Phuong.tranthanh@ftu.edu.

vn

Websites for references

www.unctad.org : World investment report
www.oeed.org : The richest countries in the world joined
www.imf.org
www.worldbank.org
www.fia.mpi.gov.vn : Foreign investment agency - Cục đầu tư nc ngoài
World Investment Report (downloadable from unctad.org)

Chap 1. 2. 3 is the most important

Chapter 1: International Investment Overview

1. The concepts
1. What is Investment?
Input: Current resources (Captial)
 Financial assets
 Real assets
Output: Fureture benefit > spend
 Financial benefits
 Social benefits

Investment in the economy view point:

Investment in economy is when you spend money in goods that deliver new
material/production to society.
VD: buy products in building. A ship to deliver goods around country

QUES: When I undertake project to invest in another country

=> What kind of investors are we: Private investors

QUES: Government: Public sector

=> What is the biggest benefit gov want to achieve: social relationship

QUES: What Investment project generate only social benefits but no financial?
=> Non profits, Trường học miễn phí, cầu nhật tân
What Investment project generate both social benefits and financial?
=> airport, FDI (Samsung),
=> Normally, all Project mà có financial sẽ có social benefits
What Investment project generate only financial benefits but no social benefits?
=> Factory that product lead to pollution/worker abuse

2. Characteristics of Investment? (3)

 Capital
 Profitability
  Risk
Unsystematic risk – Diversifiable risk: Risk that affact only some spcecific company/asset
VD:
Systematic risk – Undiversifiable risk (Market) : Affect all the company
VD:Financial crisis, covid 19, wars, natural disaster

QUES: Products that took advantage of covid19?

=> Zoom, masks

Effective use of capital

Use ROI: Return of investment on 1 project
= Net profit/investment x100%
=> The higher the better

QUES: Objective of project when spend on capital?

Expect money.
=> However when a project spent by a country, the country has many objectives beside money
VD.1: Good social welfare, very hard to measure effective use of capital to achieve =>
Skip vc tính toán
=> Với đối tượng là rich people, country focus on money profits => Easy to measure => Cta
sẽ đo lường yto money

Các chỉ số:

GDP: Gross domestic product - to measure rich level of a country
GNP: Gross national product, refer to nationality
GNI: Gross national Income – measure rich level of each citizens
=> GNP similar to GNI but from different perspective

VD về rich level: in this case, it is a good investment?

I (Investnent) GDP
2022 $10B $200
2021 $1903
=> Must have the GDP info from previous years

VD: spend 100M VND to study IELTS to get 8.5 IELTS.

=> It is not a good investment if you expect 9.0

3. A country ICOR (Incremental Captial Output Ratio)

= Total Investment/Delta GDP

Delta GDP = GDPt – GDP t-1

*No unit – không có đơn vị vì là money/money

Các trường hợp của ICOR:

 ICOR = 0 (=) I=0 (=) Investment = Divestment (Thoái vốn)
Tuy nhiên, ở trên tte trường hợp này rất khó xra
 ICOR <0
(=) I<0; Delta GDP > 0 => K thể xra
OR I>0; Dleta GDP < 0
=> I>0; Dleta GDP < 0. Đây là thop có thể xảy ra => Country is in a recession
 ICOR = infinity (=) Delta GDP = 0
=> This is very ineffective. Raise money but no different in GDP

ICOR:
 Public: Less effective. Money put in does not directly come into the project but is direct
some where else
 Private: Put money into project to sell product to earn money
=> ICOR from private sector is lower

VD: ICOR of Vietnam high or low?

=> High
VD: Cái bảng ở ảnh
=> VN have highest ICOR => Come into somewhere else but not to generate GDP (corruption,
covid)

=> LOWER ICOR = MORE EFFECTIVE USE OF CAPITAL

=> EXCEPT in developing country that is making investment in infrastructure => It make the
total investment very high but take very long time to affect the GDP.

PROBLEM 1: Có thể xhien ở bài thi

For a country in 2010, ICOR has a value of 5, GDP per capital is 1000 USD/year with the
population of 85 million people.
(a) The growth rate of this country is 6% in comparison to the previous year. How much
is the total investment of that country? $24.056B
GIẢI:
ICOR = I/Delta GDP
GDP2010= 1000x85=85,000
GDP2010 − GDP2009
=> 6%= => GDP2009= 80189
GDP2009
=> Delta GDP = 85,000 – 80,189 =4811.32
=> 5=I/4811.32 => I = 24,056

(b) If the expected annual growth rate is 6% for the period from 2010 to 2015. How much
is the total investment for that country in that period? $143.764B
GIẢI:
ICOR = Total Investment/Delta GDP
GDP Delta GDP
2011 90,100 5100
2012 95,506 5406
 2013 101,236 5730
2014 107,310 6074
2015 113,749 6439
I = 5x DeltaGDP2011->2015
KHÔNG HIỂU

4. International Investment concept

Definition:
Capital: Different
Future benefits: The same with investment
Expectation: The same with investment

=> Capital: Movement of capital outside the border of the country

Foreign investment vs International investment

Higher intuition fee
Because international not very deep but foreign is deeper
=> The movement of captial outside border of country: The viewpoint is different

Viewpoint: Stand in 1 country - Viewpoint: from Far from one country

- Give bigger picture

The same contents but only with diffrent viewpoint

Capital movement across a certain nation’s border

Capital movement across nations’ border

A-> B: Outward flow

B -> A: Inward

In theory: 2 flows must be equal.

However, in reality, different country

Home country – Host country

Investing country Receiving investment
1.2. INTERNATIONAL INVESTMENT CLASSIFICATION

OOFS : Other official flow but dont meet requirment of ODA, OA

In the offical flow, ODA is most popular

In private: FDI most popular
3rd rank: FPI

1.3. INTERNATIONAL INVESTMENT THEORIES

*Perfect market explain: Many buyer, seller and the price is the same everywhere
VD: selling fish-meat, pork, tra da in market

Theories assuming perfect markets:

The differential rates of return hypothesis
The portfolio diversification hypothesis
The market size hypothesis

Theories assuming imperfect markets:

The industrial organization hypothesis
The internalization hypothesis
The location hypothesis
The eclectic theory
 The oligopolistic reactions hypothesis
The product life cycle hypothesis
Developed in 1960s when all inventions are from developed country
4 stages in PLC:
Introduction Growth Maturity Decline
> Product is launched > Product is more > Product > Product sales fall
and only served complete, standardized, well-
domestic market competitors emerge known all around the
in both foreign world
(Neighbour) and > High demand
domestic market > Many competitors
> FDI appears

- High price => Price - Increasing demand - Reduce labor cost,

inelastic from neighbour resource price by
- Theres only 1 country (high income moving to developing
manufacturer – becuz neighbour of country with cheap
- All local demands developed) labor
are satisfied - Delete the transport
cost (Instead
delivering product
from home country,
directly produce at
the neighbour
country)

DISADVANTAGES of The PLC theory: (2)

- New product can be from any country
- The product don’t need to follow this flow but could be from many country at the same time
=> It not accurate to today context
=> Not the optimal theory to explain why do we need to invest Internationally
 1. OLI Paradigm – John Dunning’s Theory

Ownership-specific advantages (O) -

VD về specific advantage: Đồ bán ra cao hơn so với bình thường => Cần phải có better
technology/brand name/managerial expertise… => Đây là specific advantage

QUES: Which firm undertake FDI?

Firm with specific advantage
VD: SamSung – specific advantage of Brandname

Easiest way to export to international:

- Export 1 VND =>3 US

Internationalization Advantages (l)

Có các imperfect factors: (2 loại)

1. Nautural:
VD: Labour facotrs – Population, birth rate, death rate…
Material: The abundancy of the natural resources
2. Reulatory
VD: Labour facotrs - Retirement age, National minum wage…
Material - Exploitation regulataion, taxation

Location Advantages (L)

Internalization Advantages (I)

THIẾU NOTES 25/1

BMC – Business model Canvas: Thiết kế mô hình KD

Investment project: Must be International
Vdu: A vietnamese invest in another

2 docutments to submit – startups use to call for funds:

BMC - Sẽ appear in final test
Business Plan (Cô gửi template)

QUES: How do you build up 1 block in the 9 blocks in BMC:

List ALL the STEPS needed to get the information
DONT: Just Fill information in that block

VD: How do you build up the Customor segment block:

- Do survey, research……

*Remember the name + position of each block

* Khi thi phải vẽ cả hình vào - Way to memorize the 9 blocks:
Magazine hoa học trò: HHT

1. Value proposition: Focus on customers’ very SERIOUS PAIN because only serious pain
can get the money
a. How to find pain: Build the customers’ profile – gender, age, job, income,
behavior
2. Customer relationship: How to get customer comes – Customer service (VD: Haidilao,
3. Channels (Deliver values to customers):
2 types of channels (Onl-Off/Direct-Indirect).
VD: vể indirect – direct channels
When buy cakes in bakery => Direct
When buy milk that cows produce => Indirect because it shipped from person to person
=> When consider indirect channels, need to consider how many intermediaries.
4. Revenue stream: Divide the revenue, list all the streams from customers, focus on highest
proportion,
Revenue: Price x Quantity
Eg: Apple: Sale, subscription fee
a. Estimate number of revenue closest to reality:
a. Thợp 1: Business did exist => Based on statistics on past to calculate
for the future. The most common ways: Calculate the most recent 3
moths
b. Thợp 2: Start ups have no past records=> Calculate based on secondary
datas, market research
=> How to do secondary datas economically: Actively find datas
Do survey
 VD: Bakery finding datas => make survey => Come to love bakery
groups
b. Estimate the quantity:
a. Cách 1: Calculate thủ công bằng cách đếm số khách của đối thủ
VD: Tsua trên chùa láng => Calculate thủ công bằng cách đếm số khách của đối
thủ
b. Cách 2: Assess based on datas…
c. Estimate the price: Based on competitors price, production cost, labor cost
5. Cost structure: Based on the things that made up the product – Key resources cost
=> How to calculate the total labor cost (One of key resources cost)
=> Build organizational structure => Look at each department => Search each position +
Salary
6. Key activities: Each company is different
VD: Productions, distributiion

QUES: Why the model begin/conduct from the right

- The right part of BMC to see if the business will be profitable, worthy

31/1

Repayment methods
- Equal principal payment, Annuity: repayment with fixed total annual amortization amount
- Lump sum principal: the entire principal or nominal amount is paid on the last repayment date
while the interest is paid throughout the repayment period)
- Lump sum principal & interest: both principal and the interest are paid on the last repayment
date)
- Lump sum principal & compounded interest: both principal and interest are paid on the last
repayment date, however the interest is capitalized over the repayment period

Annutity = Every year

QUES: Which one has the highest level of assistance = you can delay the time to repay for
longest?
Thứ tự từ lớn:
1/ Lump sum ncipal & interest vì interest nó cao hơn cái Lump sum principal & compound
interest
2/ Lump sum principal & compound interest
3/ Lump sum principal: Được chờ đến last date to pay

Grace period: Thời gian chỉ cần trả interest

EXERCISE: 2 Points
PA: Per annum/every year
+ A loan of 1000 units is committed and disbursed on 1 January 2001. Its duration is 10 years,
and the interest rate is 2.5% p.a.
+ Repayment option is Lump sum repayment (principal & interest); Discount rate: 10%
1. Calculate the grant element of this loan? 51,8
2. If repayment option is equal principal payment by six-monthly repayments commencing
on 1 July 2003. it is assumed that interest only is paid six-monthly from a January 2001 to 3o
June 2003 GE? 32.4%
3. If repayment option is annuities: equal six-monthly repayments (principal and interest
combined) and the first principal repayment of 56.8 units, commencing on 1 July 2003. It is
assumed that interest only is paid six-monthly from 1 January 2001 to 30 June 2003. Calculate
GE?

Discount all FV into PV

1. grant element= [PV(loans) – PV(payments)/ PV(loans)] x 100%

PV(loans)= 1000
Lump sum => Pay nothing in maturity, only have 1 FV = FV of loans + FV interest = 1000 +
1000x2.5%x10= 1250.
=> PV(Payment) = 1250/(1+10%)10

2. Every half of year => 1st of july start to pay

Date Period Princinpal Principal FV(payment) Discount PV

due outstanding interest Total Payment

0.5 =
1/(1+Discount
rate)^Period
1

Dùng period để discount into PV

Princinpal outstanding = Remaining value of priniciple

Meaning of GE: Assess if the flow is ODA – the level of assistance

28/2

2.6. Purpose
- From perspective of recipients
- From perspective of donors:
1. Moral and ethical reasons (VD: The rich must help the poor)
 2. Economic self interest
- Tight aid (Aid with condition)
VD: Canada help poop contries, would require conditions such as buy …% of there
goods)
VD: Japan help Vietnam with condition: must use Japan employees
- Untight aid (Aid without condition) -> good
3. Political
VD: US help Isreal to dominate the country
VD: France aid international students a lot to spread their language

What negative impact does ODA generate to recipient

- Money goes to the pocket of the wrong people

Reccomendation
- Follow up the ODA

What may happen if the ODA recipient cannot pay back the ODA
- Restructuring of Debt: Reduce interest rate, lengthen maturity
- Refinancing: Refinancing the debt -> Give them a new money to pay back the loan -> Later,
payback the new money
- Debt reduction: Reduce debt
- Debt default: Delete debt -> Low credit -> Later, cannot borrow money

2.7. 0.7% ODA/GNI Target

- 1970 UN Resolution urge advanced countries to provide 0.7% of their national income as ODA
Big or small number
=> Very easy to reach this number
However, only 5 countries reached this target

NOTE
- Pledge (A promise): a political announcement of intent on behalf of a donor to contribute a
certain amount to a certain area
- Commitment (A contract): a firm obligation, expressed in writing and backed by the necessary
funds, undertaken by an official donor to provide specified assistance to a recipient country or a
multilateral organization.
- Disbursement (Giải ngân): Actual payment or expenditure of funds, release of funds to or the
purchase of goods or services for a recipient; by extension, the amount thus spent (Real money
actually used in poor country)

DAC List of ODA Recipients

Vietnam belongs to the lower midđle income countries and territories group

DAC List of Aid Recipients. As at 1 January 2003

Consist of 2 parts
- Part 1: Developing countries and terriaries (Official development assistance)
- Part 2: Countries and territories in Transition (Official Aid
OA: Official aid

3.1. FDI Definition

+ IMF, OECD, UNCTAD:
Foreign direct investment (FDI) is defined as an investment involving a long-term relationship
and reflecting a lasting interest and control by a resident entity in one economy (foreign direct
investor or parent enterprise) in an enterprise resident in an economy other than that of the
foreign direct investor

- Direct investors/ Parent enterprise : individuals; incorporated or unincorporated private or

public enterprises; associated groups of individuals or enterprises; governments or government
agencies; or estates, trusts, or other organizations.
+ The lasting interest:
A long-term relationship
Control: …% of share

- Direct investment enterprise/ Affilate: in which a direct investor owns 10 percent or more of
the ordinary shares or voting power (Way to see if it is a direct investment)
(Voting power is applied in company issued shares)

QUES: 2 companies located in 2 different countries. A has 20% shares of B, B has 30% shares
of A – 2 correct answers
a) A is direct investor B
b) B is direct investor A
c) They donnot have any rela
d) They are direct investor of each other: Both direct investor is above 10%
e) Not enough info include, give explaination: The info needed is to show the longterm
relationship

QUES: What type of investment is KFC, Mcdonald: Franchising

=> In return: Receive franchise fee.
=> There are no shares but they still take control => In this context (IMF definition), are they
FDI?
They claim that they control => They are FDI
However, the organization collect data for FDI would exclude this organization

VN set the threshold of 30% for foreign in 1996 and 0 for local investors
In 2005, VN changed the threshold down to attract more investors, didn’t set any threasholds
(>0%).
QUES: What is the threshold in ?? version of VN law
There is no regulation in this threshold
>0%

1/3
FDI – Characteristics:
Return is unfixed, based on the company performance
=> The try to maximixe profit
=> To the host country:
Positive: If they make profit, satisfied the local demand => The more tax we/the
government get
Negative: Try their best to maximize profit, minimize the tax paying government => Try
to report that they get loss/minize profit on report => Trasfer pricing

Tax haven characteristics

- Low tax rate
- Minimum/no employee, facilities, activities. Exist only to lower the tax for parent company =>
Called Letter box company. They dont exist in reality but only in paper
- Not strict in operation process. Strict in revealing information of the customers/owners of the
company

Transfer pricing
TNC: The one who conduct FDI

How to deal with Transfer pricing

- Global minimum tax: meaning all big firms have to pay at least … tax rate

Tecnology transfer
- All host country want to attract
- Negative impact on host country: If the technology is outdated => host coutry becomes the
place to dump
Vietnam:
- 80% is technology transfer from middle leveled technology country
*Technology is not intellectual property but is sth every country has
- From viewpoint of investors: Only when transfer technology, they can use the local labor -
cheap
Reasons for receiving low-level technology transfer:
- Vietnam: Dont have enough skills to be in higher state of operation => Only involve in the easy
position
- Allow FDI investors to show that my city/province is good

06/03
QUES: Why developed countries attract FDI more, why did it changed to developing countries
- Developed countries
It changed to developing countries because:
- Saturated market for deveoped
- System of developing countries have improved over time
- Developing countries open their economy

QUES: Why did the trend of FDI changed from the manufacturing to services?
- Require less capital
- Products of service is intangible => The only way you can serve customers is directly to places
that customers need => you conduct FDI
- The openess of economy => The services sector have more room for FDI investors