FDI and its impacts on the economy of Vietnam
I. Overview of FDI
FDI – Foreign Direct Investment
Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country.
Once a firm undertakes FDI it becomes a multinational enterprise.
FDI can be:
Greenfield investments - the establishment of a wholly new operation in a foreign country.
Acquisitions or mergers with existing firms in the foreign country.
The flow of FDI refers to the amount of FDI undertaken over a given time period.
The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time.
Outflows of FDI are the flows of FDI out of a country.
Inflows of FDI are the flows of FDI into a country.
TREND OF FDI:
There has been a marked increase in both the flow and stock of FDI in the world economy over the last 30 years.
FDI has grown more rapidly than world trade and world output because:
Firms still fear the threat of protectionism.
The general shift toward democratic political institutions and free market economies has encouraged FDI.
The globalization of the world economy is having a positive impact on the volume of FDI as firms undertake FDI to ensure they have a significant presence in many regions of the world.
Figure : FDI Outflows 1982-2006 ($ billions)
DIRECTION OF FDI:
Most FDI has historically been directed at the developed nations of the world, with the United States being a favorite target.
FDI inflows have remained high during the early 2000s for the United States, and also for the European Union.
South, East, and Southeast Asia, and particularly China, are now seeing an increase of FDI inflows.
Latin America is also emerging as an important region for FDI
Figure: FDI Inflows by Region ($ billion), 1995-2006
CHOOSING A FORM OF FDI:
Most cross-border investment is in the form of mergers and acquisitions rather than green field investments.
Firms prefer to acquire existing assets because:
Mergers and
FDI – Foreign Direct Investment
Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country.
Once a firm undertakes FDI it becomes a multinational enterprise.
FDI can be:
Greenfield investments - the establishment of a wholly new operation in a foreign country.
Acquisitions or mergers with existing firms in the foreign country.
The flow of FDI refers to the amount of FDI undertaken over a given time period.
The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time.
Outflows of FDI are the flows of FDI out of a country.
Inflows of FDI are the flows of FDI into a country.
TREND OF FDI:
There has been a marked increase in both the flow and stock of FDI in the world economy over the last 30 years.
FDI has grown more rapidly than world trade and world output because:
Firms still fear the threat of protectionism.
The general shift toward democratic political institutions and free market economies has encouraged FDI.
The globalization of the world economy is having a positive impact on the volume of FDI as firms undertake FDI to ensure they have a significant presence in many regions of the world.
Figure : FDI Outflows 1982-2006 ($ billions)
DIRECTION OF FDI:
Most FDI has historically been directed at the developed nations of the world, with the United States being a favorite target.
FDI inflows have remained high during the early 2000s for the United States, and also for the European Union.
South, East, and Southeast Asia, and particularly China, are now seeing an increase of FDI inflows.
Latin America is also emerging as an important region for FDI
Figure: FDI Inflows by Region ($ billion), 1995-2006
CHOOSING A FORM OF FDI:
Most cross-border investment is in the form of mergers and acquisitions rather than green field investments.
Firms prefer to acquire existing assets because:
Mergers and