Taiwanese Investment in Vietnam: Current Development and Issues

Taiwanese outward FDI into Vietnam focused mostly on labor-intensive sectors such as manufacturing of metals, chemicals and textiles. Taiwanese FDI contributed 2.2-2.3% of Vietnam’s total social investment; created 1.2 million jobs and helped improve the industrial structure. However, Taiwanese FDI is also characterized by low and medium level technology; sharp increase in “dirty industries” classified by Mani and Wheeler (1997) and social problems related to local labor.
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Taiwanese Investment in Vietnam: Current Development and IssuesVNU Journal of Science, Vol. 32, No. 1S (2016) 218-227Taiwanese Investment in Vietnam:Current Development and IssuesNguyen Hong Son*, Nguyen Thi Minh PhuongUniversity of Economics and Business, VNU, 144 Xuan Thuy, Cau Giay, Hanoi, VietnamReceived 06 October 2016Revised 18 October 2016; Accepted 28 November 2016Abstract: Taiwan is the 4th largest foreign investor in Vietnam. Taiwanese FDI on the one handhas contributed to Vietnam’s economic development, on the other hand has raised some seriousissues related to the country’s sustainable development. In order to analyze the currentdevelopment and emerging issues related to Taiwanese investment in Vietnam, this paper focusedon the following contents: (i) Characteristics of Taiwanese FDI inflows in comparison with theFDI flows into Vietnam in general; (ii) Some issues arising during the operation of Taiwanese FDIenterprises in Vietnam and those arising in the context of Vietnam’s international economicintegration and economic restructuring; (iii) Opportunities to attract high-quality FDI from Taiwantowards sustainable development and some policy implications for Vietnam. The results show thatFDI flows from Taiwan have increased significantly, especially since Vietnam joined the WTO.Taiwanese outward FDI into Vietnam focused mostly on labor-intensive sectors such asmanufacturing of metals, chemicals and textiles. Taiwanese FDI contributed 2.2-2.3% ofVietnam’s total social investment; created 1.2 million jobs and helped improve the industrialstructure. However, Taiwanese FDI is also characterized by low and medium level technology;sharp increase in “dirty industries” classified by Mani and Wheeler (1997) and social problemsrelated to local labor. In the context of Vietnam’s shift to encourage development of high valueadded manufacturing and services sectors and the country’s direction of sustainable development,IT, electronic products as well as education and training may be the most promising sectors forTaiwanese investment in Vietnam in the future.Keywords: Foreign Direct Investment, Taiwan, Vietnam1. Introduction*the group of lower middle-income countrysince 2010 and its GDP per capita reachedabout USD 2,100 by the end of 2015. Vietnamhas also achieved most and in some casessurpassed a number of the MillenniumDevelopment Goals, particularly with the goalsof poverty reduction1.Since political and economic reforms (“DoiMoi”) launched in 1986, Vietnam has gainedremarkable economic development. Vietnam’saverage growth rate is 6.4% a year from 2000until now. From being one of the poorestcountries in the world with GDP per capitabelow USD 100 in 1990, Vietnam has joined______________*1http://www.worldbank.org/en/country/vietnam/overview,last updated on 26th September, 2016.Corresponding author. Tel.: 84-912257733Email: nhson@vnu.edu.vn218218N.H. Son, N.T.M. Phuong / VNU Journal of Science, Vol. 32, No. 1S (2016) 218-227To obtain such achievements, resources fordevelopment have been raised from manychannels, among which foreign directinvestment (FDI) is a very important one.Thanks to the country’s process of economicintegration, beginning with the promulgation ofthe Law on Investment in 1987, annual FDIinflows increased dramatically from USD 0.32billion in 1988 to USD 14.5 billion of realizedFDI in 2015 (Statistics of General StatisticsOffice 2016).Among 110 countries and territoriesinvesting in Vietnam, Taiwan is one of the firstcomers and by the end of 2015 Taiwan rankedthe 4th largest investors in Vietnam with 2478still-valid projects and cumulative FDI inflowsof nearly USD 31 billion, accounting for 11%of the total FDI inflows into Vietnam (Statisticsof Vietnam’s Ministry of Planning andInvestment – MPI 2016). FDI inflows fromTaiwan have contributed to Vietnam’seconomic growth, not only through providinginvestment capital but also stimulating exportactivities, creating jobs, transferring technologyand generating other spill-over effects.However, besides positive impacts, FDI fromTaiwan is still a controversial topic because ofits negative impacts related to environmentaland social issues in Vietnam recently.In the current context of Vietnam’s activeparticipation in the international and regionaleconomic integration (e.g. joining EU –Vietnam Free Trade Agreement - EVFTA,Trans Pacific Partnership - TPP, ASEANEconomic Community – AEC, etc.) and thecountry’s process of restructuring, it isnecessary to identify the opportunities forattracting more FDI of high quality fromTaiwan towards sustainable development inVietnam. For that purpose, this paper focuseson three main contents: (i) The currentdevelopment of Taiwanese FDI in Vietnam; (ii)Emerging issues related to Taiwanese FDI inVietnam and (iii) Conclusion and someimplications.2192. The current develo ...