KHOA ĐẦU TƯ FACULTY OF THE INVESTMENT THE MULTILATERAL INVESTMENT SYSTEM

BỘ MÔN KINH TẾ ĐẦU TƯ AND THE MULTINATIONAL ENTERPRISES

BÀI GIẢNG HỌC PHẦN CHAPTER 3

HỆ THỐNG ĐẦU TƯ ĐA BIÊN VÀ CÔNG TY ĐA QUỐC GIA
FOREIGN DIRECT INVESTMENT AND
MULTINATIONAL ENTERPRISES
Khoa Đầu tư - ĐH Kinh tế Quốc dân
Phòng 1104 - Toà nhà A1 - 207 Giải Phóng – Hai Bà Trưng - Hà Nội
Email: [email protected] Tel: (84-4) 36 280280/5954
www.khoadautu.neu.edu.vn

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Definition:

A form of investment in which the owner brings capital to another country

to make an investment, in which the owner of capital is directly involved in
the investment process.

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1.2. THE FORMS OF FDI

• private capital, seeking profit For investment purposes

• Establish ownership and management rights with the investment capital In the form of ownership
FORMS of FDI
• It is a form of investment that is not politically binding and does not leave a debt burden for the In the form of PPP ( Public
host country
Private Parnership)
• Associated with the development of financial markets and international trade In the form of A&M

• High feasibility and economic efficiency

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For investment purposes

- Horizontal foreign direct investment: In the form of ownership

- . Vertical foreign direct investment: - Joint Venture Company (JV)

- Enterprises with 100% foreign capital
- Business cooperation contract (BCC)

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In the form of PPP ( Public Private Parnership) In the form of A&M (Mergers and Acquisitions)

- Build - Operate - Transfer contract (BOT)

- Build-Transfer-Operate Contract (BTO) - Buy 1 part
- Build-Transfer Contract (BT) - Buy all
- Build-Own-Operate Contracts (BOO)
- Build – Transfer – Lease (BTL) Contract (BTL)
- Build – Lease – Transfer Contracts (BLT) - (Compare FDI and FPI- foreign portfolio investment)
- Contract for Business – Management (O&M).

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1.3. IMPACTS OF FDI

(COUNTRIES FOR INVESTMENT)
- Marginal profit theory( Mac Douglall, 1960)
- The product Life Cycle Theory ( Vernon, 1966)
- The market imperfection Theories
- Flying Geese paradigm (Akamatsu ,1961-1962)
- The Eclectic Paradigm or OLI model ( Dunning, 1979) Positive Negative
- The investment Development Paths theory (IDP) - Expanding economic and - Managing capital and
political power technology
- Taking advantage of the - Impacting on Stable cash flow
investment country - Impacting on International
- Expanding Market balance of payments
- Searching for raw materials - Impacting on domestic
employment and labor

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Impacts of FDI on countries receiving investment
FACTORS AFFECTING FOREIGN DIRECT INVESTMENT
Positive Negative
• Fill up the shortage of capital and • Importing lifestyles that are not good The subjective factor The objective factors
foreign currency of the receiving for the national culture
countries • The economic security of the host
• Developing the received country's country may be threatened • Geographical location and natural
technological capabilities • Creating foreign currency burden, conditions
• Promoting exports and access to world especially after MNCs get capital back • Political, cultural and social
markets • The capitalist mode of production environment
• Creating jobs and improving labor significantly reduces employment • Economic development level
quality • Modern industries are mainly • The infrastructure • Movement trend of world capital
• Helping the country's economic controlled by the investing countries • Legal environment of the country flows
structure shift in a more reasonable receiving FDI
direction
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FACTORS AFFECTING FOREIGN DIRECT INVESTMENT

The subjective factor The objective factors

Structure of multinational enterprises
• State management of FDI activities
• Labor quality
• The development of supporting
industry
• Investment promotion activities

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AND THE MULTINATIONAL ENTERPRISES AND THE MULTINATIONAL ENTERPRISES

M ULTINATIONAL ENTERPRISES CHARACTERISTICS OF MNES

A multinational corporation (MNC: multinational corporation or MNE: multinational
enterprises) is a company that produces or provides services in at least two countries • Centralized ownership
A multinational enterprise that owns or has rights
of control over production capability or services
outside the borders of the country in which it has
• Activities of multinational enterprises take place in many
headquarter. countries and are carried out in an international
environment
Large multinational companies often have big
budgets that exceed the budgets of many
countries and can greatly affect international
• Multinational enterprises carry out internal transfers
relations and the economies of countries.

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INTERNAL TRANSFER ACTIVITIES STRUCTURE OF INTERNATIONAL ENTERPRISES

• Internal trading related to raw materials 1 Multinational company “horizontally”

• Internal trading related to finished products
• Transactions related to moving equipment
2 Multinational company “Vertical”
• Transactions related to intangible assets
• Provide management services, finance or expert cots
• Sponsor and receive funding 3 Multinational company “multi - dimensional”
• Borrowing and lending internally

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BUSINESS STRATEGY OF MNEs ADVANTAGES OF MNCs IN FOREIGN INVESTMENT

Global strategy 1 DEVELOPING COMPETITION ADVANTAGES

Localization strategy
2 TAKING ADVANTAGES OF GEOGRAPHICAL LOCATION

International Strategy
3 TAKING ADVANTAGES OF COUNTRIES

Transnational strategy

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DISADVANTAGES OF MNCS IN FOREIGN INVESTMENT

IMPACTS OF MNES TO
HOME COUNTRIES

Risks in buying and Risks in finance :

selling goods:
• Price POSITIVE
NAGATIVE
• Tariffs • Inflation • Stimulating the economic
• Transport • Foreign exchange development of the home - Reducing employment
country
• Insurance • Management policy
• Being a factor contributing
• Supply and demand • Tax to the unification of the
• Macro policy… • Debt crisis world economy, promoting
trade between countries

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IMPACTS OF MNEs TO HOST COUNTRIES IMPACTS OF MNEs TO HOST COUNTRIES

v POSITIVE v POSITIVE

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v NEGATIVE v NEGATIVE

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Assessment of the current situation of foreign direct investment

in Vietnam

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