The situation of fdi inflows in vietnam during the covid 19 pandemici

BANKING ACADEMY OF VIETNAM FACULTY OF FOREIGN LANGUAGUES - - GRADUATION THESIS THE SITUATION OF FDI INFLOWS IN VIETNAM DURING THE COVID-19 PANDEMIC Student : Lê Thị Huyền My Class : K22-ATCA Academic year : 2019 – 2023 Student ID : 22A7510136 Advisor : Mrs Phạm Thị Hoàng Anh (Assoc Prof., Dr,) Hanoi, May 2023 i Tai ngay!!! Ban co the xoa dong chu nay!!! 17014129039431000000 DECLARATIONS I hereby declare that this graduation paper is the result of my own research under the instruction and supervision of Mrs Pham Thi Hoang Anh This research also has not been submitted to any institutions for assessment purposes before Further, I have acknowledged all sources and cited them in the reference section Ha Noi, May 2023 Signature Le Thi Huyen My i ACKNOWLEDGEMENT During the time of conducting this research, I was fortunate to receive enormous support from my teachers, friends and family Without their love and encouragement, this paper could hardly be completed First and foremost, I would like to express my deepest appreciation to my supervisor, Mrs Pham Thi Hoang Anh, Assoc Prof., Dr, for her precious guidance, advice and timely comments Her detailed instruction and endless support are the key motivation for me to complete this paper I also owe a debt of thankfulness to her for being patient and inspiring throughout the lengthy process of conducting this study My gratitude also extends to all lecturers of the English faculty and staff of the Banking Academy of Vietnam During four years of studying at the BA, I have received precious knowledge, strong inspiration, motivation and support from all of them Everything I have when being a student of BA will become unforgettable memories engraving in my heart Last but not least, my gratitude also goes to my friends and my family, who always supported and encouraged me during the process of conducting this thesis ii LIST OF ABBREVIATIONS AIA Asean Investment Area BOT Build-Operate-Transfer BTO Build-Transfer-Operate BT Build-Transfer BCC Business Cooperation Contract CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPI The Consumer Price Index EVFTA The EU–Vietnam Free Trade Agreement EVIPA The Investment Protection Agreement between the European Union and the Socialist Republic of Vietnam EIA European Investment Area EPU Economic Policy Uncertainty FDI Foreign Direct Investment FTA Free Trade Agreement FPI Foreign Portfolio Investment GDP Gross Domestic Product GCI Global Competitiveness Index GPI Global Peace Index GSO General Statistics Office IMF International Monetary Fund M&A Mergers and Acquisitions MNC Multinational Corporation MNEs Multinational Enterprises OECD The Organisation for Economic Co-operation and Development UNCTAD The United Nations Conference on Trade and Development UKVFTA United Kingdom - Vietnam free trade agreement P.M Prime Minister Ph.D Doctor of Philosophy WHO World Health Organization iii LIST OF FIGURES Figure 3.1 The situation of FDI inflows in Vietnam (2010-2019) 20 Figure 3.2: FDI registered capital structure based on investment 22 forms Figure 3.3: GDP growth rate (%) of Vietnam during the period 26 2018-2023 Figure 3.4: The reasons of enterprises dissolution during Covid-19 29 pandemic Figure 3.5: The situation of FDI inflows in Vietnam (2019-2022) 31 Figure 3.6: FDI projects licensed by main counterparts 34 Figure 3.7: FDI inflows by sector (based on total registered capital) 36 Figure 3.8: FDI inflows in 2022 by location iv 39 ABSTRACT The introduction of Covid-19 pandemic exerts undeniable impacts on several aspects of the global economy including worsening the downturn of global foreign direct investment activities In this context, the volume of FDI flows into Vietnam consequently has experienced a considerable decline This paper aims to summarize the current situation of FDI attraction in Vietnam during the Covid-19 pandemic (through capital scale and capital structure), assess the influences of pandemic on economic and investment activities, and indicate the achievements and limitations that Vietnam has gained The author uses qualitative approach combining statistical, analytical and comparative methods evaluating secondary data to bring out comprehensive findings about the research topic as follows The results show that the pandemic and countermeasures creates adverse impacts on FDI net inflows in Vietnam through multiple channels, not only by the time it happened but also in the future The author then produces some recommendations to enhance the efficiency of luring FDI in the post-pandemic period, both in quantity and quality in a sustainable manner Keywords: FDI, FDI attraction, Covid-19, Vietnam v TABLE OF CONTENTS DECLARATIONS i ACKNOWLEDGEMENT ii LIST OF ABBREVIATIONS iii LIST OF FIGURES iii ABSTRACT v CHAPTER 1: INTRODUCTION 1.1 Introduction 1.2 Objectives of the study 1.3 Significance of the study 1.4 Scope of the study 1.5 Research methodology 1.6 Research structure CHAPTER 2: THEORETICAL FRAMEWORK AND LITERATURE REVIEW 2.1 Foreign Direct Investment 2.1.1 Definition of Foreign Direct Investment 2.1.2 Features of Foreign Direct Investment 2.1.3 Classifications of Foreign Direct Investment 2.2 The potential effects of FDI inflows on home country and host country 2.3 The determinants of FDI inflows 11 2.4 Criteria for evaluating the situation of FDI inflows 14 2.5 Literature review 14 2.5.1 Literature review 14 2.5.2 Research gap 17 Summary of Chapter 17 vi CHAPTER 3: THE SITUATION OF FDI INFLOWS IN VIETNAM DURING COVID-19 PANDEMIC 19 3.1 An overview of the FDI inflows in Viet Nam 19 3.1.1 The situation of FDI in Viet Nam for the years 2010-2019 19 3.1.2 Legal investment forms of FDI inflows in Viet Nam 22 3.2 The situation of attracting FDI in VietNam during the Covid-19 pandemic (2020-the first quarter of 2023) 24 3.2.1 Overview of Covid-19 pandemic situation in Vietnam and Government responses 24 3.2.2 The impacts of Covid-19 on economic and investment activities 26 3.2.3 The situation of attracting FDI in Vietnam during the pandemic 31 3.3 Evaluating the situation of attracting FDI in Vietnam during the Covid-19 pandemic 40 3.3.1 Achievements 40 3.3.2 Reasons of achievements 41 3.3.3 Limitations 42 3.3.4 Reasons of limitations 43 Summary of Chapter 47 CHAPTER 4: SUMMARY OF FINDINGS AND RECOMMENDATIONS 48 4.1 Summary of findings 48 4.2 Policy recommendations 49 Summary of chapter 55 CONCLUSION 56 REFERENCES 58 vii CHAPTER 1: INTRODUCTION 1.1 Introduction Foreign Direct Investment (FDI) is of utmost importance in economic growth and global economic integration It is considered to be external support, especially in terms of providing additional capital, advanced technology, and management competencies, which in turn improve the competitive capacity of the economy when joining deeply in the global supply chain In recent decades, global FDI has witnessed several noticeable movements, regarding the distribution of FDI among countries and sectors From 2015 to 2019 (preCovid-19 pandemic), the net amount of global capital flows has decreased sharply, from 2,063 billion dollars to 1,480 billion dollars Developed economies (OECD) continue to maintain their leading position when accounting for more than 50% of worldwide FDI inflows, with the top destination being Europe area, followed by the United States Among developing countries, China has been the top recipient of FDI over the past several years, even during the pandemic The total amount of FDI inflows in mainland China registered 143,6 billion dollars in 2020, then sharply increased to 166,9 billion dollars in 2021 despite the negative impacts of the pandemic From 1-11/2022, this figure experienced significant growth by 9.9% compared to the same period last year (Hongpei, 2021) This amazing achievement is thanks to the improvement of the business environment, especially the implementation of new Foreign Investment Law, huge market, and the stability of supply chains that become motivations to attract foreign investors The case study of China poses many lessons for Asian countries in general and Vietnam in particular In the year 2020, measures to curb the spread of the pandemic have negatively affected the global FDI flows, which was estimated to drop by 30-40% in all sectors, but worst in aviation, manufacturing, and energy sectors according to UNCTAD In this context, ASEAN countries including Vietnam are emerging as potential destinations In 2021, despite the complicated situation of the Covid-19 pandemic, FDI in Vietnam reached 31.15 billion USD, an increase of 9.2% compared to 2020, which illustrates great confidence and expectation of investors in the business environment in Vietnam Regarding Vietnam, there are several reasons behind this trend Firstly, the government has maintained incentive policies related to taxes, and interest rates to attract investors Secondly, the pandemic has been well controlled with the death toll remaining at a low level, associated with recovering and developing the economy which allows Vietnam to gain a positive economic growth rate in 2020 Thirdly, participation in EVFTA and EVIPA with the EU in 2020 has marked a new milestone in trade and investment relations between Vietnam and the EU, opening several opportunities to welcome investors in this bloc to invest in Vietnam In addition, geo-strategic location, competitive labor costs, and constantly improved productivity are creating good conditions for Vietnam to become a new hub in the Asia-Pacific region, avoiding a China-focused investment situation However, in the context of high competitiveness among countries due to limited capital supply and heavy impacts of the Covid-19 pandemic, Vietnam has to counter numerous obstacles In order to promptly assess the situation of attracting FDI inflows in Vietnam under the influence of Covid-19, tackle the difficulties, and offer solutions, it is urgent to conduct the research “The situation of FDI inflows in Vietnam during the Covid-19 pandemic” 1.2 Objectives of the study This study is conducted with an aim of summarizing the current situation of FDI attraction in Vietnam during the Covid-19 pandemic (through capital scale and capital structure), assessing the influences of pandemic on economic and investment activities, then indicating the achievements and limitations that Vietnam possesses in attracting FDI during this period From that point, the author suggests some recommendations for eliminating obstacles and enhancing the efficiency of luring FDI into Vietnam in the foreseeable future 1.3 Significance of the study The findings of this thesis hopefully can be useful for two main groups: people who want to gain a deeper understanding of the FDI inflows situation in Vietnam during the Covid-19 pandemic and the authorities taking responsibility for enacting policies to