Monday, May 8, 2023 7:17 AM

STT 30 - Team 2
▫ Largest foreign investment partner in Vietnam: South Korea (Samsung)
▫ Types of international investment: FDI, FPI (Đầu tư chứng khoán nước ngoài), ODA (Official development
assistance - Hỗ trợ phát triển chính thức/ Viện trợ không hoàn lại)
▫ Highest ODA in Vietnam: Japan?
▫ Organization providing ODA: IMF, ADB (Asian Development Bank), WHO, UN, World Bank
▫ Organization providing highest ODA in Vietnam: World Bank
▫ Chapter 1: International investment overview
▫ Chapter 2: ODA
▫ Chapter 3: Economic aspects of FDI
▫ Chapter 4: Legal aspects of FDI

CHAPTER 1
1. The concepts of investment, foreign investment and international investment
•

2. Classification

Shark, customer, market, competitor, profitability

• BMC (Business Model Canvas) => describe business idea
• cú: who, oroblem, what cú havd to complish

9 blocks

One color: one group of customer segment

Yellow: common things for all customer segments
Why each idea is written on one note, not all on one note? The beginning of the pj have to change so many things. If
write all on one note, you have to cross and add more => difficult to follow

▫ Customer segments - Draw avatar of customer? income, problem (the pain), occupation, age, location…
▫ Value propositions - Pain killer: The pain should be serious enough or the customers will ignore it
▫ Relationships - Retain old customers and find new customers
▫ Channels - How to deliver values to customers: online and offline channels/ direct and indirect channels
▫ Revenue streams: Revenue = P.Q

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▫ Revenue streams: Revenue = P.Q
How to predict the quantity sold?
- survey online (FB group…) or offline (supermarket, cooking class…)
- competitor (hire sb to watch and count, modify based on the number of people in wards)
- secondary data (buy market reports)
- history revenue
due dilligence (thẩm định chi tiết)

▫ Cost structure
How to estimate HR cost? build organizational structure, estimate salary for each position
▫ Key resources: materials, labors, technology, intellectual property (brand name…)
▫ Key activities: sales, R&D, marketing, production…
▫ Key partners: supplier of materials/ equipment, location/ communication/ distribution/ technology partner, strategic
partner (make competitors become partners)

Start from the right part of Canvas - the output of the project

• Business plan

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Wednesday, May 17, 2023 9:53 AM

• Investment classification
▫ Official flows of investment: Dòng đầu tư chính thức => coming from public sectors, government
▫ Private investment

Based on border
▫ Domestic investment
▫ Foreign investment

▫ Direct investment: investors have the right to control the enterprise, to make important decisions
▫ Indirect investment: a short-term attempt to make quick money, the buying of foreign stocks and bonds

▫ Fixed capital formation - Productive investment (contribute directly to the production capacity - công suất sản xuất of the economy)
eg: investing in plant and equipment, research and development, innovation and technology, or infrastructure
▫ Financial investment (do not contribute directly to the production capacity of the economy)
• International Investment concept
▫ Investment + capital moves outside a country's border
▫ Foreign investment vs. International investment
- Both refer to the capital moving outside
- Foreign investment: Capital movement across a certain nation's border => viewpoint from a country: we stand in one country and the
investors from another country come to us (2 countries)
- International investment: Capital movement across a nations' borders => overall viewpoint: many flows from country A to B, from B to C…
======>
Outward
▫ Country A Country B
<=====
Inward
Theoretically, total outward of the world = total inward
▫ Home country => investor
Host country => receiver
• International Investment classification
▫ Official flows Foreign Aid
- ODA (Official Development Assistance - final exam)
- OA (Official assistance)
- OOF (Other official flows)
▫ Private flows
- FDI
- FPI
- Private loans
• International Investment theories
Moosa, I. A. (2002), "Foreign Direct Investment: Theory, Evidence and Practice"
▫ Theories assuming perfect markets
Perfect market: identical products, all the sellers are price-takers, prices are determined by supply and demand => In reality, it's hard to see
perfect markets
▫ Theories assuming imperfect markets
- The industrial organization hypothesis
- The internalization hypothesis
- The location hypothesis
- The product life cycle hypothesis
- The eclectic theory (Eclectic/ OLI paradigm): chiết trung (John Dunning)
- The oligopolistic reactions hypothesis
▫ The product life cycle hypothesis (1960)
- Situation
- Introduction, Growth, Maturity, Declining

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 => Advantage: Answer the question why invest easy?
=> Disadvantage: Assume PLC flow from developed to developed to developing countries => not correct at the moment; eg: India to other
developed; a product, movie can be spread to all countries at the same time

▫ OLI
- Only with full set of OLI can enterprises be successful in foreign countries
- Ownership-specific advantages (O)
○ Which firms undertake FDI?
○ Firms investing abroad must possess proprietary - lợi thế độc quyền or ownership-specific (“O”) advantages to overcome the extra costs
of operating in a different, less familiar environment
○ Advantages: technology, brand name, managerial and marketing expertise, firm size, economies of scale and market power, capital,
relationship, products with good quality and design…
○ Top brands in 2022

○ What ownership factor makes both CocaCola and Pepsi successful though they have them same flavor? recipe, marketing team…
- Location advantages
○ Where to undertake FDI?
○ Advantages: political stability, economic factors (population, growth rate, demand, labor cost, tax…), cultural factors, social factors
- Internalization advantages
○ Why do firms choose to internalize their advantages by direct investment?
Foreign market entry modes:
1. Export => costs go up (tariff, transportation cost… => factors making the market imperfect)
factors making the market imperfect: natural factors, regulatory factors
Natural factors making the material market imperfect: uneven distribution of natural resources
Regulatory factors making the material market imperfect: some countries introduce policies limiting exploitation of natural resources to
pursue sustainable development
Natural factors making the labor market imperfect: population
Regulatory factors making the labor market imperfect: regulations on retirement age, birth age (độ tuổi được sinh đẻ)

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 Regulatory factors making the labor market imperfect: regulations on retirement age, birth age (độ tuổi được sinh đẻ)
2. Franchising: Franchiser gives franchisees recipe, brand name, technology… => franchiser involves a little bit in international
production
Franchiser receives franchising fees and a portion of annual revenue but may lose recipe, trade secret, risk of reputation harm
Franchisees won't have to build brand, develop brand name but have little control on the business
3. FDI
In FDI, all international production phases is internalized in the company. International production includes production, launching,
sale… of the product.
FDI requires huge sum of money

- Why Central Group bought Big C Vietnam?

O of Central Group: brand name, market power, experience, capital
L of Vietnam & Big C (phải fit với case study): Vietnam - potential market (young generation…); Big C
I: bought => M&A => FDI => advantage of internalization

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Chapter 2: Official development assistance
Monday, May 29, 2023 7:13 AM

Viện trợ phát triển chính thức (Viện trợ không hoàn lại)
eg: Vietnam received ODA from Japan, World Bank
• Explanation of ODA
ODA are official flows to or for developing countries that are provided:
- O: by the official sector (government, public funds), eg: US Aid, Sida from Sweden
- D: for development purposes
Is the money given for Japan to recover form earthquake ODA? No, just temporary, not for development purpose
- A: as grants or as “soft loans” (ODA loans are at terms significantly softer than commercial transactions, and bear a “grant element” - yếu tố cho không/
không hoàn lại of at least 25%)

=> Use the index GNI per capita to measure the wealth of people in a country
=> DAC (Development assistant committee) is the org that belongs to OECD and manages everything related to ODA. Every 2/3 years, DAC generates a list
of ODA recipients and classify by color

Bilateral
ODA donor ======> ODA recipient

Multilateral
ODA donors ==Multilateral organizations==> ODA recipients

Multilateral organizations: IMF, WHO, FAO, UN, WB, ADB

• Grant element
The grant element reflects the financial terms of a transaction:
- Interest rate (%) => usually low
- Grace period - thời gian ân hạn, i.e. interval to first repayment of capital; => don't need to pay any principal, just the interest => usually long period
- Maturity, i.e. interval to final repayment. => usually long period
It is a measure of the concessionality (softness) of a loan.

Grant element = 0 => have to pay everything, not really an assistance

Grant element = 100% => PV(Payments) = 0 => receive the highest amount of assistance, viện trợ không hoàn lại
In ODA: Grant element at least 25%. Countries don't satisfy this condition => OOF (Other offical flows)

• Repayment methods
▫ Equal principal payment, Annuity (repayment with fixed total annual amortization amount)
▫ Lump sum principal: the entire principal or nominal amount is paid on the last repayment date while the interest is paid thro ughout the repayment period
▫ pay the whole principal at maturity, trả một cục
▫ Lump sum principal & interest: both principal and the interest are paid on the last repayment date (simple interest)
▫ Lump sum principal & compounded interest: both principal and interest are paid on the last repayment date, however the intere st is capitalized over the
repayment period. (compounded interest)
=> the highest level of assistance: Lump sum principal & interest
=> the lowest level of assistance: Annuity

a. FV (Payment) = 1000 + 1000*2.5%*10 = 1250

=> PV (Payment) = 1250/ (1+10%)^10 = 481.9291

b. Principal outstanding ~ remaining principal

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c.

• Purposes of ODA
▫ From perspective of recipients
- improve healthcare, environment
▫ From perspective of donors
- moral obligations: the rich should help the poor
- natural resources exploiting (oil…)
- set the power, dominate recipients => recipients depend on economic and political perspectives
- increase their trade, eg, Canada requires recipients to spend 65% of ODA to buy products from Canada
- spread their culture, increase the number of people who speak their language
- Raise the human rights (for women…), eg: to Afghanistan, Kazakstan

Commitment to development index: Denmark, Sweden, Finland…

Tied aid - khoản hỗ trợ có ràng buộc, eg, Japan requires recipients to pay by JPY/ employs Japanese for infrastructure construction and sets the
salary
Untied aid

• 0.7% ODA/GNI target

1970 UN Resolution urged advanced countries to provide 0.7% of their national income as ODA.
Only five countries achieve the 0.7% target, but several others have plans to do so: Sweden, Netherlands, Norway, Denmark, Finland (achieved once in 1991),
Luxembourg

• Notes

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• Notes
▫ Pledge - Cam kết: a political announcement of intent on behalf of a donor to contribute a certain amount to a certain area
▫ Commitment - Ký kết: a firm obligation, expressed in writing and backed by the necessary funds, undertaken by an official donor to provide spe cified
assistance to a recipient country or a multilateral organisation. => how much money in details
▫ Disbursement - Giải ngân: Actual payment or expenditure of funds, release of funds to or the purchase of goods or services for a recipient; by extension,
the amount thus spent => how much money spent in each stage => reflect the most exact money given
• Case study - Vietnam scandals
▫ PMU 18 - Project management unit (Đơn vị quản lý dự án, thuộc Bộ GTVT): Japan and EU are top donors to this PMU. The manager Bùi Tiến Dũng in
charge of PMU and several employees used this money to play football gambling and prostitute (gái mại dâm)
▫ East-West highway scandal - Pacific consultant international: Giám đốc PCI đi đầu thú đã hối lộ quan chức sở GT công chính HCM để thắng thầu =>
Japan mất niềm tin, dừng ODA tạm thời
▫ Japan Transportation consultant scandal: CP Nhật cho Vietnam, Indo, Ubekiztan bằng JPY
• OA was officially vborn in 1993 to 2003
• DAC list of Aid recipient
since 2010, Vn jump from second to third column

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Chapter 3: The economic aspects of FDI
Wednesday, May 31, 2023 10:53 AM

1. Definition
In FDI, parent company will control the company in the host country
How to determine the right to control? the percentage of equity (Share capital / equity?)
The percentage of equity varies between countries. The most popular percentage of equity is 10% (according to IMF and OECD
rule)
Franchising: Franchisers have the right to control by providing recipe, brand name without investing money => non-equity FDI;
For OECD, UNCTAD, IMF collecting data, this is not counted as FDI
In Vietnam, there are some versions of law of FDI. 1987. 1996: The equity threshold to be 30%. 2005: deleted this threshold, no
matter how much you invest in, as long as it is not on stock market => preparing to join WTO in 2007, non-discrimination
principle btw local and foreign firms. 2014. 2020

Voting power in company that have not issued shares

1. FDI Definition
• Direct investors: individuals; incorporated or unincorporated private or public enterprises; associated groups of individuals or
enterprises; governments or government agencies; or estates, trusts, or other organizations.
- Corporation/ incorporated company: legal entity (có tư cách pháp nhân), separate from the owner; Owner has to pay
corporate income tax while paying personal income tax.
- Unincorporated company: cannot appear in any contract, just represent the owner

• Control through agreements: non-equity forms of FDI

- Franchising agreements
- Management contracts
- Partnership agreements
• Definition by Vu Chi Loc (2012)
• Return of investors: unfixed, depending on the performance of the company.
FDI investors try to maximize their return.
=> Contribute to the tax, increase living standard >< ignore the environmental problems to minimize costs, transfer pricing
(chuyển giá)
Transfer : relate to internal transaction, usually applied in FDI (countries have different tax rate)
Tax haven: countries with low tax rate (normally 0-5 %)
- No tax, or very low rates of taxation;
- Strict bank secrecy provisions;
- A lack of transparency in the operation of its tax system, and
- A lack of effective exchange of information with other countries.
eg: Bermuda, Switzerland
https://www.youtube.com/watch?v=TLSYwkWCIzA
Transfer most of pre-tax profit to a subsidiary (ghost/ seashell/ letter box company => have no activities or facilities)

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 Transfer most of pre-tax profit to a subsidiary (ghost/ seashell/ letter box company => have no activities or facilities)
Transfer pricing is popular in technological or pharmaceutical firms - where there are many intellectual property.

Technology transfer
Technology refers to patent, copyrights, skills of management, skills of marketing…
Middle technology is the most popular in Vietnam (80%), low technology (14%), high technology (6%)
Samsung: trong 60 suppliers, 5 suppliers là 100% Vietnam - lắp ráp linh kiện, 55 supplier that are 100% Korean - more
complicated stage. Why muốn sử dụng low labor cost ở VN mà ko đc? low-skilled labor

▫ By linkages
• Horizontal FDI: same industry and production stage
eg: Winmart M&A btw Masan and Vinmart
Bank sector: Some big banks bought small banks
P&G wanted to go far away from Unilever => In 2005, decided to buy number 1 company specializing in men product -
Gillette; the sales is nine times as much as the revenue of Gillette the previous year.
Lenovo is the number 1 company of computer manufacture in China. They wanted to reach customers globally in the fastest
way. They collaborated with the famous firm IBM's PC Division => increase awareness of Lenovo, jumped to top 3 after
Dell and HP
○ Advantages:
- increase customer segment, increase market share, increase from revenue
- reduce competitors
○ Disadvantages:
- create the threat of monopoly in the host country ~ anti-trust law (luật chống độc quyền)
• Vertical FDI: in one value chain, different stages of production
Supplier - Producer - Distributor
Walt Disney (producer) bought ABC Television (distributor)
Apple (producer) bought Intel (supplier of chips).
○ Advantages
- reduce production cost
- control value chain efficiently
- limit the access for competitors to distributors or suppliers
○ Disadvantages
- create the threat of monopoly of distribution in host country
• Conglomerate FDI: no common business areas
Phillip Morris bought General Foods.
Phillips Morris (produced Marlboro tobacco) and Vinataba created a joint venture called Phillips Morris Vinataba.
○ Advantages
- diversify the risk
○ Disadvantages
- hard to manage
- have to spend so much money to hire expertise

▫ By perspectives of host country

• Import-substituting FDI: advocates replacing foreign imports with domestic production.
Factors affecting import-substituting FDI:
- Demand of the host country: population, growth rate, income…
- The import tax: High import tax will encourage import-substituting FDI
• Export-increasing FDI: produce in the host country and export => increase export volume
eg: Most Samsung products are produced in Vietnam
• Government-initiated FDI: not quite popular
eg: Balance of payment is deficit => government use special policy to attract FDI

▫ By modes of entry
• Greenfield: start from 0
• M&A
- Merger
- Acquisition
- Consolidation
Which one does host country prefer? In the short term, Greenfield will creates more jobs than M&A, invest more capital. In
the long-term, both M&A and Greenfield generates the same positive effects on the host country.
Investors prefer M&A since it saves cost, time and reduce risks

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 • Measurement of FDI
▫ FDI flow - dòng FDI: can fluctuate
▫ FDI stock - lượng FDI: accumulated value of FDI, cannot fluctuate, always increase
When to use which?
FDI stock compares btw countries, eg: does Vietnam or Thailand have higher FDI stock; FDI stock from investors nào,
nước nào
FDI flow: compare FDI btw years in a country
• FDI components
▫ Equity capital
▫ Reinvested earnings
▫ Other capital (Intra-company loans)
• Toyota case cannot be considered as FDI because "borrow" means no equity at all.
• TNC and MNC: both undertake FDI across the world . Both have parent company and subsidiaries. The difference: For TNC:
only headquarter in one country; MNC: at least 2 headquarter located in 2 different countries.
• TNC
▫ Parents enterprise controls assets of other entities.
▫ unincorporated
• World FDI trend
▫ decrease in 01-03 (công nghệ thông tin hot vì Microsoft windows launched in 95-98; rất nhiều công ty về máy tính được mở
=> chỉ số nasdas? ở Mỹ lên đỉnh điểm năm 2001. Một số nhà đầu cơ bán chứng khoán câc công ty công nghệ và phát hiện
chứng khoán đang bị overvalue => buble công nghệ thông tin nổ), 07-09 (financial crisis - bubble in estate in USA), 11-13,
16-19, 20-21 (Covid)
▫ M&A dominates FDI - Greenfield là thứ yếu
▫ Uneven distribution: Which geographical area have more FDI - Asia?, Which sectors have more FDI - manufacture?, Based
on level of development - developing?

• FDI Inflow in Vietnam

▫ Decrease 1997-1999: Asian financial crisis (started in Thailand)
- 5 of 7 capital funds withdraw in Vietnam
▫ 2000-2003: stable
▫ 2004-2008: boom (only for registered FDI)
- raise FDI Inflow to Vietnam to another level
- 2007: open many sectors
- Change FDI law: delete equity threshold
- Bubble of real estate
▫ 2012-2019: a gradual increase
- 2014: big change in FDI law
▫ 2020: decrease
- Covid

• Structure of FDI to Vietnam

▫ Manufacture and processing: attract most FDI
▫ Real-estate
▫ electricity
▫ …

▫ By home country

Panama papers:
BVI (British Virgin Islands): Why rich people put so much money in BVI? To keep their money. To take money back to Vietnam
legally, they open some kind of projects ~ money laundering - rửa tiền

Minimum global tax rate: at least 15%

• The common things in Vietnamese cities attracting FDI projects

○ Good infrastructure: road, highway, airport, electricity…

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 ○
○ Industrial zone
○ High population => HR are available
• Disbursed FDI reflects more accurately (how much money has been really spent) VS Registered FDI
Eg: FDI from Tata (Indian firm). The first step to undertake a Greenfield project is to Get the license and clear the site (giải
phóng mặt bằng). The costs to clear the site is 300 mil USD. Tata only pay 150 mil USD and asked authority to pay the rest. The
solution suggested by authority is Tata pay the whole amount cost and then they would subtract the tax for Tata. However, they
not reach mutual agreement.

2007-2008: Registered FDI high but disbursed low => because of Tata project

• FPI Definition: covers investment in equity and debt securities

○ Debt securities ~ Bond
○ Easier to invest then FDI, easier to withdraw the money
• IPL (International private loan):

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FDI determinants
Saturday, June 17, 2023 9:40 AM

1. Economic determinants
a. Resource-seeking
• Availability of raw materials and natural resources
• Cost of raw materials
• Physical infrastructure (ports, roads, railways, power, telecom)
• Availability & cost of skilled labor
b. Market-seeking
Eg: 1998
• Market size and per capita income
BigC provides daily products.
• Market growth
• Access to regional and global market
• Country specific consumer preferences

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