- Inspect the assurance of income levels, insurance services, and conditions for workers in the FDI sector.
- Learn from experience and develop realistic plans to better ensure human resources in the FDI sector.
• Develop policies to attract high-quality human resources from outside areas to Nghe An province:
- Have good mechanisms and policies to create conditions to attract good managers, scientists, experienced workers, highly skilled workers... to live and work. Especially in the fields and levels that schools in Nghe An province have not been able to train.
- Issue appropriate preferential policies for talented cadres, especially experienced ones from other places, students from prestigious schools at home and abroad.
- Issue specific policies and regimes on wages, allowances and other incentives to attract talents and skilled workers from other regions to work in Nghe An province.
3.2.7 Strengthen inspection and examination work, and implement anti-transfer pricing measures
If there is no solution to handle the transfer pricing behavior of foreign investors, it will have a negative impact on the economy such as causing loss of state budget revenue, creating an unequal competitive environment among economic entities, because under the same conditions, when foreign investors carry out transfer pricing behavior, they will gain higher profits than investors who do not carry out this behavior. Therefore, in the coming time, the work of inspection, examination, and implementation of anti-transfer pricing measures needs to be promoted:
- Complete the historical information system on transaction prices of equipment imported by foreign investors, data on taxpayers, collect information and evidence through the media.
the public, through the people, through those who have worked for foreign investors, through partners who have provided input materials... on that basis, review and make comparison tables of all types of costs between businesses to detect price differences.
- Based on reports from foreign investors, conduct research on financial indicators such as how businesses pay taxes, the level of profit and loss over the years, preferential policies enjoyed, capital scale... In particular, conduct a review of businesses reporting losses for many years, analyze business performance and compare with domestic businesses under similar conditions.
- Clarifying the input costs of foreign investors:
+ It is necessary to refer to the transaction prices of machinery and equipment on the international market for comparison, clearly specify the price appraisal mechanism for machinery and equipment such as: authorized appraisal unit, appraisal time, international and domestic standards on machinery and equipment price appraisal... and at the same time have a resolution mechanism when there is disagreement on machinery and equipment price appraisal.
+ For imported input materials, it is necessary to clearly determine whether the import price of raw materials is the normal value (basically made up of 3 parts: production cost in the exporting country, sales and business management cost in the exporting country, reasonable profit level in the exporting country) of goods that can be sold in the exporting country, and at the same time, conduct an investigation and survey right at the raw material exporting enterprise of enterprises producing similar products as a basis for evidence to accurately determine the import price of raw materials.
- It is necessary to conduct thorough investigation and control of selling prices for export products, especially with partners who have beneficial relationships with foreign investors such as equity capital, or places with more tax incentives.
- Promote propaganda, mobilization, exchange and struggle
on the basis of theory and practice so that foreign investors understand and comply with tax laws and policies, and conduct business activities in accordance with objective realities in their business activities. Empower tax authorities and customs authorities to implement sanctions for tax determination, tax collection, and penalties for detected transfer pricing cases. It is necessary to inspect and strictly handle a number of typical transfer pricing cases to deter other foreign investors who intend to commit transfer pricing.
3.2.8 It is necessary to evaluate the efficiency of FDI capital use locally using econometric models.
Attracting FDI capital is necessary for each locality and the whole country, but it does not mean that it must be attracted at all costs. How much to attract, whether to continue attracting or not, depends on the efficiency of using FDI capital. To quantify the efficiency of using FDI capital, the author proposes a number of econometric models. Based on the results of the model, the locality will propose measures to adjust the strategy to attract FDI capital accordingly.
Capital and labor in the FDI sector are factors contributing to the economic growth of the locality. However, how have capital and labor contributed to the added value (VA) of the FDI sector? This is an issue that needs to be quantified specifically. Therefore, the proposed model for evaluating the efficiency of FDI capital use is to determine the relationship between capital used, labor, time and added value of the FDI sector.
• Model building theory
- Through the application of regression analysis method (studying the dependent relationship of a dependent variable with other independent variables) to study the correlation between capital (NV), labor (LD) and time (T) to the added value (VA) of the FDI sector.
- Approach to model selection.
+ Identify independent variables in the model.
+ Check the scope of assumptions: Test for multicollinearity, heteroscedasticity, autocorrelation and correct violated assumptions.
+ Choose the functional form: Based on economic theory and experimental results, compare different model forms and select the best model.
• Database for regression
- Rely on different econometric software to perform regression. Including:
+ Dependent variable: VA (million VND)
+ Independent variables: NV (million VND), T time (year)
- The data source used is NV, LD, VA in the FDI area of Nghe An province from 2000 to 2010, specifically as follows:
Table 3.1: VA, NV, LD of FDI sector of Nghe An province in the period 2000 - 2010
Year
VA (million dong) | NV (million dong) | LD (People) | T (Year) | |
2000 | 53,905 | 58,000 | 324 | 1 |
2001 | 75,658 | 69,346 | 524 | 2 |
2002 | 157.105 | 90,000 | 765 | 3 |
2003 | 228,233 | 182,274 | 864 | 4 |
2004 | 236,242 | 42,000 | 1,224 | 5 |
2005 | 278,403 | 83,000 | 1,295 | 6 |
2006 | 297,284 | 26,480 | 1,863 | 7 |
2007 | 298,964 | 45,700 | 1,260 | 8 |
2008 | 386,850 | 53,691 | 1,208 | 9 |
2009 | 447,199 | 139,700 | 1,448 | 10 |
2010 | 520,987 | 156,836 | 1,563 | 11 |
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Source: Nghe An Province Statistical Yearbook
• Select the optimal model
Based on the theory and collected data, regression of econometric models based on Eviews 4 software with a significance level of 10% (ie 90% confidence level) was conducted to determine the relationship between NV, LD, T and VA in the FDI sector of Nghe An province. Based on the evaluation and testing of different econometric models, the best model was selected to reflect the relationship between NV, LD, T and VA in the FDI sector of Nghe An province. The regression results of the models are shown as follows:
Table 3.2: Summary of regression results of the relationship between capital, labor and time with VA of the FDI sector from models (1) to (7)
Model
Correlation coefficient | Coefficient of determination (R 2 ) | Coefficient of determination adjust | Variables that do not affect VA | ||
(1) | VA i 1 2 N V i 3 LD i 4 T i u i | 0.996 | 0.994 | 0.991 | |
(2) | VA i 1 N V i 2 LD i 3 T i u i | 0.994 | 0.989 | 0.987 | LD |
(3) | VA NV 2 LD T u i 1 i 2 i 3 ii | 0.996 | 0.992 | 0.990 | LD |
(4) | VA NV LD 2 T u i 1 i 2 i 3 ii | 0.995 | 0.991 | 0.988 | LD 2 |
(5) | VA NV NV 2 LD T u i 1 i 2 i 3 i 4 ii | 0.996 | 0.992 | 0.989 | NV, NV 2 , LD |
(6) | VA NV LD LD 2 T u i 1 i 2 i 2 i 4 ii | 0.996 | 0.992 | 0.988 | LD, LD 2 |
(7) | VA NV NV 2 LD LD 2 T u i 1 i 1 i 3 i 4 i 5 ii | 0.9965 | 0.993 | 0.988 | NV, NV 2 , LD LD 2 |
From the evaluation and testing steps, the best model selected to reflect the relationship between NV, LD, T and VA of the FDI sector in Nghe An province is model (1) (see the appendix) with the specific estimation results as follows:
Table 3.3: Model estimation results table (1)
Dependent Variable: VA Method: Least Squares Sample: 2000 2010
Included observations: 11
Variable
coefficient | Std. Error t-Statistic | Prob. | |
C | -31088.36 | 14491.59 -2.145270 | 0.0691 |
NV | 0.471832 | 0.092357 5.108787 | 0.0014 |
LD | 34.75335 | 18.14964 1.914823 | 0.0971 |
T | 37229.96 | 2574.707 14.45988 | 0.0000 |
R-squared | 0.993738 | Mean dependent var | 271893.6 |
Adjusted R-squared | 0.991054 | SD dependent var | 144264.1 |
SE of regression | 13645.29 | Akaike info criterion | 22.15546 |
Sum squared residue | 1.30E+09 | Schwarz criterion | 22.30015 |
Log likelihood | -117.8551 | F-statistic | 370.2557 |
Durbin-Watson statistics | 2.541083 | Prob(F-statistic) | 0.000000 |
From the regression results of the model, it shows that the P-value of the coefficients is less than 0.1, so the model coefficients are all statistically significant (see the appendix). Furthermore, R 2 = 0.9937 is quite high, showing that when other factors are constant, NV, LD, T can explain 99.37% of the variation in VA of the FDI sector in Nghe An province.
From the selected model, we determine the actual and theoretical VA values shown in the following table:
Table 3.4: Actual value and theoretical value of VA of FDI sector
Year
Actual VA (million VND) | Theoretical VA (million VND) | Difference between fair value theory vs. reality | ||
Absolute (million dong) | Relative (%) | |||
2000 | 53,905 | 44,767.95752 | -9,137,042 | -16.95 |
2001 | 75,658 | 94,301.9947 | 18,643,995 | 24.64 |
2002 | 157.105 | 149,652.7352 | -7,452,265 | -4.74 |
2003 | 228,233 | 233,861.1368 | 5,628,137 | 2.47 |
2004 | 236,242 | 217,416.4809 | -18,825,519 | -7.97 |
2005 | 278,403 | 276,459.0541 | -1,943,946 | -0.70 |
2006 | 297,284 | 306,760,946 | 9,476,946 | 3.19 |
2007 | 298,964 | 332,103,2521 | 33,139,252 | 9.97 |
2008 | 386,850 | 371,296.4476 | - 15,553,552 | -4,189 |
2009 | 447,199 | 457,449.0414 | 10,250,041 | 2.29 |
2010 | 520,987 | 506,760.9536 | -14,225,881 | -2.73 |
Source: Nghe An Province Statistical Yearbook and author's calculations
• Results of determining the optimal model
Thus, the best model selected to reflect the correlation between NV, LD, T on VA of FDI sector in Nghe An province is:
VA = -31,088.36 + 0.471832*NV i + 34.75335*LD i + 37,229.96*T i (1)
From the regression results , it can be seen that the relationship between NV , LD and T with VA is very close and :
- If 1 unit of FDI capital investment is changed, the VA of the FDI sector will change by 0.471 units (assuming other factors remain unchanged).
- If 1 unit of labor is changed, the VA of the FDI sector will change by 34,753 units (assuming other factors remain unchanged).
- Every year when other factors remain unchanged, VA will increase by 37,229.96 units .
• Research and model application
Determining the optimal model is the basis for evaluating the effectiveness of FDI capital use . Thereby, it shows how many units of VA FDI capital has created for the economy and how changes in the investment level will cause VA to fluctuate . At the same time, through the model, it also determines the impact of labor on VA in the FDI sector. That is the basis for making investment policies and developing human resources in a reasonable way to attract FDI capital effectively.
The author proposes that through this model, policy makers can apply it to evaluate the efficiency of FDI capital use in different localities or for the entire economy, thereby providing a basis for developing appropriate policies aimed at attracting FDI capital effectively.
3.3 RECOMMENDATIONS
3.3.1 For the National Assembly
• Reduce the situation of constantly changing laws and policies causing investors to feel insecure about Vietnam's legal environment. Continue to consider amending and supplementing the Land Law, Investment Law, Natural Resources Law, Environmental Law and investment-related documents to suit the new trend of international economic integration, especially when our country has deeply participated in the WTO. In particular, it is necessary to increase high penalties for the Environmental Law to deter and prevent violations of the environment; amend the Land Law, the ordinance on the rights and obligations of foreign organizations and individuals leasing land in Vietnam to be consistent with the provisions of the Investment Law. At the same time, it is necessary to consider options to allow