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Determinants of Foreign Direct Investment in Vietnam 1988-2009 Bui Tuan

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Determinants of Foreign Direct Investment in Vietnam 1988-2009 Bui Tuan DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN VIETNAM 1988-2009 BUI TUAN ANH A thesis submitted in partial fulfillment of the requirements of the University of Greenwich for the Degree of Doctor of Philosophy October 2011 DECLARATION I certify that this work has not been accepted in substance for any degree, and is not concurrently being submitted for any degree other than that of PhD being studied at the University of Greenwich. I also declare that this work is the result of my own investigations except where otherwise identified by references and that I have not plagiarised the work of others. London, 26 October 2011 Supervisor Student Professor Željko Šević Bui Tuan Anh i ACKNOWLEDGEMENTS This thesis has been completed with professional and spiritual assistance from a number of people. I am especially indebted to Professor Željko Šević, my first supervisor, for his helpful guidance throughout the course of my study. At the initial stage of my research he helped me to design the research plan and to build up my research capability. He provided to me quickly and tirelessly with his comments on my drafted chapters so that I could gain much improvement for them after amendments. His continual practical support during all my good and bad times at Greenwich was the key to my academic achievement. I am also grateful to my second and third supervisors, Dr. Jian Chen and Dr. Alex Stojanovic. Both of them gave me very importance guidance on the first days when I started my study at the University of Greenwich. I also benefited from Dr. Jian Chen’s academic advice and his experience in finding materials for my thesis. My special vote of thanks goes to Ms Gill Haxell, who has played a very special role – her continual encouragement and assistance have greatly contributed to my success in PhD study. I am grateful to all fellow PhD students at the Business School and other staffs who provided me with help and commends on my works during the course of my study. I also express my gratitude to Vietnam’s Ministry of Education and Training and the 322 Project for providing me with the scholarship to study my four year PhD course at the University of Greenwich. Despite Vietnam’s economics difficulties, the 322 Project has marked a great effort of Vietnamese Government in improving the quality of education and conceiving education as one of the main factors contributing to its success and global integration. I am greatly indebted to my parents and my wife, Hua Hoai Thu and our son, Minh Bui. They have always given me encouragement and tremendous support in any challenging moment that I’ve encountered since I started my PhD study in Greenwich. ii ABSTRACT This thesis analyses the determinants of Foreign Direct Investment in Vietnam from 1988-2009. It examines the nature, motivation and impact of FDI upon the Vietnam economy and its contribution to the subsequent leap forward in economic growth. The focus is on developing Dunning’s eclectic theory through case study analysis of Honda-Vietnam Motorbike Company and ANZ-Vietnam Bank. The prominent theories on FDI generally used in the thesis focus on Vernon’s Product Life Cycle (PLC) model, the Market Imperfection Theory (MIT), the Transaction Cost (TC) or internalisation approach and Dunning’s Eclectic Theory. Dunning is the clearest methodology for understanding the Vietnamese case as its method is to take account of a countries particular FDI characteristics and their impact on economic growth. The addition of an emphasis on the impact of culture upon the development of FDI in Vietnam provides this thesis with evidence of its originality and legitimacy to the claim of filling a gap in the literature on FDI in developing countries and the advancement of economic theory. The main focus in the case studies is demonstrating how foreign invested enterprises altered production, management, service and marketing processes to adapt their traditional, organisational and locational advantages to suit the local environment, and give them both foreign and domestic comparative advantages, ensuring the maximum possible capital return on their investments. iii CONTENTS DECLARATION ...................................................................................................... i ACKNOWLEDGEMENTS .................................................................................... ii ABSTRACT ............................................................................................................ iii CONTENTS ............................................................................................................ iv TABLES .................................................................................................................. ix CHAPTER 1: INTRODUCTION .......................................................................... 1 1.1 FDI development and the Vietnamese culture ................................................................. 7 1.2 Confucianism, Socialism and the Vietnam legal framework .......................................... 9 1.3 Theoretical Framework .................................................................................................. 11 1.4 Conclusion ..................................................................................................................... 17 1.5 Organisation of the Thesis ............................................................................................. 21 CHAPTER 2: LITERATURE REVIEW ............................................................ 24 2.1 Introduction .................................................................................................................... 24 2.2 The basic concepts of FDI ............................................................................................. 26 2.3 The classifications of the Foreign Direct Investment .................................................... 29 2.3.1 Classification of FDI through Entry modes ............................................................ 29 2.3.2 The Different Types of FDI enterprises ................................................................. 30 2.3.3 Dunning’s classification of FDI ............................................................................. 31 2.4 Theories of FDI .............................................................................................................. 32 2.4.1 FDI and the Market Imperfection Theory .............................................................. 32 2.4.2 FDI in the Context of the Internalisation Theory ................................................... 32 2.4.3 FDI and the Eclectic Theory ................................................................................... 33 2.5 The Complex Factors influencing FDI .......................................................................... 34 2.5.1 Laws and Government Policies Affecting FDI ...................................................... 36 2.5.2 The Economic Determinants of FDI ...................................................................... 39 2.5.3 Government Facilitation of Investment .................................................................. 41 2.6 The Impact of FDI on a Host Country ........................................................................... 43 2.6.1 Benefits to the Host Country of Foreign Investment .............................................. 45 2.6.2 FDI Home Country Benefits .................................................................................. 46 2.6.3 The Linkages Between Economic Growth and FDI ............................................... 46 2.7 Development of FDI Ventures in Transition Economies .............................................. 49 2.7.1 The Movement from Centrally-planned Economy to a Transition Economy ........ 49 2.7.2 MNE and the Process of Privatisation .................................................................... 50 2.7.3 The Impact of FDI on Transition Economies ......................................................... 52 iv 2.8 Empirical studies Examining the Impact of FDI in Vietnam ........................................ 55 2.9 Conclusion ..................................................................................................................... 65 CHAPTER 3: METHODOLOGY ....................................................................... 67 3.1 Methodological Framework ........................................................................................... 68 3.2 Research methods .......................................................................................................... 73 3.2.1 Desk Research ........................................................................................................ 74 3.2.2 Mail survey ............................................................................................................. 75 3.2.3 Interviewing ............................................................................................................ 77 3.2.4 Case Study .............................................................................................................. 78 3.3 Conclusion ..................................................................................................................... 80 CHAPTER 4: DOI MOI AND VIETNAM’S FDI POLICIES ......................... 83 4.1 Introduction .................................................................................................................... 83 4.2 Vietnam’s Doi Moi Policy ............................................................................................
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