1. ECONOMIC GROWTH AND
DEVELOPMENT IN SEA
RELATIONSHIP AND DEVELOPMENT
Instructor: Msc. Nguyen Trong Dac
Group 8: Do Thanh Vinh (Leader)
Luong Thi Nhu
Pham Anh Duong
Nguyen Thi Hue
Part 1: International Economics Relationship
Part 2: International Trade and Development
Part 3: International Finance and Development
Part 4: International Investment and
3. Part I: International Economics
4. What is International Economics
Economic international relationship is a field of
international relations – the study of relationships
It is both an academic and public policy field and
can be either positive or normative as it both seeks
to analyze as well as formulate the foreign policy
of particular states.
5. A country often get IER with 5
Labor/ Human Capital
Science and Technology.
6. The reasons we have IER in the
• The differences in natural conditions between
- Natural resources
- The weather
7. The reasons we have IER in the
• The uneven development between
countries about the economic, scientific
8. The reasons we have IER in the
• The development of economic lead inevitably to
the international division of labor in order to
improve the efficiency of using resource,
9. The reasons we have IER in the
• The objective requirements of specialization
between countries in order to achieve the
optimal scale for each industry.
• The diversity of needs in each country
10. The roles of IER
For industrial development countries:
• Expansion of economic power
• Look for favorable investment
(higher margins, take advantage
of the country get investment)
11. The roles of IER
For developing countries:
• Absorbing capital, advanced science and
technology for industrialization, modernization of
• Efficient exploitation of resources, job creation,
• Promote the production of goods on a large
scale, large-scale market expansion.
12. The roles of IER
Example: In some industries, such as:
ancillary industries (industry support the
assembly of the final product by providing
detailed parts and components products of other
What do Vietnam gain?
What do Japan, Taiwan gain?
13. External economic strategy of developing
countries and least-developed countries
• Closed economy Strategy
• Opened economy Strategy
14. Closed economy strategy
• Economic development towards self-sufficiency
• Only export the excess product after meet
domestic consumer demand
• Only receive international investment in
commodity production "import substitution".
15. Closed economy strategy
• - The speed of economic growth is slow but
• - Take less negative impact of the world
economy: crisis, recession ...
• - Potential of the country in a certain extent is
• - Economic independence => politically
16. Closed economy strategy
• Contrary to the objective laws and trends of the
• Limited ability to acquire capital, advanced
scientific and technical => low labor productivity
=> country is lag
• Often have to borrow to meet domestic demand
17. Closed economy strategy
• Buying small domestic market, limited
production scale => unemployment
• Domestic market have a small buying ability,
• Imported materials to produce => rising costs,
18. Opened economy Strategy
• Expanding economic relations, focusing on
foreign trade, priority export.
• Create an open environment to attract
international investment, especially FDI.
19. Opened economy Strategy
• High economic growth
• Exports go up => more foreign currency =>
import more advanced machinery and
equipment => industrial modernization.
• Expand production scale, market => attract
• Promote domestic technological innovation to
20. Opened economy Strategy
• The speed of economic growth is precarious,
• The domestic economy is dependent on:
+ markets (input, output)
• Economic dependence may depend on political
• Economy develop unbalanced, one-sided.
21. International labor/ International
• International movement of labor in the form of
labor export and labor import.
• The labors who move to other country to get a
job form of labor export often work in factory or
as a home-making, care for children and the old
22. International Science and
The form includes the coordination between
countries to proceed:
• Exchange of research results
• Information of science and technology
• Application of new scientific and technological
achievements into practical production
23. Part II: International Trade
• The definition of International Trade in economic
• The relationship between international trade and
economic growth - development
• Advantage and dis-advantage of international trade
• Benefit and risk of international trade
• Trade barrier
• The world trade organization
• International trade in Viet Nam
25. What is International Trade?
• International trade (also known as foreign trade) is the
exchange of goods and services between countries.
• International trade is most commonly recognized in the
exchange of goods or products.
• Trading globally gives countries
the opportunity to be exposed to
goods and services not available
in their own countries
26. Why trade?
27. International trade and economic
• International trade contributes to the growth of a
country’s economy in several ways:
28. Import - Export
• A product that is bought from the global market is an
• A product that is sold to the global market is an export
29. When a country should
export or import
• How does specialization encourage trade between
• When a country is good at making their product they
specialize in it, improve the product to make more
money. If another country doesn't have that but
specializes in something the other one needs then they
will trade. This is why specialization encourages trade.
31. International trade and development
• International trade allows developing nations to acquire
capital from abroad in return for either natural resources
or cheap labor
• This foreign capital can then be invested in local
industry, agriculture, infrastructure, and social
32. Two aspects of international
A country may import
things which it cannot
Maximum utilization of
Benefit to consumer
Utilization of Surplus
•Import of harmful goods
•It may exhaust resources
•Danger of Starvation
•One country may gain at
the expensive of another
•It may lead to war
33. Benefits of international trade
Enhances the domestic competitiveness
Takes advantage of international trade technology
Increase sales and profits
Extend sales potential of the existing products
Maintain cost competitiveness in your domestic market
Enhance potential for expansion of your business
Gains a global market share
Reduce dependence on existing markets
Stabilize seasonal market fluctuations
Closer ties between nations
34. Risk in international trade
• Risk of concession in
• Risk of insolvency of the
• Risk of non-acceptance
• Risk of Exchange rate
• Risk of non- renewal of
import and exports
• Risks due to war
• Risk of the imposition of
an import ban after the
delivery of the goods
• Surrendering of political
35. Risk in international trade
Buyer country risks
Changes in the policies of
Lack of foreign currency
A bank's lack of ability to
honor its responsibilities
Lack of knowledge of
Effects of unpredictable
and fluctuating exchange
36. Trade barrier
The most common sorts of trade barriers are:
• Subsidies are often placed to protect domestic industries
• In Vietnam, the items are often heavily subsidized by
the government that is fuel (gas, petrol,..)
electric, construction material (steel…)
• Subsidies can stabilize the price of a goods
at a reasonable level and it makes imports
38. Economic effects of subsidies
• A tariff is a tax. It adds to the cost of imported goods and
is one of several trade policies that a country can enact
• Tariffs were a large source of government revenue
40. Economic effects of tariffs
• Import quotas: Puts limits on the quantity of certain
products that can be legally imported into a particular
country during a particular time frame
• Governments generally set import quotas by selling
licenses to specific importers, allowing them to import a
• Embargoes are a government order which completely
prohibits trade with another country.
• The embargo is the harshest type of trade barrier and is
usually enacted for political purposes to hurt a country
economically and thus undermine the political leaders in
• Example: Korea embargoed by the United Nations.
Because of the country's threats of nuclear weapons
43. Free trade
• Free trade is a system in which goods, capital, and labor
flow freely between nations, without barriers which could
hinder the trade process.
• A number of barriers to trade are struck down in a free
trade agreement. Such as: Taxes, tariffs, and import
• It will lower prices for goods and
services by promoting competition.
• Free trade can also foster international
cooperation, by encouraging nations to
freely exchange goods and citizens.
44. Fair trade
• Fair Trade is a trading partnership, based on dialogue,
transparency and respect
• Fair Trade contributed to sustainable development
• Fair Trade organizations have a clear commitment to
Fair Trade as the principal core of their mission
• Fair Trade is more than just trading: it proves that
greater justice in world trade is possible
45. The different between free trade
and fair trade
+ Labor and human right
Free trade: not include minimum safety, human rights and wage
Fair trade: insisting on reasonable compensation for workers and
reasonable safety, health and human standards of workers.
Free trade is financed on a cash-on-delivery basis
Fair trade is able to extend credit that can provide income during lean
Free trade products are marketed in a way that maximizes sales and
Fair trade marketing, while seeking profit and sales, focuses on
educating the consumer.
46. General Agreement on Tariffs
• The General Agreement on Tariffs and Trade (GATT)
was established in 1948.
• Adopted by 23 countries, including the United States
• GATT's main objective was to reduce the barriers of
international trade through the reduction of tariffs, quotas
• Encouraging of fair competition on
the basis of mutual compromise.
• Ensuring of predictable and
transparent trade policy of each parties.
47. The World Trade Organization
• WTO is successor of the General Agreement on Tariffs
and Trade (GATT) signed in Geneva in 1947
• WTO has 156 members (22/08/2012) and Vietnam is the
• Includes services and trade-related aspects of
intellectual property, such as books, movies,
and computer programs
• In WTO, average tariffs will fall from 6% to 4%
• Includes a dispute settlement body that should be faster,
more automatic, and less susceptible to blockage than
48. The differences between GATT
• GATT dealt with trade in goods. WTO covers services
and intellectual property as well.
• WTO dispute settlement is faster, more automatic than
GATT’s. Its rulings cannot be blocked.
• WTO reach into domestic areas that were previously
immune from external pressures.
• GATT agreements temporary, WTO agreements are
permanent; the agreements themselves describe how
the WTO is to function.
49. International trade in Viet Nam
• Country Strong Points
The country's strong points are:
- Positive economic prospects in terms of growth, despite
the global crisis;
- A young, cheap, rapidly growing and more and more
technologically qualified manpower;
- A certain social-political stability;
- A government committed to liberalizing the economy and
to introducing reforms based on the free market.
50. International trade in Viet Nam
• Country Weak Points
The country's weak points are:
- Weak investment and financial freedom;
- The lack of guarantees for property rights;
- A high level of corruption (in the legal system, as well as
for civil service).
51. How to develop international
trade in Vietnam
• Focus on key export commodities such as agricultural
products, aquatic products ...
• Innovate management policies for export activities
• Address effectively the relationship among importproduction-export
• Innovate management policies for import activities
• Governments need to make rational policies consistent
with local market
52. Part III: International finance
53. 1. Definition International
The emergence and existence of international financial
relations is an inevitable financial categories, derived from
the basis of the following objective:
 Economy: the role of decision for the generation and
development of the international financial system.
 Politics: a direct impact on the form and extent of
international financial relations.
54. 1. Definition International
 On a macro-economic perspective:
- Exchange rate.
- International balance of payments.
- Monetary system, international finance.
- Foreign debt and foreign debt management.
 A market perspective (micro economics):
- Assessment and Risk Management International.
- International financial markets.
- International investment directly and indirectly.
55. Two big problem of SEA now that
foreign aid and international debt”.
1.1 Foreign aid:
is consists of financial flows, technical assistance, and
commodities given by the residents of one country, either
as grants or as subsidized loans. Aid can be given or
received by governments, charities, foundations,
businesses, or individuals.
56. 1.1 Foreign aid:
• Not all transfers from wealthy countries to poor countries
are considered to be foreign aid.
• According to the DAC, to be counted as foreign aid the
assistance must meet two criteria:
1. It must be designed to promote economic
development and welfare as its main objective.
2. It must be provided as either a grant or a
57. 1.1 Foreign aid:
• The DAC group aid flows into three broad categories:
1. ODA is the largest, consisting of aid provided by
donor governments to low- and middle-income
2. OA is aid provided by governments to richer
countries with per capita incomes higher than
approximately $9,0005 and countries that were
formerly part of the Soviet Union or its satellites.
3. Private voluntary assistance includes grants from
nongovernment organizations, religious groups,
charities, foundations, and private companies.
58. 1.1.1 Reality of foreign aid in the
World Top Ten Foreign Aid Donor
In Billion Dollars
59. 1.1.1 Reality of foreign aid in the
Net official development assistance (ODA) in 2006
Millions of US dollars
60. 1.1.1 Reality of foreign aid in the
% of GDP
Net ODA in 2006 as a Percentage of Donor GDP
61. 1.1.1 Reality of foreign aid in the
 However, when aid is measured as a share of the
donor’s income. The most generous donors from this
perspective are Norway, Luxembourg, Denmark.
Sweden, and the Netherlands, each of which provided
between 0.74 and 0.87 percent of GDP in ODA. The
is one of the smallest donors by t his
measure, with ODA equivalent to about 0.16% of U.S
 Although U.S ODA levels as a share of income are small
compared with the other countries.
62. 1.2 The relationship among aid,
growth and development:
1.2.1 Aid Has a Positive Impact on
Economic Growth and Development:
- Promoting health, education, and the
- Providing emergency assistance and
- Supporting economic and political stability.
63. 1.2 The relationship among aid,
growth and development:
Aid, saving, and tax revenue:
• Not all aid is provided as investment goods or even
aimed at increasing investment and growth.
• Even where aid is aimed directly at investment, the
impact could be partially offset by a reduction in either
private saving or government saving.
64. 1.2 The relationship among aid,
growth and development:
Aid Has a Conditional Relationship with Growth,
Stimulating Growth Only under Certain
Circumstances, Such as in Countries with Good
Policies or Institutions:
Characteristics of the recipient country.
65. Type of aid
1) Emergency and humanitarian aid, likely to be
negatively associated with growth, since it increases
sharply at the same time growth falls because of an
2) Aid that might affect growth only after a long period
of time, if at all, and so a growth impact may be
difficult to detect, such as aid for health, education,
the environment, and to support democracy.
3) Aid directly aimed at affecting growth (building
roads, ports, and electricity generators, or
66. 1.3 Solutions to improve the
effectiveness of aid:
• Country selectivity
• Recipient participation.
• Results-based management:
There are three basic objectives:
1) Results-based management can help donors
allocate funds toward program that are working.
2) Ongoing reviews can detect problems at an early
stage and help modify and strengthen existing
3) Donors and recipient can better learn what
approaches have worked and what have not.
67. 1.4 Foreign aid to Viet Nam
• The World Bank’s assistance program of foreign aid to
Vietnam has three objectives:
– to support Vietnam’s transition to a market economy,
to enhance equitable and sustainable development,
and to promote good governance.
– From 1993 through 2004, Vietnam received pledges
of US$29 billion of Official Development Assistance
(ODA), of which about US$14 billion, or 49 percent,
has been disbursed. In 2004 international donors
pledged ODA of US$2.25 billion, of which US$1.65
billion was disbursed.
68. 1.4 Foreign aid to Viet Nam
After 16 public meetings held CG, Vietnam has 51 donors,
including 28 bilateral donors and 23 multilateral donors
have regular ODA programs.
• A large number of bilateral donors, such as: Australia,
Germany, Korea, USA, Japan, France, Singapore,
Switzerland, China, United Kingdom, ...
• World Bank Group (WB)
• International Monetary Fund (IMF)
• the Asian Development Bank (ADB)
• European Commission (EC)
• European Union (EU)
69. 1.4 Foreign aid to Viet Nam
The organizations of the UN system, including:
• UN Population Fund (UNFPA)
• Program of the United Nations Industrial Development
• United Nations Development Program (UNDP)
• United Nations Children's Fund (UNICEF)
• International Fund for Agricultural Development (IFAD)
• Food and Agriculture Organization (FAO)
• World Health Organization (WHO).
• The international non-governmental organizations in
70. 1.4 Foreign aid to Viet Nam
The use of ODA priorities for works and projects in the
• Agriculture and rural development (agriculture, irrigation,
forestry, fisheries) in combination with poverty reduction.
• Develop economic infrastructure towards modernization.
• Development of social infrastructure (health, education,
• Protection of the environment and natural resources
• Strengthening institutional capacity, management,
technical and human resource development; technology
transfer, capacity building and research development.
72. 2. Foreign debt
2.1. Overview of foreign debt:
Foreign debt is an outstanding loan that one country owes
to another country or institutions within that country.
Foreign debt also includes due payments to international
organizations such as the International Monetary Fund
(IMF). The debt may be comprised of fees for goods and
services or outstanding credit due to a negative balance of
trade. Total foreign debt can be a combination of short-term
and long-term liabilities.
74. 2. Foreign debt
2.2. Advantages and
75. 2.2.1 Advantages
From a national perspective, borrowing permits a country to
invest more than it can save and import more than it can
export. If the additional funds finance productive investment,
they should yield sufficient returns to pay the interest and
principal on the initial foreign inflows. Since capital is
relatively scarce in low-income countries, these countries
have the potential to realize higher rates of return on
investment and more rapid economic growth than richer
countries, providing the foundation for lending from rich to
When a domestic firm borrows abroad, there are no
controversies over foreign ownership, profit repatriation, tax
holidays, and the like that arise with foreign direct
investment (FDI). In addition, foreign borrowing can be
undertaken much more quickly and easily than FDI.
76. 2.2.2 Disadvantages
Besides the undeniable advantages, foreign debt has some
downsides as well:
The debts must be paid even when a project goes bad. Too much
borrowing of the wrong kind or for the wrong purposes can leave
developing countries vulnerable to sudden capital withdraws and
Short-term debt, in particular, can very quickly switch from rapid
inflow to rapid outflow, which can cause sudden plunges in
exchange rates and skyrocketing interest rates and wreak havoc
on banks, private companies, and government budgets.
Borrowing too much to finance consumption or poorly conceived
investment also can lead to trouble. Borrowing is much easier
politically than raising taxes to pay for spending, especially if
governments do not think they will still be in office when it is time to
77. 2. Foreign debt
2.3. Debt crisis in low-income countries
Low-income countries were hit by the same set of strong
international economic shocks: high oil import prices, low
commodity prices, the end of the gold standard, and weak
market demand in the industrialized countries.
=> Governments kept budget deficits high, erected
significant barriers to trade, distorted market prices, and
failed to provide basic infrastructure and health and
78. 2. Foreign debt
2.4 How to escape from the crisis:
1. Refinancing: involving making new loans to repay the
3. Reduction: in which the amount actually owed is
reduced (i.e., forgiven), either partly (a write-down) or
completely (a wirte-off).
5. Debt-equity swaps: in which creditors are given equity
in a company
79. 2. Foreign debt
2.5 Lessons from the crises:
-These crises suggest that governments should proceed
carefully in liberalizing domestic financial transactions and
ensuring parallel development of the requisite regulatory
-The crises indicate that fixed rates create vulnerability to a panic
and ultimately lead to huge economic adjustments when the
exchange rate no longer can be defended.
- In terms of foreign capital inflows, there are clear differences
between FDI and other long-term capital and short-term capital.
Long-term capital flows are much less prone to panic and more
strongly associated with long-term investment and growth
governments should be much more careful about, and at times
possibly even discourage, short-term flows
80. 2.6 Foreign debt in Viet Nam
Counted to 12/31/2003
Total national debt (Billion USD)
- Government debt
- Business debt
Foreign debt of Vietnam counted in 12/31/2003
Source: Ministry of Finance
81. 2.6 Foreign debt in Viet Nam
The indicators to evaluate debt level of Vietnam (2005)
HIPC (%) Vietnam (%)
Net present value of debt/Export
Net present value of debt/Budget revenue
(minus foreign aid)
(minus foreign aid)
82. 2.6 Foreign debt in Viet Nam
• According to the Ministry of Finance, the country's
foreign debt by the end of 31/12/2009 39% of GDP and
the highest level since 2005. However, if based on the
level of foreign exchange reserves, the total outstanding
debt of Vietnam is still in a safe threshold. Foreign
exchange reserves to total short-term foreign debt of the
Philippines is 290%, while the recommendations of the
World Bank is more than 200%. Debt obligations of the
Government of the total state budget of Vietnam is 5.1%,
the safety threshold of WB is less than 35%.
83. Part IV: International
investment and development
84. The basics of international
International investment is a process in which the
movement of capital from one country to another
country to make the investment projects to bring
benefits to the participating countries
• International Investment is a necessity factor for each
• International Investment leads to the positive and
negative impacts for the investor and the investee.
• International investment in each group of countries is
differ in size, structure, and policies
• They carry the characteristics of investment in general:
- high profitable
- high risky
86. The role and impact
1. For the investors
• Improving the efficient use of capital.
• Building a stable market for supply of raw materials.
• Expanding economic strength, improve reputation in the
• Reducing risks, changes in economic structure towards
87. The role and impact
• Investors may face greater risks.
• Leads to reduce employment in the host country.
• May be loss of the copyright in the process of technology
• Investors don’t want to do business in their country that
wants to do business in foreign countries.
88. The role and impact
2. For the investees
 For the group of developed countries:
• Solving difficult problems of social and economic.
• Creating new jobs, increase revenue in the form of taxes.
• Creating a competitive environment to promote the
development of economy and trade.
• Learning more advanced management experience of other
89. The role and impact
 For the least developed countries and developing
• Help speed up the development of the economy.
• Attracting more workers, create jobs, solve
• Contributing to the improvement of the competitive
• Contributing to reception of science and technology
from other countries.
90. The role and impact
• Leading to exploitation of natural resources excessively.
• Caused differentiation, increasing the development gap in
regions and countries.
• Increasing the problem of social evils and diseases.
• Be affected or dependent on the demand from the
91. Cause of formation and
• Due to the imbalance of the factors of production between
• Due to meet interests of the parties involved
For the investors
For the investees
• And in other case.
92. Forms of International
1. Foreign Direct Investment (FDI):
FDI is a long-term investment activities in which the
investor directly manage and controll using capital
activities. This is the capital flow high stability, long
time investment, managed by the investor directly.
93. Forms of International
2. Indirect Investment:
It is the type of movement of capital between countries, in
which the owner does not directly manage and controll
using capital activities. It depends on the level of
management and organization management of the
investee. Investment efficiency is not high.
94. Forms of International
3. International trade credit:
It is a form of international investment through the form
of lending and borrowing with interest rate market
between two countries.
95. Forms of International
4. The official development assistance (ODA):
ODA is developing cooperation between the government
of a country with foreign governments, intergovernmental
organizations or transnational..
96. The areas of investment
 60 years before, international investment mainly
focus on the traditional sectors: mining of natural
resources, agricultural development by investing in
plantations and agricultural product processing.
97. • Since 70 years, the field of investment has changed:
 Reducing investment in the sectors of
infrastructure and farm economy
 Investing in oil and gas, and some
minerals such as uranium,
titanium, platinum, ...
 Investing in the manufacturing industry,
service, finance, banking, insurance,
98. The risks in International
Changes in currency exchange rates
Dramatic changes in market value
Political, economic and social events
Lack of liquidity
Reliance on foreign legal remedies.
99. FDI in the world
• FDI inflows in the world tend to move from industrialized
countries to the emerging markets such as Asia and South
• FDI growth in the developing economies:
 Latin America and the Caribbean with 34.6 percent
growth in 2011 compared to 21.1% in 2010.
 Southeast Europe increased 30.6% in 2011 from 0.8% in
 The Asia Pacific region, the Southeast Asia's FDI
100. FDI Inflows in the World ($
Source: UNCTAD database
101. FDI in the world
102. Why Asia Pacific is the most
attractive FDI region in the world?
103. Why Asia Pacific is the most
attractive FDI region in the world?
• It is not only the most populous area in the world but also
one of the areas most vibrant economy.
• It is the most dynamically developing areas of the world
with many economic organization : APEC, ASIAN...
• Asia Pacific accounted for nearly half of global trade
value and accounts for 60% of total U.S. exports value.
104. Why Asia Pacific is the most
attractive FDI region in the world?
• Although the economic growth of the Asia Pacific region
slowed significantly in 2012 due to a number of factors
impact on the regional economy, especially the debt crisis
in Europe. However, Asia Pacific is still the region with
the fastest growth rate of the world.
• China is the second largest economy in the world and
foreign currency reserves up to $ 3.2 billion, it is actually
prospective investors to make solutions for the debt
problem in Europe.
• With the ability to export and domestic demand, countries
such as China, India and ASEAN ... will continue to
105. FDI inflows by host regions in Asia (millions of dollars)
South, East and 87,843
South- East Asia
Percentage of FDI flows Received by different Regions
South, East and 94.12
South- East Asia
Source: World Investment Report 2002
108. Top ten FDI Countries and
Territories as of 2 July 2002
Countries and territories
Number of projects
Capital ( $ billion)
109. Number of projects by sector as
of 2 July 2002
Oil and gas
• Economics and international relations are intimately
• The development of a country depends on so many
factors, not just economic but also natural, social or
• The link among international trade, finance and
investment is extremely close and strongly impact to the
growth and further, the development of a country. It is
important to note that the government policies have a
strange power to change the operation of economy.