Báo cáo Tác động của FDI đến kinh tế Việt Nam: tăng trưởng và phát triển: Economic development is always an urgent global requirement. Globalization connects countries together more importantly, plays an important role in developing countries. Financial flows, information, skills, technology, item goods and services between countries are on the rise. Trade plays an important role in improving skills through imports and advanced technology. Export businesses are motivated to apply technology to deal with competition fierce (Frankel and Romer, 1999). Trade liberalization reduces the cost of international transactions and necessary early direct foreign investment. The liberalization of capital flows already contribute to the expansion of foreign direct investment capital flows. Because the production process is dispersed and moves across the board microglobal, the global value chain has become central to the world economy (Cattaneo et al., 2010). FDI is one of the most dynamic elements in the stream international resources, it is a package of tangible and intangible assets, image and catalyst for investment and capacity in the country. FDI helps to supplement development investment capital (Brems. H., 1970), Human Resource Development and Job Creation (Gregorio, Jose, 2003), market expansion
FOREIGN TRADE UNIVERSITY GROWTH AND DEVELOPMENT MID-TERM REPORT IMPACTS OF FDI ON VIETNAM’S ECONOMY GROUP 02 Hoàng Ngọc Anh - 1814450010 Phạm Ngô Quỳnh Giao – 1814450028 Nguyễn Quang Huy – 1814450043 Nguyễn Trọng Nhân - 1814450059 Class: KTEE410(1.2/2021).1 Instructor: Mr Pham Xuan Truong Hanoi, 03/2021 TABLE OF CONTENTS INTRODUCTION CHAPTER THEORETICAL BACKGROUND 1.1 Definition of FDI 1.1.1 Concept 1.1.2 Characteristics of FDI 1.1.3 Driving forces of FDI 1.2 FDI classification 1.2.1 Horizontal FDI 1.2.2 Platform FDI 1.2.3 Vertical FDI 1.3 General impact of FDI on economy 1.3.1 Impacts on financial market 1.3.2 Impacts on economic growth 1.3.3 Impacts on labour force 11 1.3.4 Impacts on technology 11 CHAPTER PRACTICAL SITUATION IN VIETNAM AND IMPACTS OF FDI ON VIETNAM’S ECONOMY 13 2.1 Practical situation in Vietnam 13 2.1.1 FDI situation from 2000 to 2007 13 2.1.2 FDI situation from 2008 to 2019 16 2.1.3 FDI situation in 2020 23 2.2 Impacts of FDI on Vietnam’s economy in the period 2000 - 2020 26 2.2.1 Impacts on Financial Market 26 2.2.2 Impacts on Labor Force 29 2.2.3 Impacts on Technology 36 2.2.4 Impacts on Economic Growth 39 CHAPTER POLICY RECOMMENDATION 46 3.1 Opportunities and challenges for Vietnam attracting FDI 46 3.1.1 Opportunities 46 3.1.2 Challenges 53 3.2 Policies in attracting FDI 58 3.3 Policies in utilizing FDI positive impacts 61 CONCLUSION 63 REFERENCES 65 INTRODUCTION Rationality of the study Economic development is always an urgent global requirement Globalization connects countries together more importantly, plays an important role in developing countries Financial flows, information, skills, technology, item goods and services between countries are on the rise Trade plays an important role in improving skills through imports and advanced technology Export businesses are motivated to apply technology to deal with competition fierce (Frankel and Romer, 1999) Trade liberalization reduces the cost of international transactions and necessary early direct foreign investment The liberalization of capital flows already contribute to the expansion of foreign direct investment capital flows Because the production process is dispersed and moves across the board microglobal, the global value chain has become central to the world economy (Cattaneo et al., 2010) FDI is one of the most dynamic elements in the stream international resources, it is a package of tangible and intangible assets, image and catalyst for investment and capacity in the country FDI helps to supplement development investment capital (Brems H., 1970), Human Resource Development and Job Creation (Gregorio, Jose, 2003), market expansion and export promotion import, speed up the process of economic restructuring Objectives of the essay Like several other developing countries, Vietnam wants to boost the position of foreign direct investment (FDI) in its growth by drawing more FDI One of the cornerstones of Vietnam's economic growth policy for nearly two decades, since the country's opening to the world in 1986, has been to raise FDI The Vietnamese government has built a friendly atmosphere for foreign direct investment The Vietnamese government has established an attractive environment for FDI, including the passage of an FDI legislation in late 1987 and several amended FDI laws based on investor feedback Object and scope of the essay This research explores the effects of FDI on the Vietnamese economy using data from 2000 to 2021 in order to determine the importance of FDI to the Vietnamese economy The results of this paper should be used to make suggestions to policymakers in order to enhance their estimates of the impact of FDI on the country's growth There are several studies currently being conducted on the relationship between FDI and the economy Between 1991 and 2009, Assiobo Komlan Mawugnon and Fang Qiang studied the causal association between Foreign Direct Investment (FDI) and Economic Development in Togo Hansen and Rand (2004) argued that FDI has a long-term effect on GDP However, little study has been done in Vietnam on the relationship between FDI and the economy This paper fills in the gaps by looking at the effect of foreign direct investment on Vietnam's economy before and after the COVID-19 pandemic Research methodology By collecting, investigating and analyzing data of FDI into Vietnam and how Vietnam’s economy has changed due to the presence of FDI, our group make comments on the impact of FDI on Vietnam’s economy and have some recommendations Structure of essay This paper includes chapters: Chapter 1: Theoretical background Chapter 2: Practical situation in Vietnam Chapter 3: Policy recommendation CHAPTER THEORETICAL BACKGROUND 1.1 Definition of FDI 1.1.1 Concept A foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets in a foreign company However, FDIs are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies 1.1.2 Characteristics of FDI - Investors must contribute a minimum amount of capital according to the regulations of each country Vietnam's Foreign Investment Law stipulates that foreign investors must contribute at least 30% of the legal capital of a project - The division of management over firms depends on the level of capital contribution If contributing 10% of the capital, the business is completely operated and managed by a foreign investor - The investors' profits depend on the results of their business operations and are divided according to the proportion of capital contributions after paying taxes and dividends - FDI is done through building new businesses, acquiring all or part of existing businesses or merging enterprises - FDI is not only associated with capital movement, but also associated with technology transfer, transfer of knowledge and management experience and creating new markets for both the investor and the investee side - FDI is now associated with international business activities of multinational companies 1.1.3 Driving forces of FDI - Differences in the marginal productivity of capital between countries A capital surplus country usually has a lower marginal productivity A country that lacks capital tends to have a higher marginal productivity This situation will lead to a movement of capital from surplus to scarcity in order to maximize profits Because the production costs of capital surplus countries are often higher than in capital shortage countries However, this does not mean that all activities with high marginal productivity can be invested and produced by enterprises, but also have important and vital activities of enterprises, they still produce by themselves even if that activity is low marginal productivity - Product cycle For most firms engaged in international business, the life cycle of these products consists of three main stages: new product phase; product maturity stage; standardized product stage Akamatsu Kaname (1962) thinks that new products, initially invented and produced in the invested country, can then be exported to foreign markets In the importing country, the advantage of the new product increases the demand on the local market, so the importing country switches to production to replace this imported product by mainly relying on capital and technology of the country outside (product maturity stage) When market demand for new products in the domestic market is saturated, export demand reappears (product standardization stage) This phenomenon takes place cyclically and thus leads to the formation of FDI - The special advantage of multinational companies Multinationals have unique advantages (eg basic competencies) that allow companies to overcome cost constraints abroad, so they are willing to invest directly abroad When choosing a location to invest, multinationals will choose where the conditions (labor, land, politics) allow them to take advantage of these particular advantages Multinational companies often have great advantages in capital and technology to invest in countries with available raw materials, cheap labor costs and often a potential consumer market - Access to the market and reduce trade conflicts Foreign direct investment is a way to avoid bilateral trade conflicts For example, Japan is often complained by the US and Western European countries because Japan has a trade surplus and the other countries have trade deficits in the bilateral relationship In response, Japan has increased direct investment in those markets They manufacture and sell cars and computers in the US and Europe, in order to reduce the export of these products from Japan They also invest directly in third countries, and from there export to North America and Europe - Exploiting experts and technology It is not that FDI is only going from a more developed country to a less developed country The opposite is even stronger Japan is a country actively investing directly in the US to exploit a contingent of experts in the US For example, Japanese car companies have opened vehicle design divisions in the US to employ American professionals The same goes for Japanese computer companies Not only Japan invests in the US, but also other industrialized countries have similar policies China has recently promoted direct investment abroad, including investment in the US The purchase of the laptop division of a multinational company with US nationality, IBM, by the Chinese multinational company Lenovo, is seen as a strategy for Lenovo to approach superior PC technology Vietnamese IBM Or the merger of TCL (China) with Thompson (France) to become TCL-Thompson Electronics, the acquisition of Unocal (China) in the oil exploitation industry by National Offshore Oil Corporation (China) is also with the same strategy - Access to natural resources To source raw materials, many multinational companies seek to invest in countries with rich resources Japan's first wave of foreign direct investment in the 1950s was for this purpose China's FDI now has a similar purpose 1.2 FDI classification 1.2.1 Horizontal FDI A business expands its domestic operations to a foreign country In this case, the business conducts the same activities but in a foreign country For example, McDonald’s opening restaurants in Japan would be considered horizontal FDI 1.2.2 Platform FDI A business expands into a foreign country but the output from the foreign operations is exported to a third country This is also referred to as export-platform FDI Platform FDI commonly happens in low-cost locations inside free-trade areas For example, if Ford purchased manufacturing plants in Ireland with the primary purpose of exporting cars to other countries in the EU 1.2.3 Vertical FDI A business expands into a foreign country by moving to a different level of the supply chain In other words, a firm conducts different activities abroad but these activities are still related to the main business Using the same example, McDonald’s could purchase a large-scale farm in Canada to produce meat for their restaurants 1.3 General impact of FDI on economy 1.3.1 Impacts on financial market Increasing the amount of capital available in the local economy is one of the most direct ways that FDI can contribute to economic growth In developing countries, where capital is usually scarce in relation to labor, policymakers often see potential capital infusion as the most significant advantage of FDI because it boosts investment and GDP in the host economy As a result, FDI enables countries to replace capital generated by domestic savings with capital from abroad However, the extent to which foreign firm activity indeed generates a net increase in capital depends on local financial conditions 1.3.2 Impacts on economic growth Foreign investment has helped to crack the embargo, extend foreign economic ties, and promote Vietnam's membership in ASEAN, as demonstrated by the Framework Agreement signed with the EU, the Trade Agreement signed with the US, the Investment Security and Promotion Agreement signed with 62 countries/territories, and the Economic Partnership Agreement (EPA) signed with Japan and other countries With Vietnam's new status and the needs of international investors met, waves of foreign investment poured in Vietnam has long been regarded as a desirable location for foreign investment However, despite the large number of foreign investments, there are still several issues to be resolved ODA is a notable foreign investment in Vietnam This investment management has been handled and used efficiently and properly of a new type of nonrefundable loan, as well as what remedy for existing inadequacies We start by analyzing the findings of Borensztein et al (1998) They study the impact of foreign direct investment on growth, based on data of 69 less developed economies covering the period 1970-1998, and they reported that FDI promotes technology transfers amongst countries Also, Bengoa and Sanches-Robles (2003) report that FDI positively affect growth for Latin American countries, by using a two-step approach First, they test the link between economic freedom and FDI inflow, after which they test for the link between FDI inflow and growth Also relating to the impact of FDI in Latin American countries are the findings of Bosworth and Collins (1999) They documented that FDI positively affects economic development- their models were based on cross-country data In addition, Barel and Pain (1999) documented the positive impact of FDI on economic development Their analysis was based on four European countries receiving foreign investments originating from the USA Furthermore, Balasubramanyam et al.’s findings (1996) also support the notion that foreign direct investments trigger economic growth However, for FDI to positively affect growth, countries should have exceeded a threshold level of human capital, as has been proposed by Keller (1996) Similar results have been documented by Xu (2000) The findings of Blalock and Gertler (2005) suggest that FDI facilitates the transfer of technology from developed countries to developing countries In addition to meeting a minimum threshold level of human endowment, countries should also invest in their social capacity This has been proposed by Abramovitz’s findings (1986), where he suggested that the term social capacity represents economic stability, human capital and infrastructure By providing proper infrastructure, governments can convince multinationals to invest in their economy 10 GDP growth in 2019 will reach 7.02%, exceeding the target set by the National Assembly (6.6% - 6.8%) The growth rate in 2019 is lower than the growth rate of 7.08% in 2018 but higher than the growth rate of the years 2011-2017 Covid - 19 epidemic "In the context that businesses around the world are looking for a 'stop' capable of ensuring continuity in production activities, Vietnam is facing great opportunities to attract investment capital foreign investment " That is the statement of Ms Carolyn Turk, Country Director of the World Bank (WB) in Vietnam, in her interview with BNEWS / VNA reporter * Vietnam has a competitive advantage and a starting point for economic recovery Vietnam is in good control of the Covid epidemic Vietnam has had to go through three times of anti-outbreak and pandemic control despite the widespread spread of Covid's 51 origins from China It can be said that Vietnam is ahead of the world in this war against pandemic This is an amazing step forward when compared to the world situation Once the pandemic is under control, the Vietnamese economy has the opportunity to return to the reeling of many countries around the world According to the World Bank Country Director, Vietnam has shown "relative resilience" in recording positive economic growth while many other countries cannot Source: Ministry of Planning and Investment 52 On December 21, the World Bank's "Taking Stock" update on Vietnam's economic situation forecast Vietnam to grow nearly 3% by 2020 while the world economy is expected to decline at least 4%, despite facing the biggest global shock in decades Whereas Vietnam quickly prevented the Covid 19 epidemic by closing early and fighting the epidemic as soon as the first cases of infections appeared Meanwhile, most European countries not actively prevent epidemics, causing serious consequences for millions of people infected and dying by Covid every day This makes the epidemic prolonged, leading to many serious implications for the region's GDP This result, placed in the context of a very strong global decline in global investment due to the impact of the pandemic, is considered by the Foreign Investment Agency to be much better than other countries, demonstrating " of Vietnam in the eyes of international investors ” 3.1.2 Challenges The response of experts and businesses from countries at some conferences on FDI attraction in recent days has also confirmed that Talking at the on-line conference on Vietnam with the topic "Vietnam - Rising Stars" on September 7, Mr Nirukt Sapru, General Director of Standard Chartered Bank Vietnam and group of ASEAN and South Asia Given that strong fundamentals such as a young, dynamic and tech-savvy population, a growing domestic market, a growing middle class and an open economy, Vietnam continues offers attractive investment opportunities Although still maintaining investment attractiveness, it is impossible not to admit the challenges facing Vietnam in attracting FDI This is still a "difficult problem" that Vietnam is facing Competition between potential markets The developing economic markets (India, Indonesia ) also have positive actions to attract foreign investment such as: Building industrial zones with large areas, meeting the needs of investors; application of preferential land rental rates; the application of preferential tax rates makes Vietnam gradually lose its advantages in attracting FDI compared to neighboring countries due to the gradual loss of its advantages in labor, natural 53 resources and preferential policies Especially, recently, the rise of India can also be seen as a big challenge for Vietnam in attracting FDI The most important factor leading to the successes in attracting Indian foreign investment capital recently is considered the very attractive business incentives of New Delhi According to Ambassador Pham Sanh Chau, Ambassador Extraordinary and Plenipotentiary of Vietnam to India, Bhutan and Nepal, the most tried measure that India takes to attract FDI inflows is that - Build a very large "clean" land fund of about 461,000 hectares for any investor who has a need This is times the size of Singapore, as well as double the size of Luxembourg - India selected 10 industrial hubs manufacturing in states, with 100 famous industrial zones to introduce to 600 famous companies in the world According to Mr Chau, India has created a mechanism to attract investment capital in the federal and state governments Each state, based on its regional characteristics and strengths, builds a model to attract other countries - India has developed a series of schemes, including tax policies, incentives and other support The Court of Justice decided early about $ 6.62 billion to promote domestic electricity production, consolidate the ecosystem, and other industries and infrastructure With this policy, India is expected, particularly in the electronics and semiconductor sectors will reach an investment scale of 132 billion USD by 2025, creating 500,000 direct jobs, 1.5 million jobs indirectly Along with that are many other advantages such as: Young workforce, good information technology skills, and universal English speaking and so on The source of FDI into Vietnam lacks sustainability Vietnam does not have a long-term strategy to attract FDI Over the past two decades, Vietnam's FDI attraction has been quite impressive, contributing to economic growth However, other targets of attracting FDI have not been achieved, such as the goal of job creation or the goal of attracting high-tech FDI enterprises to create domestic added value 54 Expectations for technology transfer in the manufacturing sector as well as in agriculture forestry - seafood have not come true as the majority of multinational companies entering Vietnam only invest in simple production lines, low technology, little added value Vietnam's FDI depends too much on a few large-scale projects In recent years, the annual FDI capital has been based on a number of billion-dollar projects of investors coming to Vietnam, such as Samsung project, LG Display, These are projects with Many benefits to the locality, however, if these projects are not licensed or withdrawn capital, it will greatly affect that locality Accelerating the process of attracting FDI without selectivity has led to the phenomenon of low-quality FDI into Vietnam such as small capital scale, low technology application, unsustainable Investment efficiency is not high compared to the potentials and strengths of FDI enterprises: For the sake of profitability, FDI often invests in highly profitable industries such as exploitation of natural resources, outsourcing, assembling products using a lot of labor Thus, only exploiting strengths, but not creating the development spread to the branches, causing imbalance in the economic structure, the structure of products, the structure of economic regions of Vietnam Minister of Planning and Investment Nguyen Chi Dung said that although foreign investors' concerns are great, Vietnam must also develop specific criteria to choose investment projects, not attract investment at all costs "Must choose projects using high technology, efficient use of natural resources, at the same time supporting and linking the domestic sector for mutual development," said Minister Nguyen Chi Dung Many localities issued rampant licensing, increasing the registered capital of the project to have achievements, leading to the issuance of too many licenses for projects with the same product without taking into account the ability of the market wastefulness, low investment efficiency (for example, in the case of licensing steel production projects, golf courses, seaport projects ) Excessive tax incentives (changed to avoid the State's regulations on tax), land, labor are voluntarily "broken down" by many provinces, damaging the interests of the country 55 Currently, a number of localities are racing to attract investment capital, leading to unfair competition These localities find ways to attract FDI; they grant overkill incentives that make the country's invaluable natural, ecological and tourism resources cheap As a result, the profits brought to Vietnam from FDI are not commensurate with the value of the lost permanent resources On the other hand, some investment projects are not carefully censored, resulting in no, but the quality of the project is not high, it does not create many jobs and export value but even causes serious environmental pollution important While FDI inflows continue to flow into Vietnam, the number of jobs created is still increasing, but mainly cheap and unskilled labor According to a 2007 survey, foreign companies investing in Vietnam accept illiterate workers and have opened "literacy" classes just to ensure workers can read safety notices and instructions basic lead Nominally, FDI enterprises are known to attract many workers, but in fact these businesses are now trying to fully exploit the cheap labor force, "squeezing out" the sweat of workers without concern training them for their qualifications and skills In fact, although the FDI zone attracts 1.7 million workers, they are all untrained or short-trained workers Another shortcoming is that foreign investment flows mostly poured into relatively low-tech industries, heavy in assembly and processing, but some businesses are in fact workshops of domestic parent companies Policy and legal procedures are ineffective - Current FDI attraction policy is quite complicated and ambiguous There are too many types of investment incentives provided for in many different legal documents This makes it difficult for regulators to implement There is a lack of regulations on investment incentives, creating loopholes for dishonest investors to take advantage of Not to mention, investment incentives are mostly tax incentives, while other investment incentives such as labor training, industrial linkages, supply chains are lacking - Foreign investors, when participating in the Vietnamese market, are often concerned about the complicated and cumbersome procedures involved According to the survey results of VCCI (2019), 59% of enterprises with construction works in the 56 last two years show that they have difficulty in implementing procedures related to land, land clearance Meanwhile, the procedures in the field of tax fees and social insurance take a long time to implement - The current policies and institutions not have factors that promote linkages and technology transfer between domestic and foreign firms The survey shows that up to 80% of FDI enterprises use medium technology, only 5% use high technology, 15% use outdated technology, causing environmental pollution Moreover, after the Investment Law officially took effect, allowing the establishment of companies with 100% foreign capital, currently up to 80% of enterprises investing in Vietnam are 100% foreign owned enterprises - here is the picture closed formula, with no outward technology transfer Underdevelopment of human resources and businesses in Vietnam Until now, the source of cheap and hard-working labor has been considered as an attraction for investors, not skilled and high-quality human resources Meanwhile, to attract high-tech projects, the human resources of the host country must be qualified and meet the requirements of investors Although Vietnam has undergone many reforms in education and training, in general, policies for developing human resources in Vietnam and policies to develop human resources to serve the FDI sector are just broad and not paying attention to the depth of quality Vietnam lacks a good quality domestic supplier Currently, only 9% of domestic firms have international certificates of quality, while that figure for foreign firms is 50% According to data from the Ministry of Planning and Investment, 80% of FDI enterprises have medium technology, 14% are low and outdated technology, and 6% are high technology In addition, FDI enterprises invest in low technology, in the wrong place, for the wrong purpose, low capacity compared to the maximum allowed, low level of labor, inability to absorb and transport modern technology practice Technology transfer is not as expected: Most of the FDI investors in Vietnam are from Asian countries, with outdated technology and technology, the United States, Western Europe, Japan, and South Korea advanced and modern technology accounts for a small proportion 57 3.2 Policies in attracting FDI Currently, the Vietnamese economy is still quite stable under the challenges of the Covid-19 pandemic However, there is still a great risk, and there is much potential for uncertainty if the epidemic breaks out The long-lasting global Covid-19 pandemic remains the greatest threat to the prospects of economic growth and sustainable development Positive medium- and long-term economic prospects The FDI sector plays a very important role in the economic growth and development of Vietnam, the state also needs to make changes in policies to attract more high-quality FDI - There are subsidy policies for businesses with enough potential to overcome the Covid epidemic crisis, creating a favorable environment with full potential for postpandemic development Increase the level of business and must link domestic businesses - Joining and implementing bilateral and multilateral trade agreements will help the economy recover, Vietnam is also more likely to benefit from the current shift of supply chains to other countries that have a lower cost - Tax incentives are a part of the FDI policy always in relation to the orientation and overall FDI policy The highest preferential tax rate is 10% for a period of 15 years and tax exemption for years, 50% reduction of tax payable for the next years for new investment projects in some specific fields Development promotion such as information technology, software, renewable energy, environmental protection Some import and export tax incentives are being applied, such as: • Import duty exemption for goods imported for processing for foreign countries and when returning products to foreign parties, they are exempt from export tax • Goods exported for processing are exempt from tax, goods temporarily imported for re-export and goods that are raw materials for the production of exports may be extended the tax payment period up to 275 days from the date of open customs declarations • Temporarily imported and re-exported goods may be extended for tax payment up to 15 days from the date of expiration 58 • Exemption from import tax on goods to create fixed assets for projects investing in areas of special investment incentives, encouraged investment fields and investment projects in the locality have difficult socio-economic conditions … - Incentives on land: The Government has issued many policies, supporting land for businesses such as: • Reducing land rent in each period • Adjusting to reduce the rate of calculation of the common land rental unit price from 1.5% to 1% and the provincial People's Committee specifies the rate in the frame from 0.5-3% for each area, route corresponding to each land use purpose to apply the collection of land rents in the locality; • Apply land price adjustment coefficient in land price determination to calculate land rental • Review overall financial policies, especially tax policies to attract FDI currently being applied, to make appropriate adjustments, amendments and supplements, towards building a good tax system with low compliance costs • Reviewing and completing preferential policies on land to ensure consistency between the land law, the law on investment and other State policies The incentive must be substantial and should only be applied to projects investing in economic, technical, social infrastructure development, environmental protection, and investment in the field difficult and extremely difficult socio-economic tables and policy beneficiaries It is necessary to have preferential policies on tax and land to attract more sources of FDI investment However, this is not a long-term strategy as developing countries are competing with each other in a race to the bottom by reducing corporate income tax rates and continually offering huge tax incentives with multinational corporations Therefore, towards attracting sustainable FDI capital must: "Improving the business environment, not competing with tax incentives, and land is the key to attracting foreign direct investment" These unnecessary tax and non-tax incentives affect countries' ability to mobilize domestic revenue, which in turn affects spending on essential public services to fight 59 poverty and reduce grievances class The unreasonable thing is that these policies are not necessarily effective in attracting FDI inflows as policy makers often think Therefore, the government needs a sustainable source of revenue to invest in technology and education and other public services to prioritize the improvement of the business environment instead of offering ineffective incentives Coordinate the use of resources and budgets to develop infrastructure such as bridges and roads and utilities, especially in industrial and economic zones, for the purpose of attracting FDI • When transferring investment to Vietnam, enterprises have great demand for human resources Therefore, Vietnam needs to deal with the problem of labor training Design programs and support worker training: Pay attention to practical vocational education in high schools Expand the training of workers, technicians and professional staff according to many levels • Establish, accelerate and quickly build high-quality infrastructure to meet the standards to build a long-term foundation for FDI enterprises now and in the future - The revised Investment Law makes it more convenient for investors by reducing administrative procedures, and facilitating foreign direct investment (FDI) • Shorten the input administrative procedures, arrange the procedures to the right departments to avoid cumbersome time consuming for FDI enterprises and the government • Speed up the process of implementing and implementing tasks to quickly implement projects to avoid loss or loss due to prolonged time and legal procedures Sum up, the reduction of corporate income tax rates and diversification of tax incentives have contributed to creating a favorable investment environment to attract foreign investment Tax exemption and reduction has boosted export turnover over the years, especially exports of the FDI sector The government should not focus too much on incentives to attract FDI, but must focus on developing a sustainable and long-term economic environment to meet the needs of FDI enterprises 60 3.3 Policies in utilizing FDI positive impacts - Prioritize budget funds to early complete unfinished projects At the same time, it is necessary to select a number of key areas in the country to invest in upgrading the modern and advanced infrastructure to meet the diverse needs of investors At the same time, it is necessary to have a monitoring mechanism to ensure that the budget capital is used for the right job and for the right purpose with the highest efficiency Speed up the construction and approval of the missing plans; review to periodically supplement and adjust outdated plans to create favorable conditions for investors in identifying and building projects - Improve technology transfer capabilities By setting a standard of technology for investment projects in Vietnam; requesting investors to have a commitment to technology transfer; increasing forms of investment in share purchase or mergers and acquisitions of enterprises; Promote linkages between domestic and FDI enterprises to create an effective work cycle to promote development and reduce costs and balance FDI - Developing and improving the quality of human resources In order to enhance the competitiveness of the national economy and local businesses, so that local workers can quickly participate in the global value chain, contributing to strengthening employees' brands Vietnam is in the international arena, it is necessary to build a system of training human resources with professional qualifications and standards of regional and international standards This will ensure a plentiful supply of high quality human resources at a competitive cost for supporting industry enterprises and FDI enterprises - Developing relationships with foreign investors in a multilateral and diversified manner Avoid depending on one or a few foreign investors or investors, diversify investment relationships with countries and investors around the world to choose investors, investment 61 projects best, the most suitable contractors for the national economic development, existing needs and potentials of the local Region Therefore, it is necessary to promote international investment promotion at both the national and international levels in order to advertise the investment potentials of the localities in the southern key economic regions - Strengthen the inspection of the purpose, progress and quality of the implementation of FDI projects Be determined to avoid waste and loss in the implementation of FDI projects; Say no to the Prohibited Area in anti-corruption in the implementation of FDI projects Transparency, efficiency and efficiency must be ensured in the process of selecting and implementing FDI projects in localities - Simplify administrative procedures in the process of licensing FDI projects Time is also money and if the administrative procedures for licensing take too long will delay the implementation of FDI projects, leading to high costs, causing damage to FDI enterprises and businesses industry partners, related auxiliary It is necessary to have open mechanisms and professional advice on public administrative service packages so that FDI enterprises and domestic enterprises have enough information to support in the process of project implementation 62 CONCLUSION The aim of this paper is to look at how FDI affects economic development in Vietnam At the same time, the writers make some following policy recommendations Firstly, in order to maintain its competitiveness in attracting FDI inflows, Vietnam must quickly transition from FDI projects using cheap labor and natural resources to hightech projects through tax and land incentives, infrastructure growth, administrative procedure reform, the complete elimination of informal fees, and the provision of highquality services Secondly, Vietnam should always look for positive solutions to mobilize all sources of domestic and foreign capital, including state budget, private capital, and particularly external investment capital, in order to achieve the goals of its socioeconomic growth strategy in each cycle (FDI, ODA, concessional loans, remittances, others) If Vietnam develops into a low-middle-income developed economy, the relationship between Vietnam and international donors will begin to evolve, shifting from development assistance to cooperation About the fact that Vietnam continues to obtain active international funding, foreign donors are increasingly shifting their development cooperation policies with Vietnam from supplying ODA to loans with less attractive conditions, such as industrial loans and investment cooperation, and eventually ending development assistance programs for Vietnam Vietnam should think about which sectors to use for loan capital depending on its financial position For projects that directly promote economic growth associated with sustainable development, priority should be given to using ODA loans and foreign concessional loans, such as projects of transport infrastructure, smart cities, clean energy, smart agricultural development, or projects with spillover effects such as climate change adaptation, environmental quality improvement, education, health, technology, and skills However, the selection of projects should be in the overall balance of medium-term public investment and medium-term public debt, focusing on repayment duration to ensure credibility and responsibility for foreign donors Thirdly, due to the positive causal relationship between exports and economic growth in Vietnam from 1997 to 2018, Vietnam must continue to promote goods and service exports with the following solutions: strictly enforcing commitments to bilateral and 63 multilateral agreements while continuing to sign new agreements with other countries and international economic organizations, thereby maintaining available export markets and expanding new export markets Developing policies to encourage businesses to invest in new machinery, technology, and manufacturing processes in order to meet the quality and expectations of export markets Restructuring export goods in order to increase the proportion of high-value-added products Strengthening industry data to make it easier for companies to take advantage of export opportunities Promoting the development of infrastructure and logistics services Strengthening the simplification of administrative procedures, perfecting the management mechanisms and policies of import and export activities, and providing consultancy information and legal support to businesses related to import and export activities 64 REFERENCES General Statistics Office, from https://www.gso.gov.vn/wpcontent/uploads/2019/03/2.Thuc-trang-DN-co-VDT-NN-2011-2016compressed.pdf?fbclid=IwAR2chEx9QXos_UBW4VrgLNFNY5Nire9Y2odSkdUq8L9X vnw_LwjHh83eGO8 Infographics: Foreign direct investment in Vietnam contributes to economic growth, from http://thoibaotaichinhvietnam.vn/pages/xa-hoi/2021-01-31/infographics-dau-tu-tructiep-nuoc-ngoai-vao-viet-nam-gop-phan-thuc-day-tang-truong-kinh-te-99176.aspx The impact of the Covid-19 pandemic on economic growth and sustainable development in Vietnam, from https://vass.gov.vn/nghien-cuu-khoa-hoc-xa-hoi-va-nhanvan/Tac-dong-cua-dai-dich-Covid-19-den-tang-truong-kinh-te-va-phat-trien-ben-vung-o-VietNam-104 Attracting FDI into Vietnam, from https://tapchitaichinh.vn/nghien-cuu-trao-doi/nghien- cuu-dieu-tra/thu-hut-fdi-vao-viet-nam-mot-so-van-de-dat-ra-145717.html?mobile=true Foreign direct investment, Wikipedia, from https://en.wikipedia.org/wiki/Foreign_direct_investment FDI Data Shows Vietnam’s Steady Economic Growth, from https://www.vietnambriefing.com/news/fdi-data-shows-vietnams-steady-economic-growth.html/ Calvo, G.A., Leiderman, L., & Reinhart, C.M (1993), Capital inflows and real exchange rate appreciation in Latin America: the role of external factors Staff Papers, 40(1), 108-151 Chuhan, P., Claessens, S., & Mamingi, N J J o D E (1998), Equity and bond flows to Latin America and Asia: the role of global and country factors 55(2), 439-463; Fernandez-Arias, E (1996), The new wave of private capital inflows: push or pull? Journal of Development Economics, 48(2), 389-418; 10 Koepke, R (2018), Fed policy expectations and portfolio flows to emerging markets Journal of International Financial Markets, Institutions and Money; 11 Valdés, M R O., Hernández, M L., & Melado, M P (2001), Determinants of Private Capital Flows in the 1970's and 1990's: Is there Evidence of Contagion?: International Monetary Fund 65 ... investment capital, manage and use FDI more effectively Figure 2.9 GDP growth and GDP per capita in Vietnam 2000-2019 GDP Growth GDP growth and GDP per capita in Vietnam 3000 7.5 2500 2000 6.5... investment on Vietnam's economy before and after the COVID-19 pandemic Research methodology By collecting, investigating and analyzing data of FDI into Vietnam and how Vietnam’s economy has changed... relationship between FDI and the economy Between 1991 and 2009, Assiobo Komlan Mawugnon and Fang Qiang studied the causal association between Foreign Direct Investment (FDI) and Economic Development in