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Hi everyone, I’m Huy. So today, we are going to present to you a report concerning the
impact of Chinese FDI to Viet Nam’s economic. For the past 33 years since the Vietnam
passed the Law on Foreign Investment (December 1987), foreign direct investment in
Vietnam has increased and become a breakthrough in the process of integrating
international economy. In the wave of FDI to Vietnam, China emerged to become a
potential partner with investment volume has continuously grown since 1991.
How does China's FDI in Vietnam take place? What are the positive and negative
impacts of China's FDI projects on the economy and social life of Vietnam? What are
the causes of these limitations? Our research will analyze the economic data and events
from 2008-2018 to try to answer these questions.
In a moment, I will provide you with a basic definition of FDI and some literature about
how FDI impact a country’s economic so audients can follow and understand or
research more easily and deeply. and then my partner will give you an overview of the
recent trend of Chinese FDI to vn. after that will be the deep case study about the
impact of FDI. In the last part, we will recommend some possible method can be applied
to use and attract Chinese fdi more efficiency.
According to the OECD, Direct investment is a category of cross-border investment
made by a resident in one economy (the direct investor) with the objective of
establishing a lasting interest in an enterprise (the direct investment enterprise) that is
resident in an economy other than that of the direct investor.
The “lasting interest” here implies the existence of a long-term relationship between the
direct investor and the direct investment enterprise and a significant degree of influence
on the management of the latter.
The motivation of the direct investor is a strategic long-term relationship with the direct
investment enterprise to ensure a significant degree of influence by the direct investor in
the management of the direct investment enterprise.
I think the definitions of FDI is no longer strange to any of you here. So I will quickly
move to the next part. Literature reviews of previous studíes about the impact of FDI on
the host country’s economy. The citations and references of the research which
investigates below relationships are provided in our report paper. Thus you can check
hereafter.
First, let talk about the positive impact.
FDI has a positive influence not only on GDP but also on the economic growth of the
country. FDI increase the capital in those countries that are unable to raise funds for
major projects themselves and thus improve their potential to grow. This fund later plays
an important role in the construction of major infrastructure such as factories, roads.
FDI also helps create new jobs, reduce the unemployment rate.
The local firms in the host countries benefit by the indirect technology transfer that takes
place between the MNC and the domestic companies. Local firms can compete more
successfully in the export markets by copying the superior technology or management
techniques used by the multinationals (Blomstrom, 1991
FDI improving overall productivity and more efficient use of resources. Multinationals
increase the standard of the host country’s labor market by providing the laborers with
training and making them qualified enough to handle complicated machinery and
increasing their productivity. Domestic firms become more exposed to foreign markets
and subsequently their knowledge of the international markets increases. Managers and
other qualified employees of the domestic firms acquire superior managerial and
technical skills, which increases their efficiency.
Lastly, FDI affects the economy of the host country positively by increasing their
revenues in the form of taxes.
As seen above FDI has a number of positive effects on the host economy but these
effects do not come free of cost. FDI brings along with it a number of negative effects
which prove harmful to the country in various ways.
as one of the negative aspects of FDI, unfair competition can be identified. Some
multinationals acquire monopoly status in highly profitable sectors. With their
monopolistic power they wipe out all competitors from the market. New enterprises are
not willing to enter these markets because of the huge capital and risks involved. Thus
these multinationals are able to demand unreasonable prices form the customers,
leaving them with no other choice but to pay excessively higher charges due to the
limited choices available.
When multinationals set up manufacturing facilities or outsource these to other local
businesses, it leads to an increase in output which in turn leads to an increase in
pollution.
FDI has an adverse effect on the Balance of Payment of the host country (De Mellow,
1997). Financial inflows raise the exchange rates, making it unfavorable for exports.
When MNCs enter a country, they bring along foreign exchange and thus increase their
supply, which strengthens the host-country currency, making the domestic products
more expensive in the international markets, and as a result of this the total exports of
the host country reduces.
The impact of FDI on the economy is still a controversial topic among academic
researchers. However, we can conclude that FDI can bring many more benefits to the
country than harm it – that is why countries seek to attract as more FDI flows as
possible.
Well, that brings me to the end of my presentation. Next, my partners would give you an
overview about the FDI trend from China to Vietnam in recent years. .