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Regional Economic Development and Foreign Direct Investment Flows in Vietnam, 1988-98

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  • Pham Hoang Mai

Abstract

Over the 1988-98 period, large amounts of foreign direct investment (FDI) have flowed to several regions and provinces in Vietnam. These have contributed to regional economic development by increasing the industrial capital stock and output. However, as FDI flows have been allocated unequally between provinces and between regions, such contributions may widen the gap between rich and poor provinces. An analysis of factors that influence the pattern of regional allocation of FDI flows finds that the infrastructure, the quality of the labour force and the size of the local market are the most important factors deciding the regional allocation of FDI flows. Government tax incentives, on the other hand, have not made any significant impact on attracting FDI flows to poor and remote provinces. Thus the government should shift its concentration of public expenditure toward poorer provinces to improve these provinces' physical and social infrastructure. Such improvement of infrastructure will speed up the diffusion process of FDI flows toward poorer provinces located around big cities and more developed provinces. The rapid diffusion of FDI flows will then contribute more significantly to reduce the gap between rich and poor regions and provinces in Vietnam.

Suggested Citation

  • Pham Hoang Mai, 2002. "Regional Economic Development and Foreign Direct Investment Flows in Vietnam, 1988-98," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 7(2), pages 182-202.
    • Handle: RePEc:taf:rjapxx:v:7:y:2002:i:2:p:182-202
    DOI: 10.1080/13547860220134815
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    References listed on IDEAS

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    1. Peter J. Buckley & Mark Casson, 1991. "The Future of the Multinational Enterprise," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-21204-0.
    2. Donald J. Lecraw, 1991. "Factors Influencing FDI by TNCs in Host Developing Countries: A Preliminary Report," Palgrave Macmillan Books, in: Peter J. Buckley & Jeremy Clegg (ed.), Multinational Enterprises in Less Developed Countries, chapter 8, pages 163-180, Palgrave Macmillan.
    3. Mundle, S. & Van Arkadie, B., 1997. "The Rural-Urban Transition in Viet Nam: Some Selected Issues," Papers 15, Asian Development Bank.
    4. Raymond Vernon, 1966. "International Investment and International Trade in the Product Cycle," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 80(2), pages 190-207.
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    Cited by:

    1. Jacob A. Jordaan, 2008. "State Characteristics and the Locational Choice of Foreign Direct Investment: Evidence from Regional FDI in Mexico 1989–2006," Growth and Change, Wiley Blackwell, vol. 39(3), pages 389-413, September.
    2. Dafna Schwartz & Joseph Pelzman & Michael Keren, 2008. "The Ineffectiveness of Location Incentive Programs," Economic Development Quarterly, , vol. 22(2), pages 167-179, May.
    3. Huong Thu Le & Alison L. Booth, 2014. "Inequality in Vietnamese Urban–Rural Living Standards, 1993–2006," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 862-886, December.
    4. Marian Dinga, 2011. "The Role of Investment Incentives in Regional FDI Reallocation: A Regression-Discontinuity Approach," CERGE-EI Working Papers wp438, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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