Determinants of foreign direct investment from east asian countries into vietnam in the new context

Nội dung text: Determinants of foreign direct investment from east asian countries into vietnam in the new context

1. DETERMINANTS OF FOREIGN DIRECT INVESTMENT FROM EAST ASIAN COUNTRIES INTO VIETNAM IN THE NEW CONTEXT Dr. Vu Thi Yen1 Abstract: This study investigates the factors affecting the movement of foreign direct investment (FDI) into Vietnam from major investment partners in East Asia, including China, Korea, Japan, Hong Kong, Taiwan, in the new context. A secondary panel data set was used in the Gravity model for estimation. The results show that population, exchange rate, import value, geographical distance, and participation in FTAs ​​positively affect the movement of FDI flows from East Asian investors to Vietnam. Besides, the world pandemic uncertainty index (WPUI) has a negative effect on FDI inflows. Keywords: FDI, new context, Covid-19, impact factors, determinants 1. INTRODUCTION FDI plays an important role and has significant contributions to Vietnam’s economic and social development. It contributes to economic restructure and pushes export value through high export growth, product diversification, and export market diversification (CIEM, 2017). In recent years, FDI inflows to Vietnam tend to increase continuously. As a result, Vietnam has become one of the most attractive markets in Southeast Asia regarding FDI attraction. In which critical partners in East Asia (including China, Korea, Japan, Hong Kong, and Taiwan) contribute significantly to the total value of FDI Vietnam. In the past, Vietnam attracted FDI inflows mainly due to promoting the role of the factors of the potential economic development, the advantages of human resources, investment environment favourable, openness economy with preferential policies for foreign investors (Cao Tan Huy, 2019). However, in the current context (international economic integration, US-China trade war, Covid-19 pandemic, global supply chain disruption), many new factors have affected FDI flow. For example, participation in free trade agreements (FTA) or the world pandemic uncertainty (see figure 1) (Thangavelu & Findlay, 2011; My Duong at all, 2020; Ho & Christopher, 2021). To better attract FDI flows into Vietnam, it is necessary to have insights about determinants that promote or constrain this capital inflow. This study provides valuable information for policymakers to design more effective regulations and policies favouring attracting FDI in the future. 1 Thuongmai University; Email: yenvu.tm@gmail.com 623
2. 624 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI Figure 1: World Pandemic Uncertainty Index and FDI (Source: Ho & Christopher, 2021) This study used secondary data regarding FDI from East Asian countries into Vietnam from 2010 to 2020. A suitable econometric model was employed to determine key factors, including some new ones affecting FDI inflows from the major investment partners in East Asia to Vietnam. Results from this study can be used to discuss and give policy implications to attract FDI into Vietnam in the coming time. 2. THEORETICAL FRAMEWORK AND TRENDS OF FOREIGN DIRECT INVESTMENT 2.1. Overview of foreign direct investment Foreign direct investment is an activity that receives a lot of attention from organizations and countries worldwide. Foreign direct investment is an investment carried out to establish long-term economic relationships with an enterprise operating in the territory of another economy. The investor›s purpose is to gain the right to manage the enterprise. (IMF, 1993) According to the Vietnamese Investment Law: Foreign direct investment is a kind of investment in which foreign investors contribute their money or any other property into another country to obtain ownership and management or control rights over an economic entity in the country, intending to maximize their interests (National Assembly, 2005). 2.2. Trends of foreign direct investment in Vietnam The global financial crisis has made FDI flows to developing countries increasingly concentrated in a few economies, including Vietnam and other Southeast Asian countries (UNCTAD, 2019). The movement of FDI inflows to Vietnam also shows a significant effect of the US-China trade war. Some experts predict that at least 20% of production facilities in China will move to other countries in the coming years; nearly 80% of foreign companies are planning and starting to move their production systems out of China. Vietnam is considered a potential destination for this transfer with a large labour force, cheap labour costs and
3. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 625 geographical location close to the supply chain in China. Besides, participation in important FTAs like EVFTA also brings Vietnam many new opportunities in attracting FDI (see figure 2). Figure 2: Average annual growth of net FDI inflows (Source: UNCTAD, 2019) According to the Vietnam’s Foreign Investment Agency (FIA) report, in the period from 2010-2014, FDI registered capital into Vietnam fluctuated continuously and increased slightly from 19.89 billion USD in 2010 to 21.92 billion USD in 2014. Since 2015, the total FDI registered capital into Vietnam has risen strongly, with a total value of 22.7 billion USD. 2017 continues to be a record year for Vietnam’s FDI attraction. FDI value grows nearly doubling in the past four years from $20 billion in 2014 to almost $36 billion in 2017, increasing 44% compared to 2017 with 2016. In 2020 due to the impact of the Covid-19 pandemic, the global economy was seriously affected. It can be seen that the production and business activities of enterprises were affected, so FDI registered capital in Vietnam had a decrease reaching only 31.045 billion USD, down 20.3% compared to 2019. (Figure 3) Figure 3: Annual FDI inflows to Vietnam in the period 1988-2020 Source: GSO & FIA
4. 626 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI According to data from Vietnam’s General Statistics Office (GSO), the country has attracted a total FDI registered capital of over 386 billion USD with a total of 33062 investment projects from countries and regions around the world by the end of 2020. In addition, there are 10 countries committed with investment capital of over 10 billion USD. South Korea is the biggest investor, with a total registered capital of 70.44 billion USD and 8950 investment projects. Investment from this country accounts for 18.2% of total investment capital); following that is Japan with 60.57 billion USD and 4641 investment projects (accounting for nearly 15.7% of total), followed by Singapore, Taiwan, Hong Kong and China, accounting for 14.7%, 9.2%, 6.7% and 4.8%, respectively. Again, this has proven that most FDI flows in Vietnam in recent years have come from investment partners in East Asia. Figure 4: Accumulation of Vietnam’s FDI main counterparts as of 31/12/2020 Source: GSO According to Table 1 below, we can see that FDI from East Asian countries into Vietnam in the period of 2010-2020 always accounted for over fifty percent of the total FDI value into Vietnam. Especially, in 2013, 2014 and 2015 FDI inflows from counterparts in East Asia region into Vietnam accounted for more than ninety percent of the total. Table 1: FDI from East Asian countries into Vietnam, 2010-2020 Percentage/ Korea Japan China Taiwan HongKong Year total Bil USD % Bil USD % Bil USD % Bil USD % Bil USD % % 2010 2.36 11.87 2.04 10.26 - - 0.67012 3.37 0.154 0.77 26.27 2011 1.47 9.42 2.43 15.58 0.747 4.79 0.4577 2.93 2.948 18.90 51.63 2012 1.8 11.01 5.59 34.19 0.312 1.91 0.944 5.77 0.549 3.36 56.25 2013 4.46 19.95 5.682 25.42 2.3 10.29 1.73648 7.77 5.94063 26.58 90.01 2014 7.7 35.13 2.05 9.35 7.9 36.04 1.18 5.38 3.03 13.82 99.72 2015 6.9832 30.76 1.841 8.11 10.174 44.82 1.2275 5.41 1.19618 5.27 94.37 2016 7 26.02 2.589 9.62 1.88 6.99 1.86 6.91 1.64 6.10 55.65 2017 8.49 27.56 9.11 29.58 1.65 5.36 0.683 2.22 1.566 5.08 64.72 2018 7.2 27.38 8.59 32.66 2.5 9.51 1.33 5.06 3.2 12.17 86.77 2019 8.344 21.42 4.169 10.7 4.115 10.56 1.883 4.83 8.178 21 68.52 2020 4.214 13.6 2.9836 9.61 2.6133 8.42 2.2763 7.33 2.1053 6.78 45.74 Source: The author compiled from GSO
5. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 627 In 2020, there are 112 countries and territories investing in Vietnam, of which South Korea is the second big investor with a total investment capital of over 4.214 billion USD, accounting for 13.6% of total investment capital. Japan is the third investor with a total registered investment capital of 2.98 billion USD, accounting for 9.61% of total investment capital. Next are China, Taiwan, and Hong Kong. In terms of new projects, the biggest investor is Korea with 617 projects; the second is China with 360 projects; the third is Japan with 283 projects and Hong Kong ranked fourth with 216 projects. In the context of the Covid-19 pandemic covering all over the globe, it negatively impacts the world economy. As a result, global FDI inflows tend to decrease by 30-40% in value (UNCTAD,2020). In addition, the pandemic also affects FDI inflows into Vietnam (FDI value in Vietnam suddenly falls in 2020). However, it is predicted that FDI inflows into Vietnam will still increase in the post- pandemic. Because benefiting from the moving of production out of China and the advantages of FTAs that Vietnam has signed. 3. LITERATURE REVIEW There are many studies about FDI that have reported in Vietnam and other countries. Many previous studies not only have clarified the critical role of FDI in the economic development of the host country but also pointed out the variety of determinants of FDI, such as studies by Moreira (2008), Nguyen C. et al. (2012), Tran Kim Chung (2015), Nguyen Thi Mai Huong & Tran Thi Mo (2014), Ministry of Planning and Investment, World Bank (2018), Nguyen Chi Dung (2018), Le Xuan Sang (2021). However, there is no consensus among studies on how to indicate the key factor affecting FDI inflows. Most studies show that many different factors influence FDI. The most significant determinants of FDI reported in existing literature are market size, trade openness, infrastructure, human capital, labour costs, investment environment (Abdul et al, 2014; Asiedu, 2002; Reenu & Anil, 2017; Pham Thi Ngoc Anh, 2016; Phan Thi Quoc Huong, 2015). Besides, FDI inflows into host countries depend on significant factors such as natural resources, political risk, total foreign exchange reserves, exchange rate policy and essential macroeconomic variables like GDP growth rate and inflation, etc. (Nguyen Thi Lien Hoa & Bui Thi Bich Phuong, 2014); Nguyen Viet Bang et al, 2016; Nguyen Thi Hong Nhung, 2015). Moreover, in the new context (such as Covid-19 pandemic, US-China trade war, international economic integration, signing of free trade agreements between economies, etc.) Other two factors influencing the movement of FDI inflows include the world pandemic uncertainty index (WPUI) and free trade agreements (FTAs) (Bae C. & Jang Y., 2013); Thangavelu & C. Findlay., 2011; My Duong et al., 2020; Ho & Christopher., 2021). Many studies estimate the influence of FDI inflows in different countries (India, China, Thailand, Pakistan, Vietnam and some other developing countries, etc.). These studies used time series, cross-section and panel data and applied gravity model to analyze the fixed effect and random effect (Nguyen C. et al., 2012; Khachoo & Khan, 2012). Some previous studies used the gravity model on panel data to estimate determinants of FDI inflows into Vietnam. The results showed some essential economic variables, besides that joining the World Trade Organization
6. 628 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI (WTO) and FTA variables also have an impact on FDI inflows in a different way as studies by Vuong Thi Thao Binh (2016), Hoang C. et al. (2015), Nguyen C., et al. (2012), Vinh et al. (2014). However, so far, no specific research has been done to find out the factors that influence the movement of FDI inflows from East Asian countries (China, Korea, Japan, Taiwan, Hong Kong) into Vietnam and evaluate the impact of each factor in the new context. 4. DATA AND METHODOLOGY 4.1. Econometric models and description of the variables Based on previous research results, in this study, the author used a gravity model on panel data of some foreign investment partners in East Asia to assess the impact of factors on attracting FDI from these counterparts to Vietnam in the current context. The gravity model in international economics has been used by some authors such as Tinbergen (1962), Anderson (1979), Bergstrand (1985), to predict FDI flows based on the size of the economy as the gross domestic product (GDP), trade value between the two countries (export and import), and a number of other factors are population, exchange rate, geographical distance, participation in free trade agreements, etc. Using the gravity model in the international economy to analyze FDI flows from East Asian countries into Vietnam is expected to bring accurate and scientific results for further evaluation. This study selects relevant variables for the actual research of this article, then puts them into the specific model for the estimate (see Figure 5) as follows: - The Dependent variable: is the value of FDI from East Asian counterparts into Vietnam - The explanatory variables suggested by the author include: + Market size: Market size in previous studies often used for analysis include population size and total GDP or GDP per capita to reflect the purchasing power of the host country›s people (Tintin, 2013; Reenu & Anil, 2017). Foreign investors are often attracted to host countries with large market sizes because they expect that the larger the market size, the higher the investment efficiency. Thus, in this study, we chose the variable representing the market size: the GDP value and population of Vietnam. + Trade openness: The trade openness of an economy is one of the most significant factors that significantly influence the trade relationship (export and import) between two countries. It can be seen that a country has a more open trade, creates more opportunities for foreign investors, and at the same time strengthens the relationship between the domestic market and the international market. Many previous studies still used import and export value as a proxy for trade openness to estimate (Tintin, 2013). Therefore, in this study, the author also proposes to use the variable representing the trade openness are the value of exports and imports between Vietnam and East Asian countries. + Investment environment is measured by political and macroeconomic stability, fiscal policy, legal framework, quality of infrastructure, etc. (Trinh Viet Hung, 2014). The favourable investment environment is a factor that dramatically impacts attracting investment capital from foreign enterprises into Vietnam. To quantify the variables in the quantitative model, the author uses two variables representing the investment environment factors: the inflation rate of Vietnam and the exchange rate between Vietnam dong (VND) and the currencies of
7. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 629 East Asian countries. In particular, the inflation rate is often considered to indicate the stability of the host country›s macro-economy; this variable is also used to evaluate how the host country›s macroeconomic management policy affects FDI flows. Besides, the exchange rate is used as a fiscal policy tool and is also considered a factor affecting FDI inflows. + Human capital: Human capital refers to the quality of human resources (including education level, skills, experience, the health of workers). A skilled labour-rich must attract more FDI, and then it is considered one of the major determinants of attracting FDI inflows (Reenu & Anil, 2017; My Duong et al., 2020). In this study, the author introduced the human capital variable into the model for analysis and expects that this variable will positively impact FDI inflows from East Asian partners into Vietnam. + Geographical Distance: This is the variable representing trade and transactions costs between two countries, geographical distance, reducing the trade activities, and hindering investment activities between those nations (Chen, 2004 ). The far geographical distance between the investment country and the host country will increase the cost of communications and transactions and cause more risks in the transportation of goods, equipment and transport time-consuming (Frankel, 1997). So that, this variable is predicted to have a negative impact on FDI inflows. + FTA: In the context of international economic integration, countries will actively participate in the signing of bilateral and multilateral FTAs. The results of many studies show that FTAs have an impact on the trade and investment activities of member countries (Baier & Bergstrand, 2007). When countries sign the FTAs, they must improve their institutional system, policies and business environment step by step. This will promote and support foreign investors in the host countries. Therefore, the author expects that the FTA variable will positively impact FDI inflows into Vietnam. + World pandemic uncertainty index (WPUI): Currently, the Covid-19 pandemic is covering the globe and causing adverse effects on the world economy in many aspects, including FDI flows (Ho & Christopher, 2021). Figure 5: Research model Source: Suggested by the author
8. 630 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI The quantitative model that evaluates determinants of FDI from East Asian countries to Vietnam is built based on the gravity model proposed by Bergstrand (1985). The research model with regression equation has the following form: LnFDIjt= β0 + β1ln(GDPvnt) + β2ln(Populationvnt) + β3ln(ExRatejt) + β4ln(Inflationvnt) + β5ln(Importjt) + β6ln(Exportjt) + β7ln(HCvnt) + β8ln(Distancejt) + β9ln(WPUI) + β10FTA + εVNj Inside: FTA is a dummy variable that takes the value of 1 if Vietnam joins a free trade agreement with East Asian countries in year t, takes the value 0 if vice versa. - j: China, Korea, Japan, Hong Kong, Taiwan - t: from 2010 to 2020. - The dependent and explanatory variables are detailed in Table 1 below. 4.2. Data source This study used secondary data on FDI and other relevant data of Vietnam and some significant investment partners in East Asia from 2010 to 2020. The data source is shown in table 2, as follows: Table 2: Definition and data source of variables with expected signs Variable name Definition and data source Symbol Expected sign Annual FDI value from East Asian investment partners into Vietnam, expressed in USD at current prices. FDI FDIjt Source: Foreign Investment Agency (FIA) and GSO. GDP is measured as the total market value of all final goods and services GDP GDP produced in Vietnam in year t, at current prices. Source: GSO. vnt + Measured by the total number of people living in Vietnam in year t. Source: Population Population + GSO vnt Is the ratio of the value of the Vietnamese dong to the currencies of East Exchange rate Exrate + Asian countries. Source: World Bank (WB) jt Vietnam’s inflation rate in year t, measured by the consumer price index Inflation index Inflation (CPI). Source: WB and GSO vnt - Total export value of goods and services from Vietnam to East Asian countries Export value in year t, expressed in USD at current prices. Source: General Department of Export jt + Customs, GSO Total value of goods and services imported from East Asian countries in Import value year t, expressed in USD at current prices. Source: General Department of Import jt + Customs, GSO Measured by the school enrollment of Vietnam in year t. Total is the total Human capital enrollment in secondary education, expressed as a % of the population of H t Cvn + official secondary education age. Source: GSO Geographical Average distance from the capital of Vietnam to the capital of East Asian Distance distance countries. Source: collected from Great Circle Distance Between Capital Cities jt -
9. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 631 World pandemic WPUI is a measure of instability caused by world pandemic (WPUI, 2020). WPUI uncertainty index Source: WPUI (2020 .) - Free trade Is participating in free trade agreements between Vietnam and East Asian FTA agreement countries. Source: World Trade Organization (WTO) + (Note: The “+” sign indicates a positive effect and the “-” sign indicates a negative effect of variables.) Source: Compiled by the author 5. RESULTS AND DISCUSSION The fixed-effect model (FEM) and random effect model (REM) were employed to analyze the panel data (in a period from 2010-2020). Results were presented in table 3 as follow: Table 3: Estimation results for FDI inflows to Vietnam, 2010-2020 Dependent variables (LnFDI) Explanatory variables FEM REM 0.457 0.491 LnGDP vnt (0.0003102) (0.0003116) 0.020 0.003 LnPopulation vnt (0.0024688) (0.0024802) 0.000 0.000 LnExrate jt (0.000673) (0.0006592) 0.215 LnInflation - vnt (0.089913) 0.024 0.001 LnImport jt (0.046861) (0.0451535) 0.154 0.019 LnExport jt (0.0996445) (0.0869024) 0.000 0.000 LnDistance jt (0.0007884) (0.0007857) 0.161 LnHC - vnt (0.002446) 0.000 0.001 LnWPUI (3.72971) (2.663889) 0.003 0.000 FTA (0.6480454) (0.5920846) 0.003 0.948 Constant (2.301404) (6.735992) R-squared 0.7867 0.7652 Hausman P-value = (0.000) Notes: , , * significance levels at 1%, 5% and 10% respectively; Robust standard errors are in parentheses) Source: The author complied The study uses the Hausman-Taylor test to combine the advantages of both FEM and REM methods. The Hausman-Taylor method’s test results are consistent with the two FEM
10. 632 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI and REM methods, which are usually better and more reliable (Mcpherson and Trumbull, 2003). In addition, the Hausman-Taylor test can estimate the variables that are likely to be correlated with the error εVNj in the model and the variables that are fixed over time. Hausman test results show that Prob>chi2 = 0.000 < 0.05, so we reject hypothesis H0 (Hypothesis H0: there is no correlation between explanatory variables and random components). Thus, we have rejected REM and used the fixed effects model (FEM) to assess the influence of the independent variables on the results of FDI attraction from East Asian countries to Vietnam. Although we have shown both FEM and REM results, we have only discussed the results obtained from FEM only because we have accepted this model. FEM shows that R-square = 0.7867 and F-statistic value is zero, which indicates the model is a good fit. The model explains 78.67% of the change in FDI value according to the independent variables, proving that the explanatory variables selected to be included in the model are reasonable. Table 3 shows panel regression results, and it was found that four variables (GDP, Inflation rate, Export value and Human capital) are not statistically significant. It could be explained by: First, the GDP value of Vietnam is not a factor in foreign investors’ investment decisions. Foreign investors may be interested in the population size variable (p-value = 0.020). Because Vietnam has a market of nearly 100 million people with increasing consumer demand. Although income per capita (GDP per capita) is still low compared to other countries in the region, it is expected to increase in the coming time. This will be a large and potential consumption market for foreign investors at present and in the future. Second, in recent years, Vietnam’s macroeconomy has continuously developed stably with good regulation by the Government to control the inflation rate at a reasonable level. Therefore, the inflation rate variable has no impact on the investment decision of foreign investors when choosing the investment environment in Vietnam. Third, the human capital variable in this research model also has no statistical significance. Because in developing countries, especially in Vietnam, FDI projects are still mainly labour- intensive, taking advantage of cheap labour with low qualifications. The coefficient of export value is 0.1457, showing a positive relationship between FDI inflow and export. Still, the relationship was found not statistically significant at a 10 per cent level of significance. However, this finding supports that East Asia investors aim to supply the market of Vietnam instead of other markets. Besides, there are five variables (population, exchange rate, import value, geographical distance and FTA) that positively impact the movement of FDI flows from East Asian countries to Vietnam, while the WPUI has a very negative impact on FDI inflows. The influence of geographical distance on FDI was found to be positive and significant at 1 per cent significance level. It can be seen that the advantage of being located in the centre of Southeast Asia, Vietnam is considered one of the most attractive countries for foreign investors. The close geographical distance to East Asian countries helps investors from these countries save trade and transaction costs when setting up their production factories in Vietnam.
11. INTERNATIONAL CONFERENCE PROCEEDINGS: GLOBAL FDI AND RESPONSES OF FDI ENTERPRISES IN VIETNAM IN THE NEW CONTEXT 633 The estimated coefficient between FTA and FDI is 2.127. This implies that a 1 per cent increase in FTA is estimated to lead to a 2.127 per cent rise in FDI in Vietnam. Thus, this shows a positive and significant relationship between FDI and FTA. The FTA variable has the largest impact on FDI flows from East Asian countries into Vietnam. In the context of international integration, Vietnam is increasingly opening up its economy, actively participating in FTAs, implementing preferential investment policies, creating a favourable environment for foreign investors, therefore helping Vietnam become more and more attractive to foreign investors. The fact that East Asian countries raise their investment capital in Vietnam to take advantage of Vietnam’s import tax incentives and other investment protection commitments is reflected in signing FTAs ​​with Vietnam, which can show the significant impact of FTAs ​​on attracting FDI into Vietnam. It can be seen that, when the deadline for completing Vietnam’s commitments under the FTA gets closer, the more FDI flows from FTA member countries in general and East Asian countries, in particular, will move into our country. And it will grow strongly in both the quantity and quality of investment projects. In contrast to the FTA variable, the WPUI variable has adverse effects on FDI flows to Vietnam. The findings of my study revealed that the coefficient of WPUI is -15.156. This implies that a 1 per cent increase in WPUI is estimated to lead to a 15.156 per cent decrease in FDI inflows. In the context of the Covid-19 pandemic covering the whole world, which negatively impacts the global economy as stagnant production and business activities, raw material shortages, increasing logistics costs, and the broken global supply chain lead to raw material prices going up. This has significantly affected enterprises’ activities, so foreign investors must face financial difficulties and be more hesitant to expand their investment. The Covid-19 pandemic has had a comprehensive and profound impact on all countries and is still evolving in a complicated manner. The global economy fell into a serious recession. Vietnam is a country with a large economic openness and extensive international integration, which has also been affected by the Covid-19 pandemic. Although our country has had initial successful disease control, Covid-19 pandemic has significantly affected all socio-economic fields, disrupting the supply chain, production, and circulation of goods. Many businesses go bankrupt, dissolve, suspend operations, downsize, etc. Then, FDI inflows into Vietnam has dramatically dropped in 2020 and may continue to decrease next time. It can be seen that the change of FDI inflows from East Asian countries into Vietnam in the period 2010-2020 that was estimated through the gravity model can be explained by factors such as: population, exchange rate and import value from East Asian countries, geographic distance, participation in FTAs, and the world pandemic uncertainty especially Covid-19. 6. CONCLUSION AND POLICY IMPLICATIONS The findings from this study show a variety of positive factors impacting the FDI inflows to Vietnam. These factors include market size in which the representative variable is population, investment environment with a representative variable of exchange rate, trade openness with import value variable, geographical distance, FTA and world pandemic uncertainty index. This study also indicates that the negative factor that significantly impacts FDI inflows from East Asia investors into Vietnam is the world pandemic uncertainty index.
12. 634 KỶ YẾU HỘI THẢO KHOA HỌC QUỐC TẾ FDI TOÀN CẦU VÀ ỨNG BIẾN CỦA DOANH NGHIỆP FDI TẠI VIỆT NAM TRONG BỐI CẢNH MỚI This study has significant implications for policymakers and investors. Policymakers might better understand the importance of the primary determinant of FDI reported in this paper and take steps to formulate policies that attract FDI. To enhance the attraction of FDI inflows from East Asian countries into Vietnam and maintain competitiveness with other ASEAN countries, and ensure the sustainability of the received FDI, policies should focus on promoting factors that have positive impacts and restraining factors that negatively impact FDI inflows. As follows: Firstly, it is necessary to improve the domestic investment environment by completing the legal framework on foreign investment to ensure a more open environment and conditions for investors, but still according to Vietnamese law. Furthermore, steps need to be taken to maintain and improve the exchange rate policy, control inflation to ensure macroeconomic stability. Secondly, a positive opening economy and deeper integration into the international market, aiming to export, promote domestic production and welcome foreign investors. Thirdly, continue to negotiate and sign bilateral and multilateral free trade agreements (FTAs), investment agreements with other economies in the region especially those in East Asia and worldwide, to attract FDI from those countries. Besides, the next step is training and developing high-quality human resources to supply for FDI enterprises. Vietnam needs to gradually improve the quality of human resources, especially human resources for high-tech industries that provide human resources for FDI projects. Therefore, reduce progressively labour-intensive FDI projects. Finally, the Government needs to spend all resources on control and repel the Covid-19 pandemic well, maintain domestic production, business activities and support FDI enterprises to overcome difficulties caused by the pandemic. Like any other study, our study also has some limitations. When carrying out this study, we encountered some difficulties in data collection. The lack of data on some variables (such as infrastructure, labour costs, political risk, etc.) makes the author unable to include these variables in the quantitative model for analysis, resulting in limited research results. Future studies should notice this and include data for those variables into their analysis to provide more insightful pictures about the impacts of key factors on attracting FDI flows into Vietnam. REFERENCES: Vietnamese 1. Cao Tan Huy (2019), Factors affecting foreign direct investment attraction: Research on Southeast economic region, PhD thesis in economics, Ho Chi Minh National Academy of Politics. 2. CIEM (2017), Foreign Direct Investment: Some current problems and solutions. 3. Le Xuan Sang (2021), Attracting foreign direct investment to Vietnam in the new context, Financial Journal period 1+2 February 2021. 4. Ministry of Finance, (2018), Tax policy and investment incentives in foreign investment in Vietnam, Proceedings of the 30-year conference on attracting foreign investment in Vietnam.
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