Đề cương ĐTQT

1) Explain the trends of FDI inflow in Vietnam in the forms of Joint-venture and 100%

foreign-owned enterprise in 1988-2018.

According to Vietnam's Law on Foreign Investment 1987, there were three entry modes
of investment: joint ventures (JV), business cooperation contracts (BCC), and wholly
foreign-owned enterprise - 100% foreign-owned enterprise. The entry modes of inward
FDI have undergone some changes with a clear trend observed.

- In the early stages (1988 - 1992), the dominance of the entry mode of JVs accounted
for over 70% of the total registered FDI projects. The first reason is that in the early
years, foreign investors were unfamiliar with and lacked information about the
Vietnamese investment environment, and state-owned enterprises were the only legal
partners in JVs. Additionally, high transaction and establishment costs made 100%
foreign-owned option prohibitively expensive in many sectors, leaving joint venture as
the only realistic choice for many investors. Another reason for the cooperation between
foreign investors and State-owned enterprises in establishing joint ventures in Vietnam in
the early years was not only that foreign investors tended to rely on State-owned
enterprises for dealing with the authorities and for land use rights, but also because of
the economy uncertainty.

- In the period 2001-2007, there was a diversification of FDI entry modes in Vietnam
when more FDI were entering through either shareholding enterprises or capital-holding
enterprises. The policy reform had significantly improved the investment environment
and foreign investors were then allowed to any form of investment in most sectors. That's
the reason why the number of 100% foreign-owned enterprises exceeded that of Joint
ventures in this period. In detail, by 2007, 100% foreign-owned enterprises accounted for
61.6% of the registered FDI, while joint ventures accounted for only 28.9% of the total
registered FDI.

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- In the period 2008- now: There are about 73% of FDI enterprises in the form of 100%
foreign capital, while the form of joint ventures accounts for only 21.4% (VCCI, 2021).
This shows that FDI investors want to be completely active in the management and
implementation of FDI projects instead of linking joint ventures with Vietnamese
enterprises.

2) Suppose the inward FDI creates both direct and indirect positive impacts on the
host economy, which is more important to the host country? Explain? *

Direct positive impacts:

- Capital formation: Capital formation is used in economic theory, as a modern general

term (thuật ngữ) for capital accumulation, referring to the total "stock of capital" that has
been formed, or to the growth of this total capital stock. FDI is an important source of
financing (tài trợ) for transition economies as it helps to cover (bù đắp) the current
account deficit, fiscal deficit (in case of privatisation-related FDI), and supplements (bổ
sung) inadequate domestic resources to finance both ownership change and capital
formation.

- Job creation and income increase: New jobs are created within the FDI firm and
potentially in supporting industries. In addition, domestic businesses will not hesitate to
pay greater wages to workers if their productivity rises as a result of adopting
multination's production model.

- Increased tax revenue: The host government receives additional tax revenue from the
FDI firm and its employees.

Technology transfer: The FDI firm may transfer advanced technology and know- how to
local partners in the host country. Therefore, local firms can improve productivity and
competitiveness.

- Additionally, FDI directly increases social investment and improves balance of

payments.

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* Indirect positive impacts: Long-term spillover effects: These benefits spread
throughout the host country's economy over time, including:

- Skills development: Local workers gain new skills and knowledge working for the FDI
firm. On the other hand, due to FDI, domestic enterprises get more exposed to (tiếp xúc
nhiều hơn với) overseas markets, and their understanding of those markets grows as a
result. Managers and other qualified staff of domestic enterprises get superior (vượt trội)
management and technical abilities, boosting their productivity. - Infrastructure
improvement: FDI can attract further investment in infrastructure, benefiting the host
country's entire economy.

- Enhanced competitiveness: The host economy becomes more competitive in global

markets due to technological advancement and improved skills.

- Improvement of supporting industries: Through linkages between foreign affiliates

and domestic enterprises, TNC participation may play a catalytic (xúc tác) role in the
development of related industries and, under certain conditions, of an extractive industry
cluster (cụm công nghiệp khai thác).

- Additionally, FDI can provide domestic firms with access to international market
networks, or access to information about international markets.

=> It can be seen that the indirect positive impacts of FDI, while not immediately
apparent, can often lead to more sustainable and long-term benefits for the host
country than the direct impact. Therefore, the indirect positive impact is more
important to the host country.

3) Figure below denotes Mac Dougall-Kempt model, it is supposed that there are two
nations (I, II) in the world, that possess OO’ capital of which Nation I owns OA capital,
Nation II owns O’A capital, (OA>O’A); Nation I confronts FF’ curve being the curve of
value of marginal product of capital (VMPK1), and Nation II does with JJ’ curve
(VMPK2); VMPK2 is higher than VMPK1.

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Please identify:

a. GDP of each Nation before and after the movement of AB capital from Nation 1 to
Nation 2 Change of each Nation’ GDP after the movement of AB capital from Nation I to
Nation II. (Please clearly identify by which area GDP increase or decrease) (10 points)

b. Volume of loss/gain of Nation II’s owners of capital/ owners of other production

factors

after the movement of AB capital from Nation I to Nation II

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 VMPK2 J
F
Nation I Nation II
VMPK1 M
H
N E
R T
C G
J’
F’
O O’
B A
Nation Before After Change

Nation 1 Total output OFGA OFERA increase by ERG

GDP OFGA OFEB decrease by EBAG

Capital owner OCGA ONRA increase by CNRG

Labor owner CFG FNE decrease by CNEG

Nation 2 Total output O'JMA O'JERA increase by ERM

GDP O'JMA O'JEB increase by AMEB

Capital owner O'HMA O'TRA decrease by O'TRA

Labor owner JMH JET increase by EMHT

4. FDI may cause the crowding-in effect on the host country. Explain and give examples
to illustrate

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Crowding-in may take place when the presence of an FDI firm calls in other foreign or
domestic firms in the same area.

The inflow of FDI leads to an increase of the host country’s total capital formation
including foreign and domestic savings. If this one-dollar increase in FDI leads to more
than one dollar increase in total capital formation, “crowding in” occurs through the
stimulation of domestic investment.

The crowding-in effect shows that the output of FDI enterprises is relatively lower than
that of domestic enterprises. Crowding-in can happen if FDI stimulates backward or
forward production linkages in the host country. For example, if the entry of MNCs in the
final product industry increases the demand for domestically produced intermediate
inputs, we could observe an increase in the number of domestic firms providing
intermediate inputs. Crowding-in can also occur due to the spillover effects of FDI. This
happens when foreign firms’ more advanced technology spills over to domestic firms,
enhancing their competitiveness.

Domestic investors can link to FDI investors through cooperation opportunities such as
an investment joint venture between private companies and foreign firms. In some cases,
domestic investors can supply raw materials for FDI investors and get the transfer of
appropriate technologies to decrease costs. It is a crowding-in effect of FDI inflows on
domestic investment

Examples of Crowding-in Effect:

Vietnam's electronics industry: Samsung's major FDI in Vietnam's electronics sector in

the early 2000s attracted a large number of supporting suppliers and manufacturers,
creating a thriving electronics hub. This led to significant investments from foreign and
domestic industry players, propelling Vietnam's export growth.

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5. 4) Figure below illustrates the model of Firm’s Decision, Horizontal axis denotes
market size and Vertical axis denotes price /cost in a host country, Please explain

a. What do C, ACd, ACf curves and M1M1 denote?

C is the transaction cost curve faced by the foreign firm in the host country;

ACd is average cost curve faced by domestic firms in the host country

ACf is the average cost curve faced by foreign firm (ACf= ACd+C) when investing in
the host country;

M1M1 is the market price (including import tax) accepted by consumers in the host
country

b. Supposed the host market size is larger than OA and smaller than OC, which mode of
entry will foreign firm choose? Do you think foreign company like this mode of doing
business? Explain.

If OA < the host market size < OC => license. As the average production cost for
foreign firms is higher than the market price, they will not gain any profit when FDI or
export. Meanwhile, the average production cost for domestic firms is lower than the
market price which means domestic firms can gain profit when producing. Therefore, the
foreign firms will license the domestic one to operate the production

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The licensing mode can have a lot of benefits such as:

 Not too demanding on the company’s resources (good vehicle when capital is
scarce).

 Requires a low commitment to international expansion.

 Access markets that are closed to imports.

 Avoid taxes that might otherwise be levied on a product if exported.

 Governments in the foreign market might prefer licensing arrangements for local
companies.

 Protect intellectual property against cancellation or nonuse.

But it also has some problems. The licensee may not be fully committed to the licensor’s
product or technology. Lack of enthusiasm can impact the success of a product in a
foreign market. Furthermore, some problems may occur if the domestic firm wants to
cheat. Licensing may not be the most profitable way to enter a foreign market, but it does
offer less risk than a direct investment.

c. Suppose that the host country increases import tax, the market price M1M1
(comprising import tax) shifts to M2M2, Which mode of entry will the foreign company
choose if the host country’s market size is OC? Explain

When the host market is at OC, the foreign firms can earn profit as the average cost of
foreign firms is lower than the market price. Therefore, they will stop licensing and direct
invest for operating production (FDI) to take the monopoly advantage.

5) It is argued that FDI brings about positive and negative impacts on the host country’s
environment protection? Give evidence and explain

Positive:

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Directly transferring clean technology to increase usage efficiency fuel, reducing the rate
of emissions and waste.

Apply CDM (Clean Development Mechanism) to reduce total emissions, therefore

creating a win-win relationship between a foreign company and the host country.

Strictly comply with the requirements of the host country on environmental protection
issues

Regarding CDM projects that help protect the host country's environment, Vietnam ranks
4th in the world in terms of the number of projects, with more than 250 CDM projects, in
which there are many projects with the amount of foreign investment being 100% or
close to 100%. The emission reductions confirmed by the CDM Executive Board have
been calculated to be more than 10 million tons, ranking 11th in the world. These projects
not only help protect the environment in Vietnam, but also help the country reduce costs
for emission reduction activities, and create business opportunities for foreign businesses.

Negative:

Industrial waste dump

Technology transfer causing environmental pollution

Depleting energy and natural resources and increasing total emissions

Developing countries are still considered pollution havens. FDI targeting natural
resources and cheap labor is considered to be a drain on natural resources

For example, the case of Formosa Ha Tinh Company causing serious pollution to the
marine environment causing mass fish deaths in April 2016 in 4 provinces of Ha Tinh,
Quang Binh, Quang Tri, and Thua Thien-Hue is a typical example.

Mei Sheng Textiles Vietnam Co., Ltd. was sealed 7 times. Although not licensed, the
company arbitrarily built a dyeing workshop with a capacity of 1,100 tons/year;
arbitrarily drilled 26 wells; illegally exploited more than 2,700 m3 of groundwater every
day, and illegally discharged waste.

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6) FDI may cause both direct and indirect impacts on the host country’s capital
formation. Explain.

Foreign direct investment (FDI) plays a crucial role in financing development, both
directly and, as an external source of capital, and indirectly through its impact on
domestic capital formation.

- Direct impact:

Firstly, the most obvious impact of FDI on host country capital formation is the provision
of capital inflows from abroad into the country. The participation of foreign businesses
brings capital from foreign markets to these countries, thereby providing capital for
economic activities here. This flow of capital comes from all forms of investment and has
both short- and long-term impacts. In countries that do not have the skills to access
capital (for example, in African countries), FDI can contribute to capital formation
directly through investments by subsidiaries.

Secondly, the appearance of foreign enterprises will lead to crowding-in or crowding-out

effects. Regarding crowding-in, foreign enterprises will attract the appearance of other
foreign enterprises or domestic enterprises in the same area. This process helps to
increase capital for host countries directly and also helps domestic enterprises to develop
economically through cooperation with foreign enterprises.

- Indirect impact:

The inflow of FDI leads to an increase in the host country’s total capital formation,
including foreign and domestic savings, consequently increasing investment.

In macroeconomics, we have the formula: (GDP) Y = C + I (investment). With the

participants of M (import) and X (export), we got the new one: M – X = (C+I) – Y. The
above equation shows that, if M - X > 0 (exports are greater than imports), domestic
consumption exceeds GDP. Thus, to balance the balance of payments, the host country
needs to supplement capital from outside through FDI activities.

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Also, since S (saving) = Y - C, M - X = I - S. This means that if investment exceeds
saving, then imports will exceed exports. Therefore, to be able to balance the balance of
payments, the host country needs additional capital from foreign investment to achieve
this goal.

7). Please explain why in certain cases, the host country worries about FDI in the form of
cross-border M&A?

- In additional investment capital: M&A is the transfer of ownership from host country
enterprises to foreign enterprises. Thus, in the short term, the host countries will not be
able to receive new capital immediately. This leads to short-term concerns of the host
country about attracting foreign investment.

- In terms of job creation: unlike GI, M&A cannot create new jobs but also increases the
severity of unemployment in the host country. The competition in finding job
opportunities in M&A enterprises will make this situation more stressful in the short
term.

- In economic restructuring: businesses investing under M&A do not build new

businesses but only continue to operate based on the original ones. This will affect the
economic restructuring process of the host country.

- In competition and national security: in the long run, M&A can cause monopolistic
competition in host countries when enterprises merged or acquired by foreign have many
advantages over other enterprises. domestic industry. In addition, M&A also affects the
security of the host country because the host country's assets will be owned by foreigners.

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8) Host countries impose tax incentives to lure FDI inflow. Thus fiscal incentives may be
an effective measure to attract FDI. Give your opinion and examples to illustrate.

1. What kind of tax conccession

In the policy of attracting foreign capital, financial encouragement is always the central
policy of the countries.

Financial incentives typically include tax rates, tax breaks, credit incentives, fees, and
amortization periods. These are tools that not only create attraction for foreign investors
but also direct them to invest in the development direction of the host country.

The attractiveness of foreign investors depends greatly on the regulation of investment

tax rates. If the investment tax rate is low and reasonable, it will help reduce investment
costs, thereby increasing the chances of getting high profits. In order to encourage foreign
investment in the direction of the host country's development, priority sectors will often
have low tax rates.

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The time limit for investment tax exemption and reduction is also a factor attracting
foreign investors. This time will depend on the competition policy to attract FDI of each
country. In order to increase the attractiveness of the country, the government often
prolongs the tax exemption period for foreign investors. In addition, the countries also
apply import tax exemption policies for machinery, raw materials, ... for investment
projects encouraged in the host country.

Due to this effort, tax incentives have made a certain contribution to motivating and
attracting resources, especially foreign investors, to invest in production and business
development, promote exports and ensure the economic growth.

2. Provide examples.

Vietnam has continuously improved institutions and financial incentives to attract and
better manage foreign investment resources. Fiscal incentives focus on three areas: (i)
CIT incentives, (ii) Import and export tax incentives, and (iii) Land finance incentives.
Since 1987, Vietnam has carried out tax reform in four consecutive stages to attract
foreign investment enterprises.

For the foreign investment sector, the common rate of capital gains tax is 25%. In
addition, there is a lower preferential tax rate of 10%, 15% or 20% applied to projects
that encourage investment. Enterprises operating under the Law on Foreign Investment
are entitled to income tax exemption for up to 4 years from the date of business start, and
a 50% reduction in payable tax amount for the next 4 years (depending on the industry in
which investment is encouraged or the province or area of operation). For some special
cases, the period of income tax exemption can be up to 8 years.

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Câu 4: Phân tích tiến trình và tác động của điều chỉnh chính sách FDI trong tiến
trình hội nhập kinh tế quốc tế của Việt Nam ?

a, Tiến trình điều chỉnh chính sách FDI

Từ khi ra đời luật đầu tư đã được sửa đổi 5 lần (1990, 1992, 1996, 2000, 2005) với mục
tiêu chung làm cho môi trường pháp lý được minh bạch, thông thoáng hơn tăng cường
thu hút nhà đầu tư nước ngoài và hiệu quả sử dụng vốn FDI. Các chính sách được điều
chỉnh gần với thông lệ quốc tế, đảm bảo quyền lợi cho nhà đầu tư và định hướng thu hút
FDI theo chính lược phát triển KT-XH của Việt Nam. Cụ thể, qua quá trình sửa đổi đã có
một số điều chỉnh sau:

Nhóm chính sách liên quan đến luật và thủ tục hành chính

Về lĩnh vực đầu tư, năm 1996 khuyến khích đầu tư vào lĩnh vực định hướng xuất khẩu,
công nghệ cao. Năm 2005, ưu tiên đầu tư vào sản xuất vật liệu, năng lượng mới, sản
phẩm công nghệ cao, CNTT, R&D,..

Về hình thức đầu tư, năm 1987, nhà đầu tư nước ngoài chỉ được kinh doanh qua 3 hình
thức: hợp đồng hợp tác kinh doanh, liên doanh, 100% vốn nước ngoài. Qua nhiều năm
điều chỉnh, hình thức đầu tư trở nên đa dạng hơn, năm 2005 đã có thêm các hình thức
như BOT. BTO, BT, công ty cổ phần, công ty mẹ,…

Về thủ tục đầu tư, thời hạn hoạt động được kéo dài, luật năm 1987 quy định không quá
20 năm, đến năm 1990 không quá 50 năm. Đồng thời đơn giản hóa thủ tục đầu tư và tăng
cường pháp chế, như time trả lời về việc cấp phép và giải quyết thủ tục được rút ngắn,…

Nhóm chính sách liên quan đến tài chính tín dụng : được điều chỉnh nhiều nhất và khá
nhanh vì đây là công cụ để thu hút tăng dường FDI

Về Thuế: Thuế thu nhập doanh nghiệp, thuế chuyển lợi nhuận ra nước ngoài, thuế nhập
khẩu được điều chỉnh nhiều lần vs mức ưu đãi khác nhau nhằm tăng cường thu hút FDI
theo lĩnh vực quy mô, địa bàn và hình thức đầu tư mà nhà nc đã định hướng. VD: thuế
TNDN 32% (1997) xuống 20% (2016); thuế chuyển lợi nhuận về nước 1987 từ 5-10% ,
hiện nay: 3%, miễn giảm một số loại thuế nhập khẩu
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Các quy định về tài chính khác như: mở tài khoản, quản lý ngoại hối, chuyển đổi ngoại tệ
cũng được điều chỉnh theo hướng thuận lợi cho nhà đầu tư hơn.

Nhóm chính sách khác:

Để khuyến khích đầu tư vào lĩnh vực cơ sở hạ tầng, luật đầu tư năm 1996 điều chỉnh
không thu thuế đất với các dự án BOT, nhà đầu tư được hưởng toàn bộ lợi nhuận từ dự án
BT

Luật chuyển giao công nghệ và sở hữu trí tuệ ngay càng minh bạch, lành mạnh, luật đầu
tư năm 1995 được điều chỉnh quy định rõ về các công nghệ được sử dụng,

Về chính sách đất đai: thời gian thuê đất được kéo dài, giá thuê đất được giảm, quyền sử
dụng đất cũng được nới lỏng.

Về bảo vệ môi trường: từ luật đầu tư năm 2005, các chính sách về môi trường được điều
chỉnh theo hướng phát triển bền vừng như có quy định chi tiết về các hành vi bị nghiêm
cấm, gây nguy hại đến môi trường, cụ thể hóa thuế môi trường và phí bảo vệ môi
trường,..

b, Tác động của thu hút của việc điều chỉnh chính sách FDI

+) Tích cực:

Vốn FDI đăng kí, thực hiện và quy mô vốn trung bình mỗi dự án tăng: Trong 34
năm, Việt Nam trở thành một trong những nước thu hút FDI lớn nhất trong khu vực Đông
Nam Á với 36.000 dự án với 524 tỷ USD tổng vốn đăng ký FDI và 251 tỷ USD tổng số
vốn thực hiện.

Thay đổi hình thức đầu tư Hình thức đầu tư 100% vốn nước ngoài gia tăng rõ rệt và
trở thành hình thức đầu tư chính (2022)

Thay đổi FDI theo cơ cấu ngành. Trong các ngành, công nghiệp chế biến, chế tạo là
lĩnh vực thu hút được nhiều nhà đầu tư nước ngoài nhất với tổng số vốn đăng ký 261 tỷ
USD tính đến hết năm 2022

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Thay đổi FDI theo vùng/ địa phương: sau các lần thay đổi chính sách đầu tư, cơ cấu
FDI thay đổi theo ngành có sự chuyển biến tích cực, tất cả 63 tỉnh thành trên cả nước thu
hút được các dự án đầu tư nước ngoài trong đó dẫn đầu là các địa phương TP.HCM, Bình
Dương, Hà Nội

Trình độ công nghệ các doanh nghiệp FDI: nhờ có chính sách khuyến khích, quy định
rõ ràng hơn về công nghệ sử dụng nên trình độ công nghệ trong nước ngày càng được cải
thiện.

Tác động kinh tế:

 Tăng đóng góp của khu vực có vốn đâu tư nước ngoài vào sự tăng trưởng
kinh tế (nhất là từ năm 2005).
 Đóng góp to lớn cho sự phát triển thương mại quốc tế của Việt Nam.
 Tạo việc làm và tăng thu nhập
+) Tiêu cực

- Quá chú trọng vào chính sách ưu đãi FDI nên làm giảm năng lực cạnh tranh của DN nội
địa

- Tác động của sự lan tỏa công nghệ chưa thực sự hiệu quả

- Thiếu sót trong chính sách và thực hiện thu hút FDI dẫn đến chất lượng dự án FDI còn
thấp. Về mặt công nghệ chỉ 5%-6% dự án sử dụng công nghệ cao, 80% sử dụng công
nghệ trung bình , còn lại là công nghệ thấp. =>năng suất thấp, ô nhiễm môi trường

- Chuyển dịch cơ cấu vùng tuy gắn liền với FDI, nhưng cũng nảy sinh rủi ro tạo ra cơ cấu
kinh tế thiếu bền vững. Hoạt động đầu tư trực tiếp nước ngoài còn mất cân đối về cơ cấu
ngành nghề, vùng lãnh thổ.

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