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Overseas Vietnamese investment in Vietnam
- 1. Thanh “Tino” Dinh | dinht10@darden.virginia.edu The Impact of Overseas Vietnamese Investment in Vietnam Summary of Key Findings (English Version) Tino Dinh MBA Class of 2010 Independent Research Project Advised by Professor Peter Rodriguez, Associate Dean for International Affairs The views expressed in this report are the author’s alone and do not reflect the opinions of the University of Virginia, the Darden School of Business, nor its faculty. Please refer to the complete report for more detailed information on references, data, and insights. Copyright Pending. Not to be reprinted Data as of: 3 MAR 2010 1 without permission of author.
- 2. Thanh “Tino” Dinh | dinht10@alum.darden.edu The Bottom Line • Overseas Vietnamese (OV) contributions to Vietnam’s economic growth are large and significant--est. US$8.45 BB, compared with US$16 BB in total FDI and ODA in 2009. • Vietnam’s economy has large potential but still faces significant developmental challenges. OV investment, businesses, and knowledge transfer have the power to transform Vietnam’s economy in ways other forms of FDI cannot. • OV investment could be even greater. However, the flow of OV capital is informal, dispersed and inefficient because of weak legal infrastructure, a lack of dedicated allocation mechanisms, and historical mistrust. • Policy changes and innovative businesses can overcome these barriers and provide economic opportunities for Vietnamese domestically and internationally. June 28, 2010 Copyright Pending. Not to be reprinted 2 without permission of author.
- 3. Thanh “Tino” Dinh | dinht10@alum.darden.edu Methodology Anecdotal Vietnam Multi-lateral US Scholarly Reports Government Sources Government Studies, (media, Sources (WB/IMF, Sources Research interviews, (GSO) UN, ADB) (Census) Reports surveys) Overseas Vietnamese Investment (Size, Characteristics, Effect) June 28, 2010 Copyright Pending. Not to be reprinted 3 without permission of author.
- 4. Thanh “Tino” Dinh | dinht10@alum.darden.edu Sources of Investment Component Sub-components (destination) Estimated Amount to Date Significance Remittance (for investment) Investment in family-run $3.9 billion Serves as key distribution channel businesses for OV capital Recorded investment projects Real estate, start-ups, joint $ 2 billion Potential of OV-led ventures and and business ventures ventures projects is not being maximized Asset management Portfolio funds, start-ups, real- $2.5 billion OVs serve as influential estate, IT, mfg or infrastructure gatekeepers for foreign investments, projects Intellectual capital R+D/IP, scientific expertise, mgt Undetermined Greatest potential for value- know-how, educational creation, innovation exists in gap institutions b/w OV supply and local demand for intellectual capital Total $8.45 billion + Quantitatively, would make OV the 7th largest foreign investor (Ex. 7). Larger socio-economic impact unquantifiable. [1] For illustrative purposes, 10% of total recorded remittances from 2000-2009 ($39.5 billion) [2] Given more time and resources, a rough estimate could be determined by identifying all IP from overseas Vietnamese and calculating the profits that have resulted from commercializing patents, publications, etc. June 28, 2010 Copyright Pending. Not to be reprinted 4 without permission of author.
- 5. Thanh “Tino” Dinh | dinht10@alum.darden.edu 2008 Estimated Worldwide OV Remittances 0% 0% North America • Exterior circle: US$ 8.22 8% Western Europe ANZ BB in total remittances 6% 1% Eastern Europe-Eurasia • Interior circle: 3.75 MM 20% Asia-Pacific 6% OV pop. Thailand-Cambodia-Laos Other • Population data from 48% Wikipedia, projections 8% • Assumptions on 17% 6% remittances per 63% 4% household 13% June 28, 2010 Copyright Pending. Not to be reprinted 5 without permission of author.
- 6. Thanh “Tino” Dinh | dinht10@alum.darden.edu Remittance vs. Other FDI 16000 14000 12000 10000 Est Total Remittance 8000 ODA 6000 FDI 4000 2000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 • Currency represented in current US$ MM • Remittance consistently 9-10% GDP from 2002-2009 • Sources: World Bank, IMF BoP Statistical yearbook, CIA World Factbook, GSO June 28, 2010 Copyright Pending. Not to be reprinted 6 without permission of author.
- 7. Thanh “Tino” Dinh | dinht10@alum.darden.edu Samoa Switzerland 1549.1 1693.1 Total 1988-2008 FDI by Australia Fed. Russian 1811.2 1935.4 Source Overseas Vietnamese-aggregate 2000.0 China, PR 2188.3 • Currency in US$ MM United Kingdom 2711.1 Netherlands 3018.8 • Aggregate amount per country France 3216.2 Cayman Islands 4352.2 during period 1988-2008 Canada 4892.4 United States 5029.0 • Recorded projects only Thailand 6121.6 • FDI from listed countries may Hong Kong SAR (China) 7416.7 British Virgin Islands 13824.1 overlap with OV investment (esp. Korea Rep. of 16666.3 Singapore 17071.0 USA, AST, CAN, FRA) Japan 17362.2 Malaysia 18005.6 • Source: GSO, 9/10/2010 Taiwan 20951.9 0.0 5000.0 10000.0 15000.0 20000.0 25000.0 Series1 June 28, 2010 Copyright Pending. Not to be reprinted 7 without permission of author.
- 8. Thanh “Tino” Dinh | dinht10@alum.darden.edu 2008 FDI: Licensed Projects by Activity Type Manufacturing Real estate, renting business activities Mining and quarrying Transport; storage and • Exterior circle: US$ 6 BB communications Hotels and restaurants in total registered capital Construction • Interior circle: 1171 Health and social work projects Agriculture and forestry Education and training Financial intermediation Other June 28, 2010 Copyright Pending. Not to be reprinted 8 without permission of author.
- 9. Thanh “Tino” Dinh | dinht10@alum.darden.edu Licensed FDI Projects by Province • Currency in US$ MM • Registered capital > US$ 1 BB • Source: GSO, 3/3/2010 June 28, 2010 Copyright Pending. Not to be reprinted 9 without permission of author.
- 10. Thanh “Tino” Dinh | dinht10@alum.darden.edu Characteristics of Viet-Kieu Enterprises • Geography: Concentration in South • Scale: Mostly small businesses • Sector: Focus on speculative real estate development, labor-intensive manufacturing, or back-office IT outsourcing • Business model: simple, cash-based businesses that offer tangible product or service June 28, 2010 Copyright Pending. Not to be reprinted 10 without permission of author.
- 11. Thanh “Tino” Dinh | dinht10@alum.darden.edu Trends for OV Investment June 28, 2010 Copyright Pending. Not to be reprinted 11 without permission of author.
- 12. Thanh “Tino” Dinh | dinht10@alum.darden.edu Challenges and Opportunities Root Cause Barrier to Investment Business Opportunity Policy Recommendation Apathy Cultural distance Acculturation Services Risk Legal Risk Information and Risk Hanoi: Clarify legal status and rights of OV Protection Services OVC: Establish internationally recognized, independent association for OV-owned businesses operating in Vietnam to represent collective interests Systemic corruption Information and Risk Hanoi: rights-based legal reform; consistent enforcement Protection Services Hanoi, OVC: Independent, critical media Bureaucracy Information and Hanoi: Streamline, consolidate, and automate Risk Protection administrative process across agencies for receiving Services business permits and licenses (e-government) Market Platforms Financial risk; market Market Platforms inefficiencies Financial Services Lack of OV Market Platforms OVC: Coordinating or cooperative mechanism for promotion Community Capacity Financial Services of economic development in OV community and Vietnam and Markets across public, commercial, and civil society spheres Establish independent research institute for OV-centered economic, social science research Principles Mistrust Educational Hanoi, OVC: Reconciliation process institutions and services June 28, 2010 Copyright Pending. Not to be reprinted 12 without permission of author.
- 13. Thanh “Tino” Dinh | dinht10@alum.darden.edu Recommendations • Systemic legal reform Vietnam must consistently enforce basic property rights. • Building capacity and platforms in OV community Little Saigon must find an efficient means of pooling and allocating its capital. • A path to reconciliation It is in the interests of Vietnamese everywhere to contribute responsibly to Vietnam’s long-term economic development. June 28, 2010 Copyright Pending. Not to be reprinted 13 without permission of author.
- 14. Thanh “Tino” Dinh | dinht10@alum.darden.edu Key References and Acknowledgments Not a comprehensive list (see full report), the following highlights key people, organizations, and sources of data that have been especially influential or helpful in completing this study Experts/Scholars Organizations Data Sources Mr. Ernie Bower, CSIS and American Chamber of Commerce-Vietnam 1992 Constitution of the SRV Brooks Bowers-Asia Mr. Don Danh, VSVN Ash Institute-Vietnam Program. Harvard JFK Asian Legal Information Institute School of Government Dr. David Dapice, Ash Institute National Vietnamese-American Chamber of Government Statistics Office of Vietnam (Harvard-JFK) Commerce (Viet AmCham) Prof. Le Xuan Khoa, SAIS (John US-Vietnam Trade Council IMF Balance of Payments Statistics Hopkins Univ) Yearbook 2008 Prof. Nam Binh Tran, Univ of Vietnamese-American NGO Network SRV Foreign Investment Agency NSW (Austr) (Ministry of Planning and Investment) Dr. Lan Pham, Univ of Minnesota Vietnam Chamber of Commerce and Industry US Census Bureau: American (SME Center) Community Survey 2007 Prof. Mark Sidel, Univ of Iowa Vietnam Strategic Ventures Network Vietnam National Administration of Tourism Mr. Ivan Small, Cornell Univ World Bank Development Indicators Mr. Markus Taussig, HBS Mr. Dat Trinh, Levlad, LLC June 28, 2010 Copyright Pending. Not to be reprinted 14 without permission of author.