Foreign direct investment in vietnam from 2011 to 2016,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY Foreign Languages Faculty -šš&›› - GRADUATION THESIS FOREIGN DIRECT INVESTMENT IN VIETNAM FROM 2011 TO 2016 Student : Nguyen Thu Ha Class : ATCA – K16 Student ID : 16A7510041 Supervisor : Ms Can Thuy Lien (M.A) Hanoi, May 2017 ACKNOWLEDGEMENTS First and foremost, I wish to extend my regards and blessing appreciation to all my lectures in the Banking Academy of Vietnam for having provided such huge supports throughout my four-year learning process Especially I would like to offer my hearties to my mentor, Ms Can Thuy Lien, M.A, for her immeasurable help, useful guidance and support during all stages of the study and beyond, from whom I have received valuable suggestions and careful critical comments Last but not least, this thesis is dedicated to my beloved family and my precious friends for their tremendous spiritual support and encouragement Due to time constraints and limited capacity of the writer, there will be inevitably a number of shortcomings in my graduation thesis Thus, it is my hope that lecturers and readers will sympathize and offer further contribution to the thesis DECLARATION I declare that this thesis entitled “Foreign direct investment in Vietnam from 2011 to 2016” is the result of my own research and has not been previously submitted for my degree or examination in any other university All the sources I have used have been indicated and acknowledged by means of complete references Hanoi, May 20, 2017 Signature Nguyen Thu Ha LIST OF TABLES AND FIGURES Table 1.1: The policy of investment incentives according to geographical areas of Thailand 15 Figure 2.1: Total investment of the whole society in 2011-2015 19 Figure 2.2: Investment capital for the Vietnamese economy by economic sector 20112015 20 Figure 2.3: ICOR Vietnam coefficients through stages 21 Figure 2.4: FDI capital flows over the years 26 Figure 2.5: Number of projects granted new investment certificate 2011-2015 29 Table 2.1: The proportion of FDI by sector for the period 2011-2015 32 Chart 2.1: Structure of Foreign Direct Investment Capital by Area (Accumulated until December 31, 2015) 34 Table 2.2: Structure of FDI by investment partner (accumulated until 31/12/2015) 37 Chart 2.2: Capital structure by investment form (accumulated until 31/12/2015) 38 LIST OF ABBREVIATIONS AFTA ASEAN Free Trade Agreement ASEAN Association of Southeast Asia Nations BOI Board of Investment of Thailand BOT Build-Operate-Transfer FDI Foreign Direct Investment FTAs Free Trade Agreements ICOR Incremental capital output ratio IMF International Monetary Fund M&A Merger and Acquisition ODA Official Development Assistance RM Ringgit Malaysia SME Small/ medium enterprises SOEs State owned enterprises TNC Transnational corporations TPP Trans Pacific Partnership UNCTAD United Nations Conference on Trade and Development WTO Word Trade Organization TABLE OF CONTENTS ACKNOWLEDGEMENTS DECLARATION LIST OF TABLES AND FIGURES LIST OF ABBREVIATIONS Table of contents INTRODUCTION LITERATURE REVIEW CHAPTER THEREOTICAL FRAMEWORK OF FOREIGN DIRECT INVESTMENT 1.1 GENERAL UNDERSTANDING OF FOREIGN DIRECT INVESTMENT 1.1.1 Definitions 1.1.2 FDI participants 1.1.3 Characteristics 1.1.3 Types 1.2 IMPACTS OF FOREIGN DIRECT INVESTMENT 1.2.1 Impacts on investing country 1.2.2 Impacts on recipient country 1.3 INFLUENCING FACTORS TO FOREIGN DIRECT INVESTMENT 12 1.3.1 International factors 12 1.3.2 National factors 12 1.4 EXPERIENCES OF SOME COUNTRIES AND LESSONS FOR VIETNAM 14 1.4.1 Experiences of some countries 14 1.4.2 Lessons for Vietnam 17 CHAPTER 19 FOREIGN DIRECT INVESTMENT IN VIETNAM FROM 2011 TO 2016 19 2.1 OVERVIEW OF FOREIGN DIRECT INVESTMENT IN VIETNAM 19 2.1.1 Development investment capital and position of FDI 19 2.1.2 The stages of development of FDI inflows 21 2.1.3 The attractions and limitations of the investment environment in Vietnam 23 2.2 THE SITUATION OF FOREIGN DIRECT INVESTMENT INFLOWS IN VIETNAM 26 2.2.1 Foreign direct investment scale 26 2.2.2 Foreign direct investment structure 31 2.3 EVALUATION OF FOREIGN DIRECT INVESTMENT 39 2.3.1 Achievements 39 2.3.2 Drawbacks 42 2.3.3 Causes 43 CHAPTER 46 SOLUTIONS TO ENHANCE FOREIGN DIRECT INVESTMENT ATTRACTION AND EFFICIENT USE IN VIETNAM 46 3.1 VIEWS AND ORIENTATIONS OF THE GOVERNMENT IN ATTRACTING FOREIGN DIRECT INVESTMENT IN COMING YEARS 46 3.1.1 Views of the government 46 3.1.2 Orientations of the government 46 3.1.3 The current trend of Foreign Direct Investment 47 3.2 SOLUTIONS TO ENHANCE ATTRACTION AND EFFICIENT USE OF FOREIGN DIRECT INVESTMENT 49 3.2.1 Micro solutions 49 3.2.2 Macro solutions 50 CONCLUSION 54 REFERENCES INTRODUCTION Rationale for the Research Foreign direct investment is now taking place on a global scale with increasing in both volume and rotating rate Nowadays, besides promoting domestic resources, the utilization of Foreign Direct Investment (FDI) plays an important role in the countries’ socio-economy growth and development, especially in developing countries including Vietnam Foreign direct investment is not only a sign of the country's international integration and prospects for economic development but it is also a motivation for the development of international relations in a number of fields It has been becoming a trend of the times, used as an important and lasting economic policy by many nations That is why FDI had been seen as a golden key to the thriving for countries After nearly 30 years of implementing the open-door policy and attracting foreign investment with the promulgation of Investment Law in 1987, the foreign-invested sector is considered as a promoting factor to Vietnam’s economic growth The role of FDI is clearly demonstrated by its contribution to the growth’s important elements such as the investment capital addition, export promotion, technology transfer, human resource development and job creation Thanks to this important contribution, Vietnam has been known as a dynamic, innovatory country with a pretty high economic growth rate, attracting international community’s attention However, in the process of deeper integration with new opportunities and challenges, understanding the nature of the foreign investment attracting situation will create conditions for this region to develop further in terms of both quantity and quality Derived from mentioned meaning above, the case study research – “Foreign Direct Investment in Vietnam from 2011 to 2016” is essential and scientifically practical Research Objectives Based on the clarification of theoretical issues and the current situation of FDI attraction, the thesis indicates some orientations as well as measures to enhance the attraction and effective use of FDI in Vietnam Research Subject and Scope Because of time limitation, the thesis covers the practical activities of attracting and using foreign direct investment capital in Vietnam from 2011 to 2016 Research Methodology The methods used in the thesis are quantitative and qualitative one In quantitative method, the data within a five-year period, which is mostly from General Statistics Office and Foreign Investment Agency, supported the research project effectively Moreover, references of FDI volumes reported by the authorities occasionally painted a picture of investment in both large and small economic sections Therefore, the writer is able to draw reasonable conclusion, simultaneously suggesting several recommendations In qualitative method, the thesis is based upon the information acquired via qualitative researches The qualitative method supplements the statistics with a flavor of views and attitudes of various writers As a result, the extra care for these sources from the writer allows for more comprehensive and potential analyses and recommendations Such a complete picture may be half obscured if one were to rely solely on statistical data or qualitative statistic Moreover, the thesis uses mainly secondary researches, which come from prevalent information channels such as online source materials, domestic and foreign newspapers, journals, statistic reports, and annual reports The theoretical framework is abstracted from some books and public researchers All data were carefully selected, synthesized and classified into appropriate section of this thesis Simultaneously, the thesis uses specific research methods such as general analysis, statistics, comparisons, logic, etc Research Structure In addition to the introduction and conclusion, the thesis consists of three chapters: Chapter – Theoretical Framework of Foreign Direct Investment This chapter presents the literature review of FDI such as the definition, characteristics, roles as well as types, impacts and influencing factors Simultaneously, it also shows the experiences of some countries in attracting FDI, thereby draws lessons for Vietnam Chapter – Foreign Direct Investment in Vietnam from 2011 to 2016 This chapter covers three main contents such as an overview of FDI in Vietnam, the situation of FDI inflows into Vietnam from 2011 to 2016 including its scale and structure Finally, FDI activities will be evaluated in Vietnam from 2011 to 2016 on aspects of its achievements, drawbacks and causes Chapter – Solutions to enhance Foreign Direct Investment attraction and efficient use in Vietnam This chapter points out views and orientations of the government in attracting FDI inflows Concurrently, it focuses on solutions at both micro and macro vision to enhance attraction and efficient use of FDI in Vietnam 41 improve the qualifications of workers, technicians, and managers that departments having the capacity to replace foreign experts partially In addition, updating skills for both suppliers and buyers have also boosted the quality of workforce through spillover effects Fourth, FDI is an important channel for technology transfer, contributing to improve the technological level of the economy The FDI sector uses more advanced and popular technology in the region Through technology transfer contracts, the FDI sector has motivated for advanced technology transfer to Vietnam, enhancing technological capability in many areas Considering the level of technology transfer, processing and manufacturing technology is the most effective According to the Ministry of Science and Technology, some sectors have performed well technology transfer such as oil and gas, electronics, communications, informatics, mechanics, automobiles, motorcycles and textiles and footwear Among them, telecommunication, oil, and gas are evaluated most effective The spillover effects of technology transfer in the FDI sector are made through the linkages between the foreign invested and domestic enterprises, thus facilitating domestic enterprises to access to technology-transfer activities In general, the foreign investment sector has indirect spillover effect on the domestic manufacturing sector of the same industry and service sector of different industry At the same time, it makes impact on creating other manufacturing and service industries in the country to support the operation of foreign invested enterprises Fifth, foreign investment affects enhancing competitiveness at all three levels like national, enterprise, and product Thanks to FDI, many Vietnamese export products have gained firmly competitive positions in the US, EU and Japan markets The analysis results of indicators such as capital, technology, management, market access, and capacity to participate in the global production network showed that the competitiveness of the foreign direct investment sector is higher than that of the domestic sector In the interim, the FDI sector has been promoting the competitiveness of the domestic sector in particular, of the world economy in general by boosting productivity, export growth, balance of international payments, technology upgrading, labor skills, and labor restructuring 42 Sixth, FDI has made an important contribution to international integration FDI attraction has contributed to overcome the encirclement, embargo and expand external economic relations, creating favorable conditions for Vietnam to join ASEAN Moreover, it supported Vietnam to sign the agreement with the EU, US trade agreement, the Pacific Partnership Agreement and other Free Trade Agreements (FTAs) 2.3.2 Drawbacks In addition to the positive effects achieved, the foreign direct investment sector has exposed some shortcomings that need to be overcome in the following years to achieve higher investment efficiency Firstly, the overall efficiency of investment capital is not high In industry - construction, projects are heavily concentrated on assemble, value added is low, there are extremely few infrastructure projects; the proportion of projects in agriculture-forestry-fishery is low while it is the strength point of Vietnam For service sectors, large-scale real estate projects are slow to be disbursed and progressed, leading to wasted land, loans, and preferential policies The number of projects focusing on high benefit sectors like education, health care, and environment is limited Vietnam's main partners are mainly from Asia, in which small and medium enterprises account for a high proportion It has attracted over 100 of the top 500 transnational corporations worldwide The ratio of implemented capital to registered capital is still low, reaching approximately 50% Secondly, the goal of attracting technology, receiving high technology transfer has not reached as expected Over 80% of foreign-invested enterprises use medium technology in which only 56% uses high technology and about 14% use low and backward technology Technology transfer is mainly carried out horizontally between enterprises and enterprises; simultaneously there is no change in technological capability Besides, many foreign investors take advantage of the lax management of the authorities to bring back to Vietnam obsolete technologies that are no longer used to pollute the environment and increase expenses for tax evasion Without being invested much in technology, Vietnam is mainly outsourced, does not bring big value added, so it is difficult for Vietnam to join the global production network 43 Thirdly, disputes and strikes tend to increase The number of strikes by foreign-invested enterprises accounts for about 75% of all strikes nationwide, mainly occurred in South Korea, Taiwan, China, Japan enterprises, focusing on the labor-intensive industries such as textiles, mechanics, and electronics Although most of these companies have labor unions, strikes not take place in the legal framework In fact, these disputes are mainly about wage and working conditions Fourthly, some projects are licensed but not sustainable, polluting the environment, consuming energy and resources, not paying enough attention to national defense and security Vietnam's environmental regulations are applied as follow to developed countries, but the appraisal is only formal, focusing on pre-inspection There is a tendency to move environmentally unfriendly machinery and human resource into the country but many localities not have strict control mechanisms Some projects attracting investment not take into account the overall effectiveness of national security and defense, especially for afforestation, mining, aquaculture in geographically sensitive areas Fifthly, there is the phenomenon of transfer pricing for tax evasion Some foreign-invested enterprises have been questioned the transfer pricing and tax evasion with many sophisticated tricks such as raising the value of contributed capital (by machine, equipment, copyrights, etc.), the value of inputs with overseas branches, management fees, expenses for payroll, training, guarantee, loans create false loss of revenue This forced the Vietnamese party to withdraw from the joint venture, as a result, these enterprises become 100% foreign owned 2.3.3 Causes Firstly, Vietnam does not prepare premise well to attract FDI Infrastructure, human resources, development of domestic industry prepared poorly leads to reduction in absorption as well as efficiency of foreign investment Secondly, the legal system and policies related to investment are still inadequate and fail to meet the requirements of state management When developing the general legal framework for domestic investment and foreign investment, it does not take into account the particularity of foreign investment Some specialized laws (tax, real estate, construction, education, etc.) regulate both investment 44 procedures which are inconsistent with the investment law Many procedures are regulated in a simple way but not required manner of state management The investment incentives are not sufficiently attractive to attract investors in areas that need investment encouragement and breakthroughs There is a lack of flexibility that exist many lists and geographical areas with different investment incentives and lack of consistency The low minimum wage rate is one of the reasons leading to strikes, but when the state increases the minimum wage for employees in line with actual living expenses, it increases the cost of investment The system of legal documents on environmental protection has not been sufficiently pushed or synchronized, failing to meet the requirements of industrialization -modernization and integration State management of the environment is prone to preinspection but not to focus on post-inspection; be lack of strict punishment Thirdly, state management of foreign direct investment has not met requirements Management exposed many inadequacies, reflected in the lack of sector planning, product planning, planning quality is not high due to lack of long-term prediction, lack of regional and industrial connectivity; the construction of regulations does not yet take into account the domestic production capacity of foreign investment, leading to the plentiful planning, low effective interaction The competition in attracting foreign investment has led some localities to license potential projects that pollute the environment, consume energy, exploit resources ineffectively, and not focus enough on national security and national interests There has not yet been a good mechanism for guiding, inspecting, and supervising, together with responsibility conclusions and sanctions to strictly deal with violations related to decentralization, reporting mechanism and exchange of information between central and local authorities and between ministries, sectors State management of investment promotion is still limited, methods of promoting investment have not had much effect as well as the unity from central to localities, there are many delegations promoting investment in one area leading to waste of time, affecting the national image In the process of promoting investment, many areas are not paid attention Forms of investment promotion in place (supporting investors in operation), website construction, investment promotion documents are not effective as 45 well as funding is limited Overseas investment promotion activities have been implemented with many difficulties and uncertainties State management of foreign investment is heavy on licensing but not on implementation The number of licensed projects is increasing, however, when encountering difficulties in implementing, investors feel embarrassed Some ministries, sectors, and localities have not yet issued guidelines on foreign investment, including international legal and technical barriers, especially when Vietnam is deeply integrated Meanwhile, tax policy has not adjusted in time, causing difficulties for the control of a small and simple service sector due to the inability of keeping FDI to manufacturing function (as FDI enterprises shift from production to trade and services) causing difficulties for the domestic market and the inspection and supervision of the agencies The ministries and sectors have not updated, grasped information within the scope of specialized management (loans, labor, environment, science and technology, etc.) This, on the one hand, makes it difficult for specialized analysts to forecast information on investment and, in contrast, makes it difficult for the Ministry of Planning and Investment to make a general summary of the investment situation and for local implementation in implementing process The policy capacity of all levels is weak (such as experts, the environment, etc.), slowing down the legal issues that arise in practice, resulting in low efficiency 46 CHAPTER SOLUTIONS TO ENHANCE FOREIGN DIRECT INVESTMENT ATTRACTION AND EFFICIENT USE IN VIETNAM 3.1 VIEWS AND ORIENTATIONS OF THE GOVERNMENT IN ATTRACTING FOREIGN DIRECT INVESTMENT IN COMING YEARS 3.1.1 Views of the government The Vietnamese government views that the part of foreign invested enterprises is an important part of the Vietnamese economy and contributes to the innovation, industrialization, and modernization The State encourages foreign investment, creates conditions for long-term development, co-operation for mutual benefits, and ensures legal rights, benefits, and equal treats, complying with the commitments that Vietnam has participated in The attraction of foreign investment must be in line with the centralized planning, directing of the central government, coupled with reasonable decentralization to localities with socio-economic, and staff managerial conditions Especially, particular attention must be paid to the effectiveness of State management in examining and supervising investment projects, ensuring the strict observance of law In the process of development and integration, the amendment of the legal corridor relating to foreign investment activities should ensure the principle of constantly improving the competitiveness of the country, more incentives more favorable for investors but still have to ensure national interests 3.1.2 Orientations of the government The government redirects FDI attraction to select high-value projects using modern and environmentally friendly technologies, especially in the areas of information technology and biotechnology serving for agriculture, research, development and training of high quality human resources Besides, the State intensifies large-scale projects with competitive products and boosts capacity to participate in the global value chain of multinational corporations to build and develop subsidiary industries, encouraging the transfer of outsourcers to the production, developing financial markets, selecting large-scale investors, and 47 simultaneously considering small and medium-sized projects in accordance with each local condition Moreover, Vietnamese government encourages the strengthening of linkages between foreign invested enterprises and local firms, and increases the efficiency of learning and technology transfer It also conducts planning FDI projects in sectors and domains in conformity with each locality’s advantages of economic, ensuring consistency and conformity with the master plan and assuring the national interests and restructuring the economy under the new growth model 3.1.3 The current trend of Foreign Direct Investment 3.1.3.1 The trend of FDI in the world The United States held the world's number in attracting foreign investment in 2015, surpassing China and the Hong Kong Special Administrative Region (China) According to statistics released by the United Nations Conference on Trade and Development (UNCTAD), the United States has been the world's largest recipient of foreign direct investment since the 1980s, although in 2014 China surpassed the US in this regard In particular, the amount of investment in the North American country has grown by nearly 40% to reach $ 1.7 trillion, the highest level since the financial crisis in 2009 Since the world financial crisis, foreign capital inflows in the commercial sphere have been poured into high-growth economies such as China, Brazil, and India However, in recent years, foreign investment projects have tended to return to developed and stable markets and economies Particularly in 2015, this capital was more than 55% of total investment capital of the world International and economic – financial US experts predicted that in 2017, FDI inflows may be slightly reduced as the global economy continues to recover weakly, the demand in financial market was unstable, especially the growth rate of the world's largest emerging economies such as China, Brazil, Russia, Turkey, South Korea drastically could reduce There are two main reasons why FDI is returning to industrialized countries The developing countries have reduced the advantages of workers, while developed countries have many advantages in terms of infrastructure, high-level workers, as well as the consumer market Some surveys indicate that there is a “return” of series of US 48 economic groupings in the context of rising labor costs in "world factories" such as China and India for years For example, wages of workers in China and India augmented by 10-20% while wages in the United States and Europe rose slightly during the same period Therefore, the return to US production is a smart calculation in the long run While manufacturing costs in China, Brazil, and India have been rising steadily over the past decade, US costs are almost unchanged due to stable wages, diminished energy costs, and modern industry, helping to increase productivity Currently, each USD production costs in the US are equivalent to $ 0.96 in China 3.1.3.2 The trend of FDI in Vietnam Analysis of registered and disbursed FDI data over the years indicated that FDI inflows into Vietnam had increased from the opening period until the global economic crisis in 2008 Afterward, FDI into Vietnam slowed down and tended to go down However, until 2015, the situation of attracting foreign investment in Vietnam was improved and tended to go up under the positive influence of government policies such as the implementation of Resolution 103 / NQ-CP on orienting to improve efficiency of management and use of FDI accompanied with free trade agreements In the first four months of 2016, FDI inflows into Vietnam reached an impressive figure of $ 6.88 billion Other objective conditions might have an impact on FDI inflows to Vietnam, for instance, the Chinese neighboring markets, which are experiencing volatility, and FDI inflows from the country are projected to flow to neighboring countries FDI in Vietnam accounts for only 1% of global FDI, so the surplus to attract FDI is quite large In addition, Vietnam has recently joined the ASEAN economic community, making the region's economic space wider and the investment climate has been improved markedly with the catalysts of free trade agreements with EU, USA, Korea In addition, Vietnam still has to compete fiercely with countries in Asia with similar conditions to attract FDI Vietnam's position in this area is in danger of slipping as the subsidiary industry fails to meet the requirements of investors, the commercial policies are not quite open and many investment procedures are still complex Based on these advantages and difficulties, it is possible that the FDI inflow into Vietnam in the coming time will increase rapidly However, Vietnam needs to make 49 further efforts to address the problems of the business environment, human resources, policy, and procedures in order to receive this wave of FDI effectively 3.2 SOLUTIONS TO ENHANCE ATTRACTION AND EFFICIENT USE OF FOREIGN DIRECT INVESTMENT 3.2.1 Micro solutions The attraction of investment and investment efficiency depends on the ability of the business as well as the effectiveness of each specific project The weakness of Vietnamese enterprises is the reason for reducing investment efficiency as well as limiting the role of Vietnam in investment Therefore, in order to find good partners willing to invest, it is important for enterprises to show themselves as reliable partners Firstly, Vietnamese businesses should prepare for themselves knowledgeable staff of international business cooperation activities Besides, they need to be ready and have full confidence as well as competence in cooperation with foreign partners Secondly, it is necessary for Vietnamese enterprises to prepare and study cooperative methods as well as to formulate projects to call for investment and seek partners Thus, new businesses can create trust from partners as well as speed up the cooperation and capital contribution of investors Thirdly, when integrating into AFTA with favorable business and investment conditions, besides paying attention to competition in attracting capital, enterprises must have investment exploration and cooperation projects from the ASEAN businesses pouring capital into Vietnam Time has proven that it is the ASEAN enterprises whose largest projects and capital poured into Vietnam In the last few years, due to the financial crisis, the FDI from this sector has been declining but this is still an important position for FDI in Vietnam In addition, in cooperation with businesses in the same region, Vietnamese enterprises are more likely to succeed because of the macro-level advantages of integration, cultural and social closeness, the cost of promoting trade cooperation, such as transportation and communication costs, is also cheaper than in the further market Fourthly, Vietnamese enterprises may enter joint ventures and cooperate with major ASEAN conglomerates to discuss the division of the selection of production investment sites in the regional specialization allocation plan As a result, they share the benefits 50 from FDI For instance, each ASEAN country may focus on the specialization of producing certain automotive components and components based on the advantages of each country to create a production line and automotive sector become regional 3.2.2 Macro solutions If the micro solution group targets to the enterprise, the macro solution group is related to the views and policy directions from the State, ministries, and localities 3.2.2.1 Group of legal and policy solutions Continuing to review laws and policies on investment and business in order to amend non-uniform contents, inconsistencies, supplement the missing contents and eliminate the conditions for application of investment incentives inappropriate with Vietnam's commitments to FTAs The immediate priority is to address barriers to foreign investors and manufacturers, especially regulations and administrative procedures for business start-up, entry into the market, tax, social insurance, access to land, electricity, water, etc Revising of unclear regulations related to investment and business procedures The ministries and sectors shall take the initiative in amending and supplementing the contents belonging to their respective competence (regulations on sector codes, requests for lawful legalization, forms of reporting systems, post-inspection mechanisms, investment supervision, etc.); and recommend the Government and the Prime Minister to amend and supplement regulations under their authority Monitoring and supervising the implementation of the law on investment and enterprises in order to promptly detect and handle arising problems Urgently issue documents guiding new laws, especially new laws recently approved by the National Assembly on investment and business It is necessary to focus on and attract investment from the 500 TNC - transnational corporations (TOP 500) in the world, these companies have advantages in technology, research, development, management level, and market The completed proposal of the Prime Minister on implementation of Decree 103/NQ-CP, dated 28 September 2013 enhanced the effectiveness of attracting, using, and managing foreign direct investment in coming time Promulgating incentives for investment in projects for the construction of welfare 51 facilities (houses, hospitals, schools, culture, and sports) should be set up for laborers in industrial parks, export processing zones, high-tech zones, and economic zones Implementing measures to promote disbursement, license framework for backward technology projects, adverse impacts on the environment; carefully verifying the projects using more land, conditional land allocation according to project progress, avoid large projects to keep land but not deployed; consider the ratio of investment / land area, including industrial land Tax policy and financial incentives: The tax policy and financial incentives associated with FDI are a key component of the attractiveness of the FDI environment As a result, some solutions need mentioning Well implementing the law on value added tax and corporate income tax These are the two tax laws in the first phase applied to bring tax collection activities for foreign investment projects to stabilize Financial incentives need to be strengthened for investors through a pricing system applicable to foreign investors in domestic businesses, such as electricity and water price, transportation price, postage and airline price Improving the efficiency and effectiveness of financial incentives such as quick resolution of tax issues for foreign investors, convenient profit transfer to investing country, and easy capital contribution issues is also essential Moreover, it should not be allowed to restrict or oblige foreign investors to contribute capital in cash when they are also facing difficulties due to the impact of the financial crisis Supporting projects that have been granted investment licenses are subject to the requirements of the new regulations on taxation, income, new land tax rates, sales tax exemption, and reduction for enterprises that actually lose capital Foreign currency should be used for supporting foreign invested enterprises in trouble Actively attracting foreign capital does not necessarily have to set the rate of contributed capital, taking advantage of all the capital for development Allowing foreign-invested enterprises to be equitized to increase capital for production and business development is also needed taking into consideration 3.2.2.2 Group of planning solutions Speeding up the process of building and approving the missing regulations, 52 reviewing to periodically supplement and adjust backward planning to create favorable conditions for investors to identify and develop the project Thoroughly and uniformly, implement the new provisions of the Investment Law in the planning work, ensuring the elaboration of sector and domain planning as well as products in conformity with international commitments Completing the land use planning, publicizing the planning and creating conditions to accelerate the ground clearance for investment projects; reviewing, examining and adjusting the land use planning in an effective manner, especially in coastal areas, in order to ensure sustainable economic and environmental development 3.2.2.3 Group of environmental improvement solutions Besides carrying out a total review, adjustment, approval, and publication of infrastructure plans up to 2020 as a basis for attracting investment in infrastructure development, authority also needs to maximize the resources to invest in infrastructure development, especially non-state budget sources of water supply and drainage, environmental sanitation (solid waste treatment, waste tonnage, etc.) Additionally, it is high time to improve the quality of rail services, first North-South routes, two economic corridors of Vietnam - China, the railway linking the seaport complexes, the large mineral mines with the national railway system and urban railways in Hanoi and Ho Chi Minh City producing and using electricity from new types of energy such as wind, tide, solar thermal Expanding the form of seaport lease, the subject permits seaport service investment, especially logistic, to enhance the competitive capacity of the seaport system in Vietnam, calling for investment in big ports of the economic zone such as Hiep Phuoc – Thi Vai, Lach Huyen, etc Authorities should consider the issuance of a number of measures to open up our commitments to the WTO in a number of service areas in which our country has a demand for culture - health - education, post and telecommunication, maritime and aviation 3.2.2.4 Group of human resources solutions Accelerating the implementation of the master plan for training to increase the proportion of trained workers Accordingly, in addition to upgrading existing training 53 systems to the regional and world level, more vocational training centers and training centers for various funding sources need to be developed Additionally, studying on adjustment of labor restructuring according to the rate of economic restructuring is also essential Implementing measures to make the amendment and supplement some articles of the labor law into reality to prevent illegal labor strikes and improve healthy labor relations in the spirit of the Labor Law, including (i) Continue to perfect laws and policies on labor and wages in the new situation; intensify the inspection and supervision of the observance of labor legislation by employers in order to ensure the working conditions and living conditions for laborers (ii) Raise the labor law knowledge through law dissemination, propagation, and education for laborers and employers in foreign-invested enterprises in order to ensure policies and laws on labor, wages are seriously fulfilled 3.2.2.5 Some other solutions Government should continue to improve the effectiveness of anti-corruption, negativity, and harassment situation for investors along with raising the sense of responsibility of the person in handling the work, thrift practice, and waste combat at the State management agencies Moreover, strengthening the coordination of ministries, departments, and localities dealing with environmental issues and illegal strike issues of FDI enterprises is also needed to paying attention A regular dialogue mechanism between government leaders, ministries with investors, especially the annual business forum should be maintained to handle difficulties and problems of projects in time Implementing current policies and laws to ensure that projects operate on schedule and effectively in order to further consolidate investors' confidence in the Vietnamese business environment, create spillover effects, positive impact on new investors 54 CONCLUSION FDI plays an important role in the socio-economic development of many countries in the world, especially developing countries, including Vietnam The Party and the Government of Vietnam always emphasize that the foreign-invested economy is an important component of our socialist-oriented market economy, which is encouraged to develop in the long run Therefore, in the current period, promoting the attraction of FDI to accelerate economic growth, economic restructuring, revenue increasing budget, jobs creating, and poverty reduction is strategically long-term mission, deciding the development of Vietnam Vietnam has made many efforts in attracting FDI but there are still many shortcomings and limitations In order to accelerate the work of industrialization and modernization in the coming period, achieving the set objectives and effectively attracting FDI is one of the key tasks, which are given priority in the development strategy Besides, it also helps to improve the efficiency and effectiveness of State management over foreign investment, developing the subsidiary industry Accordingly, it will support to attract private SMEs in the country and increase indirect job creation effects from the foreign investment sector REFERENCES Central Institute for Economic Management (2008), "Nang cao hieu qua thu hut va su dung von dau tu truc tiep nuoc ngoai tai Viet Nam" Ministry of Planning and Investment PhD Dang Duc Long (2010), “FDI cac nganh kinh te cua Viet Nam” Financing Faculty (2015), “Quan tri tai chinh cong ty da quoc gia” lecture notes Banking Academy PhD Mai Thanh Que (2015), “Tai chinh hoc” Banking Academy Pham Thi Minh Tam (2016), “Dau tu truc tiep nuoc ngoai tai Viet Nam: Thuc trang giai phap” graduation thesis Banking Academy Sajid Anwar (2010), "Foreign direct investment and economic growth in Vietnam" Department of Foreign Investment - Ministry of Planning and Investment (2008), Report on 20 years of foreign direct investment in Vietnam Ministry of Planning and Investment, Resolution No 103/NQ-CP by the Government on orientations to improve the effectiveness of attraction, use and management of foreign direct investment in the coming time UNCTAD (2016), World Investment Report 2015: Reforming International Investment Governance 10 UNCTAD (2016), FDI/MNE database 11 World Bank (2016), World DataBank Retrieved from http://databank.worldbank.org/data/databases.aspx 12 Zainal A Yusof & D Bhattasali (2008), “Economic Growth and Development in Malaysia: Policy Making and Leadership”, Working Paper No.27, Commission on Growth and Development 13 Other websites: - Foreign Investment Website: www.fia.mpi.gov.vn - Searching website: www.google.com.vn - Website of General Statistics Office: www.gso.gov.vn - Website of Ministry of Finance: www.tapchitaichinh.vn