IS IT DIFFICULT FOR VIETNAM TO ATTRACT CAPITAL FROM TNCS?

G ROUP MEMBERS 1. NGUYEN THI THANH TRA BAIU LUONG KHANH NHU BAIU DOAN THI HUONG THAO BAIU08155

S OCIAL & POLITICAL STABILITY Political and social stability is the first most important requirement, determined on the attracting TNCs. Under the leadership of the Party, the management of the state, Vietnam is considered to be one of countries with political stability and high economic conditions, no potential conflict of religion and ethnicity. That is the basic condition to ensure the development of economic external and attract the attention of foreign investors in general and TNCs in particular.

E XPANSIVE AND POSITIVE FOREIGN POLICY The expanded foreign policy of Vietnam: promote the implementation of strategies toward the opening of export expand the cooperation of foreign investment. With the motto "Vietnam would like to make friends and reliable partner of all countries in the international community", Vietnam was a 7th member of ASEAN from July 28, 1995, joined APEC in November 1998, the first member of ASEM and member of the WTO from July 11, 2006.

Currently, we have established diplomatic relations with more than 170 countries, trade relations with more than 100 countries and territories and receive investments of nearly 80 countries. Major expansion of economic relations of the Party and State have created necessary conditions to attract and facilitate foreign investment of TNCs.

C OMPARATIVE ADVANTAGES Vietnam has natural conditions and geographical location particularly convenient. Located at the center of Southeast Asia with long seashore. Air routes and maritime world are very close to Vietnam. Vietnam has extremely diverse resources and ranked seventh among 15 countries richest of resources in the world. Large labor resource

5

- 97% Vietnam's enterprises are small and medium enterprises (SMEs), registered capital is no more than 10 billion and 300 employees scale - The speed of technological innovation in most enterprises is still too slow: Ex: Thailand: 30% Malaysia: 51% Singapore: 73% Vietnam: 2% => too low - Investment activities for science and technology of Vietnams enterprises are still low. Capacity of Vietnam partners still be limited:

- S TILL USE OUT OF DATE TECHNOLOGY. M OST COMPANIES HAVE BEEN USING THE TECHNOLOGY IN THE 80 S OF THE LAST CENTURY AND THE RESEARCH AND TECHNOLOGY INNOVATION CAPACITY ARE VERY LIMITED - 80% - 90% OF THE TECHNOLOGY IS IMPORTED ( LAG FROM 2-3 GENERATIONS ) - G ENERALLY FOR THE BUSINESS, THE LEVEL OF EQUIPMENT : 10% MODERN 38% AVERAGE BACKWARD 52% VERY BACKWARD => I T IS DIFFICUT FOR V IET N AM TO ATTRACT CAPITAL FROM TNCS.

THE MARKET ECONOMIC IS STILL SIMPLE - Market with goods and services have established but still had so much negative phenomena (fake, smuggled goods, counterfeit brand goods make market turmoil). - Labor market has appeared. Some referral centers for work and labor export appears leading to the arising negative phenomena and many crises. A highlight of this market is the supply of skilled labor is smaller than demand. - Monetary market and capital market have been set up but still a lot monitoring. - High inflation

I NSTITUTIONS AND LAWS ALSO HAVE MANY DISADVANTAGES Transparency, consistency and stability of law is the greatest disadvantage, and also the requirement of foreign investors The lack of transparency of law a gap for abuse of power in society and causing trouble for investors The lack of consistency and stability of law unpredictable changes in business

I NSTITUTIONS AND LAWS ALSO HAVE MANY DISADVANTAGES The legal document lack of consistency in content and implementation. Many of content also stop at the general and have no specific instructions. Some central agencies and local governments voluntarily issued documents contrary to law or not law enforcement

T ECHNICAL INFRASTRUCTURE IS NOT HIGH Infrastructure in Vietnam is not suitable with developed economic needs about expenditure and quality It has been improved in recent years still level average in the area The transportation cost of Vietnam is still expensive in the area Traffic density in Vietnam only equal 1% of average one of the world

T ECHNICAL INFRASTRUCTURE IS NOT HIGH Material infrastructure use a lot of capital and national budget is essential. Material infrastructure is lack of competing. The reasons: Participation of private company limits. Managing and trading in material infrastructure pay attention some national companies.

S UMMARY When Vietnam promulgated law on foreign investment: The investable way of TNCs is better. Some results of Vietnam : Attract FDI capital of total investable capital,some projects,investors ---- >increasing and developing economy However,there are many reasons why make investable environment unattractive > to attractive FDI capital of TNCs-----> Vietnam needs global and consistent solutions.

At now we are still difficult to attract foreign investment But when we point out the advantages and disadvantages of Vietnam as above, its easier for us to adapt with the invested requirements Vietnam should have flexible policies to attract TNCs in short-term (industrial zones, economic activities…) and in long-term (public infrastructure, governments military…)