Nguyên nhân và ảnh hưởng của đầu tư trực tiếp nước ngoài Cơ sở cho việc điều chỉnh chính sách tại tỉnh Thanh Hóa Việt Nam

THAI NGUYEN UNIVERSITY
Socialist Republic of Vietnam

SOUTHERN LUZON STATE UNIVERSITY
Republic of the Philippines

LE HOANG BA HUYEN (JAMES)

CAUSES AND EFFECTS OF FOREIGN DIRECT INVESTMENT:
BASIS FOR POLICY RE-DIRECTION IN THANH HOA PROVINCE
IN VIETNAM

A Dissertation Presented to the Faculty of Graduate School
of Southern Luzon State University, Philippines
and Thai Nguyen University, S.R. Vietnam

In Partial Fulfillment of the Requirement for
the Degree of Doctor in Business Administration

August, 2013


The study was done at:
INTERNATIONAL CENTRE EDUCATION,
THAI NGUYEN UNIVERSITY

Academic supervisor:

TRAN DAI NGHIA Ph.D

The thesis is prevented to the Council held in Southern Luzon State University,

Philippines at the …………, ………… , 2013

Desertation can be found at:
- National Library
- Learning Resource Center, Thai Nguyen University
- Library of International Training Center
- Library of Southern Luzon State University, Philippines

i


ACKNOWLEDGMENTS
I would like to thank Thai Nguyen University, the International Centre
Education of Thai Nguyen University, Southern Luzon State University for guiding
me throughout this research and for providing me with the opportunity to conduct this
research and for helping me to carry out the necessary revisions to the thesis.
I would like to thank Dr. Cecilia N. Gascon, President of Southern Luzon
State University and Dr. Dang Kim Vui, the President of Thai Nguyen University,
who made possible the linkage between Thai Nguyen University with Southern Luzon
State University, the offering of Doctor of Business Administration, through the ITCTUAF;
I would like to thank Dr. Tran Dai Nghia, for his support and supervision
throughout my graduate study program. His kindness and daily instructions in the last
years are greatly appreciated and this dissertation is as much his work as mine;
I would also like to thank Dr. Nguyen Manh An, President of Hong Duc
University, my colleagues at Faculty of Economic and Business Administration, Hong
Duc University, my friends for their support and encouragement during the time I do
my dissertation.
In addition, I would like to thank local government of Thanh Hoa Province,
foreign companies in Thanh Hoa province for providing me with information to
conduct this research, and feedback necessary for making this thesis is successful.

Finally, I would like to thank my family for giving me constant support and
encouragement and for always believing in me. Last but definitely not least, thanks my
wife Nguyen Thi Tam, who has provided a tremendous amount of love and support during
my research. On the final note with love is for my daughters.

ii


ABSTRACT
This research was undertaken with the primary objectives of: (1) To describe
the trends in FDI in Thanh Hoa Province in the period from 2001 to 2012. (2) To
determine the factors affecting attraction of FDI in Thanh Hoa Province. (3) To
analyze the effects of FDI in the economic growth of Thanh Hoa Province. (4) To
formulate policy implication to enhance economic growth of Thanh Hoa Province in
Vietnam. To organize the research questionnaire, the conceptual framework was
adopted from the Eclectic Paradigm or the “OLI” paradigm developed by Dunning
1993 and according to factors which are influencing to choice of a host market of
Gilomre, O’s Donnel, Carson and Cummins (2003). The paper was studied six major
factors such as Political / Government / Legal Factors, Social and Cultural Factors,
Economic and Market Factors, Financial Factors, Availability of resources factors and
Infrastructure Factors which are highly affecting for the inflow of FDI. The variables
under each of the above factors have been included in the questionnaire.
The research methodology of the study which explained conceptual
frame work, research design, population and sample size, questionnaire design,
data collection and data analysis methods. The research was conducted in two phases.
The first phase involved secondary collection, desk tally by review,

literatures,

research, journals, publications, books, official reports from government officials.

The second phase was the primary date collection by doing survey using structured
questionnaires (either through e-mailing, telephone and direct face to face interview).
The population of this research was forty one (41) FDI entrepreneurs and 100 officers.
To obtain the sample size it was used the Slovin formalation and the sample size was
determined as 37 and 80 respondents respectively.
Data processing methods, survey results are coded, data entry are described by

iii


statistical tool. The combinations of descr iptive and as we ll as stat ist ica l
tools ha ve been used to analyze the findings of the study. The data were processed
by using SPSS. All primary data collected through the questionnaires were analyzed
by frequency tables and correlation analysis. The techniques like simple tabulations
have been used for the frequency tables, determination of r a n k s u m , mean, P
Value, Adj. Variance and standard deviations. C orrelation analysis was used to
study the linear correlation among the various factors affecting FDI and the level
of significance.
This study focuses on the four main issues: Firstly, about the trends in FDI in
Thanh Hoa Province, FDI in Thanh Hoa increased rapidly in the period from 2001 –
2012. Secondly, about the factors affect the attraction of foreign direct investment in
Thanh Hoa Province. We found that there are two aspects of the Thanh Hoa economic
environments in which international business partners are particularly interested: the
economic and marketing and infrastructure factors. However, the social and cultural
factor seemed not be a significant factor. Most investors put the social and cultural
factor in the least important group. Thirdly, analyze the effects of FDI in the
economic growth of Thanh Hoa Province. FDI has a positive impact on the
industrialization and modernization in Thanh Hoa province in recent years. However,
the current state of foreign direct investment in Thanh Hoa still exist some limited
such as: Total investment project is small, they are not commensurate with the

potential and strengths of provincial; Differences between the registered capital and
performance capital is large, performance capital growth is not high etc. Finally,
evaluate the favorable level of factors affecting the investment process of FDI
enterprises in Thanh Hoa province. The result of the study shows that there are some

iv


factors that have been evaluated as much more favorable, while other factors are
considered more difficult.
Based on the findings of this research, recommendations were made to the
relevant in Thanh Hoa government in particular and as well as to the in the center
government for the formulation of appropriate investment incentive policies to attract
more foreign direct investment opportunities into Thanh Hoa province in the future
in-line with the FDI entrepreneur’s perception.

v


TABLE OF CONTENTS
Page
ACKNOWLDGEMENT...........................................................................................................ii
ABSTRACT…………………………………….......................................................................... .iii
TABLE OF CONTENTS......................................................................................................... vi
LIST OF TABLES ....................................................................................................................ix
LIST OF FIGURES ..................................................................................................................x
ABBREVIATIONS ...................................................................................................................xi

CHAPTER 1. INTRODUCTION................................................................................. 1
1.1 Background .............................................................................................................. 1

1.2 Problem Statement.................................................................................................... 3
1.3 Research Objectives.................................................................................................. 5
1.4 Study Object and Scope ............................................................................................ 6
1.5 Research Questions................................................................................................... 7
1.6 Significance of the Study .......................................................................................... 8
1.7 Research Definitions................................................................................................. 9
1.8 Organization of this study......................................................................................... 14
CHAPTER 2. LITERATURE REVIEW AND STUDIES .......................................... 15
2.1. Theoretical overview: FDI ....................................................................................... 15
2.1.1 Definitions of FDI.................................................................................................. 15
2.1.2 Attract FDI ............................................................................................................ 17
2.1.3 Forms of FDI ......................................................................................................... 18
2.1.4 Effects of FDI ........................................................................................................ 21
2.1.5 Summary of some theories of attraction of FDI ...................................................... 22
2.2 FDI and Motivation .................................................................................................. 28
2.3 Factors Influencing Location of FDI ......................................................................... 35
2.3.1 Political stability and policy mechanisms factors.................................................... 35
vi


2.3.2 Socio-cultural environment factors......................................................................... 35
2.3.3 Financial factors..................................................................................................... 36
2.3.4 Economy and market factors.................................................................................. 36
2.3.5 Resource factors..................................................................................................... 37
2.3.6 Infrastructure factors.............................................................................................. 38
2.4 The determinants of the FDI in Vietnam review of literature..................................... 40
2.5 Overview of Thanh Hoa province ............................................................................. 48
2.5.1 Overview of Thanh Hoa’s social - economy........................................................... 48
2.5.2 The mechanisms and policies for attracting FDI in Thanh Hoa province ................ 49
CHAPTER 3. RESEARCH METHODOLOGY ......................................................... 53

3.1. Theoretical framework and hypothesis development ................................................ 53
3.2. The data collection and data analytical framework ................................................... 55
3.3. Sample size and Population determination ............................................................... 60
3.3.1 Population determination ....................................................................................... 60
3.3.2 Sample size determination ..................................................................................... 61
3.3.3 Sampling Method................................................................................................... 62
3.4. Questionnaire Design............................................................................................... 62
3.5. Response Rate ......................................................................................................... 63
CHAPTER 4. DATA ANALYSIS AND RESULTS .................................................... 64
4.1 The trends of FDI inflows in Thanh Hoa Province in the period from 2001 to 2012 .. 64
4.2. Data analysis about the factors affecting the attraction of foreign direct
Investment in Thanh Hoa Province. ................................................................................ 67
4.2.1 The importance of various factors in attracting FDI ìnlows in Thanh Hoa
province ......................................................................................................................... 70
4.2.1.1. Political/governmental/legal factors (F1)............................................................ 70
4.2.1.2. Social and cultural factors (F2)........................................................................... 72

vii


4.2.1.3. Financial factors (F.3) ........................................................................................ 73
4.2.1.4. Economic and marketing factors (F4)................................................................. 74
4.2.1.5. Availability of resources factors (F5) ................................................................. 75
4.2.1.6. Infrastructure factors (F6) .................................................................................. 76
4.2.2 Results of the Analysis......................................................................................... 77
4.3 Data analysis about the effects of FDI in the economic growth of Thanh Hoa
Province ......................................................................................................................... 78
4.3.1 Contributions to development and movement of economic structure ...................... 79
4.3.2 Contributions in mobilizing invested capital for development ................................ 80
4.3.3 Employment change............................................................................................... 81

4.3.4 Contribution of FDI sector in province revenue...................................................... 82
4.3.5 FDI contribution to export turnover........................................................................ 83
4.4 Analysis of factors affecting the process of FDI investment in Thanh Hoa
province ......................................................................................................................... 84
4.2.1 Analysis of research results .................................................................................... 84
4.2.2 Correlations coefficient .......................................................................................... 89
CHAPTER 5. SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ......... 91
5.1 Summary .................................................................................................................. 91
5.2 Conclusion................................................................................................................ 93
5.3. Policy implications .................................................................................................. 96
5.4. Limitations and further research............................................................................... 99
BIBLIOGRAPHY......................................................................................................... 100
Appendix - A.................................................................................................................. 106
Appendix - B .................................................................................................................. 107
Appendix – C ................................................................................................................. 118
Appendix – D ................................................................................................................. 137

viii


LIST OF TABLES

Table

Page

4.1

Foreign direct investment project licensed in period 2001 to 2011

64

4.2

The importance level of political, governmental and legal factors

70

4.3

The importance level of social and cultural factors

72

4.4

The importance level of financial factors

73

4.5

The importance level of economic and marketing factors

74

4.6

The importance level of availability of resources factor

75

4.7

The importance level infrastructure factors

76

4.8

Descriptive Statistics

77

4.9

The important of factors affecting the process of FDI investment in

85

4.10

the Thanh Hoa province ( Response from the management FDI)
The importance of factors affecting the process of FDI investment

86

4.11

in the Thanh Hoa province (Response from the civil servants)

Factors affecting the investment process of FDI enterprises in

87

4.12

Thanh Hoa Province
Descriptive sattistics and correlation (Response from the civil

89

servants)

ix


LIST OF FIGURES
Figure

Page

3.1

Theoretical Framework

54

3.2

Data collection and analytical framework

55

3.3

Steps of the assessment process to improve the investment

60

4.1

environment
The trends in FDI in Thanh Hoa Province in the period from 2001

65

4.2

to 2012
Company’ position by the respondents

67

4.3

Time of company establishment

67

4.4

Form of investment

68

4.5

Company group by size of capital

68

4.6

Types of Business

69

4.7

Contribution of FDI in gross domestic product

79

4.8

Investment at current prices

81

4.9

Employment in FDI sector of Thanh Hoa province

82

4.10

State budget revenue from FDI sector

83

4.11

Export turnover of FDI sector

84

x


Abbreviations
ASEAN

Association of Southeast Asian Nations

BITs

Bilateral Investment Traits

CRS

Corporate Social Responsibility

DPI

Department of Planning & Investment

EP

Export- promoting

FDI

Foreign Direct Investment

FSA

Firm specific advantage

GDP

Gross Domestic Product

GSO

General Statistics Office

IS

Import-substituting

MNC

Multinational Corporation

MNE

Multinational enterprise

MER

Mixed, fixed and random

OECD

Organisation for Economic Co-operation and Development

PCI

Provincial Competitiveness Index

PCL

Product Life Cycle

R&D

Research and Development

SSA

Sub-Saharan Africa

SMEs

Small- and medium-sized enterprises

TNC

Transnational corporation

UN

United Nation

UNCTAD

United Nations Conference on Trade and Development

VCCI

Vietnam Chamber of Commerce and Industry

WTO

World Trade Organization

xi

CHAPTER 1
INTRODUCTION
1.1 Background
In global integration economy, Foreign Direct Investment (FDI) has been very
much needed to boost the growth of a country’s economy especially the developing
countries. It is claimed that FDI can create employment, increasing technological
development in the host country and improving the economic condition of the
country in general.
Vietnam implemented its economic reform Doi Moi in the mid -1980s. The
market-based economic policies and legal frameworks have contributed to open
up the country, trade barriers have been removed and FDI has been now a
fundamental part of the economy.
Among various forms of international business, FDI is highly regarded as
the most effective way by which transition economies become integrated to the
global economy. FDI involves the transfers of multiple resources to a host country,
especially transfers of knowledge, capital, management skills, marketing knowhow and the latest production technology. FDI is expected to provide urgently
needed capital for country in various fields with limited access to international
capital markets and to generate cash revenues through privatization for limited
budgets. Furthermore, the entries of foreign companies are projected to foster
changes in the economic system, to create competition and to promote the
development of many sectors, especially, private sector.

Foreign investors also

facilitate exports to Western and other international markets through their
knowledge and experience of the relevant markets as well as access to
distribution networks (Girma et al., 2005; Meyer, 1998; Nguyen and Xing,
1

2006). Hence, FDI interacts with many aspects of the transition process through its
direct impact on macroeconomics namely, the balance

of payments

and

employment, through the transfer of knowledge and through the role of investors as
new owners of formerly state-owned enterprises (Meyer, 1998). However, the
transition vice versa influences FDI inflows. For instance, FDI is gravitated to
countries with furthest progress in economic and institutional reforms to
minimize transaction costs of doing business (Baniak et al., 2002; Meyer, 2001).
As other transition economies, in the period from the late 1970s to 1990,
Vietnam was integrated in the trading system of the Soviet Union and its allies with
few other linkages. During 1980s, Vietnam had experienced severe shortages of food
and basic consumer goods, three-digit inflation, a high budget deficit, chronic trade
imbalances and deteriorating living standards. The sluggish economy forced the
Vietnamese government to initiate an overall economic reform from a planned
economy to a market one in 1986. The most important tasks of the reform
program w e r e to encourage development of private sector and to reduce the
dependence of the overall economy on inefficient state-owned enterprises. In this
process, FDI had played a crucial role in creating an “imported” private sector and
strengthening the competitiveness of the economy.
The first Law on Foreign Investment issued in 1987 by the Vietnamese
government was considered as one of the first concrete steps towards FDI
encouragement and economic renovation. This law was revised several times in
1992, 1996, 2000, and most recently replaced by a new law on investment
integrating both domestic and foreign investment (Unified Investment Law 2006).
These changes

and amendments

aimed

to remove obstacles against the

operation of foreign investors and to improve the environmental investment in

2


Vietnam, creating a fair business environment for both domestic and foreign
companies. Usually, these changes are providing more tax incentives, promote
transfer of technology and simplify investment licensing procedures.
Besides favorable and open policies toward foreign investments, Vietnam
also attracted foreign investors in another ways such as a potencial market for
consuming and low costs of production factors. In particular, Vietnam is a
profitable market with population of some 90 million so the demand of consumer
goods is huge. Moreover, factor-cost advantages arising from relatively low costs
of raw materials and low labor costs create the attractiveness of Vietnam
compared to neighboring countries, especially in garment, textile, and sea food
manufacturing industries (Mirza & Giroud, 2004). However, foreign companies in
Vietnam still have to pay high transaction costs associated with searching,
negotiating and contracting with domestic partners arising from an incomplete,
inconsistent and continuously changing institutional framework. Acording to the
Provincial Competitiveness Index Report from 2006 to 2012, many managers in
Vietnam have not fully satisfied with the resource of information on suppliers,
buyers, price trends and changes in policies and regulations, and they have to use
personal relationships with local authorities to get important information.
1.2

Problem Statement
According

to

the

decentralization

policy started in

the

FDI

law

amendment in 1996, each province was decentralized with more power and
autonomy in dealing with foreign investments

such as in granting investment

licenses, leasing land, providing export and import licenses and recruiting labor.
This policy, on the one hand, allows provincial authorities to develop in an
innovative ways that attract more foreign investors, and also leads to variations

3

in the implementation of the central laws and regulations among provinces. Foreign
investors may experience a lot of red tapes namely, corruption or delays in
administrative progress if local authorities possess conservative inherited norms
and cognitions. In this context, foreign investors have considered many factors
when investing in Vietnam such as modes of entry and location choices for their
operations so that they can make use of advantages and minimize disadvantages.
In order to attract investors to Thanh Hoa and give the most favorable
conditions to them, the province has offered many investment priority policies as well
as improves administrative procedures. Over the past revised, the province’s
investment environment has been significantly improved. With a view to: no
restrictions on size, industry, and geographic areas, based on the Investment Law and
Enterprise Law, Thanh Hoa is continuing to review and to improve the system of
mechanisms and policies towards incentives and making it more convenient for
investors. These mechanisms and policies of Thanh Hoa focus on improve and
simplify administrative procedures, issue the open and attractive mechanisms and
policies, call for investment, create innovative in building essential socio-economic
infrastructure, promote the advantages of human resources, improve the quality of
human resources in order to meet business’s demands. In addition, resolution No
02/NQ-TU dated 27/6/2011 regarding improvement for investment environment in
province in the stage 2011 – 2015 focused on implementing site clearance work in
order to meet investors’ requirements, support business development, transparency of
information for business, support business development, transparency of information
for business. With the above policy should take until 2012 in Thanh Hoa province has
41 investment projects involving foreign direct operation with a total registered
capital of USD 6,952 million.

4


These results are encouraging, but compared to the potential and advantages of

Thanh Hoa province are still limited. The number and sizes of investment projects in
Thanh Hoa are low. Thanh Hoa is not one of the top provinces classified based on
provincial competitiveness index. We have to describe the trends in FDI in Thanh
Hoa Province and identified of factors affecting the attraction of foreign investment in
Thanh Hoa. After that we can analysis of the impact of each factor to attract foreign
investment is essential for the government in offering policies to attract investment
capital and analyze the effects of FDI in the economic growth of Thanh Hoa Province.
Therefore, we can formulate policy implication to enhance economic growth of Thanh
Hoa Province in Vietnam.
This thesis focuses on determinant of “Causes and Effects of Foreign Direct
Investment: Basis for Policy Redirection in Thanh Hoa province in Vietnam”.
The research was conducted in two phases. The first phase involves secondary
collection and desk review such as reviewing of relevant literatures, journals,
publications, books and reports. The second phase is the collection of primary data via
structured questionnaire and data analysis.
1.3

Research Objectives
The main objective of this research is to determinants Foreign Direct

investment in Thanh Hoa province. Thus it hopes to achieve the following objectives:
1. To describe the trends in FDI in Thanh Hoa Province in the period from
2001 to 2012.
2. To determine the factors affecting attraction of FDI in Thanh Hoa Province
in terms of the following factors:


Political and legal



Social and culture

5




Financial



Economic and marketing



Availability of resources



Infrastructure requirement

3. To analyze the effects of FDI in the economic growth of Thanh Hoa
Province.
4. To formulate policy implication to enhance economic growth of Thanh Hoa
Province in Vietnam.
1.4 Study Object and Scope
Since year 2001 up to 2012 there are forty one (41) FDI entrepreneurs,
including 100% foreign ownership and as well as joint ventures. These companies
are playing a significant role for the growth of the Thanh Hoa province’s economy

today. This contribution played an important role restructuring of Thanh Hoa
province's

economic

structure.

FDI

corporations

have

created

industrial

manufacturing value of 4.388.8 billions VND in 2010. The estimated total value of
the exports turnover of goods and services was $US 729 million in 2012. This is an
indicator that, presently Thanh Hoa province is moving towards more diversified
industrial base industries.
With the growth of regional trade agreements the FDI flows in the Thanh Hoa
is at a higher rate than found in many other provinces in Vietnam. As such, the scope
of this research was extended to gather data from the existing foreign investors only.
In addition to that, this paper has been studied the trends in FDI in Thanh Hoa
province, the determinant factors affecting FDI flow to Thanh Hoa province and the
effects of FDI in the economic growth of Thanh Hoa Province.

6

Further more for this study, the Dunning eclectic paradigm / OLI
paradigm model and the factors which are influencing to choice of a host market of
Gilomre, O’s Donnel, Carson and Cummins (2003) are being applied.
14.1. Object
Causes and Effects of Foreign Direct Investment.
1.4.2. Scope
+ Spatial limitation Study site: Thanh Hoa province. Field survey was
conducted in forty one (41) FDI entrepreneurs and 200 officers.
+ Time range:
- Secondary data: collected during the period 2001 - 2012;
- Primary data: Surveys were conducted in the period 2012 - 2013;
- The solution was studied and proposed up to 2020.
1.4.3. Limits on Content
- Studying the trends in FDI in Thanh Hoa province;
- Determinant factors affecting FDI flow to Thanh Hoa province;
- Analyzing the effects of FDI in the economic growth of Thanh Hoa Province.
1.5

Research Questions
In order to achieve the above objectives, the following research questions were

proposed for this study:
1. What are the existing conditions of industry facilities of Thanh Hoa Province
in terms of (Land facilities (industrial park / location); Lights and water; Road
networks; Communication facilities; etc & buildings)
2. What are the existing policies with regards to (Ownership sharing; Stocks
distribution & allocation; Permits and Registration; Taxation; Supply of raw materials;
Capitalization & other resource; Man power)

7


3. To what extent that foreign direct investment are affected as course the low
FDI in terms of (Political/Government/Legal; Social and cultural; Financial; Economic
and Market; Availability of resources; Infrastructure)
4. Is there a significant difference on the perceptions of respondents in terms of
factors affecting the process of FDI investment in the Thanh Hoa province?
- Time investment licensing
- Time of evaluation the basis design, planning and construction licensing
- Compensation for land acquisition, land allocation
- Government intervention in the operation of enterprises (check by police, taxcollector, etc.)
- Labor recruitment
- The dynamics of provincial leaders
- Access to policy-makers to resolve firm issues
- Control of corruption
- The environmental factors.
- Access to information on investment policy and investment.
5. What policies investors & incentives can be redirected to encourage and
improve performance of FDI?
1.6 Significance of the Study
The study is deemed significant for its benefits to certain individuals such as
the following.
(1). The thesis indicated the general picture of foreign direct investment in
Thanh Hoa province in the period from 2001 to 2012. At the same time, it also
pointed out the trend of foreign direct investment in Thanh Hoa province during this

8

period through the number of projects, the registered capital and the field of
investment projects.
(2). The thesis is one of the first studies implemented in the province of Thanh
Hoa about the factors affecting attraction of FDI in the province. This thesis has built
models of group factors affecting attraction of FDI in Thanh Hoa Province. Based on
surveys of foreign investors and the use of statistical analysis software, author
assessed the importance of each factor and group factors in attraction of foreign direct
investment into this province.
(3). The thesis also assessed and summarized the impact of foreign direct
investment for each field as raising capital for development investment, job creation,
and contribution to exports in particular and to the growth and economic
transformation in general.
(4). The thesis interpreted the causes affecting the process of implementation
FDI projects in Thanh Hoa province. It also assessed the impacts of these factors on
the implementation of investment projects of foreign enterprises under the view of
foreign investors and of the local government related to this activity.
(5). The author proposed seven groups of solutions in attractting foreign direct
investment into the province of Thanh Hoa and promoting the role of FDI projects in
contributing to the growth and restructuring the local economy.
1.7

Research Definitions
Competitive Advantage mean - An advantage that a firm has over its

competitors, allowing it to generate greater sales or margins and/or retain more
customers than its competition. There can be many types of competitive advantages
including the firm's cost structure, product offerings, distribution network and
customer support.

9

Custom’s duty on local sales means - In respect of the sale of all finished
products in Viet Nam referred to local sales under the Ministry of Industry and Trade
of Vietnam regulations, on the value of imported raw materials component to the
product. In the case of the machine tool & machinery manufacturing sector, custom’s
duty is payable only on the value of the raw materials imported. In respect of
garments that are sold in the local market by Board of Investment firms.
Dynamic leaders means - Persons of good character. They tell the truth, keep
promises, and have the moral courage to stand up for their beliefs, even when it is
hard to do so. They respect others and themselves. They accept responsibility and do
what they are supposed to do. Dynamic leaders are fair and play by the rules. They
care about others and are considerate and forgiving. They cooperate and build a better
community.
Economic System - An economic system includes of the various offices,
entities that provide the economic structure that defines the social community. These
offices are joined by lines of trade and exchange along which goods, services, money
etc. are continuously flowing. An instance of such a system for a closed economy is
indicated in the flow-diagram. The economics system involves many production,
allocation of economic inputs, distribution of economic outputs, landlords and land
availability, households (income and expenditure consumption of goods and services
in an economy), capitalists, banks (finance institutions) and government. It is a set of
institutions and their various social relations.
Exports - Export is derived from the conceptual meaning as to ship the goods and
services out of the port of a country. The seller of such goods and services is considered
as an "exporter" who is based in the country of export whereas the overseas based buyer
is referred to as an "importer". In international trade, "exports" is defined as selling goods

10

and services produced in the home country to other markets.
Financial Regulations means - The government of Viet Nam has already been
introduced many schemes of tax holidays, exemptions depend on the location to be
chosen, duty free importation of project related items, granting of equal treatment to
foreign investors in relation to local counterparts, free to repatriate of capital as well as
dividends at any time without having any exchange control regulations or barriers.
Foreign direct investment (FDI) - FDI plays an extraordinary and growing
role in global integration economy. It can provide a company with new markets and
marketing channels, cheaper production facilities, access to new technology, products,
skills and financing. For a host country or the foreign company which receives the
investment, it can provide various sources of new technologies, organizational
technologies, capital, processes, products and management skills, and as such can
provide a strong impetus to economic development.
Foreign direct investment, in its classic definition, was defined as an enterprise
from one country making a physical investment into building a factory in another
country. The direct investment in machinery, equipment and buildings is opposed to
making a portfolio investment, which is regarded as an indirect investment.
In recent years, given quick growth and change in global investment patterns,
the definition has been extended to include the acquisition of a lasting management
interest in a company outside the investing firm’s home country. As such, it may take
many forms, such as a direct acquisition of a foreign company, construction of a
facility, or investment in a joint venture or strategic alliance with a local company
with attendant input of technology, licensing of intellectual property.
Human resources - One of the key factors of investment environment is
human resources and labor rates. Investors will select the area which meets

11

requirements of quantity, quality and price of labor. The quality of labor is a
competitive advantage for investors in areas of high technological content or use of
modern technology.
Infrastructure

system

includes

power

systems,

water

supply,

communications, roads, airports, ports ... The level of these factors reflects the level
of development of a country, a local; creates investment for investment activities.
Infrastructure affects decisively manufacture and business performance, speed of
capital flows. This is the top concern of investors when making investment decisions.
Good infrastructure is one of the important factors that help to reduce the business
cost of the investors.
Investment - In general terms, investment is defined the use money in the
hope of making more money. In business, it means the purchase by a producer of a
physical good, such as durable equipment or inventory, in the hope of improving
future business. In finance, it refers to the purchase of a financial product or other
item of value with an expectation of favorable future returns.
Location-Specific Advantage mean - The ability of an individual, company,
or economy to conduct an activity better than another for reasons related to location.

Location-specific advantages are important in making decisions such as the products
one should make or sell; if a company is unable to make a product as well as another
because resources are unavailable or difficult to acquire in a certain location, the
company might be well advised to make a different product. For example, a lumber
company in Oregon has a location-specific advantage to a lumber company in
Arizona because there are simply more trees in Oregon. This makes it unlikely that
the company in Arizona will be able to fill orders as well or as quickly as the
company in Oregon. For this reason, the Arizona company's management might
consider investing in mining instead of lumberjacking.

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Multi National Corporation - “A multinational corporation (MNC) or multinational
enterprise (MNE) or transnational corporation (TNC) is one that has its facilities and other
assets in at least one country other than its home country. Such enterprises have offices and/or
factories or branch plants in different countries and usually have a centralized head office
where they co-ordinate global management. In addition, very large multinationals have
budgets that exceed those of many small countries.
Natural Resources - The abundance of cheap raw materials is also positive
factors promoting attracting foreign investment. In case of Malaysia, the natural
resources of this country are the strongest FDI attraction. The foreign investors are
flocking to this country with an object of abundant resources such as oil, gas, rubber,
wood ... Especially in the Southeast Asian nations (ASEAN), to exploit natural
resources is an important goal of many MNEs in the past decades
Political stability - Political stability is the combination of the various “the
structures, process and activities by which a nation governs it self” all companies or
subsidiaries doing business internationally confront Political risk. If a government is
undergo frequently political changes it will be adversely affected to any type of
investments either foreign or local. According to a survey conducted by the freedom

of world Organization with consider to political risk around the world nations,
Vietnam has been classified under high level of political risk category.
Social and Cultural - Social structure refers to, “A culture’s fundamental
organization, including its groups and institutions, its system of social positions and their
relationships, and the process by which its resources are distributed.” Culture is defined,
“The set of values, beliefs, rules, and institutions held by a specific group of people.
Social group or association mean, “its collection of two or more people
with identifies and interact with one another, in short family and gender”.
Social status is defined, “processes of ranking people into social layers or classes”. On

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