INTERNATIONAL INVESTMENT

 LECTURER
PhD. Hoang Huong Giang
Tel: 0988161658

 CONTENT
Chap 1: Introduction
Chap 2: Overview on International investment
Chap 3: International investment environment
Chap 4: Investment liberalization and free investment zones
Chap 5: International investment treaties
Chap 6: Forms of International investment (TNCs and M&A)

 REFERENCES:

 Assoc Prof. Dr Vu Chi Loc (2012), International investment, FTU publisher (compulsory)
 Investment law 2014 (amended), Investment law 2020
 Investment law 2005
 The economic and legal aspects for Foreign Direct Investment – UNCTAD 2007
 World investment report 2018 – 2020
 Some FTA’s basic contents related to international investment agreements

 ASSESSMENT

 Attendence and Participant: 10 %

 Mid-term: 30%
 Group homework
 Essay: 20-25 pages
 Discussion
 Practice
 Final examamination: 60%
Lecture 1: 26/10/21
CHAPTER 2: OVERVIEW ON INTERNATIONAL INVESTMENT

Why foreign investors try to invest into VN? Why some Vietnamese investors try to invest
into other countries?
Impact of investment to micro and macro economics?

I. CONCEPTS AND CHARACTERISTICS OF INVESTMENT

What is investment / Inter.I?

1. Concepts of investment

 Concepts:
 Theo Samuelson và Nordhaus: “The sacrifice of current consumption to increase future
consumption” (hi sinh tiêu dùng hiện tại để tăng tiêu dùng trong tương lai)
Means: muốn có better consuption in future, phải reduce curent consumption. However, we don’t
know exactly comsumption in the future will be better or not. Bc future consuption is affected by
series of forces.

 Ex:
 Now tôi có 10 tỷ, dùng nó để mua ô tô để travelling everywhere (tiêu sản) -> consumption
(expenditure consumer). It means that this consumption will generate no profit for the future.
Ngoài ra còn phải mua xăng dầu, sửa chữa.
 Mua ô tô để chạy taxi/ để đi làm (buy car for business/ supporting business) -> investment
 Now có 10 tỷ, I mua nhà ở HN, dùng nhà để kinh doanh. And now I have no house to live, I have
to rent a house for my family.
o In this case, I have to sacrifice my final consumption for my investment bc I hope that 5
years later, I have 25 tỷ, I can build another house much better -> sacrifice of current
consumption to increase future consumption.

 VN Inv. Law 2014: “Investment means the investor’s spending in business activities through
establishing of (an) economic organization(s); investing through capital contribution (góp vốn),
purchasing shares (mua cổ phần) or capital contributions of economic organizations (phần vốn
góp của tổ chức kte); Investing in the form of contracts or executing (thực hiện) investment
projects.”

 These concepts are totally different from each other.

 The first concept is quiet general, it can be applied for private sector or public sector.
o + private sector: maybe in domestic or foreign investment.
VD: cta là người VN, chúng ta try to launch a company located in HN. -> domestic
investmnt
An american try to invest into a company placed in Đông Anh -> he has to sacrifice of
current consumption to increase his actually future consumption only in term of potential
cosumption. Bc he may loss in VN, he profit in VN as well.
 Investment is series of activities

 Macro-approach (cách tiếp cận vĩ mô):

Capital formation accumulation (tích luỹ hình thành tư bản)
 “Investmet is the output accumulated to increase production capacity in the later period of the
economy” (đầu tư là việc sản lượng được tích luỹ để tăng năng lực sản xuất trong thời kỳ sau của
nền kinh tế)
 Investment can be divided into 2 classes:
- Private invesstment (I): equip, house, new office, inventory…
+ local investment
+ foreign investment
Private invesstment mainly pursuit (theo đuổi) enconomic target.
- Government investment (G): G spending, G expenditure or periodic G payments to
supply public goods
G try to pursuit both economic and environmental target.
G also think about incoe contribution, environmental issues,…
G investment mainly focus on public projects that private investors do not wanna invest
into.
 Ex: you and me have no incentive (khuyến khích, động lực) to invest into Infrus structure.
We will never try to invest into National Road w/ having profit. Because we feel that this
responsibility will never belong to us.

 Explaination:
 Current expenditure for higher future benefit (expectation): chi tiêu hiện tại cho lợi ích lớn hơn
trong tương lai
 2 classes of investment:
+ Private investment: profit, sales, market share
(cô chỉ nói domestic country)

 VD:
 Limited companies: 1 or multi member
Joint stock companies
2 loại cty này có 2 loại model:
- Management and principal model (principal here is stakeholder)
 In this model, tôi có finacial or capital contribution cho cty, nhưng I have no time to
manage company at all. So I and some other members hire another manager to help us to
operate company. -> This activity we call management and principal model.
 Management and principal model often pursuits maximize sales, not maximize
profit.Because the manager believe that all principals feel very happy if they can sell a lot
of products in domestic n global market. So they try to sell products as many as possible.
 Sometimes there are conflicts bw manager n principals bc all principals try to maximize
profit, but manager try to maximize sales.
 To reduce conflicts, it is very difficult.
 Điều này xảy ra nhiều nhất ở các tập đoàn đa quốc gia.
- Direct management model

+ Public Investment: G tries to pursuit economic-social efficiency (employment, new asset, tax or
income distribution…)
 Vd: G have to get more jobs for his residents (người dân) to create new assets nation wide
to help more tax and to redistribute income classes

 Conclusion: Investment is the use of capital to gain profits and/or socio-economic benefit (lợi
ích kinh tế xã hội)
Private investment is for profit; Public investment is for socio-economic benefit

2. Characteristics of investment
Some basic characteristics:
 Capital:
 Tangible capital: asset, money, equip…
 Intangible capital: licnense, patent, brand, trademark, fame…
Sometimes intangible capital is more important than tangible capital.
 VD: TP Bank and Vietcombank
Both of them have very famous and valuable headquater locating in Hoan Kiem District
However, to cooperate with them, most of people thích work w/ Vietcombank thay vì TP Bank
because of intangible asset. Vì Vietcombank has very long ; fame; internation transaction… in
banking and finance sector
TP bank is new, has very small marketshare in VN
 Intangible is very important.
 Intangible capital can be exploited (khai thác) in many directions.
 Vd: im very famous in food industry. I have cooperated w/ some local investors in BN. In
this case, I permit them to use my trademark, brand for their production, stores. That
permission will be accounted for 30% of their projects (means that in future, if they thu đc
profit, they will share 30% their profit to me) => I invested in term of intangible capital.

 Profitability: the target of investment, even private or public investment.

It is very important, đặc biệt là với private investment.
 VD: u and me open a new store in Chua Lang Street. We sell some accessories (phụ kiện)
for students. We try to maximize our profit, it is our purpose.

 Risk: investment activities last in long time

Theo concept thì Investent mục đích là higher consumption in the future. Nhưng “future” hear is
uncertaincy. We do not know exactly what happens in the future.
 Vd: cuối 2019, mọi người feel very confident w/ economic situation because we can
analyze internal and external resources for our economic development. However, COVID-
19 pandemic changed everything, impact our daily lifes as well as economic situation.

 Time : what is long time and short time, what is long term and short term; phải chỉ rõ
Và cái longterm hay shortterm này còn phải phụ thuộc vào từng tình huống
 Vd: mk đầu từ vào 1 cửa hàng, point out exactly hoặc khoảng thời gian mà sẽ thu được lợi
nhuận
Đối với của hàng nhỏ thì 1 năm là long time, với DN lớn thì 1 năm là short time.

II. CONCEPTS AND CHARACTERISTICS OF INTERNATIONAL INVESTMENT AND

FORREIGN INVESTMENT

1. International Investment concept

 Foreign investment: an investor conducts (tiến hành) investment activities outside its
territory/nation – a national approach(tiếp cận)
 International investment: capital flows among countries – the general approach of the world
economy
 E.g. 3 countries A, B, C
Investor fr A tries to invest into B (chỉ có 2 countries) -> foreign investment
Investor fr A tries to invest into B, còn tôi live in C; Tôi realize that there is capital flow from A
into B. -> tôi gọi hđ trên là international investment

 The nature (bản chất): the outflow capital across the investor’s national boundary (dòng vốn chảy
ra qua biên giời quốc gia của nhà đầu tư)
 Nhưng trong môn học này, cta chỉ quan tâm dòng vốn chảy giữa các qgia nào, chứ k focus vào
việc dòng vốn chảy ra từ đâu. Cho nên in this subject, cta chỉ nói về international investment chứ
không nói về foreign investment.

*) Một vài concepts khác:

 “Foreign investment is the movement of capital fr an investor’s country to another country to set
up a business” ( theo Holland International Law)
This concept is only for foreign direct investment. Because sometimes we try to invest in another
country without set up any business.
Phản biện:
 VD: I am a Vietnamese investor. I buy some bonds, some shares in US stocks exchange
market. I set up no business but this activity still called foreign investment. It is in term of
portfolio investment.
 I operate in some international organizations: UN, OECD,… I have some funds for
developing countries and less develop countries like VN, Lao, Cambodia. But I don’t
launch any new business at all. I invest in humanitarian, minority ethnics, deforestration ->
these activities called official development assistant (ODA) – non private investment.
This activity is so important to developing and less develop countries. Because G has no
money for some social and ethnic issues.

 “Foreign investment is all value forms of asset or spirit that foreign investors invest in the
business activities and others for profit-marking purposes” (theo Rusian foreign investment law)
This concept is only for foreign direct investment and foreign porfolio investment (private
international investment).

 “Foreign investment is all forms of value invested by foreign investors in business activities and
others for earning profits or social effects” (theo Ucraina investment law)

 “Foreign investment is a foreign investor’s capital inflows in VN in kinds of cash and other lawful
assets to conduct investment activities.” (theo VN investment law 2005)

 In conclusion, International Investment is the act whereby an investor of 1 country (jurridical

body or individual) brings capital or any other forms of value to another country to implement
business activities or others for profit or social benefits

*) Evaluation: để invest into another country, the investor must have:

 Capital: currency or tangible/intangible asset
 Time: long working time
 Profit: discrepancy (sự khác biệt) between cost and return of investment project. However,
profit is only in term of potential and they also some projects pursuit socio efficiency (socio
efficiency= socio benefit – cost of investment)
 VD: BN has attracted a lot of foreign direct investment, coming from Japan, EU…
These projects can provide more jobs for this locality, and they have some capital
contribution to the local budges.
Labor of BN làm việc cho các projects đó, đồng thời nâng cao tay nghề kĩ năng
chuyên môn...
 Some ODA projects from Japan in some specific sectors like frus structure, micro
finance…-> improve our frus structure, our well being become much better…Because
a lot of presidents live in rural area can assess finance easily for their family, they can
develop family project, transform production,…
 Social efficiencey: social benefit minus cost of investment
It is very difficult to measure.
 Note: when implementing investment, all investors have to evaluate the project efficiency, in
terms of both profit and social benefits

*) The nature of international investment: the same as investment activities but w/ higher risk
due to “international factor”: law and regulations, cross-cultural differences, political affairs,
economic issues …

 Vd: nhà đtư Vn, đtư ở Lào in agricultural sector.

In VN, to đầu tư vào Nông nghiệp, I get lots of dificulties. Bc từ 1986, G reformed land
allocation (thời kì đổi mới). it means the relative model transform to family model.

* relative model transform to family model:in 1986, all land area have already allocated
to all families living in rural area based on family members. In the initial period, this
seems very sucessful but in long term, the weeknesses of this policy appear in 2000s. Bởi vì
đất đã được cut for many families in specific location nên họ có quyền sử dụng theo ý
muốn của họ, so now it is very difficult to transplant (cấy)… Therefore, now u get lots of
dificulties to develop agricultural production.
In this situation, Vn investors find out that it is not easily develop agricultural production
in VN. They decide to invest to another country to develop agricuture: Lao, Combodia.
Luật, quy định ở các nước Lào, Vn là khác nhau…
 This case we call international factors in term of law, regulations

 I invest into Lao, I have to hire many employees for my project but some of them are so
lazy. They often nghỉ during working days.
I can not withdraw (rút lui) easily because it is not similar to some shares/bonds in stock
exchange at all => we call “cross-cultural difference”
 - Political Affairs: The change in environment, the change in relationship in macro level
between G and another G may change everything in the world, included economic and
investment activities.
 The trade war between US and China
Chinese G thực hiện các biện pháp chống lại việc đầu tư quốc tế tại TQ. Các nhà đtư
quốc tế nhận ra điều đó vô cùng bất lợi cho họ và họ think about the change of
investment location to another Asian country.

- Econonomic issues:
VD: phân bổ thu nhập ở VN khác nhau, có người rất giàu, có người rất nghèo. When
investors decied to invest into VN, đặc biệt là in consumer products, they have to consider
the income disparity (sự khác biệt về thu nhập) for sure who will buy their products, who
will be their potential buyers,…

III. CLASSIFICATION OF INTERNATIONAL INVESTMENT

 Non-private international investment: very important to less develop and developing countries
- Official development assistant (ODA): provided with low interest rate and non refundable
loan -> important for less and developing countries
- Official assistant (OA): provided for not only less and developing countries but also for
industrial line countries in some specific purposes
 VD: financial crisis or some social crisis or some development assistants in industrial
line countries.
 However, the interest rate in this form of investment (OA) is much higher than ODA.

 Private international investment

- Foreign direct investment (FDI): quan trọng nhất in the form of Private inter. investment.
Because most of foreign investors try to invest into another country to pursuit or to get profit
oriented.
Therefore,they can utilized all resources in the home country as well as in the host country for
their business performance.
So the host country can attract investment to get more jobs and to improve their local budget,
technology, technical platforms…

- Foreign portfolio investment (FPI):

Based on lecturer’s own view or opinion, she does not do investment in this form much
because ít’s do risky and very sensitive in some situations
VD: you can wish that the regional financial crisis happening in asian countries in 1997 1998
actually were caused by FPI
 There’s relationship bw FDI and FPI. Because if a foreign investor try to buy a share of a
given company, they may .. from FPI into FDI

- Private loan: play a very small percentage in private international investment, is only in term
of credit provided by some commercial bank to some project in some specific situations

 FPI: đầu tư theo danh mục, ở góc độ DN là đầu tư gián tiếp; FII là đầu tư gián tiếp gồm cả đầu tư
phi tư nhan và FPI

Đọc world investment report

Thông tin bổ sung:
FDI: an incorporated or unincorporated enterprise in which a foreign investor owns 10 per
cent or more of the ordinary shares or voting power of an incorporated enterprise or the
equivalent of an unincorporated enterprise – IMF
FPI: FPI is a form of international investment in which an investor of one country buys
companies’s valuable papers issued in another country with a certain amount to gain profits
not to control the issuer(s).
International credit is a form of international investment in which an investor for one country
lends recipient(s) in another country in a certain period of time.
 • Official development aid (ODA): government aid that promotes and specifically targets the
economic development and welfare of developing countries - OECD
• Governments’ non-refundable and refundable grants or concessional credit
• Intergovernmental organizations or NGO
• UN organizations
• International finance organizations
• Official aids (OA): similar to ODA but OA is also for developed countries
• Private and non-private international investment:
• Investor
• Recipients of investment
• Goal of investment

IV. INTERNATIONAL INVESTMENT THEORIES

1. Marginal product of capital hypothesis (MacDougall – Kemp) – based on macro approach

This theory try to answer the question why Japan try to invest into VN and the benefit of both
countries when Jananese invest into VN.

Do you have already studied international trade theories? Explain H-O theory?
2 thuyết này have a very close relationship. Becausse H-O theory based on Hypothesis in
some assumptions:
*) Hypothesis (based on input comparative advantage – H-O model)
- 2 countries in the world: home country and host country (exporter n importer)
- perfect market: cả final và input product market
- transparent in4 : both buyer n seller have the same degree of in4. All of the have the full in4 about
products
- both countries produce an identical product: because perfect market means all producers can not
deversify their products in their domestic and foreign market at all
- free capital movement in both countries, cross countries (capital can be exported)
(Điểm khác biệt lớn nhất của 2 lí thuyết này là: capital movement
In H-O model, the capital can only move in domestric, means that u pocess capital and u cant export
ur capital oversea, u can oly utilize it in ur own country. )
Without free capital movement, we can apply H-O model. Tuy nhiên, if capital can be move across
countries, we can apply Hypothesis theory as well as H-O model. Nghĩa là, each country can develop
both inter. investment cũng như inter. trade.
Export of capital khác hẳn export of commodity. Because: u export ur capital means u only export the
rights to use capital, the ownership of capital still belongs to u.
- before (implementing) international investment: MPK (marginal product of capital) of home country
is lower than that of the host country
The gap bw the MPK among countries is the reason for inter. investment

*) Reasons For International Investment:

- existent of discrepancy (khác biệt) in marginal product of capital bw 2 nations
- capital flow tends to move from low MPK (capital abundance) to high MPK (capital scarcity)
- capital will be saturated (bão hoà) if MPK gap does not exist bw 2 nations

 Noticie: MPK gap is only necessary condition, investment environmet is sufficient.

 In VN, interest rate > in China, but most of inter jian companies operated in China instead of
VN. Because of many reasons:
China has abundance of inputs for their production like: rare earth (crucial for high tech
industry, manufacturing inđustry, eclectronic industry)
China possess a large amount of labours with rather cheap in term of price
In VN the labor price is not low enough in comparision w/ prductivity
VN productivity is lowest among Asean
China’s Infrastructure is much better than VN
 That’s why MPK in VN > MPK in China but foreign investors do not wanna invest in VN
In 2018, the trade war bw US and China happened -> VN happy
Nhưng investors k come to VN at all, họ đến cả TL, Indo, Malay… bởi investment
environment
Why Vnese G does not change the investment environment to attract foreign investors?
 VN has too struggle seriously w/ financial crisis, regional financial crisis. In Vnese
investment ennvironment actually we have only some small and insufficient changes in our
policy to attract foreign investors
 This theory only appied in specific situations when everything transparent and easy to focus ,
MPK is an indicator to change investment direction in global scale.

 Cả 2 MPK cùng là downward

Capital 1 >> Capital 2

so MPK 1 is much lower than MPK 2, MPK 1 << MPK 2
 Country 1 try to invest into country 2 to get higher MPK
Trước khi invest, income of country 1 is O1MST because their income = O1T unit of capital x TS
in term of MPK -> O1MST belongs to capitalist of country 1. And DMS is belongs to other factors
in which mainly is labor income,…
Của nước 2, income là O2AQT; VQA belongs to other factors in which mainly is labor income..
 The capitalists in nước 1 try to invest into nước 2, this why there are capital movement and labor
movement
Country 1 export their capital until MPK1=MPK2=PE -> country 1 export PT (unit) of capital
In this situation, income of capitalist in contry 1 = O1NPE domesticaly
Total income of capitalist in country 2 is O2CEP. However they have to pay back to country 1 with
PTUE (unit) because dù country 1 export PT unit of captital to country 2 thì the ownership of that
amount still belongs to country 1.
 Total income of capitalist of country 1 is O1NPE + PTUE
Với O1NPE : domestic investment; PTUE: international investment
It means that the deadloss EUS will disappear and will belongs to capitalist income in country 1
Now, the income of capitalist in country 2 is O2TUC.
The reduction QACU will be transformed to laboral in country 2 .
Because the MPK2’ = O2C so the deadloss QEU will be disappear and it will belong the laboral in
the country 2

The income of capitalist in country 1 increased by PTUE. PTUE consists of 2 components:

EUS: the deadloss before international investment
Ban đầu labor income là DMS, giờ chỉ còn DNE. It means that ENMS transferred from laboral to
capitalist income of country 1.
Deadloss EUS disappear because when both countries open the door and capital can be transferred
so capital can be utilized/used efficiently -> no deadloss in this model at all
In country 2: CUQA will belong to laboral
Therefore deadloss QEU also disappear and belongs to laboral in country 2
In general: there is no deadloss in this model at all because all resources in both countries will
be utilized efficiently

VD: A is a capitalist of VN. I possess a captial of 1B VND. I can launch a company in Lang Son or
Lao Cai or HN. I have at least 3 options for my investment.
If I invest into LS, there will be some jobs for locality. But I refuse to invest in LS because it is not
promising enough.
I decide to invest in HN.
Có 1000 DN như tôi từ chối invest vào LS. Khi đó in this locality, there’re a lot of jobs will be lost.
In general, if we invest in foreign country, domestic market will have a fewer jobs -> trade union is
very unhappy with this situation because trade union represents for benefit of laboral -> they have
struggle with capitalists
Với quốc gia có MPK cao (developing countries), họ very happy với sự investment từ các quốc gia
phát triển
Từ cái model này có thể hiểu được:
Trump là một người theo chủ nghĩa dân tuý (populist), ông ý đánh thuế để các công ty US mà đầu
tư ra nước ngoài phải quay về (thu nhập ở nước ngoài của họ rất cao)
 Nói chung về tổng thể thì international invest benefits all nations (vì không còn deadloss). Nhưng
cũng có hậu quả đó là: phân bổ lại nguồn lời ích giữa các nhóm sở hữu các nguồn lực khác nhau
trong xh.
This model also implies that without capital movement, country 1 can export some products (capital
intensive products) into country 2 and country 2 can also export some labor intensive product into
country 1.

H-O model: theory for inter. trade

M-K model: theory for inter. investment
 Close relationship w/ each other; khác nhau duy nhất điể là capital có được free hay không
There are 4 flows should be taken in consideration:
Labor flow: related to a part of inter. investment, a part of inter. trade
Material flow: related to inter. trade
In4 flow: related to both
Financial flow: related to both

2. Monopolistic advantage theory (Stephen Hymer) – Micro approach

Theo Stephen Hymer, there are many reasons that an investor try to invest into another country:
- Competitiveness and market conditions
- Profit generated by FPI and FDI (totally diferent)
- The role of transnation companies (TNCs – cty xuyên quốc gia) in the world
- Comparatitve advantages that each company possess and the imperfect market structure
 Competitiveness and market conditions are very important for international investment
There are some types of market (mônpolistic market, perfect market,...), competitiveness
VD: After VN reformed in 1986, we introduced the law on foreign investment past in 1987 -> this is
initial step to attract foreign investment in VN
A lot of Rian companies operated in VN even in some markets that domestic investor cant do well:
chemiscal consumer products like Ulinever, P&G; food and beverage like Pepsi Cocacola…
They do that bc of market conditions and competitiveness.
In this period, all domestic investors are weak and cannot compete w/ foreign investors even in
domestic market. So that foreign investors w/ cappital abundance, high tech, managerian expertise…
 -> that can invest in VN sucessfully. And they were experience in business operation in global
market (EU market, American, Easten Asia countries…) -> easy to succeed in VN bc of global
competitiveness and market conditions in VN.
At this point of time, the stock exchange market havent existed yet -> they only invest in VN in form
of foreign direct investment, and they with out all domestic companies out market
Vd: khi P&G và Ulinever came to VN, all domestic companies could not compete w/ them and they
went bankrupt, nhiều cty phải bán cho Unilever. VD: kem đr PS
Monopolistic advantages also implies that some transnation companies can compete sucessfully n
global market. Because they possess well-known trademark, advanced tech, better managerial skills,
lower prduction costs than domestic rivals. -> they can compete sucessfully even in developed
countries, developing countries, less developed countries.
Kp tca đều thành công, nhưng mà most of them. They can pursuit standardize policy as well as
unifine policy in global market. VD: cocacola come to VN, they try do diversify a lot of their
products in VN,
33p09

ĐOẠN NAY PHẢI TỰ HỌC LẠI

 Difference between FPI and FDI
 TNCs implement foreign investment because they have some monopolistic advantages or possess
specific factors:
 Well-known trademark, protected advanced technology
 Better managerial skill or lower production cost than rivals – application of industrial
organization theory
 Enterprises investing into other countries depend on their current advantages and imperfect market
structure: in case of imperfect market, they will implement FDI and control over their business
activities

3. Internalization (Bucklely Casson) (nội bộ hoá) – micro approach

 International investment implemented by internal transactions helps companies reduce their

transaction costs
  Đây là 1 strength that an inter company possesses. E.g. they possess some tech, knowledge,
human capital -> so they can transfer all their strengths to their global subsidiaries.
They also realize that in perfect market, all companies face w/ unexpected situations.
E.g. market failure in intermediate products; sometimes they also realize that they can import a lot
of input fr China, VN n other developing countries for their production. However, this activity
maybe ỉnterrupted by pandemmic, natural disater,… In this situation, their production will be
disrupted. Actually, the disruption may interfere (can thiệp) seriously on their international
competition.
So in order t get it off this bussiness uncertainty, they should themselves do everything from
beginning to the end
 Internatinalization actually is a process they try to do everything by themselves (of course they
have to buy some resource from other countries but mainly they try to do all their production
stages by themselves)

 VD: Vietnam Panasonic industrial device company

This company là cty con của Japan Panasonic company, ngoài ra còn có cty con ở Indo, North
Africa.
Cty mẹ muốn maximize their sale revenue as well as profit. They so afraid of business
uncertainty. They possess some well-known tech, trade mark… -> they want to do evrthing by
themselves nên mới locate some subsidiaries in developing countries
Tôi gọi đây là model of international production
Sometimes they also realize that if they implement to out source some activities they may also
maximize their profit but business uncertainty may appear.
e.g: they may order inputs fr China for their production in VN. However, they may face w/
some unexpected situations, chẳng hạn:
first order thì clg sp very excellent; nhưng lần 2 thì clg k bằng đc; lần 3 thì interrupted by
covid-19 pandemic nên their global supply chains bị disrupted -> they cant sell their final
products in their global market => they cant sucessfully compete w/ Hitachi commpany…
Therefore they try to evrthing themselves in order to know exactly when their inputs can be in
VN, when they can export their products in global market.
 This is why a lot of international high tech companies try to pursuit internalize their
production at global scale
  Reasons for the development of internal transaction:
 Imperfect market
 Market failures: intermediate products, human capital, knowledge and managerial and
marketing skill

 The internal transactions of TNCs develop FDI and the process will be continuous until
marginal benefit is equal marginal cost.

 Benefit of internal transactions:

 Getting rid of (thoát khỏi) business uncertainty, outside transaction uncertainty
 Getting rid of time lag (trễ) in transaction

4. Eclectic theory (John Dunning) - micro approach

John Dunning tried to integrated Monopolistic advantage theory and Internalization theory. So
It has a close relationship with monopolistic advantage theory as well as internalization.

 He tried to answer 3 questions:

• Why do enterprises try to invest overseas?
• When do they invest overseas?
• Where do they invest overseas?
Cái này còn phụ thuộc và company’s strengths, potential markets, recipient country policies…
Những câu hỏi này rất khó để xđ, nhưng nếu u play as an international investors, u have to answer
exactly these questions because if u don’t have reasonable answers, u have to face w/ many risks

 Three sufficient (đủ) factors for international investment:

Ownership advantage
Internalization advantage
Location advantage
 • Ownership advantages
Cái này lquan đến what inputs, resouces that u possess
Ownership advantages (Firm specific Advantages): possession of some specific factors (intangible
assets, borrowing capital with low interest rate (fr commercial banks that have goods relationship
w/ some international orgaization), technology advantages or favorable , or monopolistic practice
…) – Core competences?
Nói chung có mqh tốt với international commercial bank, international distributors, foreign
Government.. là very important
Distinguish advantages vss core competences?
e.g.: nếu bạn nói TA tốt -> ur advantage; nếu bạn có nhiều mqh tốt với lãnh đạo -> ur core
competences
sustainable advantages có thể transform thành core competents
nếu chỉ có short-term advantage thì rất nguy hiểm để deep in foreign environment
e.g.: bạn có mqh tốt với ngân hàng TM, bạn có thể mượn tiền cho đầu tư more easily. Nhưng
cô không gọi đó là core competence vì bạn kp là ng duy nhất có thể mượn, NH đó cũng có
rất nhiều khách hàng thân thiết (trong đó có thể có đối thủ của bạn)
e.g. A and B cùng launch 1 cty công nghệ 5G và cạnh tranh vs nhau
(China đang rất sucessful in this tech, US estimate 70% cổ phần của thị trường thành là của
China; US and Western countries prevent China fr exporting their products to global market,
to other countries; 5G tech is China’s core competences, cụ thể hơn là những cty công nghệ
sở hữu 5G ở TQ như Huawei; CN này giúp các cty Cn TQ cạnh tranh thành công trên tt CN
TG)
e.g.: Wal mart in 1970s, the owner pursuit low cost-based, they tried to đàm phán vs local
suppliers to have a good deal -> họ can sell products at low price (nhưng mà hợp lí), cạnh
tranh vs các competitors in retail market; do họ a/d Cnghe vào operation nên operation cost is
much lower than other retailers
1992, they tried to invest in Mexico. Unluckily, the tech platform, all market conditions in
Mexico are difficult than in US –> owner has to modify a liitle bit their strategy ịn this
country (thuê more employees for production) -> k thể reduce cost as much as possible.
Nhưng they operate in large scale nên họ đàm phán với Mexican suppliers to reduce their
price for end users
This model này được chuyển đến từng qgia. Và now, Wal mart very sucessful in many
countries, they continue utilizing the economic of scale.
Nguyên nhân thành công của Walmart: (1) lợi ích của đàm phát giỏi; (2) applie E-commerce
?? tại sao VN là 1 tt hứa hẹn mà Walmart k đầu tư?
 Vì rất nhiều lí do: tí nữa cô nói ở location advantages.

Trải nghiệm, trau dồi hằng ngày, Tích hợp những advantages của bạn vào trở thành điểm
mạnh của riêng ban, apply vào ọi khía cạnh đs… -> core competence
e.g.: Flschmitch company – operating in chectric power, very sucessful in global martket
However the relationship bw this cty and the local G is not as close as Alstom cty-cũng trong
lvuc electric power
They can compete sucessfully in Asean and African countries (những qgia appy sensitive
policies – “black transactions” w/ G to thành công in soe projects in VN, China, Indo…)
nhưng unluckily, most of developing countries in order to develop their infrustructure they
have to borrow money fr inter financial organization like World Bank. WB applies post
inspection for their credit (nghĩa là bạn mượn tiền của WB, after a specific period, the bank
will try to investigate whether ur credit will be used for arrive purpose or not)
WB found out that a lot of project implemented by Alstom cty in Asean and Afrcan countries
get mistakes because of curruption in những qgia này. Therefore US punished this cty and
immediately Alstom has to sell all their subsidiaries operating in Electric power to GE (GE là
1 cty US -> GE can avoid the punishment of US on Alsto cty)
Alstom operating in 2 industries: electric power and railway -> giờ chỉ còn lại railway
Nhưng Alstom có very good mqh với CP các nước recipient. Nên they can access w/ a lot of
ỉnustructure projects in Asean and African countrieis

Lợi thế thì sói mòn theo tgian, còn nluc cốt lõi là trường tồn và ngày càng đc rèn luyện, trau
dồi
Diversification: rất quan trọng
VN: nền kinh tế gia công
• Internalization advantages
How u integrate all ur production stages globally
The internalization advantage reduces trading cost, risk in comparison with external transactions -
the imperfect market because :
• Persistent weaknesses such as underdeveloped private sector (imperfect market knowledge
and transaction cost)
• Imperfect market structure: limited access to market information, policy information…
 • Location advantages
Investment environment in recipient countries
(ngoài lè chút:
e.g.: VN xk rất nhiều dày dép, sp dệt may. Cái mà VN có là cheap input price, nhưng VN biết
cách sử dụng n chỉ trong specìic situations chứ k biến n thành long-term advantage
static advantage (1) n đyamic advantage (2)
nếu biết use (1) trong stage đầu và phát triển cái (2) và mix với cái đầu thì e sẽ sở hữu ngay
core competences)

Location advantage (host country): host country possess cheap input for inter. production (labor
cost, natural resource abundance …), location advantage is in term of:
• Economic advantage
e.g: VN market is very promising for consumer products nên có rất nhiều foreign investors
utilize this econoies of scale like Unilever, P&G,…
• Cultural advantage
VN culture is similar to China and neibor countries, so they can come to VN easily and
sucessful in VN market
• Political advantage
e.g.: Israel and US try to sign FTA on trade and investment bc US try to have some
interference on midđle east countries, muốn xây dựng mqh giữa 2 nước (k chỉ trade,
investment mà còn security, army…). The distance bw Israel and US is not short enough for
developing a FTA on trade and investment but the reason is political advantage or political
afair -> they try to develop lots of activities in term of trade, đtư, security in Israel
Israel: người Do Thái -> mảnh đất khô cằn ở Trung Đông – cứ phải đánh nhau liên miên thì
mới được yên nơi đó
Đầu tư của Mĩ vào đây chỉ vì yếu tố an ninh và ctri
• (Read: M.Porter’s diamond model)
• Cluster Development: chỉ link những cái đang có lại vs nhau thôi sẽ tạo ra core
competence

Kp nói đến location advantage thì mình chỉ nhìn vào cheap input price và economic of scale đâu,
cái political và long-term advantage, core competences là cái cực kì quan trọng
 Foreign investors vào VN kp lúc nào cũng focus lợi nhuận ngắn hạn đâu
 Thái Lan investor rất đáng sợ (hơn cả TQ): n k chỉ invest, mà n còn XK hàng hoá của n sang tt
VN thông qua investment đó, hh của n sẽ cạnh tranh trực tiếp với domestiic products của VN
Từ cám con cò, n extend ra cả nuôi lợn gà phân phối thịt đến người VN

5. International product life cycle (Raymond Vernon) – micro approach

main ideas:
Technical innovation is not expected by every countries. E.g.: In VN cô và em can also
introduce new tech for education, production services… G doesn’t know exactly why we can
innovate some new devices, tools,.. for our production, operation as well
the technology gap among countries
income gap among countries
the relationship bw international trade and international investment
 Innovation in every industries is expected, means that in some countries, the producers can
introduce some new products for their consumption as well as production in term of machinery,
consumer products
At the 1st stage, all products will be consumed domestically and its prices are very high (chỉ high
income country mới consume đc its products).
E.g. calculator sx by HP in US in 1970s is very expensive, initial price: 1000USD. The first
period consumption is only about 1 year. The following period is exporting to similar income
countries (to EU and Japan). Japanese company tried to import production life from US
company, và US company exported their production life to Japanese cty.
3rd period is that Japanese cty tries to combine all input for their own production -> the price will
be reduced dramatically only about 500 USD. Japanese cty continues exporting its production
life to South Korean company.
South Korean company tries to combine all input for their own production. The price will reduce
còn có 100USD.
In early 1990s, South Korean company tries to export the production life to Chinese cty.
Chinese cty also tried to combine all input for their own production, giá còn có 50USD.
VN also imitated the production life và sell nó in domestic market at about 583000 VND
 U can realize mqh bw international trade in 1st period of production and then we realize that all
products will produce globally w/ different combination of all inputs on the production.
Therefore, prduction cost will reduce dramatically
Step by step, developing countries can imitate the production life introduced by índustrial
countries.
 Actually, inter. product life cycle implies that:
+ there’s relationship inter trade and inter investment
+ developing countries (VN, China, TL, Indo…) have to imitate the production life
introduced by índustrial countries. Nghĩa là only apply Folower model in our production, not
only in industrial sector but also in agricultural sector because we cannot invent or innovate
some new machineries, tech -> phải buy fr industrialize countries.

industrialize countries only introduct some new products in global market then sell production
life to less developed countries, nhưng mà chỉ là những backward tech thôi vì họ còn phải
keep secret cho riêng họ nữa chớ (nghĩa là nó dùng chán chê mới đến được mình =)))) – CŨ
NGƯỜI MỚI TA)

sau cái câu chuyện về cái lý thuyết này, less developed and developing countries đừng co baoh
kêu ca gì, mình chỉ là follower thui
Nó xuất hàng đtien, rồi xuất công nghệ (product first, then production life)
 Ở CÁ có 1 cái kbh theo đc CÂ: ngành luyện kim
“BLACK BOX” – Cnghe bí mật, mình phải trả tiền bản quyền cho Texac để dùng

 Some key points:

• Each product has its own life cycle: introduction, growth, maturity and decline
• Industrial countries are often inventors because they are excellent at R&D and have market
advantage
• Developing countries are followers due to their underdeveloped R&D and less attractive
market advantages
 Three stages of LPC (product life cycle):
• The first stage: New product needs quick feedback and is sold only invented country with
negligible export
• The second stage: product becomes mature and foreign demand increases, export grows
sharply, domestic and foreign competitors appear, FDI is a new option
• The third stage: when both product and production procedure are standardized, market
becomes stable/muture and product is popular. All enterpises face cost reduction as much as
possible to deduct price that help them compete better in the world market. FDI is developed
continuously.

V. IMPACTS OF INTERNATIONAL INVESTMENT

1. General impact
 In macro level: According ac Dougall-Kempt (1976):
• In home country: the income of capital owner will increase, and the income of workers
will/may decrease due to reduction of employment or capital outflow. However in general
income of home country will increase bc the increase in income of capital owner will
compensate (bù) for the reduction of capital outflow as well as the reduction of employees’
income
• In host country: the income of employees increase when foreign investment inflow raise,
jobs rises, the income of capital owners decrease.
The impact of inter. investment in home countryy and host country is totally different from
each other .
Cái này gần giống inter. trade. Ở inter. trade, quốc gia nào mà có resources abundant can
improve their income via export their products on global market.
  Theo Salvatore (1995): inter. investment may help all foreign investors diversify their risks bc
they should not invest only into some specific location, this activity is very risky. Therefore they
should diversify their business performances globally, especially for international cooperation.
E.g. Panasonic, Hitachi, they not only operate in Asian but also in European countries and Châu
Mỹ. So they can diversify their risks bc they can collect all comparative advantages in every
location in the world.
 In general:
 Inter. investment will redistribute income bw capital owners and employees among home
country and host country. Therefore the resources will be realocated, exploied utilized more
efficiently, globally.
 The world output increases

2. Home country
 Positive impact:
• Expanding economic strength and enhancing (ncao) political prestige (uy tín) in the
international arena (trường qte).
• Taking advantage (tận dụng lợi thế) of host country to reduce cost; to improve capital
efficiency (ncao hiệu quả sd vốn), ROA, ROE; to balance comparative redundance of capital.
• Expanding market, prolonging (kéo dài) product cycle
• Finding new input resources for stablizing production
• Improving product structure (cơ cấu sp), applying new technology and grading up
competitiveness (ncao năng lực cạnh tranh)
• Story of China investing into African countries? http://cafef.vn/la-chu-no-lon-nhat-the-
gioi-trung-quoc-don-cac-nuoc-dang-phat-trien-vao-goc-tuong-va-doi-mat-voi-nguy-co-chim-
trong-khung-hoang-no-20190829171200171.chn

VI. RECENT TRENDS OF FDI MOVEMENT

VII. NEW TRENDS OF ODA
V. Impact of inter. investment
1. general impact
2. home country
a) positive country
b)ne
Chaptr 4: Investment liberalization and international investment policy
Part 1: Investment liberalization and Free investment zones
Globaliation trends
Investment liberalization concepts
Liberalization of trade and investment í understood as not bound by the provisios of the law
and policies” – Dobbin, 1998
Both trade and investment can be liberalize together
Free investment and trade are implemented by gradually abolishing/lifting barriers on trade
and investment and encouraging free movement of goods, services and capital among
members” – APEC, 1994
International liberalization is not bound by or implemented by gradually lifting regulations and
restrictions imposed by Gs on foreign investors”- Bryce, 1998

Contents of investment liberalization

Gradually eliminating discrimination and encouraging investment incentives
Restriction ralated to investment modes and establishment:
The “investment control” model preserves all national control over access and establishment
The model of “selective liberation” introduces limited access and establishment rights
The model of “regional industrialization program”
The model of “reciprocatedly national treatment”
e.g: the right for foreign companies to distribute petroleum in VN is based on WTO agreement
capital restriction and foreigner’s control reight: capital contribution ratio
restrictions on activities: labor recruitment, trade, product sold in the host market…
foreign exchange control:
requirements of technology and prodction procedure transfer
other restriction: capital access and technical standard requirements
administrative restrictions:

tax incentives
exemption and reduction of corporate income tax (CIT): CIT excemption for newly
established businesses; CIT reduction; tax loss carryforward (carryback); establishment of
special zones applied low tax policy or tax excemption
other financial incentives: capital acccess, reduction of land rent…

Establishing progressive treatent standards for investment:

Non-discrimination:
Non-discrimination among investors from different nations (MFN-most favored nation)
Non-discrimination among doétic investors and foreign investors (NT-nation treatment)
Fair and equal treatments
 Resolving investment disputes by international measures
Transfers
‘;

- Globalization is a series of binding links among Gs and societies foring a modern world system.
Globaliation is also the process by which the events, decisions and activities of one part of the
world can have a devastating/serious impact on individuals and communication in rest of the
world - Mc
VD: covid-19 bắt đầu ở TQ, rồi dần lan ra toàn cầu và ảnh hưởng đến mọi hoạt động toàn cầu
->globalization
- Glovalization can be defined as a process through which markets and production in many
differenct countries are bcoming increasingly interdependent due to the dynamics of trade in
goods and services as well as the dynamics of capital and tech circulation – European Commission
- Economic globalization is the economic development process of countries in the world beyond
their borders, towards the global
- Economic globaliation is neither a phenomenon nor a temporary trend, but it is a vast inter system
that shapes domestic politics as well as foreign relations of all countries – Thoá Frieman
- Globalization as a process in which markets and products among countries increasingly dêpnd on
each other thanks to the dynamic exchange
Chiếc ly sớt và cành oliu

- The role of economic

Big data, internet of think
Investment environment
CHAPTER 5: The BASIC FORMS OF INTERNATIONAL INVESTMENT
Part 2: Private investment and TNCs
I) Concept and structure of TNCs

II) Strategies of TNCs

III) The role of TNCs in global economy and international investment
IV) Impacts of TNCs on developing recipients
V) Investment of TNCs in some countries