Assess the prospects for Vietnam to emulate the growth and development of South Korea. Consider the roles of technology and foreign direct investment in both countries. Essay Example

АSSЕSS THЕ РRОSРЕСTS FОR VIЕTNАM TО ЕMULАTЕ THЕ GRОWTH АND DЕVЕLОРMЕNT ОF SОUTH KОRЕА.

Introduction

Vietnam has been emulating the growth and development taking place in South Korea. As a result, it has invested heavily in foreign direct investment and technology. For example, the Vietnam government is working towards attracting more foreign direct investors by providing good conditions for foreign investors to attract more investors (Beresford, 2008). Considering the course reading, I consider the efforts of Vietnam towards improving the business climate to be aimed at increasing the attracting more foreign investors. Besides, there are some efforts geared towards liberalizing the foreign trade through increased reforms in the country. Like South Korea, Vietnam has realized the need for increased trade agreements in improving the economic performance. For instance, Vietnam has been engaged in negotiations with the countries like the United States aiming at making trade agreements. This essay is assessing the prospects for Vietnam emulating the growth and development experienced in South Korea with emphasizes on foreign direct investment and technology while reflecting on the course readings.

Prospects for Vietnam to emulate growth and development of South Korea

In many ways, Vietnam has been emulating the growth and developments taking place in South Korea to achieve economic improvements. For instance, Vietnam government has increased its bilateral agreements and improved the business environment to attract more foreign investors through direct investments. Course readings have helped me in assessing the policies that countries adopt in the process of improving their economic performance. The growth of the Gross Domestic Product in Vietnam has always been high since in the year 1980. For instance, between the year 1991 and the year 2012, the growth of the GDP increased by three times (Athukorala and Tien, 2012). However, in the year 2008, the growth of the Gross Domestic Product of Vietnam started to decline thus leading to the rise of several questions concerning the sustainability of its growth process. Moreover, a significant number of the analysts have shown their concern about the decline of the productivity growth and also the reliance on the capital accumulation.

I perceive the developments that are experienced in Vietnam to be associated with the increased efforts of the government to attract more foreign direct investments and technology. Besides, various competitiveness issues are being raised by the private investors, and these issues include a widening gap in skills, high trade costs and also the government bureaucracy which makes it hard for the businesses to thrive well in Vietnam. Moreover, in the year 1980 South Korea reduced the government intervention significantly and also liberalized the foreign investment to promote the aspect of competition (Beresford, 2008). In addition, the government being much concerned about the rural-urban imbalances, the government encouraged investment in the infrastructure by promoting farm mechanization. Therefore, the government of Vietnam is required to address the competitiveness issues to allow the country to achieve its aspiration of becoming a modern economy that is industrialized.

Foreign direct investment

Vietnam has been emulating the foreign direct investment taking place in South Korea leading to economic growth and development. The foreign investment on the economy of the Vietnam has been the major element in its renovation reforms that were initiated in the year 1986. Moreover, the foreign investment was liberalized in the year 1990 to reshape the economy of Vietnam to become market-based. Some of the current reforms which Vietnam has established include the foreign investment enterprises and also withdrawing the restrictions on the technology transfer (Athukorala and Tien, 2012). Also, a specific attention has been placed on the role played by the foreign direct investment in the process of connecting the global production networks with the Vietnamese manufacturing.

However, the involvement, as well as the development of the Foreign Investment in the economy of Vietnam, depends on the conduciveness of the economic policies that are present in that country. Moreover, to attract the foreign investment, Vietnam has mostly focused on the economic policies which are market oriented. In general, it is usually believed that the foreign investment can play a significant role in the transition of an economy, whereby it can revitalize the private sector that has been dormant in the economy (Lall and Teubal, 1998). In addition, the ministry of investment and planning is the organization which monitors the investment activities in the Vietnam. Moreover, the government of Vietnam provided incentives to the foreign investors such as the exemption from paying the corporate tax. In the year 1991, legislation was implemented which allowed the establishment of the export processing zones that provided special incentives to the firms which were dealing with the production of the export goods.

The course readings have helped me in understanding the factors affecting the investment climate in a country. The investment climate covers both the general investment environment and also the foreign investment rules. Moreover, under the investment climate, the evolution of the foreign investment is usually surveyed under the reforms which are market-oriented and then they are assessed using the current state. However, the first law concerning the foreign investment was enacted in the year 1987 by the Vietnamese National Assembly, which specified three ways in which ways in which the foreign investors participated in the investment activities (Choi, 2009). These three ways are; the joint-venture, the contracts of business cooperation and the third one is the fully owned foreign ventures. For instance, the joint ventures participated in various sectors which include; tourism, transportation and also port construction among the others.

Technological advancements

I consider technology as an important factor in the economic development and growth. The appropriate policies related to the technology can be obtained from the understanding of how technical changes occur at the enterprise level. Moreover, there are usually two wide approaches of technology in the economy which are the neoclassical approach, and the other one is the evolutionary approach (Lall and Teubal, 1998). In accordance with the neoclassical approach, the development of technology occurs under very simplified assumptions which are the homogenous and also small firms usually operate in perfectly competitive markets in which all the technological options are known. Another assumption made by this neoclassical approach is that technology is usually absorbed and also used without any cost being incurred. Consequently, these assumptions have resulted in a conclusion that, the free markets always optimize resources provided that they are efficient.

Technology is important in achieving innovations that are important in achieving economic developments. However, much of the current empirical research concerning the enterprise technology in the developing countries have been much focused on analyzing how the firms make use of the technology. Moreover, this analysis was structural in nature whereby it is based on the evolutionary theory of the economic growth (Choi, 2009). According to the evolutionary approach, firms usually operate with the imperfect knowledge of the technology. Moreover, firms need enough time and also effort to learn how to use technologies effectively. Besides, some of the technical efforts that firms need to put include technological innovations, adaptation to the technologies and also mastery of the technologies.

Conclusion

Vietnam has managed to achieve tremendous economic development and growth through emulating South Korea. Many markets, institutions, bureaucracies and also networks are some of the ways through which the technology activities can be organized. However, the effectiveness of these mechanisms usually depends upon a country, and the effectiveness can still change over a period. However, as a result of the amendment of the foreign investment law in the year 2000, the foreign enterprises were granted the permission to change their way of investment and also to consolidate their enterprises.

References

Athukorala, P.C. and Tien, T.Q., 2012. Foreign direct investment in industrial transition: the experience of Vietnam. Journal of the Asia Pacific Economy, 17(3), pp.446-463.

Beresford, M., 2008. Doi Moi in review: The challenges of building market socialism in Vietnam. Journal of Contemporary Asia, 38(2), pp.221-243.

Choi, J.Y., 2009. Rethinking Economic Development and the Financial Crisis in South Korea and the State in an Era of Globalization. Journal of Third World Studies, 26(2), p.203.

Lall, S. and Teubal, M., 1998. “Market-stimulating” technology policies in developing countries: A framework with examples from East Asia. World development, 26(8), pp.1369-1385.