I) NEGATIVE IMPACT

1. Exploit the workforce that is available in host country. Take undue advantage of low cost labors , unskilled labors…, make use of probation to consistently change labors without training or equipping them with experience, skill and qualification
Because FDI enterprises in Vietnam are mainly conducted labor-intensive processes such as machining and assembly. Even the leading technology companies such as Intel Inside Sam Sung that have production facilities in Vietnam mainly produced components, as inputs to the process of creating a product in another country. Besides, a number of investment projects of China, one of the major partners of Vietnam, often use Chinese labor instead of hiring workers from VN

2. There is little technology transfer and management skill transfer into Viet Nam. Even Viet Nam becomes an industrial garbage after adopting out of date technologies. Investors tend to keep their “know- how” in secret.
Channel 1:
At a conference to summarize 25 years of new FDI was organized, Deputy Minister of Planning and Investment said Dao Quang Thu, 80% FDI technology used currently in Viet Nam is average, 5 6 % used is high-tech, 14% low and backward, there are individual cases using outdated technology. Technology transfer is mainly done horizontally - between business enterprises, with little change in the level and technological capacity. Despite the fact that there would be no corporations, they now carry the No. 1 technology, latest technology investment to other countries, however, the majority of FDI projects in Vietnam only average tech show FDI mainly to take advantage of cheap labor, investment in infrastructure in the form of production assembly line, or product improvements. Consequently, Vietnam businesses create low added value, hard to participate in global production networks. There is little FDI funded projects in the field of science and technology. R & D activities in FDI enterprises in the technology only small, simple ... or research to improve adaptation in accordance with the conditions of Vietnam.
Channel 2:
Foreign enterprises hold the highest labor intensive and make more jobs than other firms. In 2007, according to UNDP’s report, FDI companies hired illiterate employers and opened many illiteracy erasing classes to ensure the staff can read through all safety notice and basic guideline. These firms always exploit thoroughly the “cheap” human resources and ignore skill training for workers.
In terms of absorbing advanced technology, it is the big worry that FDI is only contributed to low technology areas. Although capitalization plays an important role in Vietnam, in domestic industries development aspects,considering foreign firms’ appearance is a chance for improving the national industrial development. Until now, the technology used in Vietnam is only higher than the technology in the same areas and the same products of domestic economy. A majority of this is imported from Asia (69%) and South Asia (19%). European countries account for only 24%, America is 5% and G8 countries is 23,7%. Therefore, Vietnam is on the verge of outdated technology dump area of developed countries.
Regarding the technology transfer area, in the period 2004-2009, the TFP of government, private and enterprises economy which have FDI is 8,6;3,1 and -17,6 respectively. According to Nguyen Quang Thai and Bui Trinh’s research, the highest TFP proves that although the efficiency of this area is not as high as the investing capital, technology transfer is real. While the FDI area holds the minus TFP. As can be seen from a survey, in the FDI area, growth depends on other factors like cheap human resource, not technology. In fact, in many foreign capital firms, the export machines or tools when entering into Vietnam turned out to be outdated or amortized.
Additionally, a survey of Vietnam economic institute indicates that some FDI enterprises operate like “a discrete corner”, problems about technique, technology and their accounting process, Vietnamese do not know and have no connect with. Therefore, the effect of FDI on domestic industry is very small. The association between FDI enterprises and domestic enterprises shows little sign, no assistant industries are built which are linked to produce according to product supplement series. Basically, assistant industries can create about 80-95% value added for products, however, Vietnamese manufacturing firms have to import 70-80% the assistant products. Because of this drawback, the cost born in Vietnam is very low, many FDI enterprises find it hard to develop and invest deeply, so some FDI projects are moving export to other countries, or close or move to a new investment area in Vietnam. 3. FDI can lead to a trade deficit.
Supporting industries have not developed, therefore the added value of FDI is very low. FDI is the main reason for continuous trade deficit, contributing to aggravate the situation of trade deficit in Vietnam
Channel1:
Despite expectations that FDI is where manufacturers must have export orientation (state policies to encourage FDI enterprises to export more than 80% of products manufactured in Vietnam), but actually, the results of export and import of the business sector in the last several years FDI is import turnover growing faster and generally higher than export turnover.
Specifically, in the first quarter in 2010, export turnover of FDI reached over 8 billion USD, while imports about $ 7.1 billion, $ 0.9 billion surplus. But, in fact, exclusive of oil, FDI enterprises had trade deficit of over 400 million dollars. Statistics recently released GDC to replace, import turnover of the business sector FDI in the years 2006 - 2009 accounted for about 36% of the total import turnover of the country. In 2009, the value of import of equipment, machinery of FDI accounted for about 6%, raw materials account for about 26% of the country and the corresponding 15% and 70% of the total imports turn- over of FDI sector.
In the area of FDI, import turnover is higher export turnover by 10% per year. Average Import growth rate of this sector is 30% per year. On the other hand, the FDI trend that shifting from cultivation field of processing and manufacturing to the service sector will also reduce the trade balance in Vietnam. Vietnam has based on exporting products with low added value, such as agricultural products, digital products cover processing and assembly to earn foreign exchange. Until the early years of the twenty-first century, FDI flows mainly into the field of machining and processing for export folder so this area has a trade surplus, but since Viet Nam is committed to liberalize the services sector, especially in the retail sector and distribution according to WTO accession FDI implementation progress withdrawn from these areas and move into service has a higher profitability.
The initial impact toughness crabs this shift for macroeconomic stability withdrawn too much, too little, while domestic assets leads to "bubble" in the economy and high inflation. An upward trend which repatriated profits to FDI investors in the services sector will erode the foreign currency reserves are depleting anti-inflation tool and the effort of the State Bank of Viet Nam. 4. Intense competition to domestic firms
Channel 1:
Foreign firm enjoy preferential treatment of capital, land, tax… even more than VN domestic enterprises operated in a similar field. As a result, the foreign films by competing in the financial and product markets due to their superiority in production methods and technologies displace the domestic companies. Besides, the increase in the growth of wages in foreign firms can result in a similar growth in domestic films that are unable to cover this growth with a corresponding rise in productivity. The competitiveness of the local firms decrease and they are unable to match the foreign firms and ultimately they are thrown out of the market. 5. Investment efficiency and growth are not high
Channel 1:
Large enterprises avoid of contributing to government’s budget of VN. In 2013, export value is 80.91 billion USD, constituted for 61,2% total value of exports of VN. Meanwhile import value is 74,43 billion USD, made up for 56,3% total value of imports in Viet Nam. However, according to data of 300 enterprises in 2013, total loss of VN enterprises is about 206.331 billion dong, among domestic enterprise loss is 20.684 dong, FDI enterprise loss is surprisingly 68.203 billion dong. Over 50% of FDI enterprises in Viet Nam informed that they are at a loss with a view to avoid taxes.
For Example:
In Vietnam, the name Coca-Cola was first introduced in 1960 as in 1994, Coca-Cola Vietnam Vietnam back and start making long-term business strategy. Respectively in 1995 and 1998, the joint venture in North, South and Central was established. By May 10/1998, the company became a joint venture company with 100% foreign capital. Compared with Pepsi, Coca-Cola's market presence in Vietnam was later than 4 years. Many people believe that this is one reason why Coca-Cola is Pepsi not overwhelming in Viet Nam as in the global market
Just like Adidas, Coca-Cola is also involved in social activities in Vietnam, such as the Swiss franc 110,000 Si13 support for Vietnam Red Cross Society to assist 10,000 families emergency flood plain Mekong River in 2011, the program "Tet for the poor" to support families in difficult circumstances Tet.
Regarding financial performance and implementing tax policy, similar to Adidas, beverage conglomerate leading Coca-Cola also crashed into the suspected transfer pricing projects in Vietnam. According to the financial information of Coca-Cola, accumulated losses as of the end of Q3 2011 of this company in Vietnam has risen to more than 3,768 billion, surpassing the charter capital of VND 2,950 billion that Coca-Cola has posted up in Vietnam. Surprisingly, despite the losses, but the company plans to continue to expand investment in Vietnam. In the middle of the month 10/2012, the head of Coca-Cola, Mr. Muhtar Kent, has declared Vietnam to be an important growth market and Coca-Cola Vietnam aims to double revenue in 2020, together with the Coca-Cola promises additional $ 300 million will be poured into the Vietnam market in the next 3 years. This has made many people, including experts in the field of transfer pricing tax questioned for Coca-Cola Vietnam.
According to the HCMC Tax Department, within 4 years (from 2007-2010), the total revenue of the Coca-Cola Vietnam increased 2.5 times, an impressive figure from 1,000 billion to 2,500 billion copper; but also increases costs more impressive, more than 3 times. The loss extends over decades led to Coca-Cola in fact hardly any co-pay corporate income tax for budget Vietnam. In 2009, Coca-Cola Vietnam first 3.5 billion profit, but by being allowed to carry forward losses under the provisions of the Law on income tax should not be paid with public tax dollars. Moreover, compared with revenues of up to several thousand billion profit this is also very low. Even the company itself Chuong Duong Beverages, although only two products share the sassafras soda and water bottles, turnover of the company in 2011 only 422 billion profit but also up to 30 billion and pay more than 7.5 billion budget. Until this, the tax amounts that Coca-Cola paid only related to excise, VAT, personal income tax.

Figure 1. Revenue and profit of Viet Nam Coca Cola from 2004-2010 (billion VND)

Channel 2:
Nguyen Quang Thai research and Trinh Bui (2010) suggest that the effect of investment and quality growth that FDI brings to the economy is negligible: in 10 years from 1999 to 2009, ICOR in the public sector, private sector and FDI are 7.76; 3.54; and 7.91, respectively. FDI sector has highest ICOR, which proves its efficiency is the lowest. Look at the world, ICOR group average growth of only 3.6 points.
Channel 3:
According to the Tax Department in Ho Chi Minh City, 1,254 of FDI businesses filing 2008 tax report, there are 708 enterprises reported losses, of which nearly 90% activity in the textile sector wear. This is clearly ridiculous and not normal as most apparel business in Vietnam, whether to import the majority of foreign materials, are profitable. The FIEs always have a huge advantage compared to domestic firms when the parent company in the country producing raw materials. They are ready to provide the raw material for the company overseas production. So why are these businesses at loss? In Vietnam there are many FDI enterprises to take advantage of cheap labor factor for investment in the processing industry with high technology, even with outdated machinery, to create advantages in production costs exports. These businesses not only collect interest within the territory of Vietnam, but also enable companies in the home country to increase profits as increase cost of design, copyright, logistics and consulting ... partners implementing “transfer pricing strategies’’ in the form of rising input prices, decreasing output prices, causing significant damage to Vietnam. Finally, net profits were flowing outward. 6. FDI can cause structural imbalances in economy.
Channel 1:
By the end of 2008, on the territory of Viet Nam, 9803 valid FDI projects, including projects in industry and construction accounted for 6,303 projects servicer’s 2,524 projects and 976 for agriculture, cultivation in 2009, the structure of FDI into Vietnam showed a clear shift to the service sector. Accommodation and restaurant become attractive sector for investors abroad with 8, 8 dollar company committed in 2009; business sector real estate standing 2nd with $ 7.6 billion; processing industry sector, manufacturing sector is scaled registered FDI capital intensive but ranks third in 2009 with 2.97 billion USD.
Thus, it can be seen that FDI projects mainly in the fields of industry and services, agriculture attracted least FDI in terms of cases the project number, the registered capital and implemented (976 projects plan until the end of 2008). In the industrial sector, FDI in Vietnam focused on exploitation of natural resources of all sectors, protected industries, polluting industries and real estate. It's a poor investment direction. Firstly, natural resources exploitation industry doesn’t have diffusion effect and create conditions for development of ancillary industries. Secondly, the protected industry has low competitiveness. Thirdly, in polluting industries, profit was repatriated to foreign companies but our country has to suffer the consequence such as environment pollution.
Channel 2:
Foreign investors only invest in the sectors that can make profit in a short time. This leads to a number of industry expansion that are excessive in relation to the needs of the economic structure, making the use of resources becomes less efficient, causing unhealthy competition, affect the sustainable development of the economy. In 2010 FDI flow of the country focused on three areas: accommodation services and catering, real estate, industrial processing and manufacturing. Industrial processing and manufacturing sector attracted the largest FDI (accounting for 69.1% and 50.7% of the projects registered capital in Vietnam). Real estate business ranked the second with 312 FDI projects and total registered capital of USD 38.4 billion, accounting for 2.9% of projects and 22% of the total registered capital in Vietnam, followed by the accommodation services and catering, construction, communication, arts and entertainment ... Meanwhile, FDI in sectors such as agriculture, forestry, fisheries, financial major banks, health insurance, education and training are not much. FDI in sectors such as agriculture, forestry and fisheries accounted for 4% of total projects and 1.7% of the registered capital or FDI in the financial sector, banking, insurance, accounting for only 0.7% of project as well as the country's registered capital.
Channel 2:
According to Reports of PCI in 2010, 67% of enterprises operating in Viet Nam FDL produce low added value. On average across the country, only about 5% of the investors involved in the production of modern industrial demand industry information and communications, 5% participating chambers of services science, engineering, 3.5 % participating in the insurance industry and financial management skills, modern high-qualified labor. Meanwhile, the property market sector attracted over 30% of FDI
In Vietnam, the rise of inflation and real exchange company stems from the rapid increase of cash flow of FDI into real estate, which made costs of production of commodities for export increased. Therefore, many businesses in the export sector and processing production downscaled or closed. This also shows that structure of FDI in Viet Nam is unsustainable. In many localities, a large amount of agricultural land has been devoted to projects in real estate and golf course, which is not promoting economic efficiency at the local level now.