Academic journal article Southeast Asian Affairs

Foreign Direct Investment

Academic journal article Southeast Asian Affairs

Foreign Direct Investment

Article excerpt

Much has been said of the reportedly positive role played by foreign direct investment (FDI) in the Vietnamese economy, and the need to create "suitable" conditions for it. The politics of this are obvious. Vietnam received large inflows of FDI during the mid-1990s, and these tended to slow as 1997 approached. It may have been that some investors had formed a certain "view" of Vietnam, which then shifted as they learnt more. While Vietnam's domestic savings remain low, FDI will appear as an important contributor to domestic investment (more than in other export-oriented Southeast Asian economies). This is likely to change as small and medium enterprises (SMEs), with their characteristically high levels of investments from retained profits, emerge. Also, the current high rates of export growth from foreign-invested businesses point in both ways: to the relative success under current conditions and to the role played by FDI in linking Vietnamese production to global markets.

It is interesting to recall the structure of output: the way in which the non-state sector has replaced foreign-invested companies as the fastest grower, and also the relatively low rate of employment creation in foreign-invested businesses, often being rather hi-tech, tend to use more capital per worker than domestic companies. …

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