Multinational Corporations and Socio-Economic Development of Vietnam

4797
DOI: 10.20542/0131-2227-2016-60-7-86-95

E. Aksenova, The Institute of Asian and African Studies of Moscow State University, 11, build.1, Mokhovaya Str., Moscow, 125009, Russian Federation (mementomori89@list.ru

Abstract. Since the beginning of the “Doi Moi” policy in 1986, the Vietnamese government has paid special attention to attraction of foreign direct investment (FDI) to the national economy. First of all, FDI provides necessary capital resources for economic modernization. Moreover – and that sometimes is even more important – through realisation of investment projects on the territory of Vietnam TNCs can increase tax revenues for the country and solve internal economic problems, such as overabundant workforce and technological underdevelopment. The article analyses the spillover effects on the economy of Vietnam, the effectiveness of the Vietnamese government policy aimed at using the positive impacts of TNCs in achieving national development goals, reveals current economic and policy problems that prevent Vietnam from the effective use of the advantages provided by TNCs’ presence on the territory of the country. The technology transfer between Vietnamese and foreign companies is limited because of mutual distrust and absence of an established channel for such transfer. Although tax revenues from foreign companies have dramatically increased in the last decade, TNC still widely try to evade taxes and use different kinds of transfer pricing. TNC create new jobs for non-qualified workforce, influence the wage levels in a number of fields and maintain different training programmes for Vietnamese workers. Still, the steady rise of the local minimum wage level may provoke some foreign producers to further shift their production lines to neighbouring less developed countries. The number of strikes at TNC factories is rather high. At the same time, low qualification of Vietnamese workers does not meet the growing demands of the TNCs. The remaining weakness of national private sector and deficiencies of legal framework result in failure to develop fair conditions for all economic actors. The current governmental policy fails to stop transfer pricing, to encourage wider technology collaboration between TNC and Vietnamese enterprises, to prevent realization of “low income – low salary” strategy, to provide meaningful incentives to include Vietnamese enterprises into the international value chains. Negative impacts of TNCs on Vietnamese economy raise questions about the effectiveness of the modernization model with the emphasis on external sources for the development rather than internal.

Keywords: Vietnam, FDI, foreign investment, TNCs, developing countries, spill-over effects, transfer pricing 


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For citation:
Aksenova E. Multinational Corporations and Socio-Economic Development of Vietnam. World Eonomy and International Relations, 2016, vol. 60, no. 7, pp. 86-95. https://doi.org/10.20542/0131-2227-2016-60-7-86-95



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