FDI inflows

FOREIGN TRADE UNIVERSITY
FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS

---------------

GROUP ASSIGNMENT
(Statistics for Business and Economics)

VIETNAM’S FOREIGN DIRECT INVESTMENT INFLOWS

Members

Supervisor

: Nguyen Le Anh
0951050002
Le Cong Hoan
0951050071
Bui Quang Huy
0951050063
Nguyen Minh Quang 0951050138
Tran Vu Trung
0951050152
: Ms. Dao Minh Anh, MBA

Hanoi, 2011


Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

TABLE OF CONTENTS

ABSTRACT....................................................................................................................................
ACKNOWLEDGEMENTS............................................................................................................
LIST OF ABBREVIATIONS.........................................................................................................
1. INTRODUCTION......................................................................................................................
1.1. Reasons for choosing topic..................................................................................................
1.2. Objectives............................................................................................................................
1.3. Brief information about Foreign Direct Investment
(FDI)...........................................................................................................................................
1.3.1. Definition......................................................................................................................
1.3.2. Different types of FDI...................................................................................................
2. CONTENT..................................................................................................................................
2.1. Graphical analysis: Vietnam’s Foreign Direct
Investment inflows......................................................................................................................
2.1.1. The year 2005...............................................................................................................
2.1.2. The year 2006 ..............................................................................................................
2.1.3. The year 2007...............................................................................................................
2.1.4. The year 2008...............................................................................................................
2.1.5. The year 2009...............................................................................................................
2.1.6. The year 2010...............................................................................................................
2.2. Statistical analysis: The amount of Foreign Direct
Investment inflows over the last 10 years...................................................................................
2.2.1. Descriptive analysis......................................................................................................
2.2.1.1. The arithmetic mean..............................................................................................
2.2.1.2. The mean of a frequency distribution....................................................................
2.2.1.3. The Median............................................................................................................
2.2.1.4. Median for a frequency distribution:.....................................................................

2.2.1.5. The Mode and other measures of location.............................................................
2.2.1.6. Measure of dispersion and Skewness....................................................................
2.2.1.7. Skewness................................................................................................................
2.2.1.8. Standard deviation.................................................................................................
2.2.2. Inferential analysis........................................................................................................
2.2.2.1. Regression analysis................................................................................................
2.2.2.2. Time series analysis...............................................................................................
3. CONCLUSION...........................................................................................................................
3.1. Recommendations................................................................................................................
3.1.1. Improvement in law and administrative system...........................................................
3.1.2. Supports for potential industries...................................................................................
3.1.3. Enhancement of financial market.................................................................................
3.2. Summary..............................................................................................................................
4. REFERENCES...........................................................................................................................
4.1. Hyperlinks............................................................................................................................
4.2. Other sources.......................................................................................................................

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

ABSTRACT
Over the last 20 years of Doimoi (Innovation), Vietnam
has made a number of miracle socio-economic

achievements. The average annual economic growth rate
was 7.3 percent and gross domestic product (GDP) per
capita increased by 5.7 percent over the period 19902004. Concurrently, poverty rate reduced sharply from
80 percent in 1986 to approximately 29 percent in 2002.
For the last decade, Vietnam has always belonged to the
rapid growing economies group, having success in
hunger eradication and poverty reduction.
The promising achievements of the country resulted from
the policies the Vietnam has been undertaking in such a
fast changing global economy. Since the late 1980s, the
country

has

advocated

economic

integration,

promulgating the Law on Foreign Investment in 1987,
signing a number of bilateral and multilateral trade
agreements. Vietnam gradually became a member of
regional

and

international

economic

organization,

namely ASEAN, APEC and ASEM in 1995, 1998 and
2001, respectively. Another important trade agreement is
the Vietnam-US Bilateral Trade Agreement. The most
recent one is the accession to the World Trade
Organization (WTO)

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Additionally, to reach more open trade policy, Vietnam
has robustly improved the investment environment,
particularly the legal framework, to attract foreign direct
investment (FDI). The country has signed bilateral
agreements on investment promotion and protection with
45 countries and territories. The government’s efforts to
attract FDI inflows have hade regarding results. By
December 2004, Vietnam had attracted 6072 projects
with the total registered capital of nearly 49.2 billion US
dollars. The foreign invested sector has contributed
roughly 14 percent to the country’s GDP in 2004.

Besides, the sector has also offered a great number of
jobs, increased export turnover, shifted domestic
economic structure and raised the state budget.
FDI may affect variety aspects of the economy including
economy, culture and the society. Nevertheless, towards
developing countries, particularly poor countries, FDI
plays a key role in facilitating economic growth. The key
role of FDI would be evidenced by the following three
reasons. Firstly, FDI inflows increase capital surplus,
improving the balance of payment and macroeconomic
stability. Secondly, FDI support domestic investment in
order to reach target growth rate. Thirdly, FDI provides
poor

countries

with

chances

to

access

modern

technology, intellectual as well as management and labor
skills.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Developed countries have acknowledged the critical
function of Foreign Direct Investment in developing the
economy. Therefore, since the ancient time of FDI, such
countries have focused on attracting this lucrative capital
flows. However, when the market in developed countries
has been saturated, foreign investors are now seeking for
emerging economies, particularly the Asia. Vietnam, a
developing country, is regarded as a hope land for
foreign investors. The last decade witnessed a surge in
the FDI inflows in to Vietnam economy.
Correspondingly, we would like to write this paper to
analyze the statistics related to FDI inflows over the last
ten years. Moreover, the statistical methodologies used
may help you to have a general look on FDI allocation as
well as estimation in the year to come. We also include
some policy recommendations for attracting FDI in near
future. We hope that you could find needed information
connected to Foreign Direct Investment in our paper.

ACKNOWLEDGEMENTS

The

assignment

was

completed

by

invaluable

contribution of many people. Firstly, we would like to
express our many thanks to Ms. Dao Minh Anh, Master

Faculty of Economics and International Business

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

of Business Administration, for her precious instructions,
corrections, comments, criticism, suggestions and her
assistance during the development of this assignment
under her supervision. We want to demonstrate our
gratitude to Mr. Phan Minh Tan, member of Ministry of

Planning and Investment for his valuable help to access
the latest data sources. We want to show our appreciation
to our group members for their time and efforts in the
making of this paper. Finally, we also would like to
convey our thanks to all of our friends for their
constructive

discussions,

suggestions

and

timely

assistance.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

LIST OF ABBREVIATIONS

AFTA

APEC
ASEAN
ASEM
CIEM
EU
FDI
GDP
GSO
JETRO
MFN
MPI
R&D
SMEs
SOEs
TSLS
UNCTAD
UNDP
USD
WTO

Asean Free Trade Area
Asia Pacific Economic Cooperation forum
Association of South East Asian Nations
Asia Europe Meeting
Central Institute for Economic Management
European Union
Foreign Direct Investment
Gross Domestic Products
General Statistics Office
Japan External Trade Organization

Most Favored Nation
Ministry of Planning and Investment
Research and Development
Small and Medium Enterprises
State-Owned Enterprises
Two Stage Least Squares
United Nations Conference on Trade and Development
United Nations Development Program
US dollar
World Trade Organization

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

1. INTRODUCTION
1.1. Reasons for choosing topic
Our world is standing at the threshold on globalization,
which promises a lot of changes both widely and deeply
in many aspects. The effects of globalization process
with the appearance of many multi nation companies all
over the world. Moreover, technology innovation also
becomes a motivation which encourages all society “run”
faster.

Specialization as well as corporation nowadays become
more and more popular and help increase the Gross
Domestic Product (GDP). So that, it is reasonable to say
that we are living in the era of quick changes in
economy, technology and politics.
Therefore, to integrate sharply into the world economy,
almost all countries which includes Vietnam have to
realize these changes and find suitable solutions to adopt;
so that; not “out of the race”. Vietnam has no choice but
open the economy, corporate with many countries in the
world. As consequences, Vietnam recently did join in the
World Trade Organization as well as many other trade
area like ASEAN Free Trade Area (AFTA), Asian-Pacific
Economy Corporation (APEC);... On December 19th
1987, our National Assembly did pass the law that allows
organizations and individuals from foreign countries
invest into Vietnam. Since then, a huge amount of
Foreign Direct Investment (FDI) inflows have run into
Vietnam territory. It creates a lot of jobs for Vietnamese
employees, encourages technical changes and becomes
an important contributor to the recent high economy
growth rates of Vietnam.
Aware of the importance of the FDI to the Vietnam
Economy, we decide to choose this topic.

1.2. Objectives
Investment is the sacrifice of current resources for the
future development to execute certain economic

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

activities. Investment aims at gaining bigger future
benefits.
Therefore, investment is the motivation for future
development and the higher development rate means the
higher level of investment. So, it is natural that
government and national residents are very concerned
about how huge the investment level is.
Recently, Vietnam, together with China and some other
Asian countries, is considered to be one of the top
developing countries in the world with the growth rate is
always about 6-7% per year and these results are very
thanks to the high level of investment. Government did
try to use of all national resources and take advantage of
international resources. Especially, after being a member
of WTO, the role of international resources which
includes FDI (Foreign Direct Investment) seems to be
more important because FDI encourages other forms of
international resource inflows into Vietnam. When
international organizations invest into Vietnam, they
bring foreign currencies, they bring new technologies
and administration strategies as well as they create jobs

for millions of employees.
Besides that, high FDI inflows also ensure for national
security as it increases national reservations. During this
time, many have been discussed on the newspapers and
on many other media about low foreign currency
reservation of Vietnam. Many say Vietnam reservation is
just enough for 03 weeks and this causes a fact that
Vietnam may have to devaluate national currency many
times to compensate for the loss on international trade
and to buy necessary goods like petrol or electricity. This
not only makes Vietnam’s economy become very
dependable on other countries but also threats national
residents’ living standards. It is hard to find suitable
solutions in term of macro administration for current
situation because Vietnam still has to import a lot of
inputs for production. However, compensation can be
made if Vietnam government can attract the FDI into
Vietnam.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Therefore, FDI is very important to Vietnam’s economy

and how to attract FDI inflows as well as improve the
quality of FDI inflows are the two hot topics. In this
assignment, we are trying to take data from National
Bureau of Statistics and using statistical techniques like
arithmetic mean, the median, mode and other measures
for location, standard deviation,… to categorize, analyze
on these data and we hope that it will provide a brief
view on the current FDI of Vietnam.
Our further expectation is to use these data for prediction
the FDI of Vietnam in the following years. Regression
Equation and Time series analysis will be useful for this
aim. Some recommendations related to the ways to
attract more FDI inflow and improve the quality of FDI
can also be originated from this assignment.

1.3. Brief information about Foreign Direct
Investment (FDI)
1.3.1. Definition
Foreign direct investment (FDI) plays an extraordinary
and growing role in global business. It can provide a firm
with new markets and marketing channels, cheaper
production facilities, access to new technology, products,
skills and financing. For a host country or the foreign
firm which receives the investment, it can provide a
source of new technologies, capital, processes, products,
organizational technologies and management skills, and
as such can provide a strong impetus to economic
development. Foreign direct investment, in its classic
definition, is defined as a company from one country
making a physical investment into building a factory in

another country. The direct investment in buildings,
machinery and equipment is in contrast with making a
portfolio investment, which is considered an indirect
investment. In recent years, given rapid growth and
change in global investment patterns, the definition has
been broadened to include the acquisition of a lasting
management interest in a company or enterprise outside

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

the investing firm’s home country. As such, it may take
many forms, such as a direct acquisition of a foreign
firm, construction of a facility, or investment in a joint
venture or strategic alliance with a local firm with
attendant input of technology, licensing of intellectual
property. In the past decade, FDI has come to play a
major role in the internationalization of business.
Reacting to changes in technology, growing
liberalization of the national regulatory framework
governing investment in enterprises, and changes in
capital markets profound changes have occurred in the
size, scope and methods of FDI. New information

technology systems, decline in global communication
costs have made management of foreign investments far
easier than in the past. The sea change in trade and
investment policies and the regulatory environment
globally in the past decade, including trade policy and
tariff liberalization, easing of restrictions on foreign
investment and acquisition in many nations, and the
deregulation and privatization of many industries, has
probably been the most significant catalyst for FDI’s
expanded role.
The most profound effect has been seen in developing
countries, where yearly foreign direct investment flows
have increased from an average of less than $10 billion
in the 1970’s to a yearly average of less than $20 billion
in the 1980’s, to explode in the 1990s from $26.7 billion
in 1990 to $179 billion in 1998 and $208 billion in 1999
and now comprise a large portion of global FDI..
Driven
by
mergers
and
acquisitions
and
internationalization of production in a range of
industries, FDI into developed countries last year rose to
$636 billion, from $481 billion in 19981
Proponents of foreign investment point out that the
exchange of investment flows benefits both the home
country (the country from which the investment
originates) and the host country (the destination of the

investment). Opponents of FDI note that multinational
conglomerates are able to wield great power over smaller
1

(Source: UNCTAD)

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

and weaker economies and can drive out much local
competition. The truth lies somewhere in the middle.
For small and medium sized companies, FDI represents
an opportunity to become more actively involved in
international business activities. In the past 15 years, the
classic definition of FDI as noted above has changed
considerably. This notion of a change in the classic
definition, however, must be kept in the proper context.
Very clearly, over 2/3 of direct foreign investment is still
made in the form of fixtures, machinery, equipment and
buildings. Moreover, larger multinational corporations
and conglomerates still make the overwhelming
percentage of FDI. But, with the advent of the Internet,
the increasing role of technology, loosening of direct

investment restrictions in many markets and decreasing
communication costs means that newer, non-traditional
forms of investment will play an important role in the
future. Many governments, especially in industrialized
and developed nations, pay very close attention to
foreign direct investment because the investment flows
into and out of their economies can and does have a
significant impact. In the United States, the Bureau of
Economic Analysis, a section of the U.S. Department of
Commerce, is responsible for collecting economic data
about the economy including information about foreign
direct investment flows. Monitoring this data is very
helpful in trying to determine the impact of such
investments on the overall economy, but is especially
helpful in evaluating industry segments. State and local
governments watch closely because they want to track
their foreign investment attraction programs for succeed.
As mentioned above, the overwhelming majority of
foreign direct investment is made in the form of fixtures,
machinery, equipment and buildings. This investment is
achieved or accomplished mostly via mergers &
acquisitions. In the case of traditional manufacturing, this
has been the primary mechanism for investment and it
has been heretofore very efficient. Within the past
decade, however, there has been a dramatic increase in
the number of technology startups and this, together with
the rise in prominence of Internet usage, has fostered
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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

increasing changes in foreign investment patterns. Many
of these high tech startups are very small companies that
have grown out of research & development projects
often affiliated with major universities and with some
government
sponsorship.
Unlike
traditional
manufacturers, many of these companies do not require
huge manufacturing plants and immense warehouses to
store inventory. Another factor to consider is the number
of companies whose primary product is an intellectual
property right such as a software program or a softwarebased technology or process. Companies such as these
can be housed almost anywhere and therefore making a
capital investment in them does not require huge outlays
for fixtures, machinery and plants.
In many cases, large companies still play a dominant role
in investment activities in small, high tech oriented
companies. However, unlike in the past, these larger
companies are not necessarily acquiring smaller
companies outright. There are several reasons for this,
but the most important one is most likely the risk
associated with such high tech ventures. In the case of

mature industries, the products are well defined. The
manufacturer usually wants to get closer to its foreign
market or wants to circumvent some trade barrier by
making a direct foreign investment. The major risk here
is that you do not sell enough of the product that you
manufactured. However, you have added additional
capacity and in the case of multinational corporations
this capacity can be used in a variety of ways.
High tech ventures tend to have longer incubation
periods. That is, the product tends to require significant
development time. In the case of software and other
intellectual property type products, the product is
constantly changing even before it hits the marketplace.
This makes the investment decision more complicated.
When you invest in fixtures and machinery, you know
what the real and book value of your investment will be.
When you invest in a high tech venture, there is always
an element of uncertainty. Unfortunately, the recent
spate of dotcom failures is quite illustrative of this point.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Therefore, the expanded role of technology and
intellectual property has changed the foreign direct
investment playing field. Companies are still motivated
to make foreign investments, but because of the vagaries
of technology investments, they are now finding new
vehicles to accomplish their goals.
1.3.2. Different types of FDI
The first type of FDI is taken to gain access to specific
factors of production, e.g. resources, technical
knowledge, material know-how, patent or brand names,
owned by a company in the host country. If such factors
of production are not available in the home economy of
the foreign company, and are not easy to transfer, then
the foreign firm must invest locally in order to secure
access.
The second type of FDI is developed by Raymond
Vernon in his product cycle hypothesis. According to this
model the company shall invest in order to gain access to
cheaper factors of production, e.g. low-cost labour. The
government of the host country may encourage this type
of FDI if it is pursuing an export-oriented development
strategy. Since it may provide some form of investment
incentive to the foreign company, in form of subsidies,
grants and tax concessions. If the government is using an
import-substitution policy instead, foreign companies
may only be allowed to participate in the host economy
if they possess technical or managerial know-how that is
not available to domestic industry. Such know-how may
be transferred through licensing. It can also result in a
joint venture with a local partner.

The third type of FDI involves international competitors
undertaking mutual investment in one another, e.g.
through cross-shareholdings or through establishment of
joint venture, in order to gain access to each other's
product ranges. As a result of increased competition
among similar products and R&D-induced specialization
this type of FDI emerged. Both companies often find it
difficult to compete in each other's home market or in
third-country markets for each other's products. If none

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

of the products gain the dominant advantage, the two
companies can invest in each other's area of knowledge
and promote sub-product specialization in production.
The fourth type of FDI concerns the access to customers
in the host country market. In this type of FDI there are
not observed any underlying shift in comparative
advantage either to or from the host country. Export from
the companies' home base may be impossible, e.g.
certain services, or the capability to request immediate
design modifications. The limited tradability of many

services has been an important factor explaining the
growth of FDI in these sectors.
The fifth type of FDI relates to the trade diversionary
aspect of regional integration. This type occurs when
there are location advantages for foreign companies in
their home country but the existence of tariffs or other
barriers of trade prevent the companies from exporting to
the host country. The foreign companies therefore jump
the barriers by establishing a local presence within the
host economy in order to gain access to the local market.
The local manufacturing presence need only be sufficient
to circumvent the trade barriers, since the foreign
company wants to maintain as much of the value-added
in its home economy.

2. CONTENT
2.1. Graphical analysis: Vietnam’s Foreign Direct
Investment inflows
2.1.1. The year 2005
In the year 2005, Viet Nam attracted foreign direct
investment (FDI) of 5.8 billion USD, a high record for
the past eight years. Of the total figure, almost four
billion USD comes from 771 newly licensed FDI
projects and the rest from additional investment injected
into existing projects.
The Government has relentlessly perfected its legal
system, created more incentive policies for foreign

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

investors and tried to fulfill its commitments to the
international community. These progressive steps have
consolidated the confidence of foreign investors in
pouring their money into the country. Besides, Viet
Nam's efforts to maintain its socio-political stability and
step up and professionalize investment promotion
activities also play a crucial role in increasing the FDI
flow.
It is also recommended that the Government speed up
improvement of its legal mechanism, prepare instructive
documents for the implementation of the Investment Law
and the Enterprise Law, intensify the decentralization
process and investment management work, create
incentive policies for the development of supporting
industries and facilitate the Viet Nam-Japan Joint
Initiative Program and the Viet Nam-Singapore
Economic Linkage Project, he said, adding that these are
crucial steps to raise Viet Nam's competitiveness in
attracting FDI.2

VIETNAM FDI MECHANISM (1998 - NOVEMBER 2005)3

As we can see from the above pie chart, the FDI
mechanism in Vietnam from 1998 to 2005 has apparently
separated. The industry sector accounted for the largest
proportion of the total quantity of projects as well as the
2
3

Brief from Vietnam News Agency, Vneconomy News
Source: MOT, MPI, VNA

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

total implemented capital. The reason for this
phenomenon is quite clear that the country was in the
making of industrialization and modernization target.
The service sector accounted for the second biggest
proportion of the total project number and capital. The
statistics demonstrate the robust development of service
sector in the country. Even though Vietnam was an
agricultural country, the number of FDI projects related
to agriculture and the amount of capital poured in the
sector just took a small part of the total. Apparently, the

government focused on developing the industry and
service sector rather than agriculture industries.
2.1.2. The year 2006
The following chart shows the FDI allocation by industry
in 2006. It is easily noticed that industry and service still
played the most important role in the economy. Industry
sector took the largest proportion, namely 59% including
light industry and heavy industry, 30 percent and 29
percent respectively. The service sector decreased in
comparison to 2006 but still accounted a large amount,
18%. The rest belonged to other small industries and
sectors. Generally, the country was determined pursuing
the 5-years objective that created favorable condition for
service and industry.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

The graph above describes the fluctuation in the amount
of FDI register capital in the period 1998-2006. It is
clearly seen that the capital reached the peaks in 1996
and 2006. A surge in FDI capital resulted from the
government’s policies this time that followed the market

economy and attracted foreign direct investment.
2.1.3. The year 2007

The FDI capital allocation in 2007 recorded some slight
changes. The New Apartments and Building group
accounted 26% of the total that marked the glory time of

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

developing
infrastructure
in
Vietnam.
Many
constructions funded by FDI were erected in this time,
graphing a new face of Vietnam, especially Hanoi.
Another change is the decrease by 14% of the industry
sector. The capital source was moved to other beneficial
categories like hotels and tourism or transportation and
telecommunication.

2.1.4. The year 2008

Classified by Industry

The allocation of FDI in 2008 is quite the same as it in
2007. The largest amount poured in to heavy industry
and apartment projects.

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Top 20 FDI countries to Vietnam

Countries in the Asia region invested the most in
Vietnam. Malaysia ranked the first position with
approximately 15000 million US dollars, followed by
Taiwan 8500 and Japan 7500. The statistics shows that
Vietnam only gained attention from regional countries,
raising challenges that how to attract other developed
countries in the world.
2.1.5. The year 2009
Total new registered capital of FDI projects is about
21.48 billion USD, in which 16.34 billion USD is newly
licensed project (76% contribution, 839 projects). Top 3
provinces attracts FDI in Vietnam is Baria-Vung Tau

(6.73 billion $US, in which 2.857 billion $US of 12 new
licensed projects), Quang Nam (4.174, 4.150, 1), Binh
Duong (2.502, 2.152, 95). Hochiminh City and Hanoi are
ranked number #7 and #8 accordingly. However, the
number of license granted by those major economic hubs
of Vietnam is almost 537 licenses (64% of total new
licenses granted in Vietnam)

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Vietnam Ministry of Industry and Trade has expected the
industrial output contribution growth of FDI segment
remaining at high over 15% year on year

.

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Statistics for business and economics:

Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

Vietnam Ministry of Planning & Investment (MPI) has
official set the FDI target of year 2009. The country
targeted to attract 30 billion US dollars in year 2009
(almost a half of the actual number in year 2008). There
are some reasons explained from authorities: First; the
world financial crisis, Second; other regional countries
has raised up their competitiveness indexes, which could
attract more FDI inflows, Third; other reasons from
country’s competitiveness like infrastructure conditions,
administration process, etc. Vietnam's GDP growth rate
in year 2009 is planned at 6.5%

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

2.1.6. The year 2010
Vietnam’s investment planners are forecasting a massive
surge in the foreign direct investment capital on the back
of the country’s recent diplomatic successes. According

to a survey conducted by the Asian Business Council,
Vietnam ranked third for investment attraction among
Asian nations in the 2007-2009 periods, after China and
India.
South East Asian countries saw a significant rebound in
foreign direct investment (FDI) inflows in 2010 and we
expect a robust recovery to continue into 2011. In line
with our view that Indonesia and Vietnam's economic
growth would outperform the region in 2011 due to
favorable demographics and robust domestic demand, we
see the two countries as the top favorites for foreign
investors. On the other hand, continued risk aversion is
likely to put a damper on FDI inflows into Cambodia,
Myanmar and Laos.4
The post-crisis recovery in FDI inflows into South East
Asian economies is expected to continue as
macroeconomic conditions remain on a relatively more
stable footing than its western counterparts going into
2011. From a regional perspective focusing on countries
within the Association of Southeast Asian Nations
(ASEAN), we favor Indonesia and Vietnam as top
favorites in terms of attracting FDI in the coming years.
Global FDI flows witnessed a 47.1% decline from 2.10
trillion US dollars in 2007 to 1.1 trillion US dollars in
2009 as Transnational Corporations (TNC) delayed
investment plans during the course of the global financial
crisis. The rush to strengthen balance sheets at the onset
of the crisis coupled with the scarcity of credit, led to
delays in investment projects and a slowdown in mergers
and acquisitions. We believe these factors were the key

reasons behind a global decline in FDI flows. We are
beginning to see an encouraging rebound in FDI inflows
4

BMI View on FDI Attractiveness of Vietnam in year 2011

Faculty of Economics and International Business

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Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

into ASEAN in 2010, suggesting that investor sentiment
in the region is improving. As investor sentiment
continues to improve in line with better-than-expected
economic growth across ASEAN countries, we expect a
robust recovery in FDI in 2011 and 2012.
Judging from FDI inflows into ASEAN countries since
the beginning of the year, we expect inflows into
Vietnam, Indonesia and Singapore in 2010 to surpass
levels back in 2008 by a considerable margin. Indeed,
latest official estimates by government agencies suggest
FDI inflows for Indonesia, Vietnam and Singapore could
increase by 174%, 140% and 120%, respectively.
Although we expect growth rates for FDI inflows in 2011
to come in at a more moderate pace, the inflow of FDI in

these economies will nonetheless remain robust.
According to a report published by the United Nations
Conference on Trade and Development (UNCTAD),
TNCs see Vietnam and Indonesia as favored destinations
for FDI in the South East Asia region in 2011 and 2012.
This is in line with our view that Indonesia and Vietnam
will outperform the region in terms of economic growth.
Singapore remains an attractive option for foreign
investors due mainly to its advantage in infrastructure,
technology and geographical location in the region.
However, we note that the country remains heavily
exposed to external demand from the US and EU. Given
that economic conditions in the US and EU remain
uncertain, we believe TNCs will favor countries with
superior demographics and strong domestic demand over
export-orientated economies in the region.
The remaining ASEAN countries are also expected to see
an up-tick in FDI inflows in 2010, albeit at a slower
pace. In the case of Thailand, although economic data in
recent months suggests that domestic demand and
exports remain robust, we are maintaining a cautious
stance on the country's outlook for business investments
due to political risks. Thailand is expected hold general
elections in early 2011 and we expect businesses to delay

Faculty of Economics and International Business

24

Statistics for business and economics:
Vietnam’s Foreign Direct Investment Inflows

Supervisor: Ms. Dao Minh Anh, MBA

investment plans until there are more evidence that
another round of political unrest can be avoided.
Following a severe 81% decline in FDI inflows into
Malaysia from 7.3 billion US dollars in 2008 to 1.4
billion US dollars in 2009, the country is expected to see
a 357% increase to 6.4 billion US dollars in 2010.
Despite the rebound, Malaysia's FDI inflows remain
below the 7.3 billion level last seen in 2008. From our
perspective, such extreme volatility in FDI inflows
highlights the vulnerability of the Malaysian economy
towards risk aversion among foreign investors during
periods of uncertainty. However, we acknowledge that
Malaysia's recently announced 10-year Economic
Transformation Program (ETP) could help boost the
country's attractiveness to foreign investors in the
coming years.
We expect Cambodia, Myanmar and Laos - classified as
Least Developed Countries (LDC) by the United Nations
- to under-perform the region in terms of attracting FDI
inflows in 2011. We believe risk aversion among TNCs
could remain in 2011 and this could put a damper on FDI
inflows into LDCs, which have traditionally been heavily
dependent on official development assistance and FDI.
We expect TNCs to adopt a conservative approach and
wait for further evidence of a robust economic recovery

in LDCs before shifting funds into these economies. As
such, we see a gradual but slow recovery for FDI inflows
into Cambodia, Myanmar and Laos in 2011 and 2012.5

5

LDCs To Under-perform In A Challenging Economic Environment In 2011

Faculty of Economics and International Business

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