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NGÂN HÀNG NHÀ N CƯỚ VI T NAMỆ BỘ GIÁO D CỤ VÀ ĐÀO T OẠ TR NGƯỜ Đ I H C NGÂNẠ Ọ HÀNG TP HỒ CHÍ MINH NGUY NỄ KHÁNH DUY DETERMINANTS OF FOREIGN DIRECT INVESTMENT ATTRACTION IN 7 COUNTRIES OF ASSOCIATION[.]
1 NGÂN HÀNG NHÀ NƯỚC VIỆT NAM BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC NGÂN HÀNG TP HỒ CHÍ MINH NGUYỄN KHÁNH DUY DETERMINANTS OF FOREIGN DIRECT INVESTMENT ATTRACTION IN COUNTRIES OF ASSOCIATION OF SOUTHEAST ASIA NATIONS GRADUATE THESIS MAJOR: FINANCE – BANKING CODE: 7340201 LECTURER: Ph.D NGUYEN DUY LINH Ho Chi Minh City, the year of 2022 NGÂN HÀNG NHÀ NƯỚC VIỆT NAM BỘ GIÁO DỤC VÀ ĐÀO TẠO TRƯỜNG ĐẠI HỌC NGÂN HÀNG TP HỒ CHÍ MINH NGUYỂN KHÁNH DUY 050606180064 DETERMINANTS OF FOREIGN DIRECT INVESTMENT ATTRACTION IN COUNTRIES OF ASSOCIATION OF SOUTHEAST ASIA NATIONS GRADUATE THESIS MAJOR: FINANCE – BANKING CODE: 7340201 LECTURER: Ph.D NGUYEN DUY LINH Ho Chi Minh City, the year of 2022 i EXECUTIVE SUMMARY Straightforwardly, foreign direct investment in developing countries has continuously risen and it now plays a critical role in the prosperity of host countries As a result, research into the determinants that influence foreign direct investment seems to be more urgent than ever The objective of this thesis is to investigate the determinants of FDI inwards attraction in seven countries of the Association of Southeast Asia Nations by using a panel data approach This thesis examines a sample of specific countries of ASEAN in the period from 2005 and 2021, estimating variables which are market size, foreign exchange rate, labor salaries, infrastructural development, economic openness, inflation rate, and financial development (explained in more detail below) by using Fixed Effects Model approach Empirical results indicate that the variables of market size, foreign exchange rate, labor salaries, and economic openness have an impact on FDI inflows Besides, this thesis has not yet found the influence of infrastructural development, inflation rate, and financial development on abroad capital flows Also, the author has not studied the backward effect of FDI inwards on the aforementioned factors which is a drawback of this thesis and needs to shed light on other research in the future Keywords: foreign direct investment, exchange rate, market size, trade openness ii GUARANTEE This thesis is my own research work which I did under the supervision of Dr Nguyen Duy Linh In addition, the data and research conclusions presented in this thesis are completely truthful To the best of my knowledge, the thesis contains no material previously published or written by other people except where the reference is made in the thesis itself Nguyen Khanh Duy ACKNOWLEDGEMENT The graduate thesis is a synthesis of the knowledge gained during the fouryear study course at the Banking University of Ho Chi Minh City In this process, I have established a valuable knowledge foundation as a result of experiencing teaching at the university With that being said, I was conscientiously equipped to conduct this thesis Although I possess the required knowledge to carry out the thesis, I still have deficiencies that need to be pointed out and adjusted Were there no assistance coming from teachers and friends, I would never be able to undertake this thesis promptly Hence, this part is dedicated to expressing my gratitude towards every individual involved in helping me to conduct the thesis First and foremost, I would like to wholeheartedly appreciate Dr Nguyen Duy Linh for helping me to formulate a categorical timetable to complete the thesis step by step Additionally, I was also accompanied by his expertise in adjusting the layout of the thesis objectively and comprehensively Therefore, I would like to express my appreciation to him for providing sincere feedback to steer me in the right direction in accomplishing my thesis adequately I wish his blissful health to continue to mentor and achieve the desired objectives in the near future I would also like to express my genuine thanks to the teachers who are lecturing at Banking University of Ho Chi Minh City During the learning process, with sophisticated and state-of-the-art teaching methods, the teachers were able to convey essential knowledge to me, as well as other students Thanks to this, my knowledge base has been further consolidated to create a solid academic foundation to bolster this crucial thesis to bear fruit TABLE OF CONTENTS EXECUTIVE SUMMARY i GUARANTEE ii ACKNOWLEDGEMENT iii TABLE OF CONTENTS iv LIST OF TABLES vii LIST OF FIGURES vii LIST OF ABBREVIATIONS viii CHAPTER 1.INTRODUCTION 1.1 Reason for writing 1.2 Thesis novelty 1.3 Objective of the thesis 1.3.1 General objective 1.3.2 Specific objective 1.3.3 Research question 1.4 Subject and scope of the thesis 1.4.1 Thesis subject 1.4.2 Thesis scope 1.5 Regression methodology 1.6 Thesis structure CHAPTER 2.LITERATURE REVIEW AND EMPIRICAL RESEARCH 2.1 Literature review of foreign direct investment 2.1.1 Foreign direct investment definition 2.1.2 Classification of foreign direct investment 2.1.2.1 Horizontal FDI 2.1.2.2 Vertical FDI 2.1.2.3 Conglomerate FDI 2.1.3 The role of foreign direct investment 2.1.3.1 Capital supplement for economic development 2.1.3.2 Acquisition of technology and managerial abilities 10 2.1.3.3 Job creation and individual worker training 10 2.1.3.4 Budget revenues trengthen 11 2.2 Determinants of foreign direct investment attraction hypothesis 11 2.2.1 Market size 11 2.2.2 Foreign exchange 12 2.2.3 Trade openness 13 2.2.4 Infrastructure 14 2.2.5 Wage 15 2.2.6 Finance 16 2.2.7 Inflation 17 CHAPTER 3.DATA AND METHODOLOGY OF THE THESIS 21 3.1 Thesis methodology 21 3.1.1 Research process 21 3.1.2 Model building 22 3.2 Data collecting 23 3.2.1 Dependent variable: 23 3.2.2 Independent variable 23 CHAPTER 4.IMPLEMENTATION AND ANALYSIS OF THE MODEL RESULT… 28 4.1 Descriptive statistic 28 4.2 Regression model 28 4.2.1 Hausman test 29 4.3 Detection testing 30 4.3.1 Autocorrelation test 30 4.3.2 Multicollinearity test 32 4.3.3 Heteroskedasticity test 32 4.3.4 Correlation variable test 33 4.4 Thesis result and discussion 33 CHAPTER 5.CONCLUSION AND POLICY IMPLICATIONS 39 5.1 Thesis conclusion 39 5.2 Thesis limitation 40 5.3 Thesis distribution 39 5.4 Policy implications 40 REFERENCES 45 APPENDIX 49 LIST OF TABLES Table 2.1 The influence of selected variables on FDI inwards from empirical research summary 19 Table 3.1 Variable definition and its expectation 26 Table 4.1 Descriptive statistic of variables 28 Table 4.2 Regression model results 29 Table 4.3 Correlated Random Effects - Hausman Test 30 Table 4.4 Autocorrelation test result 31 Table 4.5 Multicolllinearity test result 32 Table 4.6 Heteroskedasticity test result: White 32 Table 4.7 Correlation variable matrix 33 Table 4.8 Appropriate model result 34 LIST OF FIGURES Figure 3.1 Detail research process 21 Figure 3.2 Determinants of FDI inflows 22 LIST OF ABBREVIATIONS FDI Foreign direct investment WB World Bank UNCTAD United Nations Conference on Trade and Development ADB Asian Development Bank IMF International monetary fund WTO World Trade Organization OECD Organization for Economic – Corporation, and Development GDP Gross Domestic Products MNCs Multinational corporations ... MINH NGUYỂN KHÁNH DUY 050606180064 DETERMINANTS OF FOREIGN DIRECT INVESTMENT ATTRACTION IN COUNTRIES OF ASSOCIATION OF SOUTHEAST ASIA NATIONS GRADUATE THESIS MAJOR: FINANCE – BANKING CODE: 73 40201... determinants of FDI inwards attraction in seven countries of the Association of Southeast Asia Nations by using a panel data approach This thesis examines a sample of specific countries of ASEAN in. .. titled "Determinants of Foreign Direct Investment attraction in countries of Association of Southeast Asia Nations? ?? 1.2 Thesis novelty This study was built on prior research which focuses on the influence