Summary of phd thesis in economics foreign direct investment towards sustainable development in the northern key economic region

- Research tasks: i Systematizing and clarifying the rationale offoreign direct investment towards sustainable development of NKER; iiLearning the experiences of some Asian Countries abo

TRAN THI TUYET LAN

FOREIGN DIRECT INVESTMENT TOWARDS

SUSTAINABLE DEVELOPMENT IN THE NORTHERN KEY

at the Ho Chi Minh National Academy of Politics

Academic Supervisors: 1 Assoc Prof Dr Pham Thi Khanh

2 Dr Nguyen Tu

Judge 1:

Judge 2:

Judge 3:

The thesis will be defended in front of a panel of examining judges at the Ho Chi Minh National Academy of Politics At…,……., 2014

The thesis can be found for study at the National Library and the

Library of Ho Chi Minh National Academy of Politics

1 The necessity of the research

The Northern key economic region (NKER) is one of national keyeconomic regions It is constructed and developed with the aim of maximizingthe comparative advantages of the region, creating economic zones that havemotivation nature, pervasive influence and capacity to help other regions todevelop

With its own advantages, in the past few years, NKER has been one ofthe two national key economic regions that take the lead in attracting FDI interm of the number of project and size of investment FDI business sector inNKER has positive contribution to the region’s economic-social growth anddevelopment However, the result of FDI attracting and the operation of theFDI business sector in NKER have shown negative effects which badlyinfluence the region’s sustainable development on 3 aspects: economy, societyand environmental protection… The phenomenon like transfer pricing and taxevasion occurring in FDI businesses and causing tax losses to the Governmentare quite popular and tend to keep increasing The phenomena like the fact thatlabor’s material and spiritual life hasn’t received satisfactory attention; FDIbusinesses’ awareness of complying with the Law on Environment Protection

is not good enough, seen as the neglect of environmental development and theviolation of Law on Environment Protection, have done a big deal to theecological environment and health of the population in the area Thosenegative effects are current enormous challenges to the sustainabledevelopment of NKER

With the above practical issues, further clarifications on FDI rationaletowards sustainable development; assessing FDI reality towards sustainabledevelopment in NKER and seeking for solutions for FDI attracting and FDIbusinesses’ management in order to preserve sustainable development ofNKER on the three aspects: economy, society and environment, are urgent

requirements With the aim of meeting the requirements, the subject “Foreign direct investment towards sustainable development in the Nothern key economic region” was chosen for the research.

2 Purposes and tasks of the research

- Research purposes: The thesis recommends main orientations and

solutions in order to promote foreign direct investment towards sustainabledevelopment in NKER in the future

- Research tasks: (i) Systematizing and clarifying the rationale of

foreign direct investment towards sustainable development of NKER; (ii)Learning the experiences of some Asian Countries about foreign directinvestment towards sustainable development of the key economic regions; (iii)Analyzing and assessing FDI reality towards sustainable development inNKER, which includes achievements, limitations and causes of limitations,weaknesses; (iv) Suggesting main orientations and solutions with the aim ofpromoting FDI towards sustainable development in NKER in the future

3 Subject and scope of the research

- Research subject: The research subject of the thesis is foreign direct

investment towards sustainable development in NKER

- Research scope:

+ In term of content: Foreign direct investment is related to two other

subjects: foreign investor and host country The purpose of foreign investors is

to gain profit while, to the host country, it is economic-social benefits that FDIprovides For that reason, in the perspective of the host countries, foreigndirect investment towards sustainable development is how the host countriestake benefits from FDI while maintaining sustainable development of theircountries, regions or localities

By that meaning, within the research scope of the thesis, it will studies theimpact of foreign direct investment on sustainable development of NKER onthree aspects: economy, society, and environment There in, (i) the researchedinvestment concept mentioned in the thesis is understood as the investmentactivities, investment to gain profits; (ii) the thesis doesn’t include researches

on sustainable development within the area of FDI businesses, but researches

on the impacts of FDI on the host countries, NKER particularly; (iii) the role

of the Government in managing FDI towards sustainable development is onlyconsidered in moderation within influential factors, causes of limitations ofFDI towards sustainable development; (iv) sustainable development aredefined as targets of FDI managers, not included in the dissertation research;(v) subjects that take part in deciding the orientations of foreign directinvestment towards sustainable development in NKER include the CentralGovernment, local authorities, FDI businesses and social organizations

+ In term of space: The thesis studies FDI towards sustainable

development in NKER, on the area of seven provinces and cities under the

Central Government, such as Hanoi, Hai Phong, Hai Duong, Hung Yen, QuangNinh, Bac Ninh and Vinh Phuc.

+ In term of research time: The thesis studies foreign direct investment

towards sustainable development in NKER from 2003 to 2011

4 Research methods and data sources

- Research methods: The thesis uses research methods for economic

science, especially focuses on the following methods: methods forsystemizing, methods for analyzing and summarizing, statistical andcomparative methods; inductive and deductive methods; expert methods.

- Data sources: Data sources used in the thesis is mainly secondary ones

including: (i) Statistics of the General Statistic Office and Statistics Bureaus ofprovinces, cities in NKER; (ii) Reported data of Ministries: Ministry ofPlanning and Investment, Ministry of Labor - Invalids and Social Affairs,Ministry of Natural Resources and Environment, and Departments ofprovinces and cities; (iii) Surveyed data of relevant research institutes andresearch results published in Seminars, articles published in specializedjournals

5 New contributions of the thesis

- On theoretical aspects: (i) Develop concepts, characteristics and

specify requirements for FDI towards sustainable development of keyeconomic regions; (ii) Bring out elements influencing FDI towards sustainabledevelopment of key economic regions; (iii) Specify the content and criteria ofFDI towards sustainable development of key economic regions on threeaspects: economy, society, and environment

- On practical aspects: (i) Clarify the reality of FDI towards sustainable

development in NKER, its limitations and causes; (ii) Suggest mainorientations and solutions for promoting FDI towards sustainable development

of NKER in the future

6 Structure of the thesis

A part from the introduction, conclusion, list of reference and appendix,the content of thesis are presented in 4 chapters and 10 sections

Chapter 1 OVERVIEW ON RESEARCH STATUS RELATED TO FOREIGN

DIRECT INVESTMENT TOWARDS SUSTAINABLE

DEVELOPMENT IN NORTHERN KEY ECONOMIC REGION 1.1 Research status of foreign direct investment towards sustainable development of foreign authors

The research works of foreign authors are reviewed towards: researches

on how FDI affects the economic growth; the ability to accumulate capital forthe economy; scientific and technological developments; impacts oninternational trade; impacts on labor, employments and human resources.Most of the researches support the idea that FDI has good effects on thementioned issues There are also researches showing that FDI only performspositive effects on economic growth, social and environmental developmentswith specific conditions about infrastructure, the quality of human resources,political stability, and the perfection of market institutions

1.2 Research status of foreign direct investment towards sustainable development for key economic regions of domestic authors

1.2.1 Research status of the impacts of FDI on economic growth and development

It can be confirmed that researches on FDI in Vietnam are various anddiversified In most of the researches, when studying on the relationshipbetween FDI and economic developments, many domestic scholars stated thatFDI had positive effects on economic growth, such as: the fact FDI not onlymakes up for the lack of investment, but also has important meanings ininnovating technologies, enhancing the level of management, promotingmarketing activities, increasing the export manufacture ability of the hostcountries… Besides, there are also negative effects, downsides, adverse effects

of FDI on economic developments, especially negative effects of FDI on theenvironment, which is mentioned in many researches

1.2.2 Research status of foreign direct investment towards sustainable development and sustainable developments of NKER

- The group of researches related to sustainable development of NKER

Nowadays, in Vietnam, there have been researches related to sustainabledevelopment of key economic regions in general and sustainable development

of NKER in particular The content of researches on sustainable development

of key economic regions is also pretty plentiful theoretically and practically

On theoretical aspects: there are some researches referring to the concepts ofsustainable development of key economic regions, criteria of sustainabledevelopment of key economic regions, the experience on sustainabledevelopment of key economic regions, and lessons for Vietnam in sustainabledevelopment of key economic regions On practical aspects: there are alsoanalyses and assessments of policies for sustainable development of keyeconomic regions; discoveries and analyses of downsides, unsustainableaspects of sustainable development of Vietnamese key economic regions;indicating causes and suggesting solutions that are relatively comprehensivefor sustainable development of key economic regions.

- The group of researches related to foreign direct investment towards sustainable development

This is the group of researches that are directly relevant to FDI andstudied on the FDI in the most comprehensive way about sustainabledevelopment Most of the researches assessing positive and negative effects ofFDI on the economy are analyzed on the three aspects, the three backbones ofsustainable development which are economic development, socialdevelopment and environmental protection

1.2.3 General assessment of published works about FDI towards sustainable development and theory and practical deficiency needing further researches

1.2.3.1 General assessment of published works about FDI towards sustainable development

First, researches all focus on clarifying and asserting the fact that FDIhas effect on economic growth and economic-social developments

Second, most of the researches stay at assessing effects of FDI onspecific aspects of sustainable development So far, there has been rarely workthat provides comprehensive, profound and methodical researches on foreigndirect investment towards sustainable development on the three aspects:economy, society and environment

1.2.3.2 The dissertation’s theoretical and practical deficiencies that need further researches

- On theoretical aspects: So far, there has been rarely work that provides

profound researches and systematic explanation about foreign directinvestment towards sustainable development of key economic regions

- On practical aspects: Although there are work, articles providing

researches on effects of FDI on sustainable development, most publishedscientific works are focused on analyzing, assessing FDI’s effects in general

and FDI’s effects on the target of sustainable development in particular inlarge scale – national level There are rarely works examining the effects ofFDI on sustainable development of a specific economic area, especiallyNKER.

Chapter 2 THEORETICAL FOUNDATION AND REAL SITUATIONS OF FOREIGN DIRECT INVESTMENT TOWARDS THE SUSTAINABLE

DEVELOPMENT IN THE KEY ECONOMIC REGION

2.1 Concept, characteristics and requirements for foreign direct investment towards the sustainable development in key economic regions

2.1.1 The concept of foreign direct investment and foreign direct investment towards the sustainable development in key economic regions

2.1.1.1 The concept of foreign direct investment

Foreign direct investment is the act of foreign investors to put their loan

or any property into another country so that they can have the right to possessand control on an entity long operating in that country for the target of profits

2.1.1.2 The concept of foreign direct investment towards the sustainable development in key economic regions

The dissertation author gives the concept of foreign direct investmenttowards the sustainable development in key economic regions as below,

“Foreign direct investment towards sustainable development in key economic

region is investment activity of foreign organizations and individuals in key economic region of another country, which meets planning and developing requirements of that region; makes positive impact on the development of the region to ensure harmonious and rational combination among economic development, social development and environmental protection not only for the key region, but also spillovers to other regions both in the present and in the future”.

2.1.2 Characteristics of foreign direct investment towards the sustainable development in key economic regions

Firstly, foreign direct investment towards the sustainable development

in key economic regions has subjective features of invested country, in

general, and invested key economic regions, in particular; Secondly, foreign

direct investment towards the sustainable development in key economicregions includes the targets of exploiting and utilizing resources effectively;

Thirdly, foreign direct investment towards the sustainable development in key

economic regions always aims at the harmonious and balanced developmentamong economic development, social development, and environmental

protection; Fourthly, foreign direct investment towards the sustainable

development in key economic regions always appreciate the quality over the

quantity of FDI; Fifthly, foreign direct investment towards the sustainable

development in key economic regions not only end up considering andevaluating the process of foreign direct investment at the outset, that is thestage of getting licensed , but also review business and production activities of

FDI enterprises; Sixthly, foreign direct investment towards the sustainable

development in key economic regions have mutual interaction and supportbetween foreign investors and the key economic regions

2.1.3 Requirements for foreign direct investment towards the sustainable development in key economic regions

Firstly, foreign direct investment towards the sustainable development

in key economic regions must be based on the three main developmentbackbone, which are the sustainable development of economy, society, and

environment; Secondly, foreign direct investment towards the sustainable

development in key economic regions has to produce pervasive effects to

other economic areas; Thirdly, foreign direct investment towards the

sustainable development in key economic regions must develop potentials andadvantages of the key economic regions themselves and be appropriateparticularly to the developmental orientation of each key economic region and

generally to the entire economy; Fourthly, foreign direct investment towards

the sustainable development in key economic regions must guarantee theharmony of benefits for both overseas investors and the key economic regions;

Fifthly, foreign direct investment towards the sustainable development in key

economic regions cannot be an independent activity, but need the orientationand guidance from the State, the awareness to comply with laws from FDIenterprises, and the active participation from communities of residents and

social organizations; Sixthly, foreign direct investment towards the sustainable

development in key economic regions must be coupled with the target ofsustainable development of the whole country and with the commonmovement of the modern world

2.2 Content, evaluation standards, and main factors affecting foreign direct investment towards the sustainable development in key economic regions

2.2.1 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions

2.2.1.1 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions about economy

- Foreign direct investment positively contributes to foster the economic

growth of the key economic regions: including evaluation standards: the

growth speed of FDI areas in comparison with the growth speed of the keyeconomic regions; the contribution rate of FDI areas in the economic growth

of the key economic regions

- Foreign direct investment helps to promote the economic restructure of

key economic regions towards modern movement: be evaluated by standards

like the density of industrial production value of FDI areas compared with thetotal industrial production value of key economic regions; the density ofproduction value of FDI areas in comparison with the production value of thewhole region

- Foreign direct investment makes contribution to raise export turnover

of key economic regions: including evaluation standards such as the rising

speed of FDI areas’ export turnover; the density of export turnover of FDIareas compared with the export turnover of the entire key economic regions

- Foreign direct investment contribute to enrich the budget of key

economic regions: including the following standards: the rising rate of FDI

areas’ annual budget; the rate of budget incomings from FDI areas comparedwith the total budget incomings of key economic regions

- FDI’s contribution to the total amount of socially investing capital of

key economic regions is shown in standards as the following: the contribution

rate of FDI areas into the total socially investing capital in key economicregions; the increasing rate of annual investment capital of FDI areas

2.2.1.2 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions in terms of society

- Foreign direct investment helps produce employment and speed up the

transfer of labor structure in key economic regions towards advancement: The

following standards can be used to evaluate this content: The number oflaborers created annually in FDI areas; the raising speed of workers working

in FDI areas every year; The laborers working in FDI areas to the total number

of workers having jobs in key economic regions ratio; The quantity and rate ofemploying local labor compared with the total number of laborers of FDIareas; The industrial labor in FDI areas to the total labor working in keyeconomic regions ratio;

- Foreign direct investment continuously improves the quality of labor

source having jobs in FDI businesses in key economic regions It can be

evaluated by the following standards: The average income/month/laborer

(including basic salary and other incomes) of workers; The labor rate,especially immigrant workers working in FDI companies with housing andfacilities as well as equipment for daily activities of laborers; The number ofcultural and spirit activities yearly organized by FDI enterprises; The number

of places for entertainment, culture, and sport for workers in FDI enterprises;The amount of time for rest of laborers in a day; The amount of extra workingtime of workers; The rate of labor equipped with means of labor protection;The trained workers to the total number of laborers working in FDI areas ratio

- Foreign direct investment makes contribution to hunger eradication

and poverty reduction and guarantees social welfare for residents in key economic regions: Foreign direct investment helps to foster economic growth

and contribute to the budget of key economic regions, thereby indirectlyaffecting the tasks of hunger eradication and poverty reduction and ensuringsocial welfare for inhabitants of key economic regions

2.2.1.3 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions as to environment

- Foreign direct investment must be coupled with the rational

exploitation and economical and effective utilization of natural resources in key economic regions Standards used to measure this content are: The export

value of raw materials to the total export value of FDI areas ratio; the rate ofconsuming natural resources/a unit of products and services

- Foreign direct investment must comply with and strictly follow laws of

environmental protection of the invested country, in general, and of key economic regions, in particular In order to assess the implementation of laws

on environmental protection of FDI businesses, the following standards should

be based on: The quantity and rate of FDI enterprises making Reports on theevaluation of environmental effects and Commitment for environmentalprotection; The number and rate of FDI companies having waste processingsystem/the total number of FDI enterprises; The quantity and rate of FDIbusinesses violating laws on environmental protection

- Foreign direct investment in key economic regions must be attached

with the use of high technology, modern technology, and friendly technology

to environment: this can be evaluated by standards: The scale of capital

investment/labor; The rate of fixed property equipped (fixed property)/labor;

The technological level of FDI projects (high, medium, and low technology);The rate of FDI projects from developed countries.

- Foreign direct investment in key economic regions must be combined

with the building of methods for environmental protection and prepared for the precaution, prevention, settlement, and control of environmental pollution; at the same time the protection, nourishment, and improvement the environmental quality in key economic regions The standards for this

evaluation include: The cost invested for researching and developingtechnology for environmental protection; The cost put into the tasks ofprotecting environment of FDI businesses; The spending invested for thetasks of environmental protection to the total investment capital of FDIenterprises ratio

- Foreign direct investment must offer good effects to private

businesses on the issue of environmental protection, contributing to impact the work of environmental management of the invested country, in general, and key economic regions, in particular: seriously carrying out criteria for

environment of FDI companies also has positive influence on environmentalresults from trading partners supplying inputs and satellite companiesthrough giving support and consultancy on environmental managing systems

or environmental handling measures that FDI enterprises have done.Through FDI joint venture partners, inland companies can learn and get help

as well as advice to make environment improved

2.2.2 Main factor affecting foreign direct investment towards the sustainable development in key economic regions

Firstly, group of factors from the invested country includes: (i) The

improvement of legal system and policies related to FDI towards thesustainable development in key economic regions; (ii) Strategies to attractFDI towards the sustainable development in key economic regions; (iii) Thequality of planning tasks and projects to draw FDI towards the sustainabledevelopment in key economic regions; (iv) The capability to examine andmonitor FDI activities towards the sustainable development in key economicregions; (v) The connection and coordination in operation amongstMinistries, departments, and localities as well as between local areas in keyeconomic regions; (vi) The quality of human resources to meet the demandfor foreign direct investment towards the sustainable development in keyeconomic regions; (vii) The synchronous and modern development oftechnical infrastructure system satisfying requirements for foreign direct

investment towards the sustainable development in key economic regions;(viii) The maturity and development of supplementary industry system and

services assisting business activities in key economic regions; Secondly,

group of factors from foreign investors includes: (i) Business strategies and

the orientation of the investing market; (ii) financial potentials; (iii) FDIprojects’ level of technology; (iv) The awareness to comply with laws fromoverseas investors

2.3 Experience from some Asian countries in foreign direct investment towards the sustainable development in key economic regions and lessons for the Northern key economic region

2.3.1 Experience from some Asian countries in foreign direct investment towards the sustainable development in key economic regions

International experience in foreign direct investment is summarizedfrom successful experience from some Asian countries in drawing andmanaging foreign direct investment, which is: Experience in attracting FDIand promoting area development as well as intensifying the level division tomanage the capital source for investment from Indonesia; Experience inimproving investment environment, constructing infrastructure, creatinghuman resources of high quality, and developing supplementary industryfrom Thailand; and experience in perfecting legal system and policies,focusing on infrastructure renovation and technology transference, andpaying more attention on the selection of FDI projects from China

2.3.2 Lessons gained from experience in foreign direct investment towards the sustainable development for the Northern key economic region

By summarizing experience from some Asian countries in foreign directinvestment mentioned above, the dissertation author gains some lessons fromthe experience as a reference for Vietnam, in general, and the Northern keyeconomic region, in particular in the FDI orientation towards environmentalprotection These lessons are: (i) Renovating and improving legal system aswell as opportunely adjusting investment policies to be suitable to targets anddirection of the country in each stage; (ii) Getting planning tasks and projectsfor FDI attraction of the key economic region done well coupled with generalstrategies for social-economic development of the country to meet the need forsustainable development; (iii) Actively and positively raising the effectiveness

in dividing levels to manage foreign direct investment activities; (iv)Strengthening the work of verifying and supervising activities of foreign directinvestment to ensure the sustainable development of the key economic region;(vi) Actively and positively developing supplementary industry to meet the

demand for sustainable development in the key economic region; (vii)Expanding synchronous, modern, and high qualitative infrastructure in the keyeconomic region.

Chapter 3 THE REAL SITUATION OF FOREIGN DIRECT INVESTMENT TOWARDS THE SUSTAINABLE DEVELOPMENT IN THE

NORTHERN KEY ECONOMIC REGION 3.1 Potentials, advantages, difficulties, and challenges to foreign direct investment towards the sustainable development in the Northern key economic region

3.1.1 The generalization of formation and development process of the Northern key economic region

The Northern key economic region was formed according to Decision

No 1018/1997/QĐ-TTg covering 5 Provinces and Cities of Ha Noi, HaiPhong, Quang Ninh, Hai Duong, and Hung Yen, located in the domains ofHong River Delta and the Northeastern mountainous areas On August 13th

2004, the Prime Minister released the Decision No 145/2004/ QĐ-TTg on

the main direction to develop society and economy in the Northern key economic region till 2010 and with the vision till 2020 On the Decision, the

scale of the Northern key economic region was expanded to include another

3 provinces, which were Ha Tay, Vinh Phuc, and Bac Ninh Since August

1st 2008 after the Resolution made by Congress at the third meeting of theTenth Congress on extending the administrative border of Ha Noi City,covering all Ha Tay Province, Me Linh Ward (Vinh Phuc), and 4Communes of Luong Son Province (Hoa Binh), the Northern key economicregion has included 7 provinces and cities: Ha Noi, Hai Phong, QuangNinh, Hai Duong, Hung Yen, Bac Ninh, and Vinh Phuc (Ha Tay wasmerged to become part of Ha Noi Capital)

3.1.2 Potentials, advantages, difficulties, and challenges to foreign direct investment towards the sustainable development in the Northern key economic region

3.1.2.1 Potentials and advantages to foreign direct investment towards the sustainable development in the Northern key economic region

The Northern key economic region has a lot of potentials andadvantages in attracting FDI towards the sustainable development This is theregion with favorable geological sites, plentiful and diverse naturalconditions, quite synchronous infrastructure, and development levels whichare much higher than those of other regions in the whole country combinedwith great capability of training and expanding human resources Among