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MINISTRY OF EDUCATION AND TRAINING

MINISTRY OF PLANNING AND INVESTMENT

VIETNAM INSTITUTE FOR DEVELOPMENT STRATEGIES

LAM THUY DUONG

ECONOMIC EFFICIENCY OF FOREIGN DIRECT
INVESTMENT IN VINH PHUC PROVINCE

Major : Development Economics
Code : 9 31 01 05

EXECUTIVE SUMMARY OF PHD DISSERTATION THESIS

HANOI - 2019


THE DISSERTATION IS COMPLETED AT VIETNAM INSTITUTE
FOR DEVELOPMENT STRATEGIES

Academic Instructors:
1. Assoc. Prof. PhD. BUI TAT THANG
2. Ph.D. PHAN THI THUY TRAM

Reviewer 1:

Prof. PhD NGUYEN DINH HUONG

Reviewer 2:

Assoc. Prof. PhD. TANG VAN KHIEN

Reviewer 3:

Prof. PhD NGUYEN THANH DO

The dissertation will be defended at University level Council of Dissertation
Assessment at Vietnam Institute for Development Strategies
Time: ............, date ............. month .............., year 2019

The dissertation could be found at:
- Vietnamese National Library
- Library of Vietnam Institute for Development Strategies


1
INTRODUCTION
1. The reason for choosing the topic
Vinh Phuc province is one of the localities attracting foreign direct
investment (FDI) into the country. Thanks to attracting a lot of FDI capital,
the economy of the province has increased significantly, the industry of the
province has changed towards the progress of export value and budget
revenue has increased relatively quickly, many jobs have been created ...
but when assessing the role and economic efficiency of FDI in the province,
it is still limited, both current and future have the pressure to improve
economic efficiency of FDI. So far, how to attract more FDI and how to
make the FDI sector more effective for Vinh Phuc is an unknown issue. At
the same time, in the whole country as well as at the local level, there is no
research on the economic efficiency of FDI in a systematic and

comprehensive way; especially, there is no research project of a doctoral
thesis. Facing such situation, the PhD student dicided to chose the issue of
"Economic efficiency of foreign direct investment in Vinh Phuc
province" as a PhD thesis in development economics.
2. Objectives and research tasks of the topic
2.1. Research objectives: Clarifying the main theoretical issues about
economic efficiency of FDI in the province to apply to the study of FDI in
Vietnam's localities. Proposing solutions to improve the economic
efficiency of FDI in Vinh Phuc province by 2025 with scientific bases;
thereby providing more scientific basis for local authorities in planning the
policy of attracting FDI, renewing the management of FDI enterprises and
improving the economic efficiency of FDI in the coming years.
2.2. Research tasks: To achieve the goal, the thesis will successfully
implement the main tasks: (1). Develop a theoretical basis for economic
efficiency of FDI in the province to create a theoretical basis to study the
thesis (in particular, to clarify the economic effect of FDI, the factors
affecting economic efficiency of FDI and assessment of economic
efficiency of FDI. From this requirement will have to conduct an overview
of the published research results at home and abroad. (2). Determining
clearly the achievements, limitations, weaknesses and causes of the
economic efficiency of FDI in Vinh Phuc province is still low in the period


2
of 2006-2017. (3). Proposing solutions to improve economic efficiency of
FDI in Vinh Phuc province until 2025.
3. Subjects and scope of research
a. Research object: The research object of the thesis is FDI and
economic efficiency of FDI in Vinh Phuc province (placed in relation to
state management on FDI and with the local economic development. ).

During the research process, the thesis has observed the FDI investment of
the whole country as well as some other provinces when necessary and
possible.
b. Research scope:
- In terms of science: Researching both theory and practice, both
current and future economic efficiency of FDI (placed in relation to
economic development efficiency and development investment efficiency),
the factors affecting the economic efficiency of FDI, economic efficiency
indicators of FDI; status, future economic efficiency of FDI and solutions to
improve economic efficiency of FDI to 2025 in Vinh Phuc province. The
thesis only focuses on studying the economic efficiency, social efficiency
and environmental effectiveness of the thesis mentioned only in the
theoretical part for systematic. The spillover of FDI enterprises is also an
important issue when assessing the contribution of FDI enterprises to the
provincial economy but due to the lack of data, the dissertation addresses
this issue with the possible efforts. The loss caused by FDI to the provincial
economy (through transfer pricing, to overcome environmental pollution ...)
is also a necessary issue when researching the contribution of FDI to Vinh
Phuc's economy but not There are data, so the thesis only mentions to help
look at the problem in a comprehensive way, but cannot analyze it deeply.
- In terms of time: Current status of research from 2006 to 2017 and
future research to 2025.
- In terms of space: Vinh Phuc Province and when conditions permit,
it will analyze and compare with other relevant localities.
4. Research framework
Implementing the principle of approaching the system and from the
viewpoint of adherence to the logic of thesis, the thesis developed the
general research theoretical framework as shown in Figure 1 and
approached the system throughout the research process.

3
Objectives of the study

Review

Research tasks:
1. How is the economic efficiency of a province's FDI
understood? How do factors affect the economic efficiency of
FDI? and What are the indicators of economic efficiency of
FDI?
2. What is the status of economic efficiency of FDI and
economic efficiency prospects of FDI in Vinh Phuc? What is
the cause of the unsatisfactory economic efficiency of FDI in
Vinh Phuc?
3. How to improve the economic efficiency of FDI in Vinh
Phuc province? Which solution is the most important
solution?

Conclude
&
recomment

Figure 1: Research framework
Source: Author
5. Major contributions of the thesis
- In terms of theory and scholarship: The thesis proposes a new
concept of economic efficiency of FDI (not only economic efficiency of
FDI enterprises but also FDI enterprises' contribution to the economy.
economy of the province); points out factors affecting the economic

efficiency of FDI (in which state management and technology used by FDI
enterprises are more important); specify the evaluation content and
determine the criteria for evaluating the economic efficiency of FDI.
- In terms of practicality: Detecting limitations (economic efficiency
of FDI is low, slow and unstable). Pointing out the main reasons (state
management still has many shortcomings, FDI enterprises are small and
many FDI enterprises use low technology ...). Providing a scientific basis
for planning FDI attraction policies, renewing FDI management and giving
solutions to improve the economic efficiency of FDI in Vinh Phuc province
in the process of economic development. of this locality until 2025. At the
same time, propose the work of local authorities to improve the economic
efficiency of FDI in Vinh Phuc province in the coming time.
6. Approaches and research methods
The approach of the thesis is approaching the system, going from
theoretical research to analyzing the economic efficiency of FDI; go from


4
cause to effect; then proceed to propose solutions to improve the economic
efficiency of FDI in Vinh Phuc province by 2025.
To complete the thesis, the author uses common methods such as:
System analysis method; Methods of statistical analysis; Forecast method;
Method of using experts; Analysis method according to SWOT model;
Methods of policy analysis; Comparative method; Minimum squares method.
In the process of researching the thesis, the author also uses a number of other
methods, such as separation, interpretation and inductive; At the same time,
use a combination of methods to limit the defects of each method as well as
to ensure the reliability needed for research results as set out.
7. Structure of the thesis
In addition to the introduction, conclusion and list of published

scientific works; The content of the thesis is divided into 4 chapters. Detail:


5
CHAPTER 1: LITERATURE REVIEW OF SCIENTIFIC
RESEARCH RELATED TO ECONOMIC EFFICIENCY OF
FOREIGN DIRECT INVESTMENT
Following closely the study of theory and practical experience for the
dissertation, the author conducted an overview of 98 documents (including
10 foreign documents and 19 doctoral dissertations) and selected two large
group of issues, mainly aimed at useful service for the study of the thesis.
Detail:
1.1. Overview of development investment and foreign direct investment
Perceptions and conceptions of domestic and foreign scholars on
development investment and FDI are the right ideas and views that the
author can inherit for his research.
In general, scholars emphasize the role of development investment
(including FDI). The consequence of development investment is the
economic structure that economic structure plays a decisive role in socioeconomic development. Development investment is the act of taking a sum
of money to perform one or several actions for development.
FDI capital is part of social development. This investment is carried
out by foreign investors with the desire to gain profits and contribute to the
national (or local) socio-economic development to attract FDI.
1.2. Overview of economic efficiency of development investment and
economic efficiency of FDI
In this section, the author reviews the perceptions and perceptions of
economic efficiency of FDI; Factors affecting and system of economic
efficiency indicators of FDI.
The review pointed out that, in general, scholars mentioned much
about the effectiveness of development investment, not to mention the

economic efficiency of FDI, especially the economic efficiency of FDI of a
locality. There has been almost no research on the economic efficiency of
FDI in a systematic and complete way. Some scholars refer to the
implications of the economic efficiency of FDI, but they identify the
economic efficiency of FDI with the contribution of FDI to the development
of the economy. At the same time, they only mentioned the economic
efficiency of FDI at the general level as well as not placing the economic
efficiency of FDI in the organic relationship with the effectiveness of


6
development investment as well as the efficiency of economic development.
They have not linked the economic efficiency of the FDI sector with the
efficiency of the FDI sector to the national economy. In general, scholars
mentioned factors affecting the economic efficiency of FDI from a traditional
perspective and said that these are natural, economic, social, investment and
market weaknesses. They have not considered under the perspective of actors
and impact forces to attract FDI and economic efficiency of FDI. They
analyze the effectiveness of development investment as well as the economic
efficiency of FDI through a series of indicators, in which they mention: (1)
Efficiency of investment and economic efficiency of FDI; (2) The
contribution of development investment as well as FDI to the economy
(contributing to economic growth; increasing labor productivity; improving
the structure of the industry; improving technology; increasing the openness
of the economy. create new jobs and reduce unemployment, reduce poverty,
reduce social evils, traffic accidents and occupational accidents. The author
finds that such indicators are too many; in those indicators, there are many
difficult indicators because of the lack of data and some unquantifiable
indicators. Those are the points that can be inherited for the thesis. Besides,
the author also identified issues that scholars have not adequately studied as

well as identified issues that the dissertation must study in depth.


7
CHAPTER 2: THEORETICAL FOR ECONOMIC EFFICIENCY OF
FOREIGN DIRECT INVESTMENT ON PROVINCIAL LOCATION
2.1. Economic efficiency of foreign direct investment in the province
Efficiency is a key issue of economic development as well as of
development investment. From a theoretical perspective, economic efficiency
of FDI is a measure to assess FDI attraction, activities of FDI enterprises and
evaluation of the State's FDI policies. The higher the efficiency, the better the
performance of FDI enterprises and the State's FDI policy is correct and vice
versa. Economic efficiency of FDI is part of development investment
effectiveness; but the efficiency of development investment is an integral part
of the economic development efficiency. Therefore, it can be said that the
economic efficiency of FDI is part of the efficiency of economic development
of the country or of each locality. Economic efficiency of FDI is a part of
aggregate efficiency, including economic efficiency, social efficiency and
environmental efficiency. These parts closely relate to each other, reflecting
separate but overlapping aspects. In particular, when it comes to economic
efficiency, it means the social and environmental efficiency; or when it comes
to social efficiency and environmental performance, it refers to its roots as
economic efficiency.
Economic efficiency of FDI contributes to the overall efficiency of
development investment and economic development. Economic efficiency of
FDI is closely related to local economic growth. Localities in our country
always want to attract FDI so that it is highly effective. The process of FDI
attraction has taken place since 1988. In fact, it has been pointed out that, for
nearly 30 years (1988-2017), FDI has a great impact on the economic
development of our country and many provinces (in which Vinh Phuc): making

advanced technology, many industries and services appear and new products
appear, expanding export markets and forming highly skilled labor force ...
Economic efficiency FDI is understood as a combination of direct
economic benefits brought to businesses and economic benefits of FDI
contribution to both the national or local economy due to investment and
production activities. Its business brings. In other words, the economic
efficiency of FDI consists of two basic parts: the economic efficiency of FDI
enterprises themselves and the contribution of FDI enterprises for economic
growth (including development and attraction). domestic enterprises) of the


8
whole country or of the whole province. Accordingly, it shows that economic
efficiency of FDI is closely related to economic growth. That is a proportional
relationship. The higher economic efficiency of FDI contributes to high
economic growth and vice versa, if the economic efficiency of FDI is low, it
will also make economic growth low.
Government
policy and
profitability

Domestic
investment

Income

Job

Purchasing
power

Scale
and
speed

Foreign Direct
Investment

FDI
investment
structure

Financial interest
and potential of
foreign investors
ngoài

Manufacturing
(and technology)

Economic growth

International
market
expansion
Accumulation

Stable macro and improve national
economic autonomy

Invest

Increase the scale of
GDP and GDP/person

Figure 2.2: Relationship between FDI and economic growth and effects
interactions
Note: ---- The road is interactive and only the opposite direction;
Road only influences
Source: Author
2.2. Factors affecting economic efficiency of foreign direct investment
in the province
Unlike the works that have been reviewed, the author does not approach
the problem in the traditional way but according to the new way and vision.
The author argues that there are several basic elements that affect the economic
efficiency of FDI. They are: State, Enterprise, market and globalization along


9
with the new generation FDI trend, geographic location and technical
infrastructure. Among these factors, the State factor (including central
government and local government) has the decisive significance to the
economic efficiency of FDI. Law on FDI, particularly FDI policy (there are 2
groups: a). Policies for FDI attraction, FDI investors (mainly attractive
commitments) and b). Policies for active FDI enterprises (mainly incentives
and restrictions) have a great influence on the economic efficiency of FDI. In
each development period, each factor has an effect on the economic efficiency
of FDI at different levels.
Investment guidelines

1. State
Economic policy and
investment

4.
geographic
location

Developing infrastructure
and human resources

Economic
efficiency
of FDI

3.
Market
2. Enterprise
(FDI
enterprise and
domestic
enterprise)

Investment decision

Make investment

Figure 2.3: Diagram of factors affecting the economic efficiency of FDI
Source: Author
FDI enterprises themselves play a big role in the decision of

economic efficiency of FDI in the province. When large-scale FDI
enterprises, using high technology, using less land, less electricity and
attracting many domestic enterprises, doing genuine business will certainly
have economic efficiency and vice versa.
2.3. Indicators for evaluating economic efficiency of foreign direct
investment in the province
On the basis of clarifying the theoretical and practical considerations,
the author identifies two groups of quantitative indicators mainly used to
assess the economic efficiency of FDI for localities in the context of Vietnam.


10
a) First group: Indicators of Economic efficiency for the FDI
sector itself.
This can be seen as a set of indicators reflecting the development
efficiency of the FDI sector. They represent quantitatively the economic
efficiency of FDI. Specifically include 03 indicators:
(1). Effective of using a labor force in the FDI sector (labor
productivity in the FDI sector);
(2). Effective use of an FDI investment capital. There are two
indicators reflecting this problem: The average value-added index per
invested capital of the FDI sector and the ICOR index of the FDI sector.
(3). Rate of return on business capital and rate of return on revenue
In addition, if conditions permit, it is possible to further analyze the
average value added per Kwh of electricity and the efficiency of using one
hectare of occupied land or the value-added index made on one hectare of
land. FDI sector occupied.
b) The second group: Contribution of the FDI sector to the
provincial economy.
They are measured by the contribution rate of the FDI sector to the

national economy. This group of indicators includes 6 indicators:
(1) FDI sector's contribution to the province's economic growth;
(2) FDI sector’s contribution to social labor productivity of the
province;
(3) FDI sector's contribution to the openness of the economy;
(4) FDI sector's contribution to the provincial budget revenue;
(5) FDI sector's contribution to job creation of the whole economy;
(6) Spreading level of FDI enterprises to the provincial economy (the
extent of FDI infusion to the provincial economy through the number of
domestic enterprises linking production and business with FDI enterprises
and the level of contribution improve the technological level of the
provincial economy, the elasticity ratio between the profit rate and the
budget of FDI enterprises and the elasticity ratio between the profit rate and
the employee's income makes sense important when analyzing the
contribution of FDI to the provincial economy; In addition, it is possible to
further analyze the contribution of the FDI sector to the total social
investment capital of the province.


11
For FDI attraction, the above 6 indicators are of great significance
and extremely important. If these indicators have a higher value, the better
and vice versa.

CHAPTER 3: SITUATION OF ECONOMIC EFFICIENCY OF
FOREIGN DIRECT INVESTMENT IN VINH PHUC PROVINCE
PERIOD 2006-2017
3.1. Factors affecting economic efficiency of foreign direct investment
in Vinh Phuc province
3.1.1. Elements of Vinh Phuc province itself

According to the content presented in chapter 2 and from the
perspective of considering the level of factors to the economic efficiency of
FDI in Vinh Phuc province, the author clarifies the elements of the province
itself and the influence of they affect the economic efficiency of FDI in the
province. On the basis of using the SWOT model, the author examines the
significance of the geo-economic position, the formation of a new urban
area, and the unique tourist areas, near the Hanoi Capital, easily connecting
with Noi Bai international airport, capable of coordinating development
with Hai Phong, Quang Ninh, Lao Cai, provinces in the Red River Delta ...
and draw some basic statements:
a). In terms of advantages: Overall, Vinh Phuc is close to Hanoi and
associated with the Red River Delta provinces with a market with great
potential, there is a new urban area Chua Ha belonging to Vinh Yen city,
there are quarters Tam Dao's famous tourism, where the resort of Dam Vac
and Dai Lai is both beautiful and attractive, has many golf courses ... These
are the factors that meet the needs of accommodation, entertainment, very
good relaxation, steaming. leading FDI investors.
Vinh Phuc has great potential and a variety of natural resources for
economic development in a comprehensive way with large scale and rich
goods, attracting investors. First of all, it is necessary to mention the
construction land fund (the potential is considerable in terms of area size and
most of the land is infertile, the land is not as good as in many parts of the


12
Red River Delta). Secondly, it is a very unique and very great tourism
potential to develop tourism to become a spearhead economic sector of the
province known for its large-scale tourist attractions and entertainment
complexes (most clearly as in Tam Dao, Dai Lai, Dam Vac ..). Thirdly, near
the large consumer market, it is near and easy to receive the support of high

quality human resources, advanced technology... from big economic centers urban areas.
b). In terms of difficulties: For Vinh Phuc, the author emphasizes
some major difficulties as follows: (1) The transport system has been
improved but still does not meet the requirements of large-scale
development and with high speed. The system of technical infrastructure for
electricity, water and waste treatment is lacking; (2) Although the labor
force is abundant, the quality is still low, lack of skilled labor force, and
lack of good entrepreneurs; (3). The size of the economy is still small, the
possibility of internal capital accumulation is not large; therefore the ability
of self-capital is limited; not enough to establish a large-scale enterprise, the
ability of enterprises to cooperate with foreign countries is limited.
However, these restrictions can be overcome.
3.1.2. External factors affect the economic efficiency of FDI in
Vinh Phuc province
The author analyzes in depth the impact of globalization, the impact of
the industrial revolution 4.0 and the opportunity to bring from free trade
agreements that Vietnam has signed with countries to the ability to collect
attracting FDI and economic efficiency of FDI in Vinh Phuc province. At the
same time, analyzing the socio-economic development strategy, the strategy
of attracting FDI capital of the whole country affects the economic efficiency
of FDI in the province. Specifically, please emphasize some issues:
- Globalization affects the attraction of large economic groups, has
financial potential and uses high technology to develop key products, develop
high-tech fields to modernize the foundation. economy of Vinh Phuc
province.
- The industrial revolution 4.0 brings opportunities to attract FDI
projects in the direction of contributing significantly to the modernization of
the economy and modernizing local governance in Vinh Phuc.

13
- Vietnam's socio-economic development strategy and strategy of
attracting FDI to 2030 mean to define the policy of attracting FDI capital of
Vinh Phuc province as well as other localities. Vinh Phuc needs a plan to
attract FDI in the context of competition among provinces as well as
international competition in attracting FDI.
3.2. The situation of investment and economic development in Vinh
Phuc province
3.2.1. Situation of development investment in Vinh Phuc province
in the period of 2006-2017
For Vinh Phuc as well as for localities, investment has played an
extremely important role in the socio-economic development of each locality.
In 12 years (2006-2017), total social investment reached about VND 114
trillion (2010 price). Average investment capital increased by an average of
18% / year (of which the period of 2006-2010 was about 18.9% and of the
period of 2011-2017 about 17.5%). Of the total social investment capital, the
state budget capital source has gradually decreased (from 46.9% of the 20052010 period to 39.7% of the 2011-2017 period); the proportion of domestic
private capital increased from 22.2% to 30.6% and the proportion of FDI
capital decreased slightly (from 30.9% to 29.7% over the same period).
3.2.2. The situation of restructuring and economic development of
Vinh Phuc province in the period of 2006-2017
In principle, economic structure is a consequence of development
investment. In other words, the investment structure makes sense to form and
change the economic structure of the locality or the nation. In the 2006-2017
period, the economy of Vinh Phuc province has made impressive progress.
The economic scale of the province ranks 15th in the country, GRDP / person
has reached about 2400 USD, the average annual economic growth rate in the
period of 2006-2017 reached about 11%, the export value reached more than
1 billion USD and contributes to creating an opening of about 145% for the
economy, the unemployment rate is about 3% and the poverty rate is low at

about 3.5%. For many years, GRDP in the province has grown relatively fast,
the average GRDP growth rate in the period of 2006-2010 is about 10.8% per
year and in the period of 2011-2017 is about 12.2%.
In the 2006-2017 period, Vinh Phuc's economic structure shifted
relatively quickly: the agricultural sector decreased by 9.7%, the industrial


14
proportion increased by 1.8% and the service sector increased by 7.9% . The
proportion of FDI sector increased from about 21.8% in 2005 to about 26.2%
in 2017. The proportion of advanced technology products increased from
about 13.8% in 2005 to about 21.1% in in 2017. In the period 2006-2017, the
industry contributed mainly to economic growth (accounting for about
58.8%), followed by the service sector contributing about 37.3%. The hightech sector contributes about 21% in 2017 and is mainly generated by the FDI
sector (contributing about 86% of the total 21%).
Vinh Phuc ranked first in motorbike assembly and camera production,
the third in computer assembly and production, 6th on automobile assembly,
ranked 7th in beer and beverage production ... Labor density industry
increased significantly from over 9.1% in 2005 to about 34.1% in 2017. FDI
sector developed strongly, in 2017, it accounted for only 10.2% of the total
social labor but contributed to changing the picture of social division of labor
in the province. The province has formed 12 industrial parks, 1 tourist area, 1
golf course. High-speed motorway running through the province has been
completed. That is an important premise to attract investors outside the
province.
In the last 12 years (2006-2017), the picture of social division of labor
has made clear progress and towards industrialization and modernization. The
trend of social labor division has improved, the proportion of non-agricultural
sectors has increased over the years, reaching about 51.5% in 2017;
Particularly, industrial labor increased the most, from more than 18.9% in

2005 to about 30.1% in 2017. FDI enterprises make an important contribution
to the renovation of social labor division.
3.3. Current status of economic efficiency of foreign direct investment
in Vinh Phuc province
3.3.1. The situation of attracting foreign direct investment in Vinh
Phuc province in the period of 2006-2017
In recent years, Vinh Phuc has achieved many results in attracting FDI.
Total realized FDI has always increased over the years and tends to change in
the structure towards more progressive: no longer unique for the industrial
sector as in previous years but has opened to the tourism area. , high-end
entertainment, agriculture and services. The number of FDI enterprises


15
increased rapidly and especially FDI enterprises in the field of export product
production increased significantly in terms of quantity and capital scale.
FDI attraction of Vinh Phuc has other important points compared to
the whole country. That is, although FDI capital attracted to agriculture,
tourism, infrastructure ... remains low, but the implemented capital ratio is
higher than the national level.
3.3.2. Current status of economic efficiency of foreign direct
investment in Vinh Phuc province
3.3.2.1. Economic efficiency of the foreign direct investment
sector itself
(1). Labor productivity of FDI sector: Labor productivity of FDI sector
has increased continuously, reaching a higher level than the average level of
the whole province. From 2005 to 2010, the labor productivity of the FDI
sector was about four times higher than the average labor productivity of both
the provincial economy and about 4 times, but by 2017, it was only about 2.5
times higher than that of the provincial economy. with domestic labor

productivity. In 2017, labor productivity in FDI sector is only about 3 times
higher than that of domestic economy. That may explain that FDI enterprises
have not innovated technology significantly, they mainly use technology
initially when they bring to Vietnam.
(2). Effective use of investment capital of FDI sector: reached a better
level than the average of the province as well as the average of the country.
This is reflected in the following important aspects:
- ICOR index: decreased from 3.58 of the period 2005-2010 to 3.54 of
the period 2011-2017; lower than the average of the whole province (about
0.87 compared to the corresponding level of the whole province in the
periods of 3.95 and 4.02) and lower than the national average.
- Average value added per 1 FDI investment capital: about 0.4-0.45 in
12 years (2006-2017); about 1.4 times higher than the provincial average.
Although this is not a large level, it also shows that the economic efficiency
of FDI in Vinh Phuc is quite good.
(3). Profit rate of FDI enterprises: Indicators of profit rate on
production capital and on revenue as well as average income per employee
tend to increase and exceed the average level of FDI enterprises. country.


16
Particularly, the average income per employee of FDI enterprises in Vinh
Phuc is lower than the national average.
Table 3.20: Profit rate and average labor income of FDI
enterprises
Criteria

2005
2010
FDI enterprises in Vinh Phuc

1. Rate of return on production capital, %
9,5
7,1
2. Rate of return on revenue, %
8,6
9,5
FDI enterprises in Vietnam
1. Rate of return on production capital, %
14,25
7,43
2. Rate of return on revenue, %
14,2
8,84
3. Average of labor income per month,
2.173,2
4.248,7
103VNĐ

2015

2017

7.6
4,1

7,7
6,9

7,8
7,20

7.297,8

8,8
7,98
9.740,9

Source: The author calculated according to data on FDI enterprises of the
General Statistics Office and the Statistical Yearbook of Vinh Phuc
Province 2017
3.3.2.2. Contribution of the foreign direct investment sector to
the economy of Vinh Phuc province
(1). FDI sector contributes to increasing the scale of the economy: FDI
sector has a great significance for contributing to economic growth of Vinh
Phuc province. The 2006-2017 period contributes about 34-35% to the
economic growth of Vinh Phuc province (ie contributes about 4.3 - 4.5%
points). This is a relatively high contribution compared to the national
average (about 26-28% nationwide).
Table 3.3: Contribution of foreign direct investment sector to
economic growth of Vinh Phuc province
2006-2010
2011-2017
7.190
9.245
 GRDP of whole province
2.868
3.266
 GRDP of FDI sector
Proportion compared to the
39,9
34,9

whole province, %
Source: The author calculated according to provincial statistics [9]
(2). FDI sector contributes to increasing labor productivity and
openness of the economy
+ FDI sector contributes to the increase of social labor productivity
of the province: FDI sector has contributed significantly to increasing labor


17
productivity of Vinh Phuc province. If in 2005, FDI sector contributed
18.4%, in 2017, FDI sector contributed about 30% to increase labor
productivity of Vinh Phuc province (the average level of the country in
2017 was about 26%).
+ FDI sector contributes to increasing the openness of the economy
in Vinh Phuc province: To better identify the competitiveness of the
economy, the author calculates the province's economic openness by taking
export value divided by GRDP. For Vinh Phuc province, FDI sector has
great significance for the province's exports (accounting for about 78-80%
of the province's total export turnover) as well as playing an important role
in competing with the world market. FDI sector contributes about 80-82%
of the openness of the economy of Vinh Phuc province (this figure of the
whole country is about 70%).
Table 3.5: FDI sector contributes to the opening of the economy
of Vinh Phuc province
Criteria
2005
2010
2017
Export turnover coefficient of FDI
0,78

0,81
0,84
compared to total export turnover of Vinh
Phuc province
The rate of contribution to the openness of
76,5
79,1
82,8
the economy of Vinh Phuc province
Source: The author calculated according to the formula proposed in
chapter 2 of the presentation on the criteria for evaluating the economic
efficiency of FDI.
(3). The FDI sector contributes significantly to the provincial
budget. The FDI sector contributes about 50-55% on average, particularly
in 2017 FDI sector contributed 48.2%. The growth rate of the state budget
remittance of the FDI sector has always been high (in the 2006-2017 period,
about 6.8% per year, calculated according to 2010 prices). There is a need
to improve the role of the FDI sector in contributing to the provincial
budget in the next time.
(4). FDI sector contributes to creating new jobs is also important.
In the period 2006-2017, the FDI sector created jobs for about 8,300 people,
equivalent to creating 9.6% of the total employment of the province (only
about 10% in 2017) and about 21% of jobs refresh.


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(5). The FDI sector contributes to the addition of provincial capital
for investment and development. In the past 12 years, the FDI sector has
contributed about 28-29% of the total social investment capital it has made;
This is a significant level (while this rate of the whole country is about 2224%).

The loss of Vinh Phuc economy due to the transfer of FDI
enterprises, although it needs to be determined, due to lack of information,
the author cannot calculate quantitatively. In Vinh Phuc province, the
environmental pollution caused by FDI enterprises is practically negligible.
(6). Evaluation of the extent of FDI enterprises' spread: The
coefficient of elasticity between the rate of return on revenue and the
average income per employee of FDI enterprises and the coefficient of
elasticity between the rate of return on revenue and the payment The state
budget of FDI enterprises shows that the economic efficiency of FDI in
Vinh Phuc province is low and stable. In 2017, there are 160 FDI
enterprises in the province and only 9 domestic enterprises (both small and
less than 150 employees/enterprise) associate production with FDI
enterprises and domestic enterprises. mainly produce packaging and some
odd equipment for FDI enterprises to manufacture cars.
3.3.2.3. Comprehensive evaluation of economic efficiency of
foreign direct investment in Vinh Phuc province
a). Key achievements: In general, the economic efficiency of FDI is
higher than the average level of the whole province but in general it is still
low and not stable. The FDI sector has a relatively large role in the socioeconomic development of the province (contributing 29-30% of social
investment capital, 15-16% of social labor, 35-36% of economic growth.
and 29% increase labor productivity, 64-65% of budget revenue and 82% of
the province's economic openness ...). Although the economic efficiency of
FDI is higher than the economic efficiency of the economy in the whole
province as well as some higher than the average level of the national
economy, it is also much higher. This shows the need to have a solution to
improve the economic efficiency of FDI so that the economy of Vinh Phuc
province can develop faster and more sustainably in the future.


19

b) Overview of major limitations and weaknesses: In general, the
economic efficiency of FDI in Vinh Phuc province is still low, increasing
slowly and unstable.
Spillover effects of FDI enterprises are limited. FDI projects have not
attracted domestic enterprises to develop together to create the necessary
value chain. There are two main reasons. That is, on the one hand,
Vietnamese enterprises do not have enough conditions (in terms of raw
materials, technology to manufacture components and accessories) to
participate as industrial supporters. On the other hand, the giants assembled
themselves to bring components and accessories from their countries so the
spread of FDI enterprises is limited. FDI projects have no connection with
each other so they do not create a common power.
3.3.3. Causes of successes and limitations and weaknesses in
economic efficiency of foreign direct investment in Vinh Phuc province
3.3.3.1. The cause of success: Vinh Phuc has a favorable economic
and geographical position, has many factors to meet the needs of
accommodation, leisure, entertainment and entertainment of FDI investors;
Vinh Phuc provincial government is friendly with FDI investors, wishing to
attract FDI and had a policy of attracting FDI very early; Interested by FDI
investors, at the same time, there is a response of the people in the province
and the active participation of workers from surrounding localities to work
in FDI enterprises.
3.3.3.2. Causes of limitations and weaknesses
a. On the State side:
(1). On the central government side: The law on FDI has many
unreasonable points, which appear to be inadequate but the Central
Government is slow to amend; has prolonged the weakness of the
investment environment as well as the inter-provincial infrastructure.
Ministries have not worked closely together in the field of state
management for the FD region. For many years, the Central Government

has not yet had a plan for FDI investment for each major economic region;
At the same time, in the planning of development of the Red River Delta
region as well as other major economic regions, there is no close linkage
between localities.


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(2). For Vinh Phuc provincial government: Vinh Phuc provincial
government has made great efforts in attracting and managing FDI but also
revealed many limitations and weaknesses. This is reflected in the following
key points: in the long term, Vinh Phuc's economy depends heavily on the
FDI sector; to attract few transnational economic groups; The promotion of
foreign direct investment has not been effective. Vinh Phuc's ranking of
provincial competition dropped from No. 8 in 2006 to position 13 in 2010,
position 21 in 2015 and position 20 in 2017; The provincial government of
Vinh Phuc has not coordinated with the central branches to have regulations
on investment per hectare so it does not attract high-tech projects as well as
no supporting industrial development plans to promote pushing cooperation
between FDI enterprises and domestic enterprises; At the same time, there are
no strong enough commitments to attract potential and strategic investors and
not fully control the FDI situation.
b. On the business and market side
In general, most enterprises in Vinh Phuc province depend heavily on
foreign markets; FDI enterprises have not coordinated with each other
according to the value chains, not yet shown the role of attracting domestic
enterprises. At the same time, FDI enterprises have not received the
necessary support because of the lack of supporting industries. Domestic
enterprises in the area are mainly medium and small scale, financial
capacity and technology are very limited and have not cooperated well with
FDI enterprises.

Due to the financial crisis and global economic recession as well as
the whole country, FDI enterprises in Vinh Phuc province face many
difficulties, production slows down, consumes poorer products.


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CHAPTER 4: SOLUTIONS TO IMPROVE THE ECONOMIC
EFFICIENCY OF FOREIGN DIRECT INVESTMENT ON VINH
PHUC PROVINCE, PERIOD 2018-2025
4.1. Basing on building solutions to improve economic efficiency of
foreign direct investment in Vinh Phuc province
Instead of presenting an item on factors affecting FDI economic
efficiency as in chapter 3, in section 4.1 of chapter 4, the author presents the
basis for building a solution.
The author identifies 4 main bases:
(1). First base: Market, globalization, national development strategy
and provincial socio-economic development orientation to 2025
(2). Second base: determined from the analysis of the causes of
limitations and weaknesses mentioned in chapter 3 and the experience of
some places in improving the economic efficiency of FDI.
(3). Third base: Orientation to attract FDI into Vinh Phuc province to
2025
Projects attracting Vinh Phuc province in the coming time must meet
the main criteria: High technology, clean technology, energy saving,
environmentally friendly; has financial strength and has a global market for
products; Has the ability to spread around (backyard) to form a network of
local support businesses; There is a large investment on / ha (more than 1415 million USD / ha or more) and less land use; Using a lot of local
workers, especially local people; Attracting investors to save land and
energy; bring high efficiency to the whole economy of the province, the
impact spread strongly over many domestic sectors.

(4). The fourth base: promoting the success and determination of the
province in the coming time
4.2. Solutions to improve economic efficiency of FDI in Vinh Phuc
province to 2025
The author proposes 7 basic solutions. That is:
(1). Solution No. 1: Publicizing the strong commitment of Vinh Phuc
provincial government to foreign direct investment investors: Commitment
of Vinh Phuc provincial authorities on the interests of FDI investors;
Commitment to create a competitive advantage


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(2). Solution No. 2: Select strategic investors. The author
recommends prioritizing the selection of FDI investors in the fields of
computer, telecommunications, refrigeration, manufacturing medical
equipment, tourism, relaxation and treatment ... of Japan and Taiwan. ,
Korea, USA, EU, Singapore ... Instead of calling on the subsidiaries of the
above-mentioned corporations, it is necessary to call for the direct presence
of those major corporations themselves. Based on the analysis, the author
proposed a list of key priority projects and selected strategic partners in
attracting FDI in the period 2018-2025 of Vinh Phuc province.
(3). Solution No. 3: Improving the efficiency of state management of
FDI in Vinh Phuc province. State management reform and efficiency
enhancement and state management efficiency must be implemented at both
the central and local levels. Strive to rank among the 10-15 provinces in the
PCI and PAPI rankings nationwide.
(4). Solution No. 4: Completing the technical infrastructure system,
especially the synchronous and modern development of the connecting road
system in the province, the road connecting Vinh Phuc with the arterial
routes in the North and the whole country . At the same time perfecting the

electrical system, water supply, telecommunications, banking, hotels,
restaurants, houses and entertainment facilities, high quality hospitals.
(5). Solution No. 5: Reasonable territorial organization to meet the
requirements of FDI investors. Besides completing the central urban
system, developing tourist areas, industrial park systems, golf systems ...
(6). Solution No. 6: Developing high quality human resources. From
2018 to 2025, Vinh Phuc needs to train 9,000 more middle and high-level
management personnel, 43 thousand entrepreneurs and 262 thousand
professional workers. Particularly for FDI sector, there are about 1.1
thousand manpower management, 8 thousand entrepreneurs and 8 thousand
occupational workers.
(7). Solution No. 7: Developing a contingent of domestic enterprises
in the province. Striving in 2025 in Vinh Phuc province, there are about
5,000 to 6 thousand enterprises, of which FDI enterprises alone are about
630 FDI enterprises. At the same time, develop supporting enterprises
(about 10-15) and about 20-25 domestic enterprises closely linked with FDI
enterprises.


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4.3. Evaluating the economic efficiency of foreign direct investment in
Vinh Phuc province in the period of 2018 - 2025
Successful implementation of the orientation and major solutions as
presented, through preliminary calculation also shows that the development
of Vinh Phuc economy has significant progress and economic efficiency of
the above FDI. Vinh Phuc province has been significantly improved. For
FDI sector, if compared to 2025 with 2017, FDI productivity is 3 times
higher, value added per FDI is 1.1 times higher, consuming electricity to
generate 1 USD of GDP. 20%; The proportion of FDI sector contributing to
the province's economic growth is about 1.3 times; The proportion of

contributions to the province's labor productivity increased by about 2 times
and the proportion contributing to the increase in the openness of the
provincial economy doubled, the ICOR index decreased by about 14%.
4.4. Some recommendations
- The central government needs to innovate in a comprehensive and
timely manner in the formulation, issuance and implementation of the Law
on Foreign Direct Investment in Vietnam. All regulations, rules and
regulations defined in such laws must be clear, transparent and quantitative;
to avoid the type of rules by principle and general, leading to different
understandings, difficult to implement and not to build trust for FDI
investors ...
- The central government should have regulations on high
investment rates per hectare allocated to localities near big cities to attract
high-tech projects. The central government and the provincial government
of Vinh Phuc need to regulate the height of space for the construction of
factories of FDI projects that can build high-rise buildings.
- Vietnam should organize to assess the economic efficiency of FDI
in the whole country and within the provinces to have the right information
to make decisions on FDI attraction and to have comparison data between
localities.