impacts of foreign direct investment (fdi) on restructure of exports in the northern coastal region of vietnam

SOUTHERN LUZON STATE UNIVERSITY, THE PHILIPPINES IN COLLABORATION WITH THAI NGUYEN UNIVERSITY, SOCIALIST REPUBLIC OF VIETNAM _ DISSERTATION ABSTRACT IMPACTS OF FOREIGN DIRECT INVESTMENT (FDI) ON RESTRUCTURE OF EXPORTS IN THE NORTHERN COASTAL REGION OF VIETNAM DOCTOR OF BUSINESS ADMINISTRATION BY DBA Candidate: NGUYEN THIEN SU (SUNT) Scientific Adviser: Dr TRAN DAI NGHIA July, 2013 CHAPTER I: INTRODUCTION 1.1 Background of study: The study of the impacts of FDI on restructuring exports in the Northern Coastal Region of Vietnam will be expected to have a significant contribution theoretically and practically The results of the study will provide scientific basic recommendations and references for policy makers in forming the best policy in restructuring export sector to maximize benefits of exports sustainably This is the reason for carrying out the study of “Impacts of FDI on Restructure of Exports in the Northern Coastal Region of Vietnam” 1.2 Statement of the problem: The main issue to be addressed in this research is impacts of Foreign direct investment on shifting exports structure in the Northern Coastal Region of Vietnam Specifically, this study intends to answer the following questions: (1) How has foreign direct investment affected the elements of the economy? (2) What quantitative factors are changes in export structure? (3) How foreign direct investment has been affecting the shift in export structure in the Northern Coastal Region of Vietnam (4) What are the solutions to attract FDI on shifting exports structure of the Northern Coastal Region of Vietnam? 1.3 Objectives of the study: The overall objective of this dissertation is to apply theory to analyze the practical impacts of FDI situation and how the implementation of FDI can influence the restructure of exports quantitatively and qualitatively in the Northern Coastal Region of Vietnam To achieve the overall objectives, some specific objectives will be attained as follows: To review the impacts of FDI on shifting exports structure and some related matters in order to frame the theoretical basis of the impacts of FDI on shifting exports structure To analyze the current situation reflecting the quantity and quality of exports structure in the Northern Coastal Region of Vietnam To use the models to test the impacts of FDI on shifting exports structure in the Northern Coastal Region of Vietnam And to propose solutions and policies for attracting and using FDI to improve the quality and quantity of exports structure in the Northern Coastal Region of Vietnam 1.4 Scope and limitations of the study: This research aimed at studying spatial scale of the Northern Coastal Region of Vietnam; including five provinces of Quang Ninh, Hai Phong, Thai Binh, Nam Dinh, and Ninh Binh Research data ranged from 1995 to 2012 The scope of this research was to analyse the structure of tangible exports 1.5 Organization: The dissertation is divided into five chapters; the first chapter gives an introduction on the topic, the second chapter of the dissertation provides a methodological overview in terms of theory: FDI affects exports structure both in quantity and in quality Chapter presents information about theoretical models to be developed within the analytical framework of the dissertation selected Chapters indicates the synthesis of data, model testing results along with the present value analysis, interpretation, and evaluation of the impacts of FDI on shifting exports structure in the Northern Coastal Region The final chapter includes a summary of findings, and proposes solutions for attracting and effective usage of FDI and recommendations for further research for shifting exports structure in the Northern Coastal Region of Vietnam CHAPTER II: LITERATURE REVIEW 2.1 REVIEW OF RELATED LITURATURE This section present of 18 literatures related to the topic After reviewing some local and foreign literature, some brief conclusions can be drawn out as follows: Effects of FDI on economic development: This section mainly shows a collection of experimental researches on the impact of FDI on economic factors: - FDI provides investment capital, increases revenue, and improves the balance of payment - FDI improves advanced technologies and management experience - FDI promotes economic restructure and uses internal capital more flexibly and effectively - FDI promotes to improve the legal system However, FDI also causes many obstacles and challenges for the investment receiving countries, such as: - FDI breaks down the overall development planning of the economy, as rapid growth - Foreign investors only choose those industries, economic sectors, geographical areas having comparative advantages, and providing higher ROI - Law violation, unfair competition, such as tax fraud, opening up to lower interest costs, environmental pollution often happens - FDI causes a "brain drain '' and creates a gap between the rich and the poor in society, affects the cultural life and traditional lifestyle of people, stimulates the psychology of "Culting foreign goods", etc - FDI leads to the dependence on foreign countries So, for developing countries, they must recognize the right position and the role of FDI to have appropriate policies in creating an open and attractive investment environment and promote the comparative advantages, in order to attract more and more powerful and effectively use FDI, and contribute actively to building successful industrialization and modernization of the country It is also an active and positive process of integrating more deeply into the regional and the world economies Also they need full awareness and more in-depth nature of FDI to see the flip side and the negative effects of FDI, to take measures to prevent and effectively remedy, to reduce to the maximum term processing FDI activities causing Shifting exports structure: The exports structure is a whole including many commodities or commodity groups which account for a certain percentage in terms of quantity, as well as a certain proportion of the total value of the exports structure” It is important to assess the exports structure on both sides of quantity and quality: The number of export goods structure is the export value of each type of goods in the structure and the total value of export structure Structure or the number of exports is measured by the number of actual exports in the structure This quantity is measured in units of each type of goods The quality of exports structure: The change in terms of quality can be evaluated in two ways: First, it is the change in the proportion of items Second, the quality of the goods represented by the proportion of goods by income per capita also increases, or the quality index of the export structure: PRODY and EXPY From the reality, it can be said that shifting exports structure is affected by the following factors: - The target, the opinions and the orientation of socio-economic development in general and of international trade or shifting exports structure in particular - Policies to encourage export and exports structure restructuring - The scientific and technical revolution in the world It can be said technology factors play a very important role in creating the exports structure - The development of the special and high quality services such as finance, insurance and banking The relationship between FDI and exports: The theoretical and empirical studies on relationship between FDI and exports are expressed in the most common way: - FDI reverses the trade flows into the investing countries and the investment-receiving countries, thus, in a term it will have an impact on the structure of exports and exports restructuring of both countries - FDI promotes the restructuring of export goods under the directions of improving the quality of the export structure, as shown: Firstly, FDI increases the proportion of processing goods, deep processing items, items with high technical content as well as high human capital Secondly, FDI focuseson serving for restructuring or improving structure of export goods, under the direction of enhancing the proportion of highly and deeply processed goods, with the goal of creating export goods of high quality, and highly increasing value Thirdly, FDI increases the proportion of new export commodities Fourthly, input FDI increases the number of items in investing sector in the basket of export goods; since then, it increases the proportion of these items both in quantity and export value Fifthly, output FDI affects shifting export goods that shown more than in changing quality of export goods structure In summary, in terms of theory, FDI affects exports structure both in quantity and in quality The impact of FDI input elements (FDI performance) may be stronger than that of FDI output factors However, these effects need examining through empirical researches 2.2 CONCEPTUAL FRAMEWORK FDI FDImade capital EVFDI, GOindustrial, Shifting exports structure Source: Compiled by the author, 2013 Figure 2.2: Elements of FDI towards impacts on shifting exorts structure Where: - FDI inflows to Northern Coastal Region in research period - FDImade capital is FDI implemented capital - EVFDI is the export value from FDI invested sector - GOindustrial is the value of industrial production of the FDI sector, - Shifting exports structure is the change in export structure due to FDI investment in the region CHAPTER III: RESEARCH METHODOLOGY 3.1 Locale of study: Northern Coastal Region includes five provinces of Quang Ninh, Hai Phong, Thai Binh, Nam Dinh, and Ninh Binh 3.2 Research Design A comparative research was designed to find out Impacts of FDI on Restructure of Exports in the Northern Coastal Region of Vietnam This type of research design is chosen and appropriate in this dissertation because the region has not undertaken any studies about this topic In order to achieve the research objectives, the following methodology was used: Historical research, system analysis, fieldwork, comparison, quantitative, forecasting and making models and multiples regression for testing of hypotheses; making tables, charts, figures to analyze data and to review changes in percentage of the commodity, the commodity groups in the export structure and the impacts of FDI on shifting exports structure struct in both terms of quality and quantity Since then the study proposes solutions to promote positive effects of FDI on shifting exports structure in the Northern Coastal Region of Vietnam Variables used in the research: The study used the export value (EV) to evaluate the quantity of exports structure in the region It is the change in exports value of the region over the years for whole structure In terms of quality: analyzing the shift from the raw commodity group to the processed and refined goods To quantify the above process: calculate the coefficient PRODY and EXPY in the period from 1995 to 2012 for the export of goods under sub-sector standards of Vietnam 3.3 Data sources used for analysing and testing models Data sources the thesis used are secondary data sources explored and collected from the Department of Trade and Prices-General Statistics Office of Vietnam, Statistical Yearbook of Statistics of five provinces in northern coastal region including Hai Phong, Quang Ninh, Nam Dinh, Ninh Binh, and Thai Binh, and other relevant ministries, as follows: The first, source is the one used to calculate the PRODY and EXPY indice and to evaluate the impacts of FDI on shifting exports structure in the northern coastal region in terms of quantity, including: Data of export value of the northern coastal region, and d ata of Vietnam's export under the standard of international trade SITC3 and sub-sectors under VSIC93 The second source is the one related to FDI and elements of FDI or the input and output of FDI, including: Data of FDI flow which has separation for the foreign parties in the Northern Coastal region and in the field of major exports in the region Data on production value of industry of FDI sector (GOindustrial) Data on export value of FDI for each year (EVt) Data on GDP per capita And data on the value added (VA) of the production sector 3.4 Models used in the study "The impact of FDI on shifting exports structure in the Northern Coastal Region of Vietnam" To the extent permitted, two multiple regression models were used to assess the impacts of FDI on the restructure of exports in the Northern Coastal Region as follows: (3.4) Where: LogEVt is the natural logarith of the export value in thousand $US in the period t; Log FDIt-1 is the natural logarith of utilized FDI in thousand $US in the period t-1 Log R t-1 is the real exchange rate in the period t-1 (VND/$1US) αi is scalar (coefficient), and t: time (year) EXPYmg = a + bFDImade + c EVFDI + dGOindustrial (3.5) Where: EXPYmg is index of export quality of main goods; FDImade is the capital performed; EVFDI is Export value of the FDI sector; GOindustrial is value of industrial production of the FDI sector, And a, b, c is coefficient of the estimated variable In short, the synthesis of data, model testing results along with the analysis, interpretation, and evaluation of the impacts of FDI on shifting exports structure in the Northern Coastal Region will be discussed further in Chapter CHAPTER IV PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA 4.1 Role of the Northern Coastal Region in the economic development of the country The Northern Coastal economic region is focusing on development and investment with the role of a leading economic region in the country, In addition, the Northern Coastal Region is also known as a "motivation region" significantly contributing to the economic growth of Vietnam as well as promoting the economic development of other regions 4.2 The situation of enterprises and export goods: 4.2.1 Industrial development and Economic situations in period 1986-1995 (before having FDI) During the period from 1986-1995, the export value had been a driving force to push economic growth The growth rate of exports was, on average, 2.5 times of the growth rate of the GDP (20% was compared to 7%) The exports had also contributed to solving urgent social problems such as unemployment, poverty, promoting the transition to a market economy and restructuring the economy in accordance with changes of the world market All the above contributions of export activities had enhanced the position of Vietnam in the international market, sped up the integration process of Vietnam, and to create the initial basis for the economic growth in the following period 4.2.2 Export analysis in period of 1995-2004: - The Industrial production of the private sector also sharply increased In 2004, there was an increase of 22.6% higher than that of the public sector (12.9%) and foreign-invested sector (16.2%) - In area of international trade, the number of registered enterprises has also dramatically increased By the end of 2004, the number of registered enterprises to participate in export business was 21,256, increased more than 17 times as compared to that of 1995, of which the private sector had sky-rocketed from 156 in 1995 to 15,246 businesses in 2004 This shows that policies of global integration and participation into international trade brought positive effects - The average export growth rate in the period of 2000-2004 was only 7%/year, much lower than that of the previous period (20%) - The export value of preliminary agricultural products and raw materials accounted for large proportion; while processed, industrial goods and high technology exports increased (47% in 2002), it was still, however, extremely lower than many Southeast Asian countries (from 70% to 80%), especially value-added products was too low - Competitive capacity: In terms of competitive criteria for a product such as price, quality, sale organization, business reputation, Vietnam’s exports have been in lower level than those of other countries in the region and the world Many items considered to have the lowest (e.g rice, coffee, textiles, etc.) To overcome limitations in export, one of the strategic solutions is to expand the private sector, and encourage FDI enterprises The important thing is how to increase market share of Vietnam's exports on the world market and create favorable conditions to attract and appropriately use FDI Development of private sectors to promote Vietnam's exports restructure of the country in general, and of the Northern Coastal Region in particular, is crucial to solve issues mentioned above 4.3 Impacts of FDI on restructuring exports in the Northern Coastal Region in the period 2005 - 2012 4.3.1 Exports of the Northern Coastal Region: In the period 2005-2012, the export value of the region increased continuously from U.S $1,800.4 million in 2005 to US $3,899 million, and US $6,525 million in 2008 and 2012 respectively Within the region, Quang Ninh was ranked the first in contributing to the total export value of the region On average in the period of 2005-2012, export value of Quang Ninh accounted for 45.6% of the total export value of the region Hai Phong was in the second place with 39.3% The three remaining provinces contributed only 15.2 % of the total export value of the region Export growth rate of the region % in the period of 2005-2012 is shown in Figure 4.1 20 16.9 10 15.6 15.4 15 10.8 5.54 15.9 14.5 11.4 6.54 6.86 8.9 7.43 6.22 6.79 5.81 5.69 2005 2006 2007 Export growth rate 2008 2009 2010 2011 2012 Year Proportion compared to other countries Figure 4.1: Export growth rate of the Northern Coastal Region in the period of 2005-2012 The figure 4.1 shows that in 2005 the export value accounted for 5.54% of the total export turnover of the country, and it was 7.43% in 2009.Two years later (2011-2012), even though the total export value increased the proportion in the whole country fell to 5.69% The export growth rate of the region in the period from 2005-2012 was on increasing trend, but not stable 10 Theaverage growth rate reached 15.16% for whole period The highest growth rate was 16.9% in 2012and the lowest growth rate was only 8.9% in 2009 This shows that the movement trend of export value in the Northern Coastal Region has been flutuated over time (100%) Shifting exports structure in the Northern Coastal region 11.2 7.5 6.7 6.3 38.4 40.7 43.1 39.1 14.8 4.0 35.2 3.7 4.1 33.1 31.5 Proportion of other goods (%) 36.7 Proportion of raw , prelim inary goods (%) 60.8 50.4 51.8 50.2 54.6 2005 2006 2007 2008 2009 63.2 64.4 48.4 Proportion of processed or refined goods 2010 2011 2012 ye ar Figure 4.2: Comparing export value of groups of the Northern Coastal Region in the period of 2005-2012 Figure 4.2 shows that groups of processed and refined goods in the period from 20052012 always accounted for the dominant proportion of export structure of the region In addition, the group was also on increasing trend (50.4% in 2005 to 64.4% in 2012 Meanwhile, the group of raw and preliminary products decreased gradually from 38.4% in 2005, then increased to 43.1% in 2007, and fell to 31.5%(2012) The growth rate of Group A and B is unstable, for instance, the group A’s growth rate was 52.8% in 2006, 21.8 % in 2009, and only 10,2% in 2012; the Group B’s growth rate was declining from 47.3% in 2006 to 14.5% in 2009 The proportion of the group A and group B changed inversely Exports structure movement in the Northern Coastal Region Analysis of calculating PRODY indicator and results of calculating EXPY for primary goods of the Northern Coastal Region in the period of 2006-2012 is indicated in the table 4.9, 4.10, 4.11 and 4.12 shows that: - In the above structure, raw goods and preliminary products accounted relatively for high proportion (5/10 items) and processed items such as fine art, electronic products have the export quality index which is not high - EXPY index is on the trend of increase from 2006-2012 Average Expy of this period reached 2,892,000 VND (U.S $ 146,5) 11 - Goods with highest quality, there is shift in terms of quality from raw, preliminary goods to processed groups; for instance, the proportion of processed groups increased from 4.76% in 2006 to 32.26% in 2012 corresponding to proportion of raw and preliminary groups decreased from 90.48% in 2006 to 40,86% in 2012 However, the shift level was still slow Although the proportion of raw and preliminary goods reduced, it was still high Groups of high technology content increased unstably and with low level It shows a necessity to have improved in proportion of exports of high-tech group of region’s export structure 4.3.2 FDI with shifting exports structure of the Northern Coastal Region FDI attraction in the Northern Coastal Region: In the period 1988- 2012 realized FDI capital of the Northern Coastal region was U.S $ 11,794,2 million, made up 52.8% of the total registered capital of the region, and it proves high potentials of attracting FDI of the Northern Coastal region It is revealed that the sector attracting more FDI tends to have higher GO It is also an issue for provinces in the region to have effective solution to improve capacity of managing and using FDI for economic development of the province The impacts of FDI on economic development: The FDI inflows have contributed significantly to the total investment of the whole society to achieve the objective of socio-economic development of the country FDI enterprises contributed significantly to national budget mobilization and budget balance FDI contributed to shift economic structure and improve industrial production capacity The industrial growth rate of FDI has always been higher than the country The FDI sector contributed to increasing proportion of the total export of the country FDI plays a prominent role, directly and indirectly impacts in technological innovation activities and technology transfer in Vietnam and contributes to strengthening the infrastructure for industrialization and modernization of the country The FDI has generated jobs, increased labor productivity, and contributed to improving training and human resources The FDI has created a multiplier effects to the economy: FDI enterprises’ products have been inputs for other Vietnamese enterprises and vice versa In addition to that, the role of FDI has also demonstrated through quantitative factors FDI has created motivation of competition for domestic firms, thereby to enhance the capacity of domestic enterprises; scale up domestic market; introduce, bring Vietnam-originated products into the international markets 12 Impacts of FDI on shifting exports structure: The export value of state owned sector accounted for a large proportion, but tended to decrease over the years, from 63.01% in 2005 to 52.18% in 2006, and continued to reduce (2010, 2011 and 2012 was 25.26%; 25.0% and 23.4% respectively) Export ratio of the collective sector and the private sector was not stable, the FDI sector trended to increase in the same period There was a shift in the proportion between the state owned sector and FDI sector, and the exports value of FDI sector of three groups with high processing has competitively increased with export quality 4.4 Applying two theoretical models to test the impact of FDI on shifting exports structure in the Northern Coastal Region The author presented models used to evaluated the impact of FDI on shifting exports structure in the Northern Coastal Region: 4.4.1 Empirical results of the model 1: Table 4.20 FDI and the Northern Coastal Region export performance (Note: Calculation results of the model as in Appendix 4.1a) Dep Variable LogEV(private)t LogEV(SOE)t (1) (2) (3) Constant -30.52 (17.05)* 49.39 (8.91)** Log FDIt-1 0.58 (0.18)* -0.404 (0.29) Log Rt-1 3.89 (1.53) -0.64 (0.07)** TIME -0.376 (0.055)** 0.116 (0.029)* R2 - adj 0.79 0.81 (Data from regression model, 2013) Source: authors’ analysis Figures in parentheses are t statistics (two-tailed tests); *,**, and*** denote significance at the 10%, 5% and 1% levels respectively The number in the parentheses is the standard diviation of that coefficient The estimation equations for export values of private and SOEs can be written as follows: LogEV(Private)t = -30.52 + 0.58 LogFDIt-1 + 3.89LogRt-1 – 0.376T (4.1) LogEV(Soe)t = 49.39 - 0.404LogFDIt-1 – 0.64LogRt-1 + 0.116T (4.2) The equation 4.1 shows that 1% increased in FDI inflows to private sector could result in an increase of 0.58% in export value of this sector while each year export value of private sector tend to reduce by 0.37% The equation 4.2 represents that if exchange rate ( VND/$US1) in previous year increased by 1% could make export values of SOE in current year reduce by 0.64%, while export values of SOEs tend to increase by 0,11% per year 13 The significant results for the real exchange rate variable (LogRt-1) confirm that real exchange rate negatively and significantly affect export values of public sector (SOE) Table 4.21 FDI and the Northern Coastal Region export performance by category of exported goods (Note: Calculation results of the model as in Appendix 4.1b) Dep Variable LogEV(raw)t (1) (2) LogEV(pro)t Constant 1.534(0.0003)*** 3.14 (10.40) Log FDIt-1 0.0001 (0.00005)** 0.65(0.125)** Log Rt-1 1.0004 (0.000027)*** -0.54 (0.90) TIME -0.22 (0.00004)*** -0.032 (0.35) 0.69 (3) 0.79 R - adj The estimation equations for export values of raw materials and processed goods can be written as follows: LogEV(raw)t = 1.534 + 0.0001 LogFDIt-1 + 1.0004LogRt-1 – 0.22T (4.3) LogEV(pro)t (4.4) = 3.14 + 0.65LogFDIt-1 – 0.54LogRt-1 - 0.032T The equation 4.3 and 4.4 shows that: 1% increased in FDI inflows to raw materials could result in an increase of 0.0001% in export value of this sector while each year export value of raw materials tend to reduce by 0.22% If exchange rate (VND/$US1) in previous year increased by 1% could make export values of processed goods in current year reduce by 0.54%, while export values of processed goods tend to reduce by 0,032% per year Thus, the results provide support for hypothesis Table 4.22 Dependent variable Export value by Northern Coastal region (Log EVt) (Note: Calculation results of the model as in Appendix 4.1c) Dep Variable (1) LogEVt (2) P value Constant 42.65141*** 0.003 Log FDIt-1 0.22082** 0.014 Log Rt-1 -2.73751*** 0.007 TIME 0.03573* 0.055 R2 - adj 0.8977*** (3) 0.000 The estimation equations for export values of Northern Coastal Region (Log EVt) can be written as follows: LogEVt = 42.6541 + 0.22082 LogFDIt-1 – 2.73751LogRt-1 + 0.03573 T (4.5) 14 The result shows that 1% increased in FDI inflows to REgion could result in an increase of 0.22% in export value of this sector while each year export value of Region tend to increase by 0.035% and the real exchange rate has negative influence in the region’ export value significantly This one again shows the consistent with all discussion previously 4.4.2 Analysis of test results in the practice of the regression model Table 4.24: Results of testing models (Note: Calculation results of the model as in Appendix 4.2) Number Independent variables Results Intercept -65.699 FDImade 0,098 EVFDI 0,031 GOindustrial - 0,092 R-square Observation 16 Significance level 5% 0,89 Source: Compiled by the author Table 4.24 shows that: EXPYmg = - 65.699 + 0.098 FDImade + 0.031 EVFDI - 0.092 GOindustrial Such, the models are statistically significant and reliable to make conclusions on the impact of FDI on shifting exports structure in the northern coastal region in terms of quantity and quality expressing through the coefficients: R-square and other observations of model Specifically, results and implications of model are analyzed in the following : - Inputs of FDI (FDImade) played an important role in the export structure towards improving the quality (If FDImade increases $ 1000 EXPYmg increases $ 0.098) - The factor of FDI output (EVFDI) also improved the export structure towards improving the quality if the export value of FDI increased by U.S $1,000, the quality factor of the export structure increased by U.S.$ 0.031) - The factor of GOindustry did not have great impacts on promoting the quality of the export structure (If GOindustrial increased by $U.S.1,000, the quality factor of the export structure reduced by U.S $ 0.092) - The output factors of FDI had less influence than the input factor of FDI on promoting the exports restructuring and towards quantity than quality In short, the findings also have implications for Vietnam policy towards the encouragement of inward FDI and the promotion of exports in Northern coastal region 15 4.4.3 Noticeable assessments: impacts of FDI on shifting exports structure of the Northern Coastal Region Some noticeable assessments can be withdrawn from the results of the models as follows: - It can be said that positive impacts of realized FDI on improving exports structure of the region both in terms of quantity and quality These factors play a decisive role in creating the output products of FDI sector such as GDP, GOindustry and EV; and in paving the way for the export target and export structure shift towards improving exports quality - FDI had a more marked impact on the export of processed goods than that of raw material goods - FDI increased export value of private sector significantly while it negatively influenced that of State Owned Enterprises - The exchange rate depreciated stimulated Region exports - Inputs of FDI (FDImade) played an important role in the export structure towards improving the quality - FDI output (EVFDI) also improved the export structure towards improving the quality - GOindustry did not have great impacts on promoting the quality of the export structure - Output factors of FDI had less influence than the input factors./ 16 CHAPTER SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 5.1 SUMMARY OF THE FINDINGS Main findings in this dissertation include the followings: - FDI increases export value of private sector significantly (1% increase in FDI leads to a 0.58% growth in private enterprises’ exports value in the following year); - The impact of inward FDI on Northern coastal region exports was stronger for processed or refined goods than for raw material goods This reflects Northern coastal region's current comparative advantage, and signals the potential for the development of Region's exports in more capital intensive activities - The study has also shown that the policy of the Government of Vietnam to allow the exchange rate to depreciate stimulated Vietnam exports - The results show that performing FDI (inputs of FDI) plays an important role, positive impacts on improving exports structure of the region both in terms of quantity and quality - The outputs of FDI (EVFDI and GOindustry) also improves the export structure towards improving quality But it has affected less than the inputs of FDI It even has the opposite effect (as GOindustry factor) - Exports groups including electronics, computers and components, power strings and cables of the region had increasing growth quality, but only at an average stability level - FDI for increased the quality of exports but there was still limitation when exports considered to be of high quality still had low PRODY index - Weak and insufficient supporting industries reduced the connection between FDI enterprises and domestic ones Weak supporting businesses are not just the situation of the region but also in Vietnam, which reduced the ability to attract FDI and FDI sector had to import almost all of accessories for exports production - FDI flow into Vietnam in general and the North Coastal Region in particular is mostly FDI replacement leading to the situation that FDI enterprises mainly produced goods for domestic consumption instead of promoting export In short, FDI has had positive influences on restructuring exports towards improving both quantity and quality In particular, though impacts on the quality are significant, they are still small compared to the goal of building a progressive structure of goods Therefore, it must have specific solutions to best use these funds for restructuring exports in the Northern Coastal Region in the years to come 17 5.2 CONCLUSION Through the research, the thesis has achieved some results and had the following contributions Firstly, the author studied the rationale, analyzed and clarified the role of FDI to the exports restructuring both in quantity and quality Basing on it, the author evaluated the situation of exporting in the North Coast region in Vietnam Secondly, the author studied how to use the calculation of the complexity index PRODY and EXPY for the export basket of the Northern Coastal region in the period 1995-2012 to make comments on the region’s exports restructuring in terms of quality It is considered as a quantitative method and it gives more complete information of the export quality instead of commenting on the proportion of the popular commodity groups in Vietnam Basing on the calculation results of these indicators, one can have a new classification of the exports structure and of the exports structuring besides the traditional classifications such as SITC, VSIC Thirdly, the author studied how to use a theoretical model of multiples Regression to test the hypotheses That is the tests model of the relationships: Between performing FDI and the exports value (Models 1); between performing FDI, the exports value of FDI sector and the value of industrial production of FDI enterprises with the quality index EXPYmg (model 2); and it shows the accurate results about the impact of FDI on the export restructuring in the Northern Coastal region Fourthly, the study confirmed the positive impact of FDI implementation including inputs and outputs to the region's exports restructuring both in terms of quantity and quality of the exports structure Specifically: FDImade capital has an impact on both the quality and quantity of the exports structure However it has more affect on the quality than on the quantity; FDI had a more marked impact on the exports of processed or refined goods than the export of raw material goods; FDI increases export value of private sector significantly; while it negatively influences to that of State Owned Enterprises; The exchange rate to depreciate stimulated Vietnam exports, and FDI output including GO and EVFDI has a lot more influence on the quantity than on the quality of the exports structure 5.3 RECOMMENDATIONS 5.3.1 The solutions for attraction and effective use of FDI for shifting experts structure in the Northern Coastal region, Vietnam To implementation of strategies for attracting and effective use of FDI for shifting exports structure in the Northern Coastal region and from the analysis results showed that needs to have the appropriate solutions following: 18 General solutions for attracting FDI in exporting products: There should be specific plans to improve the status of the FDI contribution on technology, export value, new product development, the amount of capital needed to increase production targets, the support of the regional authorities and the government There should be a mechanism to improve the linkage between domestic and foreign enterprises Specifically, the government will fund human resource development, combine with the foreign professional exchange programs, The Northern Coastal Region calling high-quality FDI, and creating a more attractive investment environment are essential The following measures should be taken: The region should continue to improve the infrastructure; develop strategies for training high-quality human resources to meet the project; Promote oriented investment, specific strategies aimed at transnational corporations which hold major technology, the leading partners and international partners in the areas of agricultural-processing, manufacturing supporting technology, electronics, software, and computer components The region should remove barriers affecting the decisions of potential investors There are specific policies to encourage and attract projects associated with the transfer of technology and to create friendly environment Attract and use FDI to improve the processing of products in the agriculturalprocessing sector: The region should: Develop specific planning strategies, programs and projects towards strengthening attracting and using FDI effectively for the agricultural -processing sector Develop a systematic way of calling for FDI projects in the field of agricultural science and have attention at the national level Use Official Development Assistance to improve the very poor infrastructure in rural areas There are programs to promote, attract investment and promote strong brand for the products of the agricultural sector Encourage and offer preferential policies for foreign investors to increase investment in product processing technology Review and allow groups and individuals to contribute capital to foreign investors by land using rights, which allows investors to lease the land for households or individuals to carry out production business and expanding land using rights for foreign investors as well There are policies supporting risks for foreign investors which work in the field of production and processing of agricultural, forestry and fishery for domestic consumption and especially processing for export There are training programs to improve human resources to meet the requirements of FDI, and policies to access and called for leading foreign investors in agriculture, forestry and fisheries from the USA, Canada, Australia to invest in Vietnam 19 The solution to attract and use FDI to develop high tech commodity groups - The region should: Continue creating infrastructure to attract projects; Attract and use FDI effectively to enhance the export of electronic products both quantity and quality, diversify the electronic products; Encourage FDI business to invest for electronic components, spare parts and the products which support for other sectors such as telecommunications, information technology, medical electronics, measuring devices, automation; Support or invest on innovation of technology to improve the quality of products and reduce product costs, improve value-added products; Improve the design and features of the product to adapt to the export market Do not stop at the simple device, simple audiovisual; Implement incentives and financial support as well as taxes, advertising, marketing for FDI enterprises which have successful achievements in export restructuring of the electronics; and Develop the industry which support for production to export electronic products (Refer to solutions supporting technology development) The solutions for development of supporting industry in FDI business sector The region should: The development of specific strategies and projects which are the same for every province in the North Coast region to focus on developing supporting industries; The review and assess of the supply capacity of domestic enterprises should be carried out to innovative equipment and technologies; Encouraging private investment in boosting export activities of the region; Support for establishment of international technical consultant gray to advise the region in developing strategies to attract FDI in support to reform export structure; Develop policy to encourage FDI in the form of a joint venture to create the link between FDI and domestic enterprises; There must be a stable market with new purchasing power to attract foreign investors; Develop specific strategies and plans for attracting FDI investment in supporting industries; Have preferential policies for foreign investors to invest in this area with the target of a specific market development and appropriately- controlled frame; And the province in the region has to develop a plan to call for investment in a powerful way to invest in the supporting field for FDI Encourage FDI enterprises to participate in region's export restructuring The preferential policies for attracting FDI enterprises in the export sector should pay attention to compliant conditions of the World Trade Organization (WTO) It is needed to organize more frequent meetings and discussions with the FDI enterprises to promptly remove the difficulties and problems arise and address concerned issues by foreign investors Selecting of suitable FDI inflows to promote shifting exports structure: 20 Firstly, it is necessary to form specific strategies, programs and projects for replacing FDI and additional FDI Secondly, it needs to understand the aim of the FDI investment of each partner: replacing FDI or additional FDI Thirdly, it is vital to have additional functions and duties to the Department of Foreign Investment toward strengthen FDI project appraisal and evaluation with following main attentions: Characteristics of the investors’ market; advantages and disadvantages of the investors; advantages and disadvantages of industries, and additional or replacing FDI inflows Technology solusionss for FDI to shift export structure The government should have required an independent research institution to conduct research on role of FDI technology in the export sector and in shifting exports structure and establish a "hi-tech FDI zone for export to restructure exports" The government needs to carry out evaluation of current labor skills, ability in meeting job’s requirement in order to have appropriate adjustment in capacity building program There are separate programs asking funds for technology transfer in export sector and shifting exports structure Improving infrastructure, employees’ quality and focusing on FDI enterprises produce and export high-quality products Selection of FDI in the form of joint ventures instead of 100 percent foreign owned A joint venture with FDI will be a very good technology diffusion channels and not only in technology but also have the ability to spread on labor, labor productivity, and market experience Coordination management mechanism for the regional level To ensure an effective attraction and use of FDI to promote shifting exports structure towards improving the quality of the exports of the region according to the following directions: Firstly, the establishment of implementing mechanism to coordinate regional authorities should be prioritized It is necessary to have a representative who is responsible for settlement of matters arising at the regional level The solution given is only effective if there is an office standing out, solving, monitoring and evaluating the results as well so that appropriate adjustments for next process will be made Secondly, the provinces in the region need to be adapted to take goal-oriented development of the whole region Each local implementation on its own way made it more difficult for FDI enterprises especially in export activity Therefore, the need for consensus to 21 carry out common goal of the whole region, while ensuring the interests of the province is necessary The development of the whole region will pull development of the local area-province Thirdly, the establishment of coordination mechanisms needs to be developed specifically assigned on the basis of a systematic way of creating a coherent strategy for the entire region and links to other area localities outside the Area Coordination mechanism must have a part which is mainly responsible because it will not be effective without this part Thus forming a part representing the performance of the experting functions not other administrative functions is essential to ensure the coordination in the region In summary, based on the results of the analysis in the previous chapter and solutions to attract and manage FDI in order to help the process of shifting exports structure of the Northern Coastal region to achieve goals and in accordance new development area of Vietnam is interested of policy makers in the region 5.3.2 Basic conditions to attract and use FDI to promote shifting exports structure: Adequate understanding and thought about attracting FDI and solving social and economic problems arise from FDI in the region According to national and international experts, the world economy and Vietnam’s economy will continue to face difficulties in 2013 and in the next few years The public debt situation in Europe shows no bright sign Japan is continuing recovering from earthquake and tsunami The U.S economy has been recovered after the crisis but still weak when the basic economic indexes unstable Meanwhile, the domestic economy is still facing great difficulties, prices of some commodities continue to rise, businesses stagnated, the level of employment and labor income are declining, many businesses were bankruptcy or closure Therefore, the government must make policies and measures to promote, even "save" the economy and create the momentum for development Vietnam is not an exception From this fact, investors are also more cautious and prudent in making and implementing investment decisions In this context, if Vietnam does not have correct and comprehensive measure to attract and use FDI, the bad consequences will be unpredictable and will be difficult to recover According to the Resolution of the Communist Party of Vietnam and the strategy of socio-economic development for 10 years from 2011 to 2020, Vietnam will become a modern industrial country by 2020 The objective of this strategy is to achieve the economic growth of 7% to 8% per year and gain the sustainable development Improving the effectiveness and efficiency of the government’s management in attracting FDI and solving socio- economic problems 22 Strengthening the role of the government in the market economy and international economic integration is not only in the direction of increasing the level, scope, areas of intervention, management but also improves the effectiveness and efficiency of management, regulation and intervention in the direction of liberalization and the implementation of international commitments In order to meet this requirement, the State should implement the management by laws, policies and macroeconomic tools Along with the implementation of decentralization of activities to attract FDI, we should strengthen the inspection and supervision for attracting FDI and solving socio-economic problems arising from FDI Also, it is vital to improve the effectiveness and efficiency of State’s management for this problem from the issuing of laws and policies to the implementation by listening and absorbing the extensive consultations of the socio-political organizations, businesses and people On this basis, it is time to adjust policies in time, even give new policies to solve the problems in the harmonization of interests of the State, local, FDI enterprises and people All benefits must abide by and be governed by the common goal of the nation At the same time, policies and measures for performance must be directed at the implementation of the common objectives 5.3.3 Proposals for further research Besides, the impacts of FDI in depth of the export restructuring can be studied in more details such as: Further studies should conduct surveys, collect primary data to calculate and evaluate the comparative advantage indices (Reveal Comparative Advantage-RCA) of each export commodity in the region, to complement more systematic and adequate analysis on impacts of FDI on the implementation of exports restructure in the Northern Coastal Region; Further research should analyze deeply and evaluate the situation of impacts of technological factors of FDI on restructuring of each exports commodity group./ 23 DISCLOSED RESEARCH MBA Nguyen Thien Su Situation and Solution of the impacts of Foreign Direct Investment (FDI) on restructure exports in the Northern Coastal Region, Vietnam Journal of Science & Technology - ISSN 1859-3585, Hanoi University of Industry, No 15.2013, p.p 93-96 & 99, 2013 MBA Nguyen Thien Su, B.S Doan Hai Anh and Prof.Dr Do Van Phuc: Propose evaluation methods and factors directly determining the quality of training of industrial economics Journal of Science & Technology - ISSN 1859-3585, Hanoi University of Industry, No 14.2013, p.p 82-88, 2013 MBA Nguyen Thien Su, Dr Duong Duc Chinh (Team leader) et al.: Research and propose solutions to improve management capacity and use of clean technologies in the enterprises in the Northern Industrial Park, Vietnam Ministrial Scientific Research, 2012 The approval minutes of Ministrial Research of Science and Technology Council in 2002 Minister, Ministry of Industry and Trade, dated 22 January 2013 MBA Nguyen Thien Su, Dr Duong Duc Chinh (Team leader) et al.: Research and propose solutions to improve financial management mechanisms for small and medium industrial enterprises embedded in coal and electricity industry in the North East of Vietnam Ministrial Scientific Research, 2008 The approval minutes of Ministrial Research of Science and Technology Council Minister, Ministry of Industry and Trade, dated 09 January 2009 MBA Nguyen Thien Su (Team leader) et al.: Research and propose some solutions to improve the management capacity for staffs in small and medium enterprises Ministrial Scientific Research, 2006 Code: 97-2006/R-D/ The approval minutes of Ministrial Research of Science and Technology Council in 2006 Minister, Ministry of Industry and Trade, dated 22 January 2007 24 ... Northern Coastal Region in the economic development of the country The Northern Coastal economic region is focusing on development and investment with the role of a leading economic region in the. .. restructuring exports in the Northern Coastal Region in the period 2005 - 2012 4.3.1 Exports of the Northern Coastal Region: In the period 2005-2012, the export value of the region increased continuously... affecting the shift in export structure in the Northern Coastal Region of Vietnam (4) What are the solutions to attract FDI on shifting exports structure of the Northern Coastal Region of Vietnam?