans-Pacific Partnership
EVFTA European-Vietnam Free Trade Agreement
FTA Free Trade Agreement
GSO General Statistics Office
LIST OF FIGURES
Figure 1: FDI by cumulative sectors 2019
Figure 2: Total FDI realized in the period 2010-2019 (million USD)
Figure 3: Proportion of capital investment in Vietnam by economic sector 2014-2018 (%) Figure 4: Growth rate of investment capital in Vietnam 2014-2018 (%)
Figure 5: Contribution of FDI sector to Vietnam's GDP by economic sector 2010-2017 (%) Figure 6: Contribution of FDI sector to Vietnam's export turnover 2010-2018 (%)
Figure 7: Labor productivity by economic sector (million VND)
Trang 5PART 1: INTRODUCTION
In many developing countries, economic growth is still largely based on capital while the average income is low, so it is not possible to save much to accumulate capital and therefore the capital is very limited One of the capital solutions is to rely on foreign investment In addition to adding necessary capital, foreign direct investment also creates more jobs, skills training for workers, improving professional qualifications, management or technology transfer
Foreign direct investment (FDI) has been identified as one of the important driving forces promoting economic growth and social development in our country After more than 30 years of implementing FDI attraction policies, Vietnam has achieved very important achievements
For Vietnam, attracting FDI and developing FDI enterprises have been making an important contribution in receiving modern technology, advanced management experience and creating favorable conditions for businesses to participate in the global value chains and global distribution networks; at the same time, create a premise for businesses to expand the market to the world
At the same time, attracting FDI contributes to increasing production and product consumption, making production more developed; That is, make the economy grow more
in the short term, medium term and long term as well as can create breakthrough development for the economy
The foreign direct investment (FDI) sector has increasingly affirmed its important role in Vietnam's socio-economic development According to statistics, FDI enterprises now contribute about 23.5% of total social investment (nearly 20% of GDP), accounting for over 70% of export turnover And to understand the impact of direct investment foreign direct investment (FDI) to Vietnam's economy in recent years, positive and negative impacts on the development of the country This article will analyze and assess the impact
of FDI on Vietnam's economic growth in the period 2010-2019 The paper consists of 3 chapters: chapter 1 is about the theoretical framework and practice of FDI in Vietnam, chapter 2 is about the situation and impact of FDI on Vietnam's economic growth in the period 2010-2019 and chapter 3 gives suggestions on solutions to enhance FDI attraction into Vietnam
Trang 6PART 2: CONTENT
Chapter 1: Theoretical and practical framework of FDI in Vietnam
1.1 The role of FDI in the country's socio-economic development
Along with the renovation process and opening the economy, the Law on Foreign Investment was passed and enacted by the National Assembly on December 29, 1987, marking a turning point for the formalization of foreign capital inflows Vietnam From that right policy, over the past 30 years, the FDI sector has increasingly shown its important role and significantly contributed to the economic development economic - social of the country
The attraction and use of foreign investment contribute to the impact of promoting the restructuring and restructuring the economy, renewing the growth model, improving the national competitiveness, industries, products and services; promoting institutional reforms, economic policies, business and investment environment, developing a fully modernized and integrated market economy, strengthening external relations, cooperation and international integration
Vietnam is internationally evaluated as one of the most successful FDI attracting countries
in the region and in the world, becoming a reliable and effective investment location in the eyes of foreign investors The 2017 report of the United Nations Trade and Development Organization assessed that Vietnam was among the Top 12 most successful countries in attracting FDI
According to official statistics of the Ministry of Planning and Investment, as of August
2018, Vietnam has had more than 26,500 FDI projects, with a total registered capital of more than 334 billion USD, with implemented capital of 184 billion USD Foreign investment has contributed nearly 20% of GDP and is an important additional source of capital for development investment with a proportion of about 23.7% of the total social investment capital
58% of total foreign investment is focused on processing and manufacturing, creating over 50% of the country's industrial production value Export turnover of foreign-invested sector, accounting for an increasing share in exports, reached 72.6% in 2017 and 71.4% in the first 9 months of 2018 Revenue to the region's budget Foreign investment has steadily increased over the years and reached more than 8 billion USD in 2017, accounting for 17.1% of the total state budget revenue
Trang 7Foreign investment is an important driving force for Vietnam's economic growth because the region's contribution has increased from 9.3% in 1995 to 19.6% in 2017 (accounting for 23.7% of the total social investment capital, accounting for 72% of the country's total export turnover, over 50% of industrial production value, over 17% of total state budget revenue)
Over the past decade, many foreign investment projects have transferred advanced technologies and management experience in a number of branches and fields; certain spillover effects on the domestic enterprise sector, thereby contributing to improving the technological level and governance of the economy Many big projects have brought about
a breakthrough, contributing to the budget revenue for many localities
For example, according to the report of the City People's Committee In Ho Chi Minh City,
in 1992, FDI enterprises only contributed more than VND 15 billion to the state budget (accounting for 0.6% of total budget revenue), in 2016, the revenue from FDI enterprises reached VND 48,700 billion, accounting for 16.3% of the City's total budget
The foreign investment sector has also made significant contributions to the development
of high-quality services in Vietnam such as finance - banking, insurance, auditing, shipping, logistics, education and training, health, tourism At the same time, this is also
a factor contributing to transforming development space, forming new urban areas, industrial parks, export processing zones, economic zones
Foreign investment also facilitates Vietnam to expand international markets, increase exports, gradually participate in production networks and global value chains Thanks to this orientation, exports of foreign investment sector have increased rapidly, contributing
to balancing the trade balance, reducing exchange rate pressure and improving the international payment balance
The foreign investment sector also has many contributions in creating jobs, contributing to labor restructuring and improving the quality of human resources Foreign direct employment in the foreign-invested sector increased from 330,000 in 1995 to about 3.6 million in 2017, and indirect jobs were created for around 5 to 6 million workers
FDI enterprises are also the pioneering units in training, improving the qualifications and industrial manners of workers, technicians and managers Many of the jobs previously held
by foreign experts have now been replaced by Vietnamese workers Many foreign-invested enterprises have paid attention to social responsibility to the community, participating in hunger eradication, poverty reduction and other volunteer activities
Trang 81.2 Recent situation of FDI registration in Vietnam
According to data from the Foreign Investment Agency (Ministry of Planning and Investment), as of December 20, 2019, foreign direct investment (FDI) into Vietnam included newly and additionally registered capital and foreign investors' share purchase capital reached US $ 38 billion, up 7.2% compared to the same period in 2018 This is also the highest figure in the last 10 years
1.2.1 New registered capital
As of December 20, 2019, the whole country had 3,883 new projects granted the IRC, an increase of 27.5% of the projects compared to the same period in 2018 The total newly registered capital of US $ 16.75 billion, equaling 93.2 % compared to the same period in
2018 The average registered capital of the new project decreased from US $ 5.9 million in
2018 to US $ 4.3 million in 2019 Although the newly registered investment capital in 2019 decreased But the pace of decline has been smaller than in previous months If excluding large projects of over US $ 1 billion newly licensed in the same period in 2018, the total newly registered investment capital in 2019 will increase by 32.5% over the same period (in 2019, the investment project with the scale of The largest investment capital is USD
420 million.In 2018, there was a Smart City project in Hai Boi commune, Dong Anh, Hanoi with a total registered capital of 4.14 billion USD and a factory project Polypropylene, an underground storage of liquefied petroleum with a total registered capital of 1.2 billion USD)
1.2.2 Adjusted capital
There were 1,381 projects registered to adjust investment capital, up 18.1% over the same period in 2018 Total adjusted registered capital was 5.8 billion USD, equaling 76.4% compared to the same period in 2018 In in 2019, the scale of adjustment to expand capital
of small projects (an average of USD 4.2 million / adjustment, smaller than the average of
2018 is USD 6.5 million / adjustment) and there is no large capital increase projects like in the same period of 2018 (Laguna - Singapore Co., Ltd has adjusted the project to increase its capital by 1.12 billion USD)
1.2.3 Contribute capital, buy shares
Also in 2019, the whole country had 9,842 times of capital contribution and share purchase
of foreign investors with a total value of contributed capital of US $ 15.47 billion, up 56.4% over the same period in 2018 and accounting for 40.7% of the total registered capital sign
Trang 9Investment in the form of capital contribution to share purchase has tended to increase sharply in recent years and accounts for an increasingly large proportion of the total foreign investment Specifically, 2017 investment in the form of capital contribution, share purchase accounted for 17.2% of the total registered capital, in 2018 accounted for 27.9%,
in 2019 accounted for 40.7% of the total registered capital Foreign investors contribute capital to domestic enterprises mainly in the field of processing and manufacturing industries with 45.8% of the total value and real estate business with 17.8% of the total price treatment
1.2.4 By investment field
In 2019, foreign investors invested in 19 sectors, of which investment focused on manufacturing and processing industry with a total capital of 24.56 billion USD, accounting for 64 , 6% of the total registered investment capital This is also a field that accounts for a large proportion of the registered capital in terms of registration of new investment projects, expansion investment projects, capital contribution and share purchase
Real estate business ranked second with total investment capital of 3.88 billion USD, accounting for 10.2% of total registered investment capital Next is the field of wholesale and retail, professional activities of science and technology,
Increasing FDI tends to focus on a few key sectors, associated with the roadmap of tariff reduction and opening of attractive investment sectors under FTA commitments
Statistics show that FDI in Services, especially real estate business, tends to increase rapidly and is the second largest sector in terms of FDI attraction, only after processing and manufacturing industries Generally, over the past 30 years, investment in the real estate business only accounted for 2.8% of the total number of projects, but accounted for 16.8%
of the total registered capital; the average investment capital is up to 74.4 million USD / project, more than 5 times the average capital scale of each project in the processing and manufacturing industry
Although the Vietnamese population is mainly concentrated in rural areas (about 67%), the labor force working in this region accounts for about 46% of the total social and agricultural labor contributing about 17% of Vietnam's GDP (GSO, 2016) but FDI inflows into this sector only account for 1.7% of total projects and 1% of total FDI into Vietnam It can be affirmed that with low investment, FDI does not play a role in Vietnam's agricultural and rural development
Trang 101.2.5 According to investment partners
In 2019, there were 125 countries and territories investing in Vietnam South Korea leads with a total investment of 7.92 billion USD, accounting for 20.8% of total investment capital into Vietnam; Hong Kong ranked second with total investment capital of US $ 7.87 billion (of which US $ 3.85 billion of shares bought in Vietnam Beverage Co., Ltd in Hanoi, accounting for 48.9% of Hong Kong's total investment capital) ); Singapore ranked third with a total registered investment capital of 4.5 billion USD, accounting for 11.8% of total investment capital Next is Japan, China, In particular, investment from China, Hong Kong tends to increase over the same period due to the impact of the US-China trade war Specifically: investment from China increased by nearly 1.65 times, from Hong Kong increased by 2.4 times over the same period in 2018
Foreign investors investing in Vietnam for over 30 years mainly concentrated in 15 countries and territories These major investors account for 89.4% of the registered capital and 86.2% of the total number of projects The scale of investment for the projects is largely above average In this group, the projects of Chinese investors have the smallest scale, about 6.2 million USD / project, equal to 44% of the average project size Although Korea ranks first in terms of total registered capital, the average project size is 9.1 million USD / project It is worth noting that among the 15 countries and territories considered as the
"main", there are three locations considered tax havens: British Virgin Islands, Cayman Islands and the Netherlands, with many projects large scale Registered capital from this
"triad" group, although only accounts for 4.4% of the total number of projects, the total registered capital accounts for 10.3% The project size in this group is 32.4 million USD / project, more than double the average project size
1.2.6 By investment area
Foreign investors have invested in 62 provinces and cities, of which Hanoi is the locality attracting the most foreign investment capital with a total registered capital of US $ 8.45 billion, accounting for 22.2% of total capital invest Investment capital in Hanoi is mainly based on the method of capital contribution, share purchase with 6.47 billion USD, accounting for 76.6% of total registered investment capital of Hanoi
TP Ho Chi Minh City ranked second with a total registered capital of nearly 8.3 billion USD, accounting for 21.8% of total investment capital Like Hanoi, Ho Chi Minh City's investment in the form of capital contribution, share purchase accounted for a large proportion, accounting for 67.5% of the total registered investment capital of the City and
Trang 11accounting for 58.1% of the total number of turns contribute capital, buy shares of the whole country
Next are Binh Duong, Dong Nai, Bac Ninh,
In 2019, the number of delegations working for investment opportunities increased sharply, increasing by about 30% compared to the same period last year The partners are mainly from Japan, Korea, China, Hong Kong, Singapore MPI has held many policy dialogues, talks with businesses of Japan, Korea, Singapore, China, Hong Kong, Thailand, Taiwan, Germany, Netherlands, India, in 2019
1.2.7 Cumulative foreign investment situation till December 2019
Accumulated to December 20, 2019, the whole country has 30,827 valid projects with a total registered capital of 362.58 billion USD The accumulated realized capital of foreign direct investment projects was estimated at 211.78 billion USD, equaling 58.4% of the total valid registered capital
- By field: Foreign investors have invested in 19/21 branches in the national economic system, of which the processing and manufacturing industries account for the highest proportion of 214.2 billion USD, accounting for 59.1% of total investment capital, followed by real estate business with 58.4 billion USD (accounting for 16.1% of total investment capital); electricity production and distribution with 23.65 billion USD (accounting for 6.5% of total investment capital)
sub-Figure 1: FDI by cumulative sectors 2019 (%)
Source: Ministry of Planning and Investment
Trang 12- By investment partners: In December 2019, Honduras, Iceland and Lithuania were 3 partners who had new investment projects in Vietnam, bringing the total number of countries and territories having valid investment projects in Vietnam up to 135 Among them is Korea with a total registered capital of 67.71 billion USD (accounting for 18.7%
of total investment capital) Japan ranked second with 59.3 billion USD (capturing 16.4%
of total investment capital), followed by Singapore and Taiwan, Hong Kong
- By location: foreign investment has been present in all 63 provinces and cities nationwide,
of which Ho Chi Minh City is still the leading province in attracting foreign investment with US $ 47.34 billion (accounting for 13.1% of total investment capital); followed by Binh Duong with 34.4 billion USD (accounting for 9.5% of total investment capital); Hanoi with 34.1 billion USD (accounting for 9.4% of total investment capital)
Conclude:
The number of registered projects and the value of FDI capital into Vietnam over the past time has grown very well, however, the current FDI attraction is still not methodical Vietnam has not been really proactive, selectively attracting FDI projects with high technology content and strictly controlled pollution levels Many FDI projects are crude manufacturing, high processing capacity, large emission levels, low added value, and lack
of basic industries such as supporting industries and high technologies The capacity of preventing, controlling and protecting the environment of some FDI enterprises is still inadequate
The spread of FDI inflows to economic sectors is not commensurate with expectations The level of localization in Vietnam is still low when the ratio of imported inputs to product value is largely above the threshold of 50%