Summary of phd thesis in economics foreign direct investment towards sustainable development in the northern key economic region

HO CHI MINH NATIONAL ACADEMY OF POLITICS
TRAN THI TUYET LAN
FOREIGN DIRECT INVESTMENT TOWARDS
SUSTAINABLE DEVELOPMENT IN THE NORTHERN KEY
ECONOMIC REGION
Major: Development economics
Code: 62 31 05 01
SUMMARY OF PhD THESIS IN ECONOMICS
HANOI - 2014
The thesis was finished
at the Ho Chi Minh National Academy of Politics
Academic Supervisors: 1. Assoc. Prof. Dr. Pham Thi Khanh
2. Dr. Nguyen Tu
Judge 1:

Judge 2:

Judge 3:

The thesis will be defended in front of a panel of
examining judges at the Ho Chi Minh National Academy of Politics
At…,……., 2014
The thesis can be found for study at the National Library and the
Library of Ho Chi Minh National Academy of Politics
1
INTRODUCTION
1. The necessity of the research
The Northern key economic region (NKER) is one of national key
economic regions. It is constructed and developed with the aim of maximizing
the comparative advantages of the region, creating economic zones that have
motivation nature, pervasive influence and capacity to help other regions to

develop.
With its own advantages, in the past few years, NKER has been one of
the two national key economic regions that take the lead in attracting FDI in
term of the number of project and size of investment. FDI business sector in
NKER has positive contribution to the region’s economic-social growth and
development. However, the result of FDI attracting and the operation of the
FDI business sector in NKER have shown negative effects which badly
influence the region’s sustainable development on 3 aspects: economy, society
and environmental protection… The phenomenon like transfer pricing and tax
evasion occurring in FDI businesses and causing tax losses to the Government
are quite popular and tend to keep increasing. The phenomena like the fact that
labor’s material and spiritual life hasn’t received satisfactory attention; FDI
businesses’ awareness of complying with the Law on Environment Protection
is not good enough, seen as the neglect of environmental development and the
violation of Law on Environment Protection, have done a big deal to the
ecological environment and health of the population in the area. Those
negative effects are current enormous challenges to the sustainable
development of NKER.
With the above practical issues, further clarifications on FDI rationale
towards sustainable development; assessing FDI reality towards sustainable
development in NKER and seeking for solutions for FDI attracting and FDI
businesses’ management in order to preserve sustainable development of
NKER on the three aspects: economy, society and environment, are urgent
requirements. With the aim of meeting the requirements, the subject “Foreign
direct investment towards sustainable development in the Nothern key
economic region” was chosen for the research.
2. Purposes and tasks of the research
- Research purposes: The thesis recommends main orientations and
solutions in order to promote foreign direct investment towards sustainable
development in NKER in the future.

2
- Research tasks: (i) Systematizing and clarifying the rationale of
foreign direct investment towards sustainable development of NKER; (ii)
Learning the experiences of some Asian Countries about foreign direct
investment towards sustainable development of the key economic regions; (iii)
Analyzing and assessing FDI reality towards sustainable development in
NKER, which includes achievements, limitations and causes of limitations,
weaknesses; (iv) Suggesting main orientations and solutions with the aim of
promoting FDI towards sustainable development in NKER in the future.
3. Subject and scope of the research
- Research subject: The research subject of the thesis is foreign direct
investment towards sustainable development in NKER.
- Research scope:
+ In term of content: Foreign direct investment is related to two other
subjects: foreign investor and host country. The purpose of foreign investors is
to gain profit while, to the host country, it is economic-social benefits that FDI
provides. For that reason, in the perspective of the host countries, foreign
direct investment towards sustainable development is how the host countries
take benefits from FDI while maintaining sustainable development of their
countries, regions or localities.
By that meaning, within the research scope of the thesis, it will studies the
impact of foreign direct investment on sustainable development of NKER on
three aspects: economy, society, and environment. There in, (i) the researched
investment concept mentioned in the thesis is understood as the investment
activities, investment to gain profits; (ii) the thesis doesn’t include researches
on sustainable development within the area of FDI businesses, but researches
on the impacts of FDI on the host countries, NKER particularly; (iii) the role
of the Government in managing FDI towards sustainable development is only
considered in moderation within influential factors, causes of limitations of
FDI towards sustainable development; (iv) sustainable development are

defined as targets of FDI managers, not included in the dissertation research;
(v) subjects that take part in deciding the orientations of foreign direct
investment towards sustainable development in NKER include the Central
Government, local authorities, FDI businesses and social organizations.
+ In term of space: The thesis studies FDI towards sustainable
development in NKER, on the area of seven provinces and cities under the
3
Central Government, such as Hanoi, Hai Phong, Hai Duong, Hung Yen, Quang
Ninh, Bac Ninh and Vinh Phuc.
+ In term of research time: The thesis studies foreign direct investment
towards sustainable development in NKER from 2003 to 2011.
4. Research methods and data sources
- Research methods: The thesis uses research methods for economic
science, especially focuses on the following methods: methods for
systemizing, methods for analyzing and summarizing, statistical and
comparative methods; inductive and deductive methods; expert methods.
- Data sources: Data sources used in the thesis is mainly secondary ones
including: (i) Statistics of the General Statistic Office and Statistics Bureaus of
provinces, cities in NKER; (ii) Reported data of Ministries: Ministry of
Planning and Investment, Ministry of Labor - Invalids and Social Affairs,
Ministry of Natural Resources and Environment, and Departments of
provinces and cities; (iii) Surveyed data of relevant research institutes and
research results published in Seminars, articles published in specialized
journals.
5. New contributions of the thesis
- On theoretical aspects: (i) Develop concepts, characteristics and
specify requirements for FDI towards sustainable development of key
economic regions; (ii) Bring out elements influencing FDI towards sustainable
development of key economic regions; (iii) Specify the content and criteria of
FDI towards sustainable development of key economic regions on three

aspects: economy, society, and environment.
- On practical aspects: (i) Clarify the reality of FDI towards sustainable
development in NKER, its limitations and causes; (ii) Suggest main
orientations and solutions for promoting FDI towards sustainable development
of NKER in the future.
6. Structure of the thesis
A part from the introduction, conclusion, list of reference and appendix,
the content of thesis are presented in 4 chapters and 10 sections.
4
Chapter 1
OVERVIEW ON RESEARCH STATUS RELATED TO FOREIGN
DIRECT INVESTMENT TOWARDS SUSTAINABLE
DEVELOPMENT IN NORTHERN KEY ECONOMIC REGION
1.1. Research status of foreign direct investment towards
sustainable development of foreign authors
The research works of foreign authors are reviewed towards: researches
on how FDI affects the economic growth; the ability to accumulate capital for
the economy; scientific and technological developments; impacts on
international trade; impacts on labor, employments and human resources.
Most of the researches support the idea that FDI has good effects on the
mentioned issues. There are also researches showing that FDI only performs
positive effects on economic growth, social and environmental developments
with specific conditions about infrastructure, the quality of human resources,
political stability, and the perfection of market institutions.
1.2. Research status of foreign direct investment towards sustainable
development for key economic regions of domestic authors
1.2.1. Research status of the impacts of FDI on economic growth and
development
It can be confirmed that researches on FDI in Vietnam are various and
diversified. In most of the researches, when studying on the relationship

between FDI and economic developments, many domestic scholars stated that
FDI had positive effects on economic growth, such as: the fact FDI not only
makes up for the lack of investment, but also has important meanings in
innovating technologies, enhancing the level of management, promoting
marketing activities, increasing the export manufacture ability of the host
countries… Besides, there are also negative effects, downsides, adverse effects
of FDI on economic developments, especially negative effects of FDI on the
environment, which is mentioned in many researches.
1.2.2. Research status of foreign direct investment towards sustainable
development and sustainable developments of NKER
- The group of researches related to sustainable development of NKER
Nowadays, in Vietnam, there have been researches related to sustainable
development of key economic regions in general and sustainable development
of NKER in particular. The content of researches on sustainable development
of key economic regions is also pretty plentiful theoretically and practically.
5
On theoretical aspects: there are some researches referring to the concepts of
sustainable development of key economic regions, criteria of sustainable
development of key economic regions, the experience on sustainable
development of key economic regions, and lessons for Vietnam in sustainable
development of key economic regions. On practical aspects: there are also
analyses and assessments of policies for sustainable development of key
economic regions; discoveries and analyses of downsides, unsustainable
aspects of sustainable development of Vietnamese key economic regions;
indicating causes and suggesting solutions that are relatively comprehensive
for sustainable development of key economic regions.
- The group of researches related to foreign direct investment towards
sustainable development
This is the group of researches that are directly relevant to FDI and
studied on the FDI in the most comprehensive way about sustainable

development. Most of the researches assessing positive and negative effects of
FDI on the economy are analyzed on the three aspects, the three backbones of
sustainable development which are economic development, social
development and environmental protection.
1.2.3. General assessment of published works about FDI towards
sustainable development and theory and practical deficiency needing further
researches
1.2.3.1. General assessment of published works about FDI towards
sustainable development
First, researches all focus on clarifying and asserting the fact that FDI
has effect on economic growth and economic-social developments.
Second, most of the researches stay at assessing effects of FDI on
specific aspects of sustainable development. So far, there has been rarely work
that provides comprehensive, profound and methodical researches on foreign
direct investment towards sustainable development on the three aspects:
economy, society and environment.
1.2.3.2. The dissertation’s theoretical and practical deficiencies that
need further researches
- On theoretical aspects: So far, there has been rarely work that provides
profound researches and systematic explanation about foreign direct
investment towards sustainable development of key economic regions.
- On practical aspects: Although there are work, articles providing
researches on effects of FDI on sustainable development, most published
scientific works are focused on analyzing, assessing FDI’s effects in general
6
and FDI’s effects on the target of sustainable development in particular in
large scale – national level. There are rarely works examining the effects of
FDI on sustainable development of a specific economic area, especially
NKER.
7

Chapter 2
THEORETICAL FOUNDATION AND REAL SITUATIONS OF
FOREIGN DIRECT INVESTMENT TOWARDS THE SUSTAINABLE
DEVELOPMENT IN THE KEY ECONOMIC REGION
2.1. Concept, characteristics and requirements for foreign direct
investment towards the sustainable development in key economic regions
2.1.1. The concept of foreign direct investment and foreign direct
investment towards the sustainable development in key economic regions
2.1.1.1. The concept of foreign direct investment
Foreign direct investment is the act of foreign investors to put their loan
or any property into another country so that they can have the right to possess
and control on an entity long operating in that country for the target of profits.
2.1.1.2. The concept of foreign direct investment towards the sustainable
development in key economic regions
The dissertation author gives the concept of foreign direct investment
towards the sustainable development in key economic regions as below,
“Foreign direct investment towards sustainable development in key economic
region is investment activity of foreign organizations and individuals in key
economic region of another country, which meets planning and developing
requirements of that region; makes positive impact on the development of the
region to ensure harmonious and rational combination among economic
development, social development and environmental protection not only for
the key region, but also spillovers to other regions both in the present and in
the future”.
2.1.2. Characteristics of foreign direct investment towards the
sustainable development in key economic regions
Firstly, foreign direct investment towards the sustainable development
in key economic regions has subjective features of invested country, in
general, and invested key economic regions, in particular; Secondly, foreign
direct investment towards the sustainable development in key economic

regions includes the targets of exploiting and utilizing resources effectively;
Thirdly, foreign direct investment towards the sustainable development in key
economic regions always aims at the harmonious and balanced development
among economic development, social development, and environmental
protection; Fourthly, foreign direct investment towards the sustainable
development in key economic regions always appreciate the quality over the
quantity of FDI; Fifthly, foreign direct investment towards the sustainable
8
development in key economic regions not only end up considering and
evaluating the process of foreign direct investment at the outset, that is the
stage of getting licensed , but also review business and production activities of
FDI enterprises; Sixthly, foreign direct investment towards the sustainable
development in key economic regions have mutual interaction and support
between foreign investors and the key economic regions.
2.1.3. Requirements for foreign direct investment towards the
sustainable development in key economic regions
Firstly, foreign direct investment towards the sustainable development
in key economic regions must be based on the three main development
backbone, which are the sustainable development of economy, society, and
environment; Secondly, foreign direct investment towards the sustainable
development in key economic regions has to produce pervasive effects to
other economic areas; Thirdly, foreign direct investment towards the
sustainable development in key economic regions must develop potentials and
advantages of the key economic regions themselves and be appropriate
particularly to the developmental orientation of each key economic region and
generally to the entire economy; Fourthly, foreign direct investment towards
the sustainable development in key economic regions must guarantee the
harmony of benefits for both overseas investors and the key economic regions;
Fifthly, foreign direct investment towards the sustainable development in key
economic regions cannot be an independent activity, but need the orientation

and guidance from the State, the awareness to comply with laws from FDI
enterprises, and the active participation from communities of residents and
social organizations; Sixthly, foreign direct investment towards the sustainable
development in key economic regions must be coupled with the target of
sustainable development of the whole country and with the common
movement of the modern world.
2.2. Content, evaluation standards, and main factors affecting
foreign direct investment towards the sustainable development in key
economic regions
2.2.1. Content and evaluation standards of foreign direct investment
towards the sustainable development in key economic regions
2.2.1.1. Content and evaluation standards of foreign direct investment
towards the sustainable development in key economic regions about economy
- Foreign direct investment positively contributes to foster the economic
growth of the key economic regions: including evaluation standards: the
9
growth speed of FDI areas in comparison with the growth speed of the key
economic regions; the contribution rate of FDI areas in the economic growth
of the key economic regions.
- Foreign direct investment helps to promote the economic restructure of
key economic regions towards modern movement: be evaluated by standards
like the density of industrial production value of FDI areas compared with the
total industrial production value of key economic regions; the density of
production value of FDI areas in comparison with the production value of the
whole region.
- Foreign direct investment makes contribution to raise export turnover
of key economic regions: including evaluation standards such as the rising
speed of FDI areas’ export turnover; the density of export turnover of FDI
areas compared with the export turnover of the entire key economic regions.
- Foreign direct investment contribute to enrich the budget of key

economic regions: including the following standards: the rising rate of FDI
areas’ annual budget; the rate of budget incomings from FDI areas compared
with the total budget incomings of key economic regions.
- FDI’s contribution to the total amount of socially investing capital of
key economic regions is shown in standards as the following: the contribution
rate of FDI areas into the total socially investing capital in key economic
regions; the increasing rate of annual investment capital of FDI areas.
2.2.1.2. Content and evaluation standards of foreign direct investment
towards the sustainable development in key economic regions in terms of
society
- Foreign direct investment helps produce employment and speed up the
transfer of labor structure in key economic regions towards advancement: The
following standards can be used to evaluate this content: The number of
laborers created annually in FDI areas; the raising speed of workers working
in FDI areas every year; The laborers working in FDI areas to the total number
of workers having jobs in key economic regions ratio; The quantity and rate of
employing local labor compared with the total number of laborers of FDI
areas; The industrial labor in FDI areas to the total labor working in key
economic regions ratio;
- Foreign direct investment continuously improves the quality of labor
source having jobs in FDI businesses in key economic regions. It can be
evaluated by the following standards: The average income/month/laborer
10
(including basic salary and other incomes) of workers; The labor rate,
especially immigrant workers working in FDI companies with housing and
facilities as well as equipment for daily activities of laborers; The number of
cultural and spirit activities yearly organized by FDI enterprises; The number
of places for entertainment, culture, and sport for workers in FDI enterprises;
The amount of time for rest of laborers in a day; The amount of extra working
time of workers; The rate of labor equipped with means of labor protection;

The trained workers to the total number of laborers working in FDI areas ratio.
- Foreign direct investment makes contribution to hunger eradication
and poverty reduction and guarantees social welfare for residents in key
economic regions: Foreign direct investment helps to foster economic growth
and contribute to the budget of key economic regions, thereby indirectly
affecting the tasks of hunger eradication and poverty reduction and ensuring
social welfare for inhabitants of key economic regions.
2.2.1.3. Content and evaluation standards of foreign direct investment
towards the sustainable development in key economic regions as to
environment
- Foreign direct investment must be coupled with the rational
exploitation and economical and effective utilization of natural resources in
key economic regions. Standards used to measure this content are: The export
value of raw materials to the total export value of FDI areas ratio; the rate of
consuming natural resources/a unit of products and services.
- Foreign direct investment must comply with and strictly follow laws of
environmental protection of the invested country, in general, and of key
economic regions, in particular. In order to assess the implementation of laws
on environmental protection of FDI businesses, the following standards should
be based on: The quantity and rate of FDI enterprises making Reports on the
evaluation of environmental effects and Commitment for environmental
protection; The number and rate of FDI companies having waste processing
system/the total number of FDI enterprises; The quantity and rate of FDI
businesses violating laws on environmental protection.
- Foreign direct investment in key economic regions must be attached
with the use of high technology, modern technology, and friendly technology
to environment: this can be evaluated by standards: The scale of capital
investment/labor; The rate of fixed property equipped (fixed property)/labor;
11
The technological level of FDI projects (high, medium, and low technology);

The rate of FDI projects from developed countries.
- Foreign direct investment in key economic regions must be combined
with the building of methods for environmental protection and prepared for
the precaution, prevention, settlement, and control of environmental
pollution; at the same time the protection, nourishment, and improvement
the environmental quality in key economic regions. The standards for this
evaluation include: The cost invested for researching and developing
technology for environmental protection; The cost put into the tasks of
protecting environment of FDI businesses; The spending invested for the
tasks of environmental protection to the total investment capital of FDI
enterprises ratio.
- Foreign direct investment must offer good effects to private
businesses on the issue of environmental protection, contributing to impact
the work of environmental management of the invested country, in general,
and key economic regions, in particular: seriously carrying out criteria for
environment of FDI companies also has positive influence on environmental
results from trading partners supplying inputs and satellite companies
through giving support and consultancy on environmental managing systems
or environmental handling measures that FDI enterprises have done.
Through FDI joint venture partners, inland companies can learn and get help
as well as advice to make environment improved.
2.2.2. Main factor affecting foreign direct investment towards the
sustainable development in key economic regions
Firstly, group of factors from the invested country includes: (i) The
improvement of legal system and policies related to FDI towards the
sustainable development in key economic regions; (ii) Strategies to attract
FDI towards the sustainable development in key economic regions; (iii) The
quality of planning tasks and projects to draw FDI towards the sustainable
development in key economic regions; (iv) The capability to examine and
monitor FDI activities towards the sustainable development in key economic

regions; (v) The connection and coordination in operation amongst
Ministries, departments, and localities as well as between local areas in key
economic regions; (vi) The quality of human resources to meet the demand
for foreign direct investment towards the sustainable development in key
economic regions; (vii) The synchronous and modern development of
technical infrastructure system satisfying requirements for foreign direct
12
investment towards the sustainable development in key economic regions;
(viii) The maturity and development of supplementary industry system and
services assisting business activities in key economic regions; Secondly,
group of factors from foreign investors includes: (i) Business strategies and
the orientation of the investing market; (ii) financial potentials; (iii) FDI
projects’ level of technology; (iv) The awareness to comply with laws from
overseas investors.
2.3. Experience from some Asian countries in foreign direct
investment towards the sustainable development in key economic regions
and lessons for the Northern key economic region
2.3.1. Experience from some Asian countries in foreign direct
investment towards the sustainable development in key economic regions
International experience in foreign direct investment is summarized
from successful experience from some Asian countries in drawing and
managing foreign direct investment, which is: Experience in attracting FDI
and promoting area development as well as intensifying the level division to
manage the capital source for investment from Indonesia; Experience in
improving investment environment, constructing infrastructure, creating
human resources of high quality, and developing supplementary industry
from Thailand; and experience in perfecting legal system and policies,
focusing on infrastructure renovation and technology transference, and
paying more attention on the selection of FDI projects from China.
2.3.2. Lessons gained from experience in foreign direct investment

towards the sustainable development for the Northern key economic region
By summarizing experience from some Asian countries in foreign direct
investment mentioned above, the dissertation author gains some lessons from
the experience as a reference for Vietnam, in general, and the Northern key
economic region, in particular in the FDI orientation towards environmental
protection. These lessons are: (i) Renovating and improving legal system as
well as opportunely adjusting investment policies to be suitable to targets and
direction of the country in each stage; (ii) Getting planning tasks and projects
for FDI attraction of the key economic region done well coupled with general
strategies for social-economic development of the country to meet the need for
sustainable development; (iii) Actively and positively raising the effectiveness
in dividing levels to manage foreign direct investment activities; (iv)
Strengthening the work of verifying and supervising activities of foreign direct
investment to ensure the sustainable development of the key economic region;
(vi) Actively and positively developing supplementary industry to meet the
13
demand for sustainable development in the key economic region; (vii)
Expanding synchronous, modern, and high qualitative infrastructure in the key
economic region.
14
Chapter 3
THE REAL SITUATION OF FOREIGN DIRECT INVESTMENT
TOWARDS THE SUSTAINABLE DEVELOPMENT IN THE
NORTHERN KEY ECONOMIC REGION
3.1. Potentials, advantages, difficulties, and challenges to foreign
direct investment towards the sustainable development in the Northern
key economic region
3.1.1. The generalization of formation and development process of the
Northern key economic region
The Northern key economic region was formed according to Decision

N
o
. 1018/1997/QĐ-TTg covering 5 Provinces and Cities of Ha Noi, Hai
Phong, Quang Ninh, Hai Duong, and Hung Yen, located in the domains of
Hong River Delta and the Northeastern mountainous areas. On August 13
th
2004, the Prime Minister released the Decision N
o
. 145/2004/ QĐ-TTg on
the main direction to develop society and economy in the Northern key
economic region till 2010 and with the vision till 2020. On the Decision, the
scale of the Northern key economic region was expanded to include another
3 provinces, which were Ha Tay, Vinh Phuc, and Bac Ninh. Since August
1
st
2008 after the Resolution made by Congress at the third meeting of the
Tenth Congress on extending the administrative border of Ha Noi City,
covering all Ha Tay Province, Me Linh Ward (Vinh Phuc), and 4
Communes of Luong Son Province (Hoa Binh), the Northern key economic
region has included 7 provinces and cities: Ha Noi, Hai Phong, Quang
Ninh, Hai Duong, Hung Yen, Bac Ninh, and Vinh Phuc (Ha Tay was
merged to become part of Ha Noi Capital).
3.1.2. Potentials, advantages, difficulties, and challenges to foreign
direct investment towards the sustainable development in the Northern key
economic region
3.1.2.1. Potentials and advantages to foreign direct investment towards
the sustainable development in the Northern key economic region
The Northern key economic region has a lot of potentials and
advantages in attracting FDI towards the sustainable development. This is the
region with favorable geological sites, plentiful and diverse natural

conditions, quite synchronous infrastructure, and development levels which
are much higher than those of other regions in the whole country combined
with great capability of training and expanding human resources. Among
15
these things, human resources of high level is viewed as the noticeable and
competitive advantage to draw FDI in comparison with other key economic
regions in the entire country.
3.1.2.2. Difficulties and challenges to foreign direct investment towards
the sustainable development in the Northern key economic region
Beside potentials and advantages, the Northern key economic region is
also facing a lot of difficulties and challenges to attract FDI towards the
sustainable development in the region. Particularly, the system of mechanism
and policies has not completely and specifically reflected on properties and
individual characteristics of the Northern key economic region yet; the
connection and coordination in the region remain poorly effective; the labor
quality after training is still at a low level, incompatible with potentials and
advantages of the region about the number of labor sources; high population
density, along with low average agricultural land per capita, makes it hard to
change the purpose of using agricultural land; and environmental pollution,
especially the pollution of water source because of industrial waste materials
and the process of urbanization is higher and higher and hits alarming degree.
These are huge challenges to the Northern key economic region between
continuing promoting the speed of economic growth coupled with expanding
the scale to develop industry and reaching the target of sustainable
development on environment.
3.2. The real situation of foreign direct investment towards the
sustainable development in the Northern key economic region
3.2.1. The generalization of the reality of foreign direct investment
attraction in the Northern key economic region
3.2.1.1. About the number, registered capital, and scale of FDI projects

- About the number of FDI projects: gathered from January 1
st
2003 to
July 20
th
2012, the Northern key economic region had 3,239 FDI projects
remaining effective. If compared with other key economic regions, in the
period 2003-7/2012, the Northern key economic region attracted 8.8 times
FDI projects higher than that of the Central key economic region (364
projects) but one third less than that of the Southern key economic region
(6,245 projects).
- About registered FDI capital and implemented FDI capital: during
2003-2011, the Northern key economic region drew $34,620 million of FDI
capital. The total implemented FDI capital put into the region was $11,5
16
million in the period from 2003 to 2011, reaching 33.3% compared with
registered FDI capital at the same period, an annual average of $1,3
million/year.
- About the scale of FDI projects: The scale of FDI projects in the
Northern key economic region from 2003 to July 2012 is mainly small and
medium with an average rate of $11 million/project (correspondingly $12
million/project in the South and $29 million/project in the Central)
3.2.1.2. About the structure of foreign direct investment
- About FDI structure classified into industries and fields
From 2003 to 7/2012, FDI structure classified into industry in the
Northern key economic region was focused chiefly on the field of industry
and construction, making up to 58.22% the total number of projects and
62.14% the total registered capital in the area. The field of service attracted
1,332 FDI projects, taking 41.12% the total number of projects and 37.57%
the total registered capital. The combination field of agriculture, forestry, and

fishery account for just 0.64% the total number of projects and 0.28% the
total registered capital.
- About FDI structure classified into forms of investment
From 2003 to 7/2012, FDI in the Northern key economic region was
primarily performed by the form of 100% foreign investment with 2,537
projects, accounting for 78.33% the total number of projects and 64.63% the
total registered capital. There were 573 joint venture projects, making up
17.69% the total number of projects and 18.89% the total registered capital.
The remainders were of other forms like Business cooperation contracts (2
projects), BOT, BT, and BTO Contracts (48 projects), Joint stock Company
(78 projects), and subsidiary-parent Company (01 project).
- About FDI structure divided into investing partners
There were 62 countries and dominical regions having FDI projects in
the Northern key economic region during 2003-7/2012. Among these
countries, Asian countries had 2,584 projects, taking 79.77% the total number
of projects and 69.12% the total registered capital. Of 12 nations and regions
having over $1 million of total registered capital, 2 countries representing for
European were the Netherlands (ranked 5
th
) and Luxembourg (ranked 9
th
); and
the United States (ranked 8
th
about the total registered capital) represented for
countries from Americas.
- About FDI structure divided into invested areas
17
Foreign direct investment in the Northern key economic region was
concentrated mainly on Ha Noi with 1,991 projects, accounting for 61.46% the

total number of projects and 41.89% the total registered capital. Projects were
least invested in Quang Ninh, which had a humble number of 96 projects,
making up 0.29% the total numbers of projects and 11.43% the total registered
capital.
3.2.2. The reality of foreign direct investment towards the sustainable
development in the Northern key economic region from 2003 to 2011
3.2.2.1. The real situation of foreign direct investment towards the
sustainable development in the Northern key economic region
- FDI area’s contribution to the economic growth of the Northern key
economic region: The contribution rate of this area to the economic growth of
the Northern key economic region in the period 2006-2011 rose continuously
over years and was comparatively stable. To be totally counted in the period,
GDP of FDI area averaged 17.38% compared with the GDP of the region.
- FDI area’s contribution to the total socially investing capital of the
Northern key economic region: The capital of FDI area contributed to the total
socially investing capital of the Northern key economic region tends to rise
over years and makes up a significant rate in the total investing capital of the
region for society. During the period 2003-2010, FDI capital kept certain at an
average contribution of about 12% in comparison with the total socially
investing capital of the region. The results show that the contribution rate of
inland capital area to total socially investing capital in the Northern key
economic region was quite high, accounting for 86.83%.
- FDI area’s contribution to local budget in the Northern key economic
region: FDI area has greatly contributed to local budget of the Northern key
economic region in that last years. To be totally counted during 2003-2010,
the payment rate for budget of FDI area compared with the total budget of the
area was 15.4%/year.
- FDI area’s contribution to export of the Northern key economic
region: Foreign direct investment in the Northern key economic region has
good effect on export activity of the area. Generally from 2003 to 2011, the

export value rate/FDI implemented capital always rose in almost all provinces
and cities in the region.
- FDI area’s contribution to the economic restructuring of the Northern
key economic region
18
+ During the last years, FDI area has made considerable contribution to
the process of restructuring economic industries in the Northern key
economic region towards raising the density of production value in industrial
field. The density of industrial production value of FDI area was increasing
and made up 40.62% compared with the value of industrial production in the
Northern key economic region in 2006. One after another, the figure was
42.69% (2007); 44.24% (2008); 43.36% (2009); 49.11% (2010); and 57.38%
(2011). Compared with the general production value of the Northern key
economic region, the value of industrial production of FDI area took 23.9%
(2003); 28.08% (2008); and the record rate of 40.18% (2011).
+ FDI contributes to transfer the component structure in the Northern
key economic region: The structure of industrial production value in the
Northern key economic region during the period 2006-2011 had moved
towards the direction of raising the density of industrial production value of
FDI area. FDI area’s industrial production value always held a higher density
than that of State-run businesses and private companies in the region.
3.2.2.2. The real situation of foreign direct investment towards the
sustainable development of society in the Northern key economic region
- About the capability to produce employment and make contribution to
foster the transference of labor structure in the Northern key economic
region towards the direction of industrialization
+ The capability to create employment in FDI area: FDI area of the
Northern key economic region has continuously produced jobs for workers
over years. In the period of 2003-2010, FDI area of the Northern key
economic region has 2,047,044 laborers having jobs, with an average of

255,880 workers/year. The rising rate of labor working in FDI area averaged
24%/year during this region.
+ The contribution of FDI area in promoting the transference of labor
structure: Of total laborers currently working in FDI area, industrial
employment rapidly rises and makes up the highest density. If the number of
workers having jobs in industrial field in FDI area of the Northern key
economic region was 78,222 in 2003, taking 77,26% the total number of
laborers in FDI area in 2003, the number of industrial working laborers in
2006 was 185,623, making up 89.92%, and 354,138 in 2010 with 79.86%
correspondingly.
- About raising the quality of labor source in FDI enterprises in the
Northern key economic region
19
+ Workers’ salary and income:
The average salary and income of laborers in FDI area has been
improved in the last few years, but they remains lower than those of workers
working for private businesses and joint stock companies. Additionally, there
is a definite difference in the salary of between those who have jobs in
enterprises with FDI capital and those of private businesses, between job
positions, between managing employees and workers without training in the
same kinds of enterprises with FDI capital.
+ Working conditions of laborers:
The reality of working extra shift, extra hours happens in almost all
businesses with FDI capital in general and enterprises with FDI capital in the
Northern key economic region, in particular, especially in companies
producing textile and garment, leather shoes, fishery processing, and industrial
production. FDI enterprises have not carried out well regulations on
complying with hygiene safety and labor protection.
+ Physical and spiritual life of laborers
Although workers’ salary and incomes in enterprises with FDI capital

has considerably increased in recent years, they are still lower than those of
other types of businesses. With such low income and high working intensity,
spiritual life of workers in businesses with FDI is very poor and deficient.
They do not have time to take rest, entertain, and take part in other social
activities.
+ Training and raising professional level for workers
Laborers after recruited to work in companies with FDI capital have got
supplementary training, chances to access, learn, and acquire new technology
and technique as well as methods to operate businesses and industrial working
manners, little by little contributing to enhance levels of professional
knowledge and skills.
- About effects of foreign direct investment on the situation of security
and order in the Northern key economic region
+ Enterprises with FDI capital have not strictly performed labor laws
and ensured laborers’ rights, generating social conflicts and leading series of
strikes and go-slows.
+ Happenings of violating bylaws of foreign employees’ entrance and
exit still exist in such forms as: illegally enter the country, wrongly work
20
compared with entrance purposes, excessively stay, dishonestly declare to get
visa, disorderly cause insecurity at localities.
3.2.2.3. The reality of foreign direct investment towards the sustainable
development of environment in the Northern key economic region
- Situation of carrying out laws on environmental protection: amongst
businesses with FDI in the area, Japanese enterprises often do better on the
tasks of protecting environment. Most companies with FDI offending laws on
environmental protection are businesses with small and average size from
Taiwan, South Korea, and China. Vinh Phuc Department of Natural Resources
and Environment inspected and verified enterprises with FDI in 2011 and
found 14 businesses with violating acts on environmental protection.

Authority agencies fined these businesses and with the suggestion of VND
528.75 million.
- Situation of investing in environmental protection of enterprises with
FDI capital: Most companies with FDI capital in the border of Vinh Phuc
Province have actively applied measures of processing waste materials before
dismissing it into environment and put money into changing new technology
in production and waste processing in order to reduce environmental pollution
such as: Vietnam Honda Company, Vietnam Toyota Company, Vietnam
Exedy Co., Ltd, Vietnam Meisei Co., Ltd (Vinh Phuc), and so on.
- The level of using technology in FDI projects: the level of technology
utilized in FDI projects is also varied in different industries and professions.
The advanced level of technology in field of processing agriculture, forestry,
and food products is backward; the 5 other fields (mechanics, building
material production, electricity and electronics, textile and garment, leather
shoes, and paper production; other fields) only reach medium level of
technology.
- Bad effects of FDI area on sustainable development and environment
in the Northern key economic region: The violations of laws on environmental
protection of FDI area in the Northern key economic region, causing
environmental pollution and affecting production activities, include: sewage
containing pollutants of Vietnam Nissan brake production Company, Quang
Khai industrial park, Yen Binh Prime joint stock Company; non-processing
wastewater with the content of Chrome 6, the most toxic among metals
(coupled with Asen and Mercury) found in Tungkuang industry joint stock
Company (in Hai Duong); smoke, dust, and exhaust of Chifon Cement
Company in an incident occurring in 2010 in Hai Phong.
21
3.3. General evaluation of foreign direct investment towards the
sustainable development in the Northern key economic region
3.3.1. Achievement

- About economy: (i) FDI investment structure is suitable to the
country’s policy of general economic structural movement towards increasing
the density of industry and service field; (ii) FDI investment structure
according to investing partners also has good changes with the more and more
appearance of countries around the world investing in the area, not few of
which are overseas investors with potentials of both finance and technology;
(iii) Foreign direct investment in the Northern key economic region has made
contribution to supplement capital for total social investment, playing
important role in export and raising local budget incomings in the Northern
key economic region.
- About society: (i) FDI area has produced employment in the Northern
key economic region, greatly impact the transference of labor structure
towards industrialization and modernization; (ii) some Vietnamese businesses
producing supplementary products or distributing supplementary products are
also formed; (iii) modern managing methods of some FDI enterprises like
Honda, Toyota, or Ford Company have clear effect in imparting advanced
management to Vietnamese labor.
- About environment: Most FDI enterprises in the Northern key
economic region are aware of complying with laws on environmental
protection; businesses have actively put money into tasks of protecting
environment, limiting bad influences on environment.
3.3.2. Restrictions of FDI towards the sustainable development in key
economic regions and its causes
3.3.2.1. Restrictions
- In economic field: (i) Investment structure based on industries of FDI
area is still imbalanced and inappropriate to the policy of encouraging and
favoring the development of business and field; (ii) FDI contribution in the
Northern key economic region to the economic growth is incompatible with
potentials. Technology used in FDI companies in the Northern key economic
region remains low and average, even backward in some cases; there exist

phenomenon of pricing transfer and tax evasion in FDI enterprises in the
Northern key economic region, causing losses to state budget and difficulties
to the task of managing tax in FDI companies.
22
- In social field: Jobs created in FDI area of the Northern key economic
region is incompatible; (ii) monthly average income of workers does not
match with the time and intensity of working; (iii) Physical and spiritual life of
laborers deficient, and the quality of life is poor; (iv) Labor conflicts and
strikes tend to increasingly go up, influencing order and social security of the
local area.
- In environmental field: (i) the assignment of protecting environment in
businesses with FDI capital in the Northern key economic region is not
satisfactorily concerned by investors; (ii) the occurrence of offending laws on
environmental protection is quite popular in almost all provinces and cities in
the area; (iii) some overseas investors seem to look down on people’s health
and living habitat of Vietnam, again and again breaking regulations on
environmental protection, making residents’ surroundings seriously worse
regardless of investigation, warning, and punishment of government of
different levels in the Northern key economic region.
3.3.2.2. Causes of restrictions
Firslty, the legal system and polices in regard to foreign direct
investment continue overlapping, laking of synchronicity and unification;
Secondly, the task of making planning of the Northern key economic region is
largely limited, not effectively meeting requirements for the sustainable
development of the area and failing to offer strategies to draw FDI towards the
sustainable development; Thirdly, the management task of the State on foreign
direct investment is problematic; Fourthly, the quality of labor source of the
Northern key economic region is restricted, and labor structure classified into
business remain rational; Fifthly, the technical infrastructure structure in the
Northern key economic region is poor and limited; Sixthly, complementary

industries in the Northern key economic region are not developed well to
ensure FDI towards the sustainable development.
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Chapter 4
ORIENTATION AND MAJOR SOLUTIONS FOR PROMOTING
FOREIGN DIRECT INVESTMENT TOWARDS SUSTAINABLE
DEVELOPMENT IN THE NORTHERN KEY ECONOMIC REGION
4.1. Orientations for foreign direct investment towards sustainable
development in the Northern key economic region
4.1.1. Foundation for formation of orientation for foreign direct
investment towards sustainable development in the Northern key economic
region
4.1.1.1. Domestic and international background affecting foreign direct
investment towards sustainable development in the Northern key economic
region
In the current period and the next years, domestic situation and
international context create the country in general and the Northern key
economic region in particular big strengths and opportunities, together with
extreme weaknesses and threats in performing objectives of social and
economic development and protection of the independence, sovereignty,
unification and territorial integrity during the strategic period. In addition, it
offers threats for Vietnam and the Northern key economic region in orienting
attraction and management of FDI operations to guarantee objectives of
sustainable development.
4.1.1.2. Objectives of social and economic development in the Northern
key economic region during 2011 - 2020
Economic, social and environmental targets of the Northern key
economic region in the period of 2011-2020 are identified based on
Decision No. 145/QĐ-TTg on August 13
rd

, 2004 about Major orientation
for social and economic development in the Northern key economic region
until 2010 and vision until 2020, which is foundation for formation of FDI
orientation towards sustainable development in the Northern key economic
region until 2020.
4.1.2. Orientation for foreign direct investment towards sustainable
development in the Northern key economic region until 2020
First, to renew thought on FDI attraction to the Northern key economic
region towards focusing on quality of FDI inflows; Second, to enhance
coordination of strategy establishment to attract and use effective FDI
inflows; Third, to orient attraction of FDI capital from countries with source
technology such as U.S., Europe and Japan to the Northern key economic