Full name: Lâm Phúc Minh – FNC04

Within 1,000 words, you are required to answer the following two questions:

1. In your opinion, what are the key positive and negative effects of FDI
inflows in Vietnam? (5 marks)

FDI is a form of long-term investment by an individual or organization from one

country to another by building production and business establishments to achieve
goals of long-term economic benefits and to take control of the business. The
presence of FDI inflows over the past three decades has had direct positive impacts
on the Vietnamese economy, such as:

 FDI is a source of support for development.

 FDI contributes to increasing competitiveness and expanding the export
capacity of the investee country, collects a part of profits from foreign
companies, and receives foreign currency from service activities for FDI.
 Transferring technology
 Bringing management experience, business skills, and technical
qualifications to domestic partners receiving investment.
 Providing complicated production knowledge while absorbing the
technology of the host countries.
 Promoting investment recipient countries to try to train qualified engineers
and managers to participate in joint ventures with foreign countries.
 Contributing positively to economic growth in developing countries.
 Contributing to speeding up the process of economic restructuring.
 Contributing significantly to State budget revenue through tax payment of
investment units and land rental income.
 Improving the international balance for the host country.
 Increasing the share of exports
 Expanding both domestic and foreign markets
 Additional important capital for development investment
 Contributing to labor productivity growth
 FDI has created many new jobs, attracting a significant number of workers
in the receiving country to work in foreign investment units.
  Investors will avoid barriers to trade protection, trade fees of countries
accessing investment
 Investors will make decisions in their favor to ensure the best investment
capital development
 Foreign investors can exploit potential advantages in the investment country
market
 Besides the positive effects that FDI brings, it also has the following
negative effects:
 The host country may receive many inappropriate technologies
 The host country often suffers a loss in the calculation of its share in joint
ventures and consequently a loss in the distribution of profits because it is
difficult to calculate the true value of the transferred machinery.
 Damaging to the ecological environment.
 Product quality, high production costs, and therefore products of investment
recipient countries can hardly compete in the world market.
 Economic dependence on investment recipient countries
 The costs of attracting FDI and producing goods are inappropriate.
 Facing many burdens in a new political environment, armed conflicts, or
internal disputes conflicts over differences in traditional thinking.
 If the enterprise makes investment abroad, the domestic investment capital
will be lost making it difficult to find capital for development, pressure to
create jobs in the country, which can lead to the risk of economic recession.
 Domestic policies can be changed because when making investment
requirements, investors often have measures to lobby the State in their favor.
 In the process of competition between businesses, there will be a continuous
change in capital flows, leading to a shift in the economic balance.

2. Will FDI leave Vietnam due to Covid-19? (5 marks)

According to Minister of Planning and Investment Nguyen Chi Dung, Vietnam

stands firm as a safe, attractive, and high potential investment option for foreign
investors in 2022. He said Vietnam continues its policy of selectively attracting
FDI capital, bringing foreign investment activities to a new stage.
Although the global economy has been heavily affected by the COVID-19
pandemic, Vietnam's selective investment attraction policy is in the direction of
reducing quantity, increasing quality, eliminating small-scale projects, etc. little
added value starts to take effect. 2022 is forecasted to be favorable for attracting
international capital flows. And Vietnam continues to be a safe, attractive, and
potential investment destination for foreign investors.

Timely decisions of the Government such as Resolution 105/NQ-CP, Resolution

No. 128/NQ-CP, etc. have reassured the FDI business community, so foreign
investment continues to flow into our country. In the first two months of 2022, FDI
into Vietnam, investment capital through capital contribution, and share purchase
reached $769.6 million, up 41.7% over the same period last year. The number of
newly registered projects increased by 45.2%, reaching 183 projects. However,
newly registered investment reached 631.8 million USD, down 80.9% over the
same period last year.

Since the beginning of the year, Vietnam has attracted nearly 5 billion USD in
FDI, although this figure is 91.5% over the same period last year, down 8.5%
compared to last year. This decline may only be momentary when large-scale
projects are still waiting for investment certificates and do not affect the recovery
trend of foreign investment inflows into Vietnam. Mr. Do Nhat Hoang, Director of
the Foreign Investment Department, said that the decline in new investment
projects mainly focused on small and micro-sized groups.

Vietnam is actively reforming administrative procedures, so surveying, carrying

out investment procedures, or connecting and circulating goods takes place
smoothly. The global supply chain is also recovering quickly, the world's consumer
demand is gradually increasing again, which is an opportunity for businesses to
boost production. Along with that, Vietnam's external activities are forecasted to
continue to be vibrant; including actively integrating investment promotion
content. Particularly during Prime Minister Pham Minh Chinh's trip to Europe at
the end of 2021, the total value of commitments, memorandums of understanding
on cooperation and investment of domestic and foreign enterprises is up to 30
billion USD and will be " sweet fruit" in 2022 and beyond.
The year 2022 is also the time when enterprises and multinational corporations of
Europe, Japan, Korea, the US... restructure, allocate resources, and their global
production-supply network.

In general, entering a new phase, the general trend of Vietnam's economy is

positive, socio-economic life gradually recovers. In order to effectively attract FDI,
it is necessary to well organize the implementation of the Government's program
on socio-economic recovery and development for the period 2022-2023, which is
being implemented to bring the economy back to a high and sustainable growth
trajectory soon. Along with this program is the serious implementation of
Resolution 50 of the Politburo. At the same time, it is necessary to focus on direct
contact with big investors, support businesses in training and recruiting workers to
meet the needs of the economy, especially the needs of the foreign-invested sector
after the disruptions in labor resources.