Privatization & FDI: Examining Growth in Vietnam\u27s Provinces

Over the past three decades many developing countries have looked toward privatizing investment markets and relying more on Foreign Direct Investment (FDI) to supply needed capital investment for their emerging private sectors. In their pursuit of foreign capital, developing countries have enacted several changes in economic policy and regulation in hopes of transforming formerly rural and undeveloped countries into highly urbanized centers of global production. This is particularly true for a transitioning economy such as Vietnam, which has seen increasing privatization of industry and investment since the reforms of 1986 known as “Doi Moi.” In this study I investigate the effect privatization of investment has had on industrial output per capita growth. My results indicate that FDI is both positive and statistically significant even after endogenous robustness checks. Further, I find convincing evidence that provinces with highly planned investment regimes have their growth significantly harmed by state investment and do not benefit from FDI, particularly if they are urbanizing. My results suggest that provinces with mixed and privatized investment regimes are best suited to increase growth and benefit from FDI