CHAPTER 2

International Trade and Foreign Direct

Investment

Section 1 – Term matching

1. Foreign sourcing P => A. the amount invested each year into other nations.

2. Portfolio investment K B. Japanese general trading companies that trade in a wide range

of products and materials, and also engage in logistics, plant

development and other services, as well as international resource

exploration.

3. Foreign direct C. production facilities in Mexico that temporarily import raw

investment B => P materials, components, or parts duty-free to be manufactured,

processed, or assembled with less expensive local labor, after

which the finished or semi-finished product is exported.

4. Preferential trading D. the overseas procurement of raw materials, components, and

agreement H => M products.

5. Export processing zone E. transactions in which the ownership of companies, other

O business organizations, or their operating units are transferred

 or consolidated with other entities.

6. In-bond plants F. Mexico, Brazil, Russia, India, China

(maquiladoras) C

7. International Trade  J G. market at the next stage of the production/distribution chain,

for example, the distribution and sale of motor vehicles would be

a downstream market in relation to the production of motor

vehicles.

8. Sogo shosha B H. an agreement signed by Canada, Mexico, and the United

States, creating a trilateral trade bloc in North America. The

agreement came into force on January 1, 1994.

9. NAFTA =F => H I. regional intergovernmental organization comprising

ten Southeast Asian countries that promotes intergovernmental

cooperation and

facilitates economic, political, security, military, educational,

sociocultural integration amongst its members and other Asian

states. 

10. The EU N J. exchange of products and services from one country to

another. It consists of goods and services moving in two

directions: Imports – flowing into a country from abroad,

Exports – flowing out of a country and sold overseas.

11. ASEAN I K. purchase of stocks and bonds to obtain a return on the funds
 invested.

12. Annual FDI outflows L. government actions and policies that restrict or restrain

A international trade, often with the intent of protecting local

businesses and jobs from foreign competition.

13. Merges and M. an agreement by a small group of nations to establish free

Acquisitions E trade among themselves while maintaining trade restrictions with

all other nations.

14. Protectionism L N. political and economic union located primarily in Europe that

has developed an internal single market through a

standardized system of laws, aimed to ensure the free movement

of people, goods, services and capital within the internal market.

15. M-BRIC countries F O. a government-designated zone in which workers are permitted

to import parts and materials without paying import duties, as

long as these imported items are then exported once they have

been processed or assembled.

16. Bamboo network Q P. direct investments in equipment, structures, and organizations

in a foreign country at a level that is sufficient to obtain

significant management control; does not include mere foreign

investment in stock markets

17. Downstream markets Q. ethics Chinese family businesses based outside of China.

Section 2 – Gap filling

International trade occurs primarily because of relative (13) _____________ among nations.

They stem from differences in (14) _____________, which result from: differences in the

endowments of the factors of production; differences in the levels of (15) _____________ that

determine the factor intensities used; differences in the efficiencies with which these factor
 intensities are utilized, and (16) _____________.

The seven dimensions along which management can globalize include: product, markets, (17)

_____________, where value is added, (18) _____________, use of non-home-country

personnel, and extent of global ownership. It is possible to completely standardize operations

((19) _____________ strategy) or to undertake zero standardization ((20) _____________

strategy) and variations of the level of globalization will vary with each dimension.

Section 3 – Mutiple choice questions

1.The definition of a multinational enterprise (MNE) is that it is a firm that __________.

A. exports more than it imports.

B. sells in many markets all over the world.

C. operates and controls production or distribution facilities in more than one nation.

D. has foreign stockholders.

2. Two activities to supply foreign markets may be __________.

A. to exporting to an overseas market and manufacturing in it.

B. to exporting goods to an overseas market and exporting services to it.

C. to manufacture in an overseas market and licensing technology.

D. to establish joint ventures and wholly-owned manufacturing facilities.

3. In the past, FDI has followed foreign trade because __________.

A. foreign trade is less expensive and less under threat.

B. the business can be expanded by management in great increments.

C. an export department has already been built and has hired sales representatives to live in

foreign markets.

D. the firm has already set up its own sales company in order to import in its own name.

4. An enterprise makes a decision to invest abroad because __________.

A. it can get a higher profit for the same value of investment

B. it can get a lower profit for the same value of investment

C. it cannot face domestic competition any longer

D. it lacks the workforce in the home nation

5. Frequently, a firm will travel overseas to __________.

A) keep its local market protected

B) get greater profits

C) have a product test in the market

D) All of the above.

6. A __________ in a multinational enterprise is the headquarters which are located in the home

country of the multinational enterprise.

A. parent firm

B. foreign affiliate

C. foreign firm
D. parent affiliate

7. Multinational Corporations want to invest in other countries when there are __________.

A. natural resources, low labor costs and strict tax policies

B. liberalized markets, relaxed regulations and high wages

C. stable exchange rates, political stability and low wages

D. low wages, political stability and many SOEs

8. A lot of international firms are scattering the production systems’ activities of places which

are near available resources because of __________.

A. no government barriers to trade in the new business environment

B. decreasing competition from global firms

C. new production and communications technological facilities

D. significantly decreasing shipping costs

9. Local companies often take the control of the distribution channels, the resources of finance,

and the marketing know-how, but they __________.

A. lack competent managers to have daily operations efficiently

B. do not get access to raw materials

C. lack the products for marketing to capitalize on their unique market position

D. need the assistance and experience from multinational companies

E. are overpowered by multinational companies

10. Focusing attention on a nation that is already a sizable purchaser of goods stemming from the

would-be exporter's country can bring some benefits. Which of the following is not a good

thing?

A. Relatively favorable business environment in the important nation.

B. Elimination of export and import rules.

C. Construction of satisfactory transportation facilities.

D. Abundant foreign exchange to pay for the exports.

11. __________ investment is the flow of funding given by an investor or lender to establish or

acquire a foreign company or to expand or finance an existing foreign company that the investor

owns or takes control of.

A. International portfolio

B. Foreign direct

C. Foreign indirect

D. International capital

12. __________ investment is overseas investment that does not require management control.

A. International portfolio

B. Foreign direct

C. Foreign indirect

D. International capital
13. __________ investment is any flow of lending to, or purchase of ownership in, a overseas

firm in which the investor owns 10 percent or more of the firm.

A. International portfolio

B. Foreign direct

C. Foreign indirect

D. International capital

14. A foreign direct investment actor is represented by __________.

A. the government

B. transnational private enterprises

C. subsidiaries of transnational companies

D. IMF

E. The World Bank

15. According to theory of market imperfections, foreign direct investments are determined by

__________.

A. a perfect market structure

B. shortage of market failures

C. difference in the profit rate between different markets, which results from the

imbalance in the factor market or in the financial-currency market

D. lack of government action

16. Advantages of FDI consist of all of the following except __________.

A. The resource transfer effect

B. The employment effect

C. The balance of payments effect

D. National sovereignty and autonomy

17. Which of the following statements is true?

A. FDI causes more significant technology transfers to developing nations than to

developed ones.

B. FDI has little effect on technology transfers between nations, unlike other ways of

international investment.

C. FDI is more likely to enhance economic boom in countries that maintain protectionist trade

policies because protection increases the competitive need to innovate.

D. FDI causes fewer technology transfers to developing nations than to developed ones.

18. Regarding the annual outflows of FDI, __________.

A. the ratio that comes from developing countries doubled from 1997 to 2004.

B. the ratio that comes from the United States and Europe is nearly 30 percent.

C. much of the recent increase has been connected with mergers, acquisitions, and other

international investments made by companies in industries coping with increased

competition and global consolidation.

D. nearly about half went to China and its areas in 2004.

19. Two-thirds of the stock of direct investment is in __________.

A. North America

B. Western Europe

C. Industrialized nations

D. Developing nations

20. To a large extent, foreign direct investment involves firms from __________ nations

investing in __________ ones.

A. industrialized; developing

B. industrialized; other industrialized

C. developing; industrialized

D. developing; other developing

21. Most FDI and trade is carried out by __________.

A. North America.

B. China, Japan and the US.

C. ASEAN countries.

D. The US, the EU, and Japan.

22. The world's top receivers of FDI is __________.

A. China

B. Japan

C. India

D. The United States

23. Most companies that have joined the Chinese market as competitors in the consumer market

have done so __________.

A. to enter a fast-growing market

B. to get technological and managerial know-how

C. to protect their local markets

D. to make a fast buck

24. Developed nations are __________.

A. largest receivers and largest sources of FDI

B. largest receivers and moderate sources of FDI

C. moderate receivers and largest sources of FDI

D. moderate receivers and moderate sources of FDI

25. The share of developing nations as receivers of FDI has been __________.

A. increasing

B. decreasing

C. stable

D. All of the above

26. Two major causes for the continuous booming of FDI in developing nations are __________.

A. high wages and skillful workers

B. different incentive programs and high wages

C. market-based capitalism and low wages

D. productivity and tax concessions

E. various incentive programs and emerging market-based capitalism

27. In-bond plants (maquiladoras) __________.

A. can import parts and processed materials without import duties.

B. requires import duty to be paid on the complete products on the value added in Mexico.

C. give competitive production sites due to lower cost labor.

D. are located on the border between Mexico and the U.S.

28. Increasing wage rates in Mexico have effects on maquiladoras in the following ways:

A. They have boosted Mexican firms to establish U. S. plants to supply the Mexican market.

B. They have enhanced higher value work in the Mexican maquiladoras plants.

C. They have encouraged American plants in Mexico to supply the Mexican market.

D. They have boosted the emergence of Mexico as the country having the best labor cost

advantage.

29. Production facilities in Mexico that temporarily import raw materials, components, or parts

duty-free to be manufactured, processed, or assembled with less costly local labor and then

export the finished or semi-finished product are considered as:

A. in-bond plants

B. out-bond plants

C. reverse maquila
D. matildoras

30. Which of the following is not true of FDI in developing nations:

A. China receives more FDI than the United States

B. Latin American and the Caribbean have seen a decrease in investment

C. South America receives the greatest amount of FDI

D. the process of privatization has moved to completion in many developing nations

E. there has been decrease in investment in developing countries

31. Which of the following constitutes FDI?

A. Buying company shares on a foreign stock exchange to make a good profit.

B. A UK energy company’s buying territory abroad where it expects to find oil reserves.

C. A tourist’s purchasing foreign currency to spend on a holiday abroad.

D. A company’s signing an agreement with a wholesaler to distribute its products in foreign

markets.

32. Which of the following is an example of foreign direct investment?

A. The Velasco Co. of the US transports 20 truckloads of seafood to Canada.

B. BBN Bank of Canada sends an amount of $30 million dollars to its subsidiary in the

Bahamas.

C. The Lamondo retail firm of France makes a decision to expand to the UK and purchases

a large plot of land for its first store

D. All of the above

33. Which of the following is an example of foreign direct investment?

A. John Michaels purchases an amount of $2,000 worth of shares in a foreign mutual fund.

B. Astalon technologies of Canada purchases an amount of $20 million in shares of Acer

technologies of Taiwan.

C. Vera Ltd., a small car repair shop in the border between Spain and Portugal, opens

another one in Portugal.

D. All of the above

34. Which of the following would be an example of FDI from the U.S to Taiwan?

A. A U.S. bank buys bonds issued by a Taiwan computer producer.

B. A U.S. car producer enters into a contract with a Taiwan firm for the latter to make and sell it

spark plugs.

C. Microsoft hires a Taiwanese computer programmer to locate and correct some errors in

some software for it.

D. The state of California rents space in Taipei for one of its workers to use promoting tourism in

California.

E. Warren Buffet (a U.S. citizen) decides to buy a controlling share in a Taiwanese electronics

firm.

35. If a German producer of household appliances wants to take advantage of the cheaper labor

available in the Czech Republic, which of the following activities will not serve that purpose?

A. Set up a manufacturing subsidiary there and employ Czech workers.

B. Set up a plant in the Czech Republic and send all German workers to operate it.

C. Give License to a Czech firm to produce its products under its own label.

D. Sign Contract with a Czech firm to do some of the processing for it.

E. Buy a Czech firm that produces similar products, and adapt it to produce its own products.

36. Sony and Pepsi cooperated together to market Wilson sporting goods in Japan This strategy

is__________.

A. exporting

B. licensing

C. joint venture

D. assembly operations

37. German companies were asked to build the biggest steel mills in the world in China and to

train local labor. This is known as __________.

A. licensing

B. manufacturing

C. joint venture

D. turnkey

Section 4 – T/F + explanation

1. The dollar value of exports increased by 28 times from 1970 to 2005, but when inflation's

effect is removed, the level of exports has only doubled. F

2. The largest exporters and importers result in a fairly high proportion of overall merchandise

trade of both exports and imports. F

3. The extensive distribution system is one reason Japan sells more to developed nations than

most developed nations do. T

4. There is a fine line between portfolio investment and direct investment due to the growing

number of international mergers, and acquisitions. T

5. Engaging in foreign trade is typically less costly and less risky than making a direct

investment into foreign markets. F T

6. Before a firm decides to compete internationally, it must select its strategy and choose a mode

of entry into international markets. T F

7. One reason why firms pursue international opportunities is to extend the product's life cycle. F

8. A reason that firms use international strategies is to secure needed resources, especially

minerals and energy. T F

9. Coca Cola and PepsiCo are examples of firms that have found it unnecessary to aggressively

pursue international strategies because of extensive growth opportunities available in the U.S.

market. F
10. Multinational firms have many opportunities to learn from their experiences in international

markets, so they do not have to establish R&D system. T F

11. In some industries, technology drives globalization because the economies of scale necessary

to reduce costs cannot be met by competing in domestic markets alone. T

12. As an indication of the importance of economies of scale, Ford Motor Company runs a single

global business developing cars and trucks that can be built and sold through the world. T

13. International associations such as the European Union, the Organization of American States,

and the North American Free Trade Association encourage globalization rather than

regionalization of competition.  F

14. Exporting and licensing are the most appropriate ways for smaller firms to first enter

international markets. T

15. The high cost of transportation, expense of tariffs, and loss of control are three disadvantages

of importing. T F

Section 5 – Short-answered questions

1. What are the different components of foreign investment? Why has the distinction between

them begun to blur in recent years?

2. What are three ways that a company in one country can serve (sell its product to) a market in a

foreign country?

3. Why has most of the foreign direct investment gone into the acquisition of existing companies

rather than establishing new ones?

4. With low cost advantages and significant market potential, the countries in emerging markets

have been attracting a great amount of inward foreign direct investment (FDI). However, there

has been a trend of an increasing volume of outward FDI from emerging markets. Why are these

emerging market firms investing overseas even though they have home market attractiveness yet

lack of international experience? Please discuss the firm’s motives and viable strategies

of emerging market firms conducting FDI overseas.

5. Japanese MNCs, such as Toyota, Toshiba, Matsushita, etc., made extensive investments in the

Southeast Asian countries like Thailand, Malaysia, Indonesia, and Vietnam. In your opinion,

what forces are driving Japanese investments in the region?

6. Since the NAFTA was established, many Asian firms especially those from Japan and Korea

made extensive investments in Mexico. Why do you think these Asian firms decided to build

production facilities in Mexico?

7. A Vietnamese company has just invented a new smartphone that can perform the same

functions as existing products but costs only half as much to manufacture. There have been

several patents to protect the unique design of this smartphone. As the International manager of

the firm, you are asked to formulate a recommendation for how to expand into Western Europe.

You have three options: (1) to export from Vietnam, (b) to license a European firm to
manufacture and market the computer in Europe, and (c) to setup a wholly owned subsidiary in

Europe. Evaluate the advantages and disadvantages of each alternative.

Section 6 – Case studies

Foreign Direct Investment by Cemex

In little more than a decade, Mexico's largest cement manufacturer, Cemex, has transformed

itself from a primarily Mexican operation into the third-largest cement company in the world

behind Holcim of Switzerland and Lafarge Group of France. Cemex has long been a power

house in Mexico and currently controls more than 60 percent of the market for cement in that

country. Cemex's domestic success has been based in large part on an obsession with efficient

manufacturing and a focus on customer service that is tops in the industry.

Cemex is a leader in using information technology to match production with consumer

demand. The company sells ready-mixed cement that can survive for only about 90 minutes

before solidifying, so precise delivery is important. But Cemex can never predict with total

certainty what demand will be on any given day, week, or month. To better manage

unpredictable demand patterns, Cemex developed a system of seamless information

technology, including truck-mounted global positioning systems, radio transmitters, satellites,

and computer hardware, that allows it to control the production and distribution of cement like

no other company can, responding quickly to unanticipated changes in demand and reducing

waste. The results are lower costs and superior customer service, both differentiating factors

for Cemex.

The company also pays lavish attention to its distributors-some 5,000 in Mexico alone-who
can earn points toward rewards for hitting sales targets. The distributors can then convert those

points into Cemex stock. High volume distributors can purchase trucks and other sup plies

through Cemex at significant discounts. Cemex also is known for its marketing drives that

focus on end users, the builders themselves. For example, Cemex trucks drive around Mexican

building sites, and if Cemex cement is being used, the construction crews win soccer balls,

caps, and T-shirts.

Cemex's international expansion strategy was driven by a number of factors. First. the

company wished to re duce its reliance on the Mexican construction market. which was

characterized by very volatile demand. Second, the company realized there was tremendous

demand for cement in many developing countries, where significant construction was being

undertaken or needed. Third, the company believed that it understood the needs of

construction businesses in developin gnations better than the established multinational cement

companies, all of which were from developed nations. Fourth, Cemex believed that it could

create significant value by acquiring inefficient cement companies in other markets and

transferring its skills in customer service, marketing, information technology, and production

management to those units.

The company embarked in earnest on its international expansion strategy in the early 1990s.

Initially, Cemex targeted other developing nations, acquiring established cement makers in

Venezuela, Colombia, Indonesia, the Philippines, Egypt. and several other countries. It also

purchased two stagnant companies in Spain and turned them around. Bolstered by the success

of its Spanish ventures, Cemex began to look for expansion opportunities in developed

nations. In 2000, Cemex purchased Houston-based Southland, one of the largest cement
companies in the United States, for $2.5 billion. Following the Southland acquisition, Cemex

had 56 cement plants in 30 countries, most of which were gained through acquisitions. In all

cases, Cemex devoted great attention to transferring its technological, management, and

marketing know-how to acquired units, thereby improving their performance.

In 2004, Cemex made another major foreign investment move, purchasing RMC of Great

Britain for $5.8 billion. RMC was a huge multinational cement firm with sales of $8 billion,

only 22 percent of which were in the United Kingdom, and operations in more than 20 other

nations, including many European nations where Cemex had no presence. Finalized in March

2005, the RMC acquisition has transformed Cemex into a global powerhouse in the cement

industry with more than $15 billion in annual sales and operations in 50 countries. Only about

15 percent of the company's sales are now generated in Mexico. Following the acquisition of

RMC, Cemex found that the RMC plant in Rugby was running at only 70 percent of capacity,

partly because repeated production problems kept causing a kiln shutdown. Cemex brought in

an international team of specialists to fix the problem and quickly increased production to 90

percent of capacity. Going forward, Cemex has made it clear that it will continue to expand

and is eyeing opportunities in the fast growing economies of China and India where currently

it lacks a presence, and where its global rivals are already expanding.

Case discussion questions:

1. Which theoretical explanation, or explanations, of FDI best explains Cemex‟s FDI?

2. What is the value that Cemex brings to the host economy? Can you see any potential

drawbacks of inward investment by Cemex in an economy?

3. Cemex has a strong preference for acquisitions over greenfield ventures as an entry mode.
Why?

4. Why do you think Cemex decided to exit Indonesia after failing to gain majority control of

Semen Gresik? Why is majority control so important to Cemex?

5. Why do you think politicians in Indonesia tried to block Cemex‟s attempt to gain majority

control over Semen Gresik? Do you think Indonesia‟s best interests were served by limiting

Cemex‟s FDI in the country?

Section 7 – Further Readings

Improving quality of foreign direct investment attraction

in Vietnam

Background

As one of the most critical point of economic reform policies, the Foreign Investment Law in

Vietnam was first enacted in December 1987 and then became the basic legal framework

specifying Vietnam’s point of view about opening and integration. There are some

fluctuations, but the FDI sector in particular and external economic activities in general has

shown a positive role in the achievement of growth and development of Vietnam for nearly 30

years. According to the General Statistics Office of Vietnam (GSO), average annual economic

growth was 7.3%, and GDP per capita rose by 5.7% over the period 1990–2004 and expanded

6.40% in the September quarter of 2016. GDP growth rate in Vietnam averaged 6.17% from

2000 until 2016, reaching an all- time high of 8.46% in the fourth quarter of 2007 and a record

low of 3.14% in the first quarter of 2009. Meanwhile, property rate fell from roughly 80% in
1986 to around 29% in 2002, Vietnam’s poverty rate fell from 14.2% in 2010 to 4.5% in 2015.

Vietnam aims to reduce its poverty rate 1.3–1.5% in 2016. For the past decade, Vietnam has

always been among the rapidly growing economies with sharp poverty reduction in the world

[1–3].

In the first phase of opening, FDI was an effective solution to help Vietnam out of the tricky

situation of siege and embargo. In the next stage, FDI is an important additional capital in the

total investment of the whole society, contributing significantly to the promotion of economic

restructuring, the increase of production capacity, the innovation of technology, the

breakthrough in international markets, the increase in exports, the improvement of the

international balance of payments, the contribution of state budget, the development of high-

quality human resources, and the creation of additional jobs.

FDI in Vietnam has major influence on other economic sectors, namely stimulating the

domestic investment, creating the competition, promoting the innovation and the transfer of

technology, improving production efficiency, and developing the supporting industries that all

help Vietnam participate in the value chain of global production. Today, Vietnam has become

an appealing destination of many leading corporations around the world in different fields,

such as BP, Total, Toyota, Canon, Samsung, Intel, Unilever, etc. with products of international

quality, which not only has a great contribution to consolidate the position of Vietnam on the

region and the world, but has also created the competitive motivation for the domestic

enterprises to adapt in the context of globalization. FDI also plays an active role in supporting

the process of reform of state enterprises, encouraging administrative procedures to reform and
fulfill the market economy.

Up to now, Vietnam has attracted nearly 290 billion USD in foreign direct in- vestment (FDI)

with more than 22,000 projects from 114 countries and territories and has disbursed nearly

$145 billion [4].

After nearly 30 years, FDI is distributed throughout Vietnam. Funds come primarily from

Asian countries such as Japan, China, Hong Kong, Taiwan, Korea, and Singapore (accounting

for 70.6%) or from European countries such as Germany, France, the UK (8.8%), the

Americas including the USA, Canada (accounting for 7.7%), and Australia (2.7%); the rest are

other partners. The average of used FDI accounts for 25% of social capital annually. This is an

important fund to support economic development [1, 5].

FDI sector has a positive impact on the restructuring of economic sectors and the orientation

of industrialization in Vietnam. From 2000 to 2015, the percentage of FDI in economic

structure increased by 5.4%, while the public sector and the private sector decreased

respectively. FDI sector accounted for about 45% of the total industrial production value,

contributing to the formation of the key industrial sectors including telecommunications, oil

and gas, electronics, chemicals, automotive, motorcycle, public information technology, steel,

cement, food processing agricultural products, footwear, garment, etc. The majority of FDI

enterprises operate in the fields of high-tech industries such as mining and oil and gas,

electronics, telecommunications, office equipment, and computers. FDI restructured

agricultural structure, diversified the types of product, improved the value of expectedly

agricultural goods, and acquired a number of advanced technologies and high-quality

international standard seeds and breeds. However, the percentage of FDI accounted for less

than 3% of the output of the agricultural industry [1, 5].

The motivation fueling the research is that the quality of FDI projects in Vietnam also

contributed to improving the quality of banking services, insurance, and auditing with the

modern methods of payment, credit, and card. FDI in the tourism sector, hotels, and office

leasing has changed the appearance of some major urban and coastal areas. Many recreation

areas such as golf, bowling, and gambling areas created attractive conditions for investors and

international tourists. In Vietnam, the other areas such as education, training, and health care

did not initially attract FDI but later were invested in several high-quality institutions, some

modern hospitals and clinics which served the needs of the high-income population and

foreigners living in Vietnam.

This study will analyze the specific situation of attracting foreign direct investment in Vietnam

during the period from 1988 to 2015 and propose some suggestions to improve the quality of

FDI attraction in Vietnam. Additionally, for the purpose of verifying the claims, the authors of

the study also applied the survey method to collect additional opinions of company groups in

assessing the factors affecting the quality of attracting FDI projects in Vietnam with the focus

on three main factors: resources, infrastructure, and other support policies.

Data analysis of the reality of attracting (FDI) in Vietnam between 1988 and 2015.

FDI attraction through the registered capital and implemented capital. Based on the volatility

of FDI flow into Vietnam, the development process of FDI can be divided into four (04) stages
as follows (Table 1):

– In the period of 1988–1997:

The three-year period of 1988–1990 is considered the warm-up period. Since 1991, it was

taken over by the first FDI wave with the fast pace of FDI attraction; the annual average

increased by 50% of registered capital, by 45% of realized capital, and was higher than the

average growth rate of total social capital (23%). The registered capital reached $31.6 billion;

the realized capital was $13.37 billion, equivalent to 37.5% of the registered capital [1, 2].

– In the period of 1998–2004:

This is a recession period of FDI. The registered FDI decreased to $5590.7 million in 1997,

$2012.4 million in 2000, and $4547.6 million in 2004. The annually averaged realized capital

was $2.54 billion, equivalent to 78% of the realized capital in 1997. The registered FDI

reached $23.88 billion; the realized capital was $17.84 billion, accounting for 75% of

registered capital [1, 2].

– In the period of 2005–2008:

This is the emerging second FDI wave. The registered FDI was $6.838 billion in 2005,
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Ball, D. A., Geringer, J. M., McNett, J. M., Minor, M. S. (2013). International business: The
challenge of global competition (13TH ed.) New York, NY: McGraw-Hill Irwin.

Hanh, N.P., Van Hung, Đ., Hoat, N.T., 2017. International Journal of Quality Innovation.
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Hill, Charles W. L., 2013. International business: competing in the global marketplace. McGraw-
Hill/Irwin - 9th ed.