MINISTRY OF EDUCATION AND TRAINING

HO CHI MINH CITY UNIVERSITY OF TECHNOLOGY AND

EDUCATION
INTERNATIONAL FACULY

ESSAY: Scientific Writing

Dr. Nguyễn Thị Thanh Thúy

Undergraducate: Lê Thu Phương
Student code: 21124028
Class: 21124FIE1

Topic: Foreign direct investment (FDI) is an essential and unavoidable part of

national developmental plans. There are many positive aspects for FDI for
which it is welcomed by all nations globally; however, many negative aspects
still remain. Discuss about FDI flow in Vietnam from 2015 to 2021.

Ho Chi Minh City June 2022

TABLE OF CONTENTS

HEADING

1. Reason for choosing the topic

2. List of abbreviations

CONTENT

Chapter 1: General overview of FDI

1.1 What is the concept of FDI

1.2 General characteristics of FDI

1.3 The role of FDI

Chapter 2: POSITIVE IMPACTS OF VIETNAM'S FDI IN THE

ECONOMY FROM 2015-2021

2.1 How has capital in Vietnam's industrial sector changed?

2.2 Change in investment structure by investment partners

2.3 Contributions of FDI to Vietnam's economic development

2.4 FDI is contribution to GDP growth

2.5 Contribution of FDI to production technology

Chapter 3: NEGATIVE IMPACTS OF VIETNAM'S FDI IN THE

ECONOMY FROM 2015-2021

3.1 Many sources of capital are still limited in some places

3.2 FDI enterprises have not developed in technique, technology…

3.3 FDI projects affect the environment

3.4 Remedy
CONCLUSION

REFERENCES

1 Sample Chart Table

2 Picture Appendis

3 References

HEADING
1 Reason for choosing the topic

In the current period of global development, in the direction of

industrialization and modernization, for a country that is an agricultural
country, 70% of the population is in rural areas, and only 30% is concentrated
in cities. market , that is a worrying thing . While the current trend of
industrialization and modernization focuses mainly on big cities, where there
are enough material and technical facilities, it forces Vietnam to change its
economic structure in order to meeting current needs, along with investment in
international economic integration, has accelerated the flow of capital in the
world, especially foreign direct investment (FDI).

As Vietnam is one of the members of the WTO, FDI inflows have

contributed to important changes in the economy. Changing the economic
structure together with new changes when there is a combination of
development in rural areas and good development in urban areas. Since then,
Vietnam has become a country that is highly appreciated as one of the places to
attract a lot of investment from other countries; thanks to a positive population
structure, stable political situation in the country and a growing economy.

2 List of abbreviations

FDI (Foreign Direct Investment)

WTO (World Trande Organization)

GDP ( Gross Domestic Product)

CONTENT

Chapter 1: General overview of FDI

1.1 What is the concept of FDI?

FDI is a form of long-term investment by individuals or organizations of

one country in another by setting up factories and business establishments. The
aim is to achieve long-term interests and take control of the premises in that
business.

For example: Chinfon Cement Joint Venture Company Hai Phong, this is a
company established based on foreign direct investment (FDI). When the
foreign side, Chinfon investment Co., Ltd (Taiwan) contributes 70% of capital
and Vietnam Cement Company contributes 14.4%

1.2 General characteristics of FDI

Bringing profits to investors (For example: Company A invests in KFC

Fried Chicken with an amount of USD 5 million, after 3 months the store has
brought a profit for Company A up to 45%)

Investors must contribute a minimum capital so countries can control

investment-receiving enterprises because each country has its own regulations.
(For example, when a Vietnamese company is established, just for shareholders
contributing with a maximum number of shares of 25% must not exceed this
threshold level)

FDI investment also has to have a transparent legal corridor to assist

promote the country's economy, welfare... rather than just serving personal
investment purposes.
 The rate of foreign direct investment (FDI) capital will depend upon each
country, but besides that, they'll consult with one another to be able to come up
with variety that's most appropriate.

The success of FDI investment are going to be measured by the nice

business results of these enterprises.

Most of the varieties of investment by FDI are mainly technology (artificial

intelligence, robots, ...), production lines (machines, equipment ..) for the
receiving countries, in order that energy Work productivity are significantly
improved

1.3 The role of FDI

Over the past 30 years, foreign direct investment (FDI) has made an important
contribution to Vietnam's economic growth, supplementing development
investment capital, increasing state budget revenue, promoting exports, and
many other fields. other importance.Especially, contributing to economic
growth such as perfecting the improved market economy institutions, economic
management and corporate governance capacity, improving technological
capabilities and competitiveness of enterprises, contributing to change
restructure the economy to form a number of key industries, promote import
and export, change the structure of manufactured goods in the direction of
increasing the proportion of high-value manufactured goods, and expand
foreign relations. and international economic integration, creating jobs and
improving the quality of labor resources

Chapter 2: Positive Impacts of VIETNAM'S FDI within the Economy

from 2015-2021

2..0. Structure of FDI investment by economic sector

Up to now, foreign direct investment has been present in 19 out of 21

industries in Vietnam's national economic sub-sector (except for the socio-
political, defense and activities of foreign organizations). . However, there is a
significant disparity in FDI capital across economic sectors. Specifically, the
marine and manufacturing industry is always the industry that attracts the most
foreign investment. Accumulated up to the end of November 20, 2021, this
industry accounted for more than half of the investment capital (US$240.2
billion, equivalent to 59.2%), and nearly a half of the registered projects
(15,558 projects) , equivalent to 45.2%) of total FDI investment in Vietnam
(Figure 4). One of the reasons for this industry to absorb a large amount of FDI
is that in the early stages of economic opening, Vietnam encouraged foreign
investment in the industrial and processing sectors to realize the goal of
industrialization. modernize the country. Moreover, this is an industry where
traditional Vietnamese investment partners such as Korea, Japan, and
Singapore have strengths and are interested in investing in Vietnam because
they can take advantage of many advantages of Vietnam as a source of income.
Abundant labor, available resources, many Free Trade Agreements With many
trading partners in the world.In the field of industry and processing, Vietnam's
electricity industry has attracted many projects from large corporations in the
world such as Intel, Microsoft, Foxconn, Sanyo, Samsung, Sony, Fujitsu,
Toshiba,Panasonic... Investment projects from these multinational corporations
have contributed to improving the technology level of Vietnam's manufacturing
industry, and at the same time helped many Vietnamese businesses have the
opportunity to participate prices on the global supply chain through sales
cooperation contracts, supplying raw materials to these Groups. Besides the
industrial and marine sectors, FDI investment in the service sector also tends to
increase in recent years for a number of reasons such as: increased market
demand, profit potential large and Vietnam has committed to open many
service sub-sectors under international trade agreements such as WTO and
some Free Trade Agreements (FTAs). The service industries that have attracted
the largest amount of FDI in recent years are real estate, tourism, wholesale,
retail, information and media.

2.1 How does the investment structure change by investment partners?

 According to data from the overall Statistics Office, of investment projects
in Vietnam are operating within the type of investment from 100% foreign
capital - accounting for 72.8% of total registered FDI capital as of December
2019, followed by is that the style of venture - accounting for 21.4%. Other
types of investment like BOT, BT, and BTO contracts, additionally to business
cooperation, account for a negligible proportion of about 5.8% of the registered
capital. However, foreign investors want to be proactive in implementing
business management projects rather than having to travel through joint
ventures with some partners in Vietnam. However, there are still some
investors who want to enter into a venture with a Vietnamese partner. Because
that may bring plenty of profit, it doesn't take much effort to be told about the
law, culture, business environment.. enjoy resources available in Vietnam

Structure of FDI investment by kind of investment (accumulated until

December 20, 2019)

Soure of capital Registered capital of FDI projects in

Vietnam according to the field of
investment (%)

100% foreign capital 72.8

Venture 21.4

Contract BOT, BT and BTO contracts 4.0

Contract of business cooperation 1.8

2.2 The contribution of FDI to Vietnam's economic development

Industry - construction: The FDI sector accounts for about 55% of the full
industrial production value, contributing to the formation of variety of key
industries of the economy like telecommunications, oil and gas exploitation,
and electricity. electronics, chemicals, automobiles, motorcycles, information
technology, etc. FDI enterprises account for an outsized proportion in high-tech
industries like oil and gas exploitation, electronic industry,
telecommunications, ...

Agriculture - forestry - fishery: the expansion rate of output of the FDI

sector is usually on top of that of the domestic economic sector, which has
contributed to the restructuring of agriculture, diversification of products, and
improvement of agricultural production. value of exported agricultural products
and at the identical time absorbing some advanced technologies, plant varieties
and pots can bring high productivity and prime quality up to international
standards. However, the impact of FDI isn't significant because the proportion
of FDI sector during this area is incredibly small

Service industry: FDI has a crucial impact on improving the standard of

banking and auditing services with many modern methods of payment and
credit. For FDI within the field of tourism, hotels, and offices for rent have
changed the face of some large cities and coastal areas. Many amusement parks
like golf courses, entertainment with prizes create attractive conditions for
investors and international visitors.

The education, training and healthcare sectors haven't yet attracted much
FDI, but initially variety of high-quality educational institutions are established
like hospitals, modern health check and treatment facilities, serving the
requirements of part of the Vietnamese population with high incomes similarly
as foreigners in Vietnam.

After joining the WTO, wholesale and retail trade services have developed
rapidly, creating a replacement way of distributing goods and commodity and
contributing to a rise in export turnover of products.

In addition, the FDI sector also creates jobs for about 4.5 million direct
workers and lots of ample indirect workers, including tens of thousands of
skilled workers, engineers and highly qualified managers. Perform
industrialization and modernization of the country.

2.4 Fdi’s contribution to GDP growth

The role of FDI in Vietnam's GDP is increasingly important. According to

the General Statistics Office, if in 2010, the FDI sector only contributed about
13% of the total GDP, this rate was nearly 20% by 2020. Economic fields with
many FDI investments have strong growth. For example, the industry and
construction sector have the most attraction of FDI, currently the industry that
plays the largest role in GDP, with a proportion of up to 53%. In particular, the
processing industry with the most presence of major international corporations
is the leader of the economy's growth, with a growth rate of 5.82% in 2020,
higher than doubled Vietnam's GDP growth in this year is 2.91%.

2.5Contribution of FDI to production technology

In the stage of investment to attract FDI, Vietnam has many constraints

with foreign investors, especially in terms of technology transfer. As a result,
many industries have learned from foreign technologies, helping to improve the
productivity and quality of domestic products. Typical examples can be the
Vietnam oil and gas industry with joint ventures with enterprises from the
former Soviet Union, or the telecommunications industry with many business
cooperation contracts that have access to many advanced modern technologies
and management levels. Later, with international commitments and to attract
foreign investment, Vietnam no longer requires foreign investors to transfer
technology when investing in Vietnam.

However, by bringing advanced technology from abroad to Vietnam, FDI

enterprises also help modernize manufacturing industries in Vietnam, forcing
domestic enterprises to be forced to reform and change. help employees learn
many new technologies. Thereby creating an indirect impact to help increase
the level of technology for many industries and fields in Vietnam.
Chapter 3: Negative Impacts of VIETNAM'S FDI within the economy
from 2015-2021

3.1 Many sources of capital are still limited in some places

FDI capital only focuses on investing heavily in big cities, where there's
convenient infrastructure, near means of transport like ports, airports, etc.
convenient traffic like Hanoi and Ho Chi Minh City , Hai Phong, etc. However,
Vietnam still has many limited areas in mountainous and remote areas,
especially within the northern mountainous areas, and provinces within the
central region haven't yet attracted investment sources. However, this can be a
region with many potentials like abundant labor, abundant natural resources,
favorable conditions within the development of agro-forestry-fishery, etc. This
results in matters that big cities are Infrastructure overload, labor shortage,
polluted environment, etc. cause many social consequences while rural areas in
provinces and cities have a surplus of labor, besides being concentrated mainly
in some localities. while projects from abroad only target some specific
industries, that specialize in high-value industries, abundant human resources
like realty business, electricity production and distribution, .. Tron g then
Vietnam Currently encouraging investment in high-quality agriculture,
manufacturing medical equipment, logistics,.. but has not yet attracted
investors from FDI

3.2 FDI enterprises haven't developed in technique, technology…

Although Vietnam has many preferential policies to draw in high-tech FDI

projects and technology transfer in Vietnam, they still don't meet the goals and
desires of socio-economic development in Vietnam. Particularly, major
investment partners of Vietnam like Asia, excluding Japan and Korea, achieved
only a mean level, not beyond the technology available within the country.

Instead, the participation of domestic enterprises within the supply chain of

FDI enterprises continues to be limited, so that they haven't penetrated deeply
into regional and global value chains, and haven't had many high qualifications.
, techniques of recent multinational corporations

3.3 FDI projects affect the environment

First, consistent with the globe Bank's Doing Business report in 2020,
Vietnam is ranked 70/190, although it's improved compared to previous years,
it's still a awfully long gap compared to previous years. with regional
economies like Singapore, Thailand, etc.

Secondly, Vietnam's supporting industry has not yet developed and has not
met the wants of FDI enterprises. consistent with data from the Department of
Industry - Ministry of Industry and Trade 2021, Vietnam currently includes a
total of about 3,880 supporting businesses, only about 0.64% of the entire
number of companies operating and using 2.1% of enterprises within the
industrial sector are built. Supporting businesses are mainly complementary in
Vietnam's key trend-driven industries like textiles, electronics, and engineering.
the bulk of enterprises supporting Vietnam are small in scale, and there's a
scarcity of large-scale enterprises with solid business strategies and good
competitiveness. boost that, only the supporting enterprises are private
enterprises in Vietnam, the remainder are FDI enterprises (44%) and state
enterprises (6%). Most (over 90%) of Vietnam's supporting enterprises have
outdated or medium level of art, making it difficult to compete with FDI
enterprises within the same field to participate within the application supply
chain of enterprises. FDI, especially large multinational corporations. this can
be also the rationale why many large, high-tech and foreign consultants are
afraid to take a position in Vietnam, because the domestic supporting industry
cannot meet them, making it inconvenient for them to import from abroad.
business and costs is also higher.

Third, the primary policy attraction and management still have some
inadequacies.
 For a protracted time since the start of investment, so as to draw in FDI,
some localities of Vietnam are given lots of preferential policies for foreign
investors. Besides the overall policy of the State, this locality has applied
variety of priority and incentive measures to draw in the maximum amount FDI
as possible. it's due to this "accumulation" of FDI that the work of solving
coloring jobs, high art projects, and profitable projects for the socio-economic
development of Vietnam isn't focused. additionally, policies and measures to
manage FDI after its establishment in Vietnam are still limited. Many FDI
enterprises profit of weaknesses in Vietnam's management policies to evade
taxes, exploit resources, and pollute the environment.

Source: Excerpted from "Synthetic report: Australia's direct regard to

Vietnam: Fake results and effective methods" - Center for WTO and
Integration

3.4 Remedy

Attracting investors, national corporations, especially from developed

countries like the US and EU, but must be associated with Vietnam's
innovative investment environment.

For developed localities that urgently have to attract high-tech projects,

future technologies, and modern services, they have to specialize in meeting
the wants of transnational corporations compared to the time of signing.
contract and implementation

Next, domestic enterprises must have the capacity to boost capacity all told
aspects, from work to capacity and qualifications of the workforce and
management. Only then will FDl businesses have the boldness to position
orders and support to complete the assembly process to satisfy their
applications.

Control the present use of FDI to own a thought to beat, prioritize strategic
investors to form a worldwide production chain, and prioritize high-tech
enterprises and technology experts for Vietnamese enterprises.
Finally, strictly control investment projects that are not suitable for Vietnam's
development needs or areas where enterprises have sufficient technological
capacity.

CONCLUSION

In summary, since there is investment from FDI, a country with a low GDP
ratio has gradually developed and made the economy grow more and more,
becoming a place worthy of many big countries like the US and Japan. , China
has invested and become a friend to cooperate in the economic field in the era
of industrialization and modernization, in addition, it has also created many
enterprises and enterprises on the edge of bankruptcy, which have gradually
recovered and been restored. become formidable competitors in the world
market. Particularly, Vietnamese people have gained many jobs, even in rural
areas in the countryside, many garment factories have been established, many
industrial zones have been established, helping workers to have jobs, the
unemployment rate has decreased. going a lot , the state also has many
preferential policies for companies such as loans with low interest rates , many
regimes for citizens . Those are the advantages of having FDI, since having this
capital makes people's lives become richer and happier.

REFERENCES

1 Sample Chart Table

2 Picture Appendixs

3 References

https://crmviet.vn/fdi-la-gi/

https://trungtamwto.vn/chuyen-de/19861-fdi-australia-tai-viet-nam-dien-tien-
tinh-hinh-fdi-cua-viet-nam-qua-cac-nam
https://luathoanhao.com/fdi-la-gi-vai-tro-cua-fdi-tai-viet-
nam.html#:~:text=30%20n%C4%83m%20qua%2C%20%C4 %91%E1%BA
%A7u%20t%C6%B0,l%C4%A9nh%20v%E1%BB%B1c%20quan%20tr
%E1%BB%8Dng%20kh%C3%A1c.

https://fia.mpi.gov.vn/Detail/CatID/80a3a429-cc68-4621-94a8-9ebecf86aae6/
NewsID/a733363b-8fb6-47c2-8f17-f46c4d92384b

https://trungtamwto.vn/chuyen-de/19858-fdi-australia-tai-viet-nam-cac-nhuoc-
diem-cua-hoat-dong-dau-tu-truc-tiep-nuoc-ngoai-tai- Vietnam

https://www.gso.gov.vn/du-lieu-va-so-lieu-thong-ke/2021/10/mot-so-giai-
phap-thu-hut-von-dau-tu-nuoc- foreign-tai-viet-nam/

https://trungtamwto.vn/an-pham/19842-bao-cao-nghien-cuu-dau-tu-truc-tiep-
cua-australia-tai-viet-nam-danh-gia-hieu-qua-thuc-te-va-nhung-giai-phap-
chinh-sach