Studies on FDI Flow and import in ASEAN Countries and Vietnam

Studies on FDI Flow and Import in ASEAN Countries and Vietnam

Introduction

Foreign Direct Investment (FDI) plays a crucial role in the economic development of ASEAN countries, including Vietnam. This review aims to synthesize findings from multiple research papers to understand the impact of FDI on the economic landscape of these regions, focusing on trade, export performance, and integration into global value chains.

FDI and Economic Growth in ASEAN

The ASEAN region, comprising ten nations, has been successful in leveraging FDI to boost economic growth and development. Intra-regional FDI has significantly contributed to the export capabilities of host countries and increased machinery imports from capital-exporting countries. This dynamic has been instrumental in realizing the "flying geese" pattern of industrial development in Asia, making ASEAN one of the most attractive investment locations in the developing world.

Impact of FDI on Exports

FDI has a positive and significant impact on the export performance of ASEAN countries. A study focusing on Indonesia, Malaysia, Philippines, Thailand, and Vietnam from 2000 to 2015 found that FDI, along with crude oil prices, positively affects exports, while inflation has a negative impact. The study suggests that simplifying bureaucracy and discovering alternative energy sources can further enhance productivity and attract more foreign investment.

Vietnam's Experience with FDI

Vietnam's entry into ASEAN in 1995 marked a significant turning point in its economic integration. Despite limited evidence of 'halo' or market effects influencing Transnational Corporation (TNC) entry, Vietnam has successfully integrated foreign subsidiaries into regional and global value chains. This integration is crucial for attracting further investment from ASEAN-based TNCs. However, managing this value-chain involvement carefully is essential to maximize benefits.

An empirical analysis of 5,919 FDI projects in Vietnam from 1990 to 2004 revealed that FDI is a major driver of Vietnam's rapid export growth. The study demonstrated that a 1 percent increase in FDI inflows could lead to a 0.13 percent increase in Vietnam's exports to FDI source countries, highlighting the significant role of FDI in enhancing Vietnam's export performance.

Lessons from Other ASEAN Countries

Vietnam can learn valuable lessons from other ASEAN countries like Malaysia and Thailand, where direct effects such as employment and consumption multipliers are high. However, value-chain multipliers and spillovers remain low. This indicates that while FDI can drive immediate economic benefits, long-term value creation requires strategic management of value-chain integration.

Conclusion

FDI has been a pivotal factor in the economic development of ASEAN countries and Vietnam. It has enhanced export capabilities, integrated economies into global value chains, and provided valuable lessons for managing economic growth. Continued efforts to simplify bureaucratic processes and innovate in energy and production techniques will further attract FDI and bolster economic performance in the region.

References

Regionalization, foreign direct investment and poverty reduction: Lessons from Vietnam in ASEAN
India-ASEAN Investment Flows
Impact of FDI, COP, and Inflation to Export in Five ASEAN Countries
Foreign Direct Investment and Exports the Experiences of Vietnam

Studies on FDI Flow and import in ASEAN Countries and Vietnam

Summary