THAI NGUYEN UNIVERSITY Socialist Republic of Vietnam SOUTHERN LUZON STATE UNIVERSITY Republic of the Philippines NGUYEN ANH TUAN (English name: Raphaen) Doctoral Dissertation “ENVIRONMENT FACTORS FOR FOREIGN DIRECT INVESTMENT FOR AMERICAN BUSINESS CORPORATION IN THREE MAIN COMMERCIAL CENTERS OF VIETNAM” Scientific supervisor: Associ. Prof. Do Anh Tai Hanoi – 2013 ii ENVIRONMENT FACTORS FOR FOREIGN DIRECT INVESTMENT FOR AMERICAN BUSINESS CORPORATION IN THREE MAIN COMMERCIAL CENTERS OF VIETNAM A Doctoral Dissertation Presented to the Faculty of the Graduate School of Southern Luzon State University in Collaboration With Thai Nguyen University In Partial Fulfilment of the Requirements for the Degree of Doctor in Business Administration NGUYEN ANH TUAN May 2013 Nguyen Anh Tuan Raphaen Thai Nguyen University iii Southern Luzon State University ACKNOWLEDGMENT This research was a process of learning that asked for the involvement of individuals, companies and institutions. During my research period, I received unconditional co-operation from many individuals/organizations, and their support was a key factor in successfully completing the Dissertation. I greatly appreciate the contribution of everyone involved and I apologize to those I do not mention by name. First of all, I am especially grateful to my supervisors, Professor Do Anh Tai, who provided me with valuable guidance and comments throughout the research period. I also thank my supervisor for giving me the opportunity to work in the area of my interest. I would also like to thank the members of the reading for reading the manuscript and for providing me with constructive comments. During the period of data collection, I visited both the Vietnam and US institutions. To begin with, I would like to express my gratitude to the following members of the institutions for their willingness to be interviewed and also for spending time and effort in filling questionnaires: Departments of Planning and Investment (Hanoi, Ho Chi Minh city, Da Nang); Foreign Investment Agency – Ministry of Planning and Investment; I extend especial thanks to the board of Rectors of Hanoi University of Industry for permitting me to follow the doctoral course and great favorable conditions for me to accomplish this doctoral course. I would also like to express my gratitude to Thai Nguyen University, Southern Luzon State University and their professors for organization, support and help during the doctoral course. Nguyen Anh Tuan Raphaen Thai Nguyen University iv Southern Luzon State University I wish to express my sincere thanks to my families for their continual encouragement, love, and prayers for my progress and success. Finally, I am greatly indebted to my wife for her love, moral support, understanding and great encouragement. Hanoi, 8 th June 2013 Nguyen Anh Tuan Nguyen Anh Tuan Raphaen Thai Nguyen University v Southern Luzon State University DEED OF DECLARATION I, Tuan NGUYEN ANH., hereby submit my Dissertation for oral examination, entitled “Environment factors for foreign direct investment for American business corporations in three main commercial ceters of Vietnam””, truthfully declare that the said paper is a product of my original research investigation. The data presented in the paper have clear origin. PhD candidate Nguyen Anh Tuan Nguyen Anh Tuan Raphaen Thai Nguyen University vi Southern Luzon State University TABLE OF CONTENTS DEED OF DECLARATION V LIST OF TABLES XIV LIST OF TABLES XIV LIST OF FIGURES XVI APPROVAL SHEET XX CHAPTER 1 21 INTRODUCTION 21 Backgroundof theStudy 21 StatementoftheProblem 22 Objectives 24 Hypothesis 25 Scopeandlimitationofstudy 25 Significanceofstudy 26 Definitionterms 27 CHAPTER 2 32 REVIEWOFLITERATUREANDRELATEDSTUDIES 32 1. FOREINDIRECTINVESTMENT(FDI)THEORY 32 1.1. Concept and features 32 1.1.1. Concept 32 1.1.2. Features 33 1.2. FDI classification 35 1.2.1. Joint – venture company 35 1.2.2. Enterprise with 100% foreign capital 36 1.2.3. Business cooperation contract 37 Nguyen Anh Tuan Raphaen Thai Nguyen University vii Southern Luzon State University 1.2.3. Other forms of FDI 37 1.3. Roles of foreign direct investment 40 1.3.1. Impact of FDI on investors and investor’s country 40 1.3.2. Impact of FDI on investment receiving country 41 2. OVERVIEW OF INVESTMENT ENVIROMENT 46 2.1. Concept 46 2.2. Characteristics of the investment environment 47 2.2.1. Synthetic feature 48 2.2.2. Mobile (dynamic) feature 48 2.2.3. Openness feature 48 2.2.4. Systematic feature 49 2.3. Classification of investment environment 50 2.3.1. Classification by national management function 50 2.3.2. Classification by channels of factors affecting investment activity 50 2.3.3. Classification by constituent elements 50 2.3.4. Classification by scopes 50 2.3.5. Classification by phases of formation and investment activities 51 2.3.6. Classification by causes for capital flows 51 3. IMPACT OF INVESTEMENT ENVIRONMENT ON FDI ATTRATION 51 3.1. Factors from investment environment in the host country countries 51 3.1.1. Natural environment 51 3.1.2. Politic environment 52 3.1.3. Law and policy environment 53 3.1.4. Economical environment 54 3.2. Factors from invironment in investor’s countries 56 Nguyen Anh Tuan Raphaen Thai Nguyen University viii Southern Luzon State University 3.2.1. Macroeconomic policy 56 3.2.2. International legal for oversea investment 57 3.2.3. Economic, scientific and technological potential 58 3.3. Factors from international investment environment 59 3.3.1. General trend of cooperation between regions and countries 59 3.3.2. General trend of regional lingkage and globalization 59 3.3.3. Establishment and development of transnational companies 60 4. ATTRACTING FDI EXPERIENCE WORLD-WIDE 62 4.1. Attracting FDI experience of some countries 62 4.1.1. China 62 4.1.2. Malaysia 64 4.1.3. Thailand 66 4.1.4. Singapore 67 4.2. Experience for Vietnam 68 4.3. Role of FDI on socio-economic development in Vietnam 70 4.3.1. Enhancement of investment capital 70 4.3.2. Promotion of economic structure transfer, work creation for employee 70 4.3.4. Contribution of infrastructure and techniques forming for the industrialization and modernization process 71 4.3.5. Contribution of national budget increase 72 5. REVIEW OF RELATED STUDIES 72 6. CONCEPTUAL FRAMEWORK 75 CHAPTER 3 77 METHODOLOGY 77 1. RESEARCH DESIGN 77 Nguyen Anh Tuan Raphaen Thai Nguyen University ix Southern Luzon State University 2. LOCATION OF THE STUDY 79 4. SAMPLE SIZE AND SAMPLING TECHNIQUE 81 5. DATA COLLECTION PROCEDURE 83 Figure 2. Data collection process 85 6. STATISTICAL ANALYSIS 86 CHAPTER 4 87 RESESULT AND FINDINGS 87 1. RESEARCH BACKGROUND - AN OVERVIEW OF FDI ENVIRONMENT IN VIETNAM AND THE UNITED STATE 87 1.1. General investment environment of Vietnam 87 1.1.1. Politic environment 87 1.1.2. Geographic and Infrastructure environment 89 1.1.3. Economical and Financial Environment 92 1.1.4. Institutional and Administrative Management environment 95 1.1.5. Labor environment 96 1.2. Trend of FDI attraction in Vietnam 98 1.2.1. Economic growth forecast for Vietnam 98 1.2.2. Comments about FDI from the U.S in Vietnam during 2013 – 2020 99 1.3. POLICIES OF THE U.S ON ABROAD INVESTMENT 102 1.3.1. Summary of the United States 102 1.3.2. Practice of FDI from the US in Vietnam 110 2. RESULTS OF SURVEY ON FDI ENVIRONMENT IN VIETNAM 119 2.1. Foreign Enterprise’s Assessement 120 2.1.1. Process of receiving a project under OSS (One-Stop-Shopping) mechanism 120 Nguyen Anh Tuan Raphaen Thai Nguyen University x Southern Luzon State University 2.1.2. Infrastructure 121 2.1.3. Investment supporting policy 121 2.1.4. Rapid work clearance 122 2.1.5. Ensurement of supplying raw materials, supporting industries 122 2.1.6. Review of foreign investors about the attractiveness for FDI 123 2.2. The State administrator’s assessement 125 2.2.1. Politic evironment 125 2.2.2. Institutional and management environment 126 2.2.3. Geographic and infrastructure environment 127 2.3. Foreign investor’s assessement 128 2.3.1 Evaluating the reliability of statistic data 128 2.3.2. Descriptive statistics 134 2.3.3. ANOVA analysis 135 2.3.4. Hypothesis Testing 139 2.3.5. Factor analysis on regression model 142 CHAPTER 5 147 CONCLUTIONS AND RECOMMENDATIONS 147 1. CONCLUSIONS 147 2. RECOMMENDATION FOR ATTRACTING THE U.S FDI 150 2.1 Shorterm solutions 151 2.1.1. Politic environment 151 2.1.2. Institutional- Administrative Management 151 2.1.3. Geographic- Infrastructure 153 2.1.4. Economic- Finance 155 2.1.5. Solutions related to human resources 159 [...]... effective voice in the management of that business According to the 2005 Investment Law of Vietnam, "Direct investment is a form of investment when investors invest and participate in an active investment management" and "foreign investors are foreign organizations or individuals put capital to carry out investment activities in Vietnam ", which can be understood as forms of foreign investors which invest and... individuals to implement investment activities in Vietnam" Enterprises with foreign investment capital includes enterprises founded by foreign investors for carrying out investment activities in Vietnam; Vietnam enterprises which are belong to foreign investors from shares buying, merger, acquisition activities" Investment activities are activities of investor in the investment process, including investment. .. studying investment environment for attracting FDI from USA to Vietnam in 03 major cities (Hanoi, Danang, Hochiminh city) The investment environment includes investment environment in the host countries, investment environment in domestic country and international investment environment Among three components of investment environment, the receiving country can actively control only the domestic environment. .. investment is "a form of investment by investors to invest and participate in active investment management" Indirect investment is "a form of investment through purchase of shares, stocks, bonds and other valuable papers, securities and investment funds through other intermediary financial institutions, not directly involved in the management of investment activities" Foreign investors is international organizations... compared to other forms of indirect foreign investment Fourth, FDI is a form of direct investment by foreign investors who bring capital to invest in other countries So, other than loans, FDI in the host country is not ought to refund and does not create debt burden of the national debt This is an advantage over other forms of foreign investment Bringing capital from abroad investors into the country... case, the investment activities in foreign countries are considered as direct investment when the company manages directly assets and shares; investment capital is part of investor company’s assets in the investment countries Third, in consideration of activity scope: FDI is done mainly in the form of subsidiaries or joint ventures under multinational companies Thus, FDI can be defined as the business. .. characteristics of investment; otherwise it also has its own characteristics as follows: First, FDI investors are owners of capital, foreign nationality, investing in another country so foreign investors must abide by the laws of the investment receiving country Investors involved directly in the organization, management, administration and use of investment capital They have the rights and obligations of business. .. (foreign investors or parent foreign companies) in an enterprise in an economy other than the economy of foreign investors (enterprises with 100% foreign- owned, joint ventures or foreign subsidiaries) According to the IMF, foreign direct investment is investment made to acquire long-term interest in an enterprise which operates in an economy other than the economy of the investor The goal is for effective... focused investment environment of Vietnam Among the factors of investment environment of Vietnam, there are stable or barely changed factors such as the natural environment, the political environment Therefore, the Dissertation focuses on the factors of investment environments to which the Government has heavily influenced, including: environmental policy, law, administrative procedures; economic environment; ... improvement of investment environment which is more and more increasingly attractive and competitive compared with other countries in the region A survey on 63 US investors, 30 state management agencies and 99 FDI enterprises was carried out in three main commercial centers of Vietnam (Hanoi, Da Nang, Ho Chi Minh city) in order to find advantage and/or disadvantage of subfactors of investment environment in Vietnam, . AMERICAN BUSINESS CORPORATION IN THREE MAIN COMMERCIAL CENTERS OF VIETNAM Scientific supervisor: Associ. Prof. Do Anh Tai Hanoi – 2013 ii ENVIRONMENT FACTORS FOR FOREIGN DIRECT INVESTMENT FOR AMERICAN BUSINESS. entitled ENVIRONMENT FACTORS FOR FOREIGN DIRECT INVESTMENT FOR AMERICAN BUSINESS CORPORATION IN THREE MAIN COMMERCIAL CENTERS OF VIETNAM , prepared and submitted by Nguyen Anh Tuan in partial. carried out in three main commercial centers of Vietnam (Hanoi, Da Nang, Ho Chi Minh city) in order to find advantage and/or disadvantage of sub- factors of investment environment in Vietnam, then