There are both theoretical and empirical evidences emphasising the importance of improving trade structure in developing countries. The influence of trade on growth is expected to be greater if a country can move toward manufacturing exports from primary dominant trade.
After opening the economy, FDI into Vietnam has increased significantly. FDI has been expected to be a driving force which provided substantial assistance on trade performance in the economy which, in tum, contributes to economic restructure and growth.
This paper bases on literature review on my economics project to conduct empirical studies on the impact of foreign direct investment (FDI) on changes in trade pattern from primary exports in Vietnam.
The finding shows that FDI have played an important role to encourage exports in Vietnam. However, its effect on improving trade structure is relatively moderate. Vietnam remains specialization in primary and labour intensive products such as textile, footwear. Based on argument in our project that specialization of trade in primary and highly labour intensive products may have adverse impact on long run growth, the paper confirms the issue of over-dependence on foreign investment in developing countries is totally lack sufficient ground to support. Developing countries may face a substantial expense in long term compared to current benefit they gain from FDI.
We, therefore, suggests that selective policies to attract desirable FDI are extremely important to expand the extent of FDI' s impact on trade, in particular, and long term development, in general, because the selective FDI not only avoid over-competition in domestic production, but also enable local producers to exploit spillover effect from these investments through backward and forward linkage.