1 NGÂNHÀNGNHÀNƯỚCVIỆT NAM BỘGIÁODỤCVÀĐÀOTẠO TRƯỜNGĐẠI HỌC NGÂNHÀNGTP HỒCHÍMINH NGUYỄNKHÁNHDUY DETERMINANTS OF FOREIGN DIRECT INVESTMENTATTRACTION IN 7 COUNTRIES OF ASSOCIATION OF SOUTHEASTASIANATIONS[.]
1 NGÂNHÀNGNHÀNƯỚCVIỆT NAM BỘGIÁODỤCVÀĐÀOTẠO TRƯỜNGĐẠI HỌC NGÂNHÀNGTP.HỒCHÍMINH NGUYỄNKHÁNHDUY DETERMINANTS OF FOREIGN DIRECT INVESTMENTATTRACTION IN COUNTRIES OF ASSOCIATION OF SOUTHEASTASIANATIONS GRADUATE THESISMAJOR:FINANCE– BANKING CODE:7340201 LECTURER:Ph.DNGUYEN DUYLINH HoChiMinh City,theyear of2022 NGÂNHÀNGNHÀNƯỚCVIỆT NAM BỘGIÁODỤC VÀĐÀOTẠO TRƯỜNGĐẠI HỌC NGÂNHÀNGTP.HỒCHÍMINH NGUYỂN KHÁNH DUY050606180064 DETERMINANTS OF FOREIGN DIRECT INVESTMENTATTRACTION IN COUNTRIES OF ASSOCIATION OF SOUTHEASTASIANATIONS GRADUATE THESISMAJOR:FINANCE– BANKING CODE:7340201 LECTURER:Ph.DNGUYENDUYLINH HoChiMinh City,theyear of2022 i EXECUTIVESUMMARY Straightforwardly,foreigndirectinvestmentindevelopingcountrieshascontinuo usly risen and it now plays a critical role in the prosperity of host countries.Asaresult, researchintothedeterminantsthatinfluenceforeigndirectinvestmentseems to be more urgent than ever The objective of this thesis is to investigate thedeterminants of FDI inwards attraction in seven countries of the Association ofSoutheast Asia Nationsb y u s i n g a p a n e l d a t a a p p r o a c h T h i s t h e s i s e x a m i n e s a s a m p l e of specific countries of ASEAN in the period from 2005 and 2021, estimating 7variables which are market size, foreign exchange rate, labor salaries, infrastructuraldevelopment,economicopenness,inflationrate,andfinancialdevelopment(ex plainedinmoredetailbelow)byusingFixedEffectsModelapproach Empirical results indicate that the variables of market size, foreign exchangerate,laborsalaries,and economicopennesshaveanimpactonFDIinflows.Besides,this thesis has not yet found the influence of infrastructural development, inflationrate, and financial development on abroad capital flows Also, the author has notstudiedthebackwardeffectofFDIinwardsontheaforementionedfactorswhichisadrawback ofthisthesisand needsto shedlightonotherresearchinthe future Keywords:foreigndirectinvestment,exchangerate,marketsize,tradeopenness GUARANTEE This thesis is my own research work which I did under the supervision of Dr.NguyenDuyLinh.Inaddition,thedataandresearchconclusionspresentedinthisthesis are completely truthful To the best of my knowledge, the thesis contains nomaterial previously published or written by other people except where the referenceis madeinthethesisitself NguyenKhanh 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, Ihaveestablishedavaluableknowledgefoundationasaresultofexperiencingteaching at the university With that being said, I was conscientiously equipped toconductthis thesis Although I possess the required knowledge to carry out the thesis, I still havedeficiencies that need to be pointed out and adjusted Were there no assistance comingfrom teachers and friends, I would never be able to undertake this thesis promptly.Hence, this part is dedicated to expressing my gratitude towards every individualinvolvedinhelpingmetoconductthethesis Firstandforemost,IwouldliketowholeheartedlyappreciateDr.NguyenDuyLinh for helping me to formulate a categorical timetable to complete the thesis stepbystep.Additionally,Iwasalsoaccompaniedbyhisexpertiseinadjustingthelayoutofthethes isobjectivelyandcomprehensively.Therefore,Iwouldliketoexpressmyappreciation to him for providingsincerefeedbacktosteermeintherightdirectionin accomplishing my thesis adequately I wish his blissful health to continue to mentorandachievethe desiredobjectivesin thenear future I would also like to express my genuine thanks to the teachers who arelecturing 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 toconvey essential knowledge to me, as well as other students Thanks to this, myknowledge base has been further consolidated to create a solid academic foundationtobolsterthiscrucialthesistobearfruit TABLEOFCONTENTS EXECUTIVE SUMMARY i GUARANTEE .ii ACKNOWLEDGEMENT iii TABLE OFCONTENTS iv LISTOFTABLES vii LISTOFFIGURES vii LISTOFABBREVIATIONS viii CHAPTER1.INTRODUCTION 1.1 Reasonforwriting 1.2 Thesisnovelty 1.3 Objectiveofthethesis .3 1.3.1 Generalobjective .3 1.3.2 Specificobjective .3 1.3.3 Researchquestion .3 1.4 Subjectandscopeofthethesis 1.4.1 Thesissubject 1.4.2 Thesisscope .4 1.5 Regression methodology 1.6 Thesisstructure .5 CHAPTER2.LITERATUREREVIEWANDEMPIRICALRESEARCH 2.1 Literaturereviewofforeigndirectinvestment 2.1.1 Foreigndirectinvestmentdefinition 2.1.2 Classificationofforeigndirectinvestment 2.1.2.1 HorizontalFDI 2.1.2.2 VerticalFDI 2.1.2.3 ConglomerateFDI 2.1.3 Theroleofforeigndirectinvestment 2.1.3.1 Capitalsupplementforeconomicdevelopment 2.1.3.2 Acquisitionoftechnologyandmanagerialabilities 10 2.1.3.3 Jobcreationandindividualworkertraining 10 2.1.3.4 Budgetrevenuestrengthen 11 2.2 Determinantsofforeigndirectinvestment attractionhypothesis 11 2.2.1 Marketsize .11 2.2.2 Foreignexchange 12 2.2.3 Tradeopenness .13 2.2.4 Infrastructure 14 2.2.5 Wage .15 2.2.6 Finance 16 2.2.7 Inflation 17 CHAPTER3.DATAANDMETHODOLOGYOFTHE THESIS .21 3.1 Thesismethodology .21 3.1.1 Researchprocess 21 3.1.2 Modelbuilding .22 3.2 Datacollecting .23 3.2.1 Dependentvariable: 23 3.2.2 Independentvariable 23 CHAPTER 4.IMPLEMENTATION AND ANALYSIS OF THE MODELRESULT… 28 4.1 Descriptivestatistic 28 4.2 Regressionmodel 28 4.2.1 Hausmantest 29 4.3 Detectiontesting 30 4.3.1 Autocorrelationtest 30 4.3.2 Multicollinearitytest 32 4.3.3 Heteroskedasticitytest 32 4.3.4 Correlation variabletest 33 4.4 Thesisresultanddiscussion .33 CHAPTER5.CONCLUSIONANDPOLICYIMPLICATIONS 39 5.1 Thesisconclusion 39 5.2 Thesislimitation .40 5.3 Thesisdistribution 39 5.4 Policy implications .40 REFERENCES 45 APPENDIX 49 LISTOFTABLES Table2.1TheinfluenceofselectedvariablesonFDIinwardsfromempiricalresear chsummary 19 Table3.1 Variabledefinitionanditsexpectation 26 Table4.1 Descriptivestatisticofvariables 28 Table4.2 Regressionmodelresults 29 Table4.3 CorrelatedRandomEffects -HausmanTest 30 Table4.4 Autocorrelationtestresult 31 Table4.5 Multicolllinearitytestresult 32 Table4.6Heteroskedasticitytestresult:White 32 Table4.7Correlationvariablematrix .33 Table4.8 Appropriatemodelresult 34 LISTOFFIGURES Figure3.1 Detail researchprocess 21 Figure3.2 DeterminantsofFDIinflows 22 LISTOFABBREVIATIONS FDI Foreigndirectinvestment WB WorldBank UNCTAD UnitedNationsConferenceonTradeandDev elopment ADB AsianDevelopmentBank IMF Internationalmonetaryfund WTO WorldTrade Organization Organization for Economic – Corporation, andDevelopment OECD GDP GrossDomesticProducts MNCs Multinationalcorporations