the necessity of FDI

The necessity of FDI

Attracting FDI is activities and policies of the government, business community and the population to promote, support and encourage investors to invest capital for the development purposes. The essence of attracting investment capital is to increase the attention and interest of investors, thereby shifting investment flows into the locality or industry.

Supplementing the domestic capital source

Investment capital for economic development of developing countries is still extremely limited, so attracting foreign investment is extremely important, contributing to improving domestic production capacity, creating a high and stable economic growth.

The more and more FDI capital from these developed countries to developing countries like Vietnam is an opportunity for Vietnam to take advantage of and develop the economy in the country.

The necessity of FDI

Join global production network

When attracting FDI from multinational companies, not only multinational companies have invested capital, but also other domestic enterprises with business relationship with that enterprise will also participate. regional labor division process. Therefore, the country attracting investment will have the opportunity to join the global production network that is conducive to boosting exports. The effects of FDI on the requirement of sustainable development and economic restructuring in the new stage of development, which are notably:

Additional social investment capital, but still has many limitations on the quality of growth

– Expanding export, but also increasing trade deficit.

– Creating more jobs, but also losing many traditional jobs and not attaching importance to training workers

– Many FDI enterprises pollute the natural environment and waste natural resources

– Increase national financial contributions

– Increased competition pressure

Increase the number of job

For developing countries, especially Vietnam, the level of workers is weak in many aspects, leading to job opportunities and study abroad to acquire working knowledge and skills. important. In addition, FDI projects also create many opportunities for workers to study in the host country and then return. This results in high efficiency and productivity.

FDI projects also bring new jobs to domestic labor force. Therefore, we need to be well prepared in terms of both human and strategic training and training to be able to supply abundant labor force in all fields.

Increase budget revenue

For many developed countries, or locally, taxes paid by foreign-invested enterprises are an important source of budget revenue. During the past decade, the FDI sector accounted for an increasing proportion in GDP. In 2004, the FDI sector contributed 15.2% to GDP compared with 6.4% of this sector in 1994. Besides, the other economic sector is the most dynamically developed sector. The rate of increase in rental rates in this area is always higher than the average rate of Vietnam. Vietnam embarks on the renewal work from a low base.

Therefore, in terms of capital needs, FDI is considered an important additional source of capital for domestic investment, in order to meet investment needs for development. The contribution of FDI in social investment fluctuates greatly, partly reflecting the fluctuations of this capital source, partly reflecting changes in investment of various economic sectors in the country. Along with the development, the foreign-invested sector contributes more and more to the state budget revenue. According to calculations by the General Department of Taxation, the FDI sector contributed about USD 480 million to the State budget, increasing 4.2 times compared to 1994.

In the period of 2003-2009 alone, this sector contributed to the average budget of about 6%. The small share of the contribution is due to the fact that FDI enterprises enjoy the Government’s incentive policy through income tax during their investment years. However, if crude oil revenue is included, this proportion is estimated to be about 20%. In addition, FDI has significantly contributed to the increase in the capital account surplus, contributing to the improvement of the balance of payments and dynamics in recent years.

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