The Nexus Between FDI And Economic Growth,Adjustment Of Policies To Attract FDI In Vietnam

For more two decades of "Reform" since1986, Vietnam has achieved many significant achievements in terms of socio-economic fields. The annual economic growth rate in the period of1991-2010was7.41%. In particular, in the first decade of the21st century, Vietnam has always been classified in the group of high growth countries with annual economic growth rate was7.27%phase of2001-2010, GDP per capita increased from400USD in2000to1,169USD in2010.In the current context of severe economic competition, rapid and sustainable growth has posed many challenges for the countries in the world. FDI flows are considered as the effectively supportive capital that has contributed to the national growth, especially in developing countries. Many countries therefore have tried to attract as many FDI as possible. Since the1987"Open-door" policy, Vietnam has been improving its investment environment to attract more and more FDI. Within the twenty years from1991to2010the number of FDI projects increased from152to1,237and the disbursed FDI from328.8million USD to11.0billion USD. Contribution of FDI sector to economic growth has increased from2percent in1991up to19percent in2011. The purpose of this dissertation is focused on assessing the FDI and economic growth nexus and the factors that affect FDI attraction in Vietnam in the period of2000-2011.Empirical findings show that there is a positive bi-directional relationship between FDI and economic growth in Vietnam. FDI has impacted positively on the economic growth; it has contributed significantly to increasing GDP per capita. Research also shows that such positive interaction has existed only in5of6regions of Vietnam. In addition, the research finds out that for the provinces that were distributed more FDI; they have stronger impact on increasing GDP. Meanwhile provinces with higher economic growth have attracted more FDI than others. The research result indicates that Vietnamese laws amendment has a significantly negative effect on attracting FDI; it has not brought the efficiency yet, not sufficed attraction to lure foreign investors bring capital to Vietnam, We also explore that the WTO accession has negative effect on attracting FDI, after joining the WTO, FDI per capita inflow into Vietnam decreased. Empirical evidence finds that the2008-financial crisis and global economic downturn have negative impacts on FDI attraction of Vietnam during the period of2008-2011. The study proves that the systems of seaports and airports have significantly positive impact on attracting FDI. Furthermore, the research also proves that the information quality related to doing business provided by the provinces through their websites has played an important role in increasing FDI flow to Vietnam.The research also indicates that the economic growth in Vietnam depends on the level of financial investment. FDI has positive impact on economic growth through financial market development and more FDI will be attracted to the provinces with more developed financial market. We explore that FDI has a positive impact on economic growth through research and development activities. Expenditure on development and research has contributed positively and significantly in attracting FDI in Vietnam. Finally, the research finds that there is a sub-nation competition in Vietnam’s FDI attraction, provinces and cities with better economic governance will attract more FDI.