The trend of FDI in the world related to the restructuring of the international financial market under the impact of economic recession

INTERNATIONAL FINANCIAL MANAGEMENT Mid-term Presentation The trend of FDI in the world related to the restructuring of the international financial market under the impact of economic recession Lecturer: MBA Tang My Sang Group 2: Ngo Dinh Anh Thu Nguyen Phuong Vy Hoang Van Quynh Nguyen Quynh Thuan Phat CONTENT I DEFINITION OF FDI, FDI CAPITAL Definition of FDI .3 Definition of FDI Flow THE TRENDS OF FDI IN THE WORLD UNDER THE IMPACT OF II ECONOMIC RECESSION .4 The economic recession 2012 – 2013 The trends of FDI under the economic recession 2012 – 2013 .5 2.2 FDI inflows to selected regional and interregional groups, average 2005–2007, 2008–2013 10 III The trends of FDI under the economic recession 2020 – present 11 The economic recession 2020 - present 12 The trends of FDI under the impact of COVID – 19 Epidemic 12 The International financial market under the impact of Covid – 19 Epidemic 16 IV VIETNAM’S FDI MARKET 20 Some advantaged situations 20 The situation of attracting Foreign Direct Investment (FDI) in Vietnam 21 SWOT Analysis of FDI market in Vietnam 23 What does Vietnam need to to attract FDI? 24 Suggested solutions 25 REFERENCES 27 I DEFINITION OF FDI, FDI CAPITAL Definition of FDI - According World Trade Organization (WTO), Foreign direct investment (FDI) occurs when an investor based in one country (the home country) acquires an asset in another country (the host country) with the intent to manage that asset - The management dimension is what distinguishes FDI from portfolio investment in foreign stocks, bonds and other financial instruments In most instances, both the investor and the asset it manages abroad are business firms In such cases, the investor is typically referred to as the “parent firm” and the asset as the “affiliate” or “subsidiary” - Examples of foreign direct investments include mergers, acquisitions, retail, services, logistics, and manufacturing, among others Definition of FDI Flow - FDI net inflow is defined as the total value of inward overseas direct investment made by foreign entities, including non-resident investors - Inward foreign direct investments into the domestic country includes all assets and liabilities exchanged between the foreign investors and enterprises based in the domestic country, where the investment is being made - FDI net outflow is defined as the total value of outward overseas direct investment made by the residents of the domestic country or reporting economy to businesses based in foreign economies - Outward foreign investments include assets and liabilities exchanged between investors based in a domestic country or reporting economy to foreign businesses based out in different countries Inward direct investment is also referred to as direct investment abroad II THE TRENDS OF FDI IN THE WORLD UNDER THE IMPACT OF ECONOMIC RECESSION The economic recession 2012 – 2013 - The three-year European public debt crisis has forced Greece, Ireland, Portugal and Cyprus to seek relief from the international community to avoid default Spain and Italy are also at risk France was almost caught in a spiral, and the German economy - Europe's leading - slowed significantly  Many European economies fell into recession and the Eurozone eventually failed to avoid recession again in the third quarter of 2012 - The "financial cliff" in the US: The world's largest economy grew fairly strongly in 2012 - Deflation, slowing growth in world trade, weak domestic demand and declining exports, especially to China (down as much as 14.5% in November 2012), are pushing Japan into the risk of a fifth recession in 15 years - Emerging economies that grow quite quickly such as China, India, Brazil, not keep their "form" - The decline in exports was a key reason for a significant slowdown in asia's developing economies - Structural challenges, weaker investment and excess output have caused the region's two growth engines, China and India, to lose momentum - However, the United Nations report noted that in contrast to other regions, the AsiaPacific economy in 2012 remained positive with an estimated growth rate of 5.6%, although it was inevitably lower than the previous forecast of a 6.5% increase - According to the World Bank (WB), the developing East Asia region (Indonesia, Malaysia, Philippines Myanmar), not taking into Account China, is a rare bright spot for the global economy The trends of FDI under the economic recession 2012 – 2013 2.1 Global FDI flows FDI flows to developing economies reached a new high at $778 billion, accounting for 54 per cent of global inflows, although the growth rate slowed to per cent, compared with an average growth rate over the past 10 years of 17 per cent Developing Asia continues to be the region with the highest FDI inflows, significantly above the EU, traditionally the region with the highest share of global FDI FDI inflows were up also in the other major developing regions, Africa (up per cent) and Latin America and the Caribbean (up per cent, excluding offshore financial centres) Although FDI to developed economies resumed its recovery after the sharp fall in 2012, it remained at a historically low share of total global FDI flows (39 per cent), and still 57 per cent below its peak in 2007 Thus, developing countries maintained their lead over developed countries by a margin of more than $200 billion for the second year running Developing countries and transition economies now also constitute half of the top 20 economies ranked by FDI inflows Mexico moved into tenth place China recorded its largest ever inflows and maintained its position as the second largest recipient in the world FDI by transnational corporations (TNCs) from developing countries reached $454 billion – another record high Together with transition economies, they accounted for 39 per cent of global FDI outflows, compared with only 12 per cent at the beginning of the 2000s Six developing and transition economies ranked among the 20 largest investors in the world in 2013 Increasingly, developing-country TNCs are acquiring foreign affiliates of developed-country TNCs in the developing world The per cent increase in global FDI inflows in 2013 reflected a moderate pickup in global economic growth and some large cross-border M&A transactions The increase was widespread, covering all three major groups of economies, though the reasons for the increase differed across the globe FDI flows to developed countries rose by per cent, reaching $566 billion, mainly through greater retained earnings in foreign affiliates in the European Union (EU), resulting in an increase in FDI to the EU FDI flows to developing economies reached a new high of $778 billion, accounting for 54 per cent of global inflows Inflows to transition economies rose to $108 billion – up 28 per cent from the previous year – accounting for per cent of global FDI inflows Developing Asia remains the world’s largest recipient region of FDI flows All subregions saw their FDI flows rise except West Asia, which registered its fifth consecutive decline in FDI The absence of large deals and the worsening of instability in many parts of the region have caused uncertainty and negatively affected investment FDI inflows to the Association of Southeast Asian Nations (ASEAN) reached a new high of $125 billion – per cent higher than 2012 The high level of flows to East Asia was driven by rising inflows to China, which remained the recipient of the second largest flows in the world After remaining almost stable in 2012, at historically high levels, FDI flows to Latin America and the Caribbean registered a 14 per cent increase to $292 billion in 2013 Excluding offshore financial centres, they increased by per cent to $182 billion In contrast to the preceding three years, when South America was the main driver of FDI flows to the region, 2013 brought soaring flows to Central America The acquisition in Mexico of Grupo Modelo by the Belgian brewer Anheuser Busch explains most of the FDI increase in Mexico 22 - Although newly registered capital and adjusted capital increased more than the same period last year, the contributed capital of foreign investors in the form of jointventure continued to decrease, reducing the total investment capital attracted in the first months of 2020 - In which, the newly registered capital: there were 1,797 new projects granted investment registration certificates (down 25.3% over the same period in 2020), total registered capital reached US$ 9.73 billion (increased 6.6% over the period in 2020) Investment capital increased mainly because the Bac Lieu liquefied natural gas (LNG) power plant project was granted a new investment registration certificate with a total investment of billion USD (accounting for 41.1% of the total registered capital) - There were 718 times of registered projects that wanted to change investment capital (down 20.9% compared to the same period in 2020) The total additional registered capital reached over 4.87 billion USD (up 22.2% compared to the same period in 2020) During 2020, adjusted capital in the months of 2020 increased due to the adjustment of the South Vietnam Petrochemical Complex Project in Ba Ria - Vung Tau (Thailand) 23 - Capital contribution, share purchase: There were 4,804 times of joint stock brokerage by foreign investors (down 8.2% compared to the same period in 2020), the total value of contributed capital was 4.93 billion USD (equivalent to 51.8% over the same period in 2020) The structure of the value of capital contribution and share purchase in total capital investment also decreased significantly compared to the same period in 2019 (from nearly 42% in months of 2019 to 25.2% in months of 2020) - Foreign investors have invested in 18 sectors, in which the processing and manufacturing industry leads the way with a total investment of more than 9.3 billion USD, accounting for 47.7% of the total registered capital investment The field of electricity production and distribution ranked second, with a total investment of over billion USD, accounting for 20.6% of the total registered capital investment - Among countries that have been investing in Vietnam: Singapore is the leading country with total investment capital of 6.54 billion USD, accounting for 33.5% of total investment capital in Vietnam; Korea ranked second with total investment capital of 2.97 billion USD, accounting for 15.2% of total investment capital China ranked third with a total registered investment capital of 1.75 billion USD, accounting for nearly 9% of total investment capital Next are countries: Japan, Thailand, Taiwan… SWOT Analysis of FDI market in Vietnam - By analyzing SWOT model of Vietnam in terms of FDI attraction, we are going to determine what the strengths, the weaknesses, the opportunities, and also the Threats of Vietnam in order to find out effective and suitable strategies to gain the investors’ attention around the world Furthermore, Vietnam’s economy has to minimize the threats and improve its weaknesses to get rid of forecasted issues in near future STRENGTH Suitable location WEAKNESS Lack fully oriented stable development 24 Abundant labor forces High-qualified labor forces demand Low-cost production Long time for procedures Low labor cost Stable politicy Corruption & bureaucracy The Infrastructure is still being completed OPPORTUNITY THREAT Growing good reputation High competitive region WTO’s member (2006) Some environmental issues EVFTA, RCEP agreement Less impacted by Covid-19 Encouraged by government Supportive policies related to tax incentive What does Vietnam need to to attract FDI? - Companies looked for some key factors when considering direct investment in a country - They wanted good supply of labour with skills and experience, logistics convenience in places they set up new factories so that they could easily ship in raw materials and ship out finished products, minimal bureaucratic obstacles to setting up and operating factories, and political and economic stability - Vietnam scored well in most of these aspects, and quickly improves in areas it did not - But there were several things it could to become more attractive to investors - Its logistics costs continued to be high, and it needed to quickly build and improve physical infrastructure to rise in the World Bank Logistics Performance Index from its current 45th position 25 - Government also needed to improve the country’s position in the World Bank’s ease of doing business rankings by streamlining the bureaucratic processes related to setting up and operating a business - “In the most recent World Bank survey, Vietnam ranks 70th out of 190 countries, ahead of countries like Indonesia, and the Philippines but behind Malaysia and Thailand.” - The Government’s recently announced ‘fast track’ initiative to speed up the licensing of FDI projects was a good example of the steps it could take to reduce red tape and bureaucratic hurdles companies faced - The Government should consider promoting quality FDI by setting up an Investment Promotion Agency (IPA) to actively market Vietnam’s advantages as an FDI destination around the world - The Government tended to approach FDI reactively and only worked with foreign companies that approached it though the Ministry of Planning and Investment and other relevant Government departments had become more aggressive in following potential leads - Next, Vietnam’s vocational training needs to be significantly improved to ensure that the workforce could perform tasks that require higher skill levels, and the country needed to invest in R&D and improve technical universities - Finally, the Government could encourage the formation of industrial clusters around desirable industries such as electronics - This strategy would have the dual advantage of maximising Vietnam’s benefit from FDI investments and giving firms more confidence to locate their higher valueadded activities in the country Suggested solutions - Firstly, The National Assembly and the Government need to refine the legal system and administrative procedures on foreign investment in a synchronous, consistent, easy-to-understand, and easy-to-implement manner 26 - Building outstanding institutions, preferential policies, international competition to create favorable business conditions to attract large projects, national key projects, high-tech projects, etc to attract investors Besides, Việt Nam should establish R&D centers and innovation centers to have more new potential projects that attract foreign investors - Secondly, usual inspection and supervision to create favorable conditions for enterprises to operate effectively, promoting coordination among state management agencies to avoid overlapping in inspection and examination; strengthen postinspection with FDI projects after being licensed - Thirdly, Vietnam should focus on creating an educated and high-qualified workforce, especially related to High Tech and R&D, so that Foreign corporations can make use of local Workforce helping investors not only save their money but also their time - Last but not least, Vietnam should spend budget on upgrading the infrastructure system, especially traffic, seaports in order to create favorable conditions for investors in the process of conducting investment activities in Vietnam, because Investors always want a perfect logistical system - Finally, Vietnam should not offer overly generous tax breaks Invested countries often use a range of tax incentives to attract foreign investment, and of course who does not like tax incentives? But offering overly generous tax breaks is not critical for Việt Nam to be successful in attracting FDI According to the IMF, tax incentives are “not critical” to attracting FDI and “…cannot substitute for political stability, good macroeconomic fundamentals, the availability of infrastructure, and a sound legal framework.” 27 REFERENCES https://www.investopedia.com/terms/f/fdi.asp https://www.wto.org/english/news_e/pres96_e/pr057_e.htm Kinh tế giới năm 2012: “Đi qua bóng tối” | Báo Dân trí (dantri.com.vn) Những mảng xám kinh tế toàn cầu 2012 | Tạp chí Tuyên giáo (tuyengiao.vn) World Investment Report 2014 (unctad.org) https://www.antconsult.vn/foreign-investor-in-vietnam/the-advantages-of-attracting- fdi-to-vietnam-in-2021.html/amp http://tapchicongthuong.vn/bai-viet/thuc-trang-thu-hut-von-dau-tu-truc-tiep- nuoc-ngoai-vao-viet-nam-giai-doan-2010-2020-80266.htm https://www.vietnam-briefing.com/news/fdi-in-vietnam-year-in-review-and-outlook- for-2021.html/ https://www.crowe.com/vn/insights/doing-business-in-vietnam/foreign-direct- investment-(fdi)-in-vietnam https://www.vietdata.vn/tinh-hinh-thu-hut-von-dau-tu-nuoc-ngoai-fdi-fii-5-thang- dau-nam-2020-2040743145 10 https://vietnamnews.vn/economy/749545/what-vn-needs-to-do-to-attract-quality-fdi- after-covid-19.html 11 https://tapchitaichinh.vn/su-kien-noi-bat/thu-hut-nguon-von-fdi-vao-viet-nam-va-nhung-van-dedat-ra-hien-nay-330589.html? fbclid=IwAR0r4udQMP72Ijij7WdKT9CT8xDv2lfvY8I0IieaVyOb3mwxQDg8rfyNFfs 12 https://unctad.org/system/files/official-document/wir2020_en.pdf 13 https://unctad.org/system/files/information-document/diae_gitm34_coronavirus_8march2020.pdf 14 https://data.worldbank.org/indicator/BM.KLT.DINV.CD.WD? end=2019&most_recent_value_desc=false&start=1970&type=shaded&view=chart&year=2019 15 https://tapchitaichinh.vn/su-kien-noi-bat/cac-yeu-to-anh-huong-toi-viec-thu-hut-dong-von-dau-tunuoc-ngoai-tai-viet-nam-330984.html 16 http://www.talawas.org/talaDB/showFile.php?res=12823&rb=0502 17 https://www.investopedia.com/ask/answers/06/greenfieldvsacquistion.asp 28 CONTRIBUTION Student Name ID student Contribution Ngơ Đình Anh Thư 195082471 Content part + ppt 25% Hoàng Vân Quỳnh 195082291 Content part + word 25% Nguyễn Phương Vy 195082397 Content part + word 25% Nguyễn Quỳnh Thuận Phát 195081731 Content part 25% Total: Points 100% 29 ... DEFINITION OF FDI, FDI CAPITAL Definition of FDI .3 Definition of FDI Flow THE TRENDS OF FDI IN THE WORLD UNDER THE IMPACT OF II ECONOMIC RECESSION .4 The. .. III The trends of FDI under the economic recession 2020 – present 11 The economic recession 2020 - present 12 The trends of FDI under the impact of COVID – 19 Epidemic 12 The International. .. was deepest in the services sector, followed by the manufacturing sector 15 The International financial market under the impact of Covid – 19 Epidemic 3.1 In Africa - The economic and investment