Doctoral thesis summary of Development Economics: Impact of foreign direct investment on import and export in Vietnam

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INTRODUCTION

2.2. Missions - Systemizing theoretical basis for FDI’s impacts on import export of receiving countries, which would help to select the appropriate theoretical frame and model serving the evaluation of FDI’s impacts on Vietnam’s import export.

- Figuring out direct and indirect impact channels of FDI on Vietnam’s import export. - Studying experiences of certain countries in enhancing FDI’s positive impacts and limiting its negative ones on import export, which would give lessons learnt for Vietnam. - Providing an analysis into the status of FDI’s impacts on Vietnam’s import export in the period of 1988-2018.

1. The necessity of the thesis FDI - Foreign Direct Investment has been considered as a significant driver in promoting socio-economic growth in developing countries, including Vietnam. After Doi moi (1986), Vietnm’s economy has obtained great achievements, especially impressive results in regard of attracting foreign direct investment. According to statistics by Foreign Investment Agency- Ministry of Investment and Planning, FDI inflow in Vietnam has dramatically increased and always accounts for a huge proportion in total social investment capital, from 26,67 billion USD (24,32%) in the period of 1991-2000 to 69,47 billion USD (22,75%) in the period of 2001-2010 and from 2011to 2018, FDI accounted for 25% of total social investment capital. - Testing and estimating the model evaluating FDI’s impacts on import turnover and export turnover in Vietnam. In addition, the thesis implemented an evaluation of WTO participation and FDI’s impacts on import and export turnover in Vietnam.

- Studying “Vietnam’s strategies to attract new FDI generation towards 2030”. - Based on research findings and analysis, proposing certain perspectives and solutions to foster FDI’s positive impacts and mitigate its negative ones in Vietnam’s import export.

There have been enormous activities in Vietnam’s import export, which experienced considerable success. Based on statistics (in 2001) by General Department of Vietnam Customs, it was proved that in the early decades of the 21st century, total import export turnover of Vietnam was as limited as higher than 30 billion USD. After six years (2007) that number reached 100 billion USD when Vietnam had officially participated in WTO. Four years after that (2011), the import export size doubled to 200 billion USD. Then, in the next two years only (2017), thatn number climbed to 400 billion USD.

3. Research subject and scope 3.1. Subject The research subject is FDI’s impacts on import export in Vietnam. 3.2. Scope - Content scope: The thesis researched FDI’s impacts on Vietnam’s import export through three impacts: (1) FDI’s impact on Vietnam’s import export turnover; (2) FDI’s impacts on Vietnam’s structure of import export goods; (3) FDI’s impacts on Vietnam’s import export market.

In fact, Vietnam’s import export performance in those past years reveals the importance contribution of foreign direct investment inflow. The percentage of FDI enterprises was 71% and nearly 60% of national total import and export turnover. The leading import export goods resulted from the involvement of FDI enterprises. In addition to their own export activities, these FDI enterprises also helped in the process of technology and knowledge transfer and the development of human resource, which contributed to the improvement of opportunities and export capability of local enterprises. Furthermore, the establishment of FDI enterprises was a contributor of import decline due to the supply of their own products in replace of imported ones. + Based on qualitative method application, the thesis provided an evaluation on FDI’s impacts on Vietnam’s import export in three aspects: (1) FDI’s impacts on Vietnam’s import export turnover; (2) FDI’s impacts on the structure of Vietnam’s import export goods; (3) FDI’s impacts on Vietnam’s import export market.

+ Based on quantitative method application, because of time and data limits, the thesis only quantified FDI’s impacts on import turnover and export turnover in Vietnam in order to partially prove above qualitative analysis. - Time scope: The thesis studied FDI’s impacts on Vietnam’s import export in the period of 1988-2018. Orientations, perspectives and solutions are proposed to wards 2030.

It can be stated that the appearance of FDI enterprises has such an important role in promoting import export activities in Vietnam. This exemplifies spreadingpositive impacts of FDI on Vietnam’s economy in general and import export area in particular. However, these impacts can neither always occur nor optimized as much as expected. Especially, in addition to its positive impacts, FDI also puts negative ones at the same time. Then, the arising question should be how to explore positive impacts the most and mitigate negative impacts of FDI on import export in Vietnam. That is why the thesis on “Impacts of foreign direct investment on import and export in Vietnam” was selected for in-depth research.

2. Research objectives and missions 2.1. Objectives The thesis concentrated on analyzing and evaluating the status of FDI’s impacts on import export in Vietnam in order to build up scientific and practical basis for the proposal of solutions to foster FDI’s positive impacts and mitigate its negative ones on Vietnam’s import export. 4. Research questions 1. How does FDI impact Vietnam’s import export turnover? 2. How does FDI impact Vietnam’s structure of import export goods? 3. How does FDI impact Vietnam’s import export market? 5. Research methods - Desk research - Analysis and synthesis - Modelization - Econometrics

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6. Thesis’s new contributions 6.1. Theorectical contributions

lead to that of Vietnam’s import export market structure. The research results reveal that the more a country invests FDI. in Vietnam, the greater the import export size and value between that country and Vietnam is. Thus, adjustment of FDI investor structure would help Vietnam cooperate with strategic trade investors, which then fosters FDI’s positive impacts and mitigate its negative ones on import export.

(1) FDI directly increases Vietnam’s export turnover thanks to export performance of FDI enterprises. However, at the same time, it also directly increases Vietnam’s import turnover because of these FDI enterprises’ import demand. There has been a strong growth in both export capacity and import of manufacturing inputs in FDI enterprises. Especially, FDI has revealed unprecedented obvious positive impact on the increase in value added as well as localization rate of Vietnam’s import export goods. As a result, the proactiveness of technology, manufacturing inputs supply and supporting industries as well as their deeper participation in FDI enterprises’ global supply chain would help fostering FDI’s positive impacts and mitigating its negative ones on import export, as well as increasing the value added and localization rate for Vietnam’s export goods.

(6) Following the gravity model, the thesis constructed a model serving the evaluation on impacts of FDI on import export turnover in Vietnam. The estimation showed that FDI has positive relationship with export turnover and in the long run, FDI has negative relationship with import turnover in Vietnam. The quantitative results also confirmed qualitative analysis into negative impacts of FDI on Vietnam’s import export turnover. Furthermore, based on the quantification of level of FDI’s impacts on import export turnover in the two periods of pre- and post-WTO participation, the thesis proved that the participation in WTO brought about an increase in level of FDI’s positive impact on import export turnover in Vietnam. Therefore, fostering and improving the efficiency of international economic integration would contribute to the enhancement of FDI’s positive impacts on import export in Vietnam. 6.2. Identifications and recommendations based on the thesis’s findings and survey

(2) Through indirect impact channels (spillover effects) like competitiveness pressure as well as technology and knowledge transfer, FDI puts both positive and negative impacts on Vietnam’s import export turnover. FDI enterprises construct pressure of competitiveness and transfer technology as well as knowledge for domestic enterprises, which enhances export capacity and value of these domestic enterprises. This is a supplementary factor contributing to the growth in export turnover in Vietnam. However, if FDI enterprises create intense competitiveness, transfer backward technology and attract high quality human resource from local enterprises, FDI might have negative impacts such as decreasing competitiveness, opportunities and export value of local enterprises.

The thesis stated that FDI has both positive and negative impacts on import export in Vietnam through direct and indirect channels. From the perspective of the thesis’s author, for the purpose of fostering FDI’s positive impacts and mitigate its negative ones on import export in Vietnam in the upcoming time, it is essential to concentrate on the following solutions: (1) Adjusting policies on attracting FDI in order to promote export, limit import and ensure changes of import export good structure under the positive orientation; (2) Establishing favorable conditions to optimize FDI’s expansion of positive impacts on local export enterprises; (3) Tackling causes of FDI’s negative impacts on import export in Vietnam; (4) Exploring deeper involvement of Vietnam’s local enterprises in global supply chain of FDI enterprises; (5) Enhancing and improving the effectiveness of international economic integration, especially that of investment and trade integration. (3) In the long run, FDI puts a direct impact on the decline of Vietnam’s import export turnover. This results from the usage of products by FDI’s enterprises in place of imported goods. In addition, through spreadingimpact of FDI enterprises’ technology and knowledge, in the long term, Vietnam can hold an active role in technology, manufacturing inputs supply and supporting industries rather than importing these kinds of goods. This can be considered as FDI’s positive impact on Vietnam’s import. Therefore, improving the capability of technology and knowledge adaptation from FDI would help enhance its positive impacts on Vietnam’s import. 7. Thesis organization In addition to the introduction, conclusion, references and appendix, the content of the thesis is devided into 4 chapters:

Chapter 1: Literature review Chapter 2: Theoretical basis for impacts of foreign direct investment on import export of receiving country Chapter 3: The status of impacts of foreign direct investment on import export of Vietnam in the period of 1988-2018 Chapter 4: Perspectives, solutions to foster positive impacts and mitigate (4) The establishment of FDI enterprises in the fields of manufacturing, processing industries and high technology has contributed to Vietnam’s export goods transition under a positive orientation aiming at an increase in proportion of processed-refined goods and some products with great human capital technology. In addition, FDI also helps in the structure change of Vietnam’s import goods in a positive basis: increasing the proportion of capital goods and decreasing the proportion of consumer goods. Consequently, the tendency of attracting FDI into specific areas in compliance with the targets of each development period would help promoting FDI’s positive impacts on the structure of import export goods. negative impacts on import export of Vietnam.

(5) FDI puts positive impact on the expansion of Vietnam’s import export market through the channel of promoting international trade between Vietnam and investors as well as distributing networks of Transnational Corporations (TNCs) and TNCs’ import export information channels. Moreover, the change in FDI investor structure would

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CHAPTER 1: LITERATURE REVIEW about changes in the structure of export goods of the receiving countries (Muhammad Albahi, 2016; Muhammad et. al, 2014; Selma, 2013).

1.1.3. FDI’s impacts on import export market of the receiving country Impact on the scope of import export market: Research by WTO (1996) on trade and FDI pointed out that most investors became trade partners of the receiving country. This was due to agreements about input and output of the manyfacturing process and the distribution of the products. Also, investors would take advantages of the receiving country to produce and export goods to their home due to high expense in local area. Therefore, the greater the number of investors launching foreign direct investment is, the more the import export market of the receiving country could expand.

Impact on the structure of import export market: FDI’s impacts on changes of the structure of import export market in the receiving country have obtained limited attention of scholars in the world and Vietnam. Then, this thesis is expected to clarify these impacts in the context of Vietnam.

1.1. International studies 1.1.1. FDI’s impacts on import export turnover of receiving country FDI’s impacts on export turnover: Researchers in numerous countries in the world clarified FDI’s impacts on export of the receiving countries through experimental studies in different countries. Previous researches showed that FDI put impacts on export of the receiving country through direct impact channels and series of other impact transmission channels such as competitiveness pressure, technology transfer, labor movement and knowledge transfer, co-orepation between FDI and local enterprises, etc. Based on these channels, there would be an increase in the export of the receiving country, which can be explained by: (i) export of FDI enterprises in the receiving country; (ii) increasing export capacity of local enterprises due to FDI’s spreadingpositive impacts (Aitken et. al, 1997; Blomstrom & Kokko, 2003; Bwalya, 2006; Gorg & Greenaway, 2004; Greenaway & Kneller, 2004; Günther Jutta, 2002; Kneller & Pisu, 2007; Nakamura, 2002; Sun, 2009; Wagner, 2007; Wang & Blomstrom, 1992).

1.2. Domestic studies FDI’s impacts on Vietnam’s export: Nguyễn Thanh Xuân & Yuqing Xing (2008) demonstrated that FDI put positive impacts on Vietnam’s export. Accordingly, on average, if FDI of a country in Vietnam increased 1%, Vietnam’s export to that country would also increase by 0,13%. This study also stated that preserving weak Đồng was one important reseans for the promotion of Vietnam’s export increase in the period of 1990 - 2004. Through different tests, this research revealed that the Free trade agreement (FTA) between Vietnam and different countries experienced obvious differences in export. This study discussed free trade agreements in regard of the evaluation on FDI’s impacts on Vietnam’s export. However, it also analyzed FDI’s impacts on Vietnam’s export in the period of 1990-2004. FDI’s impacts on import turnover: Different studies with different research model, time and scope have presented various conclusions. Belderbos & Sleuwaegen (1998) pointed out the negative relationship between FDI and import of certain sectors and concluded that these two areas held back each other. Supporting this perspective, in a research on some industries in 13 developing countries, Svensson (1998) proved FDI inflow in sectors creating final goods had a negative relationship with import, whereas FDI inflow in sectors creating intermediate goods would help to promote import. FDI in final good sectors would decrease import of the receiving country because the imported goods could be replaced by final ones produced by FDI enterprises.

FDI’s impacts on Vietnam’s import: To present time, there has been only one empirical study on the relationship between FDI and import and balance of trade in Vietnam. That was the research by Sajid Anwar & Nguyễn Phi Lân in 2011, which considered the relationship between: (i) FDI and export; (ii) FDI and import; (iii) FDI with net export of Vietnam within 19 biggest trade partners between 1990 and 2007. The findings were devided into three periods: (1) pre financial crisis in Asia (1990- 1997), (2) during financial crisis in Asia (1998-2000), (3) post financial crisis (2001- 2007). By using the gravity model, the authors figured out supportive relationship between FDI and import export: FDI in Vietnam promoted both import and export.

1.1.2. FDI’s impacts on the structrure of import export goods in receiving country FDI’s impacts on the structure of export goods: Hoekman & Djankov (1997) carried out a research on decisive factors of the structure of export goods in the countries of the Central and Eastern Europe area. This research analized factors having an influence on changes of the structure of export goods. It also focused on the structure of export goods in this area in the period of 1990-1995. The discussed factors included import of intermediate inputs, FDI, subcontracting. FDI was one of independent variables of the researched model, which put an emphasis on the joint venture of FDI. The test results showed there was no important relationship between FDI and changes of structure of export goods in this area except for Finland.

1.3. Research gap First, regarding research content, most previous studies, especially domestic ones just presented an evaluation on the impacts of FDI on import export of Vietnam. Therefore, the content gap that was expected to be fulfilled by this thesis would cover: First, an evaluation on FDI’s impacts on the structure of export goods in Vietnam, which would provide an overview of FDI’s impacts on Vietnam’s export. Second, an evaluation on FDI’s impacts on Vietnam’s import in three areas: FDI’s impacts on import turnover, FDI’s impacts on the structure of import goods and FDI’s impact on import market in Vietnam. The evaluation on FDI’s impacts on import would show a FDI’s impacts on the structure of import goods: Studies by Penelope Pacheco (2005), Jayakumar et. al, (2014), Chani & et. al, (2014), Khan et. al, (2018), Tabassum & et., al (2012) demonstated that FDI put direct impacts on changes of the structure of import goods in the receiving country, which would follow the direction of increasing the proportion of capital goods through FDI enterprises’ import of machine, equipment and accessories. This fact happened in almost all receiving countries, especially in developing ones. Most FDI enterprises had to import machine, equipment, and input accessories from other places because local market could not supply them. This brought

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comprehensive picture of FDI’s impacts on Vietnam’s foreign commerce, which whould help to point out real contribution of FDI to Vietnam’s foreign commerce in particular and Vietnam’s economy in general in the past time. Status of FDI capital: this covers criteria like registered FDI, implemented FDI capital, increasing implemented FDI capital, prior due date disintegrated FDI capital, over due date FDI capital and valid FDI capital.

Average FDI capital: this covers criteria like average registered FDI capital for a project, average implemented FDI capital for a project, average increasing implemented FDI for a project, average over due date FDI capital for a project, average valid FDI capital for a project.

Second, regarding research method, the author combined both quantitative and qualitative methods to assess FDI’s impacts on Vietnam’s import export. The former one was applied to quantify FDI’s impacts on import turnover and export turnover in Vietnam, which would serve as a partial evidence of conclusions from the latter method. The thesis considered influences of WTO participation on FDI in terms of import turnover and export turnover in Vietnam. b. Criteria reflecting the structure of FDI capital This covers the structure of FDI capital based on sectors, investment mode, investment area and investment partners.

Third, regarding research context, in previous studies on evaluating FDI’s impacts on import export in Vietnam, the authors mostly worked on the period pre WTO participation of Vietnam (they might be released after 2007 but the data was before this year). Then, the author of this thesis would conduct a more complete study with the updated context until 2018 in order to provide a comprehensive evaluation on FDI, import export as well as FDI’s impacts on Vietnam’s import.

2.1.2. An overview of import and export 2.1.2.1. Concept of import export 2.1.2.2. Key factors affecting import export Key factors affecting export: Legislative policies related to the State’s export activities; competitive capacity in producing export goods; foreign exchange; geographical distance among different nations; foreign direct investment inflow; international integration level; local infrastructure.

CHAPTER 2: THEORETICAL BASIS FOR FDI’S IMPACTS ON IMPORT EXPORT OF RECEIVING COUNTRY Key factors affecting import: Macro-management policies and international economic relation of the State; national economic development; foreign exchange; foreign direct investment inflow; infrastructure; geographical distance among different nations.

2.1.2.3. Criteria reflecting import export of a country a. Criteria reflecting the quantity of import export: export turnover, import turnover, total import export turnover and balance of trade.

b. Criteria reflecting the quality of import export The structure of export goods is comprised of the structure of export goods and that of import goods Import export market is comprised of import export scope and structure of import export market. 2.1. Theoretical basis for FDI’s impacts on import export of the receiving country 2.1.1. An overview of foreign direct investment 2.1.1.1. Concept of foreign direct investment FD.I. - Fore.i.g.n. D.i.re.c.t I.n.ve.stm.e.n.t is a common kind of investment in the world. Therefore, the concept of FD.I.has has been inferred by different international organizations and nations in their own way. According to the most common understanding:“Foreign direct investment in a country means investors from another country bring their capital either in currency or any type of assets to that country in order to achieve ownership and management right or control over an economic entity in that country with the aim of optimizing the benefits.”.

2.1.3. FDI’s impact transmission channels over import export in receiving country 2.1.3.1. FDI’s impact transmission channel over import export turnover in receiving country

2.1.1.2. Basic kinds of foreign direct investment Ownership: Business co-operation contracts, joint venture companies, 100% foreign direct investment enterprises, BOT, BTO and BT, joint stock companies, parent and subsidiary company.

Integration: Greenfield investment (GI), Mergers and Acquisitions (M&A) Investment purpose: FDI in search for resources, FDI in search for market, FDI in search for effectiveness, FDI in search for strategic assets. a. FDI’s impacts on export turnover a1. Direct impact channel: FDI has direct impact on export turnover in the receiving country because FDI enterprises implement export activities. The appearance of FDI enterprises or branches of TNCs aiming towards export leads to the increase in export capability of FDI enterprises in particular and the receiving country’s economy in general.

2.1.1.3. Criteria reflecting foreign direct investment in receiving country a. Criteria reflecting FDI size Number of FDI projects: this covers criteria like the number of registered projects, that of implemented ones, that of increasing capital FDI ones, that number of disintergrated ones prior to the deadline, that number of over due date ones, and that number of valid programs. a2. Indirect impact channel (1) Channel of competitiveness pressure for local export enterprises: First, the appearance of FDI enterprises creates competitiveness pressure for local export ones, forcing these enterprises to improve their productivity by using resources more effectively, applying more advanced and modern technology as well as higher quality human resource.

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Second, the operation of FDI enterprises with advantages of capital, technology, business and operation competence, management tips, etc can share with or take over the market of local enterprises.

supporting industries: The establishment of satellite FDI enterprises helps to provide products of supporting industries that had to be imported by both FDI and local enterprises in the past, which contributes to the limitation of these products’ import, gradually decreasing import turnover of FDI and local country, and increasing VA as well as localization of exported goods of the receiving country. 2.1.3.2. FDI impact channels over the structure of import export goods in the receiving country

(2) Channel of technology transfer and R&D activity: First, channel of technology transfer from FDI enterprises: In addition to capital, FDI enterprises also bring about advanced manufacturing technology, skills and management competence, etc, to which the local enterprises can access through the channel of technology transfer. Second, R&D activity of FDI enterprises: This activity can have spreadingpositive technological impacts on local export enterprises, which contributes to the improvement of export capacity of these enterprises, increasing export turnover of the receiving country.

a. FDI’s impacts on the structure of export goods: (1) Increase in the proportion of processed-refined goods and high knowledge-based ones; (2) High value added thanks to FDI’s concentration on serving the transition of export goods under the orientation of raising the proportion of processed-refined goods and high knowledge- based ones; (3) Growth in the proportion of new products in the structure of export goods.

(3) Channel of labor movement and knowledge transfer: First, local enterprises can access and receive knowledge transfer from FDI enterprises because there is labor movement from FDI enterprises to these enterprises. Second, labour movement does not happen one way from FDI enterprises to local ones, but it does reverse. A part of labor might work for FDI enterprises after having achieved great experiences. b. Impact on the structure of import goods: (1) Increase in the proportion of capital goods in the structure of import goods; (2) Decrease in the proportion of consumer goods in the structure of import goods; (3) Changes in the proportion of supporting industrial goods in the structure of import goods. 2.1.3.3. FDI impact transmission channels over import export market in the receiving country

b. FDI’s impacts on import tunrover b1. Direct impact channels (1) FDI enterprises’ goods in replace of exported goods: Together with the appearance of FDI enterprises, the import of receiving country would decrease because previous imported goods can be replaced by those manufactured by FDI enterprises. This is FDI’s positive impact on import, helping in the reduction of import and improvement of balance of trade in the receiving country. a. Impact on the scope of import export market: FDI can widen the area of import export market of the receiving country through the following channels: (1) FDI’s capability of promoting international trade between the receiving country and investing ones; (2) distributing networks of TNCs; (3) information channel of import export market.

(2) FDI enterprises’ import of machine, technology and manufacturing input: At the beginning, FDI enterprises, expecially business and manufacturing ones related to technology, usually have to import machine, technology, materials, even high quality human resource due to limited supply of the country.

b. Impact on the structure if import export market: Major import export market of a country can be altered through changes in the structure of FDI investors int his country. It is that fact that, in many countries, the greater the investment size is, the greater the bilateral trade value between the investing country and the receiving one is. Big investors would become key and strategic trade partners instead of traditional ones of the receiving country. So, FDI can change the structure of major import export market in the receiving country. 2.2. International experiences in fostering FDI’s positive impacts and mitigating its negative impacts on the receiving country

technology and knowledge

Emperical study on lessons learnt in China and Thailand helps the author to summarize five experiences for the case of Vietnam: (1) Developing local supporing industries; (2) Improving high quality human resource; (3) Encouraging FDI enterprises’ close connection with local ones; (4) Consistently upgrading infrastructure; (5) Selecting technology and foreign direct invetors; (6) Regulating and orienting FDI inflow in Vietnam with specific aims of developing the economy in each period; (7) Creating a favorable and transparent business environment. 2.3. Proposal of research frame on FDI’s impacts on import and export (3) FDI enterprises’ import of supporting industrial goods not produced by local market: In the early stage of attracting FDI, receiving countries, especially developing ones are normally uncapable of producing appropriate supporting industrial goods in response to FDI enterprises’ requirement. Therefore, FDI enterprises have to import these goods from their own home or another country. This results in an increase in import turnover of the receiving country. b2. Indirect impact channels (1) Spillover effect through reversed connection between FDI enterprises and local ones to increase manufacturing input supply capacity of local suppliers: Due to spreadingimpact of transfer from FDI enterprises, manufacturing level of local enterprises can be improved, progressing to self-production of machine, input accessories, and even advancement of new technology that had to be imported beforehand. This impact of FDI would help in decreasing import value of the receiving country. in Vietnam (2) Channel of attracting more satellite FDI enterprises, developing domestic 2.3.1. Research frame on FDI’s impacts on import export of Vietnam

Indirect

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Diagram 2.2: Resaech frame on FDI’s impacts on Vietanam’s import

Direct

FDI enterprises performing Export activities

Based on the theory and practice of FDI’s impacts on import export of receiving country, the author modelized the research frame on FDI’s impacts on Vietnam’s import export as the following diagrams (2.1 and 2.2).

Export turnover

Competitiveness pressure over local export enterprises

FDI

Source: Revised and proposed by the author 2.3.2. Proposal of model for evaluating FDI’s impacts on Vietnam import export The thesis aims at evaluating FDI’s impacts on Vietnam’s import export in three aspects: (1) FDI’s impacts on import export turnover; (2) FDI’s impacts on the structure of import export goods; (3) FDI’s impacts on import export market. However, due to time and data limits, in the quantitative analysis, the author only proposed the model for evaluating FDI’s impacts on import turnover and export turnover in Vietnam in order to provide partial proof for qualitative findings. This is the research drawback, which is expected to be completed in the upcoming studies.

Export

Technology transfer and R&D activites

Structure of export goods

Knowledge transfer and labor movement

Export market

Information about export market

Indiect

Diagram 2.1: Resaech frame on FDI’s impacts on Vietanam’s export

Source: Revised and proposed by the author

Direct

Import replacement by FDI enterprises’ goods

2.3.2.1. Model to assess the impact of FDI on import-export turnover in Vietnam In this research, the author followed the gravity model by Magalhaes & Africano (2007), Zhang & Li (2007), Zhang & Song (2000), Jing Xiao (2009) with adjustment to be in appropriate with the case of Vietnam. Specifically, it is supposed that both import and export are mainly influenced by: (1) foreign direct investment capital (implemented by FDI); (2) Vietnam’s GDP; (3) GDP of partner countries; (4) geographical distance between Vietnam and partner countries; (5) foreign exchange between VND and currency of partner countries. The author proposed the research model on FDI’s impacts on import turnover and export turnover in Vietnam as the following: Ln(EXPit) = β0 + β1ln(FDIit) + β2ln(GDPPCit) + β3ln(VNGDPPCt) + β4ln(RERit) + β5(Distancei) + it0 Ln(IMPit) = β0 + β1ln(FDIit) + β2ln(GDPPCit) + β3ln(VNGDPPCt) + β4ln(RERit) + β5(Distancei) + it0 From the author’s perspective, the participation in WTO changed level of FDI’s impacts on Vietnam’s import and export turnover, and decreased influencing level of other independent variables like average GDP per capita, geographical distance and foreign exchange. Therefore, the author estimated FDI’s impacts and other independent variables on Vietnam’s import export turnover in two periods of pre and post WTO participation (1991-2006 and 2007-2016) to prove the conclusion.

FDI enteprises’ import of machine, equipment, technology and manufacturing inputs

Import turnover

FDI enterprises’ import of supporting industries non- prodcued by local market

FDI

Import

Struture of import goods

Reversed connection between FDI anterprises and local ones to improve manufacturing inputs supply of local enterpises

Import market

Attraction of more satellite FDI enterprises in the development of local industries of

2.3.2.2. Description of model’s variables + EXPit: Vietnam’s export turnover to partner country i in year t + IMPit: Vietnam’s import turnover from partner country i in year t + FDIit: implemented FDI capital in Vietnam of partner country i in year t + GDPPCit: Average Gross Domestic Product per capita of partner country i in year t + VNGDPPCt: Vietnam’s average Gross Domestic Product per capita in year t + DISi: Distance between Vietnam and partner country i + RERit: Foreign exchange between VND and currency of partner country i in year t + it0: deviation 2.3.2.3. Testing and estimation methods 2.3.2.4. Research data a. Data description The thesis applied panel data to evaluate FDI’s impacts on impoer turnover and export turnover in Vietnam. The author only considered 10 nations with biggest FDI

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Investment place basis: Currently, all 63 provinces and cities in Vietnam have got FDI. With data in the period of 1988-2017, the leading city was Ho Chinh Minh, which was followed by Bình Dương, Hanoi, etc. The provinces attracting the least FDI in this period were Hà Giang, Lai Châu and Điện Biên.

and bilateral trade value with Vietnam. The limitation of research scope waws decided based on the following reason: these 10 countries accounted for more than 90% total FDI in Vietnam and more than 80% total bilateral trade value between Vietnam and the world. Therefore, the consideration of 10 countries could assure representativeness and did not cause excessive data as an obstacle for the research. The collected data was in the period of 1992-2016. All of the above mentioned data regarding import turnover, export turnover, FDI, GDP...is calculated by USD with reference in the year 2000 to exclude inflation. Investment partner basis: Until 2017, there had been 125 nations and territories directly investing in Vietnam. This number partially revealed the attraction of Vietnam in the eye of foreign investors. The four leading among them were South Korea, Japan, Singapore and Taiwan, of which the number of licienced projects and the amount of registered FDI were the highest.

b. Data collection source: Different sources. 2.3.2.5. Research hypothesis (related to the main variable) H1: FDI volume of partner country i in Vietnam has positive relationship with Vietnam’s export turnover to partner country i.

3.1.2. The status of import export in Vietnam in the period of 1988-2017 3.1.2.1. Import export turnover and the balance of trade Regarding export turnover: Vietnam’s export turnover experienced steady growth in the period of 1988-2017 with relatively stable growth speed. From 3,795 billion USD in 1988, Vietnam’s export turnover grew up to 14,449 billion USD in 2000, 72,237 billion USD in 2010 and 214,019 billion USD in 2017. H2: FDI volume of partner country i in Vietnam has positive relationship (in short term) and negative relationship (in long term) with Vietnam’s import turnover from partner country i. H3: WTO participation changed FDI’s impact level on Vietnam’s import turnover and export turnover. Regarding import turnover: Import turnover tended to increase in the period of 1988-2017. There were only three years 1989, 1991 and 2009 when the growth rate was negative with -6,93%; -15,04% and -13,34% respectively.

CHAPTER 3: STATUS OF FOREIGN DIRECT INVESTMENT’S IMPACTS ON VIETNAM’S IMPORT EXPORT IN THE PERIOD 1988-2018 3.1. Status of foreign direct investment and Vietnam’s import export in Regarding total import export turnover: According to General Department of Vietnam Customs, until 31/12/2017, the Customs system recorded total import export turnover of Vietnam’s goods at 425,123 billion USD, which marked the highest growth in those past years. 1988-2018

Regarding balance of trade: With the exclusion of the early period post Doi Moi, (1988-1995), from 1996 to 2015, Vietnam always suffered from trade deficit. Especially, during the strategic period, there was deep trade deficit with 81,329 billion USD, accounting for 20,76% of total export turnover in this period. In the period of 2016-2018, together with the increase in totoal import export turnover, Vietnam succeeded in trade surplus with 2,521 billion USD in 2016 and 2,915 billion USD in 2017 and 6,79 billion USD in 2018.

3.1.1. Status of foreign direct investment in Vietnam in the period of 1988-2018 3.1.1.1. Size and number of projects Since the beginning of FDI attraction to the end of 2018, Vietnam obtained 29.643 projects with total amount of registered capital of 413,486 billion USD. The total implemented capital of 190,33 billion USD, accounting for 46,03% of total registered capital. Despite various changes in the period of 1988-2018, FDI inflow in Vietnam obviously showed an increasing tendency through thouse years. However, the rate of implemented capital compared with registered capital was at low level in relation to other countries in the region and in the world, which was 46,03% in the whole period of 1988-2018.

3.1.2.2. Structure of import export goods The structure of export goods: In 2018, goods with the highest proportion in the export structure were industrial ones with 82,8%, increasing by 1,7% compared with 2017. The following goods in the list were based on agriculture, aquaculture, with 10,9%, decreasing by 1,2% compared with 2017 and those belonging to fuel, mineral with 1,9% of total export turnover.

3.1.1.2. Investment structure Sectoral basis: In the period of 1988-2018, processing and manufacturing industries attracted 13.306 projects with total registered capital of 195,911 billion USD, accounting for 57,48% of total FDI. The second biggest FDI attracting sector was real estate business with 760 projects, equal to 57,933 billion USD, accounting for 17%. The third biggest one was manufacturing and distribution of electricity, water resource and air conditioner with 119 projects, equal to 23,093 billion USD, accounting for 6,78%.. The rest 16 sectors accounted for nearly 20%. The structure of import goods: In 2018, this structure was rather diversified with the main focus on goods serving export purpose such as computer and electronic accessories with 42,2 billion USD, increasing by 11,7% compared with 2017; machine, equipment, accessories with 33,73 billion USD, equal to 2017; iron and steel with 9,9 billion USD, increasing by 9%; plastic fuel with 9,1 billion USD, increasing by 19,6%.

3.1.2.3. Import export market Export market in 2018, Asia was the biggest commercial partner of Vietnam’s enterprises in 2018 with export value of 43,95%; the next continents were America Investment mode basis: Most foreign investors chose the kind of business with 100% foreign capital.. This was the favorable selection in terms of the number of projects and totoal registered capital with 20.772 projects, equal to 231,166 billion USD, accounting for 72,33%, which excelled the rest types of investment.

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with 23,84%; European with 19,01%, of which EU-28 accounted for 17,2%; Australia with 2% and Africa with 1,2%.

Import market in 2018, the countries from which Vietnam imported the biggest number of goods were situated in Asia with 80,29% of total import turnover of the nation. The following continents were the America with turnover of 20,33 billion U.SD., European with nearly 17,81 billion U.SD., in which, that number of E.U. market was. 13,89 billion U.SD., accounting for 5,87% of totoal import turnover of the nation. 3.2. Status of foreign direct investment’s impacts on Vietnam’s import export in the period of 1988-2018 export enterpirses’ study of tips and techniques of applying technology through joint venture in business with FDI enterprises. Bofth of these two ways contributed to the increase in productivity of local export enterprises, which would lead to the rise in export turnover and local value of Vietnam’s export goods. Second, through R&D activity of FDI enterprises: Although there were big MNCs such as Nissan, Samsung, Hewlett- Parkard (HP), Bosch, Panasonic, Yamaha, Piaggio which established R&D center in Vietnam; their R&D activity in Vietnam only stopped at small and simple technology or researched suitable technology for the adaptation to Vietnam’s situation. Therefore, spreadingpositive technological impact of FDI on Vietnam’s export through R&D activity was still limited.

Negative impacts: According to Report on implementation of technology transfer law by Ministry of technology and science, Vietnam in 2016, technology transfer activity through FDI’s projects in Vietnam in the past time was neither as successful as expected nor met the demand of economic development process. In fact, the technology transferred to Vietnam by foreign enterprises were not the advanced ones, some of which were at intermediate quality whereas most of which were out of date. This could make Vietnam become “a technology landsfill site”. 3.2.1. Status of FDI’s impacts on Vietnam’s import export turnover 3.2.1.1. FDI’s impacts on export turnover a. Direct impact channels: The export value of. FDI area continuously increased through those years and accounted for higher and higher proportion in total export turnover of the country. From only 6,81 billion USD and 47% of total export turnover in 2000, the export value of FDI area increased to 175,5 billion USD and accounted for 72,08% of total export turnover in 2018. So, FDI put positive impact on export turnover. National export turnover was raised thanks to FDI’s increase in export value.

(3) Channels of labor movement and knowledge transfer Positive impacts: The appearance of FDI enterprises created a large number of jobs for Vietnam’s employees. Also, Vietnam’s labor working for FDI enterprises would be equipped with export manufacturing knowledge and skills based on the requirements of foreign investors. Finally, local export enterprises in Vietnam might access and receive knowledge transfer from FDI enterprises through labor movement from FDI enterprises to these local ones. The application of export manufacturing knowledge, skill and experiences of this labor movement would bring about favorable conditions for the improvement of local human resource quality, which would promote export competence of local enterprises, enhancing national export competence. b. Indirect impact channels (1) Competitiveness pressure Positive impacts: The establishment of FDI enterprises in Vietnam resulted in pressure of competitiveness for local export enterprises, forcing these enterprises to invest in improving manufacturing technology, labour’s skills and qualification and management skills in order to produce and export competitive goods under the pressure of competitivess with FDI enterprises. Consequently, this would lead to the the increase in export opportunities and capability of local enterprises, which would raise Vietnam’s export turnover. However, the level of this impact in Vietnam was limited because foreign investors were not interested in joint venture and cooperation with local enterprises.

Negative impacts: First, the appearance of FDI enterprises in Vietnam shifted the commerce of local export enterprises, which was from serving the export of those FDI enterprises to supplying them with products manufactured in Vietnam. Therefore, FDI resulted in the loss of export opportunities of local enterprises, which would decrease Vietnam’s export value. Second, the operation of FDI enterprises with strong financial background, high technology and good quality human resource caused harsh competitiveness, making many local export enterprises lose the input supply source for export and output consume market, which were achieved by FDI enterprises. Third, this race for cost reduction might make local enterprises choose poor quality manufacturing materials, use excessive labour compared with regulations of the export market.

(2) Channels of technology transfer and R&D activity Positive impacts: First, technology through

transfer channel of FDI enterprises: Technology transfer was FDI’s spillover effect channel over Vietnam’s export. FDI’s spreadingtechnological impacts on Vietnam were transmitted by two approaches: (i) foreign investors’ transfer of available technology to Vietnam; (ii) local Negative impacts: Labor movement not only takes place in one way from FDI enterprises to Vietnam’s local export ones but also in the reversed way, which was even in a stronger basis. After working and getting experiences from local export enterprises, a large number of employees moved to FDI ones. This caused “brain drain” of local export enterprises. This phenomenon might result in negative impacts on export business activities in local enterprises due to the loss of human resource, especially, qualified and skillful labor in the area of manufacturing export goods. 3.2.1.2. FDI’s impacts on import turnover a. Direct impact channels Positive impacts: In the past, when Vietnam’s economy was outdated with underdeveloped manufacturing activities, there were numerous goods that could not be domestically produced even the basic ones. So, the only solution to this trouble was import. However, since the open-door period and foreign investment attraction, especially FDI inflow, Vietnam’s manufacturing experienced positive changes. FDI enterprises were established in different sectors and areas in Vietnam. There were various goods produced, many of which had been imported beforehand like electric ones, computer, phones, medicine, health equipment, car, motorbike, etc. So, FDI could

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replace import goods with those of FDI enterprises made in Vietnam, which contributed to Vietnam’s import turnover decline.

USD in this period. The local area continuously got import surplus in the period of 2000-2018. Together with the increase in trade surplus of FDI area, national trade deficit dramatically declined and there was export surplus in 2012, 2013, 2014, 2016, 2017 and 2018.

3.2.2. The status of FDI’s impacts on Vietnam’s structure of import export goods 3.2.2.1. FDI’s impacts on the structure of import export goods a. Increasing the proportion of processed-refined goods in the structure of Vietnam’s import export goods

In Vietnam, FDI’s impacts on the increase in the proportion of processed-refined goods in the structure of import export ones were exhibited in the inflow of FDI in manufacturing and processing industries to promote export of these sectors. The growth in FDI capital in these industries resulted in their improved export manufacturing capacity. So, their export size and value apparently went up. b. Increasing the proportion of high brainy and technology in the structure of Vietnam’s structure of import export goods

Negative impacts: (1) FDI enterprises’s import of equipment, technology and manufacturing inputs: In the early period of joining Vietnam’s market, FDI enterprises, especially those related to technology had to import machine, technology, input fuels and accessories, even high quality human resource; which were not provided by the local enterprises. So, in compliance with FD.I increase in Vietnam, import turnover of FDI area grew up, which resulted in Vietnam’s increasing import turnover.. This impact was obvious in Vietnam because this was a developing country, of which technology level was low, human resource qualification was limited, and most FDI enterprises had to import equipment, technology and input fuel as well as accessories from investing countries. (2) FDI enterprises’ import of supporting industrial goods: Supporting industries played an important role in the economy, which directly created value added, improving competitiveness for the products and speeding up national industrialization. However, due to its weak supporting industries, Vietnam’s industry development largely depended on external resources. FDI enterprises in Vietnam had to import most goods of supporting industries to serve business and manufacturing activities.

Vietnam could produce and export goods with high level of technology and brain thanks to the fact that (i) FDI enterprises manufactured and exported products in the area of high techonology and (ii) FDI enterprises’ spreadingtechnological impacts on local enterprises’ export activities in high technology area. However, there were limited positive impacts of FDI on enhancing the proportion of goods with high level of brain and technology on the structure of Vietnam’s import export goods. Also, Vietnam’s export goods with high brainy and technological level were limited.

c. Concentrating FDI on the transition of the structure of export goods under the orientation of improving the proportion of processed-refined goods and identification of high brainy technological goods with high value added

b. Indirect impact channels (1) Spillover effects through reversed connections between FDI enterprises and local ones to improve local suppliers’ capacity of manufacturing inputs: Due to spreadingimpacts of technology and knowledge transfer from FDI enterprises, local enterprises’ manufacturing level could be improved, proceedin g to self-production of machine, input materials, even the advancement of creation of new technology that had to be imported beforehand. This FDI’s impact would decrease Vietnam’s import. However, according to the survey by VCCI in 2016, among 10 sectors of Vietnam, the technology of enterprises was mainly the imported one, which was from developing countries (accounting for nearly 65%) with 26,6% technology from China.

VA of export goods might increase because of (i) increasing number of export goods; (ii) increasing cost of export goods; (iii) decreasing cost of intermediate goods (inputs for manufacturing export goods). In fact, in Vietnam, FDI inflow had positive impacts on those three mentioned cases, which transmitted the structure of export goods under the orientation of improving the quality of export goods. However, these impacts were limited.

3.2.2.2. FDI’s impacts on the structure of import goods a. FDI’s contribution to the decrease in the proportion of cosumer goods in the structure of Vietnam’s import goods (2) Channel of satellite FDI enterprises attraction for national supporting industrues’ development: The appearance of FDI enterprises entailed the establishment of satellite FDI enterprises in Vietnam. The creation of these satellite ones provided supporting industrial goods that had to be imported for both FDI and local export ones. This contributed to the import limitation of supporting industrial goods, which would decrease import turnover of FDI area and the country as well as create VA and localization rate of Vietnam’s export goods.

FD.I. led to the increase in the demand for importing machine., equipment, tools, accessories, input materials in manufacturing process due to the expanse and growth in. FD.I enterprises.. Also, Vietnam was a country with low industrial level compared with investing countries, so, when the investors launched their porjects, in addition to capital, they had to bring new machine, tools, equipment, accessories to Vietnam to serve the manufacturing process. This resulted in the increasing proportion of industrial equipment goods in total import turnover of Vietnam. 3.2.1.2. FDI’s impacts on total import export turnover and balance of trade a. Impacts on total import export turnover: FDI had impacts on both import turnover and export turnover of Vietnam. That FDI helped in the increase in Vietnam’s export turnover was obvious through specific impact channels. Regarding import, FDI could both increase import and decrease import of Vietnam. However, impacts on import increase were clearer and could be identified in the short run. Impacts on import decrease of were rather small and abstract. b. FDI’s contribution to the increase in the proportion of capital goods in the structure of Vietnam’s import goods b. Impacts on the balance of trade: Statistics showed that FDI area experienced continuous export surplus from 2000 to 2010 with total export surplus of 41,7 billion

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import export market.

In Vietnam, when there were no FD.I enterprises., consumer goods accounted for a large proportion of total import turnover because a lot of local goods could not be exported. When FDI enterprises appeared, import consumer goods were replaced by FDI ones. So, FDI put direct impact on the structure of Vietnam’s import goods, decreasing the proportion of consumer goods through the channel of replacing the import goods by FDI ones made in Vietnam.

3.2.4.2. Not as good as expected positive impacts Positive impacts that were not as good as expected include: (1)spreadingpositive impacts of FDI on local export enterprises through limited channel of competitiveness pressure and technology transfer; (2) unachieved expectation of spreadingpositive impact of FDI on the decrease in Vietnam’s import turnover through technology and knowledge transfer; (3) limited FDI’s positive impacts on structural transition of Vietnam’s export goods through increasing proportion of high brainy goods; (4) weak positive FDI’s impacts on VA of Vietnam’s import goods; (5) slow FDI’s positive impacts on structural transition of Vietnam’s import goods through decreasing proportion of consumer goods.

3.2.3. The status of FDI’s impacts on Vietnam’s import export market 3.2.3.1. FDI’s contribution to the expanse of Vietnam’s import export market First, FD.I’s promotion of international trade between Vietnam and investing countries. Most countries having investment relationship with Vietnam held international commerce connection with Vietnam due to agreements on inputs and outputs of manufacturing and consuming processes. The higher the number of foreign direct investors in Vietnam was, the more Vietnam’s import export market could expand.

3.2.4.3. Negative impacts These include (1) FDI resulted in Vietnam’s increasing import turnover due to FDI enterprises’ import; (2) Through the channel of competitiveness pressure, FDI put negative impacts on local export enterprises in Vietnam, especially small and medium ones; (3) FDI caused “brain drain” in local export enterprises through labour movement; (4) That technology transfer was carried out mostly from Asian investors, especially China might lead to negative impacts on export in particular and Vietnam’s economy in general.

Second, distributing networks of TNCs: In addition to the market of receiving country as its target, FDI also aimed at the export to investing countries, especially the market of the third country. Through. FD.I., Vietnam’s goods might integrate more easily into international market because in addition to their capital and technology advantages, FDI. enterprise enterprises had a huge market network. FD.I. had impacts on Vietnam’s import export market through the distribution network of TNCs..

Third, information channel of import export market: Through manufacturing and business joint venture with FDI enterprises, local import export enterprises would have opportunities of getting information about import export market and could access to this market.

3.2.4.4. Reasons for negative impacts and not as good as expected positive ones Reasons for negative impacts and not as good as expected positive ones of FDI on Vietnam’s import export include the followings: (1) Most local export enterprises were small and medium, so, their financial competence was limited; (2) The quality of human resource was low; (3) Technological background of local enterprises in particular and Vietnam in general was weak; (4) Co-operation between local enterprises in Vietnam and FDI ones was not strong, the former seemed to hold external positions from the supply chain; (5) Local supporting industries were underdeveloped, causing an increase in Vietnam’s import in line with FDI’s rise; (6) Vietnam’s infrastructure was poor; (7) Policies on attracting FDI had numerous drawbacks, resulting limited positive impacts of FDI on Vietnam’s import export. 3.3. Results of testing and estimation of model on FDI’s impacts on Vietnam’s import and export turnover evaluation 3.2.3.2. FDI’s impacts on changing the structure of Vietnam’s import export market a. Changes in the structure of Vietnam’s export market Prior to 1990, the main export market of Vietnam was Socialist Republic countries.. However, from 2008, after Vietnam joined WTO, the FDI wave in Vietnam bloomed with the appearance of big investors from China, especially developing countries. The structure of Vietnam’s export market obviously changed. America, EU and China became three key export markets in Vietnam.

b. Changes in the structure of Vietnam’s import market Foreign direct investment resulted in the import of machine, technology and manufacturing materials from investing countries to Vietnam. This was because Vietnam could not produce and meet the demand of the market. The more a country invested FDI in Vietnam, the more that country’s import goods to Vietnam would be.. 3.2.4. Summary of analysis into FDI’s impacts on Vietnam’s import export in 3.3.1. Testing results Hausman test showed differences in the models evaluating FDI’s impacts on import and export turnover. Specifically, the model on evaluating FDI’s impacts on export turnover had P-value = 0.0858>0.05, meaning random effect model (REM) was better than fixed effect model (FEM), the model on FDI’s impacts on import turnover had P- value = 0.0615>0.05, meaning random effect model (REM) was better than fixed effect model (FEM). So, the thesis chose REM. the period of 1988-2018

3.3.2. Estimation results of FDI’s impacts on Vietnam’s import and export tunrover 3.3.2.1. FDI’s impacts on Vietnam’s export turnover Estimations showed FDI’s impacts on Vietnam’s export turnover within general impacts of other independent variables of the model. Specifically: First, the R square index was equal to 0.8276, meaning independent variables of the model explained 82.76% of export turnover’s impacts on Vietnam. This was a rather high number in the 3.2.4.1. Positive impacts Positive impacts include (1) FDI’s contribution to the increase in export turnover and the improvement of the balance of trade in Vietnam; (2) FDI’s contribution to the replacement of imported goods with those by FDI enterprises; (3) FDI’s contribution to the structural transition of Vietnam’s export goods on a positive direction, increasing the proportion of processed-refined goods; (4) FDI’s help in the expansion of Vietnam’s

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hand, FDI had reversed impacts on Vietnam’s import turnover . Specifically, when implememted FDI in Vietnam of the partner country increased by 1%, Vietnam’s import turnover from that country would decrease by 0.0037%.

analysis of real data. This proved the applied model in the thesis was quite good. The model’s variables had statistical meanings with Pvalue <0.05 (except for the distance). Second, variable FDI (the amount of implemented FDI) had positive impact on Vietnam’s export turnover, meaning increasing implemented FDI in Vietnam would raise its export turnover. Specifically, according to estimation in table 3.34, when the amount of implemented FDI in Vietnam of the partner country increased by 1%, Vietnam’s export turnover to that country would grow by 0.0371%. This meant FDI attraction had positive impact on Vietnam’s export turnover. Estimations also demonstrated WTO participation helped in the rise in level of FDI’s impacts on Vietnam’s import and export turnover. Regarding export, in the period post WTO, FDI had stronger impacts on export turnover compared with the pre WTO period. Regarding import, in pre WTO period, FDI had positive impacts on import turnover, on the other hand, in post WTO period, FDI had negative impact on import turnover.

CHAPTER 4: PERSPECTIVES, SOLUTIONS TO FOSTER FDI’S POSITIVE IMPACTS AND MITIGATE NEGATIVE IMPACTS ON IMPORT AND EXPORT IN VIETNAM

3.3.2.2. FDI’s impacts on Vietnam’s import turnover Estimation results showed FDI’s impact on Vietnam’s import turnover within general impacts of other independent variables in the model. Specifically: First, R square index was 0.8454, meaning independent variables in the model explained 84.54% of import tunrover’s impacts on Vietnam. This was a rather high number in the analysis of real data. This proved the applied model in the thesis was quite good. Second, FDI varibale (the amount of implemented FDI) had negative impact on Vietnam’s import turnover. This means increasing implemented FDI in Vietnam would decrease its import turnover. Specifically, according to estimation in table 3.35, when implemented FDI in Vietnam of the partner country increased by 1%, its import turnover from that country would decrease 0.0037%. Kết quả hồi quy này được thực hiện trong dài hạn (giai đoạn 1995-2016). So, these regression findings matched with the hypothesis about FDI’s impacts on Vietnam’s import turnover in the long run. 3.3.2.3. Influence of WTO participation on FDI’s impacts on Vietnam’s import and export turnover Estimations of FDI’s impacts on Vietnam’s export turnover in both pre and post WTO participation periods reveal that: 4.1. International and domestic contexts of FDI 4.1.1. International context According to report on internal investment by UNCTAD in 2018, global FDI inflow was 1.300 billion USD, decreasing 13% compared with 2017. Report by UNCTAD clearly stated strong decline in the tendency of FDI in the world. In 2018, decreasing global FDI was presented in two traditional investment approaches, which were M&A (FDI usage to merge and acquire an available business and develop it), and greenfield investment (spending capital on a new business). In 2018, developing contries were biggest receiving FDI ones in the world with 512 billion USD, accounting for 39,38% global FDI, increasing 3,9% compared with 2017. Main countries with increasing FDI were China, Hongkong (China), Singapore, Indonesia and other members of ASEAN, as well as India and Turkey. FDI inflow to Africa increased by 11% compared with 2017, achieving 46 billion USD.

First, impacts of FDI variable on Vietnam’s export turnover were different in the two periods of pre and post WTO participation. In pre WTO participation period, 1% increase in FDI capital from partner country to Vietnam would raise 0.0036% of Vietnam’s export value to that country. In the other period, FDI’s impact on Vietnam’s export turnover was stronger, in specific, when implemented FDI increased by 1%, the export turnover would increase by 0.0286%, which was a eight-time rise compared with pre- WTO participation period. Report by UNCTAD in 2018 also confimed that global FDI inflow was experiencing an important transition. Accordingly, FDI inflow from developing countries, MNCs was higher and higher in industrialized countries rather than developing ones as in previous years. Quick growth in FDI in developing countries (accounting 54% global FDI, compared with 46% in 2017) revealed changes in the tendency of global FDI transition and that business’s investment. Although global FDI went down, America ranked the first FDI attracting country in the world, which was followed by China, Hongkong (China) and Singapore.

Second, impacts of FDI variable on Vietnam’s import turnover were different in the two periods of pre and post WTO participation. In pre WTO period, FDI held positive impacts on import turnover. Howver, in post WTO period, FDI had negative impacts on import turnover. Specifically, when implemented FDI increased by 1% , the import turnover would decrease by 0.0335%. These results were appropriate with the hypothesis given by the author about FDI’s impacts on Vietnam’s import turnover in the long run, which should be positive ones. 3.3.3. Summary of estimations on FDI’s impacts on Vietnam’s import and According to FDImarkets (2017), among 10 sectors with biggest FDI changes in the world, half of them were industrial ones based on service. Among new projects in ASEAN, Asian tigers (Indonesia, Malaysia, Philippines, Thailand and Vietnam) experienced rather high non-service investment attraction cost. These projects were within sectors of textile, machine/industrial equipment, car, motorbike, electronics, consumer goods, food processing as well as investment in supporting industries such as metal, plastic materials, chemicals and packaging. export turnover

Changes in global tendency of industrial consumer goods leading to those of businessmen’s investment tendency resulted in alterations in transitional tendency of global FDI. Estimations showed that FDI had positive relationship with Vietnam’s export turnover. In particular, when the implemented FDI in Vietnam of partner country increased by 1%, Vietnam’s export turnover to that country would increase by 0.0371%. On the other 4.1.2. Vietnam’s strategies to attract new FDI generation

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import export in Vietnam

4.4.1. Solutions of adjusting policies on FDI attraction to promote export, mitigate import and launch structural transition of import export goods under positive direction 4.4.2. Solutions of setting up favorable conditions to optimize FDI’s positive spreading impacts on local export enterprises 4.4.3. Solutions of tackling with causes of FDI’s negative impacts on Vietnam’s import export 4.4.4. Solutions of fostering deeper participation of local export enterprises in the Vietnam has been confronting with a typical challenge which is the highest recorded but limited FDI in terms of “spillover effect and value added”. The domination of manufacturing, processing projects in FDI’s search for market and labor deficit had low value added. This resulted in high FDI in Vietnam. However, local value added was low, employment salary was poor, spreading effect was weak and “dual economy” was exhibited with bigger skill differences, greater privilege deficit and risks of “middle income trap”. These were drawbacks of new and current FDI in Vietnam. In order to overcome these problems, on April, 2018, Misnitry of Planning and Investment as well as World Bank released the Draft for Strategies and strategic directions to attract new FDI generation, period 2018-2030. global supply chain of FDI enterprises 4.4.5. Solutions of improving and enhancing effects of international economic integration, especially those of investment and trade integration.

CONCLUSION

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Thesis “Impacts of foreign direct investment on import and export in Vietnam” researched theoretical and practical basis for FDI’s impacts on import and export of the receiving country. It presented an analysis into the status and evaluated FDI’s impacts on Vietnam’s import export in the period of 1988-2018. After researching time, the thesis achieved its objectives and specific results.

4.2. Direction for the development of Vietnam’s import export towards 2030 According to Decision number 2471/QĐ-TTg issued on 28/12/2011 by the Prime Minister about approving “Strategies for importing and exporting goods in the period of 2011-2020, direction towards 2030”, general objectives for the development of Vietnam’s import export are third-time increasing total import export turnover by 2030 compared with. 2010 and balanced trade; specific objectives are average export growth of. 11-12%/year in the period of 2011-2020 and maintainance of growth rate at about. 10% in the period of 2021-2030. Moreover, it is essential to achieve lower import growth rate than export one; gradually decrease trade deficit, . , control trade deficit under 10% of export turnover, obtain the balance of trade in 2020 and get trade surplus in the period of 2021-2030. The strategies also propose 7 main missions including: (1) developing manufacturing, economic structure transition; (2) developing the market, promoting trade; (3) completing policies in trade, finance, credit and investment in export goods manufacturing; (4) investing in infrastructure, import export services and speeding the socialization of logistics services; (5) training human resource; (6) controlling import; (7) improving the competitiveness of the enterprises and the role of sectoral asociation. 4.3. Perspective of fostering FDI’s positive impacts and mitigate negative First, the thesis carried out a literature review on related international and domestic studies, which helps to point out the research gaps interms of content, method and context. Second, the thesis systemized theoretical basis on FDI’s impacts on Vietnam’s import export regarding three aspects (1) FDI’s impacts on Vietnam import export turnover; (2) FDI’s impacts on the structure of Vietnam’s import export goods; (3) FDI’s impacts on Vietnam’s import export market through direct and indirect impact channels. ones on import and export in Vietnam

- Fostering FDI’s positive impacts and mitigating its negative ones on Vietnam’s import export based on the adjustments of policies attracting FDI to promote export, limit import and transit the structure of export goods under positive direction.

- Fostering FDI’s positive impacts and mitigating its negative ones on Vietnam’s import export based on the establishment of favorable conditions to improve FDI’s optimal positive spreading impacts on local export enterprises. Third, based on the theoretical basis for FDI’s impacts on import export of the receiving country, the thesis discussed research model on these impacts in Vietnam. In addition, following the gravity model, the thesis proposed model on evaluating FDI’s impacts on Vietnam’s import and export turnover. However, the drawback of theis model lies on the exploration of FDI’s impacts on import export turnover without any quantification of FDI’s impacts on the structure of import export goods and import export market. The author expects to work with this problem in the upcoming studies.

- Fostering FDI’s positive impacts and mitigating its negative ones on Vietnam’s import export based on the solutions to problems causing FDI’s negative impacts on import export.

- Fostering FDI’s positive impacts and mitigating its negative ones on Vietnam’s import export based on the enhancement of deeper involvement of local enterprises in global supply chain of FDI enterprises. Forth, the thesis provided answers to the research questions based on analysis and evaluation on FDI’s impacts on Vietnam’s import export in the period of 1988-2018. Furthermore, the thesis pointed out positive impacts, those not as good as expected as well as FDI’s negative impacts on Vietnam’s import export. It also analyzed the reasons for these impacts.

- Fostering FDI’s positive impacts and mitigating its negative ones on Vietnam’s import export based on the enhancement and improvement of international economic integration, especially investment and trade integration. Fifth, the thesis proposed 5 perspectives and 5 groups of solutions to foster FDI’s positive impacts and mitigate negative ones on Vietnam’s import export in the future. This is based on the study of the structural transition of global FDI, Vietnam’s strategies 4.4. Solutions to foster FDI’s positive impacts and mitigate negative ones on

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attacting new FDI generation, orientation for the development of Vietnam’s import export towards 2030. Those perspectives and solutions also rely on FDI’s negative impacts and its certain not as good as expected positive ones on Vietnam’s import export as well as their causes.