THE FDI ATTRACTING POLICY OF INDONESIA TOWARDS GREEN
GROWTH AND RECOMMENDATIONS FOR VIETNAM
Phạm Thị Thùy Nhung1, Lê Hạnh Nguyên, Nguyễn Đức Quang, Trần Thị Thu
Hường
Sinh viên K60 Kinh tế đối ngoại - Viện Kinh tế và Kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
Đinh Diệu Anh
Sinh viên K60 Tiếng Anh Thương mại CLC - Khoa Tiếng Anh Thương mại
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
Đỗ Ngọc Kiên
Giảng viên Viện Kinh tế và Kinh doanh quốc tế
Trường Đại học Ngoại thương, Hà Nội, Việt Nam
1. Abstract
Nowadays, green growth has become an inevitable trend towards global
sustainable development goals. After a period of research, the researchers want to
analyze Indonesia's FDI-attracting policies towards green growth and then provide
suggestions for Vietnam on this matter based on similarities in investment
environment, FDI attraction, and green growth situations between the two countries.
The study has used qualitative research methods and is based on a policy analysis
framework to analyze the characteristics of FDI attraction policies implemented in
Indonesia. Therefore, to promote sustainable green growth, some recommendations
for Vietnam include solutions to three sets of policies: direct FDI-attracting policies,
indirect FDI-attracting policies, and environmental policies related to attracting FDI.
Keywords: FDI, green growth, Indonesia, policy, Vietnam
2. Introduction
It is widely accepted, that the deepening exploitation of natural resources but
lacking awareness of sustainability ascends the promotion of economic development
of many countries leading to a high growth rate. At the same time, natural resources
1
Corresponding Author, Email: k60.2111110218@ftu.edu.vn
and the environment have also triggered a series of issues, such as air pollution, water
and ocean pollution; land degradation; deforestation; biological layer decline; and
increasing emissions of greenhouse gasses such as CO2. Given these dual subjects,
green growth has become an inevitable trend for countries to achieve economic
growth as well as maintain a sustainable environment. Not an exception to that trend,
in recent years, Indonesia has promoted the implementation of plans and strategies to
promote green growth. Grasping the progress in Indonesia's green growth goal by
attracting foreign direct investment, the research team decided to conduct this study.
From the perspective of research by Lifeng Chen et. al. (2023), Harms et. al.
(2018), Li & Zhang (2016), Phung et. al. (2022), Vu (2017) and some other
researchers, this study found that FDI and the policy environment have a positive
influence on the economy. Most notably, based on the topic "Thu hút FDI xanh gắn
với mục tiêu phát triển bền vững ở Việt Nam" by Hoang Van Cuong (2020), this paper
proposes a policy analysis framework presented in the below section.
3. Methodology
The research group uses qualitative methods. The collected data will be
secondary data, including reports, figures from UNCTAD, OECD, World Bank,
academic articles, and online evaluations.
Regarding theoretical basis, from researching the concepts of FDI, FDI policies,
FDI attraction policies, and green growth, the research group concludes that FDI
attraction policies aimed at green growth are a set of measures and regulations that a
country establishes to attract foreign direct investment to achieve the dual objectives
of promoting economic growth and maintaining a harmonious balance with the
ecological environment.
Based on prior research, the research group proposes the policy analysis
framework as follows:
Figure 1. Proposed policy framework
Source: Author
4. Results
For general policies related to FDI attraction in Indonesia, the directly related
group includes the Positive Investment List, the development of special economic
zones (SEZs), and the implementation of investment protection policies; the indirectly
related group includes tax trade incentive policies, tax subsidies, tax holidays; nickel
export banning, incentives for the electric vehicle (EV) industry to attract EV battery
and manufacturer companies; improving intellectual property law policies and labor
policy with the purpose of helping investors access labor resources, promote
investment and create jobs.
Environmental policies related to attracting FDI such as the Greenhouse gas
emission reduction policy, Low Carbon Development Initiative - LCDI, Clean
Development Mechanism (CDM), carbon emission tax, cap-and-trade system with a
carbon price of 30,000/ton CO2, and applying feed-in electricity tariffs which were
then replaced by PLN set price in 2017.
General policies related to attracting FDI promote economic growth efficiently,
reflected in FDI capital attracted to the energy and environmental sectors, thereby
promoting sustainable environmental efficiency. Environmental policies related to
attracting FDI will ensure a sustainable environment in the country, creating
conditions for attracting FDI into industries and promoting the economy as a whole.
Achieving both economic and environmental efficiency will effectively promote green
growth for the country.
5. Discussions
Indonesia has recently implemented policies to attract foreign direct investment
(FDI) towards green growth, which comprehensively aligns with the country's
economic objectives. However, there are still some challenges to overcome. Firstly,
certain industries like coal-fired power plants, metallurgy, paper, and charcoal
continue to have a significant impact on the environment. Secondly, while renewable
energy sectors have achieved competitive costs compared to domestic investments in
coal, diesel, and gas, the costs are still high compared to investments in renewable
energy in some other countries. Thirdly, corruption and bribery pose significant
challenges. Fourthly, the legal system has several shortcomings. Lastly, special
economic zones (SEZs) have led to difficulties in improving economic efficiency and
environmental quality uniformly across the country.
5. Conclusions
There are numerous parallels between Vietnam and Indonesia with regard to
green growth and the investment environment. However, Vietnam is more politically
stable than Indonesia. The attracting FDI policy of Viet Nam towards green growth is
also exhibiting signs of improvement in two groups of policies: general FDI attracting
policies (including direct and direct ones) and environmental policies related to
attracting FDI.
Based on research results, some suggestions for Vietnam include: For general
policies directly related to attracting FDI, developing new strategies to attract
investment in the field of clean energy, and prioritizing high-quality human resources
in establishing partnerships with foreign investors are what Vietnam should aim for. In
regard to general ones indirectly related to attracting FDI, Vietnam should invest in
developing high-quality human resources in the energy industry and environmental
technology; and promote scientific research, apply and effectively transfer new
technologies and new products to develop the environmental industry.
Regarding environmental policies related to attracting FDI, Vietnam needs to
develop mechanisms to expedite large-scale offshore wind farm projects; tighten
discipline in the fields with high risk of causing environmental pollution; consult
extensively to choose options for applying carbon tax, design an effective applying
carbon tax implementation plan and identify methods to utilize carbon tax revenue to
address environmental issues.
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