1. RESEARCH BACKGROUND - AN OVERVIEW OF FDI ENVIRONMENT
1.3. POLICIES OF THE U.S ON ABROAD INVESTMENT
1.3.2. Practice of FDI from the US in Vietnam
FDI from the United states in vietnam during the period 1988 - 2012 is not stable over the years and can be divided into smaller stages as follows:
Period 1988 - 1994: Since Vietnam conducted innovation and had the Law on Foreign Investment, America is one of the latest countries investing in Vietnam due to the sanctions by the U.S. government for Vietnam. In 5 years, from 1988 to 1993, period still banned for Vienam, the number of projects by U.S. companies in Vietnam was only 10 projects with a total investment of $ 23 million, while foreign investment Vietnam in this period is 836 projects with a total investment of $ 7.5 billion.
However, after President B. Clinton denounced the embargo against Vietnam, even though there is no massive investment in Vietnam, but the investment activities of U.S. companies has seen rapid development. Only in 1994, the first year U.S.
embargo against Vietnam abolished, there were 12 projects with a total investment
capital of $ 120 million compared to 10 projects last 5 years. At that time, the U.S.
ranked 14thin the list of the biggest investors in Vietnam.
Figure 4. FDI from the United States in Vietnam during the period 1988-2012 Period 1995 - 2000: this period was marked by the normalized diplomatic relations between two countries, U.S. investment in Vietnam has seen tremendous growth. In 1995 there were 19 projects with a total investment of USD 462 million (nearly 2 times of the number of projects, but more than 20 times of the investment capital compared to the period 1988-1993). This is also the period of FDI attraxtion in Vietnam was influenced by the financial and monetary crisis in asia (in 1997) which has made the FDI decline in Vietnam in the following year.
Period 2001 - 2005: this period was marked by the bilateral trade agreement BTA of two countries signed in 2001: U.S. FDI in VN continued to increase; the peak was in 2003 with total investment capital of 1, $ 23 billion.
1000 USD
1,227,472
333,380 769,762
3,851,356
1,948,392 9,805,824
1,965,398 253,990
160.40 461,890
176,424 107,959 126,741
280 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000
1988 1995 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Year
Source: Department of Foreign Investment- MPI (2012)
Period 2006 - 2012: This period was marked as Vietnam became the 150th official member of the WTO in 2006. FDI from the United States continues to grow and peaked in 2007, in particular in 2009 ($ 9.8 billion). This is also the period as FDI in Vietnam was affected by financial crisis, making the global economy fall into recession; FDI from the United States in Vietnam decreased in 2008, 2010, 2011 and 2012 (Appendix 10).
The U.S. FDI structure by investment form
Currently, foreign investors invest in Vietnam through six investment forms (Appendix 11 and Table 6), while U.S. investors have been involved in the investment market in Vietnam in almost basic investment forms which are prescribed in the Investment Law of Vietnam, except for two investment forms as BOT, BT, BTO contracts and the parent – subsidỉray company. This is also the two forms which are not strong in attracting foreign investors in Vietnam.
Table 6. U.S. FDI structure by investment form (Until 31th December 2011 - only valid projects)
Order Investment form
Number of projects
Total registered capital (USD)
Total registered capital on average (USD)
Value % Value %
1 100% foreign capital 478 79.53 8,890,011,446 76.28 111,776,085 2 Joint-venture 98 16.31 2,567,570,295 22.03 157,460,178
3 Joint-stock 13 2.16 119,082,500 1.02 55,052,756
4 Business Cooperation Contract 12 2.00 77,536,082 0.67 38,832,654 5 BOT, BT, BTO Contract
6 Parent–subsidỉray company
TOTAL 601 100.00 11,654,200,323 100.00 116,542,003
Source: Foreign Investment Department - Ministry of Planning and Investment (2011) In the first period, in order to enter the investment market in Vietnam, the U.S.
company has a joint venture with Vietnam companies, but the later period, U.S.
companies invest in Vietnam mainly by form of 100% foreign-owned or move joint venture enterprises into 100% foreign capital enterprise. Until 31/12/2011, there are 601 FDI projects in Vietnam by the United States in force (about 4.4% of FDI projects in Vietnam are still valid) with a total registered capital of 11,654. $ 200,323 (approximately 5.89% of the total registered capital in force Vietnam), and the total number of projects in the form of 100% foreign investment from the United States is 478 projects (8,890. 011 446 USD). Second, the formation of joint ventures, there have 98 projects with a total investment of 2,567,570,295 USD, joint stock company has 13 projects with a total investment of $ 119,082,500; The last is the form of business cooperation, there are 12 projects with a total investment of $ 77,536,082, as follows:
100% foreign capital : This form occupies largest proportion of funds and number of project. It accounts for 79.53% of the total investment project with $ 8,890,011,446 (76.28%).
Joint venture: this form is the second ranking for funds proportion and number of project, just after the form of 100% foreign owned. This form accounts for 16.31%
of the total project investment with $ 2,567,570,295 (22,03%). This form is the main foreign investment form of U.S investor since the U.S. started to penetrate into the investment market in Vietnam in the 1990s. When U.S. investors are getting used to the investment environment in Vietnam, many U.S. companies have operated independently. In this form, U.S. FDI accounted for 2/3 and the rest belongs to Vietnam - contributed capital mainly from the value of land use rights.
Figure 5. U.S. FDI structure by investment form
Joint stock companies: this is a form established at the same time of the introduction of the Investment Law in 2005. To date, there are 13 projects (2.16%) with a total investment capital of $ 119,082,500 (1.02%).
Business cooperation contract: there are very few active projects in this form, accounting for only 2.00% of the total investment project with a total investment capital of $ 77,536,082 (0.67%). This form is mainly used in the areas of exploration and exploitation of oil and gas ...
Thus, the investment structure of U.S. investors in Vietnam is similar to the general form of investment in Vietnam, meaning: The majority of investment projects in Vietnam is implemented as 100% foreign investment form, followed by the formation of joint ventures, business cooperation contract .... In fact, activity of U.S.
companies in the world is directed to establish independent company, and Vietnam is also in this trend.
The U.S. FDI structure by investment sector
100% foreign capital76.28%
Joint venture companies 22.03%
Joint stock companies 1.02%
Business cooperation contracts
0.67%
Source: Department of Foreign Investment- MPI (2012)
FDI in Vietnam is divided into 18 subjects (Appendix 11), in which the United States has invested 17/18 subjects in Vietnam (Appendix 11), includes:
accommodation services and food; real estate business, manufacturing and fabrication industry, electricity, gas, water, air conditioning, transportation and storage, finance, banking, insurance, agriculture, forestry and fisheries; professional contract, science and technology, information and communication; mining, administration and support services ... (except for water supply, waste treatment).
Accommodation services and food: 16 major projects accounted only for 2.66%, but accounted for 51.553% of the total investment, greater than the total capital investment of the remaining 16 subjects. The capital scale of project is $ 375,504,175, 18.8 times higher than average capital scale of FDI projects from the United States in Vietnam ($ 22,596,853 / project) and 26.9 times the senior average capital of FDI projects in Vietnam ($ 15,796,561 / project).
Real estate business: this sector occupies the second proportion of total investment capital. This sector has 10 projects, accounted for 1.66% with a total investment of $ 2,039,376,496 (17.5%). The capital scale of project is $ 203,937,649, nearly 0.6 times compared to the accommodation services and food sector, but 11 times higher than the average fund size of U.S. FDI projects in Vietnam.
Figure 6. The U.S. FDI structure by investment sector
Processing, fabrication industry: There are 294 projects (48.92%), but only attracted $ 1,714,506,372 of total investment (14.71%). Average project size is
$247,841,219, equal to 0.26 times of the average project size from the U.S. in Vietnam.
Production and distribution of electricity, gas, water, air conditioning: 8 projects (1.33%), but accounted for 7.29% of the total investment.
Transportation and storage: 13 projects (2.16%) but only acounted for 1.65%
of the total investment.
Finance, Banking, Insurance: 9 projects (1.5%), accounted for 1.44% of the total investment.
Agriculture, forestry and fisheries: there are 14 projects ( 2.33%), but only accounted for 1.09% of the total investment.
The remaining 10 subjects: there are 237 projects accounting for 39.43% but accounted for only 4.76% of the total investment.
Source: Department of Foreign Investment- MPI (2012)
Thus, U.S. FDI in Vietnam focussed mainly in the service sector, reflecting the unique characteristics and strengths of the U.S. economy: structure of service and industry are dominated sectors of the U.S. economy. Number of FDI projects in the processing and manufacturing industry are big but the average project scale is low, suggesting that Vietnam has not attracted large industrial corporations in the United States to invest in Vietnam.
The U.S FDI structure by region
Up to now, there are 38 provinces and cities of Vietnam attracting FDI from the United States. However, the FDI structure in Vietnam in general and the U.S FDI structure in particular are unevenly distributed. FDI focused mainly on the key economic regions, especially in the southern provinces such as Ho Chi Minh City, Dong Nai, Binh Duong, Ba Ria - Vung Tau, along with a number of major provincial cities in the north as Hanoi, Hai Duong, Vinh Phuc and in the Central as Da Nang, Thua Thien Hue... (see Appendix 14).
Among the 38 regions where U.S. FDI projects are active, 13 provinces and leading city has attracted 512 FDI projects (85%) with a total registered capital is $ 11,255,482,714 (accounting for 97.24%), in which Ba Ria - Vung Tau is locally attracted most FDI projects 18 (3%) but accounted for 56.56% of total capital investment. Next, Phu Yen has 13 projects, accounted for only 2.16% of the total project, but attracted for 10.11% of the total registered capital. Three provinces, the largest city in Vietnam: Ho Chi Minh City, Da Nang, Hanoi stood in positions of 4, 9 and 10 with a total registered capital of $675,333,088 (5,79%), $211.47.4480 (1.18%) and $129.8 million (1.11%), respectively.
Figure 7: The US FDI structure by region (USD/Province)
In fact, FDI from the United States focussed mainly in the provinces in the south due to favorable natural conditions, good infrastructure ... to invest in services and accommodation, real estate business...
The U.S. FDI position in the FDI structure in Vietnam
Currently, Vietnam has diplomatic relations with 200 countries and territories, including economic relations with over 100 countries and territories. There are over 70/500 multi-national groups of 100 countries and territories investing in Vietnam with 14 522 FDI projects in effect, the total registered investment capital of $ 210,521,646,497, of which 28 countries and some territories have registered capital of over $ 1 billion (Appendix 14)
Leading countries and territories in investing in Vietnam is mainly from Asian countries such as Japan, Taiwan, Singapore, Korea and Thailand. These 10 investment partners have invested 11,049 (accounted for 76% of projects) with a total
Source: Department of Foreign Investment- MPI (2012)
Figure 8. The U.S. FDI position in the FDI structure in Vietnam (USD/ State) Although the U.S. is the latest country investing in Vietnam, but after the establishment of formal diplomatic relations, the United States has always been one of the ten largest countries investing in Vietnam, especially in 2009: United States has become the largest investor in Vietnam with a total registered capital of $ 9,805,824,270, accounting for 44.7% of FDI inflows into Vietnam.
Currently, the United States ranked 7th of 100 countries and territories that have FDI projects in Vietnam with 648 projects (4.46%), total investment of $ 10,507,189,345 (accounting for 4, 99%). This number does not reflect the 1st strength of the U.S in term of FDI in the world and investment attraction potential in Vietnam.
However, according to economists if acounting all U.S. FDI projects in Vietnam through third countries, the United States is the largest investor in Vietnam.