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THE PROBLEM AND ITS SETTING
1 Chapter THE PROBLEM AND ITS SETTING Introduction Tuyen Quang is a mountainous province in the North of Vietnam, 165 kilometers away from the nation’s capital, Hanoi, with geographical position of 21o30' to 22o40' of the Northern latitude and 103o53' to 105o40' of longitude The area of Tuyen Quang is 5,867 km2, of which more than three fourths of the province consists of mountainous and craggy hills Tuyen Quang province borders with Ha Giang province in the North, Bac Kan and Thai Nguyen provinces in the East, Yen Bai province in the West and Phu Tho province in the South It consists of five districts and one town, with 141 communes, wards and townships Vietnam’s prime minister's decision (Decision No 100/2008/QD-TTg July 15, 2008) on approving the overall planning of economic development which includes Tuyen Quang The plan indicates that the said province will reach the following goals by 2020: rapid economic growth and sustainable development, efficient utilization of the potential resources of the province, narrow gradually the gap between fiscal developmental level of the province and to the average of the country, immediate getaway from the less developed provinces ensuring organic relationship with economic development all through out the country, and fast integration with nationwide and regional implementation Economic development is inextricably linked with cultural development because of a balance of both will yield a strong fiscal standing of the nation, thus, improving the quality of human resources Balanced development between regions focusing on developing key economic region is a driving force behind other developing regions and reduces the gap in living standards between the strata To well implement the national policies and poverty reduction policies for disadvantaged areas, there should be a cooperation between the government and the citizens in order to gradually improve the quality of life (Decision no 100/2008/QĐ-TTg July 15, 2008 of Prime Minister Approving the overall planning of economic development - Tuyen Quang province in to 2020 ) In achieving these objectives, there should be measures to improve the environment in order to attract investors through the country’s tourism sector in which capital has important implications in both theory and practice Other factors affecting the growth of Vietnam’s economy are labor, and capital intensive technology are also important Practices that are involved in improving the role of the environment attract investment which stengthens the process of economic and social development in Tuyen Quang province Background of study In the process of industrialization modernization capital investment has always been considered a problem among developing countries How to mobilize sources of capital (both sources inside and outside sources) to meet requirements of the modernization, is always a challenge to the country on the path out of poverty Therefore, competition between countries as well as local authorities in a country to attract foreign investment capital is becoming more heightened International investment is currently a hot issue and an interesting topic in the world International investment contributes to the economic growth and brings positive effects for the countries receiving capital investment and export among countries The role of international investors is becoming significant to the economic development of countries in transition from planning economy to centralized economy like Vietnam To achieve a certain growth both in economic and social demands of these countries, thorough utilization of the resources can be done for the investment to be reasonable and effective Tuyen Quang is entering a new period of development, promoting industrialization and modernization together with strong social democratic civilization In this context the need for capital investment and development is very important and urgent However, in recent years investing in Tuyen Quang are issues that need attention, especially direct investment from abroad As planned, socio-economic development in Tuyen Quang province aims to speed economic growth (GDP) to 14.5% (Decision no 100/2008/QĐ-TTg July 15, 2008 of Prime Minister Approving the overall planning of economic development - Tuyen Quang province in to 2020 ) over the period 2010-2015, of which capital requirements for investment and development is 45,000 billion During this period, budget can only meet about 9000 billion (approximately 20-25%) (Decision no 100/2008/QĐ-TTg July 15, 2008 of Prime Minister Approving the overall planning of economic development - Tuyen Quang province in to 2020) as the rest are investment firms, credit and foreign investment Thus the short term and the long term solution in order to attract more foreign investment capital, especially direct investment from abroad is to create a force that pushes for the economic development Departing from that practice, the researcher intends to conduct a study entitled "Investment Environment in Tuyen Quang Province: A Prospect for Development " Statement of the Problem This study intends to evaluate the investment status and identify investment prospects for the development of Tuyen Quang Province Specifically, it sought to answer the following questions: What are the investors’ profiles in Tuyen Quang Province as indicated by their: 1.1 Type of Business Ownership; 1.2 Nature of Business; 1.3 Business Size; 1.4 Investor's Location; 1.5 Capitalization What is the present investment environment in Tuyen Quang Province in terms of the following factors: 2.1 Political; 2.2 Legal - administration; 2.3 Geographic location and infrastructure; 2.4 Economic and financial; 2.5 Labor What are the problems encountered by the investors in terms of 3.1 Political, 3.2 Legal - administration; 3.3 Geographic location and infrastructure; 3.4 Economic and financial; 3.5 Labor What possible solutions could be proposed to overcome the problems identified and to attract more investors in further developing Tuyen Quang province? Scope and Delimitation The topics related to this study are Economics, Finance, Law and International Relations However, due to the scope time and the research activities will manly focus on direct investment in Tuyen Quang province for 2006-2010 Subjects focused research is investor have licensed investment certificates, and the investment environment time since the government promulgated the general investment law effect in 2006 Significance of Study This study will be beneficial to the following: For the Provincial Level: Research shows that the strengths and weaknesses of the investment environment so that a solution to improve investment environment to attract resources from outside the province such as investment capital, science technology, scientific management also exploit and promote the province's comparative advantage in minerals, forest resources, tourism resources and abundant labor resources of the province Research on the investment environment to provide information on enterprises operating business in the province, review scientific evidence for the leadership of the provincial to building strategy of economic development - social, open reform, poverty reduction, implementation of modernization and modern industrial For communities: Research to detect obstacles in the process of business activities from which to support and removal of difficulties and improve the competitiveness of the business community Improve the investment environment to attract domestic investors and foreign investor in the province also means creating more jobs, raise incomes, improve living standards for people, besides enjoying The main advantage of the welfare projects such as electricity, roads, schools, health For future researchers: This study will help future researchers on research methods, analysis and evaluation of investment environment of the province from which researchers’ future studies will determine the issues for further studies Definition of Terms: Business Size is the maximum capitalization of a project investment Capitalization is the sum of a corporation's long-term debt, stock and retained earnings Direct investment is a form of investment by which investors are participating directly in investment management activities Domestic investment is a form of investment that the investor-owner as well as investment capital - the capital of the country to leave the operating organization and business activities in order to target for profitability and take responsibility for the capital, as well as the results of its business operations Investment environment consists of legal, economic, political, cultural, and social factors which affects directly or indirectly to the operation and foreign investment of a country Foreign Direct Investment is thought to be more useful to a country than investments in the equity of its companies because equity investments are potentially "hot money" which can leave at the first sign of trouble, whereas FDI is durable and generally useful whether things go well or bad (http://www.about.com/) Investment refers to capital in tangible assets or intangible assets Investment law in 2005, defines: Investor is an individual who commits money to investment products with the expectation of a financial return Generally, the primary concern of an investor is to minimize risk while maximizing return, as opposed to a speculator, who is willing to accept a higher level of risk in the hopes of collecting higher-than-average profits.(http://www.investorwords.com/2630/investor.html) Political environment includes all laws, government agencies, and lobbying groups that influence or restrict individuals or organizations in the society Chapter REVIEW OF RELATED LITERATURE AND STUDIES Foreign Literature Investment is defined as any use of resources intended to increase future production output or income Investment is "to spend, to sacrifice" in existing resources to achieve results beneficial in the future In other words, investment is the sacrifice of current benefits for a great benefit of income in the future Resources may be in the form of money, natural resources, labor and intellectual capital The results can be achieved through financial assets, physical assets, intellectual property and human resources qualification and recognition to work with higher productivity in any business entitiy There are many criteria for the classification of an investment; we can divide investors into three main categories: Financial investment which is a type of investment that people lends money or purchases price for certificates with predetermined interest, Trade investment which is a type of investment that people have money to buy goods and sell them for a higher price to earn a profit and Investment in Development in which people carry out activities to create new assets for the economy, increase the potential production of a business and social activities Therefore it is a condition to create jobs and improve the lives of all people in the society Foreign direct investment resources (FDI) 10 Foreign direct investment reflects the objective of obtaining a lasting interest by a resident entity in one economy (‘‘direct investor’’) in a resident entity of an economy other than that of the investor (‘‘direct investment enterprise’’) The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on the management of the enterprise Direct investment involves both the initial transaction between the two entities and all subsequent capital transactions between them and among affiliated enterprises, both incorporated and unincorporated.(www.oecd.org/dataoecd/10/16/2090148.pdf) Balance of Payments Manual: Fifth Edition (BPM5) (1993) and the Detailed Benchmark Definition of Foreign Direct Investment: Third Edition (BD3) (1996 refer FDI to an investment made to acquire lasting interest in enterprises operating outside of the economy of the investor Further, in cases of FDI, the investor’s purpose is to gain an effective voice in the management of the enterprise The foreign entity or group of associated entities that makes the investment is termed the "direct investor" The unincorporated or incorporated enterprise-a branch or subsidiary, respectively, in which direct investment is made-is referred to as a "direct investment enterprise" Some degree of equity ownership is almost always considered to be associated with an effective voice in the management of an enterprise It also suggests that a threshold of 10 per cent of equity ownership is required to qualify an investor as a foreign direct investor Once a direct investment enterprise has been identified, it is necessary to define which capital flows between the enterprise and entities in other economies should be classified as FDI Since the main feature of FDI is taken to be the lasting interest of a direct investor in an enterprise, only capital that is provided by the direct investor either 52 B Internet http:// www.vneconomy.com http://www.investorwords.com/2630/investor.html http://www.oecd.org/dataoecd/10/16/2090148.pdf http://www.wikepedia.com; http://www.baotuyenquang.com.vn ; http://www.tuyenquang.gov.vn http://fia.mpi.gov.vn http://ipc.danang.gov.vn 53 Table FREQUENCY AND WEIGHTED MEAN DISTRIBUTION ON POLITICAL ENVIRONMENT (N = 33) STATEMENTS SD (1) FREQ MD(2) % FREQ % NA(3) FREQ MA(4) % FREQ % SA(5) FREQ % Political environment 1.1 There is an open foreign policy 1.2 there is a reasonable policy 1.3 There is political stability which ensure commitment to investors priority investment 1.4 there is investors policy which favors investors right 1.5 The policies are well defined and clear 1.6 Political situation is consistent 1.7 There is a legal system to petitioner acts of corruption 3,02 12,1 24,2 24,2 10 30,3 9,1 3,0 21,2 11 33,3 12 36,4 6,1 15,2 16 48,5 21,2 12,1 3,0 0,0 21,2 16 48,5 10 30,3 0,0 9,1 21,2 21,2 11 33,3 15,2 0,0 21,2 16 48,5 10 30,3 0,0 3,0 24,2 13 39,4 24,2 9,1 3,0 3,2 2,3 3,0 3,2 3,0 3,1 54 Table FREQUENCY AND WEIGHTED MEAN DISTRIBUTION LEGAL - ADMINISTRATION ENVIRONMENT (N = 33) STATEMENTS SD (1) FREQ MD(2) % FREQ NA(3) % FREQ MA(4) % FREQ SA(5) % FREQ % Legal - administration environment 2,88 2.1 There is an environment which: a Build charter b Calculate fullness and synchronize c Calculate standard and integration d Markedness and righteousness is professed and capability realized 2.2 There is licensing procedure set up an enterprise 2.3 There is land employed policy, water surface favorably, and certificate immediatey at the time of investment 2.4 There is no corruption phenomena and enterprise harassment 2.5 The policies are suitable for plan for economic, political and social development 2.6 There is no distinction between domestic and foreign investors 2.7 there is remission of business income tax 12, 24, 18,2 15,2 27,3 18,2 2,64 21,2 10 30,3 12,1 27,3 18,2 14 42,4 10 30,3 12,1 9,1 2,88 9,1 21,2 12,1 27,3 9,1 2,42 9,1 14 42,4 12,1 27,3 9,1 2,85 9,1 14 42,4 12,1 27,3 9,1 2,85 9,1 14 42,4 12,1 27,3 9,1 2,85 15,2 21,2 12 36,4 12,1 15, 2,91 15,2 24,2 11 33,3 18,2 9,1 2,82 9,1 10 30,3 15,2 11 33,3 12, 3,09 3,48 55 Table FREQUENCY AND WEIGHTED MEAN DISTRIBUTION ON GEOGRAPHIC LOCATION AND INFRASTRUCTURE ENVIRONMENT (N = 33) STATEMENTS SD (1) FREQ MD(2) % FREQ NA(3) % FREQ MA(4) % FREQ % SA(5) FREQ % Geographic location and infrastructure environment 3.1 there is geographic location favouriably, near by big outlets 18,2 15,2 10 30,3 27,3 9,1 2,9 3.2 There is distance nearly when come to sea port and IAP 0,0 11 33,3 13 39,4 21,2 6,1 3,0 21,2 10 30,3 21,2 21,2 6,1 18,2 15,2 10 30,3 27,3 9,1 18,2 15,2 10 30,3 27,3 9,1 18,2 15,2 10 30,3 27,3 9,1 18,2 15,2 10 30,3 27,3 9,1 18,2 15,2 10 30,3 27,3 9,1 15,2 12 36,4 21,2 18,2 9,1 6,1 21,2 24,2 11 33,3 15,2 3.3 There is natual resources source a-plenty 3.4 There is climate and hydrography favouriably 3.5 There are system: a Road Transport (roads and bridges) b Phone c Electrical d Clean Water e Parks, industrial clusters g Internet 2,94 2,6 2,9 2,9 2,9 2,9 2,9 2,7 3,3 56 h Schools i Vocational training for workers 6,1 10 30,3 24,2 27,3 12,1 15,2 15,2 11 33,3 10 30,3 6,1 3,0 2,9 57 Table FREQUENCY AND WEIGHTED MEAN DISTRIBUTION ON ECONOMIC AND FINANCIAL ENVIRONMENT (N = 33) STATEMENTS SD (1) FREQ MD(2) % FREQ % NA(3) FREQ MA(4) % FREQ % SA(5) FREQ % Economic and Financial Environment 4.1 There is open-door policy for economic integration with international economy 4.2 There is banker's credit system 4.3 There is ratio policy suitably 4.4 There is productive money-market 4.5 There is stable exchange rate 4.6 There is stock market 2,57 18,2 27,3 13 39,4 12,1 3,0 21,2 18,2 13 39,4 18,2 3,0 9,1 21,2 11 33,3 24,2 12,1 15,2 12,1 15 45,5 24,2 3,0 18,2 12 36,4 12,1 12,1 9,1 9,1 12 36,4 9,1 24,2 0,0 2,5 2,6 3,0 2,8 2,2 2,0 58 Table FREQUENCY AND WEIGHTED MEAN DISTRIBUTION ON LABOR ENVIRONMENT (N = 33) STATEMENTS SD (1) FREQ MD(2) % FREQ % NA(3) FREQ MA(4) % FREQ SA(5) % FREQ % Labor environment 5.1 There is a source of trained workers highly and sufficiently 5.2 There are source of cheap labor for hire 5.3 There are systematic training with international standards 5.4 There is skilled engineering worker staff 5.5 There is a team of management personnel at middle level 5.6 There is a training strategy pollor market demand 2,74 18,2 27,3 13 39,4 12,1 3,0 2,55 21,2 18,2 13 39,4 18,2 3,0 2,64 9,1 21,2 11 33,3 24,2 12,1 3,09 15,2 12,1 15 45,5 24,2 3,0 2,88 18,2 12 36,4 24,2 12,1 9,1 2,58 9,1 12 36,4 10 30,3 24,2 0,0 2,70 59 Letter to the respondents UNIVERSITY OF SOUTHERN LUZON – THAI NGUYEN UNIVERSITY Jun 01, 2010 Dear Greetings! I am prensently conducting a research study entitled “Assessment of the Investment Environment in Tuyen Quang Province: A Prospect for Development” as partical fulfillment of the requirement for the degree master in Business Administration (MBA) under the international Academe Consortium of the University at Southern Luzon (SLSU) – Philippines and Thai Nguyen University – Viet Nam May I therefore request your very kind consideration by answering the attached survey instruments for the furpose of the study Rest assured that your responser will only be used in this stydy Thank you very much! Very truly yours, HOANG HAI TRUONG (TOM) APPENDIX 60 SURVEY FORM FOR INVESTORS TITLE OF THESIS: “IMPROVEMENT OF INVESTMENT ENVIRONMENT FOR ECONOMY DEVELOPMENT IN TUYEN QUANG PROVINCE" By: Hoang Hai Truong (Tom) Please accomplish this questionnaire carefully and objectively to represent your opinion and it is expected that your answer will be based solely on your conviction, observation and personal experience Kindly indicate your position by checking the box which you believe corresponds to your answer Rest assured that your answer will be treated with utmost confidentiality PART I PROFILE OF RESPONDENTS: Please fill-up all the items in this questionnaire and kindly tick the space that corresponds to your answer Name: Gender: Age: Firm _ Position: _ Location: Type of Business Ownership: Nature of Business: _ Business Size (Scale): _ Capitalization: _ PART II SURVEY QUESTIONNAIRE: Items on the table below intends to describe and evaluate the present investment environment Please rate these items using the given scale below and tick the box that correspond to your answer 61 SCALE DESCRIPTIVE INTERPRETATION 62 Strongly Agree (SA) Moderately Agree (MA) Neither Agree nor Disagree (NA) Moderately Disagree (MD) Strongly Disagree (SA) 63 INVESTMENT ENVIRONMENT Political environment 64 1.1 There is an open foreign policy 1.2 there is a reasonable economic development policy 1.3 There is political stability which ensure commitment to investors priority investment 1.4 there is investors policy which favors investors right 1.5 The policies are well defined and clear 1.6 Political situation is consistent 1.7 There is a legal system to petitioner acts of corruption Legal - administration environment 2.1 There is an environment which: a Build charter b Calculate fullness and synchronize c Calculate standard and integration d Markedness and righteousness is professed and capability realized 2.2 There is licensing procedure set up an enterprise 2.3 There is land employed policy, water surface favorably, and certificate immediatey at the time of investment 2.4 There is no corruption phenomena and enterprise harassment 2.5 The policies are suitable for plan for economic, political and social development 2.6 There is no distinction between domestic and foreign investors 2.7 there is remission of business income tax Geographic location and infrastructure environment 3.1 there is geographic location favouriably, near by big outlets 3.2 There is distance nearly when come to sea port and IAP 65 3- Other Comments: ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ……………………………………………………………………………… Your inputs are highly appreciated Thank you very much! 66 CURRICULUM VITAE PERSONAL Name Date of Birth Place of Birth Address Civil Status Wife Children : : : : : : : HOANG HAI TRUONG November 28, 1979 Tuyen Quang Tuyen Quang town, Tuyen Quang Province Married Nguyen Thi Tuyet Lan Hoang Nguyen Hanh : Hong Thai Elementary School EDUCATION Elementary Minh Xuan District, Tuyen Quang Town Secondary : 1985 – 1990 Hong Thai Secondary School Minh Xuan District, Tuyen Quang Town High School : 1990 – 1994 Chuyen High School Minh Xuan District, Tuyen Quang Town College : 1994 – 1998 Hanoi Commecial University 1998 – 2002 EMPLOYMENT Position : Vice Director, Investment promotion centre Tuyen Quang department investment and planning, Tuyen Quang Province ... geography, history and other link made the basis for selection of investors The economic benefits from FDI The following are the benefits brought by FDI: (1) Employment: While the number of jobs... explains the frequency and distribution is critical to the satisfaction of the business environment in economic and financial activities of the project in the province The indicator, “There is... CONCLUSIONS AND RECOMMENDATIONS This chapter presents the summary of the research, the findings, the conclusions and the recommendations to further improve investment environment in a prospect for the