Revue de littérature: Ref # 1_Impact of the WTO Regime on FDI Flows to Vietnam by Hoang Chi Cuong

Revue de littérature: Ref #1

English Title: Impact of the WTO Regime on FDI Flows to Vietnam : a Gravity Model Approach by Hoang Chi Cuong (Waseda University, Tokyo, Japan, July 2013, Vol. 9, no. /, 961-987.
ABSTRACT: Foreign direct investment (FDI) has taken an important role in Vietnam’s development process since the launch of Renovation in 1986. After Vietnam’s accession to the World Trade Organization (WTO), a large amount of FDI capital flowed into the country, up to 143,950.3 million USD. Wherein, there was a switching of FDI capital from the manufacturing sector to the service one in tandem with a downward trend in the agriculture. Like the previous duration, Vietnam’s FDI capital sources came mostly from Asia-Pacific region and European economies (net capital, technology exporters) probably caused by Vietnam’s integration emphases on dynamic Asia-Pacific region. Geographical location of FDI was characterized by a concentration on the three main key economic regions: the Red River Delta (surrounding Ha Noi, Hai Phong, and Quang Ninh), the Central region (surrounding Da Nang), and the Southeast of the country (surrounding Ho Chi Minh City) owing to good infrastructure, abundance of skillful labor force, and large market size. By constructing a gravity model, using descriptive, quantitative methods and applying them to recent data set by Vietnam’s authorities and the international organizations during the period from 1995 to 2011 of 18 Vietnam’s major country partners, the author finds evidence broadly consistent with the prediction that the WTO has had a positive impact on FDI flows to Vietnam.

Keywords: World Trade Organization (WTO), Vietnam, impact, foreign direct investment (FDI), gravity

FDI Registered Capital in Vietnam

Figure 1 (page xxx) shows the overall trends of FDI inflows into Vietnam by the number of projects, the amount of registered and implemented capital during 1988-2011. Generally, both the number of new licensed projects and registered capital soared rapidly in the first half of the years, and then declined dramatically in second half of the 1990s. FDI picked up in the early years of the new millennium, and then suddenly rocketed after Vietnam joined the WTO. Specifically, from 37 projects and 341.7 million USD registered capital in 1988, these figures reached at 372 projects and 10,164.1 million USD in 1996. The first half of the 1990s is usually referred to as the first “investment boom” period in attracting FDI of Vietnam. In duration of 1988-1995, Vietnam attracted 1,620 investment projects and 19,265.2 million USD registered capital. Compared with the increase of registered capital, implemented capital was far lower at only around 6,517.8 million USD.

Other useful figures

• p. 968, Table 1, FDI by Economic Sections in Vietnam during 1988-2011 
• p.971, Table 2, Top 15 Investors in Vietnam during 1988-2011 
• p. 973, Table 3, FDI by Regions in Vietnam during 1988-2011 

Concluding Remarks and Recommendations

• Government should focus on infrastructure (road, electric, seaport, airports, and water supply), and improve on Investment environment: regulatory reform, administrative procedures reform, apparatus, capacity for cadres and civil servants and administration modernization. 
• Improve Human Resource Capacity 
• Use Marketing and PR to enhance Vietnam international image. 
• More incentives for FDI into disadvantage regions.

(Source: Impact of the WTO Regime on FDI Flows to Vietnam : a Gravity Model Approach by Hoang Chi Cuong (Waseda University, Tokyo, Japan, July 2013, Vol. 9, no. /, 961-987)