The Relationships Between Foreign Direct Investment, State-Owned Investment, Private Investment, Import, Export and Economic Growth in Vietnam

Abstract

A key component for economic growth is the foreign direct investment (FDI), which drew the attention of researchers worldwide. This study aims to examine the relationship between foreign direct investment (FDI), state-owned investment (SOI), private investment (PI), import (M), export (X) and Vietnam’s economic growth (GDP) since the Renovation (1986) to now (2019). The Vector Autoregression Model (VAR) and Vector Error Correction Model (VECM) were utilized to realize the above-mentioned goals. The Johansen co-integration test confirmed that there exists a long-run relationship among the above variables. The Granger causal relationship test found one-way causal relationship from GDP to FDI and PI in the short-run. Besides, the similar causal relationship between export and GDP is confirmed. Also, the two-way causal relationship between PI and export in the short-run is also found in this study. In addition, the impact of a shock of SOI on GDP is more significant than that of an FDI or PI shocks on GDP. By contrast, the response of GDP to shocks of import and export seems are small. Finally, it is certain that FDI plays an essential role in Vietnam’s economy.

Unlocking the Secrets: Private Investments and the Remarkable Evolution of Vietnam's Economy

“…These measures have facilitated the expansion of investment scale [Tung, 2019]. Moreover, there have been changes in the structure of private investment, with a growing emphasis on capital-intensive and technologyoriented sectors, reducing reliance on natural conditions and taking advantage of the availability of cheap labor [Anh et al, 2021].…”

“…Infrastructure investment has a positive short-term and long-term impact on economic growth, indicating that infrastructure projects have an immediate effect on the economy, stimulating economic components, especially private sector activity even in economically disadvantaged regions [Luat, Trung, 2019]. Additionally, in the short term, an increase in the labor force may create pressure on the economy, but in the long term, it becomes an important input for businesses to select high-skilled labor at a low cost [Canh, Phong, 2018;Luat, Trung, 2019;Tung, 2019;Dang et al, 2020;Anh et al, 2021;.…”

“…Private enterprises are willing to implement favorable policies to attract workers, which is an essential strategy for competition. Workers' initiatives and inventions reduce production costs, enhance product quality, and meet market demands, making them valuable assets for private enterprises [Anh et al, 2021;. During work processes, businesses invest in machinery, scientific research, and enhance workers' skills, thereby increasing labor productivity and contributing to the development of individual enterprises and overall economic growth.…”

The Interaction between Labor Productivity and Competitiveness in Vietnam

“…It reflects the improved labor productivity in the condition of the labor structure not changing, the size of the employees working in each sector is unchanged during the study period. In other words, the endogeneous effect is the result of renovation, application of technological advances, improvement of labor skills and institutional factor (Anh, 2007). If referenced with the concept of total factor productivity, the endogeneous effect can also be considered as total factor productivity (Dong, 2018;Te & Dong, 2013)…”

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“…As for Causality from GDP to FDI, Adam (2018) examines 3 ECOWAS economies using annual data from 1970 to 2015 and finds causalities running from economic growth to FDI in Benin. Anh et al (2021) looks at the relationships between foreign direct investment, state-owned investment, private investment, import, export, and economic growth in Vietnam from 1985 to 2019 and find that GDP Granger causes FDI. Similarly, a one-way causal relationship is found between GDP, private investment and FDI in the short run.…”