INTRODUCTION
Background
Vietnam has experienced significant external capital inflows, particularly in the form of foreign direct investment (FDI), establishing itself as a top recipient relative to its economic size This success can be attributed to advancements in macroeconomic stabilization, an improved investment environment, and a focus on outward orientation As reported by the Ministry of Planning and Investment (MPI), since March 2007, Vietnam has attracted 7,067 FDI projects, totaling US$63.5 billion in investment capital, with US$27.7 billion in legal capital and US$30.7 billion implemented These figures continue to rise annually, reflecting the country's growing appeal to foreign investors.
Foreign Direct Investment (FDI) has significantly benefited Vietnam's economy, serving as a catalyst for growth by boosting productive capacity and productivity Currently, foreign-invested enterprises account for nearly 20% of Vietnam's GDP, 52% of total exports, and millions of jobs The diverse contributions of FDI firms highlight their crucial role in influencing the economic, cultural, and social dimensions of the national economy.
Foreign Direct Investment (FDI) plays a crucial role in the development of the Vietnamese economy, meaning that any fluctuations in investment flows can significantly impact the overall economic landscape Therefore, analyzing FDI trends is essential for the government to leverage the country's appeal to foreign investors, ensuring sustainable economic growth and stability.
The global financial crisis of 2007 and 2008 significantly impacted Vietnam, prompting an analysis of its effects on foreign direct investment (FDI) flows, particularly regarding capital scale and targeted sectors This research aims to identify the challenges faced and propose recommendations to mitigate future negative impacts As Vietnam navigates the current Euro Debt crisis, reflecting on past experiences will provide valuable insights into maintaining FDI attractiveness and minimizing the crisis's influence on investment flows.
Research objectives
This thesis investigates the impact of the 2008 global financial crisis on foreign direct investment (FDI) flows to Vietnam, highlighting the lessons that can be learned from this downturn to enhance the country's future FDI attractiveness.
Research question
This thesis aspires to provide answers to the question of concerns for practitioners: What are the impacts of global financial crisis on FDI flows to Vietnam?
Data sources
The analysis relies on trustworthy secondary data gathered from diverse sources, including country and industry reports, news articles, and databases from reputable market data providers, such as university research statistics.
Thesis structure
The thesis consists of four main chapters:
THEORETICAL FRAMEWORK
An overview of Foreign Direct Investment (FDI)
Foreign direct investment (FDI) is defined as equity funds invested in foreign countries, primarily in industrialized nations However, it also encompasses investments in Less Developed Countries (LDCs) like Eastern Europe and China, as well as Newly Developed Countries (NDCs) such as South Korea and Singapore.
Countries can pursue foreign direct investment (FDI) through two primary methods: greenfield investment and mergers and acquisitions (M&A) Greenfield investment involves home countries establishing entirely new operations in host countries, while M&A entails the direct purchase of a company or forming partnerships with existing businesses in those countries.
Foreign Direct Investment (FDI) can be categorized from both home and host country perspectives From the home country's viewpoint, FDI is divided into horizontal and vertical types Horizontal FDI involves expanding production of similar goods in the host country, while vertical FDI focuses on resource exploitation (backward) or acquiring distribution channels (forward) From the host country's perspective, FDI can be classified into import-substituting, export-increasing, and government-initiated categories Import-substituting FDI aims to produce goods that were previously imported, potentially reducing both imports and exports Export-increasing FDI seeks new sources for raw materials and finished products, boosting the host country's exports Government-initiated FDI occurs when governments provide incentives to attract foreign investors, often to address balance of payment deficits.
2.1.2 Benefits and costs of FDI a Benefits for home country
Transportation costs can greatly impact products with a low value-to-weight ratio, making it essential to minimize these expenses For instance, producing cement near the market is a strategic approach to reduce transportation costs effectively.
Market imperfections, such as tariffs and fluctuating exchange rates, can significantly raise export costs for companies This often leads businesses to opt for local installation of computers in the host country instead of incurring high export tariffs Additionally, concerns about losing control over proprietary knowledge, product quality, and the supply chain can complicate the sale of know-how, making companies wary of licensing agreements.
In industries dominated by a limited number of competitors, businesses often mimic each other's strategies to prevent any one company from gaining a substantial competitive edge A notable instance of this occurred in the 1980s when Honda's investment in Europe prompted Toyota and Nissan to swiftly implement comparable initiatives.
The product life cycle offers home countries the opportunity to leverage the early stages of foreign markets for product introduction A notable example is Xerox, which pioneered photocopier technology in the US and engaged in foreign direct investment (FDI) through joint ventures As patents expired, competitors began creating their own versions and exporting them back to the US Subsequently, Japanese firms also pursued FDI, shifting production to developing nations like Singapore and Thailand.
Companies often seek location-specific advantages, such as access to a low-cost, high-skilled workforce, exemplified by British firms establishing call centers in India Proximity to essential raw materials can also be a key factor, as it enhances operational efficiency Additionally, businesses benefit from being in environments that foster networking with skilled professionals, enabling rapid acquisition of relevant knowledge These advantages not only support company growth but also contribute positively to the host country's economy.
Resource transfer benefits: FDI involves the flow of capital, technology and management resources into the host country
Foreign Direct Investment (FDI) is often associated with direct job creation through the establishment of new factories and facilities However, this claim can be overstated, as many employees may be transferred from the multinational enterprise's (MNE) home country, potentially leading to job losses in local competing businesses Conversely, the wealth generated by FDI can boost consumption levels, ultimately contributing to an increase in overall employment within the host country.
Foreign Direct Investment (FDI) offers significant benefits to the balance of payments, particularly through three key factors Firstly, FDI leads to capital inflows as multinational enterprises (MNEs) invest in the host country Secondly, when FDI reduces imports from the MNE's home country, it positively impacts the host country's current account Lastly, the export of goods from newly established subsidiaries further enhances the host country's current account, contributing to overall economic growth.
The introduction of competition in various industries, such as the supermarket sector with Wal-Mart's entry into the UK and Western supermarkets in South Korea, has led to increased economic benefits for consumers, primarily through lower prices Similarly, the liberalization of telecommunications in numerous countries, coupled with the privatization of state-owned companies, has attracted multinational enterprises (MNEs) to invest in new systems, enabling them to provide competitive pricing for their services.
The most important concerns center around the balance-of-payments and employment effects of outward FDI
The balance of payments of a home country can be impacted in three significant ways due to foreign direct investment (FDI) Initially, the capital account experiences a negative effect from the capital outflow needed to finance the FDI; however, this is typically counterbalanced by the later inflow of foreign earnings Additionally, the current account is affected if the foreign investment aims to supply the home market from a low-cost production site Lastly, if the FDI acts as a substitute for direct exports, the current account may also suffer.
Foreign Direct Investment (FDI) can significantly impact employment levels, particularly when it replaces domestic production, as seen with Toyota's investments in Europe This shift often leads to decreased job opportunities in the home country, especially in tight labor markets with low unemployment rates Consequently, the costs associated with host countries must also be considered, as they bear the implications of such investments.
Competition concerns arise when multinational enterprises (MNEs) enter host countries, as local governments and businesses fear potential market dominance and the formation of monopolies This dominance could lead to increased prices, ultimately harming consumers The threat is particularly pronounced in developing countries with predominantly small local businesses, while it is less significant in larger industrialized nations To mitigate these risks, many countries have implemented legislation aimed at preventing monopolistic practices.
The balance of payments for a country can suffer due to the repatriation of earnings from foreign subsidiaries and rising import costs for new facilities However, host countries can mitigate these impacts by implementing regulations on the proportion of imported supplies For instance, a Japanese car manufacturer operating in Europe might commit to utilizing a specific percentage of locally sourced components, thereby supporting the local economy and reducing import dependency.
Financial crises and their impacts on FDI
Mishkin defines a financial crisis as significant disturbances in financial markets, marked by steep drops in asset prices and the collapse of numerous financial and non-financial companies.
Financial crises arise from disruptions in the financial system, leading to increased adverse selection and moral hazard issues, which hinder the efficient transfer of funds from savers to those with productive investment opportunities This inefficiency results in a significant contraction of business activities Various forms of financial crises include banking crises, currency crises, sovereign defaults, stock market crashes, and speculative bubbles A banking crisis, or banking panic, occurs when numerous banks face simultaneous runs as customers lose confidence in their solvency and rush to withdraw deposits Since banks only hold a fraction of deposits as reserves, sudden withdrawals can lead to insolvency, forcing a bank to declare bankruptcy.
A currency crisis occurs when a currency experiences a rapid and significant devaluation over a short timeframe A sovereign default happens when a country fails to meet its external debt obligations or restructures them In contrast, a stock market crash is characterized by a decline of over 20% in the price index for developed markets and more than 35% for emerging markets Additionally, a speculative bubble arises when trading volumes remain high at prices that do not align with market fundamentals.
Financial crises can be triggered by five key factors: rising interest rates, heightened uncertainty, asset market impacts on balance sheets, issues within the banking sector, and government fiscal imbalances An increase in interest rates can significantly affect borrowing costs and consumer spending, leading to broader economic instability.
Investors and companies engaging in high-risk projects tend to accept higher interest rates When market interest rates rise due to heightened credit demand or a reduced money supply, creditworthy borrowers become hesitant to take loans, while riskier borrowers remain willing This scenario exacerbates adverse selection, causing lenders to shy away from issuing loans Consequently, a significant drop in lending occurs, leading to a marked decrease in investment and overall business activity, further fueled by rising uncertainty.
A significant rise in uncertainty within financial markets can stem from the failure of a major financial or non-financial institution, a recession, or a stock market crash This heightened uncertainty complicates lenders' ability to distinguish between good and bad credit risks Consequently, the inability to address the adverse selection problem leads to a decreased willingness among lenders to provide loans, resulting in a decline in lending, investment, and overall business activity.
Banks are crucial in financial markets due to their ability to facilitate productive investments through information-producing activities Their lending capacity is heavily influenced by their balance sheets; any deterioration can lead to reduced capital and a decline in lending This reduction in lending subsequently decreases investment spending, slowing business activity In severe cases, failing banks can trigger a bank panic, where fear spreads among depositors, leading them to withdraw their funds and causing even healthy banks to collapse This widespread failure results in a loss of information production, impacting financial intermediation During a financial crisis, decreased bank lending reduces the supply of funds to borrowers, causing interest rates to rise Consequently, this environment fosters adverse selection and moral hazard in credit markets, further diminishing lending and exacerbating the contraction in business activity.
In emerging market countries like Argentina, Brazil, and Turkey, fiscal imbalances can heighten concerns about government debt defaults, making it difficult for governments to sell bonds This may compel banks to purchase these bonds, and if their value declines, it can severely impact banks' balance sheets, resulting in reduced lending Additionally, fears of default can trigger a foreign exchange crisis, leading to a sharp depreciation of the domestic currency as investors withdraw their funds This currency decline adversely affects firms with significant foreign currency debt, exacerbating balance sheet issues and increasing risks of adverse selection and moral hazard, ultimately leading to a contraction in lending and business activity.
2.2.3 Impacts of financial crises on FDI flows
The 2008 global financial crisis significantly impacted foreign direct investment (FDI) flows, highlighting the vulnerabilities in the economy This article will focus specifically on the effects of this crisis, providing insights into how it reshaped investment patterns and influenced economic stability.
The year 2008 marked a significant downturn in global foreign direct investment (FDI), which had reached a record high of $1.8 trillion in 2007 Following the worldwide financial crisis, FDI flows plummeted by over 20 percent in 2008, with expectations of further declines in 2009 as the full impact of the crisis on transnational corporations' investment expenditures became apparent.
The impact of foreign direct investment (FDI) varies significantly across regions, with developed countries experiencing the most pronounced decline in inflows, particularly in 2008, due to sluggish market prospects In contrast, while developing economies saw continued, albeit slower, growth in FDI during the same year, a decline was anticipated in 2009 due to reduced efficiency and resource-seeking investments aimed at exporting to depressed advanced economies Initially, emerging markets demonstrated resilience, with FDI inflows increasing by 11% in 2008, even as developed countries faced a one-third decline However, projections for 2009 indicated that emerging markets would attract more FDI than developed countries for the first time, despite the uncertainty surrounding this forecast Notably, FDI flows to sectors such as financial services, automotive, building materials, and intermediate goods have been significantly impacted, with the crisis rapidly affecting investments across a broader range of industries.
IMPACTS OF 2008 FINANCIAL CRISIS ON FDI
An overview in 2008 global financial crisis
3.1.1 Timeline of global financial crisis in 2008
In 2006, U.S housing prices experienced a significant downturn, with median prices dropping by 3.3 percent between the fourth quarter of 2005 and the first quarter of 2006, a trend that intensified in 2007 This decline triggered a crisis in the subprime mortgage sector, which had been providing loans to high-risk borrowers with little to no down payment By February and March 2007, over twenty-five subprime lending companies went bankrupt, causing turmoil in the financial markets, exemplified by a 416-point drop in the Dow Jones Industrial Average on February 27, marking its largest single-day loss since November 9.
April 2 nd , 2007: New Century Bankruptcy
New Century Financial Corporation, the largest U.S subprime lender, filed for bankruptcy following a series of bankruptcies of smaller subprime lending firms
July 31 st , 2007: Bear Stern Hedge Funds
Bear Stearns, a leading investment bank in the U.S., revealed that two of its hedge funds had nearly depleted their investor capital and planned to file for bankruptcy This development marked a significant early indicator of broader issues within financial markets, extending beyond the subprime loan sector.
August 2007: Subprime Woes Go Global
Subprime mortgage issues have become a global concern, with hedge funds and banks worldwide disclosing significant investments in mortgage-backed securities In response, the European Central Bank swiftly intervened by providing low-interest credit lines to support these financial institutions.
In response to the global tightening of lending markets, central banks, including the U.S Federal Reserve and the European Central Bank, have coordinated efforts to inject liquidity into credit markets for the first time since November 9 This move comes as Countrywide Financial, the largest mortgage lender in the U.S., reports that foreclosures and mortgage delinquencies have surged to their highest levels since 2002.
In February 2008, Northern Rock, a British bank, faced a crisis that led to a run on deposits, prompting long lines outside its branches as customers rushed to withdraw their funds The situation escalated, forcing Northern Rock to seek emergency assistance from the Bank of England, ultimately resulting in the bank being taken into state ownership.
September 18 th , 2007: Fed Slashes Rates
The U.S Federal Reserve made its first in a series of interest rate cuts, lowering the benchmark federal funds rate from 5.25 percent to 4.75 percent
By November 2008, the Fed would cut rates to 1 percent, as displayed on the adjoined chart In December 2008, they would make another cut, lowering rates to between 0 percent and 0.25 percent
(Source: New York Federal Reserve)
The Dow Jones Industrial Average, which measured the combined stock values of the thirty largest companies in the United States, peaked at 14,164
By February 2009, the Dow would fall to just over 6,500
January 24 th , 2008: Real Estate Fear
In 2007, the National Association of Realtors reported the largest single-year decline in U.S home sales in twenty-five years, raising concerns about a potential increase in mortgage defaults among Americans and exacerbating challenges in the credit market.
March 14 th , 2008: Bear Stern Bailout
Bear Stearns, a major U.S investment bank, faced severe liquidity issues and received a 28-day emergency loan from the New York Federal Reserve Bank, raising investor fears of a potential financial sector collapse Shortly after, JPMorgan Chase acquired Bear Stearns for just $2 per share, later increasing the offer to $10 per share, despite the bank's stock trading at $172 per share just two months prior This unprecedented collapse and sale of a Wall Street icon ignited widespread concerns about the stability of the financial sector's future.
The U.S government has decided to take control of federal mortgage insurers Fannie Mae and Freddie Mac, marking a significant intervention in the ongoing credit crisis With both firms facing high rates of mortgage defaults, regulators are concerned that their potential failure could trigger severe repercussions for the financial markets and the overall U.S economy.
On September 15, Lehman Brothers, a prominent investment bank with over 150 years in the U.S financial sector, filed for bankruptcy, marking the largest in U.S history This shocking announcement unsettled investors who believed the U.S Treasury would prevent such a significant failure On the same day, Bank of America alleviated concerns by announcing a $50 billion acquisition of Merrill Lynch, ensuring its capacity to manage short-term debts The following day, credit rating agencies downgraded AIG, the largest insurer in the U.S., prompting the Federal Reserve to provide an $85 billion loan to stabilize the company.
3.1.2 Causes of global financial crisis of 2008
The financial crisis originated in the USA before cascading globally, driven by several key factors The housing bubble, characterized by inflated property values, played a significant role, alongside subprime mortgage lending practices that allowed high-risk borrowers to obtain loans Additionally, loan securitization contributed to the crisis by spreading risk across financial institutions, while various economic issues exacerbated the situation, leading to a deepening recession.
From July 1996 to April 2006, US housing prices experienced a significant rise, as indicated by the S&P and Case Shiller composite housing price index, with a remarkable 118-month streak of increasing prices During this period, the average annual return on investment in housing reached 11% Concurrently, the supply of privately built houses saw a gradual increase, climbing from 798,000 units in January 1991 to 2,273,000 units by January 2006.
In 2006, despite increasing housing prices, there was no evidence of surging building costs, indicating that demand primarily drove the market This led to expectations of ongoing housing price appreciation during the bubble Lenders perceived their loans as well-secured by the rising collateral value, often overlooking borrowers' repayment abilities, which resulted in a significant increase in lending to high-risk borrowers between 2003 and 2005.
(Source: Yu et al., 2009) b Subprime mortgage lending
Intense competition among mortgage lenders for revenue and market share, coupled with a limited pool of high-quality borrowers, led to relaxed underwriting standards and the origination of riskier mortgages for less creditworthy individuals By 2003, strict regulations in the mortgage securitization market mandated high underwriting standards However, fierce competition from private securitizers resulted in a decline in these standards and an increase in risky loans The most problematic loans were originated between 2004 and 2007, just before the onset of the financial crisis.
Subprime mortgages constituted less than 10% of total mortgage originations until 2004, when they surged to nearly 20%, maintaining that level during the peak of the U.S housing bubble from 2005 to 2006.
Figure 3.3: US subprime lending expanded significantly 2004-2006
(Source: Yu et al., 2009) c Loan securitization
The financial crisis has its origins in the US subprime crisis, which arose from the securitization of loans by banks beginning in the 1970s The Government National Mortgage Association initiated this process by issuing mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) backed by pools of residential mortgage loans These financial instruments, along with credit default swaps (CDS), were sold to global investors, creating a complex web of financial relationships that made individual mortgages difficult to manage Rather than distributing risk, this system facilitated fraudulent activities, misjudgments, and ultimately led to a market collapse.
(buseco.monash.edu.au, nd) d Other factors
There are also many other factors contributing to the spread of regression from countries to countries in 2008 Including:
Systematic failures in regulation, supervision, and risk management create gaps in oversight of financial markets
Widespread breaches of accountability and ethics include inaccurate credit ratings, excessive risk-taking, adverse selection and moral hazard
The government’s fiscal imbalances widen budget deficit If people do not buy the government bonds, banks might be forced to do so
The case of Vietnam
The global financial crisis that began in 2008 had widespread effects, including significant impacts on Vietnam's economy One of the key areas affected is Foreign Direct Investment (FDI) in Vietnam To understand the situation, it is essential to identify the signs of the financial crisis within the country and assess how these developments have influenced FDI flows into Vietnam.
3.2.1 The signs of financial crisis in Vietnam
There are 4 main factors indicating that Vietnam is facing crisis in this period including economic growth, inflation rate, import and export and unemployment rate a Economic growth
Gross domestic product (GDP) is one of the useful indicators reflecting the health and growth of an economy
From 2001 to 2007, Vietnam experienced sustainable economic growth, rising from 4.7% to 8.5% However, this upward trend was interrupted in 2008 when growth sharply declined to 6.2%, followed by a further drop to 5.3% in 2009, signaling a regression that hindered the country's economic development.
A comparison of GDP changes between 2007 and 2008 reveals notable differences, particularly illustrated in Figure 3.5 In 2008, all four quarters experienced lower GDP growth rates than in 2007, with the most significant decline starting in the second quarter The fourth quarter saw the largest gap, with GDP growth dropping to just 5.74%, marking a 38% decrease compared to the same period in 2007.
(Source: Euro Capital Company) b Inflation rate
Compared with other economies in the world, the inflation rate of Vietnam experienced a dramatic change during the period of 2007 to 2009 Especially in
In 2008, Vietnam experienced a dramatic inflation rate exceeding 20%, significantly higher than that of other developed, Asian developing, and emerging countries, as illustrated in figure 3.6 Reports indicate that Vietnam's inflation rate was the highest in the region during that year (vnexpress.net, 2008) This surge in inflation can be attributed to a combination of internal factors, such as ineffective government management and excessive public spending, along with external influences.
The Vietnamese economy is significantly affected by external factors, particularly the global financial crisis, leading to a deeper regression compared to countries with stronger government control.
Figure 3.6: Inflation rate of Vietnam compared with other economies
The Consumer Price Index (CPI) serves as a key indicator of inflation in Vietnam In the first four months of 2008, the CPI remained notably high compared to 2009 and 2010, reaching a peak of 3.91% in May 2008 This surge was largely attributed to significant price increases in various products, with fuel prices rising by 11.5% and substantial hikes in rice prices.
Developing countries Asian developing countries
In recent months, Vietnam has experienced a significant increase in its inflation rate, rising from 50% to 100% However, following government intervention, the Consumer Price Index (CPI) began to decline Despite these efforts, controlling the CPI trend has proven challenging, as evidenced by a deflationary period where the inflation rate dipped below 0% This situation is illustrated in Figure 3.7, particularly in comparison to the year 2009.
Following the stabilization of the financial crisis in 2010, the Consumer Price Index (CPI) experienced significant fluctuations in 2008, ranging from 3.91 to -0.91 These variations in the CPI highlighted the underlying instability within the national economy.
Figure 3.7: CPI of Vietnam from 2008 to 2010
(Source: ADB, 2010) c Imports and exports
In 2008, Vietnam's total trade turnover reached USD 143.4 billion, marking a 28.9% increase from 2007 Exports amounted to USD 62.69 billion, up 29.1% and surpassing the annual target by 7%, while imports totaled USD 80.71 billion, reflecting a 28.8% rise By the end of December 2008, Vietnam's trade deficit hit a record high of USD 18.03 billion, a 27.7% increase from USD 14.12 billion in 2007.
In 2009, Vietnam's exports totaled USD 56.5 billion, reflecting a 9.9% decline compared to 2008 By the end of that year, while the global economy and Vietnam's economy were showing signs of recovery from the crisis, the impacts of the downturn had not yet been fully addressed.
Figure 3.8: Vietnam’s Exports and imports
(Source: General Statistics Office of Vietnam)
Exports (bil.USD) Imports (bil.USD) Trade Deficit (bil.USD) d Unemployment
By 2008, Vietnam's employment rate exhibited a declining trend, as illustrated in Figure 3.9 From 2004 to 2007, the unemployment rate steadily decreased from 5.6% to 4.2% However, the financial crisis of 2008 significantly impacted the economy, leading to an increase in unemployment This rise was evident as the unemployment rate climbed to 4.6% in 2008 and further to 4.66% in 2009.
The global economic downturn, driven by the financial crisis, led to a significant decline in manufacturing and business activities, resulting in slowed consumption of essential commodities and the redundancy of 667,000 workers According to the Department of Labor, Vietnam's unemployment rate reached approximately 4.65%, translating to over 2 million individuals affected.
3.2.2 Impacts of financial crisis on FDI to Vietnam a Impacts on the registered and implemented FDI to Vietnam
Total registered FDI is: 120.9 billion USD
Total implemented FDI is: 40.16 billion USD
Average proportion of implemented FDI to registered FDI is: 33%
Figure 3.10: FDI to Vietnam from 2000 to 2010
(Source: General Statistics of Vietnam)
From 2000 to 2008, there was a noticeable decline in the ratio of implemented Foreign Direct Investment (FDI) to registered FDI, as illustrated in Figure 3.10 To better understand this trend, it's essential to analyze the data by dividing this timeframe into two distinct periods.
2000 to 2005 and the second one is from 2006 to 2008
(Source: General Statistics of Vietnam)
The distinction between the two periods lies in the ratio of implemented to registered foreign direct investment (FDI) In the earlier period, this ratio significantly exceeded the average of 33%, whereas in the later period, it fell below the average level.
The decline in foreign direct investment (FDI) can be largely attributed to the financial crisis that unfolded during this period, which led to a deteriorating international business environment As economic conditions worsened, corporations faced heightened risks and a scarcity of capital, prompting them to reevaluate their investment strategies by limiting their investment scope and reducing capital allocation to mitigate exposure to potential risks.
Furthermore, 2007-2008 financial crises continued to affect the FDI to Vietnam in
2009 which made both the registered and implemented FDI go down considerably this year Particularly, the registered FDI to Vietnam in 2009 was 23,107 million
CONCLUSIONS AND RECOMMENDATIONS
Conclusions
Foreign direct investment (FDI) has been a crucial driver of growth for the Vietnamese economy, particularly after the country joined the World Trade Organization It plays a vital role in addressing capital shortages, contributing to 30% of total national investment However, the 2008 global financial crisis adversely affected the national economy and diminished Vietnam's FDI appeal As a result, the ratio of implemented FDI to registered FDI significantly declined in 2008, and it took two years for both metrics to recover to pre-crisis levels.
Recommendations
The global financial crisis has negatively impacted the Vietnamese economy, but it also serves as a valuable learning experience for future challenges To mitigate these effects and enhance foreign direct investment (FDI) attractiveness, Vietnam must focus on maintaining a stable macroeconomic environment, achieving sustainable economic growth, controlling inflation, and ensuring sound monetary and fiscal policies Furthermore, developing a market economy and fostering a robust financial market are essential to meet the urgent needs of businesses Actively promoting investment by selecting reputable foreign investors and viable projects, along with diversifying international relations, will be crucial Additionally, Vietnam should embrace the policy of "Vietnam wants to befriend all countries" to strengthen its global ties.
Secondly, Vietnam should improve the legal environment to ensure preferential terms and protections for foreign investors and ensure strict law enforcement to make foreign investor confident investing in Vietnam
Vietnam needs to prioritize the education and training of mid-level managers and specialists while also renovating and enhancing its infrastructure, particularly essential systems and structures This challenge is compounded by limited economic resources, necessitating the mobilization of capital from all segments of the Vietnamese population and the solicitation of support from other governments.
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