Exam-question Аsiа Расifiс Businеss Essay Example

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Аsiа Расifiс Businеss

FDI is the practice whereby people from a different country acquire ownership of assets in a host country with the intention of controlling the factors of production. Vietnam is a growing economy that is attractive to foreign investors because of the attractive foreign policies rolled out by the country’s government. Additionally, the state has other advantages such as its strategic location geographically near countries such as China which are global supply chains, abundant human resource, and political and economic stability. Due to the stability and the need to enhance its industrial competitiveness in the Asian region, the country reformed its industrialization strategy to be export oriented so as to attract foreign investors and transnational corporations. There are a number of roles that Foreign Direct Investment (FDI) can play in improving the performance of the industrial sector in Vietnam. FDI can lay the foundation for the expansion of international production. An inflow of FDI will mark an expansion of international production by TNCs in the country. The increase has a direct impact on foreign trade in terms of exports because the number of sales in the global market will be boosted. Foreign Direct Investment in Vietnam will add to capital formation as well as transfer superior production technology and innovative capabilities, as well as easy access to worldwide marketing networks. One benefit of the investment is a technical training and enhanced managerial practices and as a result, increased employment. There will be a swell in superior labor in the domestic and international market. Thus, Vietnam will experience an improvement in productivity and performance in the industrial sector.

Foreign firms in Vietnam will contribute majorly in enhancing the economic growth of different sectors such as telecommunication, agriculture, manufacturing and other fields. The firms will also help in the realization of the FDI policies in Vietnam that aim to help the state transition into a socialist market economy that is fully integrated into the economy of the ASEAN region and globally. There is a direct relationship between FDI and domestic investment. Thus, Vietnam is experiencing an overall positive influence in economic growth.

State-owned enterprises play a significant role in aiding the government and the economy accomplish social-political objectives. In Vietnam, there are various risks associated with FDI having a role in reshaping State Owned Enterprises. In most cases, host countries use FDI as a way of increasing exports and there are negative spill-overs because the foreign enterprises may create an uneven field for the domestic business. The state has put in place elaborate policies that govern the role of foreign firms in state-owned enterprises. The FDI cannot be a majority shareholder in any of the government enterprises. The approval from various ministries and various policies ensure that the government and local investors are more directly involved in the corporations.

The risk of FDIs reshaping the enterprises is only possible if the legal framework provides for it. The Vietnamese government has established a statutory body to represent the needs and interests of the state in the processes of privatization, management and restructuring of various state-owned ventures and monopolies. Therefore, the risks posed by FDI on these enterprises are neutralized by the political and legal efforts of the Vietnamese government. The FDI-induced economic change is essential in all sectors of the economy and the adverse effects produced by such investment can only be curbed through proper policy and statutory responses.