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The bilateral investment treaty BIT established in between Korea and Vietnam, which is traditionally thought as an effective accelerator of FDI [12] , would have contributed to this trend. The effort of the Vietnamese Government to increase the local government autonomy in authorizing FDI projects also contributed to the recovery [19]. Table 7. The slowdown in and reflected the global financial crisis. In , it reached USD 1. In , the share of Vietnam reached its highest point with Overall, Vietnam accounted for It is also comparable with the data appearing in Table 2 on the FDI flows from the world as a whole, in which Vietnam accounted for It clearly shows that Korea exceptionally values Vietnam as an investment destination more than the.

Korea's investment in China falls, investment in U.S., Vietnam rises

Table 8. Manufacturing has been the most important sector, with a share of Until , the manufacturing sector accounted for It is interesting to note that, although the amount of investment increased rapidly again to reach its maximum of USD million in , the share of the manufacturing sector in the overall OFDI has shrunk since Economic activities such as wholesale and retail trade have shown gradual growth over the years 3. The FDI inflows by the sub-categories of the manufacturing sector have changed noticeably over the years, as shown in Table 9.

The accumulated share of textiles and footwear accounted for As an accumulated amount, it accounted for A clear comparison can be made with the metal industry, including both basic and fabricated metal, the proportion of which jumped from less than 10 percent with a few years of exceptions until to over 20 percent in general since then. This difference in the investment.

Table 9. Nonetheless, Korean investors are increasingly placing more emphasis on educated laborers than low-wage incentives, as they tend to shift their investment to high-technology manufacturing sectors such as electronics and transportation machinery [21].

Top challenges of doing business in Vietnam

It established a factory producing mobile handsets near Hanoi, which exported as much as USD 24 billion in About 45 percent of smart phones produced by Samsung Electronics were manufactured in Vietnam in [9]. The investment trends are strongly correlated with the changing motivations of Korean firms in choosing Vietnam as their investment destination.

This occurs because different industries provide different kinds of advantages for foreign investors, as well as requiring different kinds of cost-saving factors. Some activities deserve more attention in terms of promoting exports, while others provide sales opportunities in the local market.

Some sectors require cheap labor as the essential production factor, while others need a developed infrastructure, such as transportation facilities. Until , export promotion was the most important motive of investors, with an average share of This is consistent with the attitude of many other Asian countries, which saw Vietnam as an export ground for their products. Cheap labor has continued to be a dominant motive for Korean firms to invest in Vietnam, despite the recent decrease in its share. It accounted for Specifically, Vietnam enjoys a low-wage incentive in the context of the rising wage in China but loses its advantage when compared with its neighboring countries, like Lao PDR and Myanmar [5].

Table Regarding the accumulated number of overseas enterprises, small and medium-sized enterprises SMEs accounted for First and foremost, compared with large enterprises, SMEs usually seek cheap labor as their primary purpose of investing abroad [21]. Vietnam provides such an investment opportunity with its low wage level. Second, many producers in the garment industry were SMEs in Korea, particularly during the s. As producers in a declining industry, they tried to invest abroad to continue their production, and corresponding investment outlets were found in China and Vietnam, among others.

Despite the successes of many Korean firms investing in Vietnam, there have also been many cases of failures. The reformative legislation of Vietnam to open its economy together with the policy of Korea allowing OFDI in the late s facilitated the flow of investment from Korea to Vietnam. In addition to the policy developments, the Vietnamese economy provided a developed infrastructure in designated areas.

The contribution rate of the foreign-invested sector in the GDP actually grew from 6.

Free trade advocate

In addition, the rapid expansion of export values contributed to changing the structure of trade from deficits to balanced trade in general 7. In this sense, FDI inflows have contributed. Meanwhile, they converged to about USD billion in In the meantime, the non-state sector was responsible for 85 percent of the employed population. The reason behind such minor performance of foreign firms in employment generation is that the investments were concentrated in activities that do not involve much job creation.

They were related either to the final production stage after the importation of components and raw materials or to other capital-intensive sectors that result in a low level of domestic employment generation [17]. Meanwhile, since the primary sector employs a great proportion of workers in Vietnam, the fact that foreign-invested enterprises FIEs explain 3 percent of the total employment may be interpreted in the sense that FIEs generate a significant proportion of value-added jobs in the manufacturing and service sectors.

Furthermore, the employment effect of Korean firms is expected to be quite large regarding the fact that the majority of Korean SMEs in Vietnam produce outputs in the labor-intensive industries, typically hiring local laborers on a largescale in the production process [20]. Although its effect differed depending on the sector, the Vietnamese economy received advanced technologies to a certain extent through FIEs. The Korean FIEs inter alia appear to have benefitted Vietnam in the sense that Korean OFDI is mostly centered on the garment, footwear, metal and electronics industries, in which technology transfer occurs at a high level [18].

However, impediments to the technology spillover effect of FDI remain, such as the market-stealing effect of foreign firms [23]. The experience of Vietnam in attracting FDI presents notable implications not only for Vietnam, but also for other developing economies. First, the case of Vietnam stresses the important role of economic liberalization policies consisting of integration into the world economy and FDI-friendly measures. This shows that the benefits of integrating into the global economy do not end merely with the preferential treatments provided by the individual agreements but extend further to increased interactions with other economies and enhanced attractiveness of the economy concerned to foreign investors.

Thus, the policy reforms in the host country to create a better investment climate for foreigners are crucial in increasing FDI inflows to their economy. Shik-Hyun Kim and Ms. For Vietnam be able to absorb this inevitable expansion of its FDI landscape the government needs to adapt holistically and quickly to the new global trade environment they have embarked on to realize its full potential. As Phan Huu Thang mentioned, education and training and renewable energy will be some of the hottest sectors in the coming months and years for FDI.

With highly advanced and technologically complex energy platforms especially renewables comes a requirement for competently trained personnel to sustain them. Vietnam has a large workforce pool; however, technical training for these opportunities is currently limited. This is good news for many renewable energy projects. Not only will a foreign business have more opportunities for development under CPTPP and EVFTA, but they can also add a minimal supplement to that investment and create the necessary workforce to support it.

An example from USA clearly demonstrates the opportunity in vocational training schools. In , Boeing, Inc.


  • Emerging Markets: Definition, Characteristics, List.
  • Vietnam's Booming Economy Offers Investment Opportunities;
  • The Patterns of Korea’s Foreign Direct Investment in Vietnam?

Along with that came a demand for technically trained personnel to operate the complex facility and to have personnel trained in the intricate technology involved in assembling the aircrafts. They provided the initial funding to build the vocational facility; in return, they have professionally trained personnel, and the government takes over costs of maintaining the training facility.

This occurs because different industries provide different kinds of advantages for foreign investors, as well as requiring different kinds of cost-saving factors.

I. List of Tables and Figures

Some activities deserve more attention in terms of promoting exports, while others provide sales opportunities in the local market. Some sectors require cheap labor as the essential production factor, while others need a developed infrastructure, such as transportation facilities. Until , export promotion was the most important motive of investors, with an average share of This is consistent with the attitude of many other Asian countries, which saw Vietnam as an export ground for their products.

Cheap labor has continued to be a dominant motive for Korean firms to invest in Vietnam, despite the recent decrease in its share. It accounted for Specifically, Vietnam enjoys a low-wage incentive in the context of the rising wage in China but loses its advantage when compared with its neighboring countries, like Lao PDR and Myanmar [5].

Table Regarding the accumulated number of overseas enterprises, small and medium-sized enterprises SMEs accounted for First and foremost, compared with large enterprises, SMEs usually seek cheap labor as their primary purpose of investing abroad [21]. Vietnam provides such an investment opportunity with its low wage level. Second, many producers in the garment industry were SMEs in Korea, particularly during the s.

As producers in a declining industry, they tried to invest abroad to continue their production, and corresponding investment outlets were found in China and Vietnam, among others. Despite the successes of many Korean firms investing in Vietnam, there have also been many cases of failures. The reformative legislation of Vietnam to open its economy together with the policy of Korea allowing OFDI in the late s facilitated the flow of investment from Korea to Vietnam. In addition to the policy developments, the Vietnamese economy provided a developed infrastructure in designated areas.

The contribution rate of the foreign-invested sector in the GDP actually grew from 6. In addition, the rapid expansion of export values contributed to changing the structure of trade from deficits to balanced trade in general 7. In this sense, FDI inflows have contributed.

Vietnam One of Asias best proxies to Emerging Market growth | Insights | Eastspring Investments

Meanwhile, they converged to about USD billion in In the meantime, the non-state sector was responsible for 85 percent of the employed population. The reason behind such minor performance of foreign firms in employment generation is that the investments were concentrated in activities that do not involve much job creation.

They were related either to the final production stage after the importation of components and raw materials or to other capital-intensive sectors that result in a low level of domestic employment generation [17]. Meanwhile, since the primary sector employs a great proportion of workers in Vietnam, the fact that foreign-invested enterprises FIEs explain 3 percent of the total employment may be interpreted in the sense that FIEs generate a significant proportion of value-added jobs in the manufacturing and service sectors.

Furthermore, the employment effect of Korean firms is expected to be quite large regarding the fact that the majority of Korean SMEs in Vietnam produce outputs in the labor-intensive industries, typically hiring local laborers on a largescale in the production process [20]. Although its effect differed depending on the sector, the Vietnamese economy received advanced technologies to a certain extent through FIEs. The Korean FIEs inter alia appear to have benefitted Vietnam in the sense that Korean OFDI is mostly centered on the garment, footwear, metal and electronics industries, in which technology transfer occurs at a high level [18].

However, impediments to the technology spillover effect of FDI remain, such as the market-stealing effect of foreign firms [23]. The experience of Vietnam in attracting FDI presents notable implications not only for Vietnam, but also for other developing economies. First, the case of Vietnam stresses the important role of economic liberalization policies consisting of integration into the world economy and FDI-friendly measures. This shows that the benefits of integrating into the global economy do not end merely with the preferential treatments provided by the individual agreements but extend further to increased interactions with other economies and enhanced attractiveness of the economy concerned to foreign investors.

Thus, the policy reforms in the host country to create a better investment climate for foreigners are crucial in increasing FDI inflows to their economy. Shik-Hyun Kim and Ms. Sooyoung Choi, on 7 July in Hanoi. The positive role that these zones play in attracting FDI has proved to be significant due to their developed transportation and telecommunications that facilitate business activities and the tax incentives provided to foreign firms operating in those zones.

However, the governments of the host countries should consider extending such economic zones to areas other than those developed in the initial stage. Thus, the case of Vietnam also indicates the necessity of building SEZs and improving the infrastructure in less developed regions for continued success in attracting FDI 8.

Third, the importance of human resources is noteworthy in attracting FDI.