What Do Malaysian Firms Seek in Vietnam?

Abstract

What do Malaysian Firms Seek in Vietnam?Based on research and qualitative personal interviews with Malaysian firms that have invested in Vietnam, the paper investigates the motives guiding their foreign direct investment (FDI). It argues that a sizeable portion of Malaysian firms are market seekers exploiting Vietnam's large, young, and growing domestic market, and natural resource seekers targeting the country's natural resource i.e. land lease, labour, and raw materials.The paper also argues that some of the firms are strategic asset seekers as they collaborate with politically well-connected Vietnamese firms to further their long term commercial interests, underscoring their experience in operating in a challenging business environment.Only a small percentage of Malaysian firms identify themselves as efficiency seekers, which highlights the low organizational and technical abilities of Malaysia's manufacturing sector.Nevertheless, such investment is suitable for Vietnam as it expedites Vietnam's development more effectively than the traditional 'North-South FDI'.

Vietnam’s Connectivity and Embeddedness in the Maritime Silk Road and Global Maritime Network

“…Vietnam's labor resources and reform policies positively activated the global investments. The investors exploit Vietnam's natural resource, large, immature, and growing domestic market, and collaborate with politically well-connected Vietnamese companies to further the long-term commercial interests [17]. After implementing opening up policy, Vietnam attracted an important partner, India, to promote trade and investment together, since the impact of India Look East Policy [18].…”

Climbing the economic ladder: the role of outward foreign direct investment

“…For example, natural resources seekers tend to invest abroad to acquire certain resources at a comparatively lower cost vis-à-vis their home country. They usually seek physical resources of one kind or another, supplies of cheap labour, and/or technological and managerial expertise (see Lim, 2017b). Meanwhile, efficiency seekers rationalize the structure of their investment so that they could gain from the common governance of geographically dispersed activities.…”

“…In many cases, a saturation of the domestic market also results in the need to expand commerce by entering foreign markets (Tham, et al, 2015). Analysing the rationale of Malaysian firms investing into Vietnam, Lim (2017b) argues that these firms are mainly interested in tapping into Vietnam's large and growing domestic market, natural resources, and strategic assets (in the form of political connections). He also observes that only a minority of Malaysian firms are efficiency seekers, reflecting the low organizational and technical abilities of Malaysia's manufacturing sector.…”

“…service providers and buyers) shutter their home operations too rapidly and the domestic populace fail to adjust to other higher value-added activities appropriately (see Rodrik, 2016). While some economies (such as Japan and Taiwan) have managed their outward FDI relatively well (see Hatch, 2010;Chu, Ye, & Hsu, 1999), the process is less coordinated in other mid-sized, relatively more liberal economies such as New Zealand (Stringer, Simmons, & Rees, 2011) and Malaysia ( Lim, 2017b;Rasiah, 2011), resulting in premature deindustrialization (Rodrik, 2016). This shallow analysis on outward investment, especially those from developing countries, is no longer tenable as developing country firms are rapidly intensifying their crossborder activities (often times aggressively into the developed economies).…”