Executive summary of PhD Dissertation thesis: Economic efficiency of foreign direct investment in Vinh Phuc province

Clarifying the main theoretical issues about economic efficiency of FDI in the province to apply to the study of FDI in Vietnam''s localities. Proposing solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025 with scientific bases; thereby providing more scientific basis for local authorities in planning the policy of attracting FDI, renewing the management of FDI enterprises and improving the economic efficiency of FDI in the coming years.

LAM THUY DUONG

ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT IN VINH PHUC PROVINCE

Major : Development Economics Code : 9 31 01 05

EXECUTIVE SUMMARY OF PHD DISSERTATION THESIS

HANOI - 2019

FOR DEVELOPMENT STRATEGIES

Academic Instructors:

1 Assoc Prof PhD BUI TAT THANG

2 Ph.D PHAN THI THUY TRAM

Reviewer 1: Prof PhD NGUYEN DINH HUONG

Reviewer 2: Assoc Prof PhD TANG VAN KHIEN

Reviewer 3: Prof PhD NGUYEN THANH DO

The dissertation will be defended at University level Council of Dissertation Assessment at Vietnam Institute for Development Strategies

Time: , date month , year 2019

The dissertation could be found at:

- Vietnamese National Library

- Library of Vietnam Institute for Development Strategies

INTRODUCTION

1 The reason for choosing the topic

Vinh Phuc province is one of the localities attracting foreign direct investment (FDI) into the country Thanks to attracting a lot of FDI capital, the economy of the province has increased significantly, the industry of the province has changed towards the progress of export value and budget revenue has increased relatively quickly, many jobs have been created but when assessing the role and economic efficiency of FDI in the province,

it is still limited, both current and future have the pressure to improve economic efficiency of FDI So far, how to attract more FDI and how to make the FDI sector more effective for Vinh Phuc is an unknown issue At the same time, in the whole country as well as at the local level, there is no research on the economic efficiency of FDI in a systematic and comprehensive way; especially, there is no research project of a doctoral thesis Facing such situation, the PhD student dicided to chose the issue of

"Economic efficiency of foreign direct investment in Vinh Phuc province" as a PhD thesis in development economics

2 Objectives and research tasks of the topic

2.1 Research objectives: Clarifying the main theoretical issues about

economic efficiency of FDI in the province to apply to the study of FDI in Vietnam's localities Proposing solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025 with scientific bases; thereby providing more scientific basis for local authorities in planning the policy of attracting FDI, renewing the management of FDI enterprises and improving the economic efficiency of FDI in the coming years

2.2 Research tasks: To achieve the goal, the thesis will successfully

implement the main tasks: (1) Develop a theoretical basis for economic efficiency of FDI in the province to create a theoretical basis to study the thesis (in particular, to clarify the economic effect of FDI, the factors affecting economic efficiency of FDI and assessment of economic efficiency of FDI From this requirement will have to conduct an overview

of the published research results at home and abroad (2) Determining clearly the achievements, limitations, weaknesses and causes of the economic efficiency of FDI in Vinh Phuc province is still low in the period

of 2006-2017 (3) Proposing solutions to improve economic efficiency of FDI in Vinh Phuc province until 2025

3 Subjects and scope of research

a Research object: The research object of the thesis is FDI and

economic efficiency of FDI in Vinh Phuc province (placed in relation to state management on FDI and with the local economic development ) During the research process, the thesis has observed the FDI investment of the whole country as well as some other provinces when necessary and possible

b Research scope:

- In terms of science: Researching both theory and practice, both

current and future economic efficiency of FDI (placed in relation to economic development efficiency and development investment efficiency), the factors affecting the economic efficiency of FDI, economic efficiency indicators of FDI; status, future economic efficiency of FDI and solutions to improve economic efficiency of FDI to 2025 in Vinh Phuc province The thesis only focuses on studying the economic efficiency, social efficiency and environmental effectiveness of the thesis mentioned only in the theoretical part for systematic The spillover of FDI enterprises is also an important issue when assessing the contribution of FDI enterprises to the provincial economy but due to the lack of data, the dissertation addresses this issue with the possible efforts The loss caused by FDI to the provincial economy (through transfer pricing, to overcome environmental pollution )

is also a necessary issue when researching the contribution of FDI to Vinh Phuc's economy but not There are data, so the thesis only mentions to help look at the problem in a comprehensive way, but cannot analyze it deeply

- In terms of time: Current status of research from 2006 to 2017 and

future research to 2025

- In terms of space: Vinh Phuc Province and when conditions permit,

it will analyze and compare with other relevant localities

4 Research framework

Implementing the principle of approaching the system and from the viewpoint of adherence to the logic of thesis, the thesis developed the general research theoretical framework as shown in Figure 1 and approached the system throughout the research process

Figure 1: Research framework

Source: Author

5 Major contributions of the thesis

- In terms of theory and scholarship: The thesis proposes a new

concept of economic efficiency of FDI (not only economic efficiency of FDI enterprises but also FDI enterprises' contribution to the economy economy of the province); points out factors affecting the economic efficiency of FDI (in which state management and technology used by FDI enterprises are more important); specify the evaluation content and determine the criteria for evaluating the economic efficiency of FDI

- In terms of practicality: Detecting limitations (economic efficiency

of FDI is low, slow and unstable) Pointing out the main reasons (state management still has many shortcomings, FDI enterprises are small and many FDI enterprises use low technology .) Providing a scientific basis for planning FDI attraction policies, renewing FDI management and giving solutions to improve the economic efficiency of FDI in Vinh Phuc province

in the process of economic development of this locality until 2025 At the same time, propose the work of local authorities to improve the economic efficiency of FDI in Vinh Phuc province in the coming time

6 Approaches and research methods

The approach of the thesis is approaching the system, going from theoretical research to analyzing the economic efficiency of FDI; go from

Objectives of the study

Research tasks:

1 How is the economic efficiency of a province's FDI understood? How do factors affect the economic efficiency of FDI? and What are the indicators of economic efficiency of FDI?

2 What is the status of economic efficiency of FDI and economic efficiency prospects of FDI in Vinh Phuc? What is the cause of the unsatisfactory economic efficiency of FDI in Vinh Phuc?

3 How to improve the economic efficiency of FDI in Vinh Phuc province? Which solution is the most important solution?

& recomment

cause to effect; then proceed to propose solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025

To complete the thesis, the author uses common methods such as: System analysis method; Methods of statistical analysis; Forecast method; Method of using experts; Analysis method according to SWOT model; Methods of policy analysis; Comparative method; Minimum squares method

In the process of researching the thesis, the author also uses a number of other methods, such as separation, interpretation and inductive; At the same time, use a combination of methods to limit the defects of each method as well as

to ensure the reliability needed for research results as set out

7 Structure of the thesis

In addition to the introduction, conclusion and list of published scientific works; The content of the thesis is divided into 4 chapters Detail:

CHAPTER 1: LITERATURE REVIEW OF SCIENTIFIC RESEARCH RELATED TO ECONOMIC EFFICIENCY OF

FOREIGN DIRECT INVESTMENT

Following closely the study of theory and practical experience for the dissertation, the author conducted an overview of 98 documents (including

10 foreign documents and 19 doctoral dissertations) and selected two large group of issues, mainly aimed at useful service for the study of the thesis Detail:

1.1 Overview of development investment and foreign direct investment

Perceptions and conceptions of domestic and foreign scholars on development investment and FDI are the right ideas and views that the author can inherit for his research

In general, scholars emphasize the role of development investment (including FDI) The consequence of development investment is the economic structure that economic structure plays a decisive role in socio-economic development Development investment is the act of taking a sum

of money to perform one or several actions for development

FDI capital is part of social development This investment is carried out by foreign investors with the desire to gain profits and contribute to the national (or local) socio-economic development to attract FDI

1.2 Overview of economic efficiency of development investment and economic efficiency of FDI

In this section, the author reviews the perceptions and perceptions of economic efficiency of FDI; Factors affecting and system of economic efficiency indicators of FDI

The review pointed out that, in general, scholars mentioned much about the effectiveness of development investment, not to mention the economic efficiency of FDI, especially the economic efficiency of FDI of a locality There has been almost no research on the economic efficiency of FDI in a systematic and complete way Some scholars refer to the implications of the economic efficiency of FDI, but they identify the economic efficiency of FDI with the contribution of FDI to the development

of the economy At the same time, they only mentioned the economic efficiency of FDI at the general level as well as not placing the economic efficiency of FDI in the organic relationship with the effectiveness of

development investment as well as the efficiency of economic development They have not linked the economic efficiency of the FDI sector with the efficiency of the FDI sector to the national economy In general, scholars mentioned factors affecting the economic efficiency of FDI from a traditional perspective and said that these are natural, economic, social, investment and market weaknesses They have not considered under the perspective of actors and impact forces to attract FDI and economic efficiency of FDI They analyze the effectiveness of development investment as well as the economic efficiency of FDI through a series of indicators, in which they mention: (1) Efficiency of investment and economic efficiency of FDI; (2) The contribution of development investment as well as FDI to the economy (contributing to economic growth; increasing labor productivity; improving the structure of the industry; improving technology; increasing the openness

of the economy create new jobs and reduce unemployment, reduce poverty, reduce social evils, traffic accidents and occupational accidents The author finds that such indicators are too many; in those indicators, there are many difficult indicators because of the lack of data and some unquantifiable indicators Those are the points that can be inherited for the thesis Besides, the author also identified issues that scholars have not adequately studied as well as identified issues that the dissertation must study in depth

CHAPTER 2: THEORETICAL FOR ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT ON PROVINCIAL LOCATION 2.1 Economic efficiency of foreign direct investment in the province

Efficiency is a key issue of economic development as well as of development investment From a theoretical perspective, economic efficiency

of FDI is a measure to assess FDI attraction, activities of FDI enterprises and evaluation of the State's FDI policies The higher the efficiency, the better the performance of FDI enterprises and the State's FDI policy is correct and vice versa Economic efficiency of FDI is part of development investment effectiveness; but the efficiency of development investment is an integral part

of the economic development efficiency Therefore, it can be said that the economic efficiency of FDI is part of the efficiency of economic development

of the country or of each locality Economic efficiency of FDI is a part of aggregate efficiency, including economic efficiency, social efficiency and environmental efficiency These parts closely relate to each other, reflecting separate but overlapping aspects In particular, when it comes to economic efficiency, it means the social and environmental efficiency; or when it comes

to social efficiency and environmental performance, it refers to its roots as economic efficiency

Economic efficiency of FDI contributes to the overall efficiency of development investment and economic development Economic efficiency of FDI is closely related to local economic growth Localities in our country always want to attract FDI so that it is highly effective The process of FDI attraction has taken place since 1988 In fact, it has been pointed out that, for nearly 30 years (1988-2017), FDI has a great impact on the economic development of our country and many provinces (in which Vinh Phuc): making advanced technology, many industries and services appear and new products appear, expanding export markets and forming highly skilled labor force Economic efficiency FDI is understood as a combination of direct economic benefits brought to businesses and economic benefits of FDI contribution to both the national or local economy due to investment and production activities Its business brings In other words, the economic efficiency of FDI consists of two basic parts: the economic efficiency of FDI enterprises themselves and the contribution of FDI enterprises for economic growth (including development and attraction) domestic enterprises) of the

whole country or of the whole province Accordingly, it shows that economic efficiency of FDI is closely related to economic growth That is a proportional relationship The higher economic efficiency of FDI contributes to high economic growth and vice versa, if the economic efficiency of FDI is low, it will also make economic growth low

Figure 2.2: Relationship between FDI and economic growth and effects

interactions

Note: The road is interactive and only the opposite direction;

Road only influences

Increase the scale of GDP and GDP/person

Stable macro and improve national economic autonomy

Domestic investment

with the new generation FDI trend, geographic location and technical infrastructure Among these factors, the State factor (including central government and local government) has the decisive significance to the economic efficiency of FDI Law on FDI, particularly FDI policy (there are 2 groups: a) Policies for FDI attraction, FDI investors (mainly attractive commitments) and b) Policies for active FDI enterprises (mainly incentives and restrictions) have a great influence on the economic efficiency of FDI In each development period, each factor has an effect on the economic efficiency

of FDI at different levels

Figure 2.3: Diagram of factors affecting the economic efficiency of FDI

Source: Author

FDI enterprises themselves play a big role in the decision of economic efficiency of FDI in the province When large-scale FDI enterprises, using high technology, using less land, less electricity and attracting many domestic enterprises, doing genuine business will certainly have economic efficiency and vice versa

2.3 Indicators for evaluating economic efficiency of foreign direct investment in the province

On the basis of clarifying the theoretical and practical considerations, the author identifies two groups of quantitative indicators mainly used to assess the economic efficiency of FDI for localities in the context of Vietnam

4

geographic

location

Economic efficiency

of FDI

1 State

2 Enterprise (FDI enterprise and domestic enterprise)

Investment guidelines

Economic policy and investment Developing infrastructure and human resources

Investment decision

Make investment

3 Market

a) First group: Indicators of Economic efficiency for the FDI sector itself

This can be seen as a set of indicators reflecting the development efficiency of the FDI sector They represent quantitatively the economic efficiency of FDI Specifically include 03 indicators:

(1) Effective of using a labor force in the FDI sector (labor

productivity in the FDI sector);

(2) Effective use of an FDI investment capital There are two

indicators reflecting this problem: The average value-added index per invested capital of the FDI sector and the ICOR index of the FDI sector

(3) Rate of return on business capital and rate of return on revenue

In addition, if conditions permit, it is possible to further analyze the average value added per Kwh of electricity and the efficiency of using one hectare of occupied land or the value-added index made on one hectare of land FDI sector occupied

b) The second group: Contribution of the FDI sector to the provincial economy

They are measured by the contribution rate of the FDI sector to the national economy This group of indicators includes 6 indicators:

(1) FDI sector's contribution to the province's economic growth; (2) FDI sector’s contribution to social labor productivity of the province;

(3) FDI sector's contribution to the openness of the economy;

(4) FDI sector's contribution to the provincial budget revenue; (5) FDI sector's contribution to job creation of the whole economy; (6) Spreading level of FDI enterprises to the provincial economy (the

extent of FDI infusion to the provincial economy through the number of domestic enterprises linking production and business with FDI enterprises and the level of contribution improve the technological level of the provincial economy, the elasticity ratio between the profit rate and the budget of FDI enterprises and the elasticity ratio between the profit rate and the employee's income makes sense important when analyzing the contribution of FDI to the provincial economy; In addition, it is possible to further analyze the contribution of the FDI sector to the total social investment capital of the province

For FDI attraction, the above 6 indicators are of great significance and extremely important If these indicators have a higher value, the better and vice versa

CHAPTER 3: SITUATION OF ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT IN VINH PHUC PROVINCE

PERIOD 2006-2017 3.1 Factors affecting economic efficiency of foreign direct investment

in Vinh Phuc province

3.1.1 Elements of Vinh Phuc province itself

According to the content presented in chapter 2 and from the perspective of considering the level of factors to the economic efficiency of FDI in Vinh Phuc province, the author clarifies the elements of the province itself and the influence of they affect the economic efficiency of FDI in the province On the basis of using the SWOT model, the author examines the significance of the geo-economic position, the formation of a new urban area, and the unique tourist areas, near the Hanoi Capital, easily connecting with Noi Bai international airport, capable of coordinating development with Hai Phong, Quang Ninh, Lao Cai, provinces in the Red River Delta and draw some basic statements:

a) In terms of advantages: Overall, Vinh Phuc is close to Hanoi and

associated with the Red River Delta provinces with a market with great potential, there is a new urban area Chua Ha belonging to Vinh Yen city, there are quarters Tam Dao's famous tourism, where the resort of Dam Vac and Dai Lai is both beautiful and attractive, has many golf courses These are the factors that meet the needs of accommodation, entertainment, very good relaxation, steaming leading FDI investors

Vinh Phuc has great potential and a variety of natural resources for economic development in a comprehensive way with large scale and rich goods, attracting investors First of all, it is necessary to mention the construction land fund (the potential is considerable in terms of area size and most of the land is infertile, the land is not as good as in many parts of the