Principles for Perfecting the FDI Economic Efficiency Indicator System in Vietnam

This is an inverse efficiency index, indicating how much FDI capital is needed to implement in year t to create one unit of additional value added.

+ Export value/capital ratio of FDI sector (3)

This indicator shows how much export value is generated by an average of one dong of FDI capital in a given period (usually one year). It helps evaluate the effectiveness of FDI capital in creating export value; the larger the indicator, the higher the effectiveness (in terms of the ability to create export value). This is an important indicator to evaluate economic efficiency when considering the implementation of export promotion policies, especially for FDI projects.

+ Net investment vs. capital income (4)

This indicator is the comparative relationship (difference or quotient) between total income from capital (including production surplus, interest income and income from property rental) and total net investment (including investment minus depreciation). If in a certain number of years, net investment is always greater than income from capital, it means that investment is excessive and investment efficiency is not guaranteed.

+ Budget revenue/FDI capital (5)

Here: FDI capital is the implemented capital.

This indicator reflects how much budget revenue is generated on average by one implemented FDI capital unit. The higher this indicator is, the greater the efficiency of FDI capital in terms of budget contribution.

+ Capital/Labor ratio (6)

This indicator shows the average investment level per worker in the FDI sector.

+ Labor productivity = Added value/Number of workers employed (7)

This indicator reflects the average ability to create added value of a laborer employed.

+ Added value of FDI (8)

+ Savings and increased foreign currency earnings (9) This indicator reflects the level of savings and increased foreign currency earnings of the region.

FDI in a given period.

+ Profit (10)

However, the above FDI economic performance indicators still have some basic shortcomings as follows:

+ Efficiency indicators are not systematic, not grouped, and are often used separately. Therefore, the calculation, analysis, and evaluation of FDI economic efficiency will lack uniformity, not ensure systematicity, and even be one-sided.

+ The current performance indicators (used to calculate efficiency indicators) are being calculated for the FDI sector, without separating the results that foreign parties enjoy and not calculating FDI capital separately. This is unreasonable because indicators such as the added value of the FDI sector include both the benefits of the recipients and the investors, so they do not accurately reflect the benefits that parties in the investment-receiving country enjoy. Furthermore, indicators such as added value, export value, and budget revenue of the FDI sector are meant to be created by both domestic and foreign capital, so they do not accurately reflect the contribution of FDI capital alone. And this is one of the reasons why the current indicators still lack groups of indicators reflecting the efficiency calculated separately for FDI capital.

+ Current indicators cannot fully reflect the basic aspects of FDI economic efficiency because they lack many important efficiency indicators such as:

- Indicators reflecting the efficiency of capital in creating: production value, net added value, net export value, savings and increased foreign currency revenue... Therefore, current indicators do not reflect the efficiency of FDI capital in creating these results.

- Indicators reflecting the efficiency of labor in creating: production value, net added value, net export value, savings and increased foreign currency revenue... Therefore, current indicators do not reflect the efficiency of labor in the FDI sector in creating production value, net added value....

- Indicators reflecting cost efficiency. These are necessary indicators to help evaluate the cost efficiency of production and business activities in general and of FDI in particular at both the micro and macro levels.

- The group of indicators of increased efficiency still lacks many necessary indicators, for example, indicators reflecting the increased efficiency of capital or increased labor. Therefore, the current indicators do not meet the research objectives of increasing efficiency of production factors such as capital and labor. This limits the ability to assess the trend of FDI efficiency between periods, and furthermore, it does not indicate whether the increase or decrease in FDI efficiency is due to increased resource efficiency or other factors.

- Effective indicators in the inverse form are rarely used, which limits the ability to study different objectives, because, as we know, positive and negative indicators have different effects.

+ Some indicators have not been named, or have inappropriate names, for example indicators (3), (5), (6). This makes it difficult to research, calculate, analyze, and evaluate effectiveness, and can even cause confusion or errors.

+ Many indicators have not been marked, for example indicators (3) to (10).

+ The method of calculating some indicators is not suitable or not accurate, which is reflected in issues such as not ensuring the principle of comparison, for example, indicators such as capital, assets, human resources - are the numerator or denominator of the indicators.

Efficiency - is often not reasonable to calculate the average (for example indicators (3), (5), (6), (7)), because these indicators are absolute numbers at a point in time, so when compared with period indicators, they need to be averaged.

+ There are some indicators that are actually results of FDI such as added value or savings and increased foreign currency income but are considered efficiency indicators.

2.1.2. Principles and directions for perfecting the system of economic efficiency indicators of FDI in Vietnam

2.1.2.1. Principles for perfecting the system of economic efficiency indicators of FDI in Vietnam

To complete the system of HQKT indicators, we need to adhere to the following basic principles:

+ Suitable for the purpose of analyzing FDI economic efficiency

The system of indicators must be adaptive and suitable to the nature, standards, requirements and objectives of FDI economic analysis.

In research as well as in practice, there are many different objectives of FDI efficiency research. In order to meet each specific objective, it is necessary to select a suitable group of efficiency indicators. There is no all-powerful system of indicators that can meet all objectives of efficiency research in general and of FDI in particular. For example, the system of indicators for evaluating FDI capital efficiency is used to evaluate FDI capital efficiency but cannot be used to evaluate human resource efficiency in FDI activities. Thus, in order to study FDI efficiency of each production factor such as capital, human resources, or costs, there must be corresponding groups of indicators suitable for those objectives. Therefore, it is necessary to base on the objectives of FDI economic efficiency analysis to build a suitable system of indicators.

+ Suitable for the nature and specific characteristics of the research object

Each specific research object needs a certain system of analytical evaluation indicators suitable for its specific nature and characteristics. Different research objects often have different systems of indicators. For example, it is impossible to mechanically use the system of indicators to evaluate the capital efficiency of a business or a project (micro level) to evaluate the FDI efficiency of the economy or of a locality or of an industry (macro level).

The outstanding feature of FDI is the joint investment of foreign capital and domestic capital. To properly analyze FDI efficiency, it is necessary to have indicators reflecting economic efficiency calculated separately for foreign capital.

In short, depending on the nature and characteristics of each type of investment, each field, each industry, each specific subject, researchers need to specify and select a suitable system of evaluation indicators.

+ Ensure comprehensiveness and systematicity

In order to comprehensively evaluate different aspects, tasks, and specific goals that have dialectical relationships with each other, the system of indicators for evaluating FDI efficiency must ensure comprehensiveness and systematicity.

- Ensuring comprehensiveness, meaning that the indicator system must include many groups of indicators to be able to fully reflect the different aspects and tasks of the research object according to the efficiency analysis objective. Specifically, the indicator system must have a subsystem of overall efficiency indicators and a subsystem of increased efficiency indicators of FDI. Each subsystem must include groups of indicators to evaluate the efficiency of each production factor such as capital, human resources, costs, and assets.

- Indicators must be an organically related system, supporting and complementing each other. Each indicator must both reflect its specific effect and overcome the limitations of other indicators.

+ Ensure feasibility

Feasibility is an important requirement for most research, management, production and business activities in general and FDI efficiency assessment in particular. Therefore, the system of indicators needs to be built to have high feasibility. Specifically, the system of indicators must be suitable for specific conditions of information sources, human resource capacity and qualifications, equipment as well as other related conditions.

Furthermore, the system of indicators needs to be considered and calculated so that the cost of collecting and processing information achieves economic efficiency. The system of indicators should not be too numerous, because if there are too many, the collection, analysis and evaluation will be difficult, costly and reduce economic efficiency.

+ Ensure consistency and comparability between Vietnam's FDI statistics and international ones

To integrate and ensure international comparability, Vietnam's FDI economic efficiency statistics in general and its FDI economic efficiency indicators in particular need to move towards unification with international statistics.

2.1.2.2. Directions for perfecting the system of economic efficiency indicators of FDI in Vietnam

To perfect the FDI efficiency index system, in addition to considering the advantages and disadvantages of current indexes and complying with the principles of selecting and perfecting the index system, we need to base on the following directions:

+ Classify, arrange and systematize indicators scientifically;

The FDI economic efficiency index system is divided into: total FDI economic efficiency index subsystem and increased FDI economic efficiency index subsystem.

In order to meet different economic efficiency analysis objectives, each subsystem includes a positive indicator group and a negative indicator group. Each group is divided into groups of efficiency indicators of production factors such as costs, capital and human resources.

+ Eliminate unnecessary indicators, add new important indicators;

+ Adjust the calculation formula if necessary to ensure comparability, accuracy, feasibility and reflect well the meaning of FDI economic efficiency;

+ Unify the names, symbols and calculation formulas of efficiency indicators:

- How to name:

* For the forward form of efficiency indicators: Productivity + Name of the indicator in the denominator + calculated by + Name of the indicator in the numerator .

For example: H GO/Ca = production.

GO stands for: Productivity of capital measured in value.

Song

* For inverse efficiency indicators: Name of the corresponding indicator in positive form + inverse form

For example: H Ca/GO =

Ca is called: Capital productivity in value terms

reverse production

- Symbol of efficiency index:

H Symbol of the indicator in the numerator / Symbol of the indicator in the denominator .

For example: H GO/Ca = GO

Song

- The unit of measurement of relative economic efficiency index is double unit.

CT HQKT Subsystem

all

CT HQKT Subsystem

increase

2.1.3. Perfecting the system of economic efficiency indicators of FDI in Vietnam

FDI Investment Promotion Agency

CT HQKT Group

	CT HQKT Group		CT HQKT Group		CT HQKT Group
form		form		form		form
favorable		inverse		favorable		inverse

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CT group reflects HQKT

of cost

CT group reflects HQKT

of resources

Diagram 2.1. FDI economic efficiency indicator system

The FDI HQKT indicator system is divided into: total efficiency indicator subsystem and increased efficiency indicator subsystem. Each subsystem includes groups

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