INTRODUCTION
Reason for study
In recent years, the mobilization of foreign investment capital has significantly influenced Vietnam's economic growth and development at local levels However, attracting and effectively utilizing this investment remains a challenge for areas with inadequate infrastructure, financial systems, and investment policies To maximize the benefits of investment capital, it is essential to enhance labor productivity, create job opportunities, increase workers' income, and facilitate the transfer of foreign technology advancements.
Long-term economic growth and the enhancement of citizens' living standards should be primary objectives for any government Achieving sustainable economic growth relies on both scientific and technological advancements and the growing interdependence among nations This global interaction is evident through international trade and the movement of capital investments across borders.
Sustainable economic growth is a fundamental aspect of economic development theory, as highlighted by Snieskaa and Tykiene (2019) It serves as a primary goal for nations worldwide, representing a key indicator of progress Vietnam's socio-economic development plan for 2020-2025 prioritizes sustainable economic growth, aiming for significant improvements in efficiency and sustainability This approach seeks to elevate Vietnam from underdevelopment while enhancing the cultural and spiritual well-being of its people.
To accelerate industrialization and the development of a knowledge-based economy, Vietnam aims to establish itself as a modern industrial nation by 2030 The country is committed to maintaining political stability and social security while safeguarding its independence, sovereignty, and territorial integrity Additionally, Vietnam is focused on enhancing its regional standing and national security.
Dong Nai province, located in the Southeast region of Vietnam, is a key locality with the second-largest population in Southern Vietnam, following Ho Chi Minh City It ranks fifth in overall population and fourth in urban population nationwide, behind Ho Chi Minh City, Hanoi, and Hai Phong As a gateway province to the Southeastern economic region, Dong Nai plays a vital role in the country's most developed economic area and forms one of the three corners of the economic triangle alongside Ho Chi Minh City and Binh Duong province.
According to Bang et al (2016), Dong Nai possesses advantageous conditions for advancing its marine economy alongside the Southeast provinces The region's economic, demographic, and geographic characteristics significantly contribute to enhancing Dong Nai's economic development potential.
Dong Nai is encountering substantial challenges in advancing its sectors and products that possess comparative advantages, while also striving for better connectivity within the Southeast region and across the country The province has established numerous traditional industrial clusters, with over 32 industrial parks approved and operational, including notable ones like Long Thanh, An Phuoc, Nhon Trach II, Bien Hoa II, and Amata.
In 2019, despite facing socio-economic challenges, the province's gross domestic product (GRDP) grew by 7.5% in the first half of the year compared to the same period in 2018 This growth followed a 7.26% increase in 2018 and an 8.2% rise in the industrial and construction sectors The service sector also showed significant growth at 7.53%, while agriculture, forestry, and fishery increased by 3.1% Additionally, product tax from manufacturing, retail, and wholesale activities rose by 7.03%.
Aquaculture has caused many dead fish in the area due to natural disasters
Despite progress in sustainability, the livestock industry continues to pose significant risks Investment capital allocation for state budget projects remains inadequate, and the implementation of domestic investment, public-private partnership (PPP) projects, and investment socialization encounters numerous challenges due to inconsistencies between the Investment Law and related regulations.
Dong Nai must prioritize the swift development of infrastructure while simultaneously modernizing its economy to achieve sustainable growth This endeavor necessitates substantial capital investment To address this, the region needs to implement effective strategies to attract both domestic and foreign funding, as well as motivate various economic sectors to confidently invest in their own initiatives, benefiting the region and the nation as a whole.
The author investigates the factors influencing direct investment capital into Dong Nai province, a topic of significant interest for economists and leaders in Vietnam While numerous studies have been conducted globally and within Vietnam, most researchers primarily utilize quantitative methods and secondary data, often neglecting targeted investment surveys Furthermore, existing research predominantly emphasizes attracting foreign direct investment (FDI) inflows to countries, focusing on the role of investment attraction factors in promoting sustainable economic growth, while the specifics of firms attracting investment capital remain underexplored.
Dong Nai province is actively seeking to enhance foreign direct investment by analyzing various influencing factors To ensure sustainable economic growth and promote social and environmental development, it is crucial to identify new barriers and opportunities that can motivate further capital investment in the region.
The research findings support sustainable growth in Dong Nai province by maintaining macroeconomic stability and ensuring economic security The focus is on economic restructuring and transforming the growth model to prioritize quality, productivity, efficiency, and competitiveness, with an emphasis on developing a knowledge-based economy Economic growth will be integrated with cultural development, social progress, and justice, while continuously enhancing the quality of life for residents Additionally, socio-economic development will prioritize environmental protection and improvement, alongside proactive measures to address climate change.
Our country has conditions for rapid growth, and fast action is also very urgent
Sustainable development serves as a foundation for rapid growth, facilitating the creation of resources necessary for ongoing sustainability This dissertation examines the theoretical factors influencing investment attraction in Dong Nai province amidst the global shift in investment flows It aims to enhance understanding and knowledge in the field of foreign and domestic direct investment, highlighting the significant impact of various factors on attracting investment capital.
The author selects the topic "Capital for Sustainable Economic Growth: The Case of Dong Nai Province in Vietnam" for their dissertation, focusing on the intersection of economics and finance-banking to explore the critical role of capital in fostering sustainable economic development.
Objectives of the study
Analyzing and measuring factors affecting the investment capital attraction for sustainable economic growth in Dong Nai province, thereby the author proposes policy implications based on research results
1 Identify factors affecting the investment capital attraction for sustainable economic growth in Dong Nai province
2 Measure the impact level of the factors on the investment capital attraction for sustainable economic growth in Dong Nai province
3 The author proposes policy implications for attracting investment capital for sustainable economic growth in Dong Nai province.
Research questions
The dissertation achieved these goals; the following items were answered:
- What factors affect the attraction of investment capital for sustainable economic growth in Dong Nai province?
How does each factor impact investment capital attraction for sustainable economic growth in Dong Nai province?
- What are the policy implications for improving the appeal of investment capital for sustainable economic growth in Dong Nai province?
Scope and delimitation of the study
1.4.1 Scope and objective of the study
The study's scope is capital for sustainable economic growth in Dong Nai province, mainly focusing on economic growth
- Scope of the survey: The author interviews enterprises, experts working at the Department of Planning and Investment, and economic experts operating in Dong Nai province
- The study's delimitation is the attraction of investment capital for sustainable economic growth in Dong Nai province
- The delimitation of the time: Primary data was collected from June 2020 to November 2020 The dissertation has an implementation period that is from 2019 to 2021.
Research methods
The research method of the dissertation is a combination of qualitative and quantitative research methods
This dissertation employs qualitative research to describe and analyze the characteristics of the research sample, as well as the behaviors of experts and enterprise leaders, based on primary research findings.
The author employs qualitative research methods, allowing for adjustments based on new information that arises during data collection, highlighting a key distinction from quantitative methods Additionally, the author incorporates external data sources, utilizing information from economic organizations, government agencies, and various publications, including books, magazines, and online resources.
The author engaged with 30 investment experts in Dong Nai province, comprising ten officials from the Department of Planning and Investment, ten economic specialists familiar with the region's investment landscape, and ten leaders from large enterprises in the area Their insights were instrumental in shaping a comprehensive questionnaire aimed at uncovering new lines of inquiry The process involved meticulously analyzing the responses from these experts to enhance the research framework.
✓ Literature review related to the dissertation;
✓ Interview enterprise leaders, experts and modify the preliminary questionnaire;
✓ Finally, there is nothing official about the questionnaire
1.5.2 Quantitative research methods This dissertation collects data and solves relationships through numerical form and studies from interpretation using scientific models and quantitative research methods Besides, the author processed through SPSS 20.0 and Amos software with descriptive statistical tools, measuring scales with Cronbach's Alpha, exploratory factor analysis (EFA), confirmatory factor analysis (CFA), structural equation modeling (SEM), and variance analysis (Tho, 2011) With the following steps:
✓ Cronbach alpha test of reliability,
✓ Testing of structural equation modeling (SEM),
✓ Testing analysis of variance (ANOVA),
✓ The author surveyed Data and processed it using SPSS 20.0 version and
The data for this research method was collected through a questionnaire that surveyed about 1.000 enterprise leaders operating in Dong Nai province.
Scientific and practical significance of research
1.6.1 The scientific significance of research
This dissertation explores the concepts of economic growth and sustainable economic growth, focusing specifically on the factors influencing investment capital attraction and sustainable growth in Dong Nai province The findings provide valuable scientific insights that can inform policy recommendations for researchers.
Secondly, the dissertation builds a quantitative model that reflects the factors affecting investment capital attraction and sustainable economic growth in Dong Nai province, supplementing research materials for subsequent studies
This dissertation serves as a valuable reference for future academic research on capital attraction in Vietnam Additionally, the findings contribute to the concept of sustainable economic growth, emphasizing the importance of achieving rapid, stable, and long-term economic development while addressing social and ecological challenges.
The dissertation develops a model for attracting investment capital to promote sustainable economic growth at the local level, specifically applied to Dong Nai province This research emphasizes that sustainable economic growth is a vital aspect of sustainable development, which involves a balanced integration of socio-economic progress and environmental protection, ensuring that the needs of the present generation are met without compromising the ability of future generations to meet their own needs.
1.6.2 The practical significance of research
This dissertation presents a pioneering analysis of the factors influencing investment capital attraction and its impact on sustainable economic growth in Dong Nai province.
This dissertation analyzes the influence of various components on investment capital attraction and sustainable economic growth in Dong Nai province It presents research findings that inform practical policy recommendations aimed at enhancing investment capital influx, thereby fostering sustainable economic development in the region.
The dissertation advises the national government to adopt similar policies across other provinces in Vietnam While there have been notable advancements in sustainable economic growth and positive economic restructuring, challenges remain in the development process Key concerns for sustainable economic development are influenced by factors such as productivity, competitiveness, innovative capacity, and the regulatory environment surrounding investment and business.
Organization of the study
In addition to references and appendices, the dissertation is divided into five chapters:
Chapter 1: Introduction Chapter 2: Literature review and research model Chapter 3: Research methodology
Chapter 4: Research results Chapter 5: Conclusions and policy implications
LITERATURE REVIEW AND RESEARCH MODEL
Theoretical framework
2.1.1 Economic growth 2.1.1.1 Modeling of economic growth
The economic growth model is a strategically designed framework that illustrates how an organization mobilizes and utilizes resources to influence the economy through its production and business activities This model aims to achieve sustainable economic growth at a reasonable rate over the years, adapting to the specific needs of each developmental stage It is characterized by defined conditions, criteria, and requirements for each phase of the process (David et al., 2007).
Sustainable development and stability are paramount in business operations, prompting leaders to establish clear growth models These models outline specific goals and activities for team members, while also assessing the organization’s resources, potential, and competitive advantages Effective mobilization and utilization of resources are crucial for balanced development within the enterprise (David et al., 2007).
Economic growth today is closely linked to its quality, as evidenced by its impact on the economy A comprehensive model outlines the essential factors influencing economic activities, serving as a tool to establish relationships and describe the evolution of growth processes These models help businesses implement effective economic strategies while defining requirements for each stage of development (David et al., 2007).
2.1.1.2 Classical economic growth Classical growth theory has the basic argument that agricultural land (R, Resources) is the source of economic growth But the production land is limited, so the producer has to expand the area on the worse land for production, and the landowner's profit decreases, leading to the high cost of food and food production, sales of agricultural goods increase, nominal wages increase, and the profits of industrialists fall That profit is the source of accumulation to expand investment leading to growth Thus, limited agricultural land reduces profits for agricultural and industrial producers and affects economic growth But the fact that change is increasing shows that this model does not explain the origin of producers need to expand their area on lousy land, leading to reduced profits, increased costs and increased wages, nominal increase, and capitalist profits decrease; where profit is a cumulative source to expand investment leading to growth, but the fact that change is increasing shows that this model is no longer suitable to explain the origin of growth (David et al., 2007)
Neoclassical growth theory is an economic theory that shows how stable economic growth comes from a combination of three factors: labor, capital, and technology
Neoclassical growth theory emphasizes that short-run economic equilibrium is driven by variations in labor and capital within the production function Additionally, it posits that technological advancements play a crucial role in influencing the economy, asserting that sustained economic growth is unattainable without ongoing technical progress (David et al., 2007).
Neoclassical growth theory identifies three key components essential for a developing economy: labor, capital, and technology Importantly, it distinguishes between temporary short-run equilibrium and long-run equilibrium, the latter of which does not depend on these factors (David et al., 2007).
Neoclassical growth theory posits that the accumulation of capital in an economy, and the way people use that capital, is critical to economic growth
Moreover, the relationship between capital and labor of an economy determines the output of the economy Finally, technology increases labor productivity and increases labor output
Therefore, the production function of neoclassical growth theory is used to measure the growth and equilibrium of an economy
The production function is: Y = AF(K, L)
Where: Y: gross domestic product GDP of an economy K: capital in an economy
L: number of unskilled workers in an economy A: quantify the technological level of the economy However, because of the relationship between labor and technology, the economy's production function is often rewritten as Y = F(K, AL)
Neoclassical economists challenge the classical perspective by asserting that production does not necessitate fixed ratios of labor and capital They propose that labor and capital are interchangeable, allowing for a diverse range of input combinations in the production process.
Scientific and technical progress is seen as a crucial driver of economic development, aligning with the principles of neoclassical theory, which emphasizes production inputs and is often referred to as supply-side theory (David et al., 2007).
Neoclassical economists, similar to classical economists, emphasize that price and wage flexibility is essential for restoring economic growth during volatile market conditions, ultimately leading the economy back to its potential output and full employment They contend that the government's role in regulating the economy is minimal (David et al., 2007).
Modern growth theory emphasizes the importance of a mixed economy, where market forces primarily dictate economic organization while the government plays a limited role in regulation to mitigate market failures This approach effectively combines elements of neoclassical and Keynesian economic theories, highlighting the balance between market dynamics and state intervention (David et al., 2007).
Modern economics views economic equilibrium through the lens of the Keynesian model, where it is established at the intersection of aggregate supply and aggregate demand Typically, the economy operates below its potential, resulting in persistent inflation and unemployment It is crucial for the government to identify the natural rate of unemployment and the acceptable level of inflation to maintain economic stability.
Modern economic growth theory aligns with the neoclassical economic model, emphasizing key factors that influence production It posits that the overall output (Y) of an economy is shaped by essential inputs: labor (L), produced capital (K), natural resources (R), and advancements in science and technology (A).
Endogenous growth theory: many economists give views on endogenous factors
Reflected through the human element and technological progress While in the models presented above, these are considered exogenous factors
Endogenous factors significantly influence economic growth, making it essential to foster innovation and transform economic operations through industrialization and modernization A highly skilled and professionally trained workforce is crucial for advancing scientific research and creativity Therefore, establishing a systematic and professional training framework for the workforce is vital for economic development.
And for appropriate and flexible application of research, a talented leadership team is needed besides the technical staff and the creative and enthusiastic force (David et al.,
Endogenous growth theory posits that technological advancement arises from human capital and investment in research and development, making these elements endogenous factors in economic growth Consequently, a nation's economic development challenges extend beyond limited capital to include the effective training and utilization of human resources Countries that prioritize investment in human capital tend to experience higher growth rates (David et al., 2007).
Review of related studies
2.2.1 Review of related studies in other countries
Foreign investment capital flows are considered one of the necessary capital flows to help the development of the economy now and in the future Maqsood et al
A study conducted in 2017 examined the factors influencing foreign direct investment (FDI) in Pakistan, utilizing data collected from 2005 to 2015 The research employed a multivariate regression model to analyze the impact of social, economic, and infrastructure factors on FDI, revealing significant results at a 5% level of significance.
The shift in global economic conditions and the progression of macroeconomic factors in developing and emerging economies are key determinants of capital flows into these regions.
Figure 2.1: Factors affecting foreign direct investment in Pakistan
Michael et al (2019) analyzed Ghana's determinants of foreign direct investment
Research conducted from 1990 to 2015 indicates that a multiple regression model was utilized to analyze the impact of inflation, interest rates, exchange rates, and real estate on foreign direct investment (FDI) The findings reveal that power generation and telephone infrastructure significantly influence FDI, achieving a meaningful significance level of 5%.
Figure 2.2: Factors affecting foreign direct investment in Ghana
In their 1997 study, Magnus and Ari explored the impact of regional integration on foreign direct investment (FDI) through a conceptual framework and three case studies They examined how regional investment agreements influence the inward and outward flows of FDI within integrating regions Highlighting the issue's complexity, they concluded that the effectiveness of an integration agreement varies based on factors such as environmental changes from the agreements, the locational advantages of the region, the competitiveness of local firms, and the underlying motives for foreign direct investment.
Batoul et al (2014) investigated the effects of technology transfer through foreign direct investment (FDI) in developing countries, focusing on the United Arab Emirates (UAE) Over the last two decades, foreign investments have emerged as a crucial strategy for many companies While developed nations account for over 86% of global foreign investment outflows, they receive only 65% of inflows In contrast, developing countries have seen inward investments rise from 28% in 1990 to 53% in 2012 This growth is attributed to the increasing belief that attracting FDI fosters technology transfer, enhances human capital, reduces income inequality, and promotes sustainable economic growth This study aims to explore these perceptions within the context of the UAE.
The study had based on a mail survey of 123 companies and personal interviews with
A review of documents from the United Nations Conference on Trade and Development, Annual World Investment reports, IMF, OECD, UAE Ministry of Economic reports, and various local agencies reveals that the UAE has experienced a significant transfer of technology, positively influencing human capital formation However, the evidence linking technology transfer to income inequality and economic growth remains inconclusive.
Sebastian (2018) identified key determinants of foreign direct investment, highlighting that shifts in global economic conditions and macroeconomic factors in developing and emerging economies significantly influence capital flows into these regions The study emphasizes the importance of foreign investment for economic development, both now and in the future, and underscores the need to examine the interplay between internal and external factors that affect capital movement in developing countries.
It is crucial to examine the interplay between internal and external factors influencing capital flow in the country This article explores the dynamics affecting foreign investment inflows into developing nations, with a particular emphasis on two key components of capital flows: foreign direct investment (FDI) and indirect investment capital.
Figure 2.3: Factors affecting foreign direct investment in developing countries
The availability of infrastructure plays a crucial role in attracting foreign direct investment (FDI) and fostering economic growth A study by Nor et al (2012) focused on the impact of infrastructure on FDI in Malaysia from 1970 to 2010, utilizing time series analysis to address non-stationarity issues The research examined various factors influencing FDI inflows, including infrastructure, market size, trade openness, and human capital The findings provide valuable insights for policymakers, emphasizing the importance of investing in both hard and soft infrastructure to enhance FDI opportunities.
Hanh et al (2017) highlighted the importance of enhancing the quality of foreign direct investment (FDI) attraction in Vietnam, where FDI enterprises significantly contribute to the economy By 2016, Vietnam had over 21,398 active FDI projects with nearly 293 billion USD in registered capital, driving substantial economic growth This study analyzes data from 1988 to 2016, focusing on project numbers, investment sectors, and source countries, identifying three key factors influencing FDI quality: resources, infrastructure, and support policies, with the latter deemed most impactful Employing descriptive statistics, scale reliability analysis, and regression analysis, the research verifies its hypotheses and offers policy recommendations to enhance FDI attraction in Vietnam moving forward.
Ngwen (2017) examined the impact of infrastructure on foreign direct investment (FDI) in developing countries, focusing on electricity consumption and the number of fixed telephone lines as indicators Analyzing data from 55 countries between 1990 and 2014, the study found that robust electricity infrastructure significantly enhances FDI attractiveness, while the availability of fixed telephone lines does not appeal to foreign investors in these regions The findings suggest that developing countries should prioritize the promotion of sustainable electricity infrastructure to improve both the quantity and quality of energy production, thereby attracting more foreign investment.
This production of power will permit attracting FDI and ensure economic growth
Manijeh and Barzelaghi (2012) explored how transportation infrastructure impacts foreign direct investment (FDI) attraction in Iran They found that inadequate transportation infrastructure in developing nations like Iran poses a major barrier to attracting immediate foreign investment To enhance FDI inflow, it is crucial to reduce production costs by expanding facilities and leveraging advanced technology.
Transportation costs in certain countries tend to be high, leading industries to concentrate in areas with better transportation systems This study investigated the impact of transportation infrastructure on foreign direct investment (FDI) attraction in Iran, utilizing the Johansen Juselius econometric method to assess both short-run and long-run effects, as well as trade intensity and market size from 1974 to 2007 The findings revealed that while transportation infrastructure had no short-term effect on attracting foreign natural investment, it significantly and positively influenced FDI attraction in the long term.
Elena (2015) examined the significance of foreign direct investment (FDI) in fostering economic development, particularly in transitioning economies FDI plays a vital role in integrating countries into the global economy and modernizing national economies through the adoption of advanced technologies and higher quality standards This research identifies effective policies that host countries implement to attract and promote FDI, emphasizing the importance of ensuring access to foreign markets, offering commercial facilities, and providing tax incentives, which are crucial for attracting foreign investors.
Abdoulaye et al (2014) explored strategies and determinants for attracting foreign direct investment (FDI) in the context of a globalized economy that offers significant opportunities for investment Their study identifies and analyzes effective management strategies aimed at enhancing FDI attraction Through a comprehensive literature review, they highlight key strategies related to capital issues and the benefits associated with FDI.
The experiences in investment capital attracting
In 2020, despite the significant impact of the Covid-19 pandemic on global investment, countries like China, Singapore, Thailand, and Malaysia continued to attract international investors, demonstrating strong and stable investment flows Notably, China emerged as the leader in foreign direct investment (FDI), successfully leveraging these inflows to enhance the quality of its economy and securing the top position in income generation.
Since the economic reform period began in 1978, China has effectively leveraged its national negotiating power to optimize foreign direct investment (FDI) inflows This strategy involves balancing the long-term interests of the country with the financial objectives of multinational corporations, demonstrating a classic approach to maximizing economic benefits.
China has overtaken Japan to become the world's second-largest economy, largely due to significant foreign direct investment Following China, Singapore stands out as a leading destination for quality foreign investment in the ASEAN region, despite lacking specific investment laws The nation has successfully navigated the challenges of the 4.0 industrial revolution, recognizing the critical role of manufacturing and processing industries in fostering innovation Singapore's proactive approach has positioned it among the first countries to introduce initiatives related to Industry 4.0, demonstrating its commitment to integrating advanced technologies across various sectors.
Thailand and Malaysia remain key players in attracting foreign direct investment (FDI), which is vital for their economic growth Despite challenges such as political instability leading to a decline in foreign capital inflows, both countries are strategically focusing on high-value-added manufacturing and investments in high-tech and ecological sectors By streamlining administrative procedures, Thailand and Malaysia continue to be appealing destinations for investors seeking lucrative opportunities.
Thailand and Malaysia recognize the importance of foreign investment as a vital resource for national development To effectively harness this resource, both countries have crafted tailored policies aimed at attracting foreign investment that align with their developmental stages These policies include initiatives to promote investment and provide incentives to foreign investors Additionally, investment management agencies in Thailand and Malaysia facilitate the investment process by offering support and guidance, which is essential for effective investment state management.
2.3.1.1 China: Combining attracting capital and attracting knowledge
China is considered to have a "taking advantage of foreign capital" method The process of attracting FDI of this country has progressed from "point" to "route," from
"route" to "area," from South to North, from East to West, step by step, expanding in fields with different levels (Amanda, 2017)
Each year, the average FDI enterprises contribute about 30% of China's GDP
Foreign Direct Investment (FDI) enterprises contribute over 20% of corporate income tax revenue, generate nearly 72,000 jobs annually, and are essential for boosting exports and enhancing foreign trade.
In the initial phase of China's reform and opening up, the country established four special economic zones and opened 14 coastal cities to attract foreign investment This initiative included offering preferential tax rates, land use, and labor incentives, which encouraged foreign direct investment (FDI) primarily in processing, manufacturing, and labor-intensive sectors.
Between 2010 and 2015, China actively promoted policies to develop market economy institutions, leading to a significant increase in foreign investment During this period, China adopted a strategy of leveraging foreign capital by encouraging foreign direct investment (FDI) enterprises to conduct research and experimentation within the country By 2010, China had emerged as the second-largest destination for FDI globally, trailing only the United States The focus of China's FDI during this time was primarily on the construction sector, which accounted for approximately 70%, with the manufacturing industry representing a substantial portion of this investment.
Since becoming a member of the World Trade Organization (WTO) in late 2001, China has revised its foreign direct investment (FDI) attraction policies to align with WTO regulations, leading to a gradual opening of various sectors, including services, real estate, and finance.
From 2015 to 2020, China focused on attracting foreign direct investment (FDI) in high-tech sectors, emphasizing the importance of management expertise and skilled human resources During this period, the country updated its guidelines for foreign investment professionals and empowered local authorities to approve investment projects ranging from $100 million to $300 million.
2.3.1.2 Singapore: Many policies to attract investors
Despite many ASEAN countries possessing abundant resources and a skilled workforce, they remain trapped in the middle-income bracket In contrast, Singapore has experienced remarkable growth since gaining autonomy in 1959, starting from nearly zero resources By 2012, the Singapore Bureau of Statistics reported a per capita GDP of $65,048, a success attributed in part to substantial foreign direct investment (FDI) that has consistently flowed into the nation, even during global economic downturns (Zeonag, 2019).
Although the global financial and economic crisis occurred in 2008, FDI inflows into Singapore increased (from 24 billion USD in 2009 to 63.99 billion USD in 2011)
In 2012, Singapore maintained its position as the leading destination for foreign direct investment (FDI) in ASEAN, attracting 56.7 billion USD despite a decrease from 2011 The country's effective FDI attraction policies have made it a preferred choice for businesses seeking profitable investment and trade opportunities By examining Singapore's successful strategies, valuable insights can be gained for enhancing FDI attraction in other regions.
Singapore is prioritizing the attraction of Foreign Direct Investment (FDI) by focusing on three key sectors: new manufacturing, construction, and export Additionally, the country adapts its FDI strategies to align with the specific conditions of each period, ensuring that investments are directed towards suitable industries.
Singapore initially leveraged foreign direct investment (FDI) to develop its economic base by focusing on export-oriented sectors such as textiles, electrical equipment assembly, and transportation As the electronics industry and advanced technologies rapidly advanced, the country shifted its investment strategy towards computer production, consumer electronics, and industries like oil and mining technology, further enhancing its economic growth.
To leverage its geographical advantages and address the scarcity of natural resources, the strategy for attracting foreign direct investment (FDI) emphasizes the development of a robust services system that fosters international investment in alignment with advanced economic growth.
The gap in the studies
Through researching related Vietnamese and abroad scientific works The author makes some general observations:
Recent studies indicate a significant relationship between foreign direct investment (FDI) and economic growth in Vietnam, despite ongoing debates regarding this connection in the current regional context Most findings affirm that maintaining FDI is crucial for enhancing Vietnam's economic development.
Public-private partnership mechanisms are essential for mitigating political risks and addressing unclear public policies, legal procurement obstacles, and insufficient institutional capacity, all of which hinder capital investment in infrastructure development.
Investing in long-term assets like infrastructure requires the timely execution of state mechanisms and policies, including the development of financial regulations tailored to each country's infrastructure needs This study aims to enhance public financial support for strategic projects, encourage active involvement of investment institutions in infrastructure management, establish a stable legal framework for these projects, and optimize funding sources.
Most studies assess the importance of the credit market and the relationship between lenders and borrowers, particularly enterprises in the economy
- The majority of research focused on one or several typical resources to exploit and utilize
The research also contains the author's subjective ideas by collecting secondary data from agencies and statistical organizations but has not provided an appropriate forecasting tool
- The studies rarely use surveys and collect primary data to assess truthfully and objectively research subjects accordingly
The articles rarely use factor analysis methods and quantitative research to evaluate the ability to attract investment capital in a locality to propose each location's specific policy implications
Research on the relationship between investment attraction and sustainable economic growth remains limited and lacks clarity, particularly in light of the challenges posed by the Covid-19 pandemic and constrained capital supply This presents a unique opportunity for the country to leverage external resources to sustain and revitalize its economic growth.
From the above general assessment, the dissertation proposes the following research model.
The scientific basis for building a research model
Numerous studies by both domestic and international researchers have identified various factors influencing investment attraction, including inflation, interest rates, exchange rates, and economic conditions Key elements that frequently emerge from these analyses are infrastructure, investment policy, the working and living environment, public service quality, regional connectivity, human resources, technology, and investment costs Understanding these eight critical factors can significantly enhance strategies for attracting investment.
Researchers emphasized the need to reform administrative procedures to enhance the business investment environment They aimed to improve the quality and efficiency of support services while actively addressing challenges and expediting site clearance This approach is designed to ensure that a clean land fund is allocated to investors in a timely manner, in line with established plans.
Efforts to attract new projects are complemented by encouraging investors to confidently expand existing ventures, enhance production, and capture market share Notably, effective strategies have emerged to navigate challenges and adapt to new standards, promoting safe and flexible solutions that facilitate the restoration and growth of businesses while ensuring sustainable development.
The author emphasizes the significance of various factors influencing investment capital attraction for sustainable economic growth in Dong Nai province and investigates additional potential aspects using theoretical research models Furthermore, the study is grounded in qualitative research methods.
The author is researching a theoretical basis to propose a research model and scale design
Following a group discussion with 30 experts in enterprise management, the author refined the model and framework to align with the research context Both domestic and international theories and practices indicate that the eight identified factors significantly influence investment capital attraction, which is crucial for sustainable economic growth in Dong Nai province.
Table 2.1: Factors affecting investment capital attraction
Factors Foreign authors Vietnamese authors
Infrastructure Maqsood et al (2017) Loc and Tuyet (2013) Investment policy Michael et al (2019) Nhuan (2017)
Human resources Donna and Ramirez (2018) Bang et al (2016)
Technology Batoul et al (2014) Ho (2011)
2.5.2 Research model and research hypothesis
The research model includes factors following:
The proposed research model illustrates the cause-and-effect relationships through one-way arrows, representing the research hypotheses The primary objective is to gather data and utilize software to assess whether these hypotheses are validated This model serves as a crucial framework for evaluating the dissertation, visually depicting the relationships between variables Typically, the variables are categorized into two types: independent variables and dependent variables The author presents the research model as follows.
Figure 2.4: The author introduces the research model Research hypothesis:
According to Managi and Bwalya (2010), foreign investors prioritize regions with strong investment infrastructure, which can significantly reduce project execution times To effectively attract foreign direct investment, host countries must enhance operational efficiency for investors by improving essential infrastructure such as roads, railway stations, airports, ports, and utilities like electricity and water, as well as establishing robust pre-investment communication and information systems.
Therefore, the author hypothesizes H1: Reduce transportation and communication costs for the stages and increase investment efficiency
Hypothesis H1: Infrastructure positively impacts the investment capital attraction in Dong Nai province
Lal (2017) demonstrated the reciprocal relationship between policy changes and institutional dynamics, highlighting that effective tax policies can align the interests of businesses and the state while anticipating future investments and production strategies A conducive investment environment must balance the benefits for both enterprises and society Consequently, businesses must negotiate tax obligations against their profits to secure robust economic infrastructure This leads to the formulation of hypothesis H2.
Hypothesis H2: Investment policy positively impacts the investment capital attraction in Dong Nai province
Investors are increasingly focused on the living and working conditions in host countries, as foreign direct investment (FDI) is a long-term commitment that often involves relocating families It is crucial for investors to assess the host country's social services and facilities to ensure they meet their living requirements This leads to the formulation of hypothesis H3.
Hypothesis H3: Working and living environments positively impact the investment capital attraction in Dong Nai province
Amanda (2017) highlighted that numerous organizations acknowledged the significance of administrative reform, particularly in streamlining processes such as tax payment timelines, goods clearance, social insurance, import and export procedures, construction permits, and investment procedures.
Unnecessary managerial procedures have been reviewed and streamlined Therefore, the author has hypothesis H4 following:
Hypothesis H4: Public service quality positively impacts the investment capital attraction in Dong Nai province
Sebastian (2018) highlighted the decentralized relationship between central and local governments, emphasizing the vertical connection between larger and smaller regional authorities that often involves cumbersome administrative orders Additionally, there exists a horizontal linkage among local authorities, characterized by voluntary administrative cooperation Improved regional connections facilitate increased investment capital from investors, ultimately driving economic growth Thus, the author proposes hypothesis H5.
Hypothesis H5: Regional connectivity positively impacts the investment capital attraction in Dong Nai province
Ishak and Rahmah (2002) emphasized the critical role of human resources in influencing an enterprise's investment decisions in a locality Low-tech and labor-intensive industries are drawn to areas with abundant labor, while skilled and disciplined workers are essential for industrial production lines (Ahmad et al., 2015) Consequently, a higher quality of human resources can significantly enhance a province's attractiveness to investors, leading to the formulation of hypothesis H6.
Hypothesis H6: Human resources positively impact the investment capital attraction in Dong Nai province
According to Batoul et al (2014), technology plays a crucial role in driving inventions and enhancing production processes It enables investors to reduce costs and boost business profitability while improving the efficiency of investment capital Additionally, technological advancements facilitate the effective utilization of natural resources and enhance labor productivity Furthermore, technology contributes to improved product quality and lower production costs, leading to the formulation of hypothesis H7.
Hypothesis H7: Technology positively impacts the investment capital attraction in Dong Nai province
According to Donna and Ramirez (2018), competitive input costs play a crucial role in enhancing an enterprise's investment efficiency When businesses maintain low input costs, they can boost their competitiveness and pursue higher profit margins However, it is essential that these competitive costs are paired with guaranteed product quality and reasonable pricing Ultimately, favorable input costs can significantly attract investor capital.
Therefore, the author has hypothesis H8 following:
Hypothesis H8: Investment costs positively impact the investment capital attraction in Dong Nai province
Investment capital attraction is crucial for sustainable economic growth in developing countries, as highlighted by Yakubu and Mikhail (2019) It addresses the investment capital shortage necessary for socio-economic development and significantly contributes to technological modernization By acquiring advanced management practices, it fosters faster and more efficient economic growth while creating job opportunities and cultivating a skilled workforce with a disciplined work ethic This, in turn, enhances labor productivity and increases worker incomes, aiding in poverty reduction and improving living standards Additionally, it boosts state revenue, supports the growth of domestic enterprises, expands international trade, and facilitates participation in global value chains.