impacts of foreign direct investment (fdi) on restructure of exports in the northern coastal region of vietnam

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SOUTHERN LUZON STATE UNIVERSITY, THE PHILIPPINES
IN COLLABORATION WITH
THAI NGUYEN UNIVERSITY, SOCIALIST REPUBLIC OF VIETNAM
_______________________________________________________________

DISSERTATION ABSTRACT

IMPACTS OF FOREIGN DIRECT INVESTMENT (FDI) ON
RESTRUCTURE OF EXPORTS IN THE NORTHERN COASTAL
REGION OF VIETNAM




DOCTOR
OF BUSINESS ADMINISTRATION


BY
DBA. Candidate: NGUYEN THIEN SU (SUNT)
Scientific Adviser: Dr. TRAN DAI NGHIA

July, 2013
1


CHAPTER I: INTRODUCTION
1.1. Background of study:
The study of the impacts of FDI on restructuring exports in the Northern Coastal Region
of Vietnam will be expected to have a significant contribution theoretically and practically. The
results of the study will provide scientific basic recommendations and references for policy
makers in forming the best policy in restructuring export sector to maximize benefits of exports
sustainably. This is the reason for carrying out the study of “Impacts of FDI on Restructure of
Exports in the Northern Coastal Region of Vietnam”
1.2. Statement of the problem:
The main issue to be addressed in this research is impacts of Foreign direct investment on
shifting exports structure in the Northern Coastal Region of Vietnam. Specifically, this study
intends to answer the following questions:
(1) How has foreign direct investment affected the elements of the economy?
(2) What quantitative factors are changes in export structure?
(3) How foreign direct investment has been affecting the shift in export structure in the
Northern Coastal Region of Vietnam
(4) What are the solutions to attract FDI on shifting exports structure of the Northern
Coastal Region of Vietnam?
1.3. Objectives of the study:
The overall objective of this dissertation is to apply theory to analyze the practical impacts
of FDI situation and how the implementation of FDI can influence the restructure of exports
quantitatively and qualitatively in the Northern Coastal Region of Vietnam.

To achieve the overall objectives, some specific objectives will be attained as follows: To
review the impacts of FDI on shifting exports structure and some related matters in order to frame
the theoretical basis of the impacts of FDI on shifting exports structure.
To analyze the current situation reflecting the quantity and quality of exports structure in
the Northern Coastal Region of Vietnam.
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To use the models to test the impacts of FDI on shifting exports structure in the Northern
Coastal Region of Vietnam.
And to propose solutions and policies for attracting and using FDI to improve the quality
and quantity of exports structure in the Northern Coastal Region of Vietnam.
1.4. Scope and limitations of the study:
This research aimed at studying spatial scale of the Northern Coastal Region of Vietnam;
including five provinces of Quang Ninh, Hai Phong, Thai Binh, Nam Dinh, and Ninh Binh.
Research data ranged from 1995 to 2012. The scope of this research was to analyse the structure
of tangible exports.
1.5. Organization:
The dissertation is divided into five chapters; the first chapter gives an introduction on
the topic, the second chapter of the dissertation provides a methodological overview in terms of
theory: FDI affects exports structure both in quantity and in quality. Chapter 3 presents
information about theoretical models to be developed within the analytical framework of the
dissertation selected. Chapters 4 indicates the synthesis of data, model testing results along with
the present value analysis, interpretation, and evaluation of the impacts of FDI on shifting exports
structure in the Northern Coastal Region. The final chapter includes a summary of findings, and
proposes solutions for attracting and effective usage of FDI and recommendations for further
research for shifting exports structure in the Northern Coastal Region of Vietnam.
3

CHAPTER II: LITERATURE REVIEW
2.1. REVIEW OF RELATED LITURATURE
This section present of 18 literatures related to the topic. After reviewing some local and
foreign literature, some brief conclusions can be drawn out as follows:
Effects of FDI on economic development:
This section mainly shows a collection of experimental researches on the impact of FDI
on economic factors:
- FDI provides investment capital, increases revenue, and improves the balance of
payment.
- FDI improves advanced technologies and management experience.
- FDI promotes economic restructure and uses internal capital more flexibly and
effectively.
- FDI promotes to improve the legal system.
However, FDI also causes many obstacles and challenges for the investment receiving
countries, such as:
- FDI breaks down the overall development planning of the economy, as rapid growth.
- Foreign investors only choose those industries, economic sectors, geographical areas
having comparative advantages, and providing higher ROI.
- Law violation, unfair competition, such as tax fraud, opening up to lower interest costs,
environmental pollution often happens.
- FDI causes a "brain drain '' and creates a gap between the rich and the poor in society,
affects the cultural life and traditional lifestyle of people, stimulates the psychology of "Culting
foreign goods", etc.
- FDI leads to the dependence on foreign countries.
So, for developing countries, they must recognize the right position and the role of FDI to
have appropriate policies in creating an open and attractive investment environment and promote
the comparative advantages, in order to attract more and more powerful and effectively use FDI,
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and contribute actively to building successful industrialization and modernization of the country.
It is also an active and positive process of integrating more deeply into the regional and the world
economies. Also they need full awareness and more in-depth nature of FDI to see the flip side
and the negative effects of FDI, to take measures to prevent and effectively remedy, to reduce to
the maximum term processing FDI activities causing.
Shifting exports structure:
The exports structure is a whole including many commodities or commodity groups
which account for a certain percentage in terms of quantity, as well as a certain proportion of the
total value of the exports structure”. It is important to assess the exports structure on both sides of
quantity and quality:
The number of export goods structure is the export value of each type of goods in the
structure and the total value of export structure. Structure or the number of exports is measured
by the number of actual exports in the structure. This quantity is measured in units of each type of
goods.
The quality of exports structure: The change in terms of quality can be evaluated in two
ways: First, it is the change in the proportion of items. Second, the quality of the goods
represented by the proportion of goods by income per capita also increases, or the quality index
of the export structure: PRODY and EXPY.
From the reality, it can be said that shifting exports structure is affected by the following
factors:
- The target, the opinions and the orientation of socio-economic development in general
and of international trade or shifting exports structure in particular.
- Policies to encourage export and exports structure restructuring.
- The scientific and technical revolution in the world. It can be said technology factors
play a very important role in creating the exports structure.
- The development of the special and high quality services such as finance, insurance and
banking.
5

The relationship between FDI and exports: The theoretical and empirical studies on
relationship between FDI and exports are expressed in the most common way:
- FDI reverses the trade flows into the investing countries and the investment-receiving
countries, thus, in a term it will have an impact on the structure of exports and exports
restructuring of both countries.
- FDI promotes the restructuring of export goods under the directions of improving the
quality of the export structure, as shown:
Firstly, FDI increases the proportion of processing goods, deep processing items, items
with high technical content as well as high human capital.
Secondly, FDI focuseson serving for restructuring or improving structure of export
goods, under the direction of enhancing the proportion of highly and deeply processed goods,
with the goal of creating export goods of high quality, and highly increasing value.
Thirdly, FDI increases the proportion of new export commodities.
Fourthly, input FDI increases the number of items in investing sector in the basket of
export goods; since then, it increases the proportion of these items both in quantity and export
value.
Fifthly, output FDI affects shifting export goods that shown more than in changing
quality of export goods structure.
In summary, in terms of theory, FDI affects exports structure both in quantity and in
quality. The impact of FDI input elements (FDI performance) may be stronger than that of FDI
output factors. However, these effects need examining through empirical researches
6


2.2. CONCEPTUAL FRAMEWORK

Figure 2.2: Elements of FDI towards impacts on shifting exorts structure
Where: - FDI inflows to Northern Coastal Region in research period
- FDImade capital is FDI implemented capital
- EV
FDI
is the export value from FDI invested sector
- GO
industrial
is the value of industrial production of the FDI sector,
- Shifting exports structure is the change in export structure due to FDI investment in the region.
FDI
FDImade capital
EV
FDI,
GO
industrial,

Shifting exports structure
Source: Compiled by the author, 2013
7


CHAPTER III: RESEARCH METHODOLOGY
3.1. Locale of study:
Northern Coastal Region includes five provinces of Quang Ninh, Hai Phong, Thai Binh,
Nam Dinh, and Ninh Binh.

3.2. Research Design
A comparative research was designed to find out Impacts of FDI on Restructure of
Exports in the Northern Coastal Region of Vietnam. This type of research design is chosen and
appropriate in this dissertation because the region has not undertaken any studies about this topic.
In order to achieve the research objectives, the following methodology was used:
Historical research, system analysis, fieldwork, comparison, quantitative, forecasting and making
models and multiples regression for testing of hypotheses; making tables, charts, figures to
analyze data and to review changes in percentage of the commodity, the commodity groups in the
export structure and the impacts of FDI on shifting exports structure struct in both terms of
quality and quantity. Since then the study proposes solutions to promote positive effects of FDI
on shifting exports structure in the Northern Coastal Region of Vietnam.
Variables used in the research:
The study used the export value (EV) to evaluate the quantity of exports structure in the
region. It is the change in exports value of the region over the years for whole structure.
In terms of quality: analyzing the shift from the raw commodity group to the processed
and refined goods. To quantify the above process: calculate the coefficient PRODY and EXPY
in the period from 1995 to 2012 for the export of goods under sub-sector standards of Vietnam.
3.3. Data sources used for analysing and testing models
Data sources the thesis used are secondary data sources explored and collected from the
Department of Trade and Prices-General Statistics Office of Vietnam, Statistical Yearbook of
Statistics of five provinces in northern coastal region including Hai Phong, Quang Ninh, Nam
Dinh, Ninh Binh, and Thai Binh, and other relevant ministries, as follows:
The first, source is the one used to calculate the PRODY and EXPY indice and to evaluate
the impacts of FDI on shifting exports structure in the northern coastal region in terms of
quantity, including: Data of export value of the northern coastal region, and d ata of Vietnam's
export under the standard of international trade SITC3 and sub-sectors under VSIC93
The second source is the one related to FDI and elements of FDI or the input and output
of FDI, including: Data of FDI flow which has separation for the foreign parties in the Northern
8

Coastal region and in the field of major exports in the region. Data on production value of
industry of FDI sector (GOindustrial). Data on export value of FDI for each year (EVt). Data on
GDP per capita. And data on the value added (VA) of the production sector
3.4. Models used in the study "The impact of FDI on shifting exports structure in the
Northern Coastal Region of Vietnam"
To the extent permitted, two multiple regression models were used to assess the impacts
of FDI on the restructure of exports in the Northern Coastal Region as follows:


(3.4)
Where: LogEV
t
is the natural logarith of the export value in thousand $US in the period t;
Log FDI
t-1
is the natural logarith of utilized FDI in thousand $US in the period t-1
Log R
t-1
is the real exchange rate in the period t-1 (VND/$1US)
α
i
is scalar (coefficient), and t: time (year)
EXPYmg = a + bFDImade + c EV
FDI
+ dGOindustrial (3.5)
Where: EXPYmg is index of export quality of main goods;
FDImade is the capital performed;
EV
FDI

is Export value of the FDI sector;
GOindustrial is value of industrial production of the FDI sector,
And a, b, c is coefficient of the estimated variable.
In short, the synthesis of data, model testing results along with the analysis, interpretation,
and evaluation of the impacts of FDI on shifting exports structure in the Northern Coastal Region
will be discussed further in Chapter 4.
9


CHAPTER IV
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
4.1. Role of the Northern Coastal Region in the economic development of the
country.
The Northern Coastal economic region is focusing on development and investment with
the role of a leading economic region in the country,. In addition, the Northern Coastal Region is
also known as a "motivation region" significantly contributing to the economic growth of
Vietnam as well as promoting the economic development of other regions.
4.2. The situation of enterprises and export goods:
4.2.1. Industrial development and Economic situations in period 1986-1995 (before
having FDI)
During the period from 1986-1995, the export value had been a driving force to push
economic growth. The growth rate of exports was, on average, 2.5 times of the growth rate of the
GDP (20% was compared to 7%). The exports had also contributed to solving urgent social
problems such as unemployment, poverty, promoting the transition to a market economy and
restructuring the economy in accordance with changes of the world market. All the above
contributions of export activities had enhanced the position of Vietnam in the international
market, sped up the integration process of Vietnam, and to create the initial basis for the
economic growth in the following period.
4.2.2. Export analysis in period of 1995-2004:
- The Industrial production of the private sector also sharply increased. In 2004, there

was an increase of 22.6% higher than that of the public sector (12.9%) and foreign-invested
sector (16.2%).
- In area of international trade, the number of registered enterprises has also dramatically
increased. By the end of 2004, the number of registered enterprises to participate in export
business was 21,256, increased more than 17 times as compared to that of 1995, of which the
private sector had sky-rocketed from 156 in 1995 to 15,246 businesses in 2004. This shows that
policies of global integration and participation into international trade brought positive effects.
- The average export growth rate in the period of 2000-2004 was only 7%/year, much
lower than that of the previous period (20%).
- The export value of preliminary agricultural products and raw materials accounted for
large proportion; while processed, industrial goods and high technology exports increased (47%
in 2002), it was still, however, extremely lower than many Southeast Asian countries (from
70% to 80%), especially value-added products was too low.
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- Competitive capacity: In terms of competitive criteria for a product such as price,
quality, sale organization, business reputation, Vietnam’s exports have been in lower level than
those of other countries in the region and the world. Many items considered to have the lowest
(e.g. rice, coffee, textiles, etc.)
To overcome limitations in export, one of the strategic solutions is to expand the private
sector, and encourage FDI enterprises. The important thing is how to increase market share of
Vietnam's exports on the world market and create favorable conditions to attract and
appropriately use FDI. Development of private sectors to promote Vietnam's exports restructure
of the country in general, and of the Northern Coastal Region in particular, is crucial to solve
issues mentioned above.
4.3. Impacts of FDI on restructuring exports in the Northern Coastal Region in the
period 2005 - 2012
4.3.1. Exports of the Northern Coastal Region: In the period 2005-2012, the export
value of the region increased continuously from U.S $1,800.4 million in 2005 to US. $3,899

million, and US. $6,525 million in 2008 and 2012 respectively. Within the region, Quang Ninh
was ranked the first in contributing to the total export value of the region. On average in the
period of 2005-2012, export value of Quang Ninh accounted for 45.6% of the total export value
of the region. Hai Phong was in the second place with 39.3%. The three remaining provinces
contributed only 15.2 % of the total export value of the region. Export growth rate of the region
in the period of 2005-2012 is shown in Figure 4.1
10.8
11.4
15.4
16.9
8.9
15.6
14.5
15.9
5.54
6.54
6.86
6.22
7.43
6.79
5.81
5.69
0
5
10
15
20
2005 2006 2007 2008 2009 2010 2011 2012
Year
%

Export growth rate Proportion compared to other countries

Figure 4.1: Export growth rate of the Northern Coastal Region in the period of 2005-2012
The figure 4.1 shows that in 2005 the export value accounted for 5.54% of the total export
turnover of the country, and it was 7.43% in 2009.Two years later (2011-2012), even though the
total export value increased the proportion in the whole country fell to 5.69%. The export growth
rate of the region in the period from 2005-2012 was on increasing trend, but not stable.
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Theaverage growth rate reached 15.16% for whole period. The highest growth rate was 16.9% in
2012and the lowest growth rate was only 8.9% in 2009. This shows that the movement trend of
export value in the Northern Coastal Region has been flutuated over time.
Shifting exports structure in the Northern Coastal region
50.4
51.8
50.2
54.6
48.4
60.8
63.2
64.4
38.4
40.7
39.1
36.7
35.2
33.1
31.5
11.2

7.5
6.7 6.3
14.8
3.7 4.1
43.1
2005 2006 2007 2008 2009 2010 2011 2012
year
(100%)
Proportion of other
goods (%)
Proportion of raw,
preliminary goods (%)
Proportion of processed
or refined goods
Figure 4.2: Comparing export value of 3 groups of the Northern Coastal Region in
the period of 2005-2012
Figure 4.2 shows that groups of processed and refined goods in the period from 2005-
2012 always accounted for the dominant proportion of export structure of the region. In addition,
the group was also on increasing trend (50.4% in 2005 to 64.4% in 2012. Meanwhile, the group
of raw and preliminary products decreased gradually from 38.4% in 2005, then increased to
43.1% in 2007, and fell to 31.5%(2012).
The growth rate of Group A and B is unstable, for instance, the group A’s growth rate was
52.8% in 2006, 21.8 % in 2009, and only 10,2% in 2012; the Group B’s growth rate was
declining from 47.3% in 2006 to 14.5% in 2009. The proportion of the group A and group B
changed inversely.
Exports structure movement in the Northern Coastal Region
Analysis of calculating PRODY indicator and results of calculating EXPY for primary
goods of the Northern Coastal Region in the period of 2006-2012 is indicated in the table 4.9,
4.10, 4.11 and 4.12 shows that:.
- In the above structure, raw goods and preliminary products accounted relatively for high

proportion (5/10 items) and processed items such as fine art, electronic products have the export
quality index which is not high.
- EXPY index is on the trend of increase from 2006-2012. Average Expy of this period
reached 2,892,000 VND (U.S. $ 146,5).
4.0

12


- Goods with highest quality, there is shift in terms of quality from raw, preliminary goods
to processed groups; for instance, the proportion of processed groups increased from 4.76% in
2006 to 32.26% in 2012 corresponding to proportion of raw and preliminary groups decreased
from 90.48% in 2006 to 40,86% in 2012. However, the shift level was still slow. Although the
proportion of raw and preliminary goods reduced, it was still high. Groups of high technology
content increased unstably and with low level. It shows a necessity to have improved in
proportion of exports of high-tech group of region’s export structure.
4.3.2. FDI with shifting exports structure of the Northern Coastal Region
FDI attraction in the Northern Coastal Region:
In the period 1988- 2012 realized FDI capital of the Northern Coastal region was U.S. $
11,794,2 million, made up 52.8% of the total registered capital of the region, and it proves high
potentials of attracting FDI of the Northern Coastal region. It is revealed that the sector attracting
more FDI tends to have higher GO. It is also an issue for provinces in the region to have effective
solution to improve capacity of managing and using FDI for economic development of the
province.
The impacts of FDI on economic development:
The FDI inflows have contributed significantly to the total investment of the whole
society to achieve the objective of socio-economic development of the country. FDI enterprises
contributed significantly to national budget mobilization and budget balance.
FDI contributed to shift economic structure and improve industrial production capacity.
The industrial growth rate of FDI has always been higher than the country.

The FDI sector contributed to increasing proportion of the total export of the country. FDI
plays a prominent role, directly and indirectly impacts in technological innovation activities and
technology transfer in Vietnam and contributes to strengthening the infrastructure for
industrialization and modernization of the country.
The FDI has generated jobs, increased labor productivity, and contributed to improving
training and human resources.
The FDI has created a multiplier effects to the economy: FDI enterprises’ products have
been inputs for other Vietnamese enterprises and vice versa.
In addition to that, the role of FDI has also demonstrated through quantitative factors. FDI
has created motivation of competition for domestic firms, thereby to enhance the capacity of
domestic enterprises; scale up domestic market; introduce, bring Vietnam-originated products
into the international markets.
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Impacts of FDI on shifting exports structure:
The export value of state owned sector accounted for a large proportion, but tended to
decrease over the years, from 63.01% in 2005 to 52.18% in 2006, and continued to reduce (2010,
2011 and 2012 was 25.26%; 25.0% and 23.4% respectively). Export ratio of the collective sector
and the private sector was not stable, the FDI sector trended to increase in the same period. There
was a shift in the proportion between the state owned sector and FDI sector, and the exports
value of FDI sector of three groups with high processing has competitively increased with export
quality.
4.4. Applying two theoretical models to test the impact of FDI on shifting exports
structure in the Northern Coastal Region
The author presented 2 models used to evaluated the impact of FDI on shifting exports
structure in the Northern Coastal Region:
4.4.1. Empirical results of the model 1:
Table 4.20 FDI and the Northern Coastal Region export performance
(Note: Calculation results of the model 1 as in Appendix 4.1a)

Dep Variable
(1)
LogEV(private)
t
(2)


LogEV(SOE)
t
(3)


Constant
-30.52 (17.05)* 49.39 (8.91)**
Log FDI
t-1
0.58 (0.18)* -0.404 (0.29)
Log R
t-1
3.89 (1.53)
-0.64 (0.07)**
TIME -0.376 (0.055)** 0.116 (0.029)*
R
2
- adj 0.79 0.81

(Data from regression model, 2013)

Source
:

authors’

analysis.
Figures in parentheses are t statistics (two-tailed tests); *,**,
and*** denote significance at the 10%, 5% and 1% levels respectively
. The number in
the parentheses is the standard diviation of that coefficient
The estimation equations for export values of private and SOEs can be written as follows:
LogEV(Private)t = -30.52 + 0.58 LogFDI
t-1
+ 3.89LogR
t-1 –
0.376T (4.1)
LogEV(Soe)t = 49.39 - 0.404LogFDI
t-1
– 0.64LogR
t-1 +
0.116T (4.2)
The equation 4.1 shows that 1% increased in FDI inflows to private sector could result in
an increase of 0.58% in export value of this sector while each year export value of private sector
tend to reduce by 0.37%.
The equation 4.2 represents that if exchange rate ( VND/$US1) in previous year increased
by 1% could make export values of SOE in current year reduce by 0.64%, while export values of
SOEs tend to increase by 0,11% per year.
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The significant results for the real exchange rate variable (LogR
t
-

1
) confirm that real
exchange rate negatively and significantly affect export values of public sector (SOE).
Table 4.21 FDI and the Northern Coastal Region export performance by category of
exported goods.
(Note: Calculation results of the model 2 as in Appendix 4.1b)
Dep Variable
(1)
LogEV(raw)
t (2)
LogEV(pro)
t (3)
Constant 1.534(0.0003)*** 3.14 (10.40)
Log FDI
t-1
0.0001 (0.00005)** 0.65(0.125)**
Log R
t-1
1.0004 (0.000027)*** -0.54 (0.90)
TIME -0.22 (0.00004)*** -0.032 (0.35)
R
2
- adj 0.69 0.79
The estimation equations for export values of raw materials and processed goods can be
written as follows:
LogEV(raw)t = 1.534 + 0.0001 LogFDI
t-1
+ 1.0004LogR
t-1 –
0.22T (4.3)

LogEV(pro)t = 3.14 + 0.65LogFDI
t-1
– 0.54LogR
t-1 -
0.032T (4.4)
The equation 4.3 and 4.4 shows that: 1% increased in FDI inflows to raw materials could
result in an increase of 0.0001% in export value of this sector while each year export value of
raw materials tend to reduce by 0.22%. If exchange rate (VND/$US1) in previous year increased
by 1% could make export values of processed goods in current year reduce by 0.54%, while
export values of processed goods tend to reduce by 0,032% per year. Thus, the results provide
support for hypothesis 3.
Table 4.22 Dependent variable Export value by Northern Coastal region (Log EV
t)
(Note: Calculation results of the model 2 as in Appendix 4.1c)
Dep Variable
(1)
LogEV
t (2)
P value
(3)

Constant 42.65141*** 0.003
Log FDI
t-1
0.22082** 0.014
Log R
t-1
-2.73751*** 0.007
TIME 0.03573* 0.055
R

2
- adj 0.8977*** 0.000
The estimation equations for export values of Northern Coastal Region (Log EVt)
can be written as follows:
LogEVt = 42.6541 + 0.22082 LogFDIt-1 – 2.73751LogRt-1 + 0.03573 T (4.5)
15


The result shows that 1% increased in FDI inflows to REgion could result in an increase
of 0.22% in export value of this sector while each year export value of Region tend to increase by
0.035% and the real exchange rate has negative influence in the region’ export value
significantly. This one again shows the consistent with all discussion previously.
4.4.2. Analysis of test results in the practice of the regression model 2
Table 4.24: Results of testing models 2
(Note: Calculation results of the model 2 as in Appendix 4.2)
Number

Independent variables Results
1 Intercept -65.699
2 FDImade 0,098
3 EV
FDI
0,031
4 GOindustrial - 0,092
5 R-square 0,89
6 Observation 16
7 Significance level 5%
Source: Compiled by the author
Table 4.24 shows that:
EXPYmg = - 65.699 + 0.098 FDImade + 0.031 EV

FDI
- 0.092 GO
industrial

Such, the models are statistically significant and reliable to make conclusions on the
impact of FDI on shifting exports structure in the northern coastal region in terms of quantity and
quality expressing through the coefficients: R-square and other observations of model.
Specifically, results and implications of model are analyzed in the following :
- Inputs of FDI (FDImade) played an important role in the export structure towards
improving the quality (If FDImade increases $ 1000 EXPYmg increases $ 0.098).
- The factor of FDI output (EVFDI) also improved the export structure towards
improving the quality if the export value of FDI increased by U.S. $1,000, the quality factor of
the export structure increased by U.S.$ 0.031).
- The factor of GOindustry did not have great impacts on promoting the quality of the
export structure (If GOindustrial increased by $U.S.1,000, the quality factor of the export
structure reduced by U.S. $ 0.092).
- The output factors of FDI had less influence than the input factor of FDI on promoting
the exports restructuring and towards quantity than quality.
In short, the findings also have implications for Vietnam policy towards the
encouragement of inward FDI and the promotion of exports in Northern coastal region.
16


4.4.3. Noticeable assessments: impacts of FDI on shifting exports structure of the
Northern Coastal Region
Some noticeable assessments can be withdrawn from the results of the models as follows:
- It can be said that positive impacts of realized FDI on improving exports structure of the
region both in terms of quantity and quality. These factors play a decisive role in creating the
output products of FDI sector such as GDP, GOindustry and EV; and in paving the way for the
export target and export structure shift towards improving exports quality.

- FDI had a more marked impact on the export of processed goods than that of raw material
goods.
- FDI increased export value of private sector significantly while it negatively influenced
that of State Owned Enterprises
- The exchange rate depreciated stimulated Region exports.
- Inputs of FDI (FDImade) played an important role in the export structure towards
improving the quality
- FDI output (EV
FDI
) also improved the export structure towards improving the quality
- GO
industry
did not have great impacts on promoting the quality of the export structure
- Output factors of FDI had less influence than the input factors./.

17


CHAPTER 5
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.1. SUMMARY OF THE FINDINGS
Main findings in this dissertation include the followings:
- FDI increases export value of private sector significantly (1% increase in FDI leads to a
0.58% growth in private enterprises’ exports value in the following year);
- The impact of inward FDI on Northern coastal region exports was stronger for
processed or refined goods than for raw material goods. This reflects Northern coastal region's
current comparative advantage, and signals the potential for the development of Region's
exports in more capital intensive activities.
- The study has also shown that the policy of the Government of Vietnam to allow the
exchange rate to depreciate stimulated Vietnam exports.

- The results show that performing FDI (inputs of FDI) plays an important role, positive
impacts on improving exports structure of the region both in terms of quantity and quality.
- The outputs of FDI (EVFDI and GOindustry) also improves the export structure
towards improving quality. But it has affected less than the inputs of FDI. It even has the
opposite effect (as GOindustry factor).
- Exports groups including electronics, computers and components, power strings and
cables of the region had increasing growth quality, but only at an average stability level.
- FDI for increased the quality of exports but there was still limitation when exports
considered to be of high quality still had low PRODY index.
- Weak and insufficient supporting industries reduced the connection between FDI
enterprises and domestic ones. Weak supporting businesses are not just the situation of the
region but also in Vietnam, which reduced the ability to attract FDI and FDI sector had to
import almost all of accessories for exports production.
- FDI flow into Vietnam in general and the North Coastal Region in particular is mostly
FDI replacement leading to the situation that FDI enterprises mainly produced goods for
domestic consumption instead of promoting export.
In short, FDI has had positive influences on restructuring exports towards improving both
quantity and quality. In particular, though impacts on the quality are significant, they are still
small compared to the goal of building a progressive structure of goods. Therefore, it must have
specific solutions to best use these funds for restructuring exports in the Northern Coastal Region
in the years to come.
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5.2. CONCLUSION
Through the research, the thesis has achieved some results and had the following
contributions.
Firstly, the author studied the rationale, analyzed and clarified the role of FDI to the
exports restructuring both in quantity and quality. Basing on it, the author evaluated the situation
of exporting in the North Coast region in Vietnam.

Secondly, the author studied how to use the calculation of the complexity index PRODY
and EXPY for the export basket of the Northern Coastal region in the period 1995-2012 to make
comments on the region’s exports restructuring in terms of quality. It is considered as a
quantitative method and it gives more complete information of the export quality instead of
commenting on the proportion of the popular commodity groups in Vietnam. Basing on the
calculation results of these indicators, one can have a new classification of the exports structure
and of the exports structuring besides the traditional classifications such as SITC, VSIC.
Thirdly, the author studied how to use a theoretical model of multiples Regression to test
the hypotheses. That is the tests model of the relationships: Between performing FDI and the
exports value (Models 1); between performing FDI, the exports value of FDI sector and the
value of industrial production of FDI enterprises with the quality index EXPYmg (model 2); and
it shows the accurate results about the impact of FDI on the export restructuring in the Northern
Coastal region
Fourthly, the study confirmed the positive impact of FDI implementation including
inputs and outputs to the region's exports restructuring both in terms of quantity and quality of
the exports structure. Specifically: FDImade capital has an impact on both the quality and
quantity of the exports structure. However it has more affect on the quality than on the quantity;
FDI had a more marked impact on the exports of processed or refined goods than the export of
raw material goods; FDI increases export value of private sector significantly; while it negatively
influences to that of State Owned Enterprises; The exchange rate to depreciate stimulated
Vietnam exports, and FDI output including GO and EV
FDI
has a lot more influence on the
quantity than on the quality of the exports structure.
5.3. RECOMMENDATIONS
5.3.1. The solutions for attraction and effective use of FDI for shifting experts
structure in the Northern Coastal region, Vietnam.
To implementation of strategies for attracting and effective use of FDI for shifting exports
structure in the Northern Coastal region and from the analysis results showed that needs to have
the appropriate solutions following:

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1. General solutions for attracting FDI in exporting products:
There should be specific plans to improve the status of the FDI contribution on
technology, export value, new product development, the amount of capital needed to increase
production targets, the support of the regional authorities and the government.
There should be a mechanism to improve the linkage between domestic and foreign
enterprises. Specifically, the government will fund human resource development, combine with
the foreign professional exchange programs,
The Northern Coastal Region calling high-quality FDI, and creating a more attractive
investment environment are essential. The following measures should be taken: The region
should continue to improve the infrastructure; develop strategies for training high-quality human
resources to meet the project; Promote oriented investment, specific strategies aimed at
transnational corporations which hold major technology, the leading partners and international
partners in the areas of agricultural-processing, manufacturing supporting technology, electronics,
software, and computer components.
The region should remove barriers affecting the decisions of potential investors. There are
specific policies to encourage and attract projects associated with the transfer of technology and
to create friendly environment
2. Attract and use FDI to improve the processing of products in the agricultural-
processing sector:
The region should: Develop specific planning strategies, programs and projects towards
strengthening attracting and using FDI effectively for the agricultural -processing sector. Develop
a systematic way of calling for FDI projects in the field of agricultural science and have attention
at the national level. Use Official Development Assistance to improve the very poor
infrastructure in rural areas. There are programs to promote, attract investment and promote
strong brand for the products of the agricultural sector. Encourage and offer preferential policies
for foreign investors to increase investment in product processing technology. Review and allow
groups and individuals to contribute capital to foreign investors by land using rights, which

allows investors to lease the land for households or individuals to carry out production business
and expanding land using rights for foreign investors as well. There are policies supporting risks
for foreign investors which work in the field of production and processing of agricultural, forestry
and fishery for domestic consumption and especially processing for export. There are training
programs to improve human resources to meet the requirements of FDI, and policies to access
and called for leading foreign investors in agriculture, forestry and fisheries from the USA,
Canada, Australia to invest in Vietnam.
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3. The solution to attract and use FDI to develop high tech commodity groups
- The region should: Continue creating infrastructure to attract projects; Attract and use
FDI effectively to enhance the export of electronic products both quantity and quality, diversify
the electronic products; Encourage FDI business to invest for electronic components, spare parts
and the products which support for other sectors such as telecommunications, information
technology, medical electronics, measuring devices, automation; Support or invest on innovation
of technology to improve the quality of products and reduce product costs, improve value-added
products; Improve the design and features of the product to adapt to the export market. Do not
stop at the simple device, simple audiovisual; Implement incentives and financial support as well
as taxes, advertising, marketing for FDI enterprises which have successful achievements in export
restructuring of the electronics; and Develop the industry which support for production to export
electronic products. (Refer to solutions supporting technology development).
4. The solutions for development of supporting industry in FDI business sector
The region should: The development of specific strategies and projects which are the
same for every province in the North Coast region to focus on developing supporting industries;
The review and assess of the supply capacity of domestic enterprises should be carried out to
innovative equipment and technologies; Encouraging private investment in boosting export
activities of the region; Support for establishment of international technical consultant gray to
advise the region in developing strategies to attract FDI in support to reform export structure;
Develop policy to encourage FDI in the form of a joint venture to create the link between FDI

and domestic enterprises; There must be a stable market with new purchasing power to attract
foreign investors; Develop specific strategies and plans for attracting FDI investment in
supporting industries; Have preferential policies for foreign investors to invest in this area with
the target of a specific market development and appropriately- controlled frame; And the
province in the region has to develop a plan to call for investment in a powerful way to invest in
the supporting field for FDI.
5. Encourage FDI enterprises to participate in region's export restructuring
The preferential policies for attracting FDI enterprises in the export sector should pay
attention to compliant conditions of the World Trade Organization (WTO).
It is needed to organize more frequent meetings and discussions with the FDI enterprises
to promptly remove the difficulties and problems arise and address concerned issues by foreign
investors.
6. Selecting of suitable FDI inflows to promote shifting exports structure:
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Firstly, it is necessary to form specific strategies, programs and projects for replacing FDI
and additional FDI.
Secondly, it needs to understand the aim of the FDI investment of each partner: replacing
FDI or additional FDI.
Thirdly, it is vital to have additional functions and duties to the Department of Foreign
Investment toward strengthen FDI project appraisal and evaluation with following main
attentions: Characteristics of the investors’ market; advantages and disadvantages of the
investors; advantages and disadvantages of industries, and additional or replacing FDI inflows
7. Technology solusionss for FDI to shift export structure
The government should have required an independent research institution to conduct
research on role of FDI technology in the export sector and in shifting exports structure and
establish a "hi-tech FDI zone for export to restructure exports". The government needs to carry
out evaluation of current labor skills, ability in meeting job’s requirement in order to have
appropriate adjustment in capacity building program.

There are separate programs asking funds for technology transfer in export sector and
shifting exports structure.
Improving infrastructure, employees’ quality and focusing on FDI enterprises produce
and export high-quality products.
Selection of FDI in the form of joint ventures instead of 100 percent foreign owned. A
joint venture with FDI will be a very good technology diffusion channels and not only in
technology but also have the ability to spread on labor, labor productivity, and market experience.
8. Coordination management mechanism for the regional level
To ensure an effective attraction and use of FDI to promote shifting exports structure
towards improving the quality of the exports of the region according to the following directions:
Firstly, the establishment of implementing mechanism to coordinate regional authorities
should be prioritized. It is necessary to have a representative who is responsible for settlement of
matters arising at the regional level. The solution given is only effective if there is an office
standing out, solving, monitoring and evaluating the results as well so that appropriate
adjustments for next process will be made.
Secondly, the provinces in the region need to be adapted to take goal-oriented
development of the whole region. Each local implementation on its own way made it more
difficult for FDI enterprises especially in export activity. Therefore, the need for consensus to
22


carry out common goal of the whole region, while ensuring the interests of the province is
necessary. The development of the whole region will pull development of the local area-province.
Thirdly, the establishment of coordination mechanisms needs to be developed specifically
assigned on the basis of a systematic way of creating a coherent strategy for the entire region and
links to other area localities outside the Area. Coordination mechanism must have a part which is
mainly responsible because it will not be effective without this part. Thus forming a part
representing the performance of the experting functions not other administrative functions is
essential to ensure the coordination in the region.
In summary, based on the results of the analysis in the previous chapter and solutions to

attract and manage FDI in order to help the process of shifting exports structure of the Northern
Coastal region to achieve goals and in accordance new development area of Vietnam is interested
of policy makers in the region.
5.3.2. Basic conditions to attract and use FDI to promote shifting exports structure:
1. Adequate understanding and thought about attracting FDI and solving social and
economic problems arise from FDI in the region
According to national and international experts, the world economy and Vietnam’s
economy will continue to face difficulties in 2013 and in the next few years. The public debt
situation in Europe shows no bright sign. Japan is continuing recovering from earthquake and
tsunami. The U.S. economy has been recovered after the crisis but still weak when the basic
economic indexes unstable. Meanwhile, the domestic economy is still facing great difficulties,
prices of some commodities continue to rise, businesses stagnated, the level of employment and
labor income are declining, many businesses were bankruptcy or closure. Therefore, the
government must make policies and measures to promote, even "save" the economy and create
the momentum for development. Vietnam is not an exception. From this fact, investors are also
more cautious and prudent in making and implementing investment decisions.
In this context, if Vietnam does not have correct and comprehensive measure to attract
and use FDI, the bad consequences will be unpredictable and will be difficult to recover.
According to the Resolution of the Communist Party of Vietnam and the strategy of
socio-economic development for 10 years from 2011 to 2020, Vietnam will become a modern
industrial country by 2020. The objective of this strategy is to achieve the economic growth of
7% to 8% per year and gain the sustainable development.
2. Improving the effectiveness and efficiency of the government’s management in
attracting FDI and solving socio- economic problems
23


Strengthening the role of the government in the market economy and international
economic integration is not only in the direction of increasing the level, scope, areas of
intervention, management but also improves the effectiveness and efficiency of management,

regulation and intervention in the direction of liberalization and the implementation of
international commitments. In order to meet this requirement, the State should implement the
management by laws, policies and macroeconomic tools. Along with the implementation of
decentralization of activities to attract FDI, we should strengthen the inspection and supervision
for attracting FDI and solving socio-economic problems arising from FDI. Also, it is vital to
improve the effectiveness and efficiency of State’s management for this problem from the issuing
of laws and policies to the implementation by listening and absorbing the extensive consultations
of the socio-political organizations, businesses and people. On this basis, it is time to adjust
policies in time, even give new policies to solve the problems in the harmonization of interests of
the State, local, FDI enterprises and people. All benefits must abide by and be governed by the
common goal of the nation. At the same time, policies and measures for performance must be
directed at the implementation of the common objectives.
5.3.3. Proposals for further research.
Besides, the impacts of FDI in depth of the export restructuring can be studied in more
details such as:
1. Further studies should conduct surveys, collect primary data to calculate and evaluate
the comparative advantage indices (Reveal Comparative Advantage-RCA) of each export
commodity in the region, to complement more systematic and adequate analysis on impacts of
FDI on the implementation of exports restructure in the Northern Coastal Region;
2. Further research should analyze deeply and evaluate the situation of impacts of
technological factors of FDI on restructuring of each exports commodity group./.

24


DISCLOSED RESEARCH
1. MBA. Nguyen Thien Su. Situation and Solution of the impacts of Foreign Direct
Investment (FDI) on restructure exports in the Northern Coastal Region, Vietnam. Journal of
Science & Technology - ISSN 1859-3585, Hanoi University of Industry, No. 15.2013, p.p. 93-96
& 99, 2013.

2. MBA. Nguyen Thien Su, B.S. Doan Hai Anh and Prof.Dr. Do Van Phuc: Propose
evaluation methods and factors directly determining the quality of training of industrial
economics. Journal of Science & Technology - ISSN 1859-3585, Hanoi University of Industry,
No. 14.2013, p.p. 82-88, 2013.
3. MBA. Nguyen Thien Su, Dr. Duong Duc Chinh (Team leader) et al.: Research and
propose solutions to improve management capacity and use of clean technologies in the
enterprises in the Northern Industrial Park, Vietnam. Ministrial Scientific Research, 2012. The
approval minutes of Ministrial Research of Science and Technology Council in 2002. Minister,
Ministry of Industry and Trade, dated 22 January 2013.
4. MBA. Nguyen Thien Su, Dr. Duong Duc Chinh (Team leader) et al.: Research and
propose solutions to improve financial management mechanisms for small and medium industrial
enterprises embedded in coal and electricity industry in the North East of Vietnam. Ministrial
Scientific Research, 2008. The approval minutes of Ministrial Research of Science and
Technology Council. Minister, Ministry of Industry and Trade, dated 09 January 2009.
5. MBA. Nguyen Thien Su (Team leader) et al.: Research and propose some solutions
to improve the management capacity for staffs in small and medium enterprises. Ministrial
Scientific Research, 2006. Code: 97-2006/R-D/. The approval minutes of Ministrial Research of
Science and Technology Council in 2006. Minister, Ministry of Industry and Trade, dated 22
January 2007.