Clarifying the main theoretical issues about economic efficiency of FDI in the province to apply to the study of FDI in Vietnam''s localities. Proposing solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025 with scientific bases; thereby providing more scientific basis for local authorities in planning the policy of attracting FDI, renewing the management of FDI enterprises and improving the economic efficiency of FDI in the coming years.
MINISTRY OF EDUCATION AND TRAINING MINISTRY OF PLANNING AND INVESTMENT VIETNAM INSTITUTE FOR DEVELOPMENT STRATEGIES LAM THUY DUONG ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT IN VINH PHUC PROVINCE Major : Development Economics Code : 31 01 05 EXECUTIVE SUMMARY OF PHD DISSERTATION THESIS HANOI - 2019 THE DISSERTATION IS COMPLETED AT VIETNAM INSTITUTE FOR DEVELOPMENT STRATEGIES Academic Instructors: Assoc Prof PhD BUI TAT THANG Ph.D PHAN THI THUY TRAM Reviewer 1: Prof PhD NGUYEN DINH HUONG Reviewer 2: Assoc Prof PhD TANG VAN KHIEN Reviewer 3: Prof PhD NGUYEN THANH DO The dissertation will be defended at University level Council of Dissertation Assessment at Vietnam Institute for Development Strategies Time: , date month , year 2019 The dissertation could be found at: - Vietnamese National Library - Library of Vietnam Institute for Development Strategies INTRODUCTION The reason for choosing the topic Vinh Phuc province is one of the localities attracting foreign direct investment (FDI) into the country Thanks to attracting a lot of FDI capital, the economy of the province has increased significantly, the industry of the province has changed towards the progress of export value and budget revenue has increased relatively quickly, many jobs have been created but when assessing the role and economic efficiency of FDI in the province, it is still limited, both current and future have the pressure to improve economic efficiency of FDI So far, how to attract more FDI and how to make the FDI sector more effective for Vinh Phuc is an unknown issue At the same time, in the whole country as well as at the local level, there is no research on the economic efficiency of FDI in a systematic and comprehensive way; especially, there is no research project of a doctoral thesis Facing such situation, the PhD student dicided to chose the issue of "Economic efficiency of foreign direct investment in Vinh Phuc province" as a PhD thesis in development economics Objectives and research tasks of the topic 2.1 Research objectives: Clarifying the main theoretical issues about economic efficiency of FDI in the province to apply to the study of FDI in Vietnam's localities Proposing solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025 with scientific bases; thereby providing more scientific basis for local authorities in planning the policy of attracting FDI, renewing the management of FDI enterprises and improving the economic efficiency of FDI in the coming years 2.2 Research tasks: To achieve the goal, the thesis will successfully implement the main tasks: (1) Develop a theoretical basis for economic efficiency of FDI in the province to create a theoretical basis to study the thesis (in particular, to clarify the economic effect of FDI, the factors affecting economic efficiency of FDI and assessment of economic efficiency of FDI From this requirement will have to conduct an overview of the published research results at home and abroad (2) Determining clearly the achievements, limitations, weaknesses and causes of the economic efficiency of FDI in Vinh Phuc province is still low in the period of 2006-2017 (3) Proposing solutions to improve economic efficiency of FDI in Vinh Phuc province until 2025 Subjects and scope of research a Research object: The research object of the thesis is FDI and economic efficiency of FDI in Vinh Phuc province (placed in relation to state management on FDI and with the local economic development ) During the research process, the thesis has observed the FDI investment of the whole country as well as some other provinces when necessary and possible b Research scope: - In terms of science: Researching both theory and practice, both current and future economic efficiency of FDI (placed in relation to economic development efficiency and development investment efficiency), the factors affecting the economic efficiency of FDI, economic efficiency indicators of FDI; status, future economic efficiency of FDI and solutions to improve economic efficiency of FDI to 2025 in Vinh Phuc province The thesis only focuses on studying the economic efficiency, social efficiency and environmental effectiveness of the thesis mentioned only in the theoretical part for systematic The spillover of FDI enterprises is also an important issue when assessing the contribution of FDI enterprises to the provincial economy but due to the lack of data, the dissertation addresses this issue with the possible efforts The loss caused by FDI to the provincial economy (through transfer pricing, to overcome environmental pollution ) is also a necessary issue when researching the contribution of FDI to Vinh Phuc's economy but not There are data, so the thesis only mentions to help look at the problem in a comprehensive way, but cannot analyze it deeply - In terms of time: Current status of research from 2006 to 2017 and future research to 2025 - In terms of space: Vinh Phuc Province and when conditions permit, it will analyze and compare with other relevant localities Research framework Implementing the principle of approaching the system and from the viewpoint of adherence to the logic of thesis, the thesis developed the general research theoretical framework as shown in Figure and approached the system throughout the research process Objectives of the study Review Research tasks: How is the economic efficiency of a province's FDI understood? How factors affect the economic efficiency of FDI? and What are the indicators of economic efficiency of FDI? What is the status of economic efficiency of FDI and economic efficiency prospects of FDI in Vinh Phuc? What is the cause of the unsatisfactory economic efficiency of FDI in Vinh Phuc? How to improve the economic efficiency of FDI in Vinh Phuc province? Which solution is the most important solution? Conclude & recomment Figure 1: Research framework Source: Author Major contributions of the thesis - In terms of theory and scholarship: The thesis proposes a new concept of economic efficiency of FDI (not only economic efficiency of FDI enterprises but also FDI enterprises' contribution to the economy economy of the province); points out factors affecting the economic efficiency of FDI (in which state management and technology used by FDI enterprises are more important); specify the evaluation content and determine the criteria for evaluating the economic efficiency of FDI - In terms of practicality: Detecting limitations (economic efficiency of FDI is low, slow and unstable) Pointing out the main reasons (state management still has many shortcomings, FDI enterprises are small and many FDI enterprises use low technology ) Providing a scientific basis for planning FDI attraction policies, renewing FDI management and giving solutions to improve the economic efficiency of FDI in Vinh Phuc province in the process of economic development of this locality until 2025 At the same time, propose the work of local authorities to improve the economic efficiency of FDI in Vinh Phuc province in the coming time Approaches and research methods The approach of the thesis is approaching the system, going from theoretical research to analyzing the economic efficiency of FDI; go from cause to effect; then proceed to propose solutions to improve the economic efficiency of FDI in Vinh Phuc province by 2025 To complete the thesis, the author uses common methods such as: System analysis method; Methods of statistical analysis; Forecast method; Method of using experts; Analysis method according to SWOT model; Methods of policy analysis; Comparative method; Minimum squares method In the process of researching the thesis, the author also uses a number of other methods, such as separation, interpretation and inductive; At the same time, use a combination of methods to limit the defects of each method as well as to ensure the reliability needed for research results as set out Structure of the thesis In addition to the introduction, conclusion and list of published scientific works; The content of the thesis is divided into chapters Detail: CHAPTER 1: LITERATURE REVIEW OF SCIENTIFIC RESEARCH RELATED TO ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT Following closely the study of theory and practical experience for the dissertation, the author conducted an overview of 98 documents (including 10 foreign documents and 19 doctoral dissertations) and selected two large group of issues, mainly aimed at useful service for the study of the thesis Detail: 1.1 Overview of development investment and foreign direct investment Perceptions and conceptions of domestic and foreign scholars on development investment and FDI are the right ideas and views that the author can inherit for his research In general, scholars emphasize the role of development investment (including FDI) The consequence of development investment is the economic structure that economic structure plays a decisive role in socioeconomic development Development investment is the act of taking a sum of money to perform one or several actions for development FDI capital is part of social development This investment is carried out by foreign investors with the desire to gain profits and contribute to the national (or local) socio-economic development to attract FDI 1.2 Overview of economic efficiency of development investment and economic efficiency of FDI In this section, the author reviews the perceptions and perceptions of economic efficiency of FDI; Factors affecting and system of economic efficiency indicators of FDI The review pointed out that, in general, scholars mentioned much about the effectiveness of development investment, not to mention the economic efficiency of FDI, especially the economic efficiency of FDI of a locality There has been almost no research on the economic efficiency of FDI in a systematic and complete way Some scholars refer to the implications of the economic efficiency of FDI, but they identify the economic efficiency of FDI with the contribution of FDI to the development of the economy At the same time, they only mentioned the economic efficiency of FDI at the general level as well as not placing the economic efficiency of FDI in the organic relationship with the effectiveness of development investment as well as the efficiency of economic development They have not linked the economic efficiency of the FDI sector with the efficiency of the FDI sector to the national economy In general, scholars mentioned factors affecting the economic efficiency of FDI from a traditional perspective and said that these are natural, economic, social, investment and market weaknesses They have not considered under the perspective of actors and impact forces to attract FDI and economic efficiency of FDI They analyze the effectiveness of development investment as well as the economic efficiency of FDI through a series of indicators, in which they mention: (1) Efficiency of investment and economic efficiency of FDI; (2) The contribution of development investment as well as FDI to the economy (contributing to economic growth; increasing labor productivity; improving the structure of the industry; improving technology; increasing the openness of the economy create new jobs and reduce unemployment, reduce poverty, reduce social evils, traffic accidents and occupational accidents The author finds that such indicators are too many; in those indicators, there are many difficult indicators because of the lack of data and some unquantifiable indicators Those are the points that can be inherited for the thesis Besides, the author also identified issues that scholars have not adequately studied as well as identified issues that the dissertation must study in depth CHAPTER 2: THEORETICAL FOR ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT ON PROVINCIAL LOCATION 2.1 Economic efficiency of foreign direct investment in the province Efficiency is a key issue of economic development as well as of development investment From a theoretical perspective, economic efficiency of FDI is a measure to assess FDI attraction, activities of FDI enterprises and evaluation of the State's FDI policies The higher the efficiency, the better the performance of FDI enterprises and the State's FDI policy is correct and vice versa Economic efficiency of FDI is part of development investment effectiveness; but the efficiency of development investment is an integral part of the economic development efficiency Therefore, it can be said that the economic efficiency of FDI is part of the efficiency of economic development of the country or of each locality Economic efficiency of FDI is a part of aggregate efficiency, including economic efficiency, social efficiency and environmental efficiency These parts closely relate to each other, reflecting separate but overlapping aspects In particular, when it comes to economic efficiency, it means the social and environmental efficiency; or when it comes to social efficiency and environmental performance, it refers to its roots as economic efficiency Economic efficiency of FDI contributes to the overall efficiency of development investment and economic development Economic efficiency of FDI is closely related to local economic growth Localities in our country always want to attract FDI so that it is highly effective The process of FDI attraction has taken place since 1988 In fact, it has been pointed out that, for nearly 30 years (1988-2017), FDI has a great impact on the economic development of our country and many provinces (in which Vinh Phuc): making advanced technology, many industries and services appear and new products appear, expanding export markets and forming highly skilled labor force Economic efficiency FDI is understood as a combination of direct economic benefits brought to businesses and economic benefits of FDI contribution to both the national or local economy due to investment and production activities Its business brings In other words, the economic efficiency of FDI consists of two basic parts: the economic efficiency of FDI enterprises themselves and the contribution of FDI enterprises for economic growth (including development and attraction) domestic enterprises) of the whole country or of the whole province Accordingly, it shows that economic efficiency of FDI is closely related to economic growth That is a proportional relationship The higher economic efficiency of FDI contributes to high economic growth and vice versa, if the economic efficiency of FDI is low, it will also make economic growth low Government policy and profitability Domestic investment Income Job Purchasing power Scale and speed Foreign Direct Investment FDI investment structure Financial interest and potential of foreign investors Manufacturing (and technology) Economic growth International market expansion Accumulation Stable macro and improve national economic autonomy Invest Increase the scale of GDP and GDP/person Figure 2.2: Relationship between FDI and economic growth and effects interactions Note: The road is interactive and only the opposite direction; Road only influences Source: Author 2.2 Factors affecting economic efficiency of foreign direct investment in the province Unlike the works that have been reviewed, the author does not approach the problem in the traditional way but according to the new way and vision The author argues that there are several basic elements that affect the economic efficiency of FDI They are: State, Enterprise, market and globalization along 11 For FDI attraction, the above indicators are of great significance and extremely important If these indicators have a higher value, the better and vice versa CHAPTER 3: SITUATION OF ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT IN VINH PHUC PROVINCE PERIOD 2006-2017 3.1 Factors affecting economic efficiency of foreign direct investment in Vinh Phuc province 3.1.1 Elements of Vinh Phuc province itself According to the content presented in chapter and from the perspective of considering the level of factors to the economic efficiency of FDI in Vinh Phuc province, the author clarifies the elements of the province itself and the influence of they affect the economic efficiency of FDI in the province On the basis of using the SWOT model, the author examines the significance of the geo-economic position, the formation of a new urban area, and the unique tourist areas, near the Hanoi Capital, easily connecting with Noi Bai international airport, capable of coordinating development with Hai Phong, Quang Ninh, Lao Cai, provinces in the Red River Delta and draw some basic statements: a) In terms of advantages: Overall, Vinh Phuc is close to Hanoi and associated with the Red River Delta provinces with a market with great potential, there is a new urban area Chua Ha belonging to Vinh Yen city, there are quarters Tam Dao's famous tourism, where the resort of Dam Vac and Dai Lai is both beautiful and attractive, has many golf courses These are the factors that meet the needs of accommodation, entertainment, very good relaxation, steaming leading FDI investors Vinh Phuc has great potential and a variety of natural resources for economic development in a comprehensive way with large scale and rich goods, attracting investors First of all, it is necessary to mention the construction land fund (the potential is considerable in terms of area size and most of the land is infertile, the land is not as good as in many parts of the 12 Red River Delta) Secondly, it is a very unique and very great tourism potential to develop tourism to become a spearhead economic sector of the province known for its large-scale tourist attractions and entertainment complexes (most clearly as in Tam Dao, Dai Lai, Dam Vac ) Thirdly, near the large consumer market, it is near and easy to receive the support of high quality human resources, advanced technology from big economic centers urban areas b) In terms of difficulties: For Vinh Phuc, the author emphasizes some major difficulties as follows: (1) The transport system has been improved but still does not meet the requirements of large-scale development and with high speed The system of technical infrastructure for electricity, water and waste treatment is lacking; (2) Although the labor force is abundant, the quality is still low, lack of skilled labor force, and lack of good entrepreneurs; (3) The size of the economy is still small, the possibility of internal capital accumulation is not large; therefore the ability of self-capital is limited; not enough to establish a large-scale enterprise, the ability of enterprises to cooperate with foreign countries is limited However, these restrictions can be overcome 3.1.2 External factors affect the economic efficiency of FDI in Vinh Phuc province The author analyzes in depth the impact of globalization, the impact of the industrial revolution 4.0 and the opportunity to bring from free trade agreements that Vietnam has signed with countries to the ability to collect attracting FDI and economic efficiency of FDI in Vinh Phuc province At the same time, analyzing the socio-economic development strategy, the strategy of attracting FDI capital of the whole country affects the economic efficiency of FDI in the province Specifically, please emphasize some issues: - Globalization affects the attraction of large economic groups, has financial potential and uses high technology to develop key products, develop high-tech fields to modernize the foundation economy of Vinh Phuc province - The industrial revolution 4.0 brings opportunities to attract FDI projects in the direction of contributing significantly to the modernization of the economy and modernizing local governance in Vinh Phuc 13 - Vietnam's socio-economic development strategy and strategy of attracting FDI to 2030 mean to define the policy of attracting FDI capital of Vinh Phuc province as well as other localities Vinh Phuc needs a plan to attract FDI in the context of competition among provinces as well as international competition in attracting FDI 3.2 The situation of investment and economic development in Vinh Phuc province 3.2.1 Situation of development investment in Vinh Phuc province in the period of 2006-2017 For Vinh Phuc as well as for localities, investment has played an extremely important role in the socio-economic development of each locality In 12 years (2006-2017), total social investment reached about VND 114 trillion (2010 price) Average investment capital increased by an average of 18% / year (of which the period of 2006-2010 was about 18.9% and of the period of 2011-2017 about 17.5%) Of the total social investment capital, the state budget capital source has gradually decreased (from 46.9% of the 20052010 period to 39.7% of the 2011-2017 period); the proportion of domestic private capital increased from 22.2% to 30.6% and the proportion of FDI capital decreased slightly (from 30.9% to 29.7% over the same period) 3.2.2 The situation of restructuring and economic development of Vinh Phuc province in the period of 2006-2017 In principle, economic structure is a consequence of development investment In other words, the investment structure makes sense to form and change the economic structure of the locality or the nation In the 2006-2017 period, the economy of Vinh Phuc province has made impressive progress The economic scale of the province ranks 15th in the country, GRDP / person has reached about 2400 USD, the average annual economic growth rate in the period of 2006-2017 reached about 11%, the export value reached more than billion USD and contributes to creating an opening of about 145% for the economy, the unemployment rate is about 3% and the poverty rate is low at about 3.5% For many years, GRDP in the province has grown relatively fast, the average GRDP growth rate in the period of 2006-2010 is about 10.8% per year and in the period of 2011-2017 is about 12.2% In the 2006-2017 period, Vinh Phuc's economic structure shifted relatively quickly: the agricultural sector decreased by 9.7%, the industrial 14 proportion increased by 1.8% and the service sector increased by 7.9% The proportion of FDI sector increased from about 21.8% in 2005 to about 26.2% in 2017 The proportion of advanced technology products increased from about 13.8% in 2005 to about 21.1% in in 2017 In the period 2006-2017, the industry contributed mainly to economic growth (accounting for about 58.8%), followed by the service sector contributing about 37.3% The hightech sector contributes about 21% in 2017 and is mainly generated by the FDI sector (contributing about 86% of the total 21%) Vinh Phuc ranked first in motorbike assembly and camera production, the third in computer assembly and production, 6th on automobile assembly, ranked 7th in beer and beverage production Labor density industry increased significantly from over 9.1% in 2005 to about 34.1% in 2017 FDI sector developed strongly, in 2017, it accounted for only 10.2% of the total social labor but contributed to changing the picture of social division of labor in the province The province has formed 12 industrial parks, tourist area, golf course High-speed motorway running through the province has been completed That is an important premise to attract investors outside the province In the last 12 years (2006-2017), the picture of social division of labor has made clear progress and towards industrialization and modernization The trend of social labor division has improved, the proportion of non-agricultural sectors has increased over the years, reaching about 51.5% in 2017; Particularly, industrial labor increased the most, from more than 18.9% in 2005 to about 30.1% in 2017 FDI enterprises make an important contribution to the renovation of social labor division 3.3 Current status of economic efficiency of foreign direct investment in Vinh Phuc province 3.3.1 The situation of attracting foreign direct investment in Vinh Phuc province in the period of 2006-2017 In recent years, Vinh Phuc has achieved many results in attracting FDI Total realized FDI has always increased over the years and tends to change in the structure towards more progressive: no longer unique for the industrial sector as in previous years but has opened to the tourism area , high-end entertainment, agriculture and services The number of FDI enterprises 15 increased rapidly and especially FDI enterprises in the field of export product production increased significantly in terms of quantity and capital scale FDI attraction of Vinh Phuc has other important points compared to the whole country That is, although FDI capital attracted to agriculture, tourism, infrastructure remains low, but the implemented capital ratio is higher than the national level 3.3.2 Current status of economic efficiency of foreign direct investment in Vinh Phuc province 3.3.2.1 Economic efficiency of the foreign direct investment sector itself (1) Labor productivity of FDI sector: Labor productivity of FDI sector has increased continuously, reaching a higher level than the average level of the whole province From 2005 to 2010, the labor productivity of the FDI sector was about four times higher than the average labor productivity of both the provincial economy and about times, but by 2017, it was only about 2.5 times higher than that of the provincial economy with domestic labor productivity In 2017, labor productivity in FDI sector is only about times higher than that of domestic economy That may explain that FDI enterprises have not innovated technology significantly, they mainly use technology initially when they bring to Vietnam (2) Effective use of investment capital of FDI sector: reached a better level than the average of the province as well as the average of the country This is reflected in the following important aspects: - ICOR index: decreased from 3.58 of the period 2005-2010 to 3.54 of the period 2011-2017; lower than the average of the whole province (about 0.87 compared to the corresponding level of the whole province in the periods of 3.95 and 4.02) and lower than the national average - Average value added per FDI investment capital: about 0.4-0.45 in 12 years (2006-2017); about 1.4 times higher than the provincial average Although this is not a large level, it also shows that the economic efficiency of FDI in Vinh Phuc is quite good (3) Profit rate of FDI enterprises: Indicators of profit rate on production capital and on revenue as well as average income per employee tend to increase and exceed the average level of FDI enterprises country 16 Particularly, the average income per employee of FDI enterprises in Vinh Phuc is lower than the national average Table 3.20: Profit rate and average labor income of FDI enterprises Criteria 2005 2010 FDI enterprises in Vinh Phuc Rate of return on production capital, % 9,5 7,1 Rate of return on revenue, % 8,6 9,5 FDI enterprises in Vietnam Rate of return on production capital, % 14,25 7,43 Rate of return on revenue, % 14,2 8,84 Average of labor income per month, 2.173,2 4.248,7 103VNĐ 2015 2017 7.6 4,1 7,7 6,9 7,8 7,20 7.297,8 8,8 7,98 9.740,9 Source: The author calculated according to data on FDI enterprises of the General Statistics Office and the Statistical Yearbook of Vinh Phuc Province 2017 3.3.2.2 Contribution of the foreign direct investment sector to the economy of Vinh Phuc province (1) FDI sector contributes to increasing the scale of the economy: FDI sector has a great significance for contributing to economic growth of Vinh Phuc province The 2006-2017 period contributes about 34-35% to the economic growth of Vinh Phuc province (ie contributes about 4.3 - 4.5% points) This is a relatively high contribution compared to the national average (about 26-28% nationwide) Table 3.3: Contribution of foreign direct investment sector to economic growth of Vinh Phuc province 2006-2010 2011-2017 7.190 9.245 GRDP of whole province 2.868 3.266 GRDP of FDI sector Proportion compared to the 39,9 34,9 whole province, % Source: The author calculated according to provincial statistics [9] (2) FDI sector contributes to increasing labor productivity and openness of the economy + FDI sector contributes to the increase of social labor productivity of the province: FDI sector has contributed significantly to increasing labor 17 productivity of Vinh Phuc province If in 2005, FDI sector contributed 18.4%, in 2017, FDI sector contributed about 30% to increase labor productivity of Vinh Phuc province (the average level of the country in 2017 was about 26%) + FDI sector contributes to increasing the openness of the economy in Vinh Phuc province: To better identify the competitiveness of the economy, the author calculates the province's economic openness by taking export value divided by GRDP For Vinh Phuc province, FDI sector has great significance for the province's exports (accounting for about 78-80% of the province's total export turnover) as well as playing an important role in competing with the world market FDI sector contributes about 80-82% of the openness of the economy of Vinh Phuc province (this figure of the whole country is about 70%) Table 3.5: FDI sector contributes to the opening of the economy of Vinh Phuc province Criteria 2005 2010 2017 Export turnover coefficient of FDI 0,78 0,81 0,84 compared to total export turnover of Vinh Phuc province The rate of contribution to the openness of 76,5 79,1 82,8 the economy of Vinh Phuc province Source: The author calculated according to the formula proposed in chapter of the presentation on the criteria for evaluating the economic efficiency of FDI (3) The FDI sector contributes significantly to the provincial budget The FDI sector contributes about 50-55% on average, particularly in 2017 FDI sector contributed 48.2% The growth rate of the state budget remittance of the FDI sector has always been high (in the 2006-2017 period, about 6.8% per year, calculated according to 2010 prices) There is a need to improve the role of the FDI sector in contributing to the provincial budget in the next time (4) FDI sector contributes to creating new jobs is also important In the period 2006-2017, the FDI sector created jobs for about 8,300 people, equivalent to creating 9.6% of the total employment of the province (only about 10% in 2017) and about 21% of jobs refresh 18 (5) The FDI sector contributes to the addition of provincial capital for investment and development In the past 12 years, the FDI sector has contributed about 28-29% of the total social investment capital it has made; This is a significant level (while this rate of the whole country is about 2224%) The loss of Vinh Phuc economy due to the transfer of FDI enterprises, although it needs to be determined, due to lack of information, the author cannot calculate quantitatively In Vinh Phuc province, the environmental pollution caused by FDI enterprises is practically negligible (6) Evaluation of the extent of FDI enterprises' spread: The coefficient of elasticity between the rate of return on revenue and the average income per employee of FDI enterprises and the coefficient of elasticity between the rate of return on revenue and the payment The state budget of FDI enterprises shows that the economic efficiency of FDI in Vinh Phuc province is low and stable In 2017, there are 160 FDI enterprises in the province and only domestic enterprises (both small and less than 150 employees/enterprise) associate production with FDI enterprises and domestic enterprises mainly produce packaging and some odd equipment for FDI enterprises to manufacture cars 3.3.2.3 Comprehensive evaluation of economic efficiency of foreign direct investment in Vinh Phuc province a) Key achievements: In general, the economic efficiency of FDI is higher than the average level of the whole province but in general it is still low and not stable The FDI sector has a relatively large role in the socioeconomic development of the province (contributing 29-30% of social investment capital, 15-16% of social labor, 35-36% of economic growth and 29% increase labor productivity, 64-65% of budget revenue and 82% of the province's economic openness ) Although the economic efficiency of FDI is higher than the economic efficiency of the economy in the whole province as well as some higher than the average level of the national economy, it is also much higher This shows the need to have a solution to improve the economic efficiency of FDI so that the economy of Vinh Phuc province can develop faster and more sustainably in the future 19 b) Overview of major limitations and weaknesses: In general, the economic efficiency of FDI in Vinh Phuc province is still low, increasing slowly and unstable Spillover effects of FDI enterprises are limited FDI projects have not attracted domestic enterprises to develop together to create the necessary value chain There are two main reasons That is, on the one hand, Vietnamese enterprises not have enough conditions (in terms of raw materials, technology to manufacture components and accessories) to participate as industrial supporters On the other hand, the giants assembled themselves to bring components and accessories from their countries so the spread of FDI enterprises is limited FDI projects have no connection with each other so they not create a common power 3.3.3 Causes of successes and limitations and weaknesses in economic efficiency of foreign direct investment in Vinh Phuc province 3.3.3.1 The cause of success: Vinh Phuc has a favorable economic and geographical position, has many factors to meet the needs of accommodation, leisure, entertainment and entertainment of FDI investors; Vinh Phuc provincial government is friendly with FDI investors, wishing to attract FDI and had a policy of attracting FDI very early; Interested by FDI investors, at the same time, there is a response of the people in the province and the active participation of workers from surrounding localities to work in FDI enterprises 3.3.3.2 Causes of limitations and weaknesses a On the State side: (1) On the central government side: The law on FDI has many unreasonable points, which appear to be inadequate but the Central Government is slow to amend; has prolonged the weakness of the investment environment as well as the inter-provincial infrastructure Ministries have not worked closely together in the field of state management for the FD region For many years, the Central Government has not yet had a plan for FDI investment for each major economic region; At the same time, in the planning of development of the Red River Delta region as well as other major economic regions, there is no close linkage between localities 20 (2) For Vinh Phuc provincial government: Vinh Phuc provincial government has made great efforts in attracting and managing FDI but also revealed many limitations and weaknesses This is reflected in the following key points: in the long term, Vinh Phuc's economy depends heavily on the FDI sector; to attract few transnational economic groups; The promotion of foreign direct investment has not been effective Vinh Phuc's ranking of provincial competition dropped from No in 2006 to position 13 in 2010, position 21 in 2015 and position 20 in 2017; The provincial government of Vinh Phuc has not coordinated with the central branches to have regulations on investment per hectare so it does not attract high-tech projects as well as no supporting industrial development plans to promote pushing cooperation between FDI enterprises and domestic enterprises; At the same time, there are no strong enough commitments to attract potential and strategic investors and not fully control the FDI situation b On the business and market side In general, most enterprises in Vinh Phuc province depend heavily on foreign markets; FDI enterprises have not coordinated with each other according to the value chains, not yet shown the role of attracting domestic enterprises At the same time, FDI enterprises have not received the necessary support because of the lack of supporting industries Domestic enterprises in the area are mainly medium and small scale, financial capacity and technology are very limited and have not cooperated well with FDI enterprises Due to the financial crisis and global economic recession as well as the whole country, FDI enterprises in Vinh Phuc province face many difficulties, production slows down, consumes poorer products 21 CHAPTER 4: SOLUTIONS TO IMPROVE THE ECONOMIC EFFICIENCY OF FOREIGN DIRECT INVESTMENT ON VINH PHUC PROVINCE, PERIOD 2018-2025 4.1 Basing on building solutions to improve economic efficiency of foreign direct investment in Vinh Phuc province Instead of presenting an item on factors affecting FDI economic efficiency as in chapter 3, in section 4.1 of chapter 4, the author presents the basis for building a solution The author identifies main bases: (1) First base: Market, globalization, national development strategy and provincial socio-economic development orientation to 2025 (2) Second base: determined from the analysis of the causes of limitations and weaknesses mentioned in chapter and the experience of some places in improving the economic efficiency of FDI (3) Third base: Orientation to attract FDI into Vinh Phuc province to 2025 Projects attracting Vinh Phuc province in the coming time must meet the main criteria: High technology, clean technology, energy saving, environmentally friendly; has financial strength and has a global market for products; Has the ability to spread around (backyard) to form a network of local support businesses; There is a large investment on / (more than 1415 million USD / or more) and less land use; Using a lot of local workers, especially local people; Attracting investors to save land and energy; bring high efficiency to the whole economy of the province, the impact spread strongly over many domestic sectors (4) The fourth base: promoting the success and determination of the province in the coming time 4.2 Solutions to improve economic efficiency of FDI in Vinh Phuc province to 2025 The author proposes basic solutions That is: (1) Solution No 1: Publicizing the strong commitment of Vinh Phuc provincial government to foreign direct investment investors: Commitment of Vinh Phuc provincial authorities on the interests of FDI investors; Commitment to create a competitive advantage 22 (2) Solution No 2: Select strategic investors The author recommends prioritizing the selection of FDI investors in the fields of computer, telecommunications, refrigeration, manufacturing medical equipment, tourism, relaxation and treatment of Japan and Taiwan , Korea, USA, EU, Singapore Instead of calling on the subsidiaries of the above-mentioned corporations, it is necessary to call for the direct presence of those major corporations themselves Based on the analysis, the author proposed a list of key priority projects and selected strategic partners in attracting FDI in the period 2018-2025 of Vinh Phuc province (3) Solution No 3: Improving the efficiency of state management of FDI in Vinh Phuc province State management reform and efficiency enhancement and state management efficiency must be implemented at both the central and local levels Strive to rank among the 10-15 provinces in the PCI and PAPI rankings nationwide (4) Solution No 4: Completing the technical infrastructure system, especially the synchronous and modern development of the connecting road system in the province, the road connecting Vinh Phuc with the arterial routes in the North and the whole country At the same time perfecting the electrical system, water supply, telecommunications, banking, hotels, restaurants, houses and entertainment facilities, high quality hospitals (5) Solution No 5: Reasonable territorial organization to meet the requirements of FDI investors Besides completing the central urban system, developing tourist areas, industrial park systems, golf systems (6) Solution No 6: Developing high quality human resources From 2018 to 2025, Vinh Phuc needs to train 9,000 more middle and high-level management personnel, 43 thousand entrepreneurs and 262 thousand professional workers Particularly for FDI sector, there are about 1.1 thousand manpower management, thousand entrepreneurs and thousand occupational workers (7) Solution No 7: Developing a contingent of domestic enterprises in the province Striving in 2025 in Vinh Phuc province, there are about 5,000 to thousand enterprises, of which FDI enterprises alone are about 630 FDI enterprises At the same time, develop supporting enterprises (about 10-15) and about 20-25 domestic enterprises closely linked with FDI enterprises 23 4.3 Evaluating the economic efficiency of foreign direct investment in Vinh Phuc province in the period of 2018 - 2025 Successful implementation of the orientation and major solutions as presented, through preliminary calculation also shows that the development of Vinh Phuc economy has significant progress and economic efficiency of the above FDI Vinh Phuc province has been significantly improved For FDI sector, if compared to 2025 with 2017, FDI productivity is times higher, value added per FDI is 1.1 times higher, consuming electricity to generate USD of GDP 20%; The proportion of FDI sector contributing to the province's economic growth is about 1.3 times; The proportion of contributions to the province's labor productivity increased by about times and the proportion contributing to the increase in the openness of the provincial economy doubled, the ICOR index decreased by about 14% 4.4 Some recommendations - The central government needs to innovate in a comprehensive and timely manner in the formulation, issuance and implementation of the Law on Foreign Direct Investment in Vietnam All regulations, rules and regulations defined in such laws must be clear, transparent and quantitative; to avoid the type of rules by principle and general, leading to different understandings, difficult to implement and not to build trust for FDI investors - The central government should have regulations on high investment rates per hectare allocated to localities near big cities to attract high-tech projects The central government and the provincial government of Vinh Phuc need to regulate the height of space for the construction of factories of FDI projects that can build high-rise buildings - Vietnam should organize to assess the economic efficiency of FDI in the whole country and within the provinces to have the right information to make decisions on FDI attraction and to have comparison data between localities 24 CONCLUSION (1) From this research, the author concludes that the economic efficiency of FDI in Vinh Phuc province is solid (2) The dissertation provides important suggestions for the current status of economic efficiency of FDI in Vinh Phuc province The author discovers the main reasons why the FDI sector has not been as effective as expected That is, in state management revealed many limitations; The provincial government has not closely coordinated with the central authorities to specifically add specific policies on FDI in the area and the construction of inter-provincial infrastructure is inadequate; Economic efficiency of FDI in Vinh Phuc province should continue to increase sustainably through the development periods from 2018 to 2025 and the following years (3) The author has proposed important and feasible solutions to improve the economic efficiency of FDI in Vinh Phuc province for the coming years That is: Publicity of commitments with FDI investors; Improving the efficiency of state management (for both central and local governments) for FDI; Renovating the structure of attracting FDI capital in the direction of strongly increasing transnational economic groups, projects with modern technologies, consuming little electricity, not using much land and not causing environmental pollution; originating from countries and territories with a high level of development Strongly develop domestic enterprises to effectively link with FDI enterprises, motivate them to innovate technology and actively participate in value chains as well as global distribution networks LIST OF THE PUBLISHED WORK RELATED TO THE THESIS 1- Lam Thuy Duong (2019), Improving the effectiveness of FDI attraction in Vinh Phuc province, Economy and Forecast Review, No 02 (684), January 2- Lam Thuy Duong (2019), Solutions to attract FDI in the sustainable direction of Vinh Phuc province until 2025, Economy and Forecast Review, No (687), February 3- Lam Thuy Duong (2019), Foreign direct investment in Vietnam: New thinking and some recommendations, Finance Review, Period + (No 698 + 699), February 4- Lam Thuy Duong (2013), Improving the efficiency of foreign direct investment in Vinh Phuc province, Journal of Political Theory, No 11 5- Lam Thuy Duong (2011), Attracting foreign direct investment - Correct development planning must be expressed by efficiency, Economy and Forecast Review, No 15 6- Lam Thuy Duong (2011), Measures to improve FDI efficiency in Vinh Phuc province, Journal of Vietnam Industrial Park, No 134 (170) 7- Lam Thuy Duong, Do Thu Trang (2011), Regarding the effectiveness of foreign direct investment in Vietnam in the 2001-2011 period, Economy and Forecast Review, No 21 8- Lam Thuy Duong, Nguyen Hoang Ha (2011), Attracting and managing FDI: FDI picture in Binh Duong province: Bright colors, Economy and Forecast Review, No 22 (Note: The author has studied the topic "Economic efficiency of FDI in Vinh Phuc province" since 2010) ... status of economic efficiency of foreign direct investment in Vinh Phuc province 3.3.1 The situation of attracting foreign direct investment in Vinh Phuc province in the period of 2006-2017 In recent... INVESTMENT IN VINH PHUC PROVINCE PERIOD 2006-2017 3.1 Factors affecting economic efficiency of foreign direct investment in Vinh Phuc province 3.1.1 Elements of Vinh Phuc province itself According to... investment and economic development in Vinh Phuc province 3.2.1 Situation of development investment in Vinh Phuc province in the period of 2006-2017 For Vinh Phuc as well as for localities, investment