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Clarify the theoretical and practical basis and objectively assess the situation of FDI attraction in view of sustainable development in Vietnam; Propose orientations and measures to attract and evaluate FDI projects towards sustainable development in Vietnam in coming time.
VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES DINH KHANH LE ATTRACTING FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT IN VIETNAM Major : Economic Management Major code : 34 04 10 SUMMARY OF ECONOMICS DOCTORAL THESIS HANOI - 2018 The study is completed at: VIETNAM ACADEMY OF SOCIAL SCIENCES GRADUATE ACADEMY OF SOCIAL SCIENCES Supervisor: Assoc Prof Dr Tran Đinh Thien Dr Pham Van Cong Reviewer 1: Assoc Prof Phi Manh Hong Reviewer 2: Assoc Prof Vu Thanh Son Reviewer 3: Assoc Prof Tran Minh Tuan The thesis is upheld in the presence of Academy Doctoral Thesis Assessment Board at , Hanoi at h day month year The thesis can be found at the library: - Library ……………………… - National Library of the Graduate Academy of Social Sciences INTRODUCTION The urgency of the thesis Attracting foreign direct investment (FDI) has become a trend of most countries in the context of international integration nowadays FDI has made immense and undeniable contribution to the socio-economic development of the countries, especially developing countries In recent years, the issue of sustainable development has become an indispensable and irreversible trend in all areas, including FDI attraction In many developing countries, including Vietnam, FDI attraction has brought positive results However, it also has significant consequences, especially social and environmental consequences The quality of FDI in Vietnam remains low, mainly processing and assembly The linkage between FDI enterprises and domestic enterprises seems to be very poor, while technology transfer remains limited Given increasing demand for investment capital attraction, as well as FDI significant consequences, especially in industrial activities, it is required for a number of countries, including Vietnam, to consider FDI attraction in the direction of sustainable development Therefore, the thesis research: Attracting foreign direct investment towards sustainable development in Vietnam proves to be very essential, and has theoretical and practical significance for Vietnam in the new context The objectives of the thesis 2.1 Overall objectives Clarify the theoretical and practical basis and objectively assess the situation of FDI attraction in view of sustainable development in Vietnam; Propose orientations and measures to attract and evaluate FDI projects towards sustainable development in Vietnam in coming time 2.2 Specific objectives Firstly, systematize the theoretical background on sustainable development, FDI attraction and FDI attraction towards sustainable development; develop a theoretical framework for analyzing and evaluating FDI flows towards sustainable development in Vietnam; Secondly, study the experience of FDI attraction in some countries such as China and Thailand Thirdly, objectively assess the FDI status in Vietnam over the past years in two aspects: achievements and existing shortcomings; impacts of FDI on Vietnam in terms of sustainable development; identify causes of ineffectiveness in FDI attraction and usage in Vietnam Fourthly, propose solutions to attract and maintain positive impacts of FDI in Vietnam in the direction of sustainable development Objects and scope of research 3.1 Research objects The research object of the thesis is foreign direct investment attraction towards sustainable development in Vietnam from 2006 to 2016 3.2 Scope of research +) In terms of content: The thesis focuses on analyzing the effects of FDI on sustainable development in Vietnam in terms of main pillars: economic, social and environmental In the "economic" pillar, the thesis examines the positive and negative effects of FDI on economic development In the "social" pillar, the thesis focuses on the effects of FDI on labor and wages In the "environment" pillar, the thesis analyzes some negative impacts of FDI on the environment and its causes +) In spatial terms: The thesis examines the general situation of FDI towards sustainable development in Vietnam, not limited to geographic locations in terms of regions and territories in Vietnam +) In temporal terms: The thesis focuses on FDI towards sustainable development in Vietnam in the period from 2006 to 2016 Approach and Methodology The thesis topic in Economic Management major is a comprehensive research that includes explanatory research, research on current situation and practical reviews, anticipatory research and research on solutions to clarify theoretical and practical bases on FDI and FDI towards sustainable development in Vietnam New scientific contributions of the thesis - To a certain extent, conducted an overview of both domestic and foreign researches related to the thesis topic to identify research gaps and issues to be studied by the thesis; - Systematized some contents related to general basis on FDI attraction towards sustainable development, including concepts, contents, evaluation criteria and factors affecting FDI attraction in the direction of sustainable development; - Assessed the actual situation of FDI attraction towards sustainable development in Vietnam in the period 2006-2016; from which causes of shortcomings were identified - Based on the analysis of opportunities and challenges of FDI attraction and targets of FDI attraction in the direction of sustainable development in Vietnam towards 2025, the thesis proposes a system of solutions to improve the attraction of foreign direct investment into Vietnam in the following years Theoretical and practical significances of the thesis 6.1 Theoretical contribution The thesis systematized basic theoretical issues on FDI attraction towards sustainable development 6.2 Practical contribution The thesis identified shortcomings in terms of policy and state management in attracting and using FDI flows efficiently and sustainably Scientific and practical-based recommendations serve as reliable sources for policy makers to refer, develop and issue feasible solutions The thesis would provide an additional "channel" of information for enterprises to make right decisions, as well as proactively propose FDI projects in line with Vietnam's sustainable development goals in coming time The structure of the thesis Apart from the introduction, conclusion, appendices and references, the thesis consists of four chapters: Chapter I: Overview of researches related to foreign direct investment towards sustainable development Chapter II: Theoretical and practical bases for foreign direct investment towards sustainable development Chapter III: FDI attraction from sustainable development perspective in Vietnam in the period 2006-2016 Chapter IV: Orientations and solutions to attract FDI in the direction of sustainable development towards 2025 with a vision to 2030 CHAPTER OVERVIEW OF RESEARCHES RELATED TO FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT 1.1 Overview of published domestic and foreign studies about FDI and impacts of FDI from sustainable development perspective 1.1.1 Overview of foreign researches a) FDI and economic issues The relationship and impacts of FDI on the economy has no longer been a new issue and has been studied by various researches Studies by Moosa, Imad A (2002) in Foreign Direct Investment: Theory, Evidence and Practice; the study by Laura Alfaro (2003) named "Foreign Direct Investment and Growth: Does the Sector Matter?" and the study by Mohammad AA & Mahmoud KA (2013) titled "Foreign Direct Investment and Economic Growth Review Literature from 1994 to 2012" focus on the impacts of FDI on various aspects of economic development and growth, including both positive and negative impacts The OECD Benchmark Definition of Foreign Direct Investment (2008) sets measurement & statistics standards of FDI impacts on balance of payments, and analyzes the relationship between FDI, trade and trade policy In the International Business: Theory of the Multinational Enterprise edited by Alan M Rugman, Richard E Caves analyzes the effects of FDI on the recipient country’s market b) FDI and social issues The relationship between FDI and social issues is mostly mentioned in terms of labor, wages and welfare Arnal, E & A Hijzen (2008) in the study “The impact of Foreign Direct Investment on Wages and Working Conditions” argues that FDI firms tend to pay higher wages than domestic firms, and the impact of FDI on wages is positive, and most evident in developing countries In the study named "Foreign direct investment and welfare", Olaf J de Groot (2014) examines the relationship between FDI and general welfare, which shows that FDI increases inequality, and brings benefits for the rich more than for the poor In the study titled "Rising Income Inequality: Technology, or Trade and Financial Globalization?” Jaumotte, F., S Lall, and C Papageorgiou (2008) also find that FDI results in higher income inequality c) FDI and environmental issues Most studies on the relationship between FDI and environmental issues show that FDI has negative impacts on the environment of the recipient country, increases CO2 emissions and water pollution, and so on A number of studies can be cited such as the study by Theodore H Moran (2011) titled "Foreign Direct Investment and Development: Launching a Second Generation of Policy Research”, the study by Jiajia Zheng & Pengfei Sheng (2017) named “The Impact of Foreign Direct Investment (FDI) on the Environment: Market Perspectives and Evidence from China" and the study by Mohammad S.A., Fatemeh Z., Reza S., Nader H & Marjan D (2013) titled "The Impact of FDI on environmental resources in selected countries" 1.1.2 Overview of domestic researches a) FDI and economic issues The role of FDI in economic growth, production capacity, budget revenue and macroeconomic balance is analyzed in "Foreign direct investment in Vietnam Theory and Practice" by Phung Xuan Nha (2013), and "Impact of Foreign Direct Investment on Economic Growth in Vietnam" by Nguyen Thi Tue Anh et al The impacts of FDI on the economy are also influenced by various factors For example, Nick J Freeman (2002) in the study titled "Foreign Direct Investment in Vietnam: An Overview" points out how policies affect FDI impacts on economy growth; the study named “Foreign direct investment and economic growth in Vietnam” by Anwar, S & Phi Lan, N (2010) specifies other factors such as education, training, financial markets, etc In addition to the positive impacts, the author, Tran Phien (2012) in the study titled "The Negative Impacts of Foreign Direct Investment on Socio-Economic Development in Viet Nam", highlights the negative effect of FDI on the recipient country in terms of economic aspect b) FDI and social issues The Report "Viet Nam Industrial Investment Report 2011: Understanding the impact of Foreign Direct Investment on industrial development” by MPI confirms that FDI has positive impacts on Vietnam's labor market such as creating more jobs, but no significant impacts on the improvement of skills and qualifications The "Annual Report on Vietnam Business Forum 2016" of the World Bank identifies the reasons for the limitations in promoting the spillover effects on technology and labor productivity of FDI enterprises, and proposes several solutions John Mc & Myunghwan Y (2016) in the study named "FDI and inequality in Vietnam: An approach with census data" suggest that the increase in FDI in a province is related to the reduction in living conditions of households if they have no members working for foreign businesses; Other studies also mention the spillover effects of FDI on social dimensions such as education, technological level, labor skills, etc c) FDI and environmental issues In the study titled “Impacts of FDI on Sustainable Development Objectives of Vietnam in International Economic Integration”, Doan Tranh, & Thoa NT (2016) identify some positive effects of FDI projects in Vietnam on the environment such as the investments in the field of water supply and waste treatment However, there are few investment projects in the environmentfriendly areas which account for about 0.2% of the total number of projects Meanwhile, Vietnam faces negative environmental impacts caused by FDI projects More and more FDI projects are found polluting the environment in the North, Central and South of Vietnam, which pollute the water, air, destroy biodiversity, degrade the environment and cause serious impacts on human life and health 1.2 The issues of the thesis not having been addressed by published researches (research gaps) FDI is no longer a new topic and has been studied from various perspectives However, the researches focus on analyzing individual factors only such as the impact of FDI on economic development, the impact of FDI on export market, capital market, labor and employment, technological factor, the relationship between FDI and labor Therefore, none of the researches has actually provided a proper and comprehensive concept, framework and procedure about FDI in the direction of sustainable development; nor proposed a set of criteria to assess FDI towards sustainable development in Vietnam; nor assessed the status of FDI in Vietnam from the sustainable development perspective, thereby appropriate solutions are recommended 1.3 Key issues addressed by the thesis The thesis will focus on clarifying the theoretical framework of FDI attraction towards sustainable development, thereby presenting the definition and approach of FDI attraction towards sustainable development in line with the context of socio-economic development in Vietnam Based on the assessment of the current status of FDI attraction and usage in Vietnam from the sustainable development perspective, the thesis analyzes shortcomings and causes, and then recommends orientations and solutions to overcome and improve the quality of FDI attraction in the coming period CHAPTER THEORETICAL AND PRACTICAL BASES FOR FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE DEVELOPMENT 2.1 The concept of FDI attraction 2.1.1 In the world "Foreign direct investment is an amount of capital invested to obtain long-term benefits in a business operating in an economy different from the economy of the investor Apart from profitability purpose, the investor also wants to gain a foothold in the management of the enterprise and market expansion” The growing importance of FDI is due to the recognition of the tremendous contribution of FDI to the economic development, and the provision of capital, technology, and modern management skills to the host countries FDI is affected by specific factors in the host country and the investor’s country Regarding the host country, these FDI attraction factors include natural resources such as mineral, while cheap labor is seen as a noless-important factor, especially when an import substitution policy is adopted which brings a great opportunity for investors Several theories of foreign direct investment are as follows: Theory of marginal profit: The theory mentions that the capital inflow will move from a country with low interest rate to a country with a high interest rate until an equilibrium is reached (the two countries' interest rates are the same) After the investment, both countries earned profits and the world's output increases higher than before investment (i) Eclectic theory or OLI model: A company wishes to engage in FDI activities should have three advantages: (1) Ownership advantages (O); (2) Locational advantages (L) and (3) Internalization advantages (I) (ii) Theory of Investment Development Path (IDP) consists of phases: (1) L advantage of a less attractive country, the inflow of FDI is negligible due to the local market limitations; (2) the inflow of FDI starts to increase as the L advantage attracts investors; (3) the FDI inflow begins to decrease and outflow begins to increase; (4) O advantage of domestic companies increases Laborintensive technologies are gradually being replaced by capital-intensive technologies; (5) the outflow and inflow of FDI continue and their volume is similar 2.1.2 In Vietnam FDI constitutes an important resource of the economy and joins the domestic resources in creating the aggregate strength for the attainment of the objectives of national industrialization and modernization and economic restructuring FDI attraction must ensure conformity with planning and the concentrated and unified direction of the central government in couple with rational decentralization to localities on the basis of socio-economic conditions and the capability and quality of officers, ; special importance must be attached to the effectiveness of the state management through inspection and supervision to ensure the strictness of law 2.2 Perspectives on Sustainable Development 2.2.1 In the world Sustainable development is "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (Worldbank, 2016) sector in relation to other economic sectors); (2) state budget revenues, and (3) ability to assist the recipient country to restructure its economy in line with its economic development strategy - Savings and increasing net foreign currency earnings: - Contribution of FDI to export: It is shown in the net export value of the FDI sector in the host country b) Evaluation criteria of "social" pillar: Increased employment: Increased employment from FDI = (Number of employees working in FDI sector x Number of working years + Number of employees increased due to related projects, sectors x Number of working years - Number of employees lost their jobs due to FDI x Number of unemployment years) - Ability to create jobs: Proportion of employments created by FDI sector = Number of employees in FDI sector / total employees of the whole country x 100% - Income of labor: - Labor productivity: Productivity of social labor = Gross domestic product (GDP) / Average number of employees - Level of technology transfer: shown in (1) the number of technology transfer contracts in the host country; (2) the proportion of investment projects coming from source technology countries; (3) the level of modernity and up-todate of technologies transferred; (4) TFP of FDI sector; (5) localization rate The higher the indicators are, the greater level of technology transfer of FDI enterprises to the recipient country is c) Evaluation criteria of "environmental" pillar: - Impact of FDI on environment: FDI enterprises polluting the environment = (Number of enterprises failing to comply with regulations on environmental protection / Total number of FDI enterprises) x 100% In addition, the level of impact of FDI projects on the environment of the recipient country can be assessed based on: Values of environmental indicators (emissions, waste, noise, etc.), the ratio of the cost of FDI enterprises spent on 11 environmental improvement activities to the total revenues of the enterprises; the proportions compared to those of countries with similar conditions and to the world average 2.6 Key groups of factors affecting FDI attraction towards sustainable development The thesis analyzes four main groups of factors affecting FDI attraction towards sustainable development, including (i) Policy framework relating to FDI attraction; (ii) labor quality of the recipient country; (iii) Infrastructure of the recipient country; (iv) Economic and political situation in the region and in the world 2.7 Experience of several countries in FDI attraction towards sustainable development From the experience of FDI attraction of China and Thailand, the lessons learned for Vietnam are: (i) FDI policies need to be harmonized, aligned with the overall national development objective set in the 10-year strategy, 5-year plan and annual plan in each period of development; (ii) In addition to financial incentives, many other factors also determine FDI attraction such as infrastructure, labor, management capacity, etc.; (iii) Investment procedures should be strict, and comply with standards on construction, environmental protection CHAPTER FDI ATTRACTION FROM SUSTAINABLE DEVELOPMENT PERSPECTIVE IN VIETNAM IN THE PERIOD 2006-2016 3.1 Overview of situation of FDI attraction in Vietnam in the period 2006-2016 3.1.1 Status of investment promotion In general, investment promotion activities in localities have been quite positive in various aspects such as: (1) local investment promotion activities have been developed quite properly, in line with the national socio-economic development master plan and plan; (2) investment promotion activities have 12 been conducted proactively rather than passively; (3) investment promotion activities have been integrated into trade and tourism; (4) Localities have encouraged and made use of socialization funding to deploy promotion activities 3.1.2 Status of Investment attraction As of 20/06/2017, there were 23,594 active projects with a total registered capital of USD 306.3 billion in Vietnam Accumulated implementation capital of the FDI projects was estimated at USD 162.57 billion, equivalent to 53% of total registered capital Foreign investors invested in 19 out of 21 sectors in the national standard industrial classification The processing and manufacturing sector attracted the largest capital, with USD 180.68 billion, accounting for 58.98% of total investment capital, followed by real estate sector with USD 50.99 billion, accounting for 16.6%, and electricity, gas, water manufacturing and distribution with USD 18.83 billion, accounting for 6.14% of total investment As of June 2017, 120 countries and territories have invested in Vietnam South Korea ranked first with a total registered capital of USD 54.5 billion (accounting for 17.7% of total investment capital) 3.2 Analysis of factors influencing FDI attraction towards sustainable development in Vietnam during 2006-2016 3.2.1 Macroeconomic environment factors a) Macroeconomic environment stability In the ranking of the World Economic Forum announced in 2017, Vietnam's trade environment is estimated to climb 14 ranks to 73rd out of 136 economies evaluated According to the World Bank's Ease of Doing Business Report published at the end of October 2016, Vietnam's business environment was recorded to have the strongest improvement since 2007, up points (from 91/189 to 82/190) It can be said that Vietnam has taken firm steps, and made efforts to change policies, and create a healthy investment environment and establish sustainable economic development areas b) Level of international economic openness of the recipient country Vietnam has become a member of many trade agreements and is also negotiating a number of other important trade agreements Specifically: By the end of 2016, Vietnam signed and implemented 10 FTAs, concluded two FTA 13 negotiations, and is negotiating four other FTAs Following the viewpoints and policies of the Party, the process of opening up, proactively and actively integrating into the global economy has opened up a new development space for Vietnamese economy c) Legal system of the recipient country Positive aspects: Vietnam is becoming an attractive destination for foreign investors since Vietnam has made significant legal reforms related to the investment environment and foreign investment The Government has promulgated and amended the Law on Investment, the Law on Enterprises, circulars and decrees to improve the investment environment and give more incentives to attract more foreign investors Limitations: Although administrative procedures for entry into Vietnamese market have been continually simplified, FDI enterprises are still much concerned about post-registration regulations; In addition, financial incentives, especially taxes, play an important role in attracting FDI and selecting investment locations in Vietnam However, this kind of incentives also reveals a number of issues for consideration; the supporting industry development policy for Vietnamese enterprises to connect with FDI enterprises and participate in the global value chain has not resulted in significant changes in the actual situation d) Capital attraction strategy for national socio-economic development The Socio-Economic Development Strategy for 2011-2020 shows that the socio-economic development goals in this decade will focus on the quality of growth, or in other words, in-depth and sustainable growth, rather than quantity, and ensure the macro balances to stabilize the economy in the long run 3.2.2 Internal factors of Vietnam a) Labor quality Positive aspects: Vietnam's labor productivity has improved significantly and continuously over the years, and the relative labor productivity gap between Vietnam and regional countries has been reduced; the labor force participation rate is high; Vietnam’s human resources quality has also been improved 14 Limitations: Vietnamese skilled labor failed to meet the market requirements; the quality of education and vocational training in Vietnam remains a concern for foreign investors b) Infrastructure system Thanks to the attention of the Government, the socio-economic infrastructure system has been gradually improved to meet the development requirements; Investment resources for infrastructure development have been increasing and diversifying; Forms of investment, construction, operation and business have been diversified and expanded However, in general, the infrastructure system of Vietnam reveals a number of limitations, lack of synchronization, poor connectivity; Urban infrastructure is of low quality and overloaded Social infrastructure is short in quantity and low in quality, inefficient, and failed to meet basic demand for social services c) Vietnam's advantages in attracting foreign direct investment Firstly, the stable security and political situation is an important condition for deciding to set up long-term investment activities in Vietnam Secondly, Vietnam has a favorable geographic position in trade with the world as well as a connection hub of the region and a gateway to penetrate economies in the western part of the Indochina Peninsula Thirdly, with a population of 92 million people, Viet Nam has the advantage of abundant and quality labor force with competitive labor costs 3.2.3 Factors related to investors a) Regional and global socio-economic situation In the first phase of opening, FDI is an effective solution to help Vietnam out of the difficult situation of blockade, embargo In the next phases, FDI is an important supplementary source of total social investment capital Therefore, Vietnam encourages FDI and offers various incentives such as licensing, finance, taxes, land use, etc to attract FDI In the period of 2006-2016, with the accession to the World Trade Organization (WTO) in 2006, foreign inflows into Vietnam increased dramatically, especially in FDI Recently, after a series of serious environmental incidents caused by FDI companies recently discovered, together with the implementation of the United 15 Nations sustainable development goals, Vietnam is shifting its focus on hightech and environment-friendly FDI projects, research and development, etc b) Investment strategy of foreign investors Depending on each stage, each investor has different purposes when investing in Vietnam In the past, the main attraction for foreign investors in Vietnam was the advantage of cheap labor At present, foreign investors choose Vietnam as their destination because of its competitive advantages such as high and stable economic growth rate over the years, political economic stability, improved investment environment, increasingly transparent legal framework and better support for investors, etc 3.3 Evaluation of FDI attraction activities in Vietnam from sustainable development perspective 3.3.1 Economic aspect Positive aspects: FDI made contribution to the state budget; to the GDP (contribution of the FDI sector to GDP was 6.3% only in 1995, increased to 15.2% in 2000 and 19.6% in 2013); to total social investment capital (contribution of the FDI sector made up 22% of total social investment capital during 2011-2015); to the export (export of the FDI sector accounted for 65.2% of total export turnover of the country in the period 2011 - 2015) Limitations: Orientation of FDI attraction by sectors and partners remains limited; the high degree of concentration of FDI in some localities may cause regional imbalances; the technology level of FDI enterprises in Vietnam failed to meet expectations; Vietnam is also facing the risk of relying too much on external resources; some FDI enterprises have the phenomenon of "transfer pricing" in Vietnam 3.3.2 Social aspects Positive aspects: The number of employees working in FDI enterprises has increased over time; average salary of employees in the FDI sector is higher than that in other sectors; the presence of foreign invested enterprises has had a positive impact on the improvement of labor productivity to a certain extent Limitations: The number of jobs generated by the FDI sector is still low compared to the demand for jobs in Vietnam each year; Laborers working in 16 many FDI enterprises have poor stability; The number of strikes in FDI enterprises tends to increase, both in size and in complexity 3.3.3 Environment aspect Some localities were not cautious enough in selecting FDI projects and investors which resulted in environment pollution caused by some enterprises, high consumption of energy, and no socio-economic benefits; Investment and recurrent costs for environmental protection account for a small proportion of total investment, production and business cost of FDI enterprises 3.4 Reasons of FDI attraction limitations in Vietnam from sustainable development perspective 3.4.1 Objective reasons a) Macroeconomic environment reasons During the financial crisis and global economic recession (2008-2014), a number of FDI enterprises must reduce their production scale, which greatly affected the performance of FDI in Vietnam In 2016, the global economy was affected by the slow economic growth of some economies, geopolitical uncertainties such as the Brexit, European migrant issue, and the United States presidential election which had a negative impact on investor sentiment, and resulted in shrinking psychology, or finding safe havens instead of looking for investment locations b) Investors-related reasons Majority of FDI enterprises focus on taking advantages of cheap labor cost, available resources, easy-going consumer markets to assemble and process products for domestic consumption and export; FDI enterprises engaged in high-tech industries tend to import inputs from their home countries rather than from FDI enterprises operating in low-tech industries and use fewer domestic private suppliers; Some FDI enterprises took advantage of loopholes in state management to cause environmental pollution; Trade unions in FDI enterprises have not yet promoted their role as representatives of the legitimate interests of employees 17 3.4.2 Subjective reasons Planning remains poor and there is a lack of sectoral planning, product planning; State management of investment promotion is still limited, investment promotion method has not been coordinated effectively and smoothly from central to local, which results in wasting resources; Decentralization of investment is not appropriate to the actual situation; The examination and issuance of Investment certificates are not done properly in some cases; The legal system, investment policies and investment attraction perspective remain unclear; The State has not invested adequately in the construction of technical infrastructure and training of human resources in economically underdeveloped areas CHAPTER ORIENTATIONS AND SOLUTIONS TO ATTRACT FDI IN THE DIRECTION OF SUSTAINABLE DEVELOPMENT TOWARDS 2025 WITH A VISION TO 2030 4.1 Future context for FDI attraction 4.1.1 Opportunities Vietnam has been deeply integrating into the global economy, thus, the trade relation between Vietnam and other countries will become stronger, capital flows from highly developed countries can bring substantial benefits; business environment is improved, which can be seen as advantages of Vietnam in the future 4.1.2 Challenges The integration process will have a profound effect on all fields of the entire economy, which requires Vietnam to better comply with technical standards, intellectual property, quality of labor, etc The United Nations adopts 17 sustainable development goals and 169 targets, which poses challenges to 18 Vietnam's economic development and investment attraction, but ensures commitments to sustainable development 4.2 Demand and potential for FDI attraction The average annual demand for FDI implementation capital is about USD 14-15 billion (purely foreign capital) The demand increases over time, about USD 9-10 billion/year in 2011- 2012; increased to USD 13-14 billion/year in 2014-2015, and USD 21-22 billion/year in 2019-2020 In terms of potential FDI attraction, objectively, domestic conditions still have a number of favorable factors to attract foreign investors Vietnam is ranked high on political stability, and highly appreciated by the international community, which makes existing foreign investors confident in operating in Vietnam while attracting new investors looking for investment locations 4.3 Viewpoints and orientations for FDI attraction towards sustainable development in Vietnam The viewpoints on FDI are reflected in the Government Resolution No 103/NQ-CP on "Orientation to increase efficiency of attracting, using and managing foreign direct investment", namely: - Foreign-invested economy constitutes a part of the national economy, is encouraged by the State for long-term development, has its rights and legitimate interests guaranteed and is equally treated on the basis of cooperation for mutual benefit and fulfillment of Vietnam’s international commitments - FDI constitutes an important resource of the economy and joins the domestic resources in creating the aggregate strength for the attainment of the objectives of national industrialization and modernization and economic restructuring - FDI attraction must ensure conformity with planning and the concentrated and unified direction of the central government in couple with rational decentralization to localities on the basis of socio-economic conditions and the capability and quality of officers, ; special importance must be attached to the effectiveness of the state management through inspection and supervision to ensure the strictness of law 19 - The revision of foreign investment policies and laws must adhere to the principle of making them more and more competitiveness, favorable and preferential Orientations for FDI attraction in coming time: 1) To attract FDI in the direction of selecting projects with high quality and added value and using modern and environment-friendly technologies, especially information technology and bio-technology to serve agriculture; developing infrastructure, training high-quality human resources, conducting research and development, providing modern services, etc 2) To intensify the attraction of large-scale projects with highly competitive products and joining the global value chains of transnational groups, thereby building and developing supporting industries and enterprises; to encourage industrial projects to gradually shift from processing to manufacture; to select big and prestigious investors to develop the financial market; while attaching importance to medium- and small- scale projects suitable to each economic sector and each locality 3) To encourage, facilitate and promote the alignment among FDI enterprises and between FDI and domestic enterprises 4) To plan FDI attraction by sectors, fields and partners, suitable to the advantages of each region and each sector in order to promote the investment efficiency of each locality and each region in conformity with the overall planning, ensure the national interests and the economic restructuring after a new growth model 4.4 Solutions to attract FDI towards sustainable development in Vietnam 4.4.1 Solutions for identifying development goals a) Develop the list of spearhead product sectors, regions, growth-driving economic elements: The accurate identification of the list of spearhead product sectors, regions, growth-driving economic elements will serve as a basis to make proper orientations for attracting FDI into key economic sectors, regions and territories 20 b) Orientations for markets and partnerships: Vietnam still needs to attract FDI of small and medium enterprises into supporting industries While attaching importance to international investment of small and medium enterprises, Vietnam should shift to attract FDI of transnational companies (TNCs) Given the globalization and the Fourth Industrial Revolution, Vietnam's industrialization policy needs to take advantage of new opportunities as a number of the world's leading TNCs invest in information technology, and build centres for Research and Development (R&D) in our country c) Orientations to attract FDI into territories, localities, industrial parks and economic zones: In each locality and territory, it is necessary to make proper orientations for attracting FDI in conformity with characteristics of each region based on actual situation For instance, big cities such as Hanoi, Ho Chi Minh City, Hai Phong and Da Nang should shift to attract projects with hightech, modern services and high-quality human resources training 4.4.2 Solutions for improving the legal framework a) FDI policy reform: including the improvement of legal framework and policies related to FDI Policies and laws relating to FDI should be further improved to make them consistent in implementation and create favorable business environment for enterprises; labor and wage policies (satisfactorily settle labor and wage disputes, complete procedures for laborers working in foreign-invested enterprises such as signing labor contracts, collective labor agreements, create and promote the role of trade unions, party organizations and youth unions); environmental protection policy; policies related to investment promotion activities b) Improve investment and business environment, review policies that are hindering FDI attraction 4.4.3 Solutions for implementation organization a) Promote technology transfer: Technology transfer is suggested to occur in either one of two ways: horizontal transfer or vertical transfer The mechanisms for horizontal technology transfer include (i) learning by observing and imitating, (ii) movement of employees between multinational corporations 21 and domestic companies, and (iii) through competitive pressure placed on domestic firms b) Improve the efficiency of state management of FDI attraction: The State should develop investment mechanisms to attract resources of foreign investors in sectors and fields that have strong vertical and horizontal linkages with domestic enterprises; Strengthen the capacity of the local enforcement apparatus; Reform the administrative procedures in the direction of getting people and enterprises as serving objects; Strengthen the inspection and supervision of foreign investment activities c) Improve the quality of human resources: At present, "abundant and cheap labor" is no longer a competitive advantage of Vietnam to attract FDI, thus Vietnam should develop a good strategy of training human resources, both in knowledge and skills and in modern industrial working style This will be the decisive comparative advantage of Vietnam in the period of deep integration into the world economy d) Diversify the forms of FDI attraction and adopt preferential policies: In addition to the traditional forms of foreign direct investment such as business cooperation contracts, joint venture enterprises and 100%-foreignowned enterprises, it is necessary to expand new forms of investment such as Build - Operate - Transfer (BOT), Build - Transfer (BT), Public - Private Partnership (PPP) e) Promote linkages between domestic and FDI enterprises: FDI plays an important role in the development of the economy, however, if the Vietnamese economy wants to develop sustainably, it is impossible not to have the domestic private sector growing efficiently The largest part of the Vietnamese economy is small and medium enterprises (SMEs), and thereby promoting the development of SMEs will significantly improve the entire economy f) Promote investments in supporting industries development to enable domestic firms to participate in the global production chain 22 CONCLUSIONSAND RECOMENDATIONS The thesis titled "Attracting foreign direct investment towards sustainable development in Vietnam” with aims to clarify the theoretical and practical issues related to FDI attraction from the sustainable development perspective; analyze the situation of FDI attraction in Vietnam and the impacts of FDI attraction and usage policies on economic growth, social justice, rational use of natural resources and environmental protection Thereby, propose key orientations and solutions to attract FDI projects in the direction of sustainable development in Vietnam Given those objectives, the thesis has achieved the following results: Firstly, systematize and clarify the theoretical and practical issues of FDI attraction from the sustainable development perspective Through different perspectives and concepts of organizations and individuals on FDI attraction, sustainable development, the thesis initially establishes a system of criteria for assessing the sustainable development when attracting FDI into Vietnam, thereby propose solutions to attract high-quality FDI in line with Vietnam's development objectives in coming time Secondly, through the study of experiences of other countries, the thesis has drawn lessons on FDI attraction towards sustainable development in Vietnam Thirdly, by analyzing and assessing the situation of FDI attraction in Vietnam based on the proposed economic, social and environmental criteria and processes, the thesis highlights the strengths and especially unsustainable factors in attracting FDI in recent years Fourthly, based on the viewpoints and orientations for FDI attraction and the sustainable socio-economic development of the country, the thesis proposes 03 groups of solutions, including 11 measures to attract FDI in the direction of sustainable development in coming time Given the system of arguments, analysis of the current situation and proposal of solutions of the thesis titled "Attracting foreign direct investment towards sustainable development in Vietnam”, the author hopes to make a 23 contribution to raising the voice about the FDI attraction towards sustainable development in Vietnam in the near future The thesis has basically met the research objectives set, but the research is conducted on a wide range of time and space scales, and the statistics are not consistent and continuous enough Besides, some criteria for assessing the effectiveness of FDI in the direction of sustainable development in Vietnam listed in Chapter have not been evaluated (Chapter 3) because of statistics limitations, and time constraint In the "social" pillar, the author assesses the current situation of labor and wages as part of the "social" pillar Therefore, although the author has made great efforts to complete the thesis, shortcomings are inevitable The author looks forward to receiving comments of local and international experts, researchers to continue to improve and further develop the research 24 LIST OF WORKS OF THE AUTHOR Dinh Khanh Le (2016), "Attracting Foreign Direct Investment (FDI) New Challenges" Journal of Finance and Accounting Research, No 06 (155) 2016 Dinh Khanh Le (2016), "Attracting FDI and environmental protection and economic growth in Vietnam" Journal of Finance and Accounting Research, No 05 (154) 2016 Dinh Khanh Le (2012), "Competition in Vietnam's banking activity after WTO accession" Journal of Finance and Accounting Research, No 12 (113) 2012 Dinh Khanh Le (2013), "Achievements of economic indicators in controlling inflation in 2012" Journal of Finance and Accounting Research, No 01 (114) 2013 ... consider FDI attraction in the direction of sustainable development Therefore, the thesis research: Attracting foreign direct investment towards sustainable development in Vietnam proves to be very... maintain positive impacts of FDI in Vietnam in the direction of sustainable development Objects and scope of research 3.1 Research objects The research object of the thesis is foreign direct investment. .. confident in operating in Vietnam while attracting new investors looking for investment locations 4.3 Viewpoints and orientations for FDI attraction towards sustainable development in Vietnam The