Research the foreign direct investment of south Korea to Vietnam in recent years

Nội dung text: Research the foreign direct investment of south Korea to Vietnam in recent years

1. DA NANG UNIVERSITY OF ECONOMICS FACULTY OF INTERNATIONAL BUSINESS SPECIAL TOPIC RESEARCH THE FOREIGN DIRECT INVESTMENT OF SOUTH KOREA TO VIETNAM IN RECENT YEARS STUDENT: HỒ THỊ VUI CLASS: 42K01.5 ` LECTURER: NGUYỄN ANH TUẤN DA NANG 2019
2. Contents INTRODUCTION iii CHAPTER I OVERVIEW ABOUT FDI 1 1. Definition : 1 2. Forms of FDI 1 3. Factors promoting foreign direct investment 3 4. Benefits of attracting FDI 4 CHAPTER II OVERVIEW OF FOREIGN DIRECT INVESTMENT FLOWS INTO VIETNAM 6 1. Scale of FDI investment in Vietnam 6 2. Investment structure by industry 7 3. Investment structure by economic region 8 4. Investment structure by investment partners 9 CHAPTER III SITUATION OF KOREAN DIRECT INVESTMENT IN VIETNAM 11 1. Overview of Korean FDI 11 2. Economic relationship between Vietnam and Korea 11 3. Scale of Korea FDI investment in Vietnam 12 5. The Impact of Korea’s FDI on the Vietnamese Economy 18 CHAPTER IV Proposals to attract more FDI capital into Vietnam 20 1. Experiences from other countries 20 2. Solutions to improve the efficiency of attracting and using foreign investment capital in the coming time 22 References 25 i
3. LIST OF TABLES Table 1 Vietnam’s foreign direct investment projects in period 2010 - 2018 (General statistics office of Vietnam) 7 Table 2 FDI projects licensed by kinds of economic activity (General statistics office of Vietnam) 8 Table 3 FDI projects licensed in 2018 by cities, provinces and items (General statistics office of Vietnam) 9 Table 4 FDI projects licensed in 2018 by main counters (General statistics office of Vietnam) 10 Table 5: Korea's FDI capital flows into the nation 11 Table 6 Total register investment capital (General statistics office of Vietnam) 13 Table 7 Korea's FDI structure by sectors into Vietnam (General statistics office of Vietnam) 14 Table 8 Structure of FDI by locality of Korea into Vietnam (General statistics office of Vietnam) 16 ii
4. RESEARCH THE FOREIGN DIRECT INVESTMENT OF SOUTH KOREA TO VIETNAM IN RECENT YEARS INTRODUCTION 1. Necessity of the topic Foreign direct investment is now taking place on a global scale with increasing volume and pace of rotation. In addition to promoting domestic resources, taking advantage of foreign direct investment is considered as a smart to shorten the time of initial capital accumulation, creating a solid premise for economic development, especially for developing countries. Therefore, FDI is considered as the "golden key" to open the door of prosperity for nations. In recent years, the number of countries investing in Vietnam has been increasing, especially Korea. This in addition to creating favorable conditions for the country's development such as creating jobs for workers, increasing investment capital for facilities also causes many disadvantages and damages to the economy in the long term. Therefore, the purpose of the study is to find out the impact foreign direct investment into Vietnam. 2. Research objectives: To research the Korean direct investment activities in Vietnam in the recent years 3. Research tasks: Firstly, clarify and deepen the importance of FDI in Vietnam. Secondly, clearly state the status and impact of Korea's FDI in Vietnam. Thirdly, propose some solutions to effectively use FDI capital and attract foreign capital. 4. Research object: The situation of Korean FDI inflows into Vietnam. Space: from the perspective of the state Time: study with data series from 2010-2018 5. Research Methods : iii
5. Methods of data collection: journals, statistics, surveys, Statistical methods, statistical analysis 6. Topic structure: In addition to the preamble, table of contents, list of references, there are also the following chapters: CHAPTER 1: OVERVIEW CHAPTER 2: OVERVIEW OF THE FOREIGN DIRECT INVESTMENT FLOWS INTO VIETNAM CHAPTER 3: SITUATION OF SOUTH KOREAN FOREIGN DIRECT INVESTMENT INTO VIETNAM CHAPTER 4: PROPOSALS TO ATTRACT MORE FDI CAPPITAL TO VIETNAM iv
6. CHAPTER I OVERVIEW ABOUT FDI 1. Definition : The World Trade Organization gives the following definition of FDI: Foreign direct investment (FDI) occurs when an investor from one country (the host country) acquires an asset in another country (the country that attracts the investment) along with the right to manage that asset. The management aspect is what distinguishes FDI from other financial instruments. In most cases, both the investor and the property he or she manages overseas are business entities. In such cases, the investor is often referred to as a "parent company" and the assets are called "subsidiaries" or "branch companies". =>Foreign direct investment is a form of long-term investment by an individual or company of one country in another country by establishing a business or production establishment. The foreign individual or company will take control of this business. 2. Forms of FDI 2.1. Classified by investment nature a. Investment in operating facilities Operating facilities investment is a form of FDI in which the parent company invests in procurement and establishes new business facilities in the host country. This form increases the volume of investment. b. Merger and acquisition Mergers and acquisitions are forms of FDI in which two or more FDI enterprises are merging with one another or one of these enterprises (either operating in the host country or abroad) acquires one FDI enterprises in the host country. This form does not necessarily lead to an increase in the volume of investment. 2.2. Classified by the nature of capital flows a. Stock capital
7. Foreign investors may purchase shares or corporate bonds issued by a domestic company at a level large enough to have the right to participate in the company's management decisions. b. Reinvestment capital FDI enterprises can use profits earned from past business activities to make additional investments. c. Internal debt transactions Between branches or subsidiaries in the same multinational company may lend to each other to invest or buy shares, corporate bonds of each other. 2.3. Divided by the motive of the investor a. Capital to search resources These are capital flows aimed at exploiting cheap and abundant natural resources in the host country, exploiting labor resources that may be low in skills but low in price or exploiting abundant skilled labor resources. This type of capital also aims to exploit brand-name assets in receiving countries (such as famous tourist destinations). It also aims to exploit the intellectual property of the receiving country. In addition, this form of capital also aims to scramble for strategic resources to avoid falling into the hands of competitors. b. Capital to search efficiency This is a source of capital to take advantage of low input costs in receiving countries such as cheap raw material prices, cheap labor costs, prices of production factors such as electricity, water, communication costs, transportation, cheap business premises, preferential tax rates, legal conditions, etc. c. Capital to search the market This is a form of investment to expand the market or keep the market from being lost by competitors. In addition, this form of investment also aims to take advantage of economic cooperation agreements between host countries with other countries and regions, taking the receiving countries as a springboard to penetrate into regional and global markets. . 3. Factors promoting foreign direct investment 2
8. 3.1. Differences in marginal productivity of capital among countries The marginal difference in productivity (the number of extra outputs a manufacturer can produce as a result of an additional unit of production factor) of capital between countries. An excess country often has lower marginal productivity. A country that lacks capital often has higher marginal productivity. This situation will lead to the movement of capital flows from the surplus to scarce places to maximize profits. Because the production costs of surplus countries are often higher than those of capital shortage countries. However, this does not mean that all activities with high marginal productivity are invested in production by enterprises but also important activities, which are vital for enterprises to produce whether that activity gives low marginal productivity. 3.2. Product cycle For most businesses involved in international business, the life cycle of these products consists of three main stages: the new product stage; maturity of products; standardized product stage 3.3. Special advantages of multinational companies Multinational companies have unique advantages (such as basic competencies) that allow them to overcome cost constraints abroad so they are willing to invest directly abroad. When choosing investment locations, multinational companies will choose where the conditions (labor, land, politics) allow them to exert the aforementioned specific advantages. Multinational companies often have a great advantage of capital and technology investing in countries that have available raw materials, cheap labor costs and often a potential consumer market We easily realize the benefits of this. 3.4. Market access and reduced trade conflict Foreign direct investment is a measure to avoid bilateral trade conflicts. For example, Japan is often complained by the United States and Western European countries because Japan has a trade surplus and other countries have trade deficits in bilateral relations. In response, Japan has increased its direct investment in those markets. They manufacture and sell cars and computers in the United States and Europe, to reduce 3
9. exports of these products from Japan. They also invest directly in third countries, and from there export to North American and European markets. 3.5. Exploiting experts and technology It is not that FDI only goes from the more developed to the less developed. The opposite is even stronger. Japan is a country actively investing in the US to exploit a team of experts in the US. For example, Japanese car companies have opened car design departments in the US to employ American experts. The same goes for Japanese computer companies. Not only does Japan invest in the United States, other industrialized countries have similar policies 3.6. Access to natural resources For raw materials, many multinational companies seek to invest in countries with abundant resources. Japan's first major wave of foreign direct investment in the 1950s was for this purpose. 4. Benefits of attracting FDI 4.1. Supplement to domestic capital In theories about economic growth, the capital factor is always mentioned. When an economy wants to grow faster, it needs more capital. If domestic capital is not enough, the economy will want both foreign capital, including FDI. 4.2. Acquire technology and management know-how In some cases, capital for growth despite lacking can still be mobilized partly by "austerity policy". However, technology and management know-how cannot be achieved by that policy. Attracting FDI from multinational companies will provide a country with the opportunity to acquire technology and business management know- how that these companies have accumulated and developed over the years and with great expenses. However, the dissemination of these technologies and management know-how to the whole country to attract investment also depends heavily on the country's absorbing capacity. 4.3. Join the global production network 4
10. When attracting FDI from multinational companies, not only enterprises with investment capital from multinational companies, but even other domestic enterprises having business relations with such enterprises will also participate too. regional labor division process. Therefore, the country attracting investment will have the opportunity to join the global production network to facilitate exports. 4.4. Increase the number of jobs and labor training Because one of the purposes of FDI is to exploit the conditions to achieve low production costs, foreign-invested enterprises will employ many local workers. An increase in the income of a part of the local population will contribute positively to local economic growth. In the process of hiring, training of occupational skills, which in many cases is new and progressive in developing countries that attract FDI, will be provided by enterprises. This creates a skilled labor force for the country to attract FDI. Not only ordinary workers, but also local professionals also have the opportunity to work and be fostered professionally in foreign-invested enterprises. 4.5. Large budget revenue For many developing countries, or for many localities, taxes paid by foreign-invested enterprises are an important source of budget revenue. 5
11. CHAPTER II OVERVIEW OF FOREIGN DIRECT INVESTMENT FLOWS INTO VIETNAM If Vietnam wants to achieve its goals of industrialization and modernization (industrialization and modernization), the most important issue is to mobilize and use foreign direct investment effectively. In recent years, the Government of Vietnam has always attached great importance to attracting investment from abroad. The Government continuously improves the investment environment, facilitating domestic and foreign enterprises, in which attaching special importance to the implementation of the law-making program. 1. Scale of FDI investment in Vietnam According to data of Foreign Investment Agency, from 1988 to October 20, 2017, 63 provinces and cities of our country have received 24,397 FDI projects of 128 countries and territories, with registered capital (there are also effectiveness) 312.9 billion USD, realized capital is 169.05 billion USD. From 1991 to now, realized FDI has increased rapidly: - 1991 - 2000 reached 19,462 billion USD, an average of 1.95 billion USD / year. - 2001 - 2010 reaching 58,497 billion USD, equaling 3 times the previous decade; on average 5.85 billion USD / year. - 2011 - 2016 reached 84 billion USD, equaling 4.55 times in the period of 1991 2000 and 1.43 times 10 years earlier; on average 12 billion USD / year. In 2016, the foreign invested economic sector contributed about 19% of domestic revenue and 19% of GDP; accounting for over 50% of industrial output value, in which oil and gas, electronics, smartphones, mobiphone, electronic components, animal feed, drinks, Have a much higher proportion; accounting for nearly 72% of total export turnover of which the main product is manufactured goods with high added value, trade surplus of about 25% of export turnover of this sector, not only to 6
12. offset the trade deficit of enterprises in countries but also created a trade surplus of nearly 3 billion USD. Foreign direct investment projects licensed in period 1988 - 2018 by Year and Items Number of Total registered capital Implementation capital projects (Mill. USD) (Mill. USD) 2010 1237 19886.8 11000.3 2011 1186 15598.1 11000.1 2012 1287 16348 10046.6 2013 1530 22352.2 11500 2014 1843 21921.7 12500 2015 2120 24115 14500 2016 2613 26890.5 15800 2017 2741 37100.6 17500 Prel. 2018 3147 36368.6 19100 Table 1 Vietnam’s foreign direct investment projects in period 2010 - 2018 (General statistics office of Vietnam) 2. Investment structure by industry Sectors that attract foreign direct investment in Vietnam include agriculture, manufacturing, real estate, The sectors which have been expanded and diversified over time. 7
13. Foreign direct investment projects licensed by kinds of economic activity (Accumulation of projects having effect as of 31/12/2018) by Kinds of economic activity and Items Number of Total registered capital projects (Mill. USD) TOTAL 27454 340849.9 Agriculture, forestry and fishing 491 3455.7 Mining and quarrying 108 4903.8 Manufacturing 13306 195911.4 Electricity, gas, stream and air conditioning supply 119 23092.8 Water supply, sewerage, waste management and remediation activities 70 2658.7 Construction 1593 10091.1 Accommodation and food service activities 734 12025.6 Information and communication 1884 3603.6 Education and training 458 4340.9 Human health and social work activities 142 1970.9 Other service activities 142 78078 Table 2 FDI projects licensed by kinds of economic activity (General statistics office of Vietnam) 3. Investment structure by economic region Foreign investment capital invested in Vietnam is unevenly distributed among provinces. The investment is concentrated in big cities such as Ho Chi Minh City, Hanoi, Da Nang and provinces with developed economies. This increases the local budget, concentrates labor resources, creates jobs, and increases income for people. 8
14. Foreign direct investment projects licensed in 2018 by province by Cities, provincies and Items Number of Total registered capital (Mill. projects USD) WHOLE COUNTRY 3147 36368.6 Red River Delta 1155 14833.5 Ha Noi 640 7547.8 Hai Phong 116 3135.4 Northern midlands and mountain areas 102 1423.1 North Central area and Central coastal area 16 364.7 Da Nang 30 479.8 Quang Nam 15 375.4 South East 29 487 Binh Duong 130 1481.1 Dong Nai 48 2299.9 Ba Ria - Vung Tau 1060 6237.6 Ho Chi Minh City 140 2588.1 Mekong River Delta 92 707.7 Table 3 FDI projects licensed in 2018 by cities, provinces and items (General statistics office of Vietnam) 4. Investment structure by investment partners. The source of investment capital from countries to Vietnam is more and more plentiful to the investing countries. Investment countries are mainly developed or developing strongly in the international market and have close relationship with Vietnam. Previously, Japan was the country with the largest investment capital in 9
15. Vietnam, including ODA and FDI. However, in the past decade, South Korea started to rise and ranked first in terms of total FDI inflows into Vietnam. Foreign direct investment projects licensed in 2018 by main counterparts by Main counterparts and Items Number of projects Total registered capital (Mill. USD) Japan 440 8944.5 Korea Rep. of 1071 7320.5 Singapore 228 5249.9 Hong Kong SAR (China) 174 3252.6 China. PR 408 2531.7 British Virgin Islands 42 1885 Australia 43 609.1 France 40 590.1 United States 88 555.4 Table 4 FDI projects licensed in 2018 by main counters (General statistics office of Vietnam) 10
16. CHAPTER III SITUATION OF KOREAN DIRECT INVESTMENT IN VIETNAM 1. Overview of Korean FDI Korea has investment projects in all regions of the world with projects in 185 countries and territories. In particular, focusing on China countries (total registered capital reached 83.3 billion USD including Hong Kong), United States (76.5 billion USD), Vietnam, Australia, Netherlands, Canada, Indonesia, Regarding investment, Korea invested mainly in manufacturing industry (USD 122 billion of registered capital); mining (85 billion USD); finance and insurance (US $ 41 billion); wholesale and retail (33.7 billion USD); real estate business (26.3 billion USD); professional, scientific and technical services (20.4 billion USD); construction (9.9 billion USD); IT (7.1 billion USD); transportation (5.5 billion USD), accommodation and catering services (5 billion USD), Table 5: Korea's FDI capital flows into the nations 2. Economic relationship between Vietnam and Korea 11
17. Vietnam and Korea are two Asian countries. The two countries established diplomatic relations on December 22, 1992. Over the past years, Korea has always ranked in the top 5 countries with the largest economic relations with Vietnam. The two countries have set up a Korea-Vietnam Intergovernmental Committee on Economic, Scientific and Technical Cooperation to promote bilateral economic cooperation. The two sides signed a number of important agreements such as: Agreement on economic and scientific cooperation (February, 1993), Agreement on encouragement and protection of amended investment (September 2003), In addition, in the past 10 years, South Korea assessed that Vietnam had basically built a cluster infrastructure to develop a number of industries along the product chain such as electricity, electronics, textiles Especially when the two countries signed a bilateral trade agreement in May 2015, the implementation of this agreement will surely lead to more quality and deeper trade and investment cooperation. For example, Vietnam's commitments on investment services and activities to Korean companies under VKFTA. In addition, Korea and ASEAN also signed the first commitment package of the ASEAN-Korea Free Trade Agreement Korea's invested enterprises mainly focus on manufacturing industry, employing a lot of labor and the main exported products. Taking advantage of cheap labor is still the goal of many foreign investors when investing in Vietnam. Korea's FDI capital flows into automobile, motorbike, electronics, civil and export products. South Korean investors invest in Vietnam mainly in the form of 100% foreign invested capital accounting for about 80%, followed by joint-venture enterprises accounting for about 15% and the remaining is contractual contracts business cooperation, It is possible that Korean investors are very careful when investing in partners, and they are very careful in choosing business forms, fields of investment, and locations. 3. Scale of Korea FDI investment in Vietnam Korean investment projects generally perform well, with large average capital scale, higher than the national average (over 40 million USD) and mainly focusing on 12
18. material production. Korean investment projects mainly focus on areas with relatively good infrastructure. The proportion of dissolved projects in Korea is relatively low (about 10%), because Korean investors are very careful in conducting surveys and research before deciding to minimize risks before went into operation. According to GSouth Korea is currently the largest foreign investor in terms of both the number of projects and the total investment capital out of the 112 countries and territories investing in Vietnam. Accumulated to October 2016, the total registered investment capital of Korea from Vietnam reached over 50 billion USD with 5,593 valid investment projects. Korean FDI enterprises play an important role in Vietnam's economy by creating jobs for 70,000 workers and contributing about 30% of the total export value of Vietnam. Korean businesses are doing business methodically in Vietnam and are considered as serious, highly effective investors and also have many contributions to Vietnam. For example, Korea was the country with the most direct investment in Vietnam in 2015, accounting for 24% of the total investment capital in 2015 with various large and small projects across most localities in the country. Next is Japan, Taiwan, Singapore, which are also countries that are expected to have large FDI inflows into Vietnam in the following years. 13
19. 45000 39159.9 40000 37719.3 35000 33185.2 28704.4 30000 25000 18613.3 20000 16185.5 15000 11079.2 10893 8132.5 10000 6809.4 5000 0 USA Japan China Taiwan Malaysia Thailand Singapore Hong kong South Korea BritishVirginlslands Total registered investment capital Table 6 Total register investment capital 2015 (General statistics office of Vietnam) As of November 2015, total Korean FDI accounted for 31.6% of total FDI into Vietnam. If counting the project of Hyosung Group (US $ 660 million, invested through Turkish entity), Korean FDI accounts for 34.9% of total FDI in Vietnam, 4.1 times higher than Japan; 6.2 times Taiwan and 6.8 times Singapore (but the traditional FDI partner ranks 2.3.4 of Vietnam). 4. Structure of Korean direct investment capital into Vietnam 4.1. Investment structure by investment sector 14
20. 10.60% 6.40% 64.50% 18.50% Manufacturing and processing industry real estate business Contruction Others Table 7 Korea's FDI structure by sectors into Vietnam 2015 (General statistics office of Vietnam) According to Vietnam’s Foreign investment agency, in 2015, Korean projects were implemented on 18/21 branches and fields; the leading industry is manufacturing and processing with 2,566 projects with a total registered capital of US $ 24.03 billion (accounting for 64.5% of total investment capital). Real estate business ranked second with 82 projects with a total capital of US $ 6.99 billion (accounting for 18.5% of total investment capital). Construction field ranked third with 579 projects, total investment capital of US $ 2.4 billion (accounting for 6.4% of total investment capital) Among Korean investment projects, there are a number of large projects, focusing on efficient industry, contributing positively to socio-economic stability and development of colonized localities. In the automobile manufacturing industry, there is Vietnam- Daewoo Automobile Company in Hanoi, registered capital of US $ 32.2 million, legal capital of US $ 10 million, which is 100% owned by Daewoo since year. 1996, effective, export products, Daewoo cars market share in Vietnam accounted for 15%; The company has been profitable since 2000. In recent years, Korean-invested enterprises have performed relatively well, although unavoidably difficult due to the fierce competition and Vietnam. Currently committed to cutting taxes within the framework of AKFTA. In addition, local raw materials and spare parts are not sufficient. Supporting industries have not been fully developed, so most of the raw materials and spare parts have to be imported; input costs are still high, the quota 15
21. regime on EU and US markets has limited the production capacity of garment projects, mostly Korean projects affecting the performance. The impact of Korean FDI projects in Vietnam. On the other hand, there are labor disputes in some enterprises with 100% Korean capital which mostly stem from conflicts of economic interests between the parties and working conditions. In general, all cases are handled satisfactorily on the basis of conciliation, negotiation and mutual concessions with the participation of representatives of local competent agencies and agencies. 4.2. Investment structure by region 14% 12.50% 61.40% 12.10% Ha Noi Thai Nguyen Dong Nai Others Table 8 Structure of FDI by locality of Korea into Vietnam 2015 (General statistics office of Vietnam) In 2015, Korea invested in 51/63 cities and provinces nationwide. In which, Hanoi attracted the most investment capital from Korea with 885 projects with a total registered capital of 5.3 billion USD, accounting for 14% of total investment capital, followed by Thai Nguyen with 43 projects. With total investment capital of 4.72 billion USD, accounting for 12.5% of total investment capital, Dong Nai ranks 3rd with a total investment of 4.56 billion USD (accounting for 12.1% of total investment capital). The rest are other localities. 4.3. Results from Korean direct investment in Vietnam a. South Korea has become an important economic partner of Vietnam After establishing official diplomatic relations at the end of December 1992, the economic relations between the two countries had much development. Right from the 16
22. first years of promulgating the Law on Foreign Investment of Korean investors was present in Vietnam. As of now, Korea is the first country among 105 countries and territories investing in Vietnam with 4,777 valid projects with a total registered investment capital of nearly 4.36 billion USD. Investment of Korean enterprises is mainly concentrated in big cities, with relatively good infrastructure conditions such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and concentrated mainly in the industries such as auto assembly, steel, mechanics, electronics, footwear, textiles and construction b. Most large Korean corporations have been present in Vietnam to create jobs for workers Many projects with large investment scale (over 40 million USD) such as Hyundai Shipyard - Vinashin with total investment of 192.6 million USD; Samsung Factory - Vina Synthetics produces fabrics, polyester yarn with total investment of 192.6 million USD; Orion Hanel shaped lamp company with total investment of 178.5 million USD; Deaha Company Limited with total investment of 52 million USD to build 5 star hotel; VSC - POSCO steel production project with a total investment of 56.1 million USD, has contributed positively to the socio-economic development of Vietnam. Korean FDI enterprises play an important role in Vietnam's economy by creating jobs for about 70,000 laborers and contributing about 30% of Vietnam's total export value in 2014. c. Some large projects of over US $ 1 billion in Vietnam in Vietnam - Sam Sung Thai Nguyen High-Tech Complex Project - Phase 2 investors Sam Sung Electronics Vietnam Co., Ltd. Thai Nguyen - Korea, the investment project in Yen Binh I Industrial Park, Thai Nguyen Province with total investment capital registered capital of 3 billion USD; - Project of LG electronics Vietnam Hai Phong Co., Ltd., investor of LG Electronics INC, this project invested in Hai Phong Industrial Zone, Hai Phong province with total registered investment capital of 1.5 billion USD; 17
23. - Samsung Electro-mechanics Vietnam Co., Ltd., the investor of Samsung Electro- mechanics Co., Ltd, the project is invested in Yen Binh I Industrial Park, Thai Nguyen Province with a total registered capital of 1.23 billion USD; - Project of Posco-Vietnam Co., Ltd., investor of Posco Co., Ltd, Korea, the project is invested in My Phu II Industrial Park, Ba Ria - Vung Tau Province with a total registered investment capital of 1.128 billion USD. ; - Project of SamSung Display Bac Ninh Co., Ltd, investor of Sam Sung Display Co., Ltd, the project is invested in Yen Phong I Industrial Park, Bac Ninh province with a total registered capital of 1 billion USD; 5. The Impact of Korea’s FDI on the Vietnamese Economy 5.1. Achievement After more than 10 years of establishing diplomatic relations, relations between the two countries are increasingly developing. Two-way trade turnover always achieved a stable growth of 10-15% / 1 year. In addition to the policy developments, the Vietnamese economy provided a developed infrastructure in designated areas. Further improvements in the Vietnamese economy, such as the accession to the ASEAN and WTO, stimulated not only Korea’s OFDI but also investments from many other countries, mostly in Asia. Consequently, Korea’s FDI in Vietnam has grown extensively over the years, influencing the Vietnamese economy through various channels, like economic growth, employment generation and the transfer of technologies estimation results showed that FDI had a positive effect on labor productivity and economic growth in Vietnam. Data for Vietnam’s provinces showed that FDI, together with domestic investment, human capital, labor force and international trade, had positive effects on economic growth. That brings a huge revenue to the country, paving the way for other countries to continue investing in Vietnam. Creating capital for our country to invest in developing facilities, industrial parks and factories built to create jobs for laborers. Take advantage of the country's strengths and develop its economy. 18
24. 5.2. Limitations There is no denying the benefits that Korea's FDi capital has brought to Vietnam in recent years. However, besides the quiz, there are still some aspects that adversely affect our country. First, allowing Korean businesses to rush to build factories. factories across the country caused mixed reactions from the people. Factories occupy land, causing harm to long-term living environment, failing to build up standards, thus causing harms to workers' health and labor safety. Secondly, the industries that Korea invests in our country are only secondary industries, which need low labor skills, so enterprises pay low salaries, making products with no high value for the economy, causing waste. social resources, disequilibrium among sectors in the economy. And, businesses are mainly invested with 100% foreign capital, so we have difficulty controlling, limited technology transfer, not helping long-term development. 19
25. CHAPTER IV Proposals to attract more FDI capital into Vietnam 1. Experiences from other countries 1.1. China China has mobilized FDI in the form of production contracts, joint ventures, 100% foreign investment capital into special areas. The basic policy to attract Chinese investment is the tax policy. China has issued many separate taxes for investment forms: joint venture, 100% foreign capital for 14 coastal cities. The joint venture pays taxes with 30% and 10% additional income for the localities. For enterprises with 100% foreign capital, the profit tax is from 20-40% and 10% for localities. Regarding import and export duties, China has exempted import taxes on items such as: machinery, equipment, loose parts, materials contributed as joint venture capital, or machinery and equipment from foreign countries. brought in to exploit oil and gas, develop energy, railways, roads, and put into export processing zones. Regarding administrative procedures, China decentralizes strongly to localities on project evaluation and investment licensing. After obtaining the investment license, the procedures related to project implementation were quickly resolved. The ground clearance, electricity supply, water supply, traffic and environment issues have been completely solved. Implementing the "one-door" policy to create favorable conditions for FDI attraction. In addition, China for a longer period may be more than 50 years. 1.2. Indonesia Indonesia encourages investment in export projects, saving foreign currencies, processing finished and semi-finished products, transferring technology, employing experts and Indonesian labor. • About tax policy: 20
26. For profit taxes, if the company has a net profit of 10 million rupees or less, it is taxed at 15%, over 10 million rupees, it is taxed at 25%, over 50 million rupees, the tax is 35%. Interest, rental, resource, technical, and management fees are taxed at 15% on sales. There is no sales and income tax reduction. • Regarding import tax: Indonesia has an import duty exemption or reduction policy on machinery, equipment and parts approved by the investment committee in the list. For export products: The credit interest rate for export is 9% / year, while other interest rates are 18-24% / 1 year. Refunded or exempted from import tax on items. The company that produces the goods for export is not only allowed to export its goods but also other companies. • Regarding market policy: Recently, in order to create a favorable competitive environment, Indonesia allowed all industries except the exclusion list and in bonded warehouses to be free in the domestic market. Indonesia also lifted restrictions and taxes on the use of foreigners. • Regarding administrative procedures: Indonesia simplifies procedures for granting investment licenses, especially industrial investment. 1.3. Thailand The Thai government encourages investors to cooperate with state agencies, exploit resources and protect the environment, labor-intensive projects, labor export, and use Thai raw materials, replacing imported goods, is prioritized by the state. The rate of joint venture capital does not become a mandatory condition. However, for projects that allow Thailand to contribute more than 50% of capital, the investment committee issues guarantee certificates. 21
27. In terms of profit tax, a 30% tax on companies and partners registered on the stock market in Thailand and a 35% tax on companies and other partners. Depending on each project, income tax may be exempted or reduced for 3-8 years after it is profitable. Regarding import tax, enterprises are exempted from 50% of import tax on goods that Thailand cannot produce. Regarding export, enterprises producing export products are exempted from import tax on materials, spare parts, details temporarily imported for re-export, and exempt or reduced income tax by 5%. Enterprises in export processing zones are exempt from import tax on supplies. 2. Solutions to improve the efficiency of attracting and using foreign investment capital in the coming time In the coming time, with the context of the strong 4.0 Industrial Revolution, the orientation to attract FDI in line with the requirements of Vietnam's international economic integration, it is necessary to focus on the following issues: Firstly, to prioritize attracting FDI capital into hi-tech industries, new and advanced technologies, environment-friendly technologies, information technology, telecommunications and electronics, at advanced levels of world, automotive technology, agricultural machinery, construction equipment, industrial equipment, electrical equipment, supporting industries, research and development, financial services, logistics and other modern services. Secondly, identifying FDI attraction is both an opportunity and a challenge, thereby building a mutually beneficial, cooperative relationship. In order to increase the added value per unit of product and increase the "localization" rate, foreign investors should be invested in capital, high technology, advanced and modern, to participate more deeply. production networks and global value chains; Contribute to improving the capacity of innovation, national competitiveness, businesses and products and services of Vietnam. At the same time, it is necessary to strengthen the linkage between the FDI sector and the domestic sector to increase the "localization" rate and the value of 22
28. the products created. Thereby, expanding exports, promoting economic restructuring, associating with innovation of growth model on the basis of Industrial Revolution 4.0. Thirdly, there is a strategy to train managers and technical workers working in FDI enterprises in terms of professional skills, behavior and working attitude. Hone the managerial staff operating in the field of foreign economic skills of market exploitation, business skills and international law Paying attention to salary policies, building trade unions in FDI enterprises to protect the legal rights for Vietnamese workers. Fourthly, continue to improve the system of laws and policies related to investment in the direction of publicity and transparency, ensuring competitiveness compared to other countries in the region. Ensure clarity, detail, ease of application and transparency of procedures to improve the investment environment. At the same time, perfecting legal documents to encourage and create favorable conditions for technology transfer activities, ensuring the effectiveness of state management of this activity, preventing the situation of "price transfer" ”, Evading taxes, evading financial obligations through technology transfer contracts. 23
29. Conclusion After more than 20 years of implementing the economic reform policy, opening up foreign investment attraction, international economic integration box in the region and the world, especially after joining the World Trade Organization, Vietnam has made great achievements in national construction and development. From a poor, backward country, we have gradually established a solid foundation in the near future to gain a foothold in the international arena. With the goal of turning our country into an industrialized country by 2020, the government needs solutions to attract foreign investment, effectively utilize capital, protect the environment and ensure growth in long-term. Invest properly, catch up the trend of social development, should not follow the path, and go after other countries. Maintain good relationships with countries around the world, taking human development as the core for the country's development. Eliminate projects and plots harming the nation, people and the natural environment. 24
30. References 1. The Impact of Foreign Direct Investment on Economic Growth: Evidence from Vietnam 2. The Patterns of Korea’s Foreign Direct Investment in Vietnam Ji Hyun Oh, Jai S. Mah 3. Potential economic impacts of the Vietnam-Korea free trade agreement on Vietnam - Thanh Hoan Phan Assistant Professor, College of Economics, Hue University, Ji Young Jeong Professor, College of Commerce, Chonbuk National University 4. Improving quality of foreign direct investment attraction in Vietnam - Ngo Phuc Hanh, Đao Van Hùng, Nguyen Thac Hoat & Dao Thi Thu Trang 5. General statistics office of Vietnam 6. Vietnam’s Ministry of planning and investment. 25