Summary of phd thesis in economics foreign direct investment towards sustainable development in the northern key economic region

HO CHI MINH NATIONAL ACADEMY OF POLITICS TRAN THI TUYET LAN FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT IN THE NORTHERN KEY ECONOMIC REGION Major: Development economics Code: 62 31 05 01 SUMMARY OF PhD THESIS IN ECONOMICS HANOI - 2014 The thesis was finished at the Ho Chi Minh National Academy of Politics Academic Supervisors: Assoc Prof Dr Pham Thi Khanh Dr Nguyen Tu Judge 1: Judge 2: Judge 3: The thesis will be defended in front of a panel of examining judges at the Ho Chi Minh National Academy of Politics At…,……., 2014 The thesis can be found for study at the National Library and the Library of Ho Chi Minh National Academy of Politics INTRODUCTION The necessity of the research The Northern key economic region (NKER) is one of national key economic regions It is constructed and developed with the aim of maximizing the comparative advantages of the region, creating economic zones that have motivation nature, pervasive influence and capacity to help other regions to develop With its own advantages, in the past few years, NKER has been one of the two national key economic regions that take the lead in attracting FDI in term of the number of project and size of investment FDI business sector in NKER has positive contribution to the region’s economic-social growth and development However, the result of FDI attracting and the operation of the FDI business sector in NKER have shown negative effects which badly influence the region’s sustainable development on aspects: economy, society and environmental protection… The phenomenon like transfer pricing and tax evasion occurring in FDI businesses and causing tax losses to the Government are quite popular and tend to keep increasing The phenomena like the fact that labor’s material and spiritual life hasn’t received satisfactory attention; FDI businesses’ awareness of complying with the Law on Environment Protection is not good enough, seen as the neglect of environmental development and the violation of Law on Environment Protection, have done a big deal to the ecological environment and health of the population in the area Those negative effects are current enormous challenges to the sustainable development of NKER With the above practical issues, further clarifications on FDI rationale towards sustainable development; assessing FDI reality towards sustainable development in NKER and seeking for solutions for FDI attracting and FDI businesses’ management in order to preserve sustainable development of NKER on the three aspects: economy, society and environment, are urgent requirements With the aim of meeting the requirements, the subject “Foreign direct investment towards sustainable development in the Nothern key economic region” was chosen for the research Purposes and tasks of the research - Research purposes: The thesis recommends main orientations and solutions in order to promote foreign direct investment towards sustainable development in NKER in the future - Research tasks: (i) Systematizing and clarifying the rationale of foreign direct investment towards sustainable development of NKER; (ii) Learning the experiences of some Asian Countries about foreign direct investment towards sustainable development of the key economic regions; (iii) Analyzing and assessing FDI reality towards sustainable development in NKER, which includes achievements, limitations and causes of limitations, weaknesses; (iv) Suggesting main orientations and solutions with the aim of promoting FDI towards sustainable development in NKER in the future Subject and scope of the research - Research subject: The research subject of the thesis is foreign direct investment towards sustainable development in NKER - Research scope: + In term of content: Foreign direct investment is related to two other subjects: foreign investor and host country The purpose of foreign investors is to gain profit while, to the host country, it is economic-social benefits that FDI provides For that reason, in the perspective of the host countries, foreign direct investment towards sustainable development is how the host countries take benefits from FDI while maintaining sustainable development of their countries, regions or localities By that meaning, within the research scope of the thesis, it will studies the impact of foreign direct investment on sustainable development of NKER on three aspects: economy, society, and environment There in, (i) the researched investment concept mentioned in the thesis is understood as the investment activities, investment to gain profits; (ii) the thesis doesn’t include researches on sustainable development within the area of FDI businesses, but researches on the impacts of FDI on the host countries, NKER particularly; (iii) the role of the Government in managing FDI towards sustainable development is only considered in moderation within influential factors, causes of limitations of FDI towards sustainable development; (iv) sustainable development are defined as targets of FDI managers, not included in the dissertation research; (v) subjects that take part in deciding the orientations of foreign direct investment towards sustainable development in NKER include the Central Government, local authorities, FDI businesses and social organizations + In term of space: The thesis studies FDI towards sustainable development in NKER, on the area of seven provinces and cities under the Central Government, such as Hanoi, Hai Phong, Hai Duong, Hung Yen, Quang Ninh, Bac Ninh and Vinh Phuc + In term of research time: The thesis studies foreign direct investment towards sustainable development in NKER from 2003 to 2011 Research methods and data sources - Research methods: The thesis uses research methods for economic science, especially focuses on the following methods: methods for systemizing, methods for analyzing and summarizing, statistical and comparative methods; inductive and deductive methods; expert methods - Data sources: Data sources used in the thesis is mainly secondary ones including: (i) Statistics of the General Statistic Office and Statistics Bureaus of provinces, cities in NKER; (ii) Reported data of Ministries: Ministry of Planning and Investment, Ministry of Labor - Invalids and Social Affairs, Ministry of Natural Resources and Environment, and Departments of provinces and cities; (iii) Surveyed data of relevant research institutes and research results published in Seminars, articles published in specialized journals New contributions of the thesis - On theoretical aspects: (i) Develop concepts, characteristics and specify requirements for FDI towards sustainable development of key economic regions; (ii) Bring out elements influencing FDI towards sustainable development of key economic regions; (iii) Specify the content and criteria of FDI towards sustainable development of key economic regions on three aspects: economy, society, and environment - On practical aspects: (i) Clarify the reality of FDI towards sustainable development in NKER, its limitations and causes; (ii) Suggest main orientations and solutions for promoting FDI towards sustainable development of NKER in the future Structure of the thesis A part from the introduction, conclusion, list of reference and appendix, the content of thesis are presented in chapters and 10 sections Chapter OVERVIEW ON RESEARCH STATUS RELATED TO FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT IN NORTHERN KEY ECONOMIC REGION 1.1 Research status of foreign direct investment towards sustainable development of foreign authors The research works of foreign authors are reviewed towards: researches on how FDI affects the economic growth; the ability to accumulate capital for the economy; scientific and technological developments; impacts on international trade; impacts on labor, employments and human resources Most of the researches support the idea that FDI has good effects on the mentioned issues There are also researches showing that FDI only performs positive effects on economic growth, social and environmental developments with specific conditions about infrastructure, the quality of human resources, political stability, and the perfection of market institutions 1.2 Research status of foreign direct investment towards sustainable development for key economic regions of domestic authors 1.2.1 Research status of the impacts of FDI on economic growth and development It can be confirmed that researches on FDI in Vietnam are various and diversified In most of the researches, when studying on the relationship between FDI and economic developments, many domestic scholars stated that FDI had positive effects on economic growth, such as: the fact FDI not only makes up for the lack of investment, but also has important meanings in innovating technologies, enhancing the level of management, promoting marketing activities, increasing the export manufacture ability of the host countries… Besides, there are also negative effects, downsides, adverse effects of FDI on economic developments, especially negative effects of FDI on the environment, which is mentioned in many researches 1.2.2 Research status of foreign direct investment towards sustainable development and sustainable developments of NKER - The group of researches related to sustainable development of NKER Nowadays, in Vietnam, there have been researches related to sustainable development of key economic regions in general and sustainable development of NKER in particular The content of researches on sustainable development of key economic regions is also pretty plentiful theoretically and practically On theoretical aspects: there are some researches referring to the concepts of sustainable development of key economic regions, criteria of sustainable development of key economic regions, the experience on sustainable development of key economic regions, and lessons for Vietnam in sustainable development of key economic regions On practical aspects: there are also analyses and assessments of policies for sustainable development of key economic regions; discoveries and analyses of downsides, unsustainable aspects of sustainable development of Vietnamese key economic regions; indicating causes and suggesting solutions that are relatively comprehensive for sustainable development of key economic regions - The group of researches related to foreign direct investment towards sustainable development This is the group of researches that are directly relevant to FDI and studied on the FDI in the most comprehensive way about sustainable development Most of the researches assessing positive and negative effects of FDI on the economy are analyzed on the three aspects, the three backbones of sustainable development which are economic development, social development and environmental protection 1.2.3 General assessment of published works about FDI towards sustainable development and theory and practical deficiency needing further researches 1.2.3.1 General assessment of published works about FDI towards sustainable development First, researches all focus on clarifying and asserting the fact that FDI has effect on economic growth and economic-social developments Second, most of the researches stay at assessing effects of FDI on specific aspects of sustainable development So far, there has been rarely work that provides comprehensive, profound and methodical researches on foreign direct investment towards sustainable development on the three aspects: economy, society and environment 1.2.3.2 The dissertation’s theoretical and practical deficiencies that need further researches - On theoretical aspects: So far, there has been rarely work that provides profound researches and systematic explanation about foreign direct investment towards sustainable development of key economic regions - On practical aspects: Although there are work, articles providing researches on effects of FDI on sustainable development, most published scientific works are focused on analyzing, assessing FDI’s effects in general and FDI’s effects on the target of sustainable development in particular in large scale – national level There are rarely works examining the effects of FDI on sustainable development of a specific economic area, especially NKER Chapter THEORETICAL FOUNDATION AND REAL SITUATIONS OF FOREIGN DIRECT INVESTMENT TOWARDS THE SUSTAINABLE DEVELOPMENT IN THE KEY ECONOMIC REGION 2.1 Concept, characteristics and requirements for foreign direct investment towards the sustainable development in key economic regions 2.1.1 The concept of foreign direct investment and foreign direct investment towards the sustainable development in key economic regions 2.1.1.1 The concept of foreign direct investment Foreign direct investment is the act of foreign investors to put their loan or any property into another country so that they can have the right to possess and control on an entity long operating in that country for the target of profits 2.1.1.2 The concept of foreign direct investment towards the sustainable development in key economic regions The dissertation author gives the concept of foreign direct investment towards the sustainable development in key economic regions as below, “Foreign direct investment towards sustainable development in key economic region is investment activity of foreign organizations and individuals in key economic region of another country, which meets planning and developing requirements of that region; makes positive impact on the development of the region to ensure harmonious and rational combination among economic development, social development and environmental protection not only for the key region, but also spillovers to other regions both in the present and in the future” 2.1.2 Characteristics of foreign direct investment towards the sustainable development in key economic regions Firstly, foreign direct investment towards the sustainable development in key economic regions has subjective features of invested country, in general, and invested key economic regions, in particular; Secondly, foreign direct investment towards the sustainable development in key economic regions includes the targets of exploiting and utilizing resources effectively; Thirdly, foreign direct investment towards the sustainable development in key economic regions always aims at the harmonious and balanced development among economic development, social development, and environmental protection; Fourthly, foreign direct investment towards the sustainable development in key economic regions always appreciate the quality over the quantity of FDI; Fifthly, foreign direct investment towards the sustainable development in key economic regions not only end up considering and evaluating the process of foreign direct investment at the outset, that is the stage of getting licensed , but also review business and production activities of FDI enterprises; Sixthly, foreign direct investment towards the sustainable development in key economic regions have mutual interaction and support between foreign investors and the key economic regions 2.1.3 Requirements for foreign direct investment towards the sustainable development in key economic regions Firstly, foreign direct investment towards the sustainable development in key economic regions must be based on the three main development backbone, which are the sustainable development of economy, society, and environment; Secondly, foreign direct investment towards the sustainable development in key economic regions has to produce pervasive effects to other economic areas; Thirdly, foreign direct investment towards the sustainable development in key economic regions must develop potentials and advantages of the key economic regions themselves and be appropriate particularly to the developmental orientation of each key economic region and generally to the entire economy; Fourthly, foreign direct investment towards the sustainable development in key economic regions must guarantee the harmony of benefits for both overseas investors and the key economic regions; Fifthly, foreign direct investment towards the sustainable development in key economic regions cannot be an independent activity, but need the orientation and guidance from the State, the awareness to comply with laws from FDI enterprises, and the active participation from communities of residents and social organizations; Sixthly, foreign direct investment towards the sustainable development in key economic regions must be coupled with the target of sustainable development of the whole country and with the common movement of the modern world 2.2 Content, evaluation standards, and main factors affecting foreign direct investment towards the sustainable development in key economic regions 2.2.1 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions 2.2.1.1 Content and evaluation standards of foreign direct investment towards the sustainable development in key economic regions about economy - Foreign direct investment positively contributes to foster the economic growth of the key economic regions: including evaluation standards: the 16 million in the period from 2003 to 2011, reaching 33.3% compared with registered FDI capital at the same period, an annual average of $1,3 million/year - About the scale of FDI projects: The scale of FDI projects in the Northern key economic region from 2003 to July 2012 is mainly small and medium with an average rate of $11 million/project (correspondingly $12 million/project in the South and $29 million/project in the Central) 3.2.1.2 About the structure of foreign direct investment - About FDI structure classified into industries and fields From 2003 to 7/2012, FDI structure classified into industry in the Northern key economic region was focused chiefly on the field of industry and construction, making up to 58.22% the total number of projects and 62.14% the total registered capital in the area The field of service attracted 1,332 FDI projects, taking 41.12% the total number of projects and 37.57% the total registered capital The combination field of agriculture, forestry, and fishery account for just 0.64% the total number of projects and 0.28% the total registered capital - About FDI structure classified into forms of investment From 2003 to 7/2012, FDI in the Northern key economic region was primarily performed by the form of 100% foreign investment with 2,537 projects, accounting for 78.33% the total number of projects and 64.63% the total registered capital There were 573 joint venture projects, making up 17.69% the total number of projects and 18.89% the total registered capital The remainders were of other forms like Business cooperation contracts (2 projects), BOT, BT, and BTO Contracts (48 projects), Joint stock Company (78 projects), and subsidiary-parent Company (01 project) - About FDI structure divided into investing partners There were 62 countries and dominical regions having FDI projects in the Northern key economic region during 2003-7/2012 Among these countries, Asian countries had 2,584 projects, taking 79.77% the total number of projects and 69.12% the total registered capital Of 12 nations and regions having over $1 million of total registered capital, countries representing for European were the Netherlands (ranked 5th) and Luxembourg (ranked 9th); and the United States (ranked 8th about the total registered capital) represented for countries from Americas - About FDI structure divided into invested areas 17 Foreign direct investment in the Northern key economic region was concentrated mainly on Ha Noi with 1,991 projects, accounting for 61.46% the total number of projects and 41.89% the total registered capital Projects were least invested in Quang Ninh, which had a humble number of 96 projects, making up 0.29% the total numbers of projects and 11.43% the total registered capital 3.2.2 The reality of foreign direct investment towards the sustainable development in the Northern key economic region from 2003 to 2011 3.2.2.1 The real situation of foreign direct investment towards the sustainable development in the Northern key economic region - FDI area’s contribution to the economic growth of the Northern key economic region: The contribution rate of this area to the economic growth of the Northern key economic region in the period 2006-2011 rose continuously over years and was comparatively stable To be totally counted in the period, GDP of FDI area averaged 17.38% compared with the GDP of the region - FDI area’s contribution to the total socially investing capital of the Northern key economic region: The capital of FDI area contributed to the total socially investing capital of the Northern key economic region tends to rise over years and makes up a significant rate in the total investing capital of the region for society During the period 2003-2010, FDI capital kept certain at an average contribution of about 12% in comparison with the total socially investing capital of the region The results show that the contribution rate of inland capital area to total socially investing capital in the Northern key economic region was quite high, accounting for 86.83% - FDI area’s contribution to local budget in the Northern key economic region: FDI area has greatly contributed to local budget of the Northern key economic region in that last years To be totally counted during 2003-2010, the payment rate for budget of FDI area compared with the total budget of the area was 15.4%/year - FDI area’s contribution to export of the Northern key economic region: Foreign direct investment in the Northern key economic region has good effect on export activity of the area Generally from 2003 to 2011, the export value rate/FDI implemented capital always rose in almost all provinces and cities in the region - FDI area’s contribution to the economic restructuring of the Northern key economic region 18 + During the last years, FDI area has made considerable contribution to the process of restructuring economic industries in the Northern key economic region towards raising the density of production value in industrial field The density of industrial production value of FDI area was increasing and made up 40.62% compared with the value of industrial production in the Northern key economic region in 2006 One after another, the figure was 42.69% (2007); 44.24% (2008); 43.36% (2009); 49.11% (2010); and 57.38% (2011) Compared with the general production value of the Northern key economic region, the value of industrial production of FDI area took 23.9% (2003); 28.08% (2008); and the record rate of 40.18% (2011) + FDI contributes to transfer the component structure in the Northern key economic region: The structure of industrial production value in the Northern key economic region during the period 2006-2011 had moved towards the direction of raising the density of industrial production value of FDI area FDI area’s industrial production value always held a higher density than that of State-run businesses and private companies in the region 3.2.2.2 The real situation of foreign direct investment towards the sustainable development of society in the Northern key economic region - About the capability to produce employment and make contribution to foster the transference of labor structure in the Northern key economic region towards the direction of industrialization + The capability to create employment in FDI area: FDI area of the Northern key economic region has continuously produced jobs for workers over years In the period of 2003-2010, FDI area of the Northern key economic region has 2,047,044 laborers having jobs, with an average of 255,880 workers/year The rising rate of labor working in FDI area averaged 24%/year during this region + The contribution of FDI area in promoting the transference of labor structure: Of total laborers currently working in FDI area, industrial employment rapidly rises and makes up the highest density If the number of workers having jobs in industrial field in FDI area of the Northern key economic region was 78,222 in 2003, taking 77,26% the total number of laborers in FDI area in 2003, the number of industrial working laborers in 2006 was 185,623, making up 89.92%, and 354,138 in 2010 with 79.86% correspondingly - About raising the quality of labor source in FDI enterprises in the Northern key economic region 19 + Workers’ salary and income: The average salary and income of laborers in FDI area has been improved in the last few years, but they remains lower than those of workers working for private businesses and joint stock companies Additionally, there is a definite difference in the salary of between those who have jobs in enterprises with FDI capital and those of private businesses, between job positions, between managing employees and workers without training in the same kinds of enterprises with FDI capital + Working conditions of laborers: The reality of working extra shift, extra hours happens in almost all businesses with FDI capital in general and enterprises with FDI capital in the Northern key economic region, in particular, especially in companies producing textile and garment, leather shoes, fishery processing, and industrial production FDI enterprises have not carried out well regulations on complying with hygiene safety and labor protection + Physical and spiritual life of laborers Although workers’ salary and incomes in enterprises with FDI capital has considerably increased in recent years, they are still lower than those of other types of businesses With such low income and high working intensity, spiritual life of workers in businesses with FDI is very poor and deficient They not have time to take rest, entertain, and take part in other social activities + Training and raising professional level for workers Laborers after recruited to work in companies with FDI capital have got supplementary training, chances to access, learn, and acquire new technology and technique as well as methods to operate businesses and industrial working manners, little by little contributing to enhance levels of professional knowledge and skills - About effects of foreign direct investment on the situation of security and order in the Northern key economic region + Enterprises with FDI capital have not strictly performed labor laws and ensured laborers’ rights, generating social conflicts and leading series of strikes and go-slows + Happenings of violating bylaws of foreign employees’ entrance and exit still exist in such forms as: illegally enter the country, wrongly work 20 compared with entrance purposes, excessively stay, dishonestly declare to get visa, disorderly cause insecurity at localities 3.2.2.3 The reality of foreign direct investment towards the sustainable development of environment in the Northern key economic region - Situation of carrying out laws on environmental protection: amongst businesses with FDI in the area, Japanese enterprises often better on the tasks of protecting environment Most companies with FDI offending laws on environmental protection are businesses with small and average size from Taiwan, South Korea, and China Vinh Phuc Department of Natural Resources and Environment inspected and verified enterprises with FDI in 2011 and found 14 businesses with violating acts on environmental protection Authority agencies fined these businesses and with the suggestion of VND 528.75 million - Situation of investing in environmental protection of enterprises with FDI capital: Most companies with FDI capital in the border of Vinh Phuc Province have actively applied measures of processing waste materials before dismissing it into environment and put money into changing new technology in production and waste processing in order to reduce environmental pollution such as: Vietnam Honda Company, Vietnam Toyota Company, Vietnam Exedy Co., Ltd, Vietnam Meisei Co., Ltd (Vinh Phuc), and so on - The level of using technology in FDI projects: the level of technology utilized in FDI projects is also varied in different industries and professions The advanced level of technology in field of processing agriculture, forestry, and food products is backward; the other fields (mechanics, building material production, electricity and electronics, textile and garment, leather shoes, and paper production; other fields) only reach medium level of technology - Bad effects of FDI area on sustainable development and environment in the Northern key economic region: The violations of laws on environmental protection of FDI area in the Northern key economic region, causing environmental pollution and affecting production activities, include: sewage containing pollutants of Vietnam Nissan brake production Company, Quang Khai industrial park, Yen Binh Prime joint stock Company; non-processing wastewater with the content of Chrome 6, the most toxic among metals (coupled with Asen and Mercury) found in Tungkuang industry joint stock Company (in Hai Duong); smoke, dust, and exhaust of Chifon Cement Company in an incident occurring in 2010 in Hai Phong 21 3.3 General evaluation of foreign direct investment towards the sustainable development in the Northern key economic region 3.3.1 Achievement - About economy: (i) FDI investment structure is suitable to the country’s policy of general economic structural movement towards increasing the density of industry and service field; (ii) FDI investment structure according to investing partners also has good changes with the more and more appearance of countries around the world investing in the area, not few of which are overseas investors with potentials of both finance and technology; (iii) Foreign direct investment in the Northern key economic region has made contribution to supplement capital for total social investment, playing important role in export and raising local budget incomings in the Northern key economic region - About society: (i) FDI area has produced employment in the Northern key economic region, greatly impact the transference of labor structure towards industrialization and modernization; (ii) some Vietnamese businesses producing supplementary products or distributing supplementary products are also formed; (iii) modern managing methods of some FDI enterprises like Honda, Toyota, or Ford Company have clear effect in imparting advanced management to Vietnamese labor - About environment: Most FDI enterprises in the Northern key economic region are aware of complying with laws on environmental protection; businesses have actively put money into tasks of protecting environment, limiting bad influences on environment 3.3.2 Restrictions of FDI towards the sustainable development in key economic regions and its causes 3.3.2.1 Restrictions - In economic field: (i) Investment structure based on industries of FDI area is still imbalanced and inappropriate to the policy of encouraging and favoring the development of business and field; (ii) FDI contribution in the Northern key economic region to the economic growth is incompatible with potentials Technology used in FDI companies in the Northern key economic region remains low and average, even backward in some cases; there exist phenomenon of pricing transfer and tax evasion in FDI enterprises in the Northern key economic region, causing losses to state budget and difficulties to the task of managing tax in FDI companies 22 - In social field: Jobs created in FDI area of the Northern key economic region is incompatible; (ii) monthly average income of workers does not match with the time and intensity of working; (iii) Physical and spiritual life of laborers deficient, and the quality of life is poor; (iv) Labor conflicts and strikes tend to increasingly go up, influencing order and social security of the local area - In environmental field: (i) the assignment of protecting environment in businesses with FDI capital in the Northern key economic region is not satisfactorily concerned by investors; (ii) the occurrence of offending laws on environmental protection is quite popular in almost all provinces and cities in the area; (iii) some overseas investors seem to look down on people’s health and living habitat of Vietnam, again and again breaking regulations on environmental protection, making residents’ surroundings seriously worse regardless of investigation, warning, and punishment of government of different levels in the Northern key economic region 3.3.2.2 Causes of restrictions Firslty, the legal system and polices in regard to foreign direct investment continue overlapping, laking of synchronicity and unification; Secondly, the task of making planning of the Northern key economic region is largely limited, not effectively meeting requirements for the sustainable development of the area and failing to offer strategies to draw FDI towards the sustainable development; Thirdly, the management task of the State on foreign direct investment is problematic; Fourthly, the quality of labor source of the Northern key economic region is restricted, and labor structure classified into business remain rational; Fifthly, the technical infrastructure structure in the Northern key economic region is poor and limited; Sixthly, complementary industries in the Northern key economic region are not developed well to ensure FDI towards the sustainable development 23 Chapter ORIENTATION AND MAJOR SOLUTIONS FOR PROMOTING FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT IN THE NORTHERN KEY ECONOMIC REGION 4.1 Orientations for foreign direct investment towards sustainable development in the Northern key economic region 4.1.1 Foundation for formation of orientation for foreign direct investment towards sustainable development in the Northern key economic region 4.1.1.1 Domestic and international background affecting foreign direct investment towards sustainable development in the Northern key economic region In the current period and the next years, domestic situation and international context create the country in general and the Northern key economic region in particular big strengths and opportunities, together with extreme weaknesses and threats in performing objectives of social and economic development and protection of the independence, sovereignty, unification and territorial integrity during the strategic period In addition, it offers threats for Vietnam and the Northern key economic region in orienting attraction and management of FDI operations to guarantee objectives of sustainable development 4.1.1.2 Objectives of social and economic development in the Northern key economic region during 2011 - 2020 Economic, social and environmental targets of the Northern key economic region in the period of 2011-2020 are identified based on Decision No 145/QĐ-TTg on August 13rd, 2004 about Major orientation for social and economic development in the Northern key economic region until 2010 and vision until 2020, which is foundation for formation of FDI orientation towards sustainable development in the Northern key economic region until 2020 4.1.2 Orientation for foreign direct investment towards sustainable development in the Northern key economic region until 2020 First, to renew thought on FDI attraction to the Northern key economic region towards focusing on quality of FDI inflows; Second, to enhance coordination of strategy establishment to attract and use effective FDI inflows; Third, to orient attraction of FDI capital from countries with source technology such as U.S., Europe and Japan to the Northern key economic 24 region to take a short-cut some technology sectors; Fourth, for enterprises in the area, to be necessary to take advantages of benefits from investment attraction of multinational companies and large economic corporations by building development strategies to participate in global value chains of companies in the world market step by step; Fifth, direct FDI inflows in the area to industries, sectors with potential and development advantages such as industry, services, commerce; Sixth, to coordinate between investment promotion agencies, trade promotion agencies and tourism promotion agencies of the Government and local organizations in the area in a more close and harmonious way 4.2 Major solutions for enhancing foreign direct investment towards sustainable development in the Northern key economic region until 2020 4.2.1 Group of solutions from Central State 4.2.1.1 Solutions for continuing to renew, complete legal systems and policies related to FDI operations towards sustainable development First, to complete management mechanism and legal systems, policies suitable for commitments with WTO; Second, to complete the legal documents, to guide implementation of Investment Law promulgated in 2005; Third, to consolidate apparatus and improve capacity of civil servants to enforce law and systems of investment encouragement policies in a effective way 4.2.1.2 Establishment of FDI strategies and plans of FDI attraction for the country towards sustainable development FDI strategies and plans must be in a master plan of the resources of the country, associate with other domestic and foreign resources to promote integrated strength, improve national competitiveness in the context of extensive integration and international competitiveness The relevant strategies must be concretized by sectors, territories suitable for the sector plans and major products as well as international commitments and requirements of investors Based on FDI plans, it is necessary to build List of countries attracting FDI, projects by important industry, sector and the specific technical parameters to provide basic information for investors interested in, in which projects necessary to apply form of joint venture as a matter of priority should be focused 4.2.1.3 Improvement of validity and effect of State management for foreign direct investment operations 25 First, to innovate and organize State management apparatus towardss compactness; Second, to review and assess the implementation results of State decentralization in general and foreign investment in particular; Third, to invest in additional funds and improve physical facilities for ministries, departments, and local authorities to meet requirements of investment management operations; Fourth, to enhance investment in training, fostering State management staffs 4.2.2 Group of solutions from local government in the Northern key economic region 4.2.2.1 Solutions for improving quality of development spatial planning in the Northern key economic region towards sustainable development First, to change perceptions, methods, make spatial planning for social and economic development for the Northern key economic area; Second, to build spatial planning for social and economic development for the Northern key economic area; Third, to invest funds in research institutes with professional capacity, function of making planning for social and economic development; Fourth, to consider, evaluate, select spatial planning for social and economic development and other types of specialized planning of the Northern key economic region 4.2.2.2 Solutions for FDI attraction to the Northern key economic region associated with sustainable development goals First, to understand the positive and negative impacts of FDI on economy in a clear and united way; Second, to promulgate and execute reasonable investment encouragement policies to reach socio-economic efficiency; Third, to apply investment encouragement policies flexibly to direct foreign investors to the key economic sectors of the area; Fourth, to enhance innovation of investment promotion 4.2.2.3 Solutions for coordination between ministries and agencies and local in the Northern key economic region First, for provinces and cities directly under the central, to be necessary to coordinate with concerned ministries and agencies and local in the region on the initiative; Second, to supplement, change planning opportunely to adapt to new conditions; Third, to make spatial planning for social and economic development and other types of planning of the area; Fourth, to consolidate steering committee for development coordination of the Northern key economic region towards compactness 4.2.2.4 Solutions for improving management of FDI enterprises in the Northern key economic region 26 First, to improve information for foreign investors to approach, update the current guidelines and policies of our country; Second, to organize interdisciplinary management agencies instead of the current FDI project management board; Third, to review and supplement the current policies, regulations, management mechanisms of FDI enterprises operating in the area to create a synchronous system of policies suitable for movement of development of enterprise in the region, general management mechanism of the country and international practice; Fourth, to encourage and make appreciate supporting policies for FDI enterprises, to facilitate the political and social organizations in the enterprises, which is to gather and motivate employees to properly implement commitments in the labor contract; to build consentaneous and long relationship between labors and business owners 4.2.2.5 Solutions for improving human resource quality in the Northern key economic region to meet FDI requirements towards sustainable development First, to build plans of human resource development towards strengthening connection of provinces in the Northern key economic region associated with the requirements and strategic objectives of social and economic development of the area; Second, to build policy framework of human resource development of the Northern key economic region; Third, to enhance investment in education – training at all educational levels to meet increasing requirements of human resource quantity and quality, requirements of foreign investors 4.2.2.6 Solutions for developing supporting industries First, to promote and create an environment for enterprises in the region to participate in the supporting industry development; Second, to encourage foreign investment capital for the supporting industries, especially industries and sectors without conditions and capacity for implementation; Third, to enhance link among enterprises in developing the supporting industries; Fourth, to develop human resource for the supporting industries 4.2.2.7 Solutions for building, improving economic - social infrastructure towards modern to attract foreign investors First, to focus all resources of investment capital on building synchronous technical infrastructure system with ability to connect local in the area and the Northern key economic region with other locals in the country, ensuring convenient circulation with the world and the area; Second, to attach importance to increase of additional investment capital sources by public-private partnership method (PPP), to use resources on site 27 to accelerate the level of synchronization, modernization of technical infrastructure systems; Third, to coordinate, build and improve quality of road traffic structure; Fourth, to be interested in system of schools, hospitals, health centers, cultural centers, amusement parks, cultural and tourism works, residential areas, urban areas, etc, in a comprehensive way to attract foreign investors, especially when they intend to make a long-term business in the area 28 CONCLUSION Foreign direct investment towards sustainable development in key economic regions is investment activity of foreign organizations and individuals in key economic regions of another country, which meets planning and developing requirements of that region; makes positive impact on the development of the region to ensure harmonious and rational combination among economic development, social development and environmental protection not only for the key region, but also spillovers to other regions both in the present and in the future NKER is one of national key economic regions that provide potentials and advantages for attracting FDI In the past few years, NKER and the Southern key economic region are the two national economic regions that attract the most number of FDI projects in comparison to other economic region of the nation FDI sectors of the region has taken an important part in promoting economic growth, restructuring the region’s economy towards industrialization and modernization, creating jobs, increasing export turnover, and step by step expanding the region’s export market Whereby, NKER’s role of a leader and motivation in developing economy is confirmed gradually However, a part from positive effects, the operation of FDI sectors in NKER also raises obstacles for the region’s sustainable development Bad effects of FDI sectors on the area have been shown in three aspects: economy, society and environment They are transfer pricing and tax evasion which cause losses to the state budget; the facts like created jobs are insufficient, average monthly incomes of workers in FDI enterprises are not commensurate with work intensity, workers have poor material and spiritual life, labor disputes and strikes tend to increase in FDI businesses, which affects the area’s order and security Law violations are quite popular in FDI businesses, which cause bad effects on the environment and the health of community The causes of the mentioned limitations are: First, law systems and policies related to foreign direct investment are overlapped, deficient in synchronism and consistency; Second, planning about NKER is still limited and not really as efficient as it is supposed to be to meet the requirements of the area’s sustainable development; it fails to develop strategies for attracting FDI towards sustainable development; Third, the Government’s FDI management activities are insufficient; Fourth, the quality of NKER’s human resources is limited; the structure of sector employment still has unreasonable 29 factors; Fifth, the infrastructure is limited and poor; Sixth, supporting industries in NKER are not developed enough to lead FDI towards sustainable development To overcome limitations, weaknesses, and reduce negative effects of FDI on sustainable development of NKER, it is necessary to implement two main solutions comprehensively and effectively with specific solutions including: First, the group of solutions suggested by the Central Government: Keep on innovating and completing law systems and policies related to FDI’s operations towards sustainable developments; Develop FDI strategies and projects for attracting FDI towards sustainable developments; Improve the effects and efficiency of the Government’s management over the activities of foreign direct investment Second, the group of solutions suggested by NKER authorities: Improve the quality of planning on space for economic developments of NKER towards sustainable development; Attract FDI into NKER with the aim of sustainable development; Have cooperation among ministries, branches and localities in NKER; Strengthen management over FDI businesses operating in NKER; Increase the quality of NKER’s human resources in order to meet the requirements of FDI towards sustainable development; Develop supporting industries; Build and upgrade economic-social infrastructure in a modern way to attract foreign investors The two groups of solutions require flexible and harmonious management activities from the Central Government to local authorities However, in the trend of promoting the decentralization for managing investment activities, it is necessary to focus on strengthening coordination and management capacity for the local governments, especially the provincial ones./ THE LIST OF PUBLISHED SCIENTIFIC WORKS RELATED TO THE SUBJECT OF THE DISSERTATION Tran Thi Tuyet Lan (2008), “Solving job for farmers having their lands reclaimed in Vinh Phuc province”, Journal of Labor and Social Affairs, no 336, pages 39-42 Tran Thi Tuyet Lan (2008) “The current relationship between salary and economic growth in Vietnam”, Journal for Labor and Social Affairs, no 343+344, pages 69-71 Tran Thi Tuyet Lan (2009), “The basic solutions for Vinh Phuc province to attract foreign direct investment towards sustainable development”, Asia-Pacific Journal, no 264-265, pages 38-45 Tran Thi Tuyet Lan (2012), “Solutions to improve the quality of economic space planning for Northern key economic region in order to attract foreign direct investment towards sustainable development”, Asian-Pacific Journal, no 384 Tran Thi Tuyet Lan (2012), “Environmental issues of FDI businesses in Vinh Phuc province – Solution orientations”, State Management Magazine, no 203 ... development in the Northern key economic region 3.1.2.1 Potentials and advantages to foreign direct investment towards the sustainable development in the Northern key economic region The Northern key economic. .. direct investment towards the sustainable development in the Northern key economic region 3.1.1 The generalization of formation and development process of the Northern key economic region The Northern. .. foreign direct investment towards the sustainable development in key economic regions 2.1.1 The concept of foreign direct investment and foreign direct investment towards the sustainable development