外人直接投資越南的決定因素

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i

國

立

交

通

大

學

科技管理研究所

碩

士

論

文

外人直接投資越南的決定因素

Determinants of Foreign Direct Investment in Vietnam

研究生：阮娜娜

指導教授：虞孝成教授

中華民國九十七年六月

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外人直接投資越南的決定因素

Determinants of Foreign Direct Investment In Veitnam

研究生：阮娜娜 Student：Nguyen Thi Nga

指導教授：虞孝成 Advisor：Dr. Hsiao-Cheng Yu

國立交通大學

科技管理研究所

碩士論文

A Thesis

Submitted to Institute of Management of Technology

College of Management

National Chiao Tung University

in partial Fulfillment of the Requirements

for the Degree of

Master of Business Administration

in

Management of Technology

June 2009

Hsinchu, Taiwan, Republic of China

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ABSTRACT

Although Vietnam has attracted lots of foreign direct investment (FDI) over last two

decades, Vietnam still suffers from a trade deficit with China which has become an

export-oriented economy. As a way to diagnose this problem, this study aims to examine the

determinants of foreign direct investments (FDI) in Vietnam, focused particularly on differences

between two groups of top investors: Asian and non-Asian countries. The panel data regression

model was built for each group of investors considering four determinants: relative gross

domestic product (GDP), openness by adding exports and imports, relative wages, and relative

exchange rates between Vietnam and FDI home countries. We selected these four determinants

out of seven candidates based on step-wise regression modeling by SAS. According to the

results, Asian investors’ FDI showed a significant positive relationship with relative GDP and

openness, but a significant negative relationship with relative wages and relative exchange rates.

Non-Asian investors’ FDI showed a significant positive relationship with relative GDP, but a

significant negative relationship with relative wage. Openness and relative exchange rates were

insignificant for non-Asian investors. From these results, we conclude that, in Vietnam, Asian

investors are market-seeking FDI and resources-seeking for which market size or rate of return

are important when deciding whether to invest. Non-Asian investors are rather

efficiency-seeking FDI for which low cost of labor and/or infrastructure is more important than

market openness and/or exchange rate. These results imply that the largest investors in Vietnam,

Asian investors, have invested in Vietnam as a way to expand markets for their products.

Related data also supports conclusions from our study.

Keywords – Vietnam, foreign direct investment, market-seeking FDI, efficiency-seeking

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ACKNOWLEDGEMENTS

I wish to express my deepest gratitude to Professor Hsiao Cheng Yu, my thesis advisor, for his guidance, patience and careful supervision towards my academic program. My study in the Institute of Management of Technology and this thesis would not be done and completed without his persistent support and encouragement. He showed me how to be an intelligent scholar who rigorously pursues the truth. He made me know that I can do things that I thought to be beyond my capacity.

I gracefully acknowledge Professor Hsiao Tien Pao, who taught me statistics from basic to advance. She has given me a lot of constructive comments and valuable suggestions all the way long

I wish to express my gratitude to Professor Jinsu Kang for being my friend, philosopher and guide throughout my stay at the National ChiaoTung University. She has contributed a great deal to the completion of this thesis.

I would like to express special thanks to Prof. Chyan Yang in the Institute of Information Management. He was the first person who helped, encouraged and got me along during the first year of study.

I am especially indebted to the Institute of Management of Technology and National ChiaoTung University for granting me study leave and supporting me during my stay. I would like to express my thanks to all the other members of the faculty of the institute of management of technology for their great assistants and the co-operation

I thank all my colleagues and friends – Vu Thi Huyen Nga, Vu Ngoc Hung, Dan Weltmann, 淑惠, JinMei, 志祺, Diu, Andes… who helped and shared with me in many ways during

my stay in NCTU. It is hard to mention by name all the people who participated accomplishing

this work, but I would like to thank all those who, in one way or another, participated in assisting me with the compilation of this thesis

Finally, I owe an immeasurable indebtedness to my family who has always stayed beside me. Their continuous support and encouragement have been my sources of confidence that my study and my work in Taiwan would eventually be completed.

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List of Tables

Table 1. Vietnam economic performance since Doi Moi. ... 12

Table 2. Descriptive statistic and T-test results between two groups of investors ... 40

Table 3. Panel regression model results ... 46

Table 4. Key Economic Indicators for Vietnam and China ... 56

Table 5. Taiwan FDI by sector (Accumulated amount - 22/08/2008) ... 60

Table 6. Korea FDI by sector (Accumulated amount - 22/08/2008) ... 61

Table 7. Japan FDI by sector (Accumulated amount - 22/08/2008) ... 62

Table 8. France FDI by sector (Accumulated amount - 10/10/2008) ... 63

Table 9. USA FDI by sector (Accumulated amount – 10/10/2008) ... 64

Table 10. Composition of sales of FDI enterprises (unit: percent) ... 65

Table 11. Sources of inputs to FDI enterprises (unit: percent) ... 66

Table 12. Investors Distribution ... 67

Table 13. Vietnam Imports by SITC ... 68

Table 14. Factors favoring investment by host country (ten most attractive countries for FDI), 2008–2010 ... 69

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List of Figures

Figure 1. Vietnam map ... 9

Figure 2. Vietnam workforce structure. ... 10

Figure 3. Overall Country Risk Ranking ... 11

Figure 4. FDI distribution by forms of investment ... 13

Figure 5. FDI development ... 14

Figure 6. Vietnam FDI classified by segments ... 17

Figure 7. Vietnam FDI classified by industries ... 18

Figure 8. Vietnam FDI top investors ... 20

Figure 9. Vietnam FDI classified by regions ... 21

Figure 10. Vietnam Trade Balance (million of US$) ... 53

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CHAPTER I

INTRODUCTION

1.1 An Overview

Since starting its economic reformation (Doi Moi, “renovation”) in 1986, Vietnam has

been one of the fastest growing economies in the region. Doi Moi facilitated marketization and

decentralization, which boosted the foreign and private development in the national economy

(Quang, 2002). According to state statistics, foreign investment has increased from virtually

zero to about 99.596 million USD in 2007 (Vietnam General Statistic Office, 2008). According

to United Nations Conference on Trade Development (UNCTAD) survey 2008-2010, Vietnam

remains in sixth place because of the availability of skilled and cheap labor and its being the

second fastest growing economy in the world behind only China (Appendix, table 11, UNTACD,

world investment 2008). Especially, joining the World Trade Organization (WTO) in 2007

resulted in increasing FDI inflows in to Vietnam together with greater liberalization and FDI

promotion efforts, particularly with respect to infrastructure FDI. Despite all the positive sides of

FDI, Vietnam has suffered from trade deficits. Moreover, how to absorb FDI more efficiently is

giving many Vietnamese policy-makers headaches. Therefore, one of the goals of this thesis is to

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2 understanding about FDI’s performances.

Despite increased attractiveness of Vietnam for FDI, there has been little research on the

determinants of FDI in Vietnam. Organization fodr Economic Co-operation and Developemnt

(OECD) explains that the observed pattern of FDI in Asia is mostly determined by the

traditional ties between host and home countries, and partly by factors such as proximity, and

cultural similarities (Foreign Direct Investment and Recovery in Southeast Asia, OECD

publication,1999). However, no study has analyzed impacts on the Vietnamese economy by

different regional investors using quantitative method. In that context, the division of investors

allows us to identify the determinants of FDI in Vietnam depending on the group, leading to a

better understanding about the characteristics of FDI sources. Therefore, taking into

consideration the vital role of FDI in the future economic development of Vietnam, this paper

attempts to study the determinants of FDI inflow into Vietnam depending on regions – Asian and

non-Asian countries/regions.

1.2 Research Questions

Among the factors that led to Vietnam’s renovation success, foreign direct investment has

played a crucial role (Impacts of FDI in Vietnam 1988-2007). Despite the huge amount of FDI it

has absorbed, Vietnam is distinct in the source-composition from other countries/regions in the

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1980s, but the major part of this capital flow comes from Asian economies. Even though after the

signing of US-Vietnam Bilateral Trade Agreement, investment from Non-Asian countries such

as France, the Netherlands, and the United States has been increasing, it still only accounts for a

small amount of total FDI. Up to the end of 2008, Singapore, Taiwan, Japan, Korea, and Hong

Kong were the top investors and in 2008 constituted 50.25 percent of total FDI commitments.

Therefore, there are many aspects of the FDI in Vietnam that cannot be fully appreciated without

a comparison between two groups of investors. Thus one objective of this paper is to examine

why Vietnam FDI source-composition has been so different from Asian and non-Asian

countries/regions. We find the determinants of FDI to Vietnam and analyze how these variables

are different from Asian and non-Asian investors. The paper is devoted to exploring the

following two research questions

1. Characteristics of FDI in Vietnam

- How has Vietnam’s FDI evolved during the last decades?

- What countries have contributed to the increase of FDI inflow to Vietnam?

- What are the geographical and sectoral distributions of FDI in Vietnam?

2. Determinants of FDI in Vietnam - What factors drive FDI to Vietnam?

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- How does FDI have influence on trade?

When these questions are investigated and answered, a better understanding of Vietnam

FDI inflow can be created. It should help Vietnam policy makers identify features missed, and

then make improvement current policies.

1.3 Contributions

Analyzing FDI flows into Vietnam is important for several reasons. First, on the subject

of FDI, Vietnam remains under-researched. Although some empirical work has been done on the

determinants of FDI inflows into Vietnam, the number of these works is still very small, and

most of the analyses are at the sectoral or industrial level (Hoang; Ngoc & Ramstetter, 2004;

Nguyen, Nguyen, Dinh, & Hanoi, 2007; Vu, 2008; Vu, Gangnes, & Noy, 2008). Furthermore, to

the best of our knowledge there is no published empirical study on FDI that has been conducted

and paid particular attention to the differences in determinants of inward FDI into Vietnam from

Asian countries and non-Asian countries. Our empirical analysis employs a data set which

includes 7 top Asian investors and 7 top non-Asian investors in Vietnam during the time period

2000-06. Dividing investors into two groups allows us to understand more determinants of FDI

into Vietnam and helps to answer characteristics of Vietnam’s industry.

Second, to the extent that FDI to Vietnam is driven by different factors, policies that have

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Hence, our analysis will shed light on ways in which policy makers in Vietnam can attract FDI

more efficiently. Third, since FDI contributes to growth, it is important to know the factors that

affect FDI flows to Vietnam.

In sum, the findings of this study will provide a better understanding about Asian and

non-Asian investors. From that, implications for policy makers are broght out. In addition, this

study also contributes to the available literature on FDI by particularly examining the subject

with Vietnam.

1.4 Research Design

This paper utilizes a time-series cross-sectional panel data regression model to

investigate the determinants of foreign direct investment (FDI) into Vietnam by analyzing

macroeconomic determinants of FDI inflows into Vietnam depending on regional division –

Asian and non-Asian countries/regions. The annual data applied here are collected from 14

countries in the period 2000-2006. Among the countries there are seven Asian and seven

non-Asian countries. The descriptive statistics and t-tests are used for variable differences

between Asian and nine non-Asian countries, and then we employed the panel data regression

models to study four main FDI determinants.

1.5 Research Procedure

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consists of a general introduction concerning what will be researched. Chapter II begins with an

overview of the Vietnamese economy and the current FDI status. In this chapter, development

trends as well as the impact of FDI in Vietnam are examined. We also studied the sectoral

distribution and illustrated the regional and source country of FDI in Vietnam.

Chapter III reviews the current literature on FDI and the theoretical framework. First of

all, the subject of related FDI will be explained. Then the literature will focus specifically on the

FDI’s determinants. Specific attention is paid to the five main determinants which later will be

studied in the Vietnam case. And finally, the two main articles which this research mainly based

on are brought out and discussed.

Chapter IV explores the country specific determinants of FDI in Vietnam. In this section,

a conceptual framework is constructed based on research questions and literature review. This

section also describes how the data was collected, and the methodology of this research is

explained.

Chapter V is devoted to the presentation of results and discussion of FDI impact on

Vietnam’s trade. A small comparison of China and Vietnam regarding their performance in FDI

is done. And finally, the last part of this research, chapter VI, consists of conclusions,

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CHAPTER II

FOREIGN DIRECT INVESTMENT AND THE ECONOMY IN

VIETNAM

Since the Vietnamese government launched an economic reform process called “Doi

Moi” in 1986, Vietnamese socio-economy has made remarkable changes and witnessed great

achievements. Both gross domestic product (GDP) and its trade with other countries grow

dramatically. Vietnam’s GDP steadily increased at an average of 7.2% per year. These great

results and the increased openness of Vietnam’s economy mainly due to Vietnamese

government’s import-substitution and export-oriented industrialization strategy in which trade

and promoting FDI policies have the most favorable treatment in priority industries.

The purpose of this chapter is to examine the trends and impact of FDI in Vietnam. The

major findings of this chapter are: (1) FDI has been only focused on three sectors such as oil,

heavy industry and construction, which required lots of import. (2) Majority of FDI is from

Asian countries (3) FDI in Vietnam is still dominant in the South regions, especially along the

Mekong River

The chapter is divided into four sections: Section I provides an overview of the

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Section III studies Vietnam’s experience in utilizing foreign investment and it’s characteristic.

The last section is devoted to conclude this chapter and its implication.

2.1 The Vietnamese Economy: An overview

Vietnam is located at the centre of Southeast Asia (figure 1). It has an inland border of

4,550km long and a complex of about 3,000 islands in Gulf. With a long coastal line of 3,260km

along the Pacific Ocean to the East, Vietnam is opening economy door to China, other ASEAN

countries and the world. This outstanding advantage of geographical makes Vietnam becoming a

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9 Figure 1. Vietnam map

Source: Google map

Vietnam is populous, though is not a big country. The estimated population is 85.14

million inhabitants in 2007, a 1.22 % increase in comparison with that of 2006 (The World

Development Indicators). With a crowded population, Vietnam might be an appealing market for

companies focusing on domestic selling. Moreover, since the renovation in 1986 the ratio of

labor working in the areas of agriculture has decreased, and in parallel with that is the increasing

of the labor ratio in the industry and services (figure 2). In addition, the number of labor aged

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ratio is about 66.1% in 2006. Comparing to China, Malaysia, and Indonesia, Vietnam has a

higher adult literacy rate (Le, 2003). Thus, huge young human resources with high level of

literacy provide Vietnam economy many opportunities to attract more investors..

Figure 2. Vietnam workforce structure.

Source: World Indicator

About social political, Vietnam is considered one of the most stable environments in the

region according to Political and Economic Risk Consultancy, a Hong Kong-based organization,

which has ranked Vietnam the 1st in terms of the political and social stability after the 11th

September event. Besides, about 85% of Vietnamese are following Buddhism, and Vietnam has

almost no conflict among religion groups. Therefore, in comparison with other regional countries

such as Malaysia, Indonesia, Philippines, India and China, Vietnam has fewer problems

regarding religious and racial contradictions. For those regions, in 2007 and 2009, Vietnam has

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11 Risk Consultancy Ltd, figure 3)

Figure 3. Overall Country Risk Ranking

Source: Political & Economic Risk Consultancy Ltd.

Vietnam before 1986 was a poor country and had a close economy. In 1986, Vietnam has

embarked on “Doi Moi” renovation to transform from a planned economy into a market-based

economy, and has achieved a high stable GDP growth rate (table 1). Many important policies

have been employed during this two decades in order to stimulus the economy such as

transformation in agriculture which let farmers sell their producst, emloying a “three plans

system” in industry in which state-owned enterprises (SOEs) were permitted to engate in

commercial activities, fnancial reforms in which stock markets were established in 1997 and a

better monetary policy was adopted. Though Vietnam has achived very successful results from

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still under heavily protection of the government which leads to a huge loses (60%) from SOEs or

the policy system is still week

Table 1. Vietnam economic performance since Doi Moi.

Year GDP (constant 2000 Billion US$) GDP per capita (constant 2000 US$) GDP growth (annual %) GDP per capita, PPP (current international $) GDP, PPP (current international billion $) Exports (constant 2000 billion US$) Imports (constant 2000 billion US$) 1986 12.2 202.8 2.8 509.6 30.7 0.0 0.0 1990 15.0 226.9 5.1 653.1 43.2 2.0 2.0 1995 22.3 305.2 9.5 991.7 72.4 6.8 7.3 2000 31.2 401.5 6.8 1416.5 110.0 17.2 17.9 2005 44.8 538.7 8.4 2142.8 178.1 37.0 41.2 2006 48.4 575.8 8.2 2363.1 198.8 45.4 50.0 2007 52.5 617.0 8.5 2599.8 221.3 53.5 61.3

Source: World Development Indicator, the 2007 World Bank Group

2.2 Policies and Trends

One of the most significant characteristic during the Vietnam’s transformation from a

planned economy into a market-based economy is foreign direct investment. The huge amount of

investment inflow into Vietnam has made Vietnam among the fastest growing countries in the

Southeast Asia and one of the best countries among all developing countries in absorbing foreign

investment.

Foreign investment defined in Vietnam law on investment is the remittance of capital in

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activities. In Vietnam, investors can be permitted to carry out the following forms of direct

investment: One hundred percent of foreign investment which has been always the largest

proportion of foreign investment; Joint ventures; Business cooperative contracts; Joint stock

companies; Parent companies and subsidiaries; and the contractual forms of BCC (business

co-operation contract), BOT (build-operate-transfer contract), BTO (build-transfer-operate

contract) and BT (build-transfer contract)

Figure 4. FDI distribution by forms of investment

Source: FIA-MPI

The Law on Foreign Investment in Vietnam officially came into effect on 1st January

1988. Since then to the end of 2004, foreign investment into Vietnam underwent a period of 17

years and enjoyed great results. Figure 5shows the overall trend of FDI inflows in Vietnam since

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Figure 5. FDI development

Source: Vietnam Government

During these two decades, along with the FDI development, Vietnam foreign investment

laws and polices also have experienced a lot of changes, and four different phases can be

distinguished: (i) the initial phase (1986 – 1990), during which FDI began to be permitted in

Vietnam; (ii) the continuous development stage (1991 – 1996); (iii) the adjustment stage

(1997-2001), in which Vietnam survived the Asian financial crisis in 1997; (iv) the high-growth

period (2002-and onward), during which Vietnam’s inward FDI surged

The initial stage (1986 – 1990)

During these initial years of renovation, Vietnam had implemented many plans to

encourage the process of transformation from self-control to state enterprises, such as changing

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multi-sector economy. In 1987, the first law on foreign direct investment took effect. The big

market, cheap labor cost and the potential transitional economy attached a huge amount of FDI

into Vietnam. According to Vietnam government statistic results, during the short period of

1986 – 1990, Vietnam granted USD 1,582 million newly capital and in 1990 Vietnam FDI inflow

were USD 180 trillion (World Development Indicator)

The continuous developments stage (1991 – 1996)

This period was the flourish period of Vietnam FDI inflows. Together with the fast

growth of the first period, FDI inflows increased rapidly and peaked in 1996 at USD 2,395

million as a result of joining the ASEAN Free Trade Area, AFTA. It indicated a more relaxed

attitude towards foreign enterprises. Vietnam also made a commitment to eliminate tariff and

non-tariff barriers. In addition, during this period, series actions from the United States towards

Vietnam such as removing embargo and going to have the bilateral trade agreement with Vietnam

made Vietnam a very attractive to foreign investors and created an unprecedented surge in FDI in

Vietnam.

The adjustment stage (1997 – 2001)

The Asian financial crisis and the high world oil prices in the end were extremely bad for

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Especially for Vietnam whose major investors accounted for more than 50% amount of FDI

inflows were from Asian country. During this period, Vietnam experienced a FDI inflow

downfall, particularly 7% in 1997, 24% in 1998 and 15% in 1999.

The high growth stage (2002 – onward)

After Asian crisis, Vietnam tried to adjust the industrial structure of FDI. The Corporate

Law officially took effect in 2000. And this event was the first step of the development of various

non-state enterprises. The FDI inflows gradually increased again at the beginning of period with

total amount of USD 1,400 million in 2002. Vietnam was striving to boost the market, so it

created many favorable conditions for investors, and its entry into the World Trade

Organization (WTO) turned out to be very attractive to foreign investors.

So far, the amount of accumulated FDI in Vietnam during 1988-2007 is $99,596.2

million (National Bureau of Statistic of Vietnam; GSO, 2008). And the amount of newly and

increased FDI in Vietnam in the first 2 months of 2009 is $ 7,583 million (Vietnam Ministry of

planning and investment).

2.3 Vietnam FDI Sectoral, Regional and Source Countries Distribution

As stated above, during the past 20 years of economic renovation, FDI has been an

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and services-based economy. In the beginning of the development, Vietnam was seen a natural

investment destination, and oil and gas were the most comparative factors of Vietnam to attract

investors to invest at first. Then with the very cheap labor cost, Vietnam has become an export

platform for foreign investors to reduce their production costs. By 2008, the manufacturing

sector is accounted for almost 60 percent of total foreign investments compare to 45 percent in

1990s. These early investment mostly concentrated in a relatively low technological contents,

such as textile, garment, and footwear. Other sectors also have been growing very fast are

construction, real estate and tourism-related investment as shown in figure 6

Figure 6. Vietnam FDI classified by segments

Source: Vietnam government

Although, most of the FDI focused on import substitute industries, exports industries

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the structure of manufacturing FDI which becomes more and more technological. In 2006, Intel

announced its $1 billion investment in Vietnam to build up a semiconductor assembly, and

Hong Hai – Foxconn, Taiwan wants to invest up to $5 billion of electronic and computer

manufacturing in Vietnam. This indicates a good sign of the country’s production changes.

Figure 7. Vietnam FDI classified by industries

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services, especially in telecommunication, media and finance. This happens is due to the

Government’s protection. Vietnam government wants to keep most service sectors away from

foreign investors. The restrictions on FDI investments in services might cause the low quality,

lack of innovation and higher cost to consumers. But this situation won’t last for a long time

since Vietnam jointed World Trade Organization and has committed to open its services sectors.

Another distinct characteristic of FDI in Vietnam from other countries’ FDI is in its

composition of source countries. Vietnam FDI can be characterized by the high dependence on

Asian countries. Figure 8 shows the top 20 investors in Vietnam during 1998 and September

2007. Among those, over 60% lived in Asia. The relatively low proportions of FDI from

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Figure 8. Vietnam FDI top investors

South Korea is the first largest FDI source country, with US$11,032 million, and

Singapore is the second, with US$9,654 million. Taiwan is the third, with US$9,221 million,

and mostly focus on apparel and textiles. One of the possible reasons for the large proportion of

FDI flows from Asia is the geographic distance between Vietnam and these Asian countries. In

addition, most of countries typically invest in Vietnam for reducing production cost, so that

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21 advantage in labor-intensive products.

Foreign investment in Vietnam is very unequal across its 64 provinces, as shown in

figure 9. The majority of FDI located in the southern part with about 50% of investment by

2008 as a consequence of the most developed infrastructure and available skilled labors.

Therefore, this disparity in Vietnam FDI distribution is understandable and very common in all

countries. Recently, there is a trend of FDI movement into the North part of Vietnam that is

results of the Government’s policy to attract investors and the better development of the

Northern part.

Figure 9. Vietnam FDI classified by regions

2.4 Findings of Vietnam FDI

During the past two decades of Doi Moi, Vietnam economy has changed very fast from

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successful without FDI. Foreign investors have been the major force in boosting the Vietnam

economy open up and more integrate with the World economy.

Vietnam started opening its economy with abundant natural resources such as oil, gas to

attract resource-seeking investors. During the past 20 years, step by step its production

structure transform from a manufacturing stage in which investments concentrate on a

relatively low technological contents, such as textile, garment, and footwear, and on going to a

more technology advanced stage in which investments focus on more advanced technological

contents, such as electronic, computers equipments. Most of investments inflows are from

Asian country, while from developed and high technology based countries such as EU, America

are still a very small proportion. The inactive of non-Asian investors indicates that the

Government needs to have more incentives to attract them. In addition, there is an uneven

distribution of FDI in Vietnam across provinces. It is dominant in the South regions, especially

along the Mekong River. Thus in order to reducing the gap among regions, the Government

should have some fiscal incentives to encourage investors invest in less developed area.

Moreover, the Government also needs to develop the infrastructure and have policies to

diversify the FDI types into different sectors, such as more technological fields or on services

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CHAPTER III

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

The World Bank (World Investment Report, 2007) defines Foreign Direct Investment as

“an investment involving a long-term relationship and reflecting a lasting interest and control by

a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise

resident in an economy other than that of the foreign direct investor (FDI enterprise or affiliate

enterprise or foreign affiliate)” In order to gain a better insight to FDI, in this chapter, we review

several major related theories which seek to explain various phenomena of foreign direct

investment from different perspectives. In addition, as FDI grows more and more important to

the world economy in general and specially to an individual country, it is essential and worth to

look at the determinants of FDI inflows. Lastly, the theoretical framework related to this study is

undertaken.

3.1 Theoretical Approaches to FDI

According to Charles W. L. Hill, most of theories approach from three complementary

perspectives. The first theoretical perspective seeks to explain why firms often prefer FDI to

other alternatives, exporting and licensing. The second set of theories seeks to explain why the

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locations. The last perspective is eclectic paradigm which attempts to combine the best aspects of

the two other perspectives into one explanation.

Some people argue that FDI is risky because of the cost when establishing facilities

production abroad and of the risk when operating in a different culture while exporting and

licensing can help to bear the costs and risks associated with FDI. However, as the matter of fact,

more and more firms apparently prefer FDI over either exporting or licensing. A branch of

economic theory has been developed to explain these phenomena. One of a very well known

theory is internalization theory. According to internalization theory, there are three drawbacks of

licensing strategy in exploiting foreign market opportunities: First, riskiness in revealing

valuable technological to a potential competitor; Second, difficulties in maximizing market share

and profitability because of not fully controlling over manufacturing market; Third, inefficient to

transfer competitive advantages which are mainly based on management instead of products

(Hill, 2007). This theory is first discussed by Coase, and he states that firms are more efficient if

using internal market (Coase, 1937). Then Casson argue that if firms own some specific

advantages which only they can internalize, it is better to go through FDI than licensing or

exporting (Casson, 1985). Because these advantages often take the form of management or

knowledge which is not amendable to licensing, the market for their transaction is likely to be

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exporting strategy, it is often constrained by transportation costs and trade barriers such as tariff

or quotas, so that it reduces firms’ profitability, special when firms have to shift products over a

large distance.

The two other theories are developed by F. T. Knickerbocker and Vernon to attempt to

explain the tendency of same industry firms direct their investment activities at the same time

toward certain locations. In Knickerbocker’s statistical study of 187 large US multinational

enterprises, 46% of the new investments in each country were clustered in three year periods, and

75% within seven-year periods. This result demonstrates firms based in oligopolistic industries

tended to imitate each other’s FDI in order to maintain their market position in each foreign

country (Knickerbocker, 1973). However, this theory does not explain the first mover who

decides to undertake FDI, yet the internationalization theory does. Therefore, the

internationalization theory is much more preferred. Besides those theories, another theory,

product life-cycle theory proposed by Vernon, is also used to explain FDI. The product life-cycle

theory is based on the observation that the mass production in 20th century was developed and

sold first in the U.S market (Vernon, 1993). Vernon argued that when having cost pressures or

having demand in foreign countries, often the same firms that pioneer a product in their home

markets undertake FDI to invest in low-cost location or produce a product for consumption in

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26 profitable than exporting or licensing (Hill, 2007).

The widely accepted theory is the eclectic theory of FDI or is known as the

ownership-location-internalization (OLI) paradigm (Dunning, 1988b) which considers the

location-specific advantages in explanations of FDI. According to this theory, firms like to

establish FDI to exploit assets or resource endowments, such as human resources. There are three

advantages with which enterprises would open a subsidiary in a foreign country: (1) Ownership

advantage which relates to advantages or specific assets which a firm owns in order to compete

with its rivals, such as intangible assets like patent or band name; (2) Location advantage which

refers to advantages of doing business offered by a host country to a multinational firm, such as

cheaper labor, large market size, good environment, etc; (3) Internalization advantage which

refers to an ability of a multinational enterprise to absorb the above two advantages rather than to

exporting or licensing. A location-specific advantage is not only basic resources but also

knowledge, such as some intellectual concentration area like science parks in Taiwan or Silicon

Valley in US. This view is also supported by one well-establish theory by Krugman in which he

suggests that firm can benefit from minimizing transport costs by locating in the resources region

(Krugman, 1991). Therefore, a country can differentiate by creating industrialized “core or an

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3.2 Determinants of FDI flows

To more understand about location advantages factor which affect multinational

enterprises’ motivation in undertaking FDI, it is essential to distinguish three main types of FDI

international production based MNE activities: marketing seeking (import substituting), resource

seeking (supply oriented), and efficiency seeking (rationalized investment) (Dunning, 1988a).

And later Dunning proposed one more type of FDI which is strategic asset seeking FDI (Dunning,

2000)

Market-seeking FDI or horizontal FDI is driven by access to local or regional markets

where firms can set up production to support goods and services (Markusen & Venables, 1998).

Therefore, the size of market-population or the prospects of market growth is important

determinants to attract this type of FDI. This investment will find and exploit new markets for

firms’ finished goods. Normally in order to survive in local market, the multinational enterprises

have to possess special technologies which enable it to compete against local companies. And

since this type of FDI requires firms to build up facilities and involving high technology, the

firms often have a long contract with host countries, and in return the firm often asks for a higher

level of development and higher requirements for human capitals and infrastructures from host

countries.

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resources such as raw material, natural resources, etc at a lower cost in host countries than the

cost which enterprises purchase at its home country. Therefore, this kind of investment is

motivated by foreign cheap labor. Firms often set up at least one production stage which involves

standardized technologies, but requires unskilled labor intensities, and then export products back

to home country or to third countries. So that FDI projects are often export oriented, and the

implications are low wages relative to home countries, trade costs such as tariffs and

transportation cost will give greater opportunities to multinational enterprises to invest, and so

will attract more FDI.

Efficiency-seeking FDI seeks to gain advantages from a lower cost structure in host

countries by transferring activities from home country. Therefore, policies stabilities, exchange

rate policies, fiscal and monetary policies and local conditions are important consideration.

Normally by undertaking this kind of FDI, enterprises want to rationalize its structure of

investment and diversify risk to have an efficient allocation of international economic activities.

Strategic asset seeking FDI aims to maintain and develop a firm’s existing O advantages

to position its competitive advantages against other competitors.

3.3 Theoretical Framework

Those determinants stated above have been emerged in various empirical researches. In

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The works of Barrell and Pain (Barrell & Pain, 1996), Rodrig (Rodrig, 2007) and Chakrabartim

(Chakrabarti, 2001) suggest the following theoretical model of foreign direct investment:

Y = f(X, I, Z) (1)

Where Y denotes for net FDI; X represents for a set of variables related to aggregate

demand; I is a set of interest variables, often include the host country’s wage, openness, and real

exchange rate; Z is set of other factors that measure different phenomenon from I, yet might

influence the firm’s level of production.

The variables’ units are not always the same, so that a log-linear multiple regression is

often used for this kind of specification model. The use of log-linear might help to reduce

extreme values or transform non-linear relationship into a linear one (Wei, 2005). Therefore, the

equation (1) can be written as:

Ln(Y) =α+ β1LnX + β2LnI+β3LnZ+ε (2)

where Ln represents natural logarithms.

A vast empirical literature has developed surrounding the issue of relationship between

FDI and its determinants, yet still there is a lack of consensus about it. The aggregate demand or

the size of the market of the country, often measured by Gross Domestic Product (GDP), is

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resources and exploit economies efficiently, the large market-size is a crucial factor. Janicki and

Wunava in their analysis of determinants of FDI among 15 EU nations in 1997 demonstrates a

significant relationship between FDI and market size (Janicki & Wunnava, 2004). The results

obtained by Grosse & Trevino also reveals a significant positive relationship between the amount

of FDI and market size which is used as a proxy to pursue international expansion (Grosse &

Trevino, 1996; Rodrig, 2007)

Another factor which has been very popular as well as controversial part in an

explanation of FDI is the wage differentials between the source and host countries. Theoretically,

a rise in wage rate often associates with a fall in FDI or in other words, a lower wage rate of the

host country encourages firms to invest in order to reallocate production and obtain cheaper cost,

and hence FDI will rise (Janicki & Wunnava, 2004). There are, however, some studies find the

positive effect of wage in attracting FDI (Nankani, 1979). One of alternative explanation is that a

rise in wage might result from the development of economy which leads to the changes of the

factor price-ratio. The economy demands more capital as a substitution of labor, and hence FDI

increase. Another explanation is wage rate might not fully reflect labor cost. A rise in wage rate

could imply for a fall in labor cost when it is possible for productivity are not associated with

labor and increases far from wage rises (Yang, Groenewold, & Tcha, 2000).

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openness. Theoretically, openness measures the degree to which an economy is open to foreign

trade and integrated with the world economic system, so that the more openness the economy is,

the better and larger domestic market are offered for market seeking firms. On the other hand,

some researchers argue that FDI inflows might be a substitution of trade, so that these two

variables would be negatively correlated or in the other words a fall or a rise in FDI flows will be

associated with a rise or a fall in trade flows (Yang, et al., 2000).

Another critical determinant of FDI in empirical work is related to exchange rate. And

there is unclear evidence regarding the significant of exchange rate as well. The theoretical

expectation is that there is a strong negative correlations between host countries’ exchange rate

and FDI inflow because a depreciation of the host country’s currency allows foreign firms to

purchase cheaper assets and technology so lowers relative cost of capital then increases the

relative wealth position of foreign firms (Chakrabarti, 2001; Dees, 1998; Froot & Stein, 1991;

Grosse & Trevino, 1996; Liu, Song, Wei, & Romilly, 1997). However, others have found a

positive relationship (Froot & Stein, 1991; Thomas & Grosse, 2001; Wang & Swain, 1995). The

main argument is the rate of return. When the host country’s currency depreciates relative to

others, the return of the asset in the foreign currency will go down because the profit will be

converted back into the home country’s currency. In addition, foreign firms’ assets might engage

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As stated above, there has been a multitude of research focusing on foreign direct

investment, yet literature studying FDI’s determinants at macroeconomic level by using

comparison of two different characteristic groups of investors is rather sparse. This study draws

methodologies from both principal studies Zhang (Zhang HongLin, 2005) and Wei (Wei, 2005)

that analyzed FDI in China, and then it is applied to Vietnam case.

Zhang uses a comparative analysis between FDI from Hong Kong-Taiwan (HKTDI) and

from the European Union, the US, and Japan (the Triad) goes to Mainland China. The paper

presents evidences that cannot be fully appreciated without understating China’s location

characteristic and differences between HKTDI and the Triad FDI. Four determinants are

identified: labor cost, economic growth, trade barriers in which tariff rates are used and political

instability which is employed as dummy variables defined by the author. The result reveals low

labor cost as the primarily determinant which motivates HKTD investors. However, this paper

just investigates the effects of individual determinants by measuring relatively the host country’s

conditions in comparison with other potential host countries, yet not with other home countries.

Therefore, only series data, not cross-section data, is adopted (Zhang HongLin, 2005).

Wenhui Wei explores the determinants of inward FDI in China by using time-series

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this study’s model suggest that the major driving force of attracting FDI in China is its domestic

market, rather than the low labor cost. However the paper studies the effects of determinants by

pulling all home countries together, yet not by comparative analysis which divides home

countries into different groups of investors (Wei, 2005).

Based on the above discussion of theories and empirical work, a panel data set is used and

a time-series cross-sectional model is developed to analyze the major determinants of FDI from

Asian and non-Asian countries into Vietnam. Four important determinants: market size as the

ratio of the host country to the home country, degree of openness as the ratio of trade (import plus

export) of host country to the home country, labor cost, and exchange rate between home and

host country are included in this study.

Regarding Vietnam, not any detailed analysis on FDI’s contribution to growth has been

conducted. Although some empirical works have been done on the determinants of FDI inflows

into Vietnam, the numbers of these works are still very little, and most of the analyses are at

sectoral or industrial level (Hoang; Ngoc & Ramstetter, 2004; Nguyen, et al., 2007; Vu, 2008; Vu,

et al., 2008). Furthermore, to the best of our knowledge there is no published empirical study on

FDI that has been conducted and paid a particular attention to the differences in determinants of

inward FDI into Vietnam from Asian countries and non-Asian countries. Therefore, it calls for a

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34 answer characteristics of Vietnam’s industry.

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CHAPTER IV

HYPOTHESIS, MODEL SPECIFICATION, AND METHODOLOGY

4.1 Hypothesis

Given that the literature review and the theoretical framework has been discussed and set

up in chapter III, specific hypotheses can be formulated for testing the framework as following.

H1 – Market Size: The higher the relative host countries’ GDP to home countries’ GDP is, the higher is FDI inflows to host countries

GDP may be seen as a measure of the future potential of the host country’s domestic

market or the economic development. Therefore, as for market-seeking investors, the bigger the

market size is, the better infrastructure and the larger potential market the host countries have, so

that the better for them to set up, expand their production and sell their products in domestic

markets.

H2 - Openness: The higher the openness (exports and imports) between host countries and home countries, the higher FDI inflows is to host countries

The openness is often seen as the relationship between a country and the others.

Therefore, the higher the openness of host countries are, the more open they are to foreign

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H3 – Wage: The higher the relative host countries’ real wage to home countries’ real wage, the lower is FDI inflows to host countries.

A cheaper relative real wage of host countries to other countries means a cheaper

production in host countries, so that the host countries attach more investors.

H4 – Exchange rate: Exchange rate of host countries relative to that of home countries can have both positive and negative effects on FDI

The higher exchange rate of host countries relative to that of home countries expresses

depreciation in host countries’ currency that means investors can sell their products abroad with a

higher return. However, if investors sell their products in domestic market then convert profit to

their currency or they have to import materials from abroad, then they get a lower return or more

expensive in production.

To estimate the determinants of FDI into Vietnam, the data from 2000 to 2006 was

employed. Top fourteen investors were chosen based on the availability of data and continuity

of investment. These investors are South Korea, Singapore, Taiwan, Japan, Hong Kong,

Thailand, China, Australia, Canada, Germany, UK, USA, Netherlands, and France.

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economic fluctuation affecting on investment - the year 2000 was just after the Asian financial

crisis and the year 2006 was just before Vietnam joined World Trade Organization (WTO). This

period may give us more objective results studying determinants of Vietnam’s FDI inflow.

The data was collected from General Statistical Office (GSO) in Vietnam. Although

there is a concern that the data from Vietnamese government tends to be overstated, it is not

easy to find data about Vietnam in other sources. According to the data from GSO, there were 21

countries which had a continuous investment in Vietnam from 2000 to 2006. Table 4 shows the

amount of FDI from these countries. Among them, British Virgin Islands had no trade with

Vietnam. We also found out that there is little information available about Malaysia and no wage

information available for Denmark, so that we excluded these three countries from the country

set. Three outlier countries (Belgium, Italy, and New Zealand) were taken away because they

had significantly smaller amount of investment compared to other countries. Russia used to

have a special relationship with Vietnam so their investment may not represent typical FDI. So,

Russia was also excluded from our data.

For the analysis of difference depending on region, we divided countries into two

groups considering the important influences of geographic distance and cultural distance on FDI

inflows- Region 1 (called Asian countries) consisting of 7 countries such as South Korea,

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countries) consisting of 7 countries such as Australia, Canada, Germany, UK, USA, Netherlands,

and France.

Summary statistics of the variables of the two investor groups and Satterthwaite method

of t test used to classify the data are reported in Table 1

4.2 Data

To estimate the determinants of FDI into Vietnam, the data from 2000 to 2006 was

employed. Top fourteen investors were chosen based on the availability of data and continuity

of investment. These investors are South Korea, Singapore, Taiwan, Japan, Hong Kong,

Thailand, China, Australia, Canada, Germany, UK, USA, Netherlands, and France.

We chose the period between 2000 and 2006 which appeared not to have serious

economic fluctuation affecting on investment - the year 2000 was just after the Asian financial

crisis and the year 2006 was just before Vietnam joined World Trade Organization (WTO). This

period may give us more objective results studying determinants of Vietnam’s FDI inflow.

The data was collected from General Statistical Office (GSO) in Vietnam. Although

there is a concern that the data from Vietnamese government tends to be overstated, it is not

easy to find data about Vietnam in other sources. According to the data from GSO, there were 21

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amount of FDI from these countries. Among them, British Virgin Islands had no trade with

Vietnam. We also found out that there is little information available about Malaysia and no wage

information available for Denmark, so that we excluded these three countries from the country

set. Three outlier countries (Belgium, Italy, and New Zealand) were taken away because they

had significantly smaller amount of investment compared to other countries. Russia used to

have a special relationship with Vietnam so their investment may not represent typical FDI. So,

Russia was also excluded from our data.

For the analysis of difference depending on region, we divided countries into two

groups considering the important influences of geographic distance and cultural distance on FDI

inflows- Region 1 (called Asian countries) consisting of 7 countries such as South Korea,

Singapore, Taiwan, Japan, Hong Kong, Thailand, and China, and Region 2 (called Non-Asian

countries) consisting of 7 countries such as Australia, Canada, Germany, UK, USA, Netherlands,

and France. Summary statistics of the variables of the two investor groups and Satterthwaite

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Table 2. Descriptive statistic and T-test results between two groups of investors

Variables

Mean (µ) Std Dev (δ) Minimum Maximum t – test

(t ratio)

Asian Non-Asian Asian Non-Asian Asian Non-Asian Asian Non-Asian

FDI (in $US million) $291mil $97mil 433mil 181mil $6.58mil $1.1mil $2,769mil $770mil 2.89*** Relative GDP 0.17 0.03 0.14 0.02 0.006 0.003 0.44 0.09 6.16*** Openness (in $US million) 4021 1646 2427 1784 854 136 10634 8832 5.52*** Relative Wage 0.19 0.3 0.25 0.01 0.007 0.009 0.99 0.07 4.5*** Relative Exchange Rate 1965 16015 2986

(1.32)a 5277 (-0.33)a 11.04 7616 10066 29429 -16.22*** Culture Distance 40.7 69.6 36.9 23.4 10 15 127 108 -4.61*** Geography 2067.9 9984 925.8 1975.5 868 7769 3672 13159 -25.4***

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4.3 Model Specification

The purpose of this study is to examine the determinants of FDI inflows into Vietnam.

The method of investigation in this research is the panel regression. Based on the existing

literature review, we took a set of possible determinants of FDI: relative GDP between

Vietnam and FDI home countries (RGDP), Vietnam import from FDI home countries

(IM), Vietnam export to FDI home countries (EX), total Vietnam import from and export

to countries (OP), relative real wage between Vietnam and FDI home countries (RW),

relative exchange rate between Vietnam and FDI home countries’(REX), culture distance

between Vietnam and FDI home countries(CulD), geography distance between Vietnam

and FDI home countries (Geo), the number of double tax signed by Vietnam (DT), and the

number of bilateral agreement signed by Vietnam (BA).

First, step-wise auto-regression and back-ward method were carried out to find

most related variables to FDI in Vietnam. As a result, only 5 variables were left in the

model representing the economic relationship with FDI such as RGDP, OP, RW, REX, and

CulD. Then, descriptive analyses with five variables (Table 2) also support that these five

variables are significantly related to the amount of FDI at 1% level of significance.

Second, the panel regression models were built for each group using four variables

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distance, the rest four variables have cross-sectional time series characteristic. In addition,

the culture distance was used in the beginning together with the geographic distance to

divide countries into two groups, so that the influences of culture distance have already

studied. Therefore, in this second step, we only considered the main four variables RGDP,

OP, RW, and REX. The following model was constructed to express the relationship of

these four economic variables with FDI inflows:

FDIit = f(RGDPit+, OPit+, RWit

￣

, REXit)

Where i and t denote country and time respectively; FDI: foreign direct investment

denotes the annual real inward registered FDI into Vietnam from country i in year t; RGDPit:

the ratio of real Vietnam’s GDP to real FDI home country i’s GDP in year t; OPit: the sum of

real Vietnam’s exports to and imports from a home country i in year t; RWit: the ratio of

Vietnam’s real wage to a home country i’s real wage; REXit: the ratio of Vietnam’s

currency/US$ real exchange rate to a home country i’s currency /US$ real exchange rate in

year t;

Where “+” and “-“denote the expected effect of the potential determinants of FDI.

Data on amount of FDI, export and import to Vietnam were collected from Vietnam

General Statistic Office (GSO) and the Ministry of Planning and Investment (MPI). Data on

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2007). Information about wages was obtained from IMF International Financial Statistics

(2007). All the wages were converted to US dollars by current exchange rates. For wages in

Vietnam, they were decided based on the experts’ opinion from Vietnam because of the

difficulty of collecting data.

The model can be rewritten as of the form:

FDIit = CAi RGDPitβ1 OPitβ2 RWitβ3 REXitβ4

Therefore, the log-linear form of the above equation is:

ln FDIit = β1ln RGDPit+ β2 lnOPit+ β3 lnRWit + β4 ln REXit+ µit (1)

i = 1… N; t = 1… T

Applying a log-linear can be helpful to deal with several extreme values of FDI

which comes from certain countries in some year. In addition, the use of logarithm may help

to transform a likely non-linear relationship between inward FDI in Vietnam and the

explanatory (Wei, 2005)

It is very obvious that these four independent variables are longitudinal data

observed from different countries within Vietnam over time. Therefore, panel regression

model is the most appropriate way to deal with these kinds of cross section time series data.

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44 regression model is the best statistical model.

Therefore, two panel regression models were built between the amount of FDI and

the four macroeconomic factors mentioned above as independent variables for Asian and

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CHAPTER V

EMPIRICAL RESULTS AND ANALYSIS

5.1 Empirical results – Determinants of FDI in Vietnam

The descriptive statistic and t-test results, as shown in table 2, in the beginning

of the research show that more investment in Vietnam comes from Asian countries than

from Non-Asian countries. The relative GDP and the relative wages of the Asian

countries are lower than those from the Non-Asian countries. The relative exchange

rates and the degree of openness of the Asian countries are higher than those of the

Non-Asian countries. This shows that the bilateral trade between Vietnam and the nine

Asian countries is more than that with the Non-Asian countries. The results of t-tests

reveal that Asian and non-Asian countries show different behavior regarding to the

variables defined before.

After the t-test is conducted, the panel model is adopted to understand the

inward FDI determinants in Vietnam. At first, we conducted the panel model for all 14

countries. However, the results showed insignificant effects for all variables.

Moreover, the R-square was only 30% which is too low to prove that the model can

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understandable since the data used by the model was significantly different inside.

The data included 14 countries with very different characteristics; therefore, the

relationship cannot be studied by pulling all those countries together. The separated

models for each group of investors are necessary, and as shown in the table 3, the

results of the estimation of the models for Asian investors and non-Asian investors are

very significant. The adjusted-R2s which are higher than 80% indicate a good

explanatory power.

Table 3. Panel regression model results

Independent variables Asian Investors Non-Asian Investors All Investors Intercept 12.52***(6.13) 12.65*** (2.72) 13.75*(1.90) Ln(RGDP) 0.15* (1.77) 0.51* (1.69) 0.27 (0.32) Ln (Op) 1.17*** (4.76) 0.24 (1.25) 0.79 (1.23) Ln( RW) -0.17** (-3.01) -0.71*** (-6.63) -0.2 (-0.66) Ln(REX)) -0.18*** (-2.04) 0.2 (0.44) -0.18 (-0.75) R-Square 0.84 0.8099 0.30 M.S.E a 0.2987 0.3063 0.15 D.F.Eb 44 44 93

Notes: t-values are in parenthesis and the asterisks ***, **, and * indicate significance at the 1%, 5%, and 10% levels, respectively.

a

M.S.E: Mean squared error

b

DFE: Degree of freedom

The relative wage and the relative GDP variables are significant and have the

right signs as expected for both Asian and Non-Asian countries. The coefficients for the

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differences between FDI home countries and Vietnam the stronger the incentive for that

FDI home countries to invest in Vietnam and to take advantage of the low wages of her

labor for manufacturing purpose. The positive coefficient for GDP is consistent with

our expectation that if the host country market expands more rapidly than the home

country market, the host country market becomes more attractive and home country

firms become more willing to enter the host country.

The major different determinant is Vietnam’s exchange rate relative to the

home countries. The relative exchange rates have significant negative effect for Asian

countries, but positive though insignificant in the regression functions for Non-Asian

countries. For Non-Asian countries, there are pretty much different between Vietnam’s

currency and Non-Asian country, so the fluctuation of Vietnam’s currency is relatively

small compared to other countries’ currency. When the relative exchange rates between

Vietnam and Non-Asian countries ratio are used, the REX coefficient of variation

become very small as 0.33 comparing to 1.52 that of Asian investors. Therefore, the

REX variable is relatively constant in this case so does not show its effects and become

insignificant in this model. In contrast to Non-Asian countries, the negative significant

effect of exchange rates for Asian countries supporting the theory of “rate-of-return”,

in which the foreign investors get a lower return from invested assets when the host

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The second different determinant is the degree-of-openness. Although they

have positive signs as expected for both groups of investors, the degree-of-openness

in the regression model is significant for Asian investors, but insignificant for

Non-Asian investors. The positive coefficient for the degree-of-openness variable

reflects that the bigger the bilateral trade between Vietnam and other home countries,

the more i FDI inflow there will be from these countries. The insignificance for

Non-Asian investors might be due to the fact that Vietnam is one of place for

Non-Asian investors diversify their risk from other countries, and from the statistic

results, the small amount of Vietnam trade with non-Asian investors might reflect

their unconcern about the degree-of-openness. As a result, the degree-of-openness has

an insignificant influence on the non-Asian investors’ decisions.

In sum, we have labor cost and market size as the important determinants and

have the right expected effects on both Asian and Non-Asian countries. However, the

relative exchange rate and degree-of-openness are only significant for Asian countries.

The exchange rate has a negative correlation with FDI, and that support to the

hypothesis of lower returns on assets for Asian investors when Vietnam’s currency

外人直接投資越南的決定因素

國

立

交

通

大

學

科技管理研究所

碩

碩

碩

碩

士

士

士

士

論

論

論

論

文

文

文

文

外人直接投資越南的決定因素

Determinants of Foreign Direct Investment in Vietnam

研 究 生：阮娜娜

指導教授：虞孝成 教授

中 華 民 國 九 十 七 年 六 月

外人直接投資越南的決定因素

Determinants of Foreign Direct Investment In Veitnam

研 究 生：阮娜娜 Student：Nguyen Thi Nga

指導教授：虞孝成 Advisor：Dr. Hsiao-Cheng Yu

國 立 交 通 大 學

科技管理研究所

碩 士 論 文

ABSTRACT

ACKNOWLEDGEMENTS

Table of Contents

List of Tables

List of Figures

CHAPTER I

INTRODUCTION

1.1 An Overview

1.2 Research Questions

1.3 Contributions

1.4 Research Design

1.5 Research Procedure

CHAPTER II

FOREIGN DIRECT INVESTMENT AND THE ECONOMY IN

VIETNAM

2.1 The Vietnamese Economy: An overview

2.2 Policies and Trends

2.3 Vietnam FDI Sectoral, Regional and Source Countries Distribution

2.4 Findings of Vietnam FDI

CHAPTER III

LITERATURE REVIEW AND THEORETICAL FRAMEWORK

3.1 Theoretical Approaches to FDI

3.2 Determinants of FDI flows

3.3 Theoretical Framework

CHAPTER IV

HYPOTHESIS, MODEL SPECIFICATION, AND METHODOLOGY

4.1 Hypothesis

4.2 Data

4.3 Model Specification

CHAPTER V

EMPIRICAL RESULTS AND ANALYSIS

5.1 Empirical results – Determinants of FDI in Vietnam

研究生：阮娜娜

指導教授：虞孝成教授

中華民國九十七年六月

研究生：阮娜娜 Student：Nguyen Thi Nga

國立交通大學

碩士論文