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VIETNAM FDI Powered By Docstoc
					FDI in Viet Nam
    12th May 2007

                               Group 7:
                               NGUYEN Thi Thanh Nhan
                               NGUYEN Tra My
          Lecture:             PHAN Thi Hien
Pr. Dr. Michel Henry Bouchet   PHUNG Danh Thang
                               VU Duc Loi
                               VU Thi Minh Thu
                               NGUYEN Quang Tuan
       FDI Introduction

    Part I: The Roles of FDI

Part II: Vietnam FDI Background

   Part III: Benefits from FDI

         FDI Introduction
 FDI is a source of funding for
  development, and a means of acquiring
  foreign technology.
 FDI makes transfer of ideas and
  information to receiving countries.
 FDI is a mechanism by which a national
  economy becomes integrated into the
  international flow of goods and services.
     Part I: The Roles of FDI
 FDI meets demands for goods and services
  where domestic supplies are weak and
 FDI can fill gaps and shift the economy's
  productive focus towards comparative
 FDI is an important element of the corporate
  community in Vietnam, and an equally
  important engine of economic growth for the
            Part II: VIETNAM FDI
   Launching “Doi moi” policy in 1986
   Publishing FDI law in 1987
   Period of 1995-1996
   1997 Asian economic crisis and its effect on FDI
    inflow in Vietnam
   Period of 1999-2003 with signing BTA between
    Vietnam and USA
   Period of 2003 until now –Vietnam joining in

    1986 : launching Doi Moi policy ,
     Vietnam’s transformation from command
     economy into market economy

    1987 : Publishing of Foreign Direct
     Investment (FDI) law with three type of
       1- Business cooperation contract
       2-100% foreign-owned enterprises
       3- Joint-Venture companies
     1995-1996 FDI IN VIETNAM
   FDI licensed projects valued at $ 8.6 billion

   Major firms set up in Vietnam :Pepsi-Cola,
    Unilever, Proctor and Gamble, IBM

   A lot of new jobs created and the quality of
    life in Vietnam's largest cities visibly
   1995-1997 FDI IN VIETNAM
But there were numerous developing problems
 Weakness of domestic banks & lack of
  security for foreign lenders
 Lack of a coherent government FDI policy:
    - Excessive red tape prevented business
  operations and contract negotiations.
    - Starting a business required as many as
  10-20 permits
   The worth of FDI proposed projects fell to $4.6
    billion, down $3.99 billion from the previous year.

   Departure of many foreign investors who suffered
    losses because of their overestimating domestic
    demand in Vietnam.

   Reduction of projects financed by biggest investors -
    regional players such as Thailand, Japan and Taiwan
    due to Asian economic crisis
    Corruption and excessive business "red tape".

    Difficult-to-interpret and ever-changing investment
    legal system.

   Failure of many foreign investor who overestimated
    domestic demand in Vietnam
    ( They got excited about the 80 million people in Vietnam and the idea that it was
     going to be the next Asian Tiger but didn't consider the per capita GDP [gross
     domestic product] was around $320)

   Effects of Asian economic crisis.
     1999-2003 FDI IN VIETNAM
Favorable situation on FDI in Vietnam
 Preparing for the economically liberal
  Bilateral Trade Agreement (BTA) with the
  United States

   Taking steps to prepare the country for
    possible entry into the World Trade
    Organization (WTO).
     1999-2003 FDI IN VIETNAM
Vietnam’s FDI policy step forward
 Party Congress resolution including
  improvements and transparency in FDI law;
  opened medical, travel and tourism sectors to
  foreign investment

   Foreign joint-venture partners could buy out
    local partners. Two major companies took
    advantage of the new law, Colgate-Palmolive
    and Coca-Cola
      1999-2003 FDI IN VIETNAM
   By the end of 2001, the value of proposed
    FDI projects had risen to an estimated
    $6.3 billion, which was $4.3 billion more
    than 2000

   Vietnam's economy improved dramatically
    in 2002: GDP expanded at about 7.4
Relation between FDI and GDP in
       Vietnam (from 2003)
FDI in Vietnam by Sector
Top Ten FDI by country up to march 07

          Country       No of Projects   Pledged ($M)    Implemented ($M)

 Singapore                   466                 8,767             4,047

 Hàn Quốc                   1332                 8,420             2,893

 Đài Loan                   1575                 8,352             3,127

 Nhật Bản                    766                 7,780             5,171

 Hồng Kông                   385                 5,409             2,328

 BritishVirginIslands        285                 3,405             1,439

 Hà Lan                      72                  2,361             2,242

 Hoa Kỳ                      321                 2,302               718

 Pháp                        177                 2,203             1,152

 Cayman Islands              23                  1,680               641
             Types of FDI
 Horizontal Foreign Direct Investment: investment in
  the same industry abroad as a firm operates in at
 Vertical Foreign Direct Investment: Takes two forms:
            1) backward vertical FDI:
            2) forward vertical FDI:
    Contribution of FDI for Vietnam’s
   FDI companies contributed 13.3 % to the GDP,
    23% to export, 25% to total state budget
   On other hand the FDI attracted into Vietnam is
    by regional standards quite modest (FDI into
    Vietnam is about 2% of FDI into China)
   In year 2004 alone, earned US$8.6 billion from
    exports and imported US$10.97 billion worth
    of products
   Turnover of US$18 billion, the sector remitted
    US$800 million to the State budget
   Employed 739,000 workers
     Vietnam Government’s Efforts to
            Attract more FDI
   Allows foreign investors to purchase a stake in local firms
   Permits foreign invested enterprises (FDIs) to become
    shareholding companies
   Allowing FDIs to buy stakes in Vietnamese enterprises.
   Allow 100% FOEs to participate in a number of sectors
    including forestry, tourism, mechanical engineering, metal,
    information technology and technical publishing.
   Have been praised by international donors, and
    international investors sentiment is generally positive.
        Part III: Benefits from FDI
                 Benefits                                          Challenges
Additional resources available for   productive     Currency appreciation
investment                                           Reduced    scope for independent macroeconomic
Risk sharing with the rest of the world (equity)    policy actions
Greater external market discipline on               Greater exposure to external shocks
macroeconomic policy                                 Demands for protection in local markets
Greater exploitation of comparative economic        Some loss of control of foreign owned domestic
advantages                                           industry
Enhanced access to technology, information, ideas   Disruption of national capital markets, asset
and management skills                                inflation
Broader access to export markets through foreign    Increased volatility in financial and exchange
partners                                             markets
Training and broader exposure of national staff     High sterilization costs
Greater liquidity to meet domestic financing
Broadening and deepening of national capital
Improvement of financial sector skills
   Tomorrow Vietnam have to compete more with
    Chine and the rest of Southeast Asia as well.

   It is necessary to accelerate reform and developing
    niche sectors where FDI can both generate profits and
    benefit the country's labor force, foreign-currency
    coffers and technology intake.

   Government FDI policy will have to continue to
    change to attract FDI in an ever-increasing
    competitive global market
   Improve the law system, especial the foreign investment law, labor
    laws and the rules and regulation should be stable
   Simplify the procedures of licensing, enhance the infrastructures:
    electronics; waters; telecommunications…
   Fair treatment between domestic enterprises and FDIs
   The local government of each provinces should offer favorable
    specifics for investors, encourage investment and international
   Should be set up the information channels between investors and the
    governments (both general and local)
   The competitive advantages (cheap labor cost, potential market,
    growth rate, stable politic, rapidly development of provinces…) should
    be public in investment fairs, economy forums.

   FDI is vital to Vietnam's modernization and
    poverty alleviation.

   FDI projects has shifted away from capital-
    intensive industries and domestically oriented
    business towards labor-intensive
    manufacturing for export, an area where
    Vietnam does have a competitive advantage.
Thanks for your listening

      Have a good time!