Ibsm Fdi


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Foreign Direct Investment information - Vietnam

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  • Transfer of ideas and information are often more important that technology.
  • History of FDI in vietnam/
  • Red – bring financial know how and specialize in banking services.
  • Countries that have high and sustained growth rates receive more FDI flows than volatile economies
  • Multinational firms engaged in export oriented investment may prefer to locate in a more open economy since increased imperfections that accompany trade protection generally imply higher transaction costs associated with exportingEffect of the degree of openness on FDI is mixed as the openness is not only attracting the foreign capital to the host area, but also taking the competition between the foreign and domestic firms on it
  • Depreciation of Vietnam Dong (VND) favoring price competitiveness of Vietnam’s exports and attracting foreign investors using Vietnam as the export base.
  • Those who decide to license ought to keep the options open for extending market participation. This can be done through joint ventures with the licensee.
  • Ibsm Fdi

    1. 1. International Business Study Mission 2009 (IBSM) Edwin Yeo (GM) Shannon Zhang (CrM) Koh Bee Ling (CoM-1) Jean Lee (CoM-2) Tan Jun Rong (LM) Richie Hideaki Mui (WM)
    2. 2. Contents • What is FDI? • How FDI started in Vietnam? • Top ten FDI investors • What does Vietnam offers which attracts FDI? • Which countries have the highest investment in Vietnam? • Which provinces attract high FDI? • How can firms enter Vietnam to invest?
    3. 3. What is FDI? •Foreign Direct Investment •Source of funding for development •Means of acquiring foreign technology •Meet demands for Goods and Services •Weak & Underdeveloped domestic supplies •Shift towards Comparative advantage •Lower production costs •Multinationals Enterprise
    4. 4. History Introduction • Command economy to Market-driven economy • Key economic policies were implemented (Doi Moi) Aim • Reduce poverty • Generate economic growth
    5. 5. History – Economic policies • The decentralization of state economic management, which allowed state industries some local autonomy • The replacement of administrative measures by economic ones, including a market orientated monetary policy • Adoption of an outward orientated policy in external economic relations; exchange rates and interest rates were allowed to respond to the market
    6. 6. History – Economic policies •Agricultural policies that allowed for long term land use rights and greater freedom to buy inputs and market products •Reliance on the private sector as an engine of economic growth •Letting state and privately owned industries deal directly with the foreign market for both import and export purposes
    7. 7. History – Effect of policy • GDP , GDP Per Capita • Additional capital flows into the Vietnamese economy, FDI can also bring more industries, jobs and products, modern technology as well as managerial expertise • Promote better utilization of domestic resources • Accelerate economic structural transformation in the direction of industrialization and modernization
    8. 8. History – Law on Foreign investment • ‘Law on Foreign investment’ in December 1987 The law states that: “Vietnam welcomes and encourages foreign organizations and nationals to invest capital and technology in Vietnam “on the basis of respect for national independence and sovereignty, full observance of the Laws of Vietnam, equality and mutual benefit. The State shall guarantee the ownership of the invested capital and other rights of the foreign investors, and extend to the latter favorable conditions and easy formalities”.
    9. 9. Growth of FDI in Vietnam Registered capital ('000,000 USD) Total 163,607.2 1988 341.7 1999 2,565.4 1989 525.5 2000 2,838.9 1990 735.0 2001 3,142.8 1991 1,291.5 2002 2,998.8 1992 2,208.5 2003 3,191.2 1993 3,037.4 2004 4,547.6 1994 4,188.4 2005 6,839.8 1995 6,937.2 2006 12,004.0 1996 10,164.1 2007 21,347.8 1997 5,590.7 2008 60,220.0 1998 5,099.9
    10. 10. Top ten FDI investors FDI in Vietnam in 2008 (Mil USD) 16000 14000 14969.2 12000 10000 8000 8851.7 7578.7 6000 4000 4495.8 4417.8 4237.7 4052.6 4046.2 2000 2712.2 2200.1 0 Malaysia Taiwan Japan Singapore Brunei Canada British Thailand Cayman Cyprus Virgin Islands Islands Specialize in financial services In developing countries
    11. 11. What does Vietnam offers that attract foreign investors? 1. Strategic location – Located in a rapidly growing economy – Domino effect for Vietnam 2. Stable economic & political environment 3. Large natural mineral resources 4. Abundant, relatively well educated labour force – Twelve years universal compulsory education
    12. 12. What does Vietnam offers that attract foreign investors? 5. Large & growing domestic market – GDP increased 3.5 times from 1986 to 2008 – A population of 84 million people which commands a vast potential for consumption – GDP has a positive relationship with FDI flows Therefore, the larger the GDP of Vietnam, the greater the FDI inflow would attract.
    13. 13. What does Vietnam offers that attract foreign investors? 6. Liberal investment & Government’s commitment to economic reform – Multinational firms engaged in export oriented investment may prefer to locate in a more open economy – Effect of the degree of openness on FDI is mixed
    14. 14. What does Vietnam offers that attract foreign investors? 7. Infrastructure development – Roads – Ports – Railways – Telecommunication system – Institutional development (i.e. accounting legal services) 8. Exchange rate – Favorable price competitiveness 9. Potential to be an export for EU & US market
    15. 15. Which provinces are the most attractive? Top Three 1. Da Nong 2. Binh Duong 3. Vinh Phuc
    16. 16. Which provinces are the most attractive?
    17. 17. Entry modes to Vietnam for investment 1. Exporting (Direct) • Negotiation to be done with client • Products are produced in home country and sold to foreign customers (Indirect) • Uses an intermediary/agent to contract(sell) your services(products)
    18. 18. Entry modes to Vietnam for investment 1. Exporting Advantages Disadvantages Gain global market shares Additional costs Speed of entry High transport costs Company is being viewed as an Diversification ‘outsider’
    19. 19. Entry modes to Vietnam for investment 2. Licensing • The Licensor will grant a foreign organization the license to produce the specific product, use the brand name etc in return that they will receive a royalty payment. Advantages Disadvantages Low financial risk Licensees become competitors Speed of entry Limited license period
    20. 20. Entry modes to Vietnam for investment 3. Franchising • A form of licensing • The franchisor grants the right to distribute its products, techniques, and trademarks for a percentage of gross monthly sales and a royalty fee. • The franchisor governs the method of conducting business between both parties. • 3 types of franchising: - Product/Trade Name Franchising - Business Format Franchising - Distributorship
    21. 21. Entry modes to Vietnam for investment 4. Joint Venture In order to share the risk of market entry into a foreign market, two organizations may come together to form a company. • Extensive form of cooperation • Share in-depth knowledge • No full control of management
    22. 22. Entry modes to Vietnam for investment 5. Turnkey projects • Contractor agrees to handle every detail of the project for a foreign client • Built, Operate, Transfer
    23. 23. Case studies • Licensing – Man B&W and Vinashin – http://marinelink.com/Story/MAN+B&W+Adds+Vietn am+Licensee-15558.html • Joint Venture – Furniweb Industrial Products Berhad Group and Trunet (Vietnam) Co. Ltd. – http://www.massa.net.my/news/y7_q2_a11.htm • Turnkey project – Binh An Water Treatment Plan
    24. 24. Ways to open up their economy Current situation • WTO in 2007 • AFTA • AANZFTA Future prospects • More FTA • Bilateral agreements • Better infrastructure
    25. 25. What is FDI?  A. Foreign Direct Investment B. Foreign Direct Intervention  C. Foreigner Do Investment D. Fraud Detection Institute
    26. 26. A. Foreign Direct Investment
    27. 27. Which country is in one of the Top 10 FDI investors in Vietnam?  A. South Africa  B. Cambodia  C. Singapore  D. Australia
    28. 28. C. Singapore
    29. 29. What does Vietnam have that attracts foreign investors?  A. Cheap food  B. Strategic location  C. Beautiful ladies  D. Handsome guys
    30. 30. B. Strategic location
    31. 31. Thanks for playing!
    32. 32. Sorry, try again!