The Impact Of Overseas Vietnamese Investment In Vietnam

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Thanh “Tino” Dinh | [email protected] The Impact of Overseas Vietnamese Investment in Vietnam Summary of Key Findings (English Version) Tino Dinh MBA Class of 2010 Independent Research Project Advised by Professor Peter Rodriguez , Associate Dean for International Affairs Data as of: 3 MAR 2010 1 Copyright Pending. Not to be reprinted without permission of author. The views expressed in this report are the author’s alone and do not reflect the opinions of the University of Virginia, the Darden School of Business, nor its faculty. Please refer to the complete report for more detailed information on references, data, and insights.

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Condensed, 14-slide version of research report on overseas Vietnamese investment in Vietnam.

Transcript of The Impact Of Overseas Vietnamese Investment In Vietnam

Page 1: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

The Impact of Overseas Vietnamese Investment in Vietnam

Summary of Key Findings(English Version)

Tino DinhMBA Class of 2010

Independent Research Project Advised by Professor Peter Rodriguez, Associate Dean for International Affairs

Data as of: 3 MAR 2010 1Copyright Pending. Not to be reprinted

without permission of author.

The views expressed in this report are the author’s alone and do not reflect the opinions of the University of Virginia, the Darden School of Business, nor its faculty. Please refer to the complete report for more detailed information on references,

data, and insights.

Page 2: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

The Bottom Line• Overseas Vietnamese (OV) contributions to Vietnam’s economic

growth are large and significant--est. US$8.45 BB, compared with US$16 BB in total FDI and ODA in 2009.

• Vietnam’s economy has large potential but still faces significant developmental challenges. OV investment, businesses, and knowledge transfer have the power to transform Vietnam’s economy in ways other forms of FDI cannot.

• OV investment could be even greater. However, the flow of OV capital is informal, dispersed and inefficient because of weak legal infrastructure, a lack of dedicated allocation mechanisms, and historical mistrust.

• Policy changes and innovative businesses can overcome these barriers and provide economic opportunities for Vietnamese domestically and internationally.

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Page 3: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Methodology

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Vietnam Government

Sources (GSO)

Multi-lateral Sources

(WB/IMF, UN, ADB)

US Government

Sources (Census)

Scholarly Studies,

Research Reports

Anecdotal Reports (media,

interviews, surveys)

Overseas Vietnamese Investment

(Size, Characteristics, Effect)

Page 4: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Sources of InvestmentComponent Sub-components (destination) Estimated Amount to Date Significance

Remittance (for investment) Investment in family-run

businesses

$3.9 billion Serves as key distribution channel

for OV capital

Recorded investment projects

and business ventures

Real estate, start-ups, joint

ventures

$ 2 billion Potential of OV-led ventures and

projects is not being maximized

Asset management Portfolio funds, start-ups, real-

estate, IT, mfg or infrastructure

$2.5 billion OVs serve as influential

gatekeepers for foreign

investments, projects

Intellectual capital R+D/IP, scientific expertise, mgt

know-how, educational

institutions

Undetermined Greatest potential for value-

creation, innovation exists in gap

b/w OV supply and local demand

for intellectual capital

Total $8.45 billion + Quantitatively, would make OV

the 7th largest foreign investor

(Ex. 7). Larger socio-economic

impact unquantifiable.

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[1] For illustrative purposes, 10% of total recorded remittances from 2000-2009 ($39.5 billion)[2] Given more time and resources, a rough estimate could be determined by identifying all IP from overseas Vietnamese and calculating the profits that have resulted from commercializing patents, publications, etc.

Page 5: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

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48%

13%

4%

6%

8%

20%

1%

63%

17%

6%

6%

8%0%0%

North America

Western Europe

ANZ

Eastern Europe-Eurasia

Asia-Pacific

Thailand-Cambodia-Laos

Other

• Exterior circle: US$ 8.22

BB in total remittances

• Interior circle: 3.75 MM

OV pop.

• Population data from

Wikipedia, projections

• Assumptions on

remittances per

household

2008 Estimated Worldwide OV Remittances

Page 6: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Remittance vs. Other FDI

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0

2000

4000

6000

8000

10000

12000

14000

16000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Est Total Remittance

ODA

FDI

• Currency represented in current US$ MM• Remittance consistently 9-10% GDP from 2002-2009• Sources: World Bank, IMF BoP Statistical yearbook, CIA World Factbook, GSO

Page 7: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Total 1988-2008 FDI by Source

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20951.9

18005.6

17362.2

17071.0

16666.3

13824.1

7416.7

6121.6

5029.0

4892.4

4352.2

3216.2

3018.8

2711.1

2188.3

2000.0

1935.4

1811.2

1693.1

1549.1

0.0 5000.0 10000.0 15000.0 20000.0 25000.0

Taiwan

Malaysia

Japan

Singapore

Korea Rep. of

British Virgin Islands

Hong Kong SAR (China)

Thailand

United States

Canada

Cayman Islands

France

Netherlands

United Kingdom

China, PR

Overseas Vietnamese-aggregate

Fed. Russian

Australia

Switzerland

Samoa

Series1

• Currency in US$ MM

• Aggregate amount per country

during period 1988-2008

• Recorded projects only

• FDI from listed countries may

overlap with OV investment (esp.

USA, AST, CAN, FRA)

• Source: GSO, 9/10/2010

Page 8: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

2008 FDI: Licensed Projects by Activity Type

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Manufacturing

Real estate, renting business activities

Mining and quarrying

Transport; storage and communications

Hotels and restaurants

Construction

Health and social work

Agriculture and forestry

Education and training

Financial intermediation

Other

• Exterior circle: US$ 6 BB

in total registered capital

• Interior circle: 1171

projects

Page 9: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Licensed FDI Projects by Province

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• Currency in US$ MM

• Registered capital > US$ 1 BB

• Source: GSO, 3/3/2010

Page 10: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Characteristics of Viet-Kieu Enterprises

• Geography: Concentration in South

• Scale: Mostly small businesses

• Sector: Focus on speculative real estate development, labor-intensive manufacturing, or back-office IT outsourcing

• Business model: simple, cash-based businesses that offer tangible product or service

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Page 11: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Trends for OV Investment

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Page 12: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Root Cause Barrier to Investment Business Opportunity Policy Recommendation

Apathy Cultural distance Acculturation Services

Risk Legal Risk Information and Risk

Protection Services

Hanoi: Clarify legal status and rights of OV

OVC: Establish internationally recognized, independent

association for OV-owned businesses operating in Vietnam

to represent collective interests

Systemic corruption Information and Risk

Protection Services

Hanoi: rights-based legal reform; consistent enforcement

Hanoi, OVC: Independent, critical media

Bureaucracy Information and

Risk Protection

Services

Market Platforms

Hanoi: Streamline, consolidate, and automate

administrative process across agencies for receiving

business permits and licenses (e-government)

Financial risk; market

inefficiencies

Market Platforms

Financial Services

Lack of OV

Community Capacity

and Markets

Market Platforms

Financial Services

OVC: Coordinating or cooperative mechanism for promotion

of economic development in OV community and Vietnam

across public, commercial, and civil society spheres

Establish independent research institute for OV-centered

economic, social science research

Principles Mistrust Educational

institutions and

services

Hanoi, OVC: Reconciliation process

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Challenges and Opportunities

Page 13: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Recommendations

• Systemic legal reform

Vietnam must consistently enforce basic property rights.

• Building capacity and platforms in OV community

Little Saigon must find an efficient means of pooling and allocating its capital.

• A path to reconciliation

It is in the interests of Vietnamese everywhere to contribute responsibly to Vietnam’s long-term economic development.

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Page 14: The Impact Of Overseas Vietnamese Investment In Vietnam

Thanh “Tino” Dinh | [email protected]

Key References and Acknowledgments

Experts/Scholars Organizations Data Sources

Mr. Ernie Bower, CSIS and Brooks Bowers-Asia

American Chamber of Commerce-Vietnam 1992 Constitution of the SRV

Mr. Don Danh, VSVN Ash Institute-Vietnam Program. Harvard JFK School of Government

Asian Legal Information Institute

Dr. David Dapice, Ash Institute(Harvard-JFK)

National Vietnamese-American Chamber of Commerce (Viet AmCham)

Government Statistics Office of Vietnam

Prof. Le Xuan Khoa, SAIS (John Hopkins Univ)

US-Vietnam Trade Council IMF Balance of Payments Statistics Yearbook 2008

Prof. Nam Binh Tran, Univ of NSW (Austr)

Vietnamese-American NGO Network SRV Foreign Investment Agency (Ministry of Planning and Investment)

Dr. Lan Pham, Univ of Minnesota Vietnam Chamber of Commerce and Industry (SME Center)

US Census Bureau: American Community Survey 2007

Prof. Mark Sidel, Univ of Iowa Vietnam Strategic Ventures Network Vietnam National Administration of Tourism

Mr. Ivan Small, Cornell Univ World Bank Development Indicators

Mr. Markus Taussig, HBS

Mr. Dat Trinh, Levlad, LLC

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Not a comprehensive list (see full report), the following highlights key people, organizations, and sources of data that have been especially influential or helpful in completing this study