Malaysia's policy of attracting foreign direct investment in the process of international economic integration - current situation, experience and possibility of application in Vietnam - 1

Pledge ii

Thanks iii

Table of Contents iv

List of symbols, abbreviations and acronyms

List of tables and figures vii

Foreword 1

Chapter I Some theoretical issues on FDI attraction policy 6

1.1 FDI and the role of FDI for developing countries 6

1.2 Some issues on FDI attraction policy 26

Chapter II Malaysia's FDI attraction policy in the integration process

international economics (1971 - 2005) 58

2.1 FDI attraction policy in the period 1971 - 1996 58

2.2 FDI attraction policy in the period 1996 - 2005 77

2.3 Some lessons learned from Malaysia's FDI attraction policy 103

Chapter III: The possibility of applying some experiences on FDI attraction policy of Malaysia to Vietnam 116

3.1 Overview of Vietnam's FDI attraction policy 116

3.2 Some similarities and differences between Vietnam and Malaysia

impact on FDI attraction policy 144

3.3 Ability to apply some experiences in FDI attraction policies

Malaysia to Vietnam152

3.4 Necessary conditions for better implementation of lessons learned from Malaysia's FDI attraction to Vietnam

168

Conclusion 177

List of scientific works of the author 179

References 180

Appendix 186

List of symbols and abbreviations

Abbreviation Write full English Write full Vietnamese

AFTA : ASEAN Free Trade Area

: ASEAN Free Trade Area APEC : Asia-Pacific Economic Co-operation

: Association of South-East Asian Nations : Association of South-East Asian Nations

: Association of Southeast Asian Nations

CEPT : Scheme on Common Effective Preferential Tariffs

: CNC Common Effective Preferential Tariff Scheme : High Technology

CNH: Industrialization

DPT: Developing

EU : European Union

: European Union

FDI: Foreign Direct Investment

: Foreign direct investment GDP : Gross domestic product Modernization : Modernization

HVXK: Export oriented

IMF: International Monetary Fund

: International Monetary Fund

IMP : Industrial Master Plan

: JETRO Industry Master Plan : Japanese External Trade Organization

: Japan External Trade Organization Industrial Park : Industrial Park

International Economics: International Economics

MIDA : Malaysian Intrustrial Development Authority

: Malaysian Industrial Development Authority

MITI: Ministry of International Trade and Industry Malaysia

: Ministry of International Trade and Industry Malaysia M&A : Merger and Acquisition

: Mergers and Acquisitions

NEP : New Economic Policy

: New Economic Policy

NICs : Newly Industrialized Countres

: Newly industrialized countries

ODA : Official Development Assistance

OECD : Organization for Economic Cooperation and Development

RM : Malaysian Ringgit

: Malaysian Ringgit R&D : Research and Development

: Research and Development of TMTD : Free Trade

TNCs: Transnational Corporations

: Transnational Corporation TTNK : Import Substitution

UNCTA C

: United Nations Conference on Trade and Development

:United Nations Conference on Trade and Development

USD : United States Dollar

: US Dollar

WB : World Bank

: World Bank

WTO: World Trade Organization

: World Trade Organization Socialist : Socialist

List of tables and figures

Table of Contents Page

Table 1.1. FDI capital flows in the world, period 2000 - 2005 37

Table 1.2. Adjustment of FDI regulations of countries, 1991 - 2004 38

Table 2.1. Some major investors in Malaysia during the period 1993 - 1997 73

Table 2.2. FDI structure in Malaysian economic sectors from 1971-1987 74

Table 2.3. FDI into Malaysia by states, 1990 - 1997 76

Table 2.4. Proportion of FDI capital in manufacturing industry in Malaysia, 2002 - 2005 99

Table 3.1. Comparison of business costs in Vietnamese FDI enterprises

South and some Asian countries in 2004 137

Table 3.2. Assessment of competitiveness according to factors affecting FDI 138

Table 3.3. Comparison of some FDI attraction policies between Vietnam and Malaysia 140

Page Contents Image

Figure 1.1. FDI capital flows in the world in the period 1993 - 2005 35

Figure 2.1. FDI flows into Malaysia, 1975 - 1996 71

Figure 2.2. FDI into ASEAN by host country, 1995 - 2004 98

Figure 2.3. FDI in Malaysian manufacturing industry, 1996 - 10/2001 100

Figure 3.1. FDI attraction situation in Vietnam, 1998 - 2005 125

Figure 3.2. Structure of FDI registered in Vietnam by industry, 1988 - 2005 127

Figure 3.3. Structure of FDI sources in Vietnam, 1988 - 2005 128

Introduction

I. Urgency of the topic

Currently, international economic integration (IEE) is posing many opportunities and challenges for developing countries (DPCs), including the issue of competition to attract foreign direct investment (FDI). FDI capital is important and necessary for DPCs, it not only supplements development investment capital, contributes to accelerating economic growth, exploiting and improving the efficiency of using domestic resources, but also receives technology, management experience, expands markets... The issue of attracting FDI in IEE depends on many factors, including the role of policies to create a competitive investment environment to attract FDI.

In recent times, Malaysia has been one of the countries that has been quite successful in introducing policies to attract FDI. It has created more resources to accelerate industrialization (I) according to the outward-oriented strategy (export-oriented - HVXK) in the process of international economic integration. After several decades of development, Malaysia is preparing to join the ranks of newly industrialized countries (NICs).

Vietnam has implemented economic renovation (1986 - present), with the policy of "Diversification and multilateralization of foreign economic relations" advocating opening the economy with positive policies, has achieved certain results in attracting FDI, contributing to promoting industrialization and modernization of the country. However, the FDI attraction policy still reveals many limitations, affecting the speed, scale and efficiency of FDI attraction. Therefore, learning from the experience of Malaysia, a pioneer and successful country in attracting FDI, has practical theoretical and practical significance for Vietnam in mobilizing foreign capital sources for development investment, to achieve the goal of our country basically becoming an industrialized country by 2020. Therefore, the researcher chose the issue: "Policy to attract foreign direct investment

"Malaysia's economic integration process in the international economy - current situation, experience and possibility of application in Vietnam" is the research topic of the thesis.

2. Overview of research works related to the thesis

On the issue of FDI attraction policy of Malaysia, there have been a number of research works by domestic and foreign scholars.

Abroad, the research work "Malaysia - Overview of the legal framework in foreign direct investment" by author Arumugam Rajenthran in Economics and Finance No. 5/2002 published by the Singapore Institute of Southeast Asian Studies in October 2002. Here, the author researched and analyzed the legal aspects related to FDI in Malaysia in terms of legislation, land, labor, environment; some tax and non-financial incentive policies; intellectual property rights; management and settlement of disputes... In this research work, the author mainly analyzed from a macro perspective, associated with a specific context to analyze the origin of the policies, as well as the objectives of the regulations in the FDI attraction policy of Malaysia. At the same time, the research work also raised some challenges for Malaysia in handling relations with neighboring AESEAN countries; related to the agreement on trade-related aspects of investment (TRIM); and the agreement on trade-related aspects of intellectual property rights (TRIP). However, this research has not fully studied the content of FDI attraction policies that Malaysia has applied and some of the researched contents have only mentioned the year 1999.

Within the framework of the OECD's research project "Foreign direct investment and industrialization in Malaysia, Singapore, Taiwan and Thailand", authors Linda YC Lim and Pang E. Fong (1991) outlined some FDI trends in the world, and focused on analyzing the current situation of attracting FDI to serve industrialization and also mentioned some FDI attraction policies of Malaysia, Singapore, Taiwan and Thailand, and only stopped until 2000. Author Yumiko Okamoto (1994) also had a research article "The impact of trade and investment liberalization policies on