Attracting Foreign Direct Investment: A Critical Analysis of
Vietnam’s Performance
A thesis submitted in fulfilment of the requirements
for the degree of doctor of philosophy
Thanh Hoa Le
Master of Management, University of South Australia, Australia
Bachelor of Law, University of Law Ho Chi Minh City, Vietnam
School of Economics Finance and Marketing
College of Business
RMIT University
March 2015
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DECLARATION
I certify that except where due acknowledgement has been made, the work is that of the
author alone; the work has not been submitted previously, in whole or in part, to qualify
for any other academic award; the content of the thesis is the result of work which has
been carried out since the official commencement date of the approved research
program; any editorial work, paid or unpaid, carried out by a third party is
acknowledged; and, ethics, procedures, and guidelines have been followed.
Thanh Hoa Le
March 17, 2015
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REFEREE REVIEWED PAPERS
During his PhD candidature, the researcher has written several papers that have been
referee reviewed and accepted for presentation at quality international conferences.
These papers are as follows:
Le, TH & Tam, OK 2014, ‘Attracting foreign direct investment: An analysis of
Vietnam’s location advantages in comparison with other ASEAN
countries’, Proceedings of the 2014 International Conference on Business and
Information (BAI2014) in Osaka, Japan, Paper ID: 3308 (Best Paper Award).
Le, TH & Tam, OK 2014, ‘The flows of FDI to Vietnam: From policy to
implementation’, Proceedings of the 7th Vietnam Economists’ Annual Meeting
(VEAM2014) in Ho Chi Minh, Vietnam, Paper ID:70.
Le, TH & Tam, OK 2014, ‘Vietnam’s FDI location advantages: A sub-national level
analysis’, Proceedings of the 13th Eurasia Business and Economics Society (EBES)
Conference in Istanbul, Turkey, Paper ID: 194.
Le, TH & Tam, OK 2014, ‘Attracting foreign direct investment: A review of the
literature and conceptual framework’, Paper accepted for presentation at the 10th
Asian
Business Research Conference in Bangkok, Thailand, Paper ID: 212.
Le, TH & Tam, OK 2014, ‘Attracting foreign direct investment: A critical analysis of
Vietnam’s policy framework’, Paper accepted for presentation at the 5th Kuala Lumpur
International Business, Economics and Law Conference in Kuala Lumpur, Malaysia,
Paper ID: 41.
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ACKNOWLEDGEMENTS
This thesis has been completed with professional and spiritual assistance from several
people. First and foremost, I am especially indebted to my senior supervisor, Professor
On Kit Tam, Deputy Pro Vice-Chancellor, Business International at RMIT University,
for his helpful and expert guidance throughout the course of this study. At the formative
stage of my research, he helped me to develop my research skills and design the
research plan, and encouraged and inspired me to become a good research scholar. He
was enthusiastic and provided me with practical feedback on my draft chapters. He has
been a very responsible and dedicated supervisor. I could not have finished this study
successfully without his careful supervision and support. I would also like to express
my profound gratitude to Dr Meg Sato, my associate supervisor. Her generous
guidance, support, and understanding have helped me tremendously during my PhD
journey.
Further, I wish to express my appreciation to Dr Cuong Tat Do at Ho Chi Minh
National Political Academy for his advice in selecting and developing the appropriate
econometric models for this study. I wish also to express my gratitude to Professor
Geoffrey Stokes, Professor Imad Moosa, Professor Lisa Farrell, and Dr Ashton De Silva
in the Business College, RMIT University, for their valuable comments on my
presentations in PhD seminar series. My special thanks go to Esther, Priyanka, and
Prue, who supported me through every stage of my research process. Something that I
have most cherished is my friendships with exceptional PhD candidates: Jane, Trang,
Tung, Hoa, Bac, Anh, Huong, Hai, Ha, Phuong, Hung, Nga, Duong, Tri, Nguyen,
George, Dian, Siti, Jack, Brad, Saiful, and Narjess, whom I met during my PhD journey.
Moreover, I express particular thanks to the 165 Vietnamese Project for funding my
PhD study. This is a great effort by the Vietnamese Communist Party for improving the
quality of leaders and managers in the political system to meet the requirements of the
period of accelerated industrialisation and modernisation of Vietnam. Especially, I
would like to express deep appreciation to Mr To Huy Rua, Mr Nguyen Van Quynh,
and Mr Nguyen Van Du as well as the 165 Vietnamese Project staff for supporting me
morally and financially during my study.
Furthermore, I extend my utmost thanks to my mother, Mrs Tuyet Thi Kim Nguyen; my
brother and brothers in-law, Tam Thanh Le, Hung Tai Le, and Thuc Vinh Pham; and
my sisters and sister in-law, Phung Thi Kim Le, Loan Thi Kim Le, and Oanh Thi
Nguyen. They greatly encouraged me during challenging moments in Australia. Lastly,
and most importantly, my biggest thanks go to my dearest friend Xinh Chi Vo for
giving me the encouragement, support, motivation, care, and understanding to complete
my PhD study.
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CONTENTS
DECLARATION ………………………………………………………………………………………… ii
REFEREE REVIEWED PAPERS ………………………………………………………………… iii
ACKNOWLEDGEMENTS ………………………………………………………………………….. iv
CONTENTS ……………………………………………………………………………………………….. v
LIST OF CHARTS …………………………………………………………………………………….. xii
LIST OF DIAGRAMS AND FIGURES ………………………………………………………..xiii
LIST OF TABLES …………………………………………………………………………………….. xiv
ABSTRACT ……………………………………………………………………………………………….. 1
CHAPTER 1: INTRODUCTION ……………………………………………………………………. 3
1.1 RESEARCH BACKGROUND ………………………………………………………………… 3
1.2 RESEARCH MOTIVATION AND SCOPE ……………………………………………….. 6
1.3 RESEARCH OBJECTIVES AND QUESTIONS ………………………………………… 8
1.4 RESEARCH DESIGN ……………………………………………………………………………. 9
1.5 RESEARCH CONTRIBUTIONS …………………………………………………………… 12
1.6 STRUCTURE OF THE THESIS …………………………………………………………….. 12
CHAPTER 2: LITERATURE REVIEW ……………………………………………………….. 14
2.1 INTRODUCTION ……………………………………………………………………………….. 14
2.2 DEFINITION OF FDI …………………………………………………………………………… 16
2.3 REVIEW OF FDI THEORIES ……………………………………………………………….. 19
2.3.1 Ownership Advantage theory ……………………………………………………………. 22
2.3.2 Product Life Cycle theory ………………………………………………………………… 24
2.3.3 Internalisation theory ………………………………………………………………………. 27
2.3.4 Dunning’s Eclectic theory ………………………………………………………………… 29
2.4 STUDIES ON FDI POLICIES AND LOCATION FACTORS IN HOST
COUNTRIES …………………………………………………………………………………………….. 34
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2.4.1 FDI inflow effects of government policies and the effectiveness of policies
on the utilisation of location factors ……………………………………………………………. 35
2.4.2 Exchange rate uncertainty and FDI inflows …………………………………………. 38
2.4.3 Market size and FDI inflows …………………………………………………………….. 40
2.4.4 Labour quality and FDI inflows ………………………………………………………… 42
2.4.5 Labour cost and FDI inflows …………………………………………………………….. 44
2.4.6 Infrastructure development and FDI inflows ……………………………………….. 46
2.4.7 Trade openness and FDI inflows ……………………………………………………….. 48
2.4.8 Inflation rates and FDI inflows …………………………………………………………. 51
2.4.9 Special economic zones and FDI inflows ……………………………………………. 52
2.4.10 Tax incentives and FDI inflows ………………………………………………………. 54
2.5 CONCLUSION ……………………………………………………………………………………. 62
CHAPTER 3: FDI INFLOWS IN THE GLOBALISATION ERA AND
EXPERIENCES OF SELECTED COUNTRIES IN ATTRACTING FDI ………… 63
3.1 INTRODUCTION ……………………………………………………………………………….. 63
3.2 AN OVERVIEW OF FDI ……………………………………………………………………… 65
3.2.1 Trends in global FDI ……………………………………………………………………….. 65
3.2.2 Impacts of FDI inflows on host countries ……………………………………………. 69
3.2.3 The importance of FDI inflows to developing countries ………………………… 74
3.3 DEVELOPING AND UTILISING POLICIES TO ATTRACT FDI IN
SELECTED COUNTRIES ………………………………………………………………………….. 75
3.3.1 Australia and its FDI policy development …………………………………………… 76
3.3.2 China and its FDI policy development ……………………………………………….. 78
3.3.3 Malaysia and its FDI policy development …………………………………………… 81
3.4 CONCLUSION ……………………………………………………………………………………. 83
CHAPTER 4: THE DOI MOI POLICY AND FDI INFLOWS IN VIETNAM ….. 85
4.1 INTRODUCTION ……………………………………………………………………………….. 85
4.2 FDI POLICIES IN VIETNAM BEFORE THE DOI MOI POLICY ………………. 87
4.2.1 FDI policies in Vietnam under French rule …………………………………………. 87
4.2.2 FDI policies in Vietnam in the period 1955-1975 …………………………………. 88
4.2.3 FDI policies in Vietnam after the country’s reunification, 1976-1985 ……… 90
