Are Determinants Of Fdi Inflows Subject To Political And Pandemic Issues? Empirical Evidence From Vietnam

Foreign direct investment (FDI) plays an important role in economic growth and social innovation in developing countries, which are always thirsty for investment capital. Its role is expressed through promoting transformation, restructuring the economy, developing human resources, providing new production technology and improving quality of life. Therefore, FDI is always considered a top concern of governments of developing countries. The impact of FDI capital flows is unstable and changes depending on influencing factors such as macroeconomic factors, socio-political factors… Previously, studies based on this relationship were mostly implemented in developed economies and were considered quite little in developing countries like Vietnam. On the other hand, research results among authors are inconsistent. Our research aims to analyze the determinants of FDI flows into Vietnam in the period 1996–2021, focusing on political stability and the covid-19 epidemic, thereby drawing out applicable policies in the current post-COVID economic recovery context. Research purpose: This research is aimed at figuring out critical factors influencing the decision of foreign investors to pour money into Vietnam from 1996 to 2021 with a special focus on pandemic and political issuses. Based on empirical results, we aim to offer policy implications and recommendations for relevant stakeholders. Research motivation: Since its Doi Moi in 1986 and its integration into the world economy, FDI has always been exerting beneficial effects on the Vietnamese economy. Owing to its importance, it is necessary to figure out critical factors determining FDI inflows especially amid rising uncertainties caused by political factors and unexpected events such as the COVID-19 pandemic. Research design, approach, and method. This paper employs regression method (specifically robust least squares) to investigate the determinants of FDI inflows into Vietnam by using annual data from World Bank’s World Development Indicators (WDI) from 1996 to 2021. Main findings. Research results show that market size, trade openness, inflation, political stability, have a positive correlation with FDI capital into Vietnam, while infrastructure, corruption and Covid - 19 have a negative impact, no binding relationship has been found between natural resources and foreign investors’ willingness to provide capital. Practical/managerial implications: Practical implications – This study is significant in promoting Vietnam’s economy through policy recommendations that if implemented can ensure attracting more capital flows into the economy. Social implications - This research has proposed effective ways to attract FDI, thereby taking advantage of the benefits it brings, improving social security and enhancing quality of life.