Group 8. part a

ECONOMIC GROWTH AND DEVELOPMENT IN SEA

ECONOMIC INTERNATIONAL RELATIONSHIP AND DEVELOPMENT

Instructor: Msc. Nguyen Trong DacGroup 8: Do Thanh Vinh (Leader) Luong Thi Nhu Pham Anh Duong Nguyen Thi Hue

Content• Part 1: International Economics Relationship• Part 2: International Trade and Development• Part 3: International Finance and Development• Part 4: International Investment and

Development

Part I: International Economics Relationship

What is International Economics Relationship?

Economic international relationship is a field of international relations – the study of relationships among countries.It is both an academic and public policy field and can be either positive or normative as it both seeks to analyze as well as formulate the foreign policy of particular states.

A country often get IER with 5 main dimensions:

• Trade• Finance• Investment• Labor/ Human Capital• Science and Technology.

The reasons we have IER in the world?

• The differences in natural conditions between countries:

- Natural resources- The weather- … Ex: Vietnam


• The uneven development between countries about the economic, scientific and technical


• The development of economic lead inevitably to the international division of labor in order to improve the efficiency of using resource, economic growth


• The objective requirements of specialization between countries in order to achieve the optimal scale for each industry.

• The diversity of needs in each country

The roles of IER

For industrial development countries:• Expansion of economic power• Look for favorable investment (higher margins, take advantage of the country get investment)

The roles of IER

For developing countries:• Absorbing capital, advanced science and

technology for industrialization, modernization of the economy

• Efficient exploitation of resources, job creation, economic growth

• Promote the production of goods on a large scale, large-scale market expansion.

The roles of IER• Example: In some industries, such as:- garment industry- service industries- ancillary industries (industry support the

assembly of the final product by providing detailed parts and components products of other intermediate goods)

What do Vietnam gain? What do Japan, Taiwan gain?

External economic strategy of developing countries and least-developed countries

• Closed economy Strategy

• Opened economy Strategy

04/07/2023

Closed economy strategy• Economic development towards self-sufficiency• Only export the excess product after meet

domestic consumer demand• Only receive international investment in

commodity production "import substitution".

04/07/2023

04/07/2023

Closed economy strategy

Advantages:• - The speed of economic growth is slow but

steady• - Take less negative impact of the world

economy: crisis, recession ...• - Potential of the country in a certain extent is

exploited maximum.• - Economic independence => politically

independent.

Closed economy strategy

Disadvantages:• Contrary to the objective laws and trends of the

times.• Limited ability to acquire capital, advanced

scientific and technical => low labor productivity => country is lag

• Often have to borrow to meet domestic demand

04/07/2023

Closed economy strategy• Buying small domestic market, limited

production scale => unemployment• Domestic market have a small buying ability,

less abundant• Imported materials to produce => rising costs,

inefficient production

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Opened economy Strategy• Expanding economic relations, focusing on

foreign trade, priority export.• Create an open environment to attract

international investment, especially FDI.

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Opened economy StrategyAdvantages:• High economic growth• Exports go up => more foreign currency =>

import more advanced machinery and equipment => industrial modernization.

• Expand production scale, market => attract workers

• Promote domestic technological innovation to improve competitiveness.

04/07/2023

Opened economy Strategy

Disadvantages:• The speed of economic growth is precarious,

unstable• The domestic economy is dependent on: + capital + technology + markets (input, output)• Economic dependence may depend on political• Economy develop unbalanced, one-sided.-

International labor/ International human capital

• International movement of labor in the form of labor export and labor import.

• The labors who move to other country to get a job form of labor export often work in factory or as a home-making, care for children and the old people.

International Science and Technology

The form includes the coordination between countries to proceed:

• Research• Patent• Design• Test• Exchange of research results• Information of science and technology• Application of new scientific and technological

achievements into practical production

Part II: International Trade

Content

• The definition of International Trade in economic• The relationship between international trade and

economic growth - development• Advantage and dis-advantage of international trade• Benefit and risk of international trade• Trade barrier• The world trade organization• International trade in Viet Nam

What is International Trade?

• International trade (also known as foreign trade) is the exchange of goods and services between countries.

• International trade is most commonly recognized in the exchange of goods or products.

• Trading globally gives countries the opportunity to be exposed to goods and services not available in their own countries

Why trade?

International trade

Makes domestic market more

contestable

Transfer good idea

Attract new capital investment

and innovation

Import new

technology

International trade and economic growth

• International trade contributes to the growth of a country’s economy in several ways:

+ Import+ Export+ Specialization

raises GDPInternational trade increased productivity improved infrastructure

Import - Export• A product that is bought from the global market is an

import• A product that is sold to the global market is an export

When a country should export or import

Specialization• How does specialization encourage trade between

countries?• When a country is good at making their product they

specialize in it, improve the product to make more money. If another country doesn't have that but specializes in something the other one needs then they will trade. This is why specialization encourages trade.

International trade and development

• International trade allows developing nations to acquire capital from abroad in return for either natural resources or cheap labor

• This foreign capital can then be invested in local industry, agriculture, infrastructure, and social improvements.

Two aspects of international trade

Advantages• A country may import

things which it cannot produce

• Maximum utilization of resources

• Benefit to consumer• Reduces trade

fluctuations• Utilization of Surplus

produces• Fosters International

trade

Disadvantages•Import of harmful goods•It may exhaust resources•Over Specialization•Danger of Starvation•One country may gain at the expensive of another•It may lead to war

Benefits of international trade• Enhances the domestic competitiveness• Takes advantage of international trade technology• Increase sales and profits• Extend sales potential of the existing products• Maintain cost competitiveness in your domestic market• Enhance potential for expansion of your business• Gains a global market share• Reduce dependence on existing markets• Stabilize seasonal market fluctuations• Closer ties between nations

Risk in international trade

Economic risk• Risk of concession in

economic control• Risk of insolvency of the

buyer• Risk of non-acceptance• Risk of Exchange rate

Political risk• Risk of non- renewal of

import and exports licenses

• Risks due to war• Risk of the imposition of

an import ban after the delivery of the goods

• Surrendering of political sovereignty

Risk in international tradeBuyer country risks

• Changes in the policies of the government

• Exchange control regulations

• Lack of foreign currency• Trade embargoes• Commercial risk• A bank's lack of ability to

honor its responsibilities

Other risks• Cultural differences• Lack of knowledge of

overseas markets• Language barriers• Effects of unpredictable

business environment and fluctuating exchange rates

• Sovereign risk • Natural risk

Trade barrier

The most common sorts of trade barriers are:

• Subsidies• Tariffs• Quotas• Embargoes

Subsidies

• Subsidies are often placed to protect domestic industries• In Vietnam, the items are often heavily subsidized by

the government that is fuel (gas, petrol,..) electric, construction material (steel…)• Subsidies can stabilize the price of a goods at a reasonable level and it makes imports non-competitive

Economic effects of subsidies

Tariffs• A tariff is a tax. It adds to the cost of imported goods and

is one of several trade policies that a country can enact• Tariffs were a large source of government revenue

Economic effects of tariffs

Quotas• Import quotas: Puts limits on the quantity of certain

products that can be legally imported into a particular country during a particular time frame

• Governments generally set import quotas by selling licenses to specific importers, allowing them to import a specified quantity.

Embargoes• Embargoes are a government order which completely

prohibits trade with another country.• The embargo is the harshest type of trade barrier and is

usually enacted for political purposes to hurt a country economically and thus undermine the political leaders in charge

• Example: Korea embargoed by the United Nations. Because of the country's threats of nuclear weapons

Free trade• Free trade is a system in which goods, capital, and labor

flow freely between nations, without barriers which could hinder the trade process.

• A number of barriers to trade are struck down in a free trade agreement. Such as: Taxes, tariffs, and import quotas…

• It will lower prices for goods and services by promoting competition.• Free trade can also foster international cooperation, by encouraging nations to freely exchange goods and citizens.

Fair trade• Fair Trade is a trading partnership, based on dialogue,

transparency and respect • Fair Trade contributed to sustainable development• Fair Trade organizations have a clear commitment to

Fair Trade as the principal core of their mission• Fair Trade is more than just trading: it proves that greater

justice in world trade is possible

The different between free trade and fair trade

+ Labor and human rightFree trade: not include minimum safety, human rights and wage standardsFair trade: insisting on reasonable compensation for workers and reasonable safety, health and human standards of workers.+ FinancingFree trade is financed on a cash-on-delivery basisFair trade is able to extend credit that can provide income during lean periods.+ MarketingFree trade products are marketed in a way that maximizes sales and profits.Fair trade marketing, while seeking profit and sales, focuses on educating the consumer.

General Agreement on Tariffs and Trade

• The General Agreement on Tariffs and Trade (GATT) was established in 1948.

• Adopted by 23 countries, including the United States• GATT's main objective was to reduce the barriers of

international trade through the reduction of tariffs, quotas and subsidies.

• Encouraging of fair competition on the basis of mutual compromise.• Ensuring of predictable and transparent trade policy of each parties.

The World Trade Organization • WTO is successor of the General Agreement on Tariffs

and Trade (GATT) signed in Geneva in 1947• WTO has 156 members (22/08/2012) and Vietnam is the

150th member.• Includes services and trade-related aspects of

intellectual property, such as books, movies, and computer programs• In WTO, average tariffs will fall from 6% to 4%• Includes a dispute settlement body that should be faster,

more automatic, and less susceptible to blockage than GATT

The differences between GATT and WTO

• GATT dealt with trade in goods. WTO covers services and intellectual property as well.

• WTO dispute settlement is faster, more automatic than GATT’s. Its rulings cannot be blocked.

• WTO reach into domestic areas that were previously immune from external pressures.

• GATT agreements temporary, WTO agreements are permanent; the agreements themselves describe how the WTO is to function.

International trade in Viet Nam• Country Strong PointsThe country's strong points are:- Positive economic prospects in terms of growth, despite the global crisis;- A young, cheap, rapidly growing and more and more technologically qualified manpower;- A certain social-political stability;- A government committed to liberalizing the economy and to introducing reforms based on the free market.

International trade in Viet Nam• Country Weak PointsThe country's weak points are:- Weak investment and financial freedom;- The lack of guarantees for property rights;- A high level of corruption (in the legal system, as well as for civil service).

How to develop international trade in Vietnam

Export:• Focus on key export commodities such as agricultural

products, aquatic products ...• Innovate management policies for export activitiesImport:• Address effectively the relationship among import-

production-export• Innovate management policies for import activities• Governments need to make rational policies consistent

with local market

Part III: International finance

1. Definition International finance

The emergence and existence of international financial relations is an inevitable financial categories, derived from the basis of the following objective: Economy: the role of decision for the generation and

development of the international financial system.

Politics: a direct impact on the form and extent of international financial relations.

1. Definition International finance

On a macro-economic perspective:- Exchange rate.- International balance of payments.- Monetary system, international finance.- Foreign debt and foreign debt management.

A market perspective (micro economics):- Assessment and Risk Management International.- International financial markets.- International investment directly and indirectly.

Two big problem of SEA now that foreign aid and international debt”.

1.1 Foreign aid:- Definition: is consists of financial flows, technical assistance, and commodities given by the residents of one country, either as grants or as subsidized loans. Aid can be given or received by governments, charities, foundations, businesses, or individuals.

1.1 Foreign aid:

• Not all transfers from wealthy countries to poor countries are considered to be foreign aid.

• According to the DAC, to be counted as foreign aid the assistance must meet two criteria:

1. It must be designed to promote economic development and welfare as its main objective.

2. It must be provided as either a grant or a subsidized loan.

1.1 Foreign aid:• The DAC group aid flows into three broad categories:

1. ODA is the largest, consisting of aid provided by donor governments to low- and middle-income countries.

2. OA is aid provided by governments to richer countries with per capita incomes higher than approximately $9,0005 and countries that were formerly part of the Soviet Union or its satellites.

3. Private voluntary assistance includes grants from nongovernment organizations, religious groups, charities, foundations, and private companies.

1.1.1 Reality of foreign aid in the world

World Top Ten Foreign Aid Donor Countries

Country In Billion DollarsUnited States 12.9

Japan 9.2

Germany 5.4

France 5.2

United Kingdom 4.8

Netherlands 3.4

Italy 2.3

Canada 2.0

Sweden 1.8

Norway 1.8


0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

Net official development assistance (ODA) in 2006

United States

Germany

United Kingdom

Japan

Netherlands

Italy

Luxembourg

Mill

ions

of U

S do

llars


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0.16

0.280.36

0.19

0.74

0.15

0.85

United States

Germany

United Kingdom

Japan

Netherlands

Italy

Luxembourg

Net ODA in 2006 as a Percentage of Donor GDP

% o

f GD

P


Þ However, when aid is measured as a share of the donor’s income. The most generous donors from this perspective are Norway, Luxembourg, Denmark. Sweden, and the Netherlands, each of which provided between 0.74 and 0.87 percent of GDP in ODA. The United States is one of the smallest donors by t his measure, with ODA equivalent to about 0.16% of U.S income.

Þ Although U.S ODA levels as a share of income are small compared with the other countries.

1.2 The relationship among aid, growth and development:

1.2.1 Aid Has a Positive Impact on Economic Growth and Development:- Promoting health, education, and the

environment.

- Providing emergency assistance and humanitarian relief.

- Supporting economic and political stability.


Aid, saving, and tax revenue:• Not all aid is provided as investment goods or even

aimed at increasing investment and growth.

• Even where aid is aimed directly at investment, the impact could be partially offset by a reduction in either private saving or government saving.


Aid Has a Conditional Relationship with Growth, Stimulating Growth Only under Certain Circumstances, Such as in Countries with Good Policies or Institutions:• Characteristics of the recipient country.

• Donors practices.

Type of aid1) Emergency and humanitarian aid, likely to be

negatively associated with growth, since it increases sharply at the same time growth falls because of an economic shock.

2) Aid that might affect growth only after a long period of time, if at all, and so a growth impact may be difficult to detect, such as aid for health, education, the environment, and to support democracy.

3) Aid directly aimed at affecting growth (building roads, ports, and electricity generators, or supporting agriculture).

1.3 Solutions to improve the effectiveness of aid:

• Country selectivity• Recipient participation.• Results-based management:

There are three basic objectives:1) Results-based management can help donors

allocate funds toward program that are working.2) Ongoing reviews can detect problems at an early

stage and help modify and strengthen existing programs.

3) Donors and recipient can better learn what approaches have worked and what have not.

1.4 Foreign aid to Viet Nam• The World Bank’s assistance program of foreign aid to

Vietnam has three objectives: – to support Vietnam’s transition to a market economy,

to enhance equitable and sustainable development, and to promote good governance.

– From 1993 through 2004, Vietnam received pledges of US$29 billion of Official Development Assistance (ODA), of which about US$14 billion, or 49 percent, has been disbursed. In 2004 international donors pledged ODA of US$2.25 billion, of which US$1.65 billion was disbursed.

1.4 Foreign aid to Viet NamAfter 16 public meetings held CG, Vietnam has 51 donors, including 28 bilateral donors and 23 multilateral donors have regular ODA programs.• A large number of bilateral donors, such as: Australia,

Germany, Korea, USA, Japan, France, Singapore, Switzerland, China, United Kingdom, ...

• World Bank Group (WB)• International Monetary Fund (IMF)• the Asian Development Bank (ADB)• European Commission (EC)• European Union (EU)

1.4 Foreign aid to Viet NamThe organizations of the UN system, including:• UN Population Fund (UNFPA)• Program of the United Nations Industrial Development

(UNIDO)• United Nations Development Program (UNDP)• United Nations Children's Fund (UNICEF)• International Fund for Agricultural Development (IFAD)• Food and Agriculture Organization (FAO)• World Health Organization (WHO).• The international non-governmental organizations in

Vietnam (NGO)

1.4 Foreign aid to Viet NamThe use of ODA priorities for works and projects in the following areas: • Agriculture and rural development (agriculture, irrigation,

forestry, fisheries) in combination with poverty reduction. • Develop economic infrastructure towards modernization.• Development of social infrastructure (health, education,

population…)• Protection of the environment and natural resources

management. • Strengthening institutional capacity, management,

technical and human resource development; technology transfer, capacity building and research development.

1.4 Foreign aid to Viet Nam

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

1

2

3

4

5

6

7

8

9

1.81 1.942.26 2.43 2.4

2.77 2.85

2.42.2

2.52.84

3.443.7

4.4

5.45

5.9

8 7.9

Bill

ion

USD

Situation ODA commitment period 1993 - 2011

2. Foreign debt2.1. Overview of foreign debt:Foreign debt is an outstanding loan that one country owes to another country or institutions within that country. Foreign debt also includes due payments to international organizations such as the International Monetary Fund (IMF). The debt may be comprised of fees for goods and services or outstanding credit due to a negative balance of trade. Total foreign debt can be a combination of short-term and long-term liabilities.

2. Foreign debt2.1.1 Debt flows to developing countries:2.1.2. Debt sustainability indicators:

1. Debt/GDP.2. Debt/exports (and NPV debt/exports).3. Debt/revenue (or NPV debt/revenue).4. Debt service/exports .5. Debt service/revenue.6. Short-term foreign debt/foreign

2. Foreign debt

2.2. Advantages and disadvantages

2.2.1 Advantages1. From a national perspective, borrowing permits a country to

invest more than it can save and import more than it can export. If the additional funds finance productive investment, they should yield sufficient returns to pay the interest and principal on the initial foreign inflows. Since capital is relatively scarce in low-income countries, these countries have the potential to realize higher rates of return on investment and more rapid economic growth than richer countries, providing the foundation for lending from rich to low-income countries.

2. When a domestic firm borrows abroad, there are no controversies over foreign ownership, profit repatriation, tax holidays, and the like that arise with foreign direct investment (FDI). In addition, foreign borrowing can be undertaken much more quickly and easily than FDI.

2.2.2 DisadvantagesBesides the undeniable advantages, foreign debt has some downsides as well:1. The debts must be paid even when a project goes bad. Too much

borrowing of the wrong kind or for the wrong purposes can leave developing countries vulnerable to sudden capital withdraws and financial crises.

2. Short-term debt, in particular, can very quickly switch from rapid inflow to rapid outflow, which can cause sudden plunges in exchange rates and skyrocketing interest rates and wreak havoc on banks, private companies, and government budgets.

3. Borrowing too much to finance consumption or poorly conceived investment also can lead to trouble. Borrowing is much easier politically than raising taxes to pay for spending, especially if governments do not think they will still be in office when it is time to repay.

2. Foreign debt2.3. Debt crisis in low-income countriesLow-income countries were hit by the same set of strong international economic shocks: high oil import prices, low commodity prices, the end of the gold standard, and weak market demand in the industrialized countries.=> Governments kept budget deficits high, erected significant barriers to trade, distorted market prices, and failed to provide basic infrastructure and health and education services.

2. Foreign debt2.4 How to escape from the crisis:1. Refinancing: involving making new loans to repay the

old.2. Rescheduling.3. Reduction: in which the amount actually owed is

reduced (i.e., forgiven), either partly (a write-down) or completely (a wirte-off).

4. Buybacks.5. Debt-equity swaps: in which creditors are given equity

in a company

2. Foreign debt2.5 Lessons from the crises:-These crises suggest that governments should proceed carefully in liberalizing domestic financial transactions and ensuring parallel development of the requisite regulatory institutions.-The crises indicate that fixed rates create vulnerability to a panic and ultimately lead to huge economic adjustments when the exchange rate no longer can be defended.- In terms of foreign capital inflows, there are clear differences between FDI and other long-term capital and short-term capital. Long-term capital flows are much less prone to panic and more strongly associated with long-term investment and growth => governments should be much more careful about, and at times possibly even discourage, short-term flows

2.6 Foreign debt in Viet NamOrder Indicators Counted to 12/31/2003

1 Total national debt (Billion USD)- Government debt

- Business debt

13.251

10.1203.231

2 Total debt/GDP 32%

3 Total debt/Export 5.8%

Foreign debt of Vietnam counted in 12/31/2003 Source: Ministry of Finance

2.6 Foreign debt in Viet Nam

Order Indicators HIPC (%) Vietnam (%)

1 Net present value of debt/Export 150 36

2 Net present value of debt/Budget revenue (minus foreign aid)

250 95

3 Repayment/Export 15 2

4 Repayment/Budget revenue (minus foreign aid)

10 6

The indicators to evaluate debt level of Vietnam (2005)

2.6 Foreign debt in Viet Nam• According to the Ministry of Finance, the country's

foreign debt by the end of 31/12/2009 39% of GDP and the highest level since 2005. However, if based on the level of foreign exchange reserves, the total outstanding debt of Vietnam is still in a safe threshold. Foreign exchange reserves to total short-term foreign debt of the Philippines is 290%, while the recommendations of the World Bank is more than 200%. Debt obligations of the Government of the total state budget of Vietnam is 5.1%, the safety threshold of WB is less than 35%.

Part IV: International investment and development

The basics of international investment

1. Definition International investment is a process in which the

movement of capital from one country to another country to make the investment projects to bring benefits to the participating countries

Characteristics

• International Investment is a necessity factor for each country

• International Investment leads to the positive and negative impacts for the investor and the investee.

• International investment in each group of countries is differ in size, structure, and policies

• They carry the characteristics of investment in general: - high profitable - high risky

The role and impact1. For the investorsPositive Impacts:• Improving the efficient use of capital.• Building a stable market for supply of raw materials.• Expanding economic strength, improve reputation in the

international market.• Reducing risks, changes in economic structure towards

efficiency.

The role and impact

Negative impact:• Investors may face greater risks.• Leads to reduce employment in the host country.• May be loss of the copyright in the process of technology

transfer.• Investors don’t want to do business in their country that

wants to do business in foreign countries.

The role and impact

2. For the investeesPositive impacts:

For the group of developed countries:• Solving difficult problems of social and economic.• Creating new jobs, increase revenue in the form of taxes.• Creating a competitive environment to promote the

development of economy and trade.• Learning more advanced management experience of other

countries

The role and impact For the least developed countries and developing

countries:• Help speed up the development of the economy.• Attracting more workers, create jobs, solve

unemployment.• Contributing to the improvement of the competitive

environment.• Contributing to reception of science and technology

from other countries.

The role and impact

Negative impact:• Leading to exploitation of natural resources excessively.• Caused differentiation, increasing the development gap in

regions and countries.• Increasing the problem of social evils and diseases.• Be affected or dependent on the demand from the

investors.

Cause of formation and development

• Due to the imbalance of the factors of production between countries

• Due to meet interests of the parties involved For the investors For the investees• And in other case.

Forms of International Investment

1. Foreign Direct Investment (FDI): Definition: FDI is a long-term investment activities in which the

investor directly manage and controll using capital activities. This is the capital flow high stability, long time investment, managed by the investor directly.


2. Indirect Investment: Definition: It is the type of movement of capital between countries, in

which the owner does not directly manage and controll using capital activities. It depends on the level of management and organization management of the investee. Investment efficiency is not high.


3. International trade credit: Definition: It is a form of international investment through the form

of lending and borrowing with interest rate market between two countries.


4. The official development assistance (ODA): Definition: ODA is developing cooperation between the government

of a country with foreign governments, intergovernmental organizations or transnational..

The areas of investment

60 years before, international investment mainly focus on the traditional sectors: mining of natural resources, agricultural development by investing in plantations and agricultural product processing.

• Since 70 years, the field of investment has changed: Reducing investment in the sectors of infrastructure and farm economy Investing in oil and gas, and some minerals such as uranium, titanium, platinum, ... Investing in the manufacturing industry, service, finance, banking, insurance, tourism, transportation, telecommunications...

The risks in International Investment

• Changes in currency exchange rates• Dramatic changes in market value• Political, economic and social events• Lack of liquidity• Less information• Reliance on foreign legal remedies.

FDI in the world• FDI inflows in the world tend to move from

industrialized countries to the emerging markets such as Asia and South East Europe.

• FDI growth in the developing economies: Latin America and the Caribbean with 34.6 percent

growth in 2011 compared to 21.1% in 2010. Southeast Europe increased 30.6% in 2011 from 0.8% in

2010. The Asia Pacific region, the Southeast Asia's FDI

increase 16%.

FDI Inflows in the World ($ billions)

Source: UNCTAD database

http://www.ibimapublishing.com/journals/JFSR/2011/961946/fig%201.jpg

FDI in the world

Why Asia Pacific is the most attractive FDI region in the world?

Why Asia Pacific is the most attractive FDI region in the world?• It is not only the most populous area in the world but also

one of the areas most vibrant economy.• It is the most dynamically developing areas of the world

with many economic organization : APEC, ASIAN...• Asia Pacific accounted for nearly half of global trade

value and accounts for 60% of total U.S. exports value.

Why Asia Pacific is the most attractive FDI region in the world?• Although the economic growth of the Asia Pacific region

slowed significantly in 2012 due to a number of factors impact on the regional economy, especially the debt crisis in Europe. However, Asia Pacific is still the region with the fastest growth rate of the world.

• China is the second largest economy in the world and foreign currency reserves up to $ 3.2 billion, it is actually prospective investors to make solutions for the debt problem in Europe.

• With the ability to export and domestic demand, countries such as China, India and ASEAN ... will continue to develop economic.

FDI inflows by host regions in Asia (millions of dollars)

Region 1996 1997 1998 1999 2000 2001

1 Asia 93,311 105,828 96,109 102,779 133,707 102,066

2 West Asia 2,898 5,645 6,705 324 688 4,133

3 Central Asia 2,590 3,844 3,152 2,466 1,895 3,569

4 South, East and South- East Asia

87,843 96,338 86,252 99,990 131,123 94,365

Percentage of FDI flows Received by different Regions

1 Asia 100.00 100.00 100.00 100.00 100.00 100.00

2 West Asia 3.11 5.33 6.98 0.32 0.51 4.05

3 Central Asia 2.78 3.63 3.28 2.40 1.42 3.50

4 South, East and South- East Asia

94.12 91.03 89.74 97.29 98.07 92.45

Source: World Investment Report 2002

Foreign Direct Investment in Vietnam

FDI Registered and Implemented Capital

1994 1995 1996 1997 1998 1999 2000 20010

100020003000400050006000700080009000

10000

4071

5516

9212

55484827

19052400 2431

1515

2652 23712950

1900 2156 2150 2300

Registered capital implemented capital

Top ten FDI Countries and Territories as of 2 July 2002

Countries and territories Number of projects Capital ( $ billion)

Singapore 254 6.90

Taiwan 832 5.30

Japan 339 4.12

South Korea 403 3.46

Hong Kong 234 2.82

France 117 2.04

B.V.Islands 144 1.76

Netherlands 42 1.65

Russia 41 1.51

UK 40 1.17

Number of projects by sector as of 2 July 2002

Heavy industry28%

Oil and gas1%Light industry

25%

Food industry5%

Agriculture and 11%

Hotel and 4%

Service6%

Others20%

Conclusion• Economics and international relations are intimately

intertwined.• The development of a country depends on so many

factors, not just economic but also natural, social or political factors.

• The link among international trade, finance and investment is extremely close and strongly impact to the growth and further, the development of a country. It is important to note that the government policies have a strange power to change the operation of economy.