ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE GRADUATION THESIS Topic: SOLUTIONS TO IMPROVE THE EFFICIENCY IN ATTRACTING FDI IN NGHE AN PROVINCE Instructor: Msc. Nguyen Thi Thuy Linh Student: Nguyen Anh Tu Student number: 5083106553 Class: CLC 8.2 Ha Noi, 5/2021 ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE GRADUATION THESIS TOPIC: SOLUTIONS TO IMPROVE THE EFFICIENCY IN ATTRACTING FDI IN NGHE AN PROVINCE Ha Noi, 5/2021 TABLE OF CONTENTS LIST OF ABBREVIATIONS. 5 LIST OF TABLES AND FIGURES. The need of the subject.
Objectives of the research. Scope of research. Structure of the thesis. 9 CHAPTER 1: LITERATURE REVIEW OF.
10 FOREIGN DIRECT INVESTMENT. Overview of foreign direct investment. Foreign direct investment. Characteristics of foreign direct investment.
Types of foreign direct investment. Forms of foreign direct investment. Impact of foreign direct investment. For home country.
For host country. Factors affecting the ability to attract foreign direct investment. Criteria for evaluating the effectiveness of FDI attraction. Experiences in attracting FDI.
China's experiences in attracting FDI. Ha Tinh's experience in attracting FDI. Lessons for Nghe An Province. 33 CHAPTER 2: SITUATION OF ATTRACTING FDI.
35 IN NGHE AN PROVINCE. General overview of Nghe An province. Economic development situation of Nghe An province. The economic structure.
Advantages and disadvantages of Nghe An province in attracting FDI. Incentive policies to attract FDI. Incentive policies to attract FDI in Vietnam. Incentive policies to attract FDI in Nghe An province.
The situation of attracting FDI in Nghe An. Total value of FDI. Yearly attrated FDI. Foreign investment partners.
Foreign dirrect investment forms. Structure of FDI attraction by economic sectors. New licensing situation. Total investment capital for implementation of foreign direct investment projects in Nghe An province.
Overall assessment of the situation of attracting FDI in Nghe An province. Reasons of limitations. 64 CHAPTER 3: SOLUTIONS TO IMPROVE THE EFFICIENCY IN ATTRACTING FDI IN NGHE AN PROVINCE. Orientation of attracting FDI in Nghe An Province in the period of 2021- 2025.
General orientation of attracting FDI capital of Nghe An province. Solutions to improve the efficiency in attraction FDI in Nghe An province. Reform administrative procedures to create attractive environment to foreign investors. Improve the efficiency of investment promotion.
Strengthen the ability of investment management and investment supervision. Increasing the effectiveness of management, inspection, monitoring, and business assistance. Finalize the policy. Improve the quality of labour.
For the state. For Nghe An province. 79 4 LIST OF ABBREVIATIONS Abbreviation Full meaning FDI Foreign direct investment GRDP Gross Regional Domestic Product ODA Official Development Assistance 5 LIST OF TABLES AND FIGURES Table 2.1: GRDP growth rate of Nghe An province in the period 2011-2020 .2: GRDP per capita of Nghe An province in the period 2010-2020 .3: The economic structure in 2010 and 2020.4: Total accumulated FDI attraction in Nghe An province .1: GRDP growth rate of Nghe An province in the period 2011-2020 .2: GRDP per capita of Nghe An province in the period 2010-2020 43 Figure 2.3: Total accumulated FDI attraction in Nghe An province in the period of 2017-2020 .4: Total accumulated FDI in 2019 of Thanh Hoa, Nghe An, Ha Tinh provinces .5: New FDI attraction in Nghe An province from 2017 to 2020 .6: Foreign direct investment capital in Nghe An province in 2020 by major investment partners.7: Structure of FDI attraction by economic sector in Nghe An province in 2019 .8: New foreign direct investment projects licensed in Nghe An province in the period of 2017-2020. 58 6 ACKNOWLEDGEMENT I would like to express my heartfelt gratitude to my instructor, Msc.
Nguyen Thi Thuy Linh - Academy of Policy and Development, for her assistance in completing my thesis. The person who passionately led and advised me throughout the internship and thesis writing processes. I would like to express my gratitude to all the teachers in the university, particularly the ISEF teachers, who have given me knowledge that will be my future luggage during my studies at the university. Through this page, I would like to show my appreciation and gratitude to everyone who has assisted me during my time at university.
My sincere thanks! Student Nguyen Anh Tu 7 INTRODUCTION 1. The need of the subject Investment is the driving force behind the socio-economic development of every country. In recent years, based on the correct perception of the role of investment, Vietnam's economy has made positive changes in attracting and using investment capital, in which FDI plays a very important role. FDI capital has contributed significantly to the overall achievements of the country's socio- economic development as well as in the process of industrialization and modernization of the country.
The attraction and use of FDI capital to more effectively exploit the inherent potential of the country is an urgent requirement posed in most localities in the country, including Nghe An province. Located in the North Central economic region, with an average economic growth rate of 6.92%/year, higher than the national average, Nghe An province is very attractive to foreign investors. To achieve the present achievements, the province has experienced many ups and downs along with the efforts of the people and leaders of the province. The province has gradually built and successfully completed its socio-economic development plan in the context of maintaining political and security stability.
Moreover, the province also strives in economic restructuring The province, from an agricultural province to an industrial one, continues to contribute more to the national economy and improve the material and spiritual life of the people. However, besides certain successes, activities of attracting FDI in Nghe An province still have many shortcomings and have not exploited the full potential of the province. Realizing the importance of attracting FDI in Nghe An province, I decided to choose the topic: "Solutions to improve the efficiency in attracting FDI in Nghe An province". Objectives of the research Research and evaluate the situation of attracting FDI in Nghe An province.
From there, propose solutions to improve the outstanding problems in the process of attracting FDI capital of the province. Research method In the research process, the author mainly uses these research methods: Data analysis, synthesis and comparison. From there, give suggestions to improve the research problem. Systematization method: This method is used in the theoretical basis of the topic (chapter 1), thereby determining the content to focus on the research of the thesis.
Statistical and comparative method: This method is used in the actual situation of FDI attraction in Nghe An province in chapter 2. Scope of research Space: Nghe An Province Time: From 2019 to 2021 5. Structure of the thesis In addition to the introduction and conclusion, the thesis consists of the following three chapters: CHAPTER 1: LITERATURE REVIEW OF FOREIGN DIRECT INVESTMENT CHAPTER 2: SITUATION OF ATTRACTING FDI IN NGHE AN PROVINCE CHAPTER3: SOLUTIONS TO IMPROVE THE EFFICIENCY IN ATTRACTING FDI IN NGHE AN PROVINCE 9 CHAPTER 1: LITERATURE REVIEW OF FOREIGN DIRECT INVESTMENT 1. Overview of foreign direct investment 1.
Foreign investment According to Investopedia.com, an asset or object purchased with the intention of generating income or appreciation is referred to as an investment. The term "appreciation" refers to an asset's value increasing over time. When a person buys something as an investment, the goal is not to consume it, but to use it to build wealth in the future. An investment always entails the current expenditure of some asset—time, money, or effort—with the expectation of a higher return in the future than what was first invested.
According to the Investment Law (2014) "Business investment is the investment by an investor to carry out business activities through the establishment of an economic organization; capital contribution, purchase of shares or capital contribution of economic organizations; investment in the form of a contract or implementation of an investment project". v Main characteristics of investment are listed below: (i) Risk Factor: Every investment entails some level of risk. It is a crucial element of investing that refers to principal loss, interest and capital payment delays, and so on. The majority of investors prefer to put their money into less risky securities.
(ii) Expectation of Return: The primary goal of investment is to generate a profit. Investors anticipate substantial and consistent income from their money on a regular basis. (iii) Safety: Investors expect their money to be safe. They want to know how much money they'll get back and that their investment or principal will be safe.
10 (iv) Liquidity: Liquidity refers to the ease with which a capital or investment can be sold or converted into cash without incurring a loss. As a result, the majority of investors favor liquid investments. (v) Marketability: Another property of investments is that they can be sold. It refers to the ability to buy and sell securities in the market.
(vi) Stability Of Income: Investors put their money in with a high anticipation of profit. As a result, the return on their investment must be adequate and consistent. According to the Law on Investment of Vietnam (2005): “Foreign investment is the process that foreign investors invest capital in cash and other lawful assets to conduct investment activities in Vietnam”. This is an objective necessity, because it comes from the difference in needs and ability to accumulate capital, the search for an advantageous business place of enterprises.
Currently, there are different investment flows in the world such as: from industrialized countries to developing countries, between developed countries and large international corporations, etc. • Types of foreign investment: Foreign investments can be classed into two types: direct and indirect: (i) Foreign direct investments (FDI) are physical investments and purchases made by a firm in an other country, typically by opening a branch and purchasing buildings, machineries, factories, and other equipment in the foreign country. These forms of investments are far more popular because they are typically regarded as long-term investments that serve to strengthen the outside country's economy. (ii) Foreign indirect invétments (FII): Corporations, financial institutions, and individuals investors make indirect foreign investments by purchasing holdings 11 or positions in foreign enterprises that trade on a foreign stock exchange.
In general, this type of foreign investment is less advantageous because the domestic company can readily sell off their investment very fast, often within days of purchase. This is also known as a foreign portfolio investment (FPI). Indirect investments include not only equity assets such as stocks, but also debt products such as bonds. Foreign direct investment 1.
Definiton FDI is a topic that has received the attention of many scholars and research organizations, so many conceptions of FDI have been proposed. According to the International Monetary Fund (1993), Foreign Direct Investment is defined as an “investment that reflects the objective of obtaining a lasting interest by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the foreign enterprise and a significant degree of influence by the investor on the management of the enterprise.” It is this sought- after element of influence and control that distinguishes direct from portfolio investment. According to the Benchmark Definition of OECD (2008), “Foreign Direct Investment is a category of cross-border investment made by a resident in one economy (the foreign direct investor) with the objective of establishing a lasting interest in an enterprise (the foreign direct investment enterprise) that is resident in an economy other than that of the direct investor.
The motivation of the direct investor is a strategic long-term relationship with the direct investment enterprise to ensure a significant degree of influence by the direct investor in the management of the direct investment enterprise.