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MINISTRY OF EDUCATION AND TRAINING FOREIGN TRADE UNNIVERSITY SUMMARY OF DOCTORAL THESIS IMPACTS OF PUBLIC INVESTMENT ON PRIVATE INVESTMENT: THE CASE OF KEY ECONOMIC REGIONS IN VIETNAM Major: International Economics Code: 9310106 HO THI HOAI THUONG HA NOI - 2023
The thesis is completed at Foreign Trade university Science Instructor: Assoc. Prof. Dr. Nguyen Thi Thuy Vinh Reviewer 1: .......................................................... ............................................................ Reviewer 2: .......................................................... ............................................................. Reviewer 3: .......................................................... ............................................................. The thesis will be defended in front of the thesis committee at University level at Foreign Trade university At hour ... date ... month... year 2023 The thesis can be consulted at the National Library and Library of Foreign Trade University
1 INTRODUCTION 1. Rationale of the research In the context of international economic integration, public investment has a great role in promoting economic development, especially in building socio-economic infrastructure, creating a favorable environment for business, and thereby improving the competitiveness of the private sector. In addition, increasing public investment in socio-economic infrastructure is also one of the important factors attracting foreign direct investment (FDI) and increasing the country's development resources. In Vietnam, the rapidly increasing scale of public investment has contributed to Vietnam's high growth for a long time. Public investment is often referred to as “priming investment” to attract and lead private investment, create impetus for socio-economic development in localities and economic regions of the country. In addition, Vietnam is integrating more deeply into the world economy by implementing a roadmap to reduce tariffs according to commitments. At that time, to ensure growth, the Government needs to increase public investment in economic infrastructure (roads, bridges, ports...) and social infrastructure (schools, hospitals...) to improve the investment environment and business environment. Currently, Vietnam has four key economic regions, including the Northern Key Economic Region, the Central Key Economic Region, the Southern Key Economic Region and the Mekong Delta Key Economic Region with a total of 24 provinces and cities. The Government has identified these as the driving force behind the development of other regions across the country. These are also key areas for public investment, private investment and contribute much to the country's economic growth. Although playing a leading role in creating an infrastructure foundation to attract private investment in the region and the whole country, over the years, the role of public investment in key economic regions has been considered as weak (Tran Du Lich, 2021). In fact, public investment in infrastructure of key economic projects has made many achievements in creating a stimulus to attract private investment, especially in economic zones and industrial parks (Nguyen Thi Chinh, 2020; Nguyen Thi Thanh
2 Huyen et al., 2022). However, in many cases, the attraction is not effective and has not created the motivation to attract private investment. Specifically, the infrastructure of transport, seaports, railways and urban areas has not been synchronized due to lack of regulation and regional planning, so it has not been able to promote its advantages, efficiency and create guidance for the private sector (Tran Duy Dong, 2022). In addition, public investment puts great pressure on the state budget because the same key economic regions need a large resource to serve regional linkage investment projects, thereby creating a debt burden on the loan capital market and negatively affecting private investment (Do Thi Thanh Huyen et al., 2021). Therefore, whether public investment has a crowding - out or crowding – in effect on private investment in Key Economic Regions is still a controversial issue. In addition, from the perspective of research, the impact of public investment on private investment is a topic of interest to many scientists, but the mechanism and results of the impact are controversial. Many studies show that public investment has a crowding-in effect on private investment. Specifically, adequate public investment in infrastructure improves market access, reduces production costs, and increases private investment (ASchauer,1989a; Saidjada et al., 2016; Makuyana, 2016 and Ouedraogo & associates, 2019). In addition, government investment in human capital (such as education and health), spending on research and development contribute to the formation of human capital, improve labor productivity and promote private investment (Lall, 2007; Daniele, 2009; Flores-Chamba & associates, 2019; Jena & Barua, 2020). However, other research suggests that public investment can have a crowding-out effect on private investment when large demand for government development investment may cause rising interest rates on the loan market to reduce private sector access to capital (Friedman, 1978; Ganelli, 2003; Kustepeli, 2005; Cavallo & Daude, 2011). In addition, raising taxes or borrowing to finance government spending also makes it difficult for the private sector to access the scarce financial resources of the economy (Pereira & Andraz, 2004; Drezgić, 2011; Rodríguez-Pose & et al., 2012; Solihin & associates, 2021). The impact of public investment on private