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FDI and employment creation in the enterprise sector in Vietnam

Besides, a positive relation between the FDI intensity (in terms of the size of FDI in relative to the total capital resource) and the growth of employment in the domestic enterprise sector is found which implies that the relatively larger presence of FDI enterprises can have positive spillover effects on the domestic enterprise sector’s employment growth. However, the spillover effects of FDI are considered limited. | VNU Journal of Science Economics and Business Vol. 36 No. 5E 2020 81-91 Original Article FDI and Employment Creation in the Enterprise Sector in Vietnam Dao Thi Bich Thuy VNU University of Economics and Business 144 Xuan Thuy Cau Giay Hanoi Vietnam Received 13 July 2020 Revised 19 December 2020 Accepted 19 December 2020 Abstract Since the Foreign Investment Law was first promulgated in Vietnam in 1987 the inflows of FDI to the country have increased significantly over the years. Among the contributions of FDI to the socio-economic development of the country interest is placed on employment creation. The purpose of this study is to assess the relation between FDI and employment creation in the enterprise sector in Vietnam. The empirical study is conducted at the local level with all 63 provinces nationwide in the period from 2006 to 2014. The results reveal that the FDI enterprise sector has a higher employment creation capability than the domestic enterprise sector. Besides a positive relation between the FDI intensity in terms of the size of FDI in relative to the total capital resource and the growth of employment in the domestic enterprise sector is found which implies that the relatively larger presence of FDI enterprises can have positive spillover effects on the domestic enterprise sector s employment growth. However the spillover effects of FDI are considered limited. Keywords FDI employment enterprise sector. 1. Introduction Investment Law and Domestic Investment Promotion Law. This Law creates a unity in the Foreign Investment Law was first legal system of investment that creates a fair promulgated in Vietnam in 1987 setting an playing field non-discriminates among important milestone for the process of investors simplifies investment procedures and international economic integration. Through creates favorable conditions to attract and several times of amendments and supplements effectively use of investment capital sources. to meet the requirements of .