Determinants of foreign direct investment in the agricultural sector: Empirical evidence based on economic regional data in Vietnam

Abstract

Agriculture is an industry that plays an essential role in economic development towards eliminating poverty issues, but foreign direct investment (FDI) inflows to this sector remain modest in Vietnam. This study analyzed the determinants of foreign direct investment in the agricultural sector into the Southern Key Economic Zone (KEZ) of Vietnam, which is considered the foreign direct investment magnet of Vietnam, but its FDI inflows into the agricultural sector have been consistently low, and has shown a downward trend in recent years. The study was based on a sample of 129 foreign investors of a total of 164 multinational enterprises (MNEs) in the agricultural sector, including representatives of the Board of Directors and representatives at the department level. The Partial Least Squares Structural Equation modeling (PLS-SEM) approach was used to test the hypotheses. Findings indicated that FDI attraction policies have the strongest impact on FDI inflows. This was followed by infrastructure, regional agriculture policies, public service quality, natural conditions, and human resources. This study suggests policy recommendations to improve foreign direct investment inflows into the agricultural sector of the Southern Key Economic Zone (KEZ) of Vietnam.