This research project investigates the relationship between the Provincial Competitiveness Index PCI and attracting Foreign Direct Investment FDI in provinces and cities in Vietnam.. The
INTRODUCTION
Background of the research
In the context of increasingly deepening international economic integration, attracting Foreign Direct Investment (FDI) plays a crucial role in the economic development of countries, especially developing ones like Vietnam FDI not only brings investment capital but also transfers technology, managerial knowledge, labor skills, and creates many jobs (Nunnenkamp
& Spatz, 2004) To attract FDI effectively, countries need to build a favorable business and investment environment, in which the role of local governments is very important
FDI, or Foreign Direct Investment is the investment by an organization or individual from one country into a business or project in another country with the aim of participating in the management and control of that business or project FDI can be an important part of a country's economic development strategy, especially in an increasingly globalized world According to Dunning (1993), FDI is defined as "the direct investment of an enterprise in one country into an enterprise in another country, with the aim of participating in the management and control of that enterprise" This may involve purchasing shares in a local company or establishing a new business According to the definition of the Organization for Economic Co-operation and Development (OECD, 2008), FDI is "a type of cross-border investment by a private entity aiming to establish long-term economic benefits in a company in another country from the country of the investor’s nationality." Moran (1998) explains that FDI involves "a parent company from one country setting up a subsidiary in another country, or acquiring shares in an existing company in that country." FDI differs from Foreign Portfolio Investment in that the FDI investor has the right to control and manage the operations of the enterprise they invest in
FDI has played and continues to play an important role in Vietnam's economic development Since the beginning of economic opening and reforms in the 1980s, FDI has significantly contributed to the country's economic growth Vietnam has attracted a large amount of FDI, especially in recent years According to UNCTAD's research in 2021, FDI plays a crucial role in technology transfer, knowledge dissemination, and job creation Multinational corporations often bring along advanced technologies and management expertise, contributing to enhancing the industrial capacity of the host country Vietnam is no exception, with its economy benefiting significantly from technology transfer through FDI
According to the World Bank (2020), FDI has helped Vietnam achieve rapid economic growth, structural economic transformation, deeper integration into the global economy, and increased labor productivity FDI has also created millions of jobs, contributed significantly to the state budget, and promoted the development of key industries Research by Blomstrửm and Kokko
(1998) also indicates that FDI can create employment opportunities and improve the quality of life for local workers Thanks to investments from multinational corporations, workers have the opportunity to learn and develop skills, while creating a more competitive and efficient working environment
A research by Hanh and Anh (2020) on the role of FDI in Vietnam's economic development shows that FDI has helped the country diversify its economy, particularly in areas such as manufacturing, services, and technology This not only enhances Vietnam's competitiveness in the international market but also helps the country integrate into global value chains Nguyen
FDI has been instrumental in Vietnam's economic growth, allowing the country to capitalize on its competitive edge in low-cost labor while gaining access to new markets Nonetheless, Vietnam must strive to attract higher-quality, sustainable FDI investments that prioritize environmental protection.
According to information released in 2021 by the Ministry of Planning and Investment, foreign direct investment inflows have been assessed as playing an extremely important role, becoming a key driving force for Vietnam's economic growth and development over the past three decades In the 2011-2020 period, FDI accounted for about 24% of total social investment capital and contributed about 20% of Vietnam's GDP
With such importance, attracting FDI into Vietnam and maximizing the benefits from FDI is one of the important goals of the Vietnamese government And the PCI index may be an important factor influencing the investment decisions of foreign investors in Vietnam
The Provincial Competitiveness Index (PCI) is a tool for evaluating the business environment and competitiveness of provinces and cities across the country This index is developed by the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID) in Vietnam to provide information on the quality of economic governance and business investment environment of localities for policymakers and the business community According to Malesky (2011), "PCI provides a comprehensive and
6 detailed view of the differences in the business environment and management quality among provinces and cities in Vietnam."
The Provincial Competitiveness Index (PCI) evaluates the economic governance quality of provinces on a 100-point scale It measures factors crucial for private sector growth, including Entry Costs, Land Access, Transparency, Time Costs, Informal Charges, Fair Competition, Dynamism, Business Support Policies, Labor Training, and Legal Institutions This index is vital for assessing the competitiveness of provinces, as it provides insights into their economic governance and business environment.
The annual PCI results often show a clear disparity among localities across the country In general, major provinces and cities such as Hanoi, Ho Chi Minh City, Dong Nai, and Binh Duong often lead in PCI scores Meanwhile, mountainous provinces and remote areas tend to have lower PCI scores
The PCI score has become an important tool for localities to assess their business environment and competitiveness compared to other localities From there, provinces and cities can propose practical policies and solutions to improve their shortcomings and enhance their overall competitiveness
The PCI is also one of the important criteria that domestic and foreign investors refer to and evaluate before deciding to invest in a locality Provinces and cities with high PCI scores often attract more investment Therefore, improving the PCI is one of the key tasks of localities to enhance the business investment environment and attract investment
However, despite being considered quite comprehensive, the PCI still has some limitations as it only relies on subjective survey results from businesses and does not fully assess objective indicators of the business environment, quality of administrative systems, etc Therefore, the PCI should only be considered as one of many tools for assessing the business environment and competitiveness of localities
Objective of research
The research purpose of this topic is to investigate and understand the relationship between the Provincial Competitiveness Index (PCI) and the inflow of Foreign Direct Investment (FDI) in different provinces of Vietnam This study intends to provide insights that can inform policymakers, investors, and local governments about the significance of the PCI in attracting FDI and how improvements in the investment climate can positively influence FDI trends.
Research question
The research addresses 2 questions (RQ) below:
RQ 1 How does the Provincial Competitiveness Index (PCI) affect the volume and distribution of Foreign Direct Investment (FDI) in different provinces of Vietnam?
RQ 2 What are the key factors of PCI influencing FDI in provinces of Vietnam?
Main findings and contribution
Government policies and administrative efficiency play a critical role in attracting foreign direct investment (FDI) alongside economic factors Business Support Policy is particularly influential in attracting FDI, followed by efforts to minimize informal costs, enhance Labor Policy, and foster strong leadership While the study does not directly examine the use of the Provincial Competitiveness Index (PCI) by FDI companies, improved PCI scores, indicative of effective local governance, are likely to attract higher FDI investments in those regions.
This summary underscores the pivotal role of policy and governance in FDI attraction, highlighting the importance of proactive measures in creating an investment-friendly environment By prioritizing effective policies and enhancing governance, localities can not only attract more FDI but also potentially stimulate economic growth, create jobs, and foster overall development within their communities
Research organization
This research paper is organized into five chapters Chapter 2 reviews literature on the Provincial Competitiveness Index (PCI) and its impact on Foreign Direct Investment (FDI) in Vietnamese provinces, identifying factors affecting PCI competitiveness and the relationship between PCI and FDI Chapter 3 describes the research methodology, including data collection, cleaning, exploratory analysis, and regression analysis Chapter 4 presents the data analysis results and discusses them in relation to the research questions and hypotheses Chapter 5 draws inferences and makes evidence-based proposals based on the research findings, assessing the impact of the PCI on FDI attraction in Vietnam and its implications for provincial FDI attraction strategies.
LITERATURE REVIEW
Foreign Direct Investment (FDI) plays a pivotal role in the economic development of nations, acting as a catalyst for growth and technological advancement In recent years, FDI has gained significant attention globally, with Vietnam emerging as a notable recipient To comprehend the factors influencing FDI attraction, a comprehensive literature review has been conducted, exploring various dimensions According to data from the World Bank (WB), FDI capital into Vietnam in 1986 was about 3 million USD, ranking 136/160 countries globally, 9/10 countries in the ASEAN region However, by 2022, foreign capital into Vietnam will increase 6,000 times, to 19 billion USD, ranking 28th globally and 3rd/10th in ASEAN However, according to updated data from the Ministry of Planning and Investment, FDI capital into Vietnam in
2022 will amount to 22.4 billion USD (Nguyen Nga, 2023)
The literature on the impact of PCI (Provincial Competitiveness Index) on FDI in Vietnam presents several controversies and unresolved issues Some studies found a positive relationship (eg., 1-2-3), others found a negative relationship, (eg., 123) For example, Tran
(2020) was positive and some found that trade openness had no significant impact on FDI inflows This suggests that the impact of trade openness on FDI is complex and may depend on other factors, such as the country’s economic policies and the nature of its trade relationships
This review highlights the need for further research to fully understand the relationship between PCI and FDI in Vietnam and its implications for economic development Future studies could use more granular data and consider additional factors to provide a more comprehensive picture of this complex issue
Foreign Direct Investment (FDI) has emerged as a crucial driver of economic growth and development globally, playing a key role in shaping the economic landscape of countries across the world (UNCTAD, 2021) FDI can be defined as the investment made by an entity, typically a multinational corporation (MNC) or an individual, in a foreign country with the aim of acquiring a lasting interest and significant influence in the management of an enterprise (Dunning, 1993)
The significance of FDI in the contemporary global economy cannot be overstated FDI capital flows contribute to the economic growth of countries around the world, so countries actively seek to attract foreign capital to improve economic competitiveness and foster sustainable development (Wei & Liu, 2001)
In the global context, FDI serves as a catalyst for economic development by facilitating technology transfer, knowledge diffusion, and creating employment opportunities (Blomstrửm
& Kokko, 1998) Multinational corporations, as major contributors to FDI, bring with them advanced technologies and management expertise, thereby contributing to the enhancement of the host country’s industrial capabilities This transfer of technology not only leads to productivity gains but also promotes innovation and fosters a more competitive business environment
Furthermore, FDI has been shown to be a key driver of globalization, linking economies through cross-border investment and trade (Moran, 1998) It strengthens economic ties between countries and promotes international cooperation The connectivity established through FDI allows for efficient resource allocation on a global scale, ultimately benefiting both the investing and receiving countries
Considering the specific case of Vietnam, FDI has played a transformative role in the country's economic development (Hanh & Anh, 2020) Since the economic reforms of the late 20th century, Vietnam has actively pursued a policy of attracting FDI to boost its industrialization and modernization efforts The inflow of foreign capital has been instrumental in diversifying the Vietnamese economy, particularly in sectors such as manufacturing, services, and technology
Foreign direct investment (FDI) has significantly contributed to Vietnam's growth and development FDI fosters job creation and skills enhancement, as multinational corporations transfer expertise and provide training to the local workforce This not only augments Vietnam's human capital but also enhances its participation in the global value chain, bolstering its competitive advantage in the international market.
A comprehensive analysis of existing research on Foreign Direct Investment (FDI) reveals a multifaceted understanding of the factors influencing the inflow of foreign capital and the
12 subsequent impact on host economies Researchers have extensively investigated the determinants of FDI, emphasizing the critical role played by factors such as political stability, regulatory transparency, infrastructure development, and favorable tax policies
Asiedu (2006) emphasizes the importance of political stability and transparent investment policies in attracting foreign investors Wei and Liu's study (2001) contributes to the understanding of the connection between developed infrastructure and increased FDI, highlighting the role of modern facilities in reducing costs and promoting a favorable business environment Alfaro and Xu's research (2008) sheds light on the significance of tax policies, demonstrating that lower tax rates and investment-friendly measures correlate with higher FDI inflows In terms of the impact of FDI on host economies, research by Nguyen and Nguyen
(2020) in Vietnam emphasizes the positive effects, including improved managerial and technical capabilities in local enterprises Additionally, Blomstrửm and Kokko's research
Foreign direct investment (FDI) plays a crucial role in fostering economic growth and sustainability Studies indicate that FDI stimulates job creation and improves the quality of life for local workers Research has identified key determinants that attract FDI, such as a favorable business climate, skilled workforce, and stable political environment The positive impacts of FDI extend to increased economic growth, innovation, and technology transfer By attracting foreign investment, countries can leverage the benefits of global interconnectedness and enhance their overall economic well-being.
Local Perspective on FDI in Vietnam
In Vietnam, FDI research mainly focuses on the national scale However, the local aspect of FDI, especially at the provincial level, has not been fully researched This study aims to bridge this gap by focusing on the drivers of FDI attraction at the local level, providing an in-depth understanding of the factors at play Supporting studies for Local Perspective on FDI in Vietnam, Vietnam Accounting Newspaper (2020), a group of reporters talk about the role, current situation and shortcomings in FDI attraction activities in Vietnam, as well as the solutions to improve efficiency in attracting FDI
Research by Mr Nguyen (2017) analyzes the role and meaning of building economic zones in Vietnam by region, as well as influencing factors directly related to capital investment from foreign countries Along with that, many research articles about each province and city in Vietnam have made great efforts to improve infrastructure, adjust and supplement a number of preferential policies to encourage investors, Reform administrative procedures through the
"one-stop shop" mechanism, as well as organizing conferences and seminars to promote
13 foreign investment, etc has attracted businesses with foreign direct investment into the province
METHODOLOGY
Research Methods
In this chapter, we will describe in detail the methodologies used to analyze the relationship between PCI and FDI in Vietnam We will apply quantitative research methods to evaluate the impact of PCI on FDI flows into provinces and cities.
Samples and Data
Data on foreign direct investment (FDI) and provincial competitiveness index (PCI) will be sourced from the General Statistics Office of Vietnam (GSO) for the period of 2010-2019 Annual reports published by the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID) will provide the PCI data The control variables, namely Gross Domestic Product (GDP), foreign direct investment (FDI), population, and labor force, will be sourced from the General Statistics Office of Vietnam (GSO).
Due to data availability, this study utilized panel data from 2010 to 2021, encompassing 63 provinces and centrally governed cities in Vietnam This extended time frame enhances the reliability of the analysis by capturing long-term trends and fluctuations Notably, post-2008 global financial crisis, Vietnam experienced an influx of FDI in 2010, despite economic challenges This influx suggests the allure of Vietnam's investment environment, driven by attractive policies, infrastructure development, and a youthful labor force, positioning it favorably in the Southeast Asian investment landscape The study employed the registered capital of FDI inflow as the dependent variable, while the independent variables were represented by PCI component index scores ranging from 1 to 10, reflecting business evaluations of local operations in specific work areas.
1 VCCI:https://vcci.com.vn/
Mean Std.De Min Max
Variables and Regression Models
We will identify FDI as the dependent variable and PCI as the main independent variable In addition, to more comprehensively evaluate the impact of PCI on FDI, we also consider other control variables Specifically, Gross Domestic Product (GDP) is included in the model as a
19 control variable because GDP reflects the size and health of a country’s economy, which can influence foreign investors' investment decisions The proportion of trained workers is also considered as a control variable, based on the observation that a highly skilled workforce will attract FDI by providing quality human resources for investing businesses
Previous studies have shown that GDP and the rate of trained workers have a significant influence on FDI For example, Alfaro et al (2004) in the article “FDI and Economic Growth: The Role of Local Financial Markets” pointed out that GDP is an important factor attracting FDI, while Borensztein et al (1998) in “How Does Foreign Direct Investment Affect Economic Growth?” emphasized the role of the rate of skilled labor through training in enhancing the effectiveness of FDI on economic growth These findings provide the basis for us to include GDP and the rate of trained labor force in the regression model as control variables
The regression model will be built to analyze the impact of PCI and control variables on FDI The Regression method is an essential tool to study the relationship between variables and make predictions in many different fields, especially in diverse economic sectors In economics, Regression Analysis is used to explore the relationship between economic variables such as GDP, inflation, financial growth, revenue, costs, etc This allows researchers and policymakers to make informed decisions about economic, investment and business policy
Log(FDI)I,t = β0 + β1PCIi,t-k + β2GDPi,t-k + β3 LABi,t-k + ei,t-k
(1) PCI : Provincial Competitiveness Index Score
FDI: Foreign Direct Investment registered in various regions (in million USD) i: Respective regions nationwide (i = 1, 2 63) t: Observation year (t 06, 2007 2022) k: Time lag during observation (k=0, 1, 2)
Log: Taken for the variable FDI to reduce data variability
Log(FDI)I,t = β0 + β1 ECi,t-k+ β2 ALi,t-k + β3 TRAi,t-1 + β4 TCsi,t-k + β5 ICsi,t-k + β6 PBi,t-k +β7 PRAi,t- k+ β8 BSPi,t-k + β9LPi,t-k + β10LOi,t-k+ β11GDPi,t-k + β12LABi,t-k + ei,t-k
(12) LAB: Labor Force above 15 years old
FDI: Foreign Direct Investment registered in various regions (in million USD) i: Respective regions nationwide (i = 1, 2 63) t: Observation year (t 10, 2011 2021) k: Time lag during observation (k=0, 1, 2)
Log: Taken for the variable FDI to reduce data variability
Data Analysis Methodology
We will use the statistical software Stata to conduct multivariate linear regression analysis We will test the quantitative and qualitative nature of the data, and apply statistical tests such as FDI test, t-test, and multicollinearity test
With panel data used in research, observations change over both time and space, Ordinary Least Squares (OLS) method with multiple variables is a widely used statistical technique for estimating the relationship between a dependent variable and one or more independent variables The main purpose of OLS is to find the linear regression line where the distance (measured by the square terms) between the actual values and the values predicted by the model is minimized Besides, In consideration of the panel data utilized within this research, which encompasses observations over both time and geographical variations, estimations methods such as Fixed Effects Model (FEM) and Random Effects Model (REM) are often advocated for quantitative studies employing panel data (Khachoo, 2012; Shahriar et al., 2019) The FEM approach explicitly accounts for time-invariant characteristics by eliminating variables that are constant over time and operates under the premise of existing correlation between these fixed factors and the residuals In contrast, the REM posits that there should be no correlation between the independent variables and the error terms, implying that randomness is inherent within the data (Khachoo, 2012) The regression analysis model with panel data on the Stata program estimates the regression coefficients β This is typically done through the method of least squares, where we attempt to minimize the sum of squares of the errors (i.e., the difference between the predicted and actual value of the dependent variable) Performing econometric tests to quantify the impact of the factors, which are the PCI component indices, on attracting FDI to localities throughout the country During the estimation process, we take the lag for the independent variables (lagging k = 1, k = 2 respectively) due to the delayed impact of the independent factors on the dependent factor That means the observed data of the dependent variable FDI attraction in year t will be estimated corresponding to the observed data of the independent variables, which are the PCI component index in previous years, 1 year and 2 year respectively Additionally, the study also examines the impact of the PCI component index on FDI attraction of two groups of localities attracting high and low FDI sources This technique is implemented by accumulating registered FDI sources into localities during the research period, then separating the estimates into 2 groups: group 1 includes 32 localities with total registered FDI capital over 12 years from high to low, and group 2 includes the remaining 31
22 localities This estimate aims to examine the differences and reduce disparities between localities
RESULTS AND DISCUSSION
Results research
With the identified research model, the purpose of this study is to determine and measure the impact of 10 component indexes of PCI on attracting FDI to localities in Vietnam, specifically
63 provinces Initially, the authors used model 1 to evaluate the FDI efficiency of 63 Vietnamese provinces and cities from 2010 to 2021 through the PCI scores of each locality
First of all, consider the F test of the FEM model with the result Prob>F = 0.000 chi2 = 0.0008 < 0.05, showing that hypothesis H0 is rejected and the REM model is appropriate
Figure 4.1 Result of F test (Source: made by author by using Stata)
Next, we perform the Hausman test to select the appropriate model between REM vs FEM with the assumptions: H0: accept the FEM model and H1: accept the REM model Considering the result is Prob > chil2 = 0.0053 < 0.05, the assumption H0 is rejected Therefore, estimation using the REM model will be more optimal than the FEM.Thuy
Figure 4.2 Result of Hausman test (Source: made by author by using Stata)
The estimation is also performed with a lag due to the time-lagged impact of the independent variables on FDI attraction
4.1.1 The effects of PCI on FDI
In this section, we provide our results for the baseline model on the relationship between PCI and FDI of provinces and cities in Vietnam The results are presented in Table 4.1
Following Table 4.1, columns (1)-(3) show the results of the regression (1) using OLS model, columns (4)-(6) report the estimated results using FEM model, and columns (7)-(9) are for REM model
The first estimate shows that in addition to the PCI score, GDP and LAB also have a positive influence on FDI attraction However, the PCI score at lag k=2 has no significant impact on the model
The F test completely satisfies the coefficient P = 0.000 This shows that, with a lag of k=0,1,2, the independent variables and control variables, respectively, explained 36.9%, 37% & 36.1% of the change in FDI attraction to localities Specifically, the findings from the research results are as follows:
First, with the estimation model without lag and lag k=1, provincial competitiveness index, Gross domestic product (GDP) and labor force older than 15 years old (LAB) all have a positive influence on attracting FDI into the locality This means that the greater the province's PCI, GDP and LAB scores, the higher its effectiveness in attracting FDI
Second, at the 2-year lag, the PCI score has coefficient P > |z| = 0.226 > 0.05 shows that this variable has no significant impact on FDI in this model Although the results show that LAB and GDP both have a positive impact, this model is not significant because the PCI score is the main variable
*: statistically significant at the 10% level; **: statistically significant at the 5% level; ***: statistically significant at the 1% level Table 4.1 The effects of PCI on FDI, estimated results in 3 models
(Source: Made by author by using Stata)
Our analysis reveals a positive correlation between independent factors and the dependent variable in three scenarios: no-lag, one-year lag, and two-year lag models This suggests that an increase in these factors is associated with a corresponding increase in the dependent variable, indicating a strong relationship among them However, further research is crucial to fully grasp the nature and dynamics of this relationship.
4.1.2 The relationship between PCI and FDI under the effect of Covid-19
In this section, we provide our results for the baseline model on the relationship between PCI and FDI of provinces and cities in Vietnam under the effect of Covid-19 The results are presented in Table 4.2
Following Table 4.2, columns (1)-(3) show the results in the period 2010-2018, columns (4)-
(6) report the estimated results in the period 2019-2021
Estimate 2, we divide into 2 periods 2010-2018 (before Covid-19) and 2019-2021 (during Covid-19) Because the pandemic is considered a milestone for the Vietnamese economy During these two periods, PCI scores both had a strong impact on FDI attraction with a
27 significant result of 1% Furthermore, the strongest impact on FDI attraction is always the PCI score, in addition, a small part also has an impact from GDP and LAB
*: statistically significant at the 10% level; **: statistically significant at the 5% level; ***: statistically significant at the 1% level Table 4.2 The relationship between PCI and FDI under the effect of Covid-19
(Source: Made by author by using Stata)
In encapsulating the findings, it is noteworthy that the prevailing relationship remained unscathed and retained its positive nature amidst the COVID-19 epoch This underscores the resilience of the research variables, which, despite the adversities engendered by the pandemic, continued to exert a positive impact on the dependent variable This observation not only reinforces the robust correlation among these variables but also underscores their stability in the face of global disruptions
4.1.3 The impacts of different PCI components on FDI
In this section, we provide our results for the baseline model on the impacts of different PCI components on FDI The results are presented in Table 4.3
Following Table 4.3, columns (1)-(3) show the lagging of FDI from 0 to 2 years
Using the OLS method, Model 2 estimates the relationship between the dependent variable and control variables (Christopher, 2002) This is done by minimizing the squared differences between observed and predicted values of the dependent variable, which is assumed to have a linear relationship The results of this analysis are presented in a table.
*: statistically significant at the 10% level; **: statistically significant at the 5% level; ***: statistically significant at the 1% level Table 4.3 The impacts of different PCI components on FDI
(Source: Made by author by using Stata)
Specifically, the findings from the research results are as follows:
Finding 1 - Impact of No-Lag Estimation Model: In the no-lag estimation model, apart from the control variables that exhibit significance, only public performance (PRA), fair competition (PB), and labor training (LP) demonstrate meaningful significance The remaining components do not significantly impact the model This suggests that the efficacy of local governance takes a longer duration to manifest its influence in attracting Foreign Direct Investment (FDI) However, elements of equal competition, dynamism (PRA), and labor training have an immediate impact on registered FDI inflows
Finding 2 - Role of Fair Competition: Fair competition emerges as a significant determinant in attracting registered FDI capital inflows to localities The criteria for fair competition have been incorporated into the Provincial Competitiveness Index (PCI) criteria set since 2013
Policy implications
The study also examines the impact of the PCI component index on FDI attraction of two groups of localities attracting high and low FDI sources This technique is performed by averaging the total direct investment capital at current prices into localities during the research
32 period, then separating the estimates into 2 groups: group 1 includes 16 Localities with total registered FDI capital above average and group 2 includes 47 localities below average This estimate aims to consider differences and reduce disparities between localities
In regard to the research findings, several policy recommendations are made that municipalities can consider while working to improve the provincial competitiveness index in order to encourage the attraction of foreign direct investment (FDI)
Firstly, focus on policies and solutions to improve access to land for investors, including the ability to obtain land to build for businesses and stability during use land and facilitate land transactions with the government
Secondly, the statement would emphasize maintaining bureaucratic complexities and opacity in administrative processes, thereby increasing time costs for businesses It would advocate against transparency initiatives, suggesting that keeping procedures and information confidential would inflate unofficial costs for enterprises Essentially, this perspective would oppose administrative reforms aimed at streamlining processes and enhancing transparency, instead favoring maintaining inefficiencies and barriers that hinder business operations and investment
Thirdly, Create a fair competitive environment for businesses throughout the investment attraction phase and the operational process of business production and trading, particularly instilling confidence among businesses regarding equal treatment between state, private, and FDI sectors
To foster economic growth, enhancing support services for investment enterprises, including both private and public service providers, is paramount Regions with lower per capita incomes (PCI) face a critical need to augment the volume and caliber of services offered to businesses These services should encompass a wide range of critical areas to facilitate business operations, foster innovation, and attract investment.
Lastly, Local leadership should demonstrate proactive, decisive, and resolute guidance, accompanying FDI enterprises to promptly address challenges encountered during project implementation and business investment.
CONCLUSION AND RECOMMENDATIONS
The study examines the impact of PCI on FDI Research in Vietnam in the period 2010 - 2021 Using a sample including 756 observations over 12 years of 10 component variables of Vietnam PCI, I find that to measure the level of influence on FDI, we use data on 10 variables as mentioned above When examining the impact of each aspect of the variables on controlling for variations, we present evidence that Business Support Policies are associated with the strongest impact on image holding to FDI in Vietnam
Besides economic factors, policy issuance and local government administration have a strong impact on the investment decisions of FDI enterprises Research results show that Business Support Policy is the factor that has the strongest impact on registered FDI capital flows into localities Besides, minimizing informal costs, Labor Policy and increasing leadership dynamism also have a significant impact on attracting FDI capital
The study has not addressed whether FDI enterprises consult the Provincial Competitiveness Index (PCI) when deciding to invest in localities However, it is certain that effective local governance, as reflected by increased scores in the criteria, will strongly incentivize FDI enterprises to increase their investment capital in those localities
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