Multinational Corporations and Socio-Economic Development of Vietnam

4821
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 


REFERENCES

1. Tình hình đầu tư trực tiếp nước ngoài 12 tháng năm 2014. [The Situation of Foreign Direct Investment to December 15, 2014 (In Vietnamese)]. Available at: http://fia.mpi.gov.vn/tinbai/2346/Tinh-hinh-dau-tu-truc-tiep-nuoc-ngoaiden-15-thang-12-nam-2014 (accessed 07.04.2015).

2. Mazyrin V.M. Ekonomicheskie posledstviya uchastiya V'etnama v VTO [The Economic Impact of the Vietnam Participation in WTO]. V’etnamskie issledovaniya. Issue 4. V’etnam v mirovom soobshchestve [Vietnamese studies. Issue 4. Vietnam in World Community]. Moscow, Institute of Far Eastern Studies of RAS, 2014, pp. 91-1 16.

3. Tran Dinh Lam. Foreign Direct Investment in Vietnam. Center for Vietnamese and Southeast Asian Studies, University of Social Sciences and Humanities,Vietnam National University, 2014. Available at: http://www.cvseas.edu.vn/NHUNG-BAI-BAO-CUA-TIEN-SI-TRAN-DINH-LAM_C82_D2797.htm (accessed 07.04.2015).

4. Schwab K. The Global Competitiveness Report 2014–2015. Geneva, World Economic Forum, 2014. 565 p.

5. KAM Index Rating. World Bank. Available at http://info.worldbank.org/etools/kam2/KAM_page5.asp (accessed 07.02. 2015).

6. Few Vietnamese Companies Receive Tech Transfer from Foreign Companies. Available at: http://english.vietnamnet.vn/fms/business/117340/few-vietnamese-companies-receive-tech-transfer-from-foreign-companies.html (accessed 27.11.2014).

7. Hi-tech Transfers by Foreign Firms Remain a Pipe Dream. Available at: http://www.vir.com.vn/hi-tech-transfersby-foreign-firms-remain-a-pipe-dream.html (accessed 11.11.2014).

8. Brach J., Newman C., Rand J., Tarp F. Firm-level Competitiveness and Technology in Vietnam: Evidence from a Survey in 2010. Business Sector Programme Support (BSPS) Royal Embassy of Denmark in Vietnam, Development Economics Research Group (DERG), University of Copenhagen (UoC) Central Institute for Economic Management (CIEM), Vietnam Ministry of Planning and Investment, Hanoi, 2011. 49 p.

9. Unden C. Multinational Corporations and Spillovers in Vietnam-Adding Corporate Social Responsibility. Lund (Sweden), Lund University, 2007. 46 p.

10. Anwar S., Lan Phi Nguyen. Foreign Direct Investment as a Conduit for Technology Transfer: The Case of Vietnam. Asia Pacific Business Review, vol. 16, no. 1-2, January-April 2010, pp. 183-202.

11. Newman C., Rand J., Talbot T., Tarp F. Technology Transfers, Foreign Investment and Productivity Spillovers: Evidence from Vietnam. Dublin, IIIS Discussion Paper Series, 2014. 22 p .

12. Fam Mi Khung. Pryamye inostrannye investitsii kak istochnik finansirovaniya real'nogo sektora ekonomiki: na primere V'etnama. Kand. ec. nauk [Foreign Direct Investment as a Source of Funding of the Real Sector of the Economy: the Case of Vietnam, PhD. Thesis in Economics]. Moscow, 2013. 158 p.

13. La Man’ Tkhang. Strategii i perspektivy deyatel’nosti zarubezhnykh TNK na rynke Vetnama. Kand. ec. nauk [Strategies and Prospects of Foreign TNCs in the Market of Vietnam, PhD. Thesis in Economics]. Moscow, 2013. 153 p.

14. Do MNC Like Big Game in Vietnam? (In Vietnamese). Available at: http://baophapluat.vn/thi-truong/cac-tap-doan-da-quoc-gia-co-con-thich-choi-lon-oviet-nam-179549.html (accessed 05.03.2014).

15. Vinh Phuc Province: Local Revenue Exceeded 3 trillion VND Plan (In Vietnamese). Available at: http://thoibaotaichinhvietnam.vn/pages/thue-voi-cuoc-song/2014-11-25/vinh-phuc-thu-noi-dia-vuot-ke-hoach-hon-3000-ty-dong-15487.aspx (accessed 25.11.2014).

16. Top 10 doanh nghiệp nộp thuế lớn nhất Việt Nam 2014. [10 Largest Enterprises in Vietnam on Tax Revenues to the State Budget (In Vietnamese)]. Available at: http://tapchitaichinh.vn/Tai-chinh-Doanh-nghiep/Top-10-doanhnghiep-nop-thue-lon-nhat-Viet-Nam-2014/54953.tctc (accessed 23.10.2014).

17. Incentives for FDI in Vietnam. Available at: http://plf.vn/en/plf-enterprise/corporate/Incentives-for-FDI-in-Vietnam-33/0/ (accessed 07.02.2015).

18. Economists Balk at Vietnam’s ‘Overly-Generous’ FDI Incentives. Available at: http://www.thanhniennews.com/business/economists-balk-at-vietnams-overlygenerous-fdi-incentives-29422.html (accessed 02.08.2014).

19. Excessive FDI Incentives Will Nullify Benefits to Society, Say Experts. Available at: http://english.vietnamnet.vn/fms/business/106502/excessive-fdi-incentives-will-nullify-benefits-to-society--say-experts.html (accessed 07.03.2014).

20. General Statistic Office of Vietnam. Trade, Price, Tourism. Available at: https://www.gso.gov.vn/default_en.aspx?tabid=780 (accessed 07.02.2015).

21. Should Vietnam Offer Big Incentives to Formosa? Available at: http://english.vietnamnet.vn/fms/business/107045/should-vietnam-offer-big-incentives-to-formosa-.html (accessed 10.07.2014).

22. Why Did Samsung Electronic Go to Vietnam? Available at http://english.donga.com/srv/service.php3?biid=2014071566178 (accessed 15.07.2014).

23. Most FIEs in Vietnam Transfer Pricing, Evade Tax. Available at: http://english.vietnamnet.vn/fms/business/100426/most-fies-in-vietnam-transfer-pricing--evade-tax.html (accessed 21.04.2014).

24. FDI Enterprises’ Transfer Pricing Question: Will there be a Conclusion? Available at: http://www.widza.com/news/fdi-enterprises%27-transfer-pricing-question%3A-will-there-be-a-conclusion/559 (accessed 20.08.2012).

25. Hoang Xuan Binh. Transfer Pricing in Multinationals Corporations in Vietnam. Hanoi, Foreign Trade University, 2013. 24 p.

26. General Statistic Office of Vietnam. Population and Employment. Available at: http://www.gso.gov.vn/Default.aspx?tabid=217 (accessed 07.02.2015).

27. Samsung Invests $3 Billion More in Vietnam. Available at: http://english.vietnamnet.vn/fms/business/116242/samsung-invests-3-billion-more-in-vietnam.html (accessed 11.11.2014).

28. Nokia to Shift Smartphone Production to Vietnam. Available at: http://english.vietnamnet.vn/fms/science-it/110322/nokia-to-shift-smartphone-production-to-vietnam.html (accessed 22.08.2014).

29. About Canon Vietnam Co. Ltd. Available at: http://www.canon-vn.com.vn/en/news_detail.html (accessed 11.03.2013).

30. U.S. Department of State. 2013 Investment Climate Statement – Vietnam. Available at: http://www.state.gov/e/eb/rls/othr/ics/2013/204760.htm (accessed 07.04.2015).

31. U.S. Companies and Global Supply Networks: Key Facts. Available at: http://www.amchamvietnam.com/tag/multinational-companies (accessed 26.01.2013).

32. Low-cost Strategy Dictates FDI Recruitment. Available at: http://vietnamnews.vn/opinion/in-the-spotlight/252116/low-cost-strategy-dictates-fdi-recruitment.html (accessed 10.03.2014).

33. The Results of Aggregate Data Studies of Living Standards in 2012 (In Vietnamese). Hanoi, Statistical Publishing House, 2013. 562 p. Available at: https://www.gso.gov.vn/default.aspx?tabid=417&idmid=4&ItemID=13886 (accessed 07.04.2015).

34. Foreign Companies Report Labor and Skills Shortage in Vietnam. Available at: http://www.vietnam-briefing.com/news/foreign-companies-report-labor-skills-shortage-vietnam.html/ (accessed 30.07.2014).

35. Le Quoc Hoi, Pomfret R. Foreign Direct Investment and Wage Spillovers in Vietnam Evidence from Firm Level Data ASEAN. Economic Bulletin, 2010, vol. 27, no. 2, pp. 159-172. 


Registered in System SCIENCE INDEX

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



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2024, vol. 68, No. 9
Topical Themes of the Issue:
  • India’s Impact on the Formation of Multipolar Nuclear Order
  • USA: Politics and Society
  • Reserves of the Visegrad Cooperation
  • Russia and New BRICS Countries: Prospects for Technological Cooperation
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.