Foreign direct investment in Vietnam : Greenfield and mergers and acquisitions
Abstract
Foreign Direct Investment (FDI) is currently recognized as the leading source of external
financing in Vietnam with total FDI inflow of 2013 was roughly US$ 22.35 billion,
which accounted for around 20% of national GDP and 66.78% of total export value of the
country. Differentiating two entry modes of FDI (Mergers and Acquisitions [M&A] and
Greenfield investment), this paper employs a panel data consisting of FDI and
macroeconomic factors for the period 1990-2012 to empirically analyze the impact of
macroeconomic factors on FDI, thus assess the effectiveness of recent policies to attract
FDI and may give some further suggestions. As the result, GDP per capita as proxy for
economic growth shows significant impact on FDI inflow both in the form of M&A and
Greenfield FDI. While Corporate income tax rate only has impact on Greenfield FDI,
Maximum foreign shareholdings as proxy for the investing environment shows
significant relation to FDI and negative relation to M&A, which offers the evidence that
M&A FDI in Vietnam may belong to horizontal FDI. In addition, Inflation rate proxy for
economic stability negatively affects FDI and Greenfield. Furthermore, it suggests that
Government policy should focus on strengthening economic growth and maintaining
macroeconomic stability in order to sustain high FDI inflows.