MASTER IN INTERNATIONAL BUSINESS MASTER THESIS "Foreign Direct Investment in Real Estates in Vietnam" Graduate student: Pham Anh Tuan Supervisor: Dr. Ly Dai Hung HÀ NỘI, 2023 ACKNOWLEDGEMENT ---------- I would like to thank the Board of Rectors, International School, Vietnam National University, Hanoi for creating all conditions for me in the process of studying and completing the Master Thesis. I would like to thank the teachers who have dedicatedly taught the Master of International Business (MIB1) class. I would like to express my deep gratitude to my Supervisor, Dr.
Ly Dai Hung, who wholeheartedly helped and guided me throughout the process of writing this Master Thesis. I would like to thank all my friends, colleagues and family who have always supported, encouraged and created the best conditions for me to complete this Master Thesis. Thank you! 1 DECLARATION OF AUTHORSHIP ---------- I hereby declare that this Master Thesis was carried out by myself under the guidance and supervision of Dr. Ly Dai Hung; and that the work contained and the results in it are true by author and have not violated research ethics.
The data and figures presented in this thesis are for analysis, comments, and evaluations from various resources by my own work and have been duly acknowledged in the reference part. In addition, other comments, reviews and data used by other authors, and organizations have been acknowledged, and explicitly cited. I will take full responsibility for any fraud detected in my Thesis. Hanoi, date 21 month 08 year 2023.
Author (signature and full name) 2 Table of Content ---------- List of Figures. 4 List of Abbreviations. Rationale of Thesis .3 Methodology and Data. Structure of Thesis.
Outlines of Thesis. 10 Chapter 2: Theoretical Background. Foreign Direct Investment. Foreign Direct Investment Strategy in Real Estates.
26 Chapter 3: Foreign Direct Investment in Vietnam Real Estates. Foreign Direct Investment in Vietnam Economy. Real Estates Sector in Vietnam Economy. Foreign Direct Investment in Vietnam Real Estates.
67 Chapter 4: Foreign Direct Investment Strategy in Vietnam Real Estates. Foreign Direct Investment Strategy in Vietnam Economy. Foreign Direct Investment Strategy in Vietnam Real Estates. Case Study: Capitaland Strategy in Real Estates in Vietnam.99 3 List of Figures ---------- Figure 3.
FDI in Real Estates in Vietnam. Area of Real Estates Purchased with One Million USD. Share of Real Estates in Total FDI into Vietnam. Correlation between FDI in Real Estate and Economic Growth in Vietnam.91 4 List of Abbreviations ---------- FDI: Foreign Direct Investment FDIRE: Foreign Direct Investment in Real Estates FPI: Foreign Portfolio Investment FTAs: Free Trade Agreements GDP: Gross Domestic Product GI: Greenfield Investment GNP: Gross National Product GSO: General Statistics Office IMF: International Monetary Fund MNEs: Multinational Enterprises M&A: Mergers and Acquisitions USD: United States Dollar VND: Vietnam Dong TNC: Transnational Corporations 5 Chapter 1 Introduction ---------- 1.
Rationale of Thesis The real estates are one crucial sector in an economy, for both advanced and developing economies. According to the Vietnam Ministry of Construction (2023)(1), the real estates account for about 4.5% of output, measured by the gross domestic product (GDP) in 2022. In combination of real estates and the related construction sector, the joint contribution is about 11% of GDP, or about over 30 billion USD in current price. This stylized fact proves the importance of the real estates in the context of Vietnam economy.
Recently, the foreign capital flows into real estates sector have always ranked as top receiving sectors, usually as second or third position in total foreign direct investment in the Vietnam economy. The foreign direct investment (FDI) flows directly affect the real estates sector, and also exert an impact on the Vietnam economic growth rate. And on the process of implementing the foreign direct investment, the foreign investors penetrate the real estates market with various strategies, depending on the location and timing of entering the Vietnam economy. The Vietnam economy is currently an open economy with a quite in-depth international integration.
The trade openness, as the ratio of total exports and imports over GDP, is now nearly 190% (Vietnam General Statistics, 2023). And this economy has signed over 15 free trade agreements (FTAs) and is in process of several trade negotiations with other economies, such as Japan, European Union, China and the Republic of Korea. The international integration also raises an optimistic trajectory for Vietnam to attain more foreign capital inflows in the future. The combination of significant contribution by real estates sector with the prospect of increasing foreign investment opens a research gap in the strategy of 6 foreign direct investment into the Vietnam economy.
And this Master Thesis aims to fill in this gap. Research Objective The Master Thesis aims to investigate the strategy of foreign direct investment into the real estates in Vietnam economy. In particular, the main research question is stated as follows: Which strategies do the foreign direct investment firms employ to operate into the real estates in Vietnam economy? To answer the main research question, the Thesis proposes the following small questions. And the clarification of these small questions will constitute the justification for the main research question.
What is the concept of foreign direct investment and real estates? What is the theoretical mechanism underlying the foreign direct investment into the real estate sector? How can the foreign direct investment firms operate successfully in the Vietnam real estate sector? What are the practical implications for the strategies by the foreign direct investment firms in the Vietnam real estate sector? On answering these questions, the Thesis will also review the theoretical and empirical evidence on the foreign direct investment inflows into the real estates sector, as well as the foreign direct investment firms' strategies in the Vietnam economy. On that basis, the investment is the impact of foreign direct investment into the host country, as well as the foreign strategies carried out by the foreign investors in the Vietnam real estates sector. 7 Finally, the Thesis also provides some discussion about the appropriate public policy to enhance the foreign investment into the Vietnam real estates market.3 Methodology and Data The research method is based on a combination of qualitative analysis and quantitative analysis. The qualitative method examines recent literature on the real estates market, focusing on the context of the Vietnam case as one developing economy.
Then the quantitative method examines the dynamic pattern in the strategies carried out by the foreign direct investment firms in the Vietnam real estates sector. The research data is an annual time series sample of FDI inflows into Vietnam's real estates sector in the period 2006-2022. 2006 was the starting point when Vietnam's economy started joining the World Trade Organization (WTO - World Trade Organization). Since then, Vietnam has experienced two cycles of Vietnamese real estates, the period 2006 - 2014, and the cycle 2014 - 2022 (average of 8 years per cycle).
And the endpoint is 2022 when the Vietnamese economy is recovering from the recent Covid-19 pandemic and is also the latest year with data on foreign investment in the real estates sector. Foreign direct investment (FDI) in real estates is measured by disbursement value in billions of USD at current prices. The contribution to the importance of FDI in real estates in the economy is measured by the proportion of FDI in the real estates sector to total annual FDI in Vietnam. The data on foreign direct investment is obtained from the Foreign Investment Department, Ministry of Planning and Investment (2023)(2).
Economic growth (gGDP) is measured by the growth rate of gross domestic product (GDP) over time at 2010 constant prices. This data is collected from an online database. line of the General Statistics Office (2023)(3). 8 With the collected data, the article calculates the correlation coefficient between the amount of FDI invested in the real estates sector with the economic growth rate over time.
Pearson correlation coefficient (Pearson correlation coefficient, symbol r) (Wooldridge, 2015) is an index that measures the degree of linear correlation between two variables. Usually, the Pearson correlation has a value ranging from -1 to +1. With r = 0: The two variables in the coefficient have no linear correlation. With r = 1 or r = -1: The two variables in the coefficient have absolute linear correlation.
If r < 0: The correlation coefficient is negative. This means that the values of the two dependent variables will be opposite, that is, the value of variable x decreases, the value of variable y increases and vice versa, the value of variable x increases, the value of variable y decreases. If r > 0: The correlation coefficient is positive. This means that the values of two dependent variables go hand in hand, that is, as the value of variable x increases, the value of variable y increases and vice versa, the value of variable y increases, the value of variable x also increases.
With, the collected values of two variables x and y, the calculation formula of the correlation coefficient is as follows: 𝑁𝛴𝑥𝑦 − (𝛴𝑥)(𝛴𝑦) 𝑟= √[𝑁𝛴𝑥 2 − (𝛴𝑥)2 ][𝑁𝛴𝑦 2 − (𝛴𝑦)2 ] Finally , on the graph, if r = -1 the data variables will be distributed on a straight line with a negative slope, r = 1 the data will be distributed on a straight line with a positive slope. Structure of Thesis The Master Thesis intends to carry out an outline with the main idea in each chapter as following. 9 The section discusses the motivation and associated overview of the Thesis on the foreign direct investment into the Vietnam real estates. Chapter 2: Theoretical Background.
The chapter presents the theory about the foreign direct investment and the real estates investment strategy. It examines both the recent theoretical and empirical evidence on the foreign direct investment into the real estates sector. Chapter 3: Foreign Direct Investment in Vietnam Real Estates The chapter deals with the current situation of foreign direct investment into the Vietnam real estates sector with a dataset of Vietnam over 2010-2022. The main trends and key stylized facts about the foreign direct investment would be the focal points in this chapter.
Chapter 4: Foreign Direct Investment Strategy in Vietnam Real Estates The chapter investigates the strategies implemented by the foreign direct investment firms when they enter and operate in the Vietnam economy. The content would focus on common strategies, especially regarding large foreign investment firms. Chapter 5: Conclusion The section summarizes the Thesis and provides more discussion on the appropriate public policy to enhance foreign direct investment into the Vietnam real estates. In particular, the Thesis intends to carry out an in-detail outline as follows.
Outlines of Thesis. Rationale of Thesis 1. Methodology and Data 1. Structure of Thesis 10 Chapter 2: Theoretical Background 2.
Foreign Direct Investment. Foreign Direct Investment Strategy in Real Estates. Chapter 3: Foreign Direct Investment in Vietnam Real Estates 3. Foreign Direct Investment in Vietnam Economy.
Real Estates Sector in Vietnam Economy. Foreign Direct Investment in Vietnam Real Estates. Chapter 4: Foreign Direct Investment Strategy in Vietnam Real Estates 4. Foreign Direct Investment Strategy in Vietnam Economy.
Foreign Direct Investment Strategy in Vietnam Real Estates. Case Study: Capitaland Strategy in Real Estates in Vietnam. Future Research Avenue 11 Chapter 2: Theoretical Background ---------- 2. Foreign Direct Investment.
The capital stock is an important component of the economic growth. A country's total capital requirements are satisfied by not only the internal sources, but also the foreign sources. In particular, the Foreign Direct Investment (FDI) and Foreign Indirect Investment (FII) are the two most common avenues by which foreign investors invest in an economy. The FDI is the investment of foreign investors with the right to manage directly the operation of firms in a foreign country, while FPI means the investment of investors in financial assets without the management right such as stocks and bonds in another country.
