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FDI INFLOW IN VIETNAMDirect Foreign Investment (FDI) is a very important factor in the development of Vietnams economy today. We cannot deny the positive that FDI brings to Vietnam such as: adding investment capital, boosting exports, reducing unemployment, ... Thanks to the contribution of FDI, Vietnams economic growth rate increase over the years. FDI inflows in Vietnam is growing strongly over the years based on total registered capital and implemented capital.
MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY FACULTY OF FINANCE PRESENTATIONS: INTERNATIONAL FINANCE FDI INFLOWS IN VIETNAM Full name: Trần Thị Thanh Xuân Student’s ID: 31181024134 Class: FNC03-K44 Ho Chi Minh city, 2020 INTRODUCTION Direct Foreign Investment (FDI) is a very important factor in the development of Vietnam's economy today We cannot deny the positive that FDI brings to Vietnam such as: adding investment capital, boosting exports, reducing unemployment, Thanks to the contribution of FDI, Vietnam's economic growth rate increase over the years FDI inflows in Vietnam is growing strongly over the years based on total registered capital and implemented capital Figure 1: FDI inflows in Vietnam (2000-2018) (total registered capital and implemented capital) Source: GSO (2000-2018) THE KEY POSITIVE EFFECTS OF FDI INFLOWS IN VIETNAM 1.1 Additional source of social investment capital From the data in Table 2, it is found that the investment capital by economic sectors according to the structure of the state economy decreased over the years The share of investment capital from the state economic sector decreased by 33% (59.1% in 2000 to 33.1% in 2018) In contrast, the non-state economy and the foreign invested sector tended to increase steadily and stability Foreign investment sector accounted for 18% of total investment in 2000, it increased by 23.4% in 2018, creating the potential of capital, leading to technological innovation Figure 2: Structure of Vietnam's social investment capital (2000-2018) Source: GSO 1.2 Improve exports Figure 3: Structure of Vietnam exports of goods (2000-2018) Source: GSO It is easy to see that exports in the FDI sector account for almost 50% of the total value, clearly seeing the high competition compared to the domestic sector Some items of Vietnam are known for FDI: electronic components, phones, office computers The results show that FDI plays an important role, especially when Vietnam joins the WTO and most of the products are exported “Data from the General Department of Vietnam Customs and the Ministry of Industry and Trade show that, from the beginning of the year to the end of October 15, 2019 The total export turnover of the whole country reached US $204.9 billion while the total value of imported goods reaching $198.1 billion USD Remarkably, FDI enterprises had import and export value up to $255.3 billion USD, accounting for 63.3% of total import and export turnover of the country Exports of this group reached US $140.3 billion, up 4.8% over the same period and accounting for 68.5% of Vietnam's total merchandise export value FDI enterprises amounted to $25.4 billion USD ”, Tien Phong’s newspaper 1.3 Reducing unemployment, create jobs Currently, there are many factories, enterprises and companies led by foreign investors in Vietnam, creating more job opportunities In 2017, FDI created more than million direct jobs, not to mention indirect associations According to JobStreet's first recruitment overview market in the first half of 2018, job search for job opportunities in foreigninvested enterprises increased 10 times compared to the same period in 2017 1.4 Technological innovation, improving competition Vietnam is a developing country, so technology transfer is of special importance and contributes to the development of national internal resources, quickly accomplishing the goal of self-research and testing Some industries such as: oil and gas, construction, hotels, offices for lease are being promoted and enhanced by FDI in our country Therefore, our country has created many new products and imported restrictions due to innovation and advanced equipment to promote development compared to other countries In the market, almost high-quality products, beautiful designs, attracting a large number of customers are created by FDI enterprises 1.5.Improve the level of business management and administration Foreign companies are heavily influenced by professionalism abroad, so the foreign invested sector have a well-known team of directors and managers that help educate employees with high qualifications, transfer experience and intensive job training creates the best job efficiency In addition, Vietnamese workers can learn methods and technology from foreign managers to accumulate experience and knowledge for themselves, create trust to deal with jobs and businesses for us THE KEY NEGATIVE EFFECTS OF FDI INFLOWS IN VIETNAM 2.1 Unreasonable investment structure We often call for foreign investment to call for capital, modern technology, lots of experience to create a balanced and modern economy But learning to put capital in places we need very little, because these are areas of low profitability and high risk of creating the imbalance we want The imbalance is expressed on three angles: an imbalance in FDI into the three industries of industry, agriculture and services; imbalance in internal investment in each industry; irrationality in the regional investment structure 2.2 Inheriting outdated technology, lack of modern technology “Vietnam effective technology transfer from FDI is very low and tends to lag behind other countries in the region such as Thailand, South Korea even ranked behind Laos and Cambodia”, taken from newspaper Figure 4: technology transfer rate of FDI project in Vietnam Note: 5%: High technology 10%: Domestic value 15%: Medium technology 70%: Poor technology, backward Source: https://enternews.vn/fdi-va-nhung-mat-xich-cong-nghe142849.html The goal of our country in attracting foreign investment is to create a new and modern transfer technology to create quality and competitive products in the market But what is the weakness, foreign investment has moved into our country with outdated technologies that are not used much in their countries According to Figure 5, accounting for 70% of technology transferred to our country is not new and outdated technology, Vietnamese workers are handed over simple stages, requiring unskilled labor The amount of technology we desire for foreign investment is a modest 5% Most foreign investors in Vietnam are Asian countries, so technology transfer is low Investors from the United States and Europe account for a small proportion of the Vietnamese economy 2.3.Adverse impacts on the environment In developing countries, the tax rates for industries polluting the environment are low, and Vietnam is also an exception Part of the pollution is caused by outdated technology, old machinery and equipment emitting into the environment toxic substances that pollute the air, water, soil and noise Policies to control foreign investment are still limited, lax management, implementation of regulations on environmental protection to cope, resulting in great economic losses and lives of people such as: Vedan Company discharges water untreated waste into rivers, Formasa discharges toxins that kill fish 2.4.Conflict between investors and employees In 2017, the whole country had 314 strikes and suspension of collective work in 36 provinces and cities, which occurred mainly in FDI enterprises (accounting for 82.1%) According to the report of the Vietnam General Confederation of Labor, the number of incidents related to wages, income and minimum wage adjustments account for a high proportion (accounting for 54.1%) Some industries with low salary and income occurred many strikes such as: Textile and garment (162 cases, accounting for nearly 51.8%); 71 cases of leather shoes (accounting for nearly 22.5%) SUGGESTIONS TO MITIGATE THAT NEGATIVE EFFECTS OF FDI INFLOWS IN VIETNAM − Perfecting the system of laws, policies and management of the state openly and intelligently while promoting investment while ensuring quality efficiency, encouraging high technology and preventing projects of poor quality − Do not accept excess technology projects or environmental pollution strengthen inspection and control of waste disposal processes, remedies and technology transfer import processes to minimize poor and outdated technologies so as not to become old storage yards Ask businesses to report honestly to find the best solution for both parties to achieve high economic efficiency − − − Protect the rights of employees and prevent law violations of the business owner To force the head of the enterprise to be responsible for the violations of the implementation of the law Improve staff appraisal FDI projects, training a fundamental and systematic professional qualifications, knowledge and experience realistic and qualified professional ethical appraisal price Invest in infrastructure, enhance investment promotion activities, expand and consolidate diplomatic relations with other countries to create confidence in modern technology investment in our country REFERENCE o All statistics are taken from official sources of the General Statistics Office for the years 2000-2018, official website: http://www.gso.gov.vn https://www.tienphong.vn/kinh-te/xuat-khau-su-thong-tri-cuakhoi-fdi-1482929.tpo o https://vietnambiz.vn/co-hoi-viec-lam-tai-cac-doanh-nghiep-fditang-gap-10-lan-so-voi-nam-2017-64888.htm o https://enternews.vn/fdi-va-nhung-mat-xich-cong-nghe142849.html o ... imbalance in FDI into the three industries of industry, agriculture and services; imbalance in internal investment in each industry; irrationality in the regional investment structure 2.2 Inheriting... investment capital, boosting exports, reducing unemployment, Thanks to the contribution of FDI, Vietnam' s economic growth rate increase over the years FDI inflows in Vietnam is growing strongly over... OF FDI INFLOWS IN VIETNAM − Perfecting the system of laws, policies and management of the state openly and intelligently while promoting investment while ensuring quality efficiency, encouraging