Research the foreign direct investment of south korea to vietnam in recent years

f surplus countries are often higher than those of capital shortage countries. However, this does not mean that all activities with high marginal productivity are invested in production by enterprises but also important activities, which are vital for enterprises to produce whether that activity gives low marginal productivity. Product cycle For most businesses involved in international business, the life cycle of these products consists of three main stages: the new product stage; maturity of products; standardized product stage Special advantages of multinational companies Multinational companies have unique advantages (such as basic competencies) that allow them to overcome cost constraints abroad so they are willing to invest directly abroad. When choosing investment locations, multinational companies will choose where the conditions (labor, land, politics) allow them to exert the aforementioned specific advantages. Multinational companies often have a great advantage of capital and technology investing in countries that have available raw materials, cheap labor costs and often a potential consumer market ... We easily realize the benefits of this. Market access and reduced trade conflict Foreign direct investment is a measure to avoid bilateral trade conflicts. For example, Japan is often complained by the United States and Western European countries because Japan has a trade surplus and other countries have trade deficits in bilateral relations. In response, Japan has increased its direct investment in those markets. They manufacture and sell cars and computers in the United States and Europe, to reduce exports of these products from Japan. They also invest directly in third countries, and from there export to North American and European markets. Exploiting experts and technology It is not that FDI only goes from the more developed to the less developed. The opposite is even stronger. Japan is a country actively investing in the US to exploit a team of experts in the US. For example, Japanese car companies have opened car design departments in the US to employ American experts. The same goes for Japanese computer companies. Not only does Japan invest in the United States, other industrialized countries have similar policies Access to natural resources For raw materials, many multinational companies seek to invest in countries with abundant resources. Japan's first major wave of foreign direct investment in the 1950s was for this purpose. Benefits of attracting FDI Supplement to domestic capital In theories about economic growth, the capital factor is always mentioned. When an economy wants to grow faster, it needs more capital. If domestic capital is not enough, the economy will want both foreign capital, including FDI. Acquire technology and management know-how In some cases, capital for growth despite lacking can still be mobilized partly by "austerity policy". However, technology and management know-how cannot be achieved by that policy. Attracting FDI from multinational companies will provide a country with the opportunity to acquire technology and business management know-how that these companies have accumulated and developed over the years and with great expenses. However, the dissemination of these technologies and management know-how to the whole country to attract investment also depends heavily on the country's absorbing capacity. Join the global production network When attracting FDI from multinational companies, not only enterprises with investment capital from multinational companies, but even other domestic enterprises having business relations with such enterprises will also participate too. regional labor division process. Therefore, the country attracting investment will have the opportunity to join the global production network to facilitate exports. Increase the number of jobs and labor training Because one of the purposes of FDI is to exploit the conditions to achieve low production costs, foreign-invested enterprises will employ many local workers. An increase in the income of a part of the local population will contribute positively to local economic growth. In the process of hiring, training of occupational skills, which in many cases is new and progressive in developing countries that attract FDI, will be provided by enterprises. This creates a skilled labor force for the country to attract FDI. Not only ordinary workers, but also local professionals also have the opportunity to work and be fostered professionally in foreign-invested enterprises. Large budget revenue For many developing countries, or for many localities, taxes paid by foreign-invested enterprises are an important source of budget revenue. OVERVIEW OF FOREIGN DIRECT INVESTMENT FLOWS INTO VIETNAM If Vietnam wants to achieve its goals of industrialization and modernization (industrialization and modernization), the most important issue is to mobilize and use foreign direct investment effectively. In recent years, the Government of Vietnam has always attached great importance to attracting investment from abroad. The Government continuously improves the investment environment, facilitating domestic and foreign enterprises, in which attaching special importance to the implementation of the law-making program. Scale of FDI investment in Vietnam According to data of Foreign Investment Agency, from 1988 to October 20, 2017, 63 provinces and cities of our country have received 24,397 FDI projects of 128 countries and territories, with registered capital (there are also effectiveness) 312.9 billion USD, realized capital is 169.05 billion USD. From 1991 to now, realized FDI has increased rapidly: 1991 - 2000 reached 19,462 billion USD, an average of 1.95 billion USD / year. 2001 - 2010 reaching 58,497 billion USD, equaling 3 times the previous decade; on average 5.85 billion USD / year. 2011 - 2016 reached 84 billion USD, equaling 4.55 times in the period of 1991 2000 and 1.43 times 10 years earlier; on average 12 billion USD / year. In 2016, the foreign invested economic sector contributed about 19% of domestic revenue and 19% of GDP; accounting for over 50% of industrial output value, in which oil and gas, electronics, smartphones, mobiphone, electronic components, animal feed, drinks,... Have a much higher proportion; accounting for nearly 72% of total export turnover of which the main product is manufactured goods with high added value, trade surplus of about 25% of export turnover of this sector, not only to offset the trade deficit of enterprises in countries but also created a trade surplus of nearly 3 billion USD. Foreign direct investment projects licensed in period 1988 - 2018 by Year and Items Number of projects Total registered capital (Mill. USD) Implementation capital (Mill. USD) 2010 1237 19886.8 11000.3 2011 1186 15598.1 11000.1 2012 1287 16348 10046.6 2013 1530 22352.2 11500 2014 1843 21921.7 12500 2015 2120 24115 14500 2016 2613 26890.5 15800 2017 2741 37100.6 17500 Prel. 2018 3147 36368.6 19100 Table 1 Vietnam’s foreign direct investment projects in period 2010 - 2018 (General statistics office of Vietnam) Investment structure by industry Sectors that attract foreign direct investment in Vietnam include agriculture, manufacturing, real estate, ... The sectors which have been expanded and diversified over time. Foreign direct investment projects licensed by kinds of economic activity (Accumulation of projects having effect as of 31/12/2018) by Kinds of economic activity and Items Number of projects Total registered capital (Mill. USD) TOTAL 27454 340849.9 Agriculture, forestry and fishing 491 3455.7 Mining and quarrying 108 4903.8 Manufacturing 13306 195911.4 Electricity, gas, stream and air conditioning supply 119 23092.8 Water supply, sewerage, waste management and remediation activities 70 2658.7 Construction 1593 10091.1 Accommodation and food service activities 734 12025.6 Information and communication 1884 3603.6 Education and training 458 4340.9 Human health and social work activities 142 1970.9 Other service activities 142 78078 Table 2 FDI projects licensed by kinds of economic activity (General statistics office of Vietnam) Investment structure by economic region Foreign investment capital invested in Vietnam is unevenly distributed among provinces. The investment is concentrated in big cities such as Ho Chi Minh City, Hanoi, Da Nang and provinces with developed economies. This increases the local budget, concentrates labor resources, creates jobs, and increases income for people. Foreign direct investment projects licensed in 2018 by province by Cities, provincies and Items Number of projects Total registered capital (Mill. USD) WHOLE COUNTRY 3147 36368.6 Red River Delta 1155 14833.5 Ha Noi 640 7547.8 Hai Phong 116 3135.4 Northern midlands and mountain areas 102 1423.1 North Central area and Central coastal area 16 364.7 Da Nang 30 479.8 Quang Nam 15 375.4 South East 29 487 Binh Duong 130 1481.1 Dong Nai 48 2299.9 Ba Ria - Vung Tau 1060 6237.6 Ho Chi Minh City 140 2588.1 Mekong River Delta 92 707.7 Table 3 FDI projects licensed in 2018 by cities, provinces and items (General statistics office of Vietnam) Investment structure by investment partners. The source of investment capital from countries to Vietnam is more and more plentiful to the investing countries. Investment countries are mainly developed or developing strongly in the international market and have close relationship with Vietnam. Previously, Japan was the country with the largest investment capital in Vietnam, including ODA and FDI. However, in the past decade, South Korea started to rise and ranked first in terms of total FDI inflows into Vietnam. Foreign direct investment projects licensed in 2018 by main counterparts by Main counterparts and Items Number of projects Total registered capital (Mill. USD) Japan 440 8944.5 Korea Rep. of 1071 7320.5 Singapore 228 5249.9 Hong Kong SAR (China) 174 3252.6 China. PR 408 2531.7 British Virgin Islands 42 1885 Australia 43 609.1 France 40 590.1 United States 88 555.4 Table 4 FDI projects licensed in 2018 by main counters (General statistics office of Vietnam) SITUATION OF KOREAN DIRECT INVESTMENT IN VIETNAM Overview of Korean FDI Korea has investment projects in all regions of the world with projects in 185 countries and territories. In particular, focusing on China countries (total registered capital reached 83.3 billion USD including Hong Kong), United States (76.5 billion USD), Vietnam, Australia, Netherlands, Canada, Indonesia, ... Regarding investment, Korea invested mainly in manufacturing industry (USD 122 billion of registered capital); mining (85 billion USD); finance and insurance (US $ 41 billion); wholesale and retail (33.7 billion USD); real estate business (26.3 billion USD); professional, scientific and technical services (20.4 billion USD); construction (9.9 billion USD); IT (7.1 billion USD); transportation (5.5 billion USD), accommodation and catering services (5 billion USD), ... Table 5: Korea's FDI capital flows into the nations Economic relationship between Vietnam and Korea Vietnam and Korea are two Asian countries. The two countries established diplomatic relations on December 22, 1992. Over the past years, Korea has always ranked in the top 5 countries with the largest economic relations with Vietnam. The two countries have set up a Korea-Vietnam Intergovernmental Committee on Economic, Scientific and Technical Cooperation to promote bilateral economic cooperation. The two sides signed a number of important agreements such as: Agreement on economic and scientific cooperation (February, 1993), Agreement on encouragement and protection of amended investment (September 2003), In addition, in the past 10 years, South Korea assessed that Vietnam had basically built a cluster infrastructure to develop a number of industries along the product chain such as electricity, electronics, textiles ...     Especially when the two countries signed a bilateral trade agreement in May 2015, the implementation of this agreement will surely lead to more quality and deeper trade and investment cooperation. For example, Vietnam's commitments on investment services and activities to Korean companies under VKFTA. In addition, Korea and ASEAN also signed the first commitment package of the ASEAN-Korea Free Trade Agreement Korea's invested enterprises mainly focus on manufacturing industry, employing a lot of labor and the main exported products. Taking advantage of cheap labor is still the goal of many foreign investors when investing in Vietnam. Korea's FDI capital flows into automobile, motorbike, electronics, civil and export products.  South Korean investors invest in Vietnam mainly in the form of 100% foreign invested capital accounting for about 80%, followed by joint-venture enterprises accounting for about 15% and the remaining is contractual contracts business cooperation,...It is possible that Korean investors are very careful when investing in partners, and they are very careful in choosing business forms, fields of investment, and locations. Scale of Korea FDI investment in Vietnam Korean investment projects generally perform well, with large average capital scale, higher than the national average (over 40 million USD) and mainly focusing on material production. Korean investment projects mainly focus on areas with relatively good infrastructure. The proportion of dissolved projects in Korea is relatively low (about 10%), because Korean investors are very careful in conducting surveys and research before deciding to minimize risks before went into operation. According to GSouth Korea is currently the largest foreign investor in terms of both the number of projects and the total investment capital out of the 112 countries and territories investing in Vietnam. Accumulated to October 2016, the total registered investment capital of Korea from Vietnam reached over 50 billion USD with 5,593 valid investment projects. Korean FDI enterprises play an important role in Vietnam's economy by creating jobs for 70,000 workers and contributing about 30% of the total export value of Vietnam. Korean businesses are doing business methodically in Vietnam and are considered as serious, highly effective investors and also have many contributions to Vietnam. For example, Korea was the country with the most direct investment in Vietnam in 2015, accounting for 24% of the total investment capital in 2015 with various large and small projects across most localities in the country. Next is Japan, Taiwan, Singapore,...which are also countries that are expected to have large FDI inflows into Vietnam in the following years. Table 6 Total register investment capital 2015 (General statistics office of Vietnam) As of November 2015, total Korean FDI accounted for 31.6% of total FDI into Vietnam. If counting the project of Hyosung Group (US $ 660 million, invested through Turkish entity), Korean FDI accounts for 34.9% of total FDI in Vietnam, 4.1 times higher than Japan; 6.2 times Taiwan and 6.8 times Singapore (but the traditional FDI partner ranks 2.3.4 of Vietnam). Structure of Korean direct investment capital into Vietnam Investment structure by investment sector Table 7 Korea's FDI structure by sectors into Vietnam 2015 (General statistics office of Vietnam) According to Vietnam’s Foreign investment agency, in 2015, Korean projects were implemented on 18/21 branches and fields; the leading industry is manufacturing and processing with 2,566 projects with a total registered capital of US $ 24.03 billion (accounting for 64.5% of total investment capital). Real estate business ranked second with 82 projects with a total capital of US $ 6.99 billion (accounting for 18.5% of total investment capital). Construction field ranked third with 579 projects, total investment capital of US $ 2.4 billion (accounting for 6.4% of total investment capital)... Among Korean investment projects, there are a number of large projects, focusing on efficient industry, contributing positively to socio-economic stability and development of colonized localities. In the automobile manufacturing industry, there is Vietnam-Daewoo Automobile Company in Hanoi, registered capital of US $ 32.2 million, legal capital of US $ 10 million, which is 100% owned by Daewoo since year. 1996, effective, export products, Daewoo cars market share in Vietnam accounted for 15%; The company has been profitable since 2000. In recent years, Korean-invested enterprises have performed relatively well, although unavoidably difficult due to the fierce competition and Vietnam. Currently committed to cutting taxes within the framework of AKFTA. In addition, local raw materials and spare parts are not sufficient. Supporting industries have not been fully developed, so most of the raw materials and spare parts have to be imported; input costs are still high, the quota regime on EU and US markets has limited the production capacity of garment projects, mostly Korean projects ... affecting the performance. The impact of Korean FDI projects in Vietnam. On the other hand, there are labor disputes in some enterprises with 100% Korean capital which mostly stem from conflicts of economic interests between the parties and working conditions. In general, all cases are handled satisfactorily on the basis of conciliation, negotiation and mutual concessions with the participation of representatives of local competent agencies and agencies. Investment structure by region Table 8 Structure of FDI by locality of Korea into Vietnam 2015 (General statistics office of Vietnam) In 2015, Korea invested in 51/63 cities and provinces nationwide. In which, Hanoi attracted the most investment capital from Korea with 885 projects with a total registered capital of 5.3 billion USD, accounting for 14% of total investment capital, followed by Thai Nguyen with 43 projects. With total investment capital of 4.72 billion USD, accounting for 12.5% of total investment capital, Dong Nai ranks 3rd with a total investment of 4.56 billion USD (accounting for 12.1% of total investment capital). The rest are other localities. Results from Korean direct investment in Vietnam South Korea has become an important economic partner of Vietnam After establishing official diplomatic relations at the end of December 1992, the economic relations between the two countries had much development. Right from the first years of promulgating the Law on Foreign Investment of Korean investors was present in Vietnam. As of now, Korea is the first country among 105 countries and territories investing in Vietnam with 4,777 valid projects with a total registered investment capital of nearly 4.36 billion USD. Investment of Korean enterprises is mainly concentrated in big cities, with relatively good infrastructure conditions such as Hanoi, Ho Chi Minh City, Dong Nai, Binh Duong and concentrated mainly in the industries such as auto assembly, steel, mechanics, electronics, footwear, textiles and construction Most large Korean corporations have been present in Vietnam to create jobs for workers Many projects with large investment scale (over 40 million USD) such as Hyundai Shipyard - Vinashin with total investment of 192.6 million USD; Samsung Factory - Vina Synthetics produces fabrics, polyester yarn with total investment of 192.6 million USD; Orion Hanel shaped lamp company with total investment of 178.5 million USD; Deaha Company Limited with total investment of 52 million USD to build 5 star hotel; VSC - POSCO steel production project with a total investment of 56.1 million USD,... has contributed positively to the socio-economic development of Vietnam. Korean FDI enterprises play an important role in Vietnam's economy by creating jobs for about 70,000 laborers and contributing about 30% of Vietnam's total export value in 2014. Some large projects of over US $ 1 billion in Vietnam in Vietnam - Sam Sung Thai Nguyen High-Tech Complex Project - Phase 2 investors Sam Sung Electronics Vietnam Co., Ltd. Thai Nguyen - Korea, the investment project in Yen Binh I Industrial Park, Thai Nguyen Province with total investment capital registered capital of 3 billion USD; - Project of LG electronics Vietnam Hai Phong Co., Ltd., investor of LG Electronics INC, this project invested in Hai Phong Industrial Zone, Hai Phong province with total registered investment capital of 1.5 billion USD; - Samsung Electro-mechanics Vietnam Co., Ltd., the investor of Samsung Electro-mechanics Co., Ltd, the project is invested in Yen Binh I Industrial Park, Thai Nguyen Province with a total registered capital of 1.23 billion USD; - Project of Posco-Vietnam Co., Ltd., investor of Posco Co., Ltd, Korea, the project is invested in My Phu II Industrial Park, Ba Ria - Vung Tau Province with a total registered investment capital of 1.128 billion USD. ; - Project of SamSung Display Bac Ninh Co., Ltd, investor of Sam Sung Display Co., Ltd, the project is invested in Yen Phong I Industrial Park, Bac Ninh province with a total registered capital of 1 billion USD; The Impact of Korea’s FDI on the Vietnamese Economy Achievement After more than 10 years of establishing diplomatic relations, relations between the two countries are increasingly developing. Two-way trade turnover always achieved a stable growth of 10-15% / 1 year. In addition to the policy developments, the Vietnamese economy provided a developed infrastructure in designated areas. Further improvements in the Vietnamese economy, such as the accession to the ASEAN and WTO, stimulated not only Korea’s OFDI but also investments from many other countries, mostly in Asia. Consequently, Korea’s FDI in Vietnam has grown extensively over the years, influencing the Vietnamese economy through various channels, like economic growth, employment generation and the transfer of technologies estimation results showed that FDI had a positive effect on labor productivity and economic growth in Vietnam. Data for Vietnam’s provinces showed that FDI, together with domestic investment, human capital, labor force and international trade, had positive effects on economic growth. That brings a huge revenue to the country, paving the way for other countries to continue investing in Vietnam. Creating capital for our country to invest in developing facilities, industrial parks and factories built to create jobs for laborers. Take advantage of the country's strengths and develop its economy. Limitations There is no denying the benefits that Korea's FDi capital has brought to Vietnam in recent years. However, besides the quiz, there are still some aspects that adversely affect our country. First, allowing Korean businesses to rush to build factories. factories across the country caused mixed reactions from the people. Factories occupy land, causing harm to long-term living environment, failing to build up standards, thus causing harms to workers' health and labor safety. Secondly, the industries that Korea invests in our country are only secondary industries, which need low labor skills, so enterprises pay low salaries, making products with no high value for the economy, causing waste. social resources, disequilibrium among sectors in the economy. And, businesses are mainly invested with 100% foreign capital, so we have difficulty controlling, limited technology transfer, not helping long-term development. Proposals to attract more FDI capital into Vietnam Experiences from other countries China China has mobilized FDI in the form of production contracts, joint ventures, 100% foreign investment capital into special areas. The basic policy to attract Chinese investment is the tax policy. China has issued many separate taxes for investment forms: joint venture, 100% foreign capital for 14 coastal cities. The joint venture pays taxes with 30% and 10% additional income for the localities. For enterprises with 100% foreign capital, the profit tax is from 20-40% and 10% for localities. Regarding import and export duties, China has exempted import taxes on items such as: machinery, equipment, loose parts, materials contributed as joint venture capital, or machinery and equipment from foreign countries. brought in to exploit oil and gas, develop energy, railways, roads, and put into export processing zones. Regarding administrative procedures, China decentralizes strongly to localities on project evaluation and investment licensing. After obtaining the investment license, the procedures related to project implementation were quickly resolved. The ground clearance, electricity supply, water supply, traffic and environment issues have been completely solved. Implementing the "one-door" policy to create favorab