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http://dx.doi.org/10.13106/jafeb.2020.vol7.no6.173

Determinants of Foreign Direct Investment: Evidence from Vietnam  

NGO, Minh Ngoc (Faculty of Business Administration, Industrial University of Hochiminh City)
CAO, Huy Hoang (Faculty of Business Administration, Industrial University of Hochiminh City)
NGUYEN, Long Ngoc (Faculty of Business Administration, Industrial University of Hochiminh City)
NGUYEN, Thuc Ngoc (Faculty of Business Administration, Industrial University of Hochiminh City)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.6, 2020 , pp. 173-183 More about this Journal
Abstract
The paper investigates the determinants of foreign direct investment (FDI) in Vietnam in 2000-2019 period. This study uses difference Generalized Methods of Moments (GMM) and Pooled Mean Group (PMG) to analyse panel data officially provided by General Statistical Office of Vietnam. The results show that market size impacts positively significant on FDI attraction: 1% -1.45% (PMG) and 1% -1.25% (GMM). Besides, some other factors have positive influences as labor force, macroeconomic policy, macroeconomic stability and skilled labor. Meantime, the trade openness negatively affects FDI inflows in the short-term, while not being statistically significant in the long-term. Moreover, economic shocks often have a negative impact on FDI inflows. The findings of this study lead to the following recommendations. First, authorities should pay special attention to encourage economic growth rate in Vietnam to expand market size because this is the first priority of foreign investors. Second, authorities need to continue increasing the rate of skilled labor, especially highly qualified management force, engineers and well-skilled workers. Third, the authorities should adjust trade openness to boost the role of its determinant in attracting FDI inflows. Fourth, macroeconomic stability needs to be governed by international standards in order to secure the belief of foreign investors in the long-term.
Keywords
Inward FDI; Market Size; Infrastructure; Trade Openness; Vietnam;
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