HOW DOES COMPETITIVENESS INDEX PROMOTE FOREIGN DIRECT INVESTMENT AT THE PROVINCIAL LEVEL IN VIETNAM? A NON-PARAMETRIC APPROACH

Abstract

Foreign Direct Investment (FDI) has become crucial to global economic integration. It allows countries to participate in global value chains and access new markets, ultimately contributing to economic growth and development. Particularly in developing and emerging markets, FDI is critical in building a strong economy. This is why domestic enterprises and policymakers have been incentivized to attract FDI, recognizing its benefits, such as the transfer of technology, spillover effects, and increased competition. FDI has been vital in diversifying Vietnam's economic base. FDI has helped Vietnam move from its dependence on agriculture and traditional manufacturing industries towards more advanced and sophisticated industries, such as electronics, software, and telecommunications. This has increased competition in global markets and helped Vietnam integrate into the global economy. In particular, the provinces' effectiveness in attracting FDI is an important and decisive issue. At the provincial level in Vietnam, the set of competitive indexes is a useful measure to rank the efficiency in using resources to attract FDI of those provinces. Therefore, in this thesis, we use an integrated model of Grey Delphi, the Data Envelopment Analysis Super Slack-Based Measure Model (DEA–Super SBM), and the Malmquist Model (DEA–Malmquist) to evaluate the FDI attractiveness of Vietnamese provinces from 2017 to 2021. First, ten critical dimensions of the provincial competitive index (PCI) affect the number of FDI by cases and amount of FDI capital were validated via the Grey Delphi method. Secondly, the Super-SBM model is applied to assess the FDI efficiency of 63 provinces in Vietnam from 2017 to 2021. Then, the DEA–Malmquist model is employed to analyze the total change in the productivity of 63 provinces’ FDI performance in Vietnam. The findings of this study revealed that the efficiency of FDI in Vietnam's provinces is relatively low, and there is a significant variation in the attractiveness of FDI among the provinces. This study can provide valuable insights for policy makers and other stakeholders in developing effective strategies to attract FDI and foster economic development.