Introduction
Problem Statement
There is a lack of empirical studies examining the independent variables of the Provincial Competitiveness Index (PCI) and their influence on provincial Foreign Direct Investment (FDI) in Vietnam Understanding how these traditional variables impact provincial FDI is crucial for developing effective investment strategies.
I also did not find any analysis related to the independent variables of PCI whether they have internal relation.
Research Objectives
Previous studies have explored the factors that attract foreign direct investment (FDI) to developing countries, revealing key determinants influencing investment decisions This thesis aims to identify these critical factors that contribute to attracting FDI across various nations.
(i) Independent variables of PCI and other traditional variables are significant impacts to FDI of Provinces in Vietnam; and
(ii) Factors of PCI are highly correlated and we should revise PCI set.
(iii) PCI determinants out of the ten original factors should be included in a new, more significant subset base of PCI determinants.
(iv) Interaction effects between PCI improvement and FDI growth.
Research questions
This thesis examines the factors influencing provincial foreign direct investment (FDI) in Vietnam, utilizing a set of independent variables derived from the Provincial Competitiveness Index (PCI) along with traditional variables that may attract FDI to various provinces.
This study explores the relationship between foreign direct investment (FDI) and various independent variables identified in the Provincial Competitiveness Index (PCI) project in Vietnam We detail the theoretical framework and empirical findings related to FDI, followed by a comprehensive description of the independent variables utilized in our analysis Our research model is constructed based on data collected from the PCI project and the General Statistics Office of Vietnam, enabling us to address key research questions, particularly focusing on which PCI and traditional variables significantly influence FDI across Vietnamese provinces.
(2) Factors of PCI are highly correlated and we should revise PCI set?
(3) Which PCI determinant out of the ten original factors should be included in a new. more significant subset base of PCI determinants?
(4) Are interaction effects between PCI improvement and FDI growth?
Organization of the study
This thesis has five chapters, while the chapter one has presented as above explain the purpose chose the theme The rest of this thesis is organized as follows:
Chapter two offers an overview of regional development and foreign direct investment (FDI) theory, while also summarizing empirical research focused on strategies for attracting FDI, particularly in relation to various provinces within the country.
Chapter three outlines the process of constructing the research model based on the insights from chapter two, focusing on data selection It emphasizes the significance of identifying dependent and independent variables utilized in the PCI project for annual surveys, while also incorporating traditional variables.
Chapter four is the econometric analysis and finding The last chapter will be conclusion and recommendation of the research.
Theoretical Consideration and Literature Review
The regional development and competitive regionalism theory
of human capital Competition regionalism are low corruption, predictable and transparent businesses environment, secure property rights flexible labor markets, a competitive tax regime and efficiently supplied public goods.
According to Porter (1990), national competitive advantage is influenced by key factors such as skilled labor, robust infrastructure, the characteristics of domestic demand, and the presence of supporting industries These elements play a crucial role in attracting foreign direct investment (FDI) to both countries and their provinces.
FDI theories and its applicability
Foreign Direct Investment (FDI) occurs for various reasons, leading to diverse approaches in understanding its determinants Capital theory emphasizes the importance of profit rates and risks for firms, while international trade theories explore the relationships between FDI and exports as either substitutes or complements Additionally, industrial organization theories view FDI as a means for firms to leverage their specific advantages The OLI paradigm offers a dynamic perspective on FDI determinants, and agglomeration economies examine the spatial distribution of FDI.
2.2.1 Capital Theory 2.2.1.1 Differential Rate of Return Theory
Until the 1950s, foreign direct investment (FDI) was primarily understood through the traditional theory of international capital movements, which viewed it as a reaction to varying rates of return on capital across different countries.
Investors aim to create an efficient investment portfolio to minimize risk When selecting between alternative assets, the potential rates of return are closely linked to the associated risks, guiding the decision-making process in building a balanced portfolio.
Dunning (1973) argues that portfolio theory only partially accounts for direct foreign investment because it overlooks the fact that direct investment does not alter ownership Instead, it facilitates the transfer of essential resources such as entrepreneurship, technology, and management expertise Furthermore, the effectiveness of these resources is influenced by their relative profitability across different countries, in contrast to the mere movement of monetary capital.
The theory argued that the international diversification of portfolios is a way of reducing the finn’s risk and hedging the risks.
, Capital theory shows that some determinants related cost factors in PCI set have potential effects to attracting FDI of provinces.
2.2.2.1 Mundell and the Heckscher-Ohlin Model Mundell (1975) extended the basic model to show that trade and capital movements can be substitute He argued that the introduction of trade tariffs would induce a flow of FDI towards the protected countries This argument was the same with original Heckscher-Ohlin model that restrictions on trade can be modified by international movements of factors, namely capital, given the immobility of labor.
Kojima (1973) groups motives of FDI into four categories (i) to seek natural resources , (ii) to take advantage of cheap labor cost in the host country (iii) to avoid tariff and
12 non-tariff barriers, and (iv) to take advantage of oligopolistic power owing to technology and knowledge advantage.
The product cycle model, introduced by Vernon in 1966, addresses the rapid investment of US firms abroad by outlining that each product undergoes three phases: innovation, maturity, and standardization Domestic demand serves as a catalyst for innovation, while similarities in international demand boost exports Vernon's theory highlights how the US's abundance of skilled labor and research and development resources, combined with a sophisticated domestic market, fosters innovation among American companies.
2.2.3 Market Failures and Industrial Organization
Foreign firms face inherent disadvantages compared to domestic companies, such as limited market knowledge and communication barriers, necessitating firm-specific advantages for successful foreign production Hymer (1960) posits that foreign direct investment (FDI) transcends mere capital transfer; it involves the international movement of proprietary rights and intangible assets, including technology, business methods, and skilled personnel He argues that FDI arises from international market imperfections related to these assets, prompting firms to "internalize or supersede" these market failures through direct investment.
Internal transactions can often lead to greater cost savings compared to market exchanges Internalization occurs when the advantages, such as reducing barriers for new entrants, surpass the costs related to communication, coordination, and control Foreign Direct Investment (FDI) is a strategy employed to leverage these benefits effectively.
2.2.4 The Eclectic Paradigm and International Investment Path
Dunning (1979) suggests that a firm engage in FDI if three conditions are satisfied:
It possesses net ownership (0-) advantage vis-a-vis firms from other countries;
- It is beneficial to internalize (I- advantage) those advantages rather than to use the market to pass them to foreign firms;
There are some location (L-) advantages in using the firm’s ownership advantages in a foreign location rather than at home.
The IDP approach examines the relationship between a country's inward and outward investments, highlighting a correlation between its development level and international investment position, as indicated by net outward investment per capita The fundamental hypothesis posits that there is a significant interconnection between the flows of inward and outward investments and the overall development of the country.
In other words, as a country develops, the conditions, which domestic firm and foreign firms face, will change.
The rapid globalization and standardization of multinational enterprises (MNEs) have made location determinants a crucial factor in foreign direct investment (FDI) decisions in host countries According to UNCTAD (2001), while traditional FDI drivers remain relevant, their significance is waning, especially in dynamic and high-tech sectors Instead, the attractiveness of FDI locations is increasingly reliant on the host countries' capacity to offer complementary skills, robust infrastructure, reliable suppliers, and effective institutions.
Increasing returns in production activities are needed if we want to explain economic agglomerations without appealing to the attributes of physical geography.
Externalities from agglomeration are known to encompass specialized labor markets and supplier networks as well as knowledge spillovers.
Competitive advantage theory identifies key determinants of regional economic growth in developing countries, including geography and infrastructure, the ability to engage with the global economy, the effectiveness of local governance and institutions, and the quality of human capital.
Competition regionalism are low corruption, predictable and transparent businesses environment, secure property rights flexible labor markets, a competitive tax regime and efficiently supplied public goods.
The determinant of national competitive advantage, the nations in factors of production is skilled labor, infrastructure, the nature of home demand and supporting industries.
Geography, Infrastructure, Legal Institutions, Quality of human capital;
Competitive tax regime and efficiently supplied public goods.
Skilled labor, infrastructure, supporting industries.
3 Capital Theory Higher rate of return , leading to higher attracting FDI
Factor cost: Entry Cost, Informal charges, Time Costs of Regulatory
Trade tariffs would induce a flow of FDI
Legal Institutions , Proactively of Provincial Leadership
Motiving of FDI into four categories (i) to seek natural resources (ii) to take advantage of cheap labor cost in the host country
(iii) to avoid tariff and non-tariff barriers, and (iv) to take advantage of oligopolistic power
Labor Training, Access to Land, Legal Institutions,
Domestic demand can be an incentive to innovate, while international demand similarity stimulates exports.
Market size, Labor Training, Business Support Service , Provincial Industry Product
FDI is not simply about the transfer of capital, it is about the international transfer of proprietary rights and intangible assets-
16 technology, business tecluiiques, and skill personnel’s.
Some transactions are more cost- saving if it is performed inside the firm than in the market.
Internalization occurs when the advantages, such as those related to barriers for new entrants, outweigh the costs of communication, coordination, and control Foreign Direct Investment (FDI) is pursued to leverage these benefits effectively.
Factor cost: Entry Cost, Informal charges, Time Costs of Regulatory
This section aims to explore the fundamental theories related to regional development and the attraction of Foreign Direct Investment (FDI) While existing theories outline the factors that draw FDI to a country, it is essential to evaluate their potential impact on provincial FDI levels.
Empirical studies on the determinants of FDI
Conventional empirical studies on the determinants of Foreign Direct Investment (FDI) have identified ten key variables, as proposed by Dunning and Narula (1996) These variables include natural and created assets, capital intensity, market size and growth, infrastructural development, labor costs and productivity, and the degree of openness.
(vii) government policies; (viii) political stability; (ix) profitability; (x) geographical proximity.
Nonnemberg and Mendonça (2004) analyzed the factors influencing foreign direct investment (FDI) in developing countries by employing an econometric model that utilized panel data from 38 developing economies spanning the years 1975 to 2000 Their research highlights key determinants that affect FDI flows, providing valuable insights for policymakers and investors in emerging markets.
A study conducted in 2000 identified education as a key determinant of foreign direct investment (FDI), particularly in developing countries where investments are increasingly focused on knowledge-intensive activities The research highlighted that an economy's degree of openness significantly influences its ability to attract FDI Additionally, a causality test revealed that GDP tends to lead to FDI rather than the other way around Furthermore, Ali and Guo (2005) found that market size is a crucial factor in attracting FDI, while labor costs and global integration also play significant roles.
Sahoo (2006) conducted a panel cointegration study focusing on five South Asian countries—India, Pakistan, Bangladesh, Sri Lanka, and Nepal—revealing a long-run equilibrium relationship between Foreign Direct Investment (FDI) and its determinants Key factors influencing FDI in this region include market size, labor force growth, infrastructure quality, and trade openness The study emphasizes the necessity for South Asian nations to sustain economic growth, enhance labor utilization, improve infrastructure, and adopt more open trade policies to attract increased FDI Additionally, Kozlova and Smajlovic (2008) identified FDI inflows as the dependent variable in their model, with GDP per capita, investment freedom, trade openness, and infrastructure as explanatory variables, while also considering whether a country is an oil exporter through a dummy variable.
FDIi = oi + §1 (GDPperCap)i + §2 (InvestmentFreedom)i + §3 (Infrastructure)i + §4 (TradeOpenness)i + §5 D (OilExp)i + ui
The general conclusion from the results demonstrates that the infrastructure and trade openness are significantly related to FDI in the MENA (the Middle East and North
Vijayakumar et al (2010) identified that, aside from Economic Stability and Growth prospects—assessed through inflation rates and industrial production—trade openness, measured by the ratio of total trade to GDP, significantly influences FDI inflows in BRICS countries While most FDI research has concentrated on individual countries or select groups, there is a need to examine these potential explanatory variables in relation to the independent variables affecting provincial FDI.
Geographical literature on Vietnam, China and ASEAN countries
Xu et al (2009) reported that agglomeration economies, labor cost, infrastructures greatly influence the spatial distribution of FDI in China.
According to Dang (2008), several key factors drive foreign direct investment (FDI) in China Firstly, many investors are attracted to the expansive Chinese domestic market Secondly, the availability of low-cost labor in China presents opportunities for reducing production expenses Additionally, the country's robust infrastructure significantly boosts FDI, as it enables firms to improve their technology and achieve economies of scale Lastly, the political environment plays a crucial role, with China's leadership providing a clear vision for the nation's growth and development, further enhancing its appeal to foreign investors.
Iuo et al (2007) emphasize the importance of investigating how natural resource endowments can drive local economic growth and attract foreign direct investment (FDI) in under-developed areas Additionally, the study reveals that multinational enterprises (MNEs) tend to prioritize locations that facilitate high-value activities over those that simply offer low labor costs.
Havrylchyk and Poncet (2006) found that the positive impact of agglomeration, high labor productivity and low labor costs, market size, infrastructure density, and market reforms on FDI.
Na and Lightfoot (2006) found that three key variables significantly influence Foreign Direct Investment (FDI) across 30 regions in China Firstly, the market demand and size, as indicated by GDP, positively attract FDI Secondly, regions with a higher quality of labor are more appealing to investors Lastly, the degree of openness and the level of reform within each region also play a crucial role in attracting FDI.
According to Giang (2008), four local factors hinder foreign direct investment (FDI) in Vietnam's mountainous provinces (NMPs): their remote location from commercial centers, underdeveloped infrastructure, weak FDI policies, and an unfavorable investment environment compared to other regions Annual surveys conducted by VCCI and VNCI reveal that the FDI climate in these provinces is not conducive, with all but Lao Cai being among the least transparent areas in Vietnam Six of these provinces rank as the least transparent overall.
According to Anh and Thang (2007), key factors influencing foreign direct investment (FDI) location decisions in Vietnam include market potential, labor availability, and infrastructure quality However, their research did not reveal any significant evidence regarding the influence of local government policies on FDI.
In their 2007 study, Anh et al conducted an empirical evaluation of the effectiveness of incentives in attracting foreign direct investment (FDI) They employed a two-step difference-in-differences (DD) estimation approach, beginning with the estimation of a regression model using ordinary least squares (OLS) methodology.
In year t, the level of per capita Foreign Direct Investment (FDI) attracted to province s is represented by Yst, while Xst includes the relevant determinants influencing FDI attraction A dummy variable, Breaks, is utilized, where it equals 0 for non-breakers and 1 for breakers The subsequent step involves estimating the effect of incentives on FDI attraction.
OLS regression in this two period panel The regression has a very simple form as follow: gsi = b3 b4.Timesi + usi (2)
The analysis reveals that the impact of labor costs on foreign direct investment (FDI) varies significantly before and after investment is made In regression (1), the negative and statistically insignificant coefficient of wages suggests that investors initially prefer locations with lower labor costs Conversely, in regression (2), the positive and statistically significant wage coefficient indicates that after investment, the presence of FDI projects leads to increased demand for labor, resulting in higher productivity and wages This shift underscores the differing considerations foreign investors have regarding labor costs at various stages of their investment journey.
Thu (2007) studied the determinants of the FDI in Vietnam, the specific empirical model of the time-series determinants of FDI inflows in Vietnam is:
LnFDIt — 0 + 61 lnGDPt 62 lnGDPGt+ 63 lnTELt + 64 lnHKt + 65 lnOPENt + 66 lnEXCHANGEt + 67 D1998+ 68ASEAN * ut The results reveal that higher market size and higher GDP growth are encouraging FDI inflows into Vietnam.
Ali and Ahmad (2008) reported that important factors in determining the location relationship of FDI in Malaysia are the community, availability of raw materials and fuel.
Spatial Determinants of Inward FDI in China: Evidence from Provinces
FDI in China Economic Growth and Policy
Foreign Direct Investment (FDI) in China is influenced by various regional determinants, which play a crucial role in shaping investment patterns In South Asia, FDI trends reveal significant policy impacts, highlighting the importance of regulatory frameworks in attracting foreign capital Recent literature summarizes key factors affecting FDI and economic growth, emphasizing the interplay between local market conditions, government policies, and global economic trends Understanding these determinants is essential for fostering sustainable investment and enhancing regional economic development.
Foreign direct investment in Vietnam: An overview and analysis the determinants of spatial distribution across provinces
22 agglomeration economies, labor cost, infrastructures
Market size and growth, Government incentive policies; Cheap labor cost; High investment return market size (GDP),quality labor degree of openness
Market size, labor force growth, infrastructure index and trade openness. market size, economic growth, macroeconomic stability, Infrastructure , regulation, economic barrier the marker potential, the labour factors, and infrastructure
Determinants of the FDI in Vietnam market size; GDP growth
The determinants of foreign direct investment: a panel data study for the oecd countries the marker size, the trained labour , and infrastructure
Most research on Foreign Direct Investment (FDI) has concentrated on national or regional levels, with limited studies examining regional FDI in China This thesis specifically investigates provincial FDI in Vietnam, utilizing the Provincial Competitiveness Index (PCI) and other traditional variables as independent factors.
Base on Vietnam PCI project proposed general framework for determinants of provincial competition index as follows:
PCI 'f (EC Qt› it› TAI ;J TCRC jt› IC jt› PPL jt› BSS ;t• LT ;t› LI jt› in u ,th (1)
The article emphasizes key factors influencing business operations, including EC (Entry Costs), AL (Access to Land), TAI (Transparency and Access to Information), TCRC (Time Costs of Regulatory Compliance), IC (Informal Charges), PPL (Proactivity of Provincial Leadership), BSS (Business Support Services), and LT (Leadership Training) These elements collectively impact the ease of doing business, highlighting the importance of regulatory efficiency, land accessibility, and proactive governance in fostering a supportive environment for entrepreneurs Prioritizing transparency and minimizing informal charges can further enhance business growth and sustainability.
Labor Training , LI-Legal Institutions, INF- infrastructure.
Base on empirical studies related to FDI, especially regional FDI, economic theory and base on PCI survey as equation (1), the research question is
(i) Which independent variables of PCI and other traditional variables are significant impacts to FDI of Provinces in Vietnam? ,
The first regression model for this study is suggested as follow:
/ BSS , + a g LT t 9 I I t + ºio ô + O] j INF t + ºj 3 MS + ºl 3 KEA g + ì
Where: IP-Industrial Product of province, MS-Market Size, KEA: northern and southern key economic area KEA =1, other provinces KEA=0
The OLS technique applies for the first regression model to answer for the first research question
Base on economic theory and principle component analysis we expect to find multicollinearity or significant interaction effects among some of these as following
24 cxplanation Some independent variables can be dropped off to trio group Cost Factors
The analysis incorporates the Cost Factor (CF), which encompasses Economic Costs (EC), Total Revenue Cost (TCRC), and Investment Costs (IC), alongside Province Policies (PP) that include Agricultural Land (AL), Taxation and Investment Policies (TAI PPL), Business Support Services (BSS), Land Tenure (LT), and Land Information (LI) Additionally, it is essential to consider other significant variables in this review This methodology directly addresses Research Questions No 2 and No 3.
The initial regression model utilized in this study focuses on the distribution determinants of total Foreign Direct Investment (FDI) within provinces By employing the logarithm of annual FDI as the dependent variable, this model highlights the growth rate of FDI effectively.
Where, / and i denote sample provinces, and time (year) respectively p denotes residuals.
To answer for research question No.4, The OLS technique also applies.
3.2 Data Collection There are two types of panel data: Balanced versus non-balanced data Balanced case: i = 1, 2, , N t = 1, 2, , T
Unbalanced case: i = 1, 2, , N t — 1, 2, , Ti Or: t — tj 1, tj2 , , tjTi
Two limit cases are a "pure" cross section data with only one time period or a "pure" Time-series data with only one individual
I gathered panel data, including both dependent and independent variables, from the PCI project (www.pcivietnam.org) and the statistical yearbook of Vietnam provided by the General Statistics Office (www.gso.gov.vn) This data encompasses all provinces in Vietnam from 2006 to 2009, resulting in 252 observations (4 years x 63 provinces) To create cross-sectional data, I calculated the average values over the four years, yielding 63 observations Additionally, I obtained registered Foreign Direct Investment (FDI) data for the provinces in Vietnam, applying a weight of 0.33 for the years 2007 to 2009.
2009) of the implementation value of provincial FDI as following:
Table 3.1: the implementation value of provincial FDI
Source: GSO 2007-2009 This is the average data of ten provinces which they had FDI capital in high level (2006-2009):
Table 3.2: FDI capital of top ten provinces
Hat Duong PCI point 62.02 62.89 62.43 54.75 74.80 60 10 74 12 59.41 59.75 54.74 FDI-Mill
By using OLS method for estimating the equations (2), and (3) to answer for four research questions (i,ii,iii,iv).
Above result will be compared with actual survey data (benchmarking) to choose the best output.
3.3.1The Provincial Competitiveness Index-PCI (total point — 100)
The Provincial Competitiveness Index (PCI) aims to analyze the varying performance levels of different regions in the country concerning private sector dynamism, job creation, and economic growth By utilizing recent survey data from businesses about their perceptions of local business environments, along with reliable and comparable data from official sources, the PCI provides insights into local conditions The following table presents the PCI results for 2009.
3.3.2 Provincial Foreign Direct Investment-pFDI (mill USD)
Is investment which provinces in Viet Nam receive from investors who come from other countries.
A measure of the time and difficulty it takes firms to register, acquire land, and receive all the necessary licenses to start business.
The goal of this sub-index is to assess the differences in entry costs for new firms
Research Model, Data Collection and Variable Description
Data Collection
Unbalanced case: i = 1, 2, , N t — 1, 2, , Ti Or: t — tj 1, tj2 , , tjTi
Two limit cases are a "pure" cross section data with only one time period or a "pure" Time-series data with only one individual
I collected panel data, including both dependent and independent variables, from the PCI project (www.pcivietnam.org) and the statistical yearbook of Vietnam from the General Statistics Office (www.gso.gov.vn) This data encompasses all provinces in Vietnam from 2006 to 2009, resulting in 252 observations (4 years x 63 provinces) I then computed cross-sectional data by averaging the values over the four years, yielding 63 observations Additionally, I obtained registered FDI data for the provinces in Vietnam, applying a weight of 0.33 for the years 2007 to 2009.
2009) of the implementation value of provincial FDI as following:
Table 3.1: the implementation value of provincial FDI
Source: GSO 2007-2009 This is the average data of ten provinces which they had FDI capital in high level (2006-2009):
Table 3.2: FDI capital of top ten provinces
Hat Duong PCI point 62.02 62.89 62.43 54.75 74.80 60 10 74 12 59.41 59.75 54.74 FDI-Mill
By using OLS method for estimating the equations (2), and (3) to answer for four research questions (i,ii,iii,iv).
Above result will be compared with actual survey data (benchmarking) to choose the best output.
Variables description
3.3.1The Provincial Competitiveness Index-PCI (total point — 100)
The Provincial Competitiveness Index (PCI) aims to identify the reasons behind varying levels of private sector dynamism, job creation, and economic growth across different regions It utilizes recent survey data from businesses that reflect their perceptions of local business environments, alongside reliable and comparable data from official sources concerning local conditions The results for PCI in 2009 are presented in the following table.
3.3.2 Provincial Foreign Direct Investment-pFDI (mill USD)
Is investment which provinces in Viet Nam receive from investors who come from other countries.
A measure of the time and difficulty it takes firms to register, acquire land, and receive all the necessary licenses to start business.
The goal of this sub-index is to assess the differences in entry costs for new firms
Despite the intention of the Enterprise Law and its subsequent implementing documents to establish uniform procedures across all provinces, studies indicate that inconsistencies still exist in practice.
This is negative independent variable of FDI which above empirical research have done It may have internal relation with variables group Cost Factor
3.3.4 Access to Land-AL (point-10)
The ease of land access for firms is assessed through a sub-index that was updated in 2006 to include a new dimension measuring the security of tenure after land acquisition Key factors evaluated include the possession of official land use rights certificates, the adequacy of land for business expansion, rental agreements with state-owned enterprises (SOEs), and a comprehensive assessment of the land situation.
27 conversion efforts The second dimension includes perceptions of various tenure
• security risks such as expropriation, unfair compensation values or changes in the lease contract as well as the duration of tenure.
Private firms frequently highlight the significant disparities in land policies across provinces, which can be categorized into two main dimensions The first dimension, Access to Land, refers to the challenges firms face in acquiring productive land, hindering new business investments and limiting access to capital since Land Use Rights Certificates (LURCs) cannot be used as collateral for loans Additionally, firms forced to rent land from State-Owned Enterprises (SOEs) or provincial agencies face restricted growth opportunities and incur extra transaction costs The second dimension is Security of Tenure, which assesses whether firms feel confident in the long-term stability of their land rights Greater security encourages firms to invest in the long-term productivity of their land, while concerns about potential expropriation or changes in lease contracts lead to a more short-term investment perspective.
, business plans and decisions Employing such a short-term or 'footloose' approach tends to undermine overall provincial welfare in terms of income and employment creation.
This is positive independent variable of FDI which above empirical research have done It may have internal relation with variables group -Province Policy
3.3.5Transparency and Access to Information-TAI (point-10)
Access to essential planning and legal documents is vital for businesses to operate effectively, ensuring these resources are equitably available Additionally, the clear communication and predictable implementation of new policies and laws are critical for firms The utility of provincial web pages also plays a significant role in supporting businesses Analysts and development practitioners emphasize that transparency is a key factor in fostering a conducive business environment.
in distinguishing between environments conducive to private sector business.
This is positiv e independent variable of FDI which above empirical research have , done It may have internal relation with variables group -Province Policy
3.3.6Time Costs of Regulatory Compliance-TCRC (point-10)
The article examines the significant time costs that firms incur due to bureaucratic compliance and mandatory inspections by local regulatory agencies It highlights two key dimensions: Bureaucratic Procedures and Time Lost to Inspections, both of which are equally weighted This analysis of transaction costs in time is crucial in the context of economic transitions, particularly in Vietnamese provinces where the adage "time is money" holds true Firm managers frequently find themselves diverted from essential business operations to address bureaucratic issues, resulting in lost time that could be better utilized for effective management of their companies.
This is negative independent variable of FDI which above empirical research have done It may have internal relation with variables group -Cost Factor
A measure of how much firms pay in informal charges and how much of an obstacle those extra fees pose for their business operations.
This section evaluates the informal fees, fines, and extraordinary payments that businesses incur as a routine aspect of their operations It utilizes five key indicators to assess the prevalence, nature, and magnitude of these additional costs The significance of this analysis has increased following the Revised Anti-Corruption Law enacted by the National Assembly in August 2007.
This is negative independent variable of FDI which above empirical research have done It may have internal relation with variables group- Cost Factor
3.3.8 Proactivity of Provincial Leadership-PPL (point-10)
Provinces demonstrate their creativity and ingenuity by effectively implementing central policies, developing unique initiatives to support private sector growth, and navigating ambiguous national regulations to advocate for local businesses.
Ambiguity in legal documents can stem from unclear wording, delays in the implementation of central laws, and contradictions between various official documents This lack of clarity particularly affects new industry segments in Vietnam, where a defined legal framework may be absent When legal ambiguity delays business projects, the actions of provincial governments can significantly influence the success of these ventures Delays caused by provincial officials can lead to increased costs and wasted time for businesses, as they await clarification from implementing documents or central authorities Some provinces may even exploit these uncertainties to create barriers against potential competitors Conversely, provinces that demonstrate creativity in navigating central laws and proactively address the challenges faced by private firms can greatly enhance private sector development.
This is positive independent variable of FDI which above empirical research have done It may have internal relation with variables group —Province Policy
3.3.9Business Support Service-BSS (point-10)
Provincial policies aimed at promoting private sector trade and facilitating business partner matchmaking are crucial for assessing the effectiveness of local officials This evaluation focuses on how successfully provincial authorities are addressing the challenges faced by businesses, ensuring a supportive environment for trade and collaboration.
The eighth sub-index builds on the Pro-activity Sub-index by examining how provincial initiatives foster private sector development in Vietnam Surveys of local firms reveal key challenges they face, including: i) limited access to information about domestic and international markets; ii) difficulties in comprehending new regulatory changes; and iii) a shortage of skilled workers necessary for their operations.
This is positive independent variable of FDI which above empirical research have done It may have internal relation with variables group — Province Policy
A measure of the efforts by provincial authorities to promote vocational training and skills development for local industries and to assist in the placement of local labor.
Vietnam faces a significant challenge in creating employment for 1.4 million new job seekers annually while simultaneously grappling with firms' complaints about the low skill levels of the workforce The private sector's reluctance to hire unskilled workers underscores the need for a skilled labor pool to enhance business value Consequently, provincial initiatives aimed at improving local labor skills are essential for fostering a conducive business environment While some firms invest in training their employees, they often lose trained workers to competitors offering better wages, leading to a collective action problem This situation highlights the importance of provinces providing general labor training to address the skills gap effectively.
This is positive independent variable of FDI which above empirical research have
- done It may have internal relation with variables group — Province Policy
The confidence of the private sector in provincial legal institutions is crucial for effective dispute resolution and addressing corruption As Vietnam integrates into the WTO, strengthening these legal institutions and local courts is essential; however, many individuals and private firms continue to prefer informal dispute resolution methods.
Provincial policies serve as a positive independent variable influencing foreign direct investment (FDI), as evidenced by empirical research These policies may have a significant internal relationship with the group of variables categorized under Province Policy.
3.3.12 Infrastructure-INF (point-10) This is composition measurement Infrastructure includes land, transport, communication, industrial zone, buildings, and workspace and associated , infrastructure .
This is positive independent variable of FDI which above empirical research have done.
3.3.13 Gross output of industry at constant 1994 prices by province-IP
Gross output of provincial industry consists of those goods that are produced within a province compared at constant 1994 prices.
Industrial product is an indicator showing the results of industrial production under the form of material products and services in a given time.
Physical products are industrial items produced through the transformation of primary materials using various tools, resulting in new products with enhanced utility These products can also be sourced from mining operations A key category of physical products is finished goods, which are fully manufactured industrial products ready for market distribution.