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FACTORS AFFECTING THE SATISFACTION OF
INVESTORS IN INDUSTRIAL ZONES
OF THAI NGUYEN PROVINCE
EXECUTIVE SUMMARY
CENTRAL PHILIPPINE UNIVERSITY
DOCTOR IN PUBLIC ADMINISTRATION
NGUYEN THI THU HA
DECEMBER 2016
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EXECUTIVE SUMMARY
Title:
Factors affecting the Satisfaction of Investors in Industrial Zones of Thai
Nguyen province
Total number of page: 148
Researcher:
Nguyen Thi Thu Ha
Degree Program:
Doctor of Public Administration
Institution:
Central Philippine University
Jaro, Iloilo City
Region VI
Rationale/Introduction of the Study
As of 2015, in Thai Nguyen province, there are 6 industrial zones which have been
planned in details with the size of 1420 hectares of natural land. Such industrial zones have
attracted 133 investment projects, of which 61 FDI projects have the amount of registered
capital reaching nearly 7 billion USD, 72 domestic investment projects have the registered
capital of 11,000 billion VND. Up to 2015, there were 100 projects in operation, of which: the
amount of FDI which was implemented was 6.2 billion dollars (accounting for 88.57% of total
registered FDI), accounting for 86.11% of FDI disbursed in the whole province; The amount of
implemented domestic capital is VND 7,700 billion (accounting for 70% of total registered
domestic capital) (Phan Manh Cuong, 2015). The FDI projects mainly focus on the fields of
industrial production, construction steel; producing portable mechanic tools for export;
producing garments for export; producing electronic components; producing mobile devices,
electronics and telecommunications; installing electronic products, etc and some other fields
with strengths of Thai Nguyen province. These achievements in the investor attraction have
been largely due to the significant improvement of the investment environment of the province.
In the 4 years from 2011 to 2014, Provincial Competitiveness Index (PCI) of Thai Nguyen
province increased by 49 grade, from No. 57 to No. 8, shows the high appreciation of investors
about the investment environment of the province.
Up to 2015, projects in Thai Nguyen industrial zones have gained the export value
which reached 18,5 billion USD, accounting for 97,2% of total the export value of the
province; created jobs for 95,000 labours (accounting for 57,9% of the amount of labours
working in the sectors of industry and contruction ) with the average income reached 5.7
million VND/month/person; submitted 2,100 billion VND for the national budget (Phan
Manh Cuong, 2015).
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The above statistical data showed achievements in investment attraction, development
of industrial zones in Thai Nguyen province which contribute significantly to the social
economic development of the province. However, there are still many shortcomings exist in
the investment attraction, particularly investment attraction in industrial zones. The
investment attraction in the industrial zones is limited. Up to December in 2015, 2 out of 6
industrial zones have not attracted any investment project. The occupancy rate of the planned
land area of the industrial zones is low. By the end of 2015, the occupancy rate of the planned
area just reached 36%.
According to Mai The Cuong (2005), in order to solve these difficulties in investment
attraction into industrial zones, the local authority should consider investors as customers, and
must aware of need and requests of investors in order to satisfy their desires. The investor
satisfaction with a locality is a competitive advantage that locality . If the locality is able to meet
the requirements of investors, there will be an positive impact on their satisfaction leading to
investment decisions into the locality.
For Thai Nguyen Province’s industrial zones, in order to attract investment projects,
satisfying needs of investors is very necessary and important. In order to be able to satisfy
investors, industrial zones need to define what factors affecting investor satisfaction and their
impact (positive or negative), then find out solutions for these factors, by which improve the
satisfaction of investors, attracting investment into industrial zones of Thai Nguyen province.
There are some studies on investor satisfaction or factors affecting the investor
satisfaction but most of them are papers published on journals, such as: “Factors affecting
foreign investor satisfaction in industrial zones – quantitative model and policy implications”
(Dinh Phi Ho et al., 2011b) – a research on industrial zones in Binh Duong province; “Factors
affecting foreign investor satisfaction about tax support service – a case study in Dong Nai
province” (Dinh Phi Ho et al.,2011c). Besides, the article “Factors affecting foreign direct
investment attraction – a case study of Thai Nguyen province” (Trinh Viet Hung et al., 2014)
was conducted based on the survey about the investors’ perspectives but not research on the
investor satisfaction. There are some other studies about the factors affecting the investor
satisfaction but they are just the master theses, such as: “Investment environmental factor
affecting investor satisfaction: case study in Phu Quoc distric, Kien Giang province” (To Hoang
Phuong, 2013), “Factors affecting investor satisfaction in Ben Tre province” ( Bo Quang Thuy,
2015). From the review of the related studies as summarized above, the author found that up to
now, there is no large scale studies like a doctoral dissertation on factors affecting on investor
satisfaction, particularly in the industrial zones of Thai Nguyen province.
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After recognizing and taking this research opportunity , this study was entitled “Factors
affecting the Satisfaction of Investors in Industrial Zones of Thai Nguyen province”, with
using quantitative methods will be a new scientifically significant research direction and
contribute to enhance the investment attraction in these industrial zones.
Statement of the Problem
General
This research intends to analyze factors affecting the satisfaction of investors in
industrial zones of Thai Nguyen province, and on that basis, proposes some policy solutions in
order to enhance the satisfaction of investors, thereby increase the investment attraction as well
as attract more investors to the industrial zones of Thai Nguyen province.
Specific
- Assess the satisfaction of investors about the industrial zones of Thai Nguyen province
where they are investing;
- Analyze the factors affecting the investors’ satisfaction in the industrial zones of Thai
Nguyen province;
- Propose some policy recommendations in order to enhance the investors’ satisfaction,
to increase the investment attraction and to attract many investors in the industrial zones of
Thai Nguyen province.
Research Design and Procedure
The survey research design will be used in this study. In addition, a descriptive document
analysis will be done. Secondary data will be provided by Thai Nguyen Provincial Statistical
Office and Management Authority of industrial zones of Thai Nguyen province. Questionnaires
will be prepared and distributed to investors in the industrial zones to survey on their satisfaction
with the place where they are investing. The study will be conducted through two main steps:
(1) Preliminary study and (2) Official study.
The draft scale is built on the theoretical basis of quality of service (namely
SERVQUAL scale of Parasuraman et al., 1988), theory of the investment behavior and the
Local Marketing theory and specificity of research that is to study factors affecting the
satisfaction of investors. To adjust the scales, the qualitative method was used in this study,
through the pilot study with 20 investors who are investing in industrial zones of Thai Nguyen
province and be able to assess those industrial zones. Through the results of this study, the
draft scale was adjusted to give the official scale.The official scale was used for official study.
A quantitative research was used for official study with the direct interview technique for
investors. This study was performed to test scale models and theoretical models. Scales were
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preliminarily evaluated by reliability coefficient method through Cronbach alpha and
Exploratory factor analysis (EFA).
Study Population and Sampling Technique
Population: Investors investing in the industrial zones of Thai Nguyen province
Sample size depends on the analysis method. This study uses the method EFA.
According to Hair et al. (2006), the minimum sample size for EFA is 50, preferably 100 and
the ratio of observation / measurement variable is 5/1. This study has used the EFA tool with
42 observation variables, so the sample size is at least 210. Meanwhile, according to reports
of the Industrial Zone Management authorities, the number of enterprises operating in the
industrial zones of Thai Nguyen province at the time of survey is 82. Therefore, the author
conducted a survey on the 82 enterprises, specifically, interviewed 3 respondents in each
enterprises. So the sample size of this study is 246.
The method of selecting respondents: The study selected the respondents who meet the
requirements of the following criteria:
They are investors who are the capital owners in the enterprises in Thai Nguyen
industrial zones .
They are the senior managers of their enterprises, including: Manager, Deputy
Manager, Head of Department, Deputy Head of Department. These are the people who are
most capable of understanding the operational status of their enterprises and understand the
issues related to the industrial zones in Thai Nguyen province in general, especially the
industrial zones where they are operating.
The author conducted surveying 82 enterprises operating in industrial zones with the
survey sample, as follows:
- Total number of samples sent to the survey: 246
- Total number of samples collected after the survey: 239
- Number of invalid samples due to the lack of information: 3
- Number of valid samples: 236
Thus the number of samples for research is 236 (This sample size is qualified for the
analysis of the research data)
Data Collection and Instrumentation
The data collection in this study has been gathered in form of primary and secondary
data in order to implement the qualitative and quantitative analysis. Because this study is
focused on particular research questions, data were collected with the use of a survey
questionnaire. Data was provided by Industrial Zone Management Authority of Thai Nguyen
province and by enterprises operating in Thai Nguyen industrial zones.
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The primary data collection was conducted through implementing survey using
questionnaires. The questionnaires will be delivered to the office of enterprises in industrial
zones by the researcher and her assistant, through the help of
the Industrial Zone
Management Authority. Secondary data was collected from data of reports and documents in
provincial departments and the Industrial Zone Management Authority. In addition, data and
research information also were collected from publishes such as: Book, formal website,
research journals etc. The researcher collected the data of enterprises operating in industrial
zones and their characteristics from Industrial Zone Management Authority.
Data Processing and Analysis
The collected data was processed with the SPSS 20.0 software. After encoding and
cleansing, the data was analyzed through two steps: (1)Descriptive statistical analysis; (2) The
quantitative analysis of factors affecting the satisfaction of investors through three steps: (1)
Test the quality of scales; (2) Exploratory Factor Analysis (EFA); (3) Multiple Regression
Analysis (MRA).
Findings
The followings were the major findings of the study:
(1). In recent years, the Thai Nguyen province's investment environment has been
increasingly improved and attractive to investors. The province has favorable natural
conditions, namely: important socio-economic geographic location in the Northern
mountainous areas; good transport connections with other major economic centers resulting in
favorability for economic activities of businesses; variety of types of mineral resources that
gives Thai Nguyen a good comparative advantage in the development of metallurgical
industry, mining, production of construction materials. Besides, the province also has a
system of engineering economic infrastructure which was built quite well, ensuring the
business activities and the socio-economic activities in the province. In addition, political and
order security stability, and the good healthcare supplies, as well as abundant labor resources
who are trained at all levels are also important factors contributing in attracting investors in
recent years.
(2). The evaluation of the investors or the enterprises on the investment environment of
Thai Nguyen province is expressed through Provincial Competitiveness Index (PCI). Before
2012, the Provincial Competitiveness Index of Thai Nguyen was only passable. However, since
2012, the Provincial Competitiveness Index of Thai Nguyen has had got a marked increase and
has ranked higher. The significantly increase of PCI in recent years (ranked 57 in 2011, ranked 17
in 2012 and ranked 7 in 2015) has created a huge impression on investors and has contributed in
increasing investment attractiveness of the province. This achievement has been derived from the
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strategy to improve PCI of the province. Since then, the province has created the synergy of the
whole political system to find solutions to reform administrative procedures improve the
investment environment, the production environment and business environment for enterprises,
enhance PCI right in 2012 and in the following years.
(3). The study has described and analyzed some of the characteristics and
organizational structure of the Industrial Zone Management Authority. The contribution of the
Management Authority was also analyzed, such as being active to timely grasp the difficult
time incurred during the process of production and business investment of enterprises,
providing materials and regulation documents on mechanism and investment preferential
policies; implementing well the investment promotion activities; concentrating on inspecting,
supervising and handling violations, etc. These have contributed greatly in improving the
investment environment of Thai Nguyen province in general and the industrial zones in
particular, have increased the attractiveness to domestic and foreign investors in order to
increase the attraction of investment projects in the industrial zones of the province. However,
the industrial zone management authority has encountered some difficulties in some activities,
such as the investment promotion to the industrial zones has been not effective, focused
resources for the compensation for ground clearance and synchronous infrastructure creation
in the industrial zones are limited, etc.; Overlaps and inconsistencies in the legal system
related to the development of the industrial zones; the planning and management planning
have many problems; Legal system related to the state management on planning - building in
the industrial zone have been not clear; Sense of observance the law related to investment,
production and business activities of some enterprises in industrial zones have been not good.
(4). The investment policies of Thai Nguyen province and the investment preferential
policies in the industrial zones of the province are important conditions for attracting
investment, are one of the first concerns of the investors before they decide to or not to invest
in the industrial zones in the province. After collecting secondary document from the
industrial zone management authority, the author has found that besides applying preferential
policies to attract investment to the province under Decision No. 41/2012/QD-UBND dated
11/15/2012 of People's Council of Thai Nguyen Province about promulgating Regulations on
policies of the incentive and support for investment in Thai Nguyen province, the province's
industrial zones have applied some other preferential policies. The industrial zones have
applied some investment preferential policies of their own, such as: Decision No.
3296/2000/QD-UB of Thai Nguyen People's Committee dated 13/10/2000 (for Song Cong I
and II IZ); Decision No. 08/2013/QD-UBND of Thai Nguyen People's Committee dated
12/06/2013 on the issuance of investment incentives for project of Thai Nguyen Samsung
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high-tech combination of Thai Nguyen Vietnam Samsung Electronics Co., Ltd., project of
manufacturing of microprocessors and integrated circuits of Samsung Electro - Mechanics
Co., Ltd. and 02 high-tech projects of the two subsidiaries of Samsung Group in Yen Binh
industrial zone (for Yen Binh IZ); etc.
(5). To assess the state of the factors affecting the satisfaction of investors, the study
has analyzed and evaluated the characteristics of technical infrastructure and service
infrastructure of the industrial zones in Thai Nguyen province. In 6 of the industrial zones in
the province, Quyet Thang industrial zone and Song Cong 2 industrial zone have not been
constructed the infrastructure yet. Meanwhile, Song Cong 1 industrial zone, Diem Thuy
industrial zone, Nam Pho Yen industrial zone and Yen Binh industrial zone have constructed
technical infrastructure and service infrastructure. In particular, Yen Binh industrial zone has
good infrastructure, ensures well for enterprises to make production and business activities.
Song Cong 1 industrial zone and Diem Thuy industrial zone have had the synchronized
technical infrastructure which has been basically suitable for the business and production
activities of enterprises. However, these two industrial zones have not had got full service
infrastructure for enterprises. Nam Pho Yen industrial zone is the industrial zone which has
least attractive infrastructure among the industrial zones in the province, because lots of items
in the technical infrastructure have not been synchronized. The study also pointed out a
situation in which many enterprises in the industrial zones are currently using the services
providers outside the industrial zones because this industrial zone lacks of services providers
or don't meet the demand of enterprises on those services. However, basically enterprises
have met their demand on the services because they can access the service providers in the
neighborhood areas without spending too much cost and time.
(6). The study analyzed and assessed the situation of attracting investment in industrial
zones in Thai Nguyen province through the data on the occupancy rate of the industrial zones,
the number of investment projects and total registered capital on the industrial zones in the
period of 2013 - 2015, specially made in-depth analysis on FDI.
Overall, occupancy rate in the area planning of industrial zones in Thai Nguyen
province has been not high. Up to 12/2015, among 4 industrial zones in operation, Diem Thuy
industrial zone has had the highest occupancy rate (65%), followed by Yen Binh industrial zone
(60.71%), Song Cong 1 industrial zone has the occupancy rate of 50% (Ranking 3 rd), and Nam
Pho Yen industrial zone has the lowest occupancy rate (39.7%). Song Cong 2 industrial zone
and Quyet Thang industrial zone have not been in operation. Their occupancy rates have been 0.
After collecting, synthesizing, analyzing secondary data on investment in the industrial
zone in the province in the period of 2013 - 2015, the study has shown results of attracting
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investment. In terms of the total number of investment projects in industrial zones in Thai
Nguyen province, it has the increase in the past three years of the period of 2013 - 2015. In
terms of the number of investment registered capital, this number of capital was
VND
4,560.6195 billion in 2015 (decreased by 93.23% compared to 2014). This dramatic reduction
was due to the reduction of FDI in the industrial zones in 2015 ( VND 4,083.5795 billion,
decreased 93.9% compared to 2014). The domestic capital investment in industrial zones in
Thai Nguyen province in recent years is mostly from limited liability companies and joint stock
companies in Vietnam. Yen Binh industrial zone, in 2014 and 2015, had not attracted anymore
of domestic investment projects. The domestic investment project in 2015 was only in Song
Cong 1 industrial zone and Diem Thuy industrial zone. FDI capital resources always play a key
role in investment capital in industrial zones in Thai Nguyen province (greater than 85% in the
years of 2013 to 2015).
The study has shown that most of the domestic investment projects in industrial zones in
Thai Nguyen province in recent years are in the field of processing - manufacturing industry
(58.33% of the total project in the period of 2013-2015). However, compared to the inflows of
FDI into the Processing - manufacturing industry sector in the industrial zones in the province,
the number of domestic investment has been really tiny. Foreign investors in recent years of
Thai Nguyen province have particularly interested in investing in the field of electronics
industry and the production of auxiliary components for electronic devices.
About FDI capital resources in the industrial zones, investors were from the countries
such as Korea, China and Japan (mostly from Korea). Percentage of investment capital from
Korea in the total of FDI investment capital in the industrial zones of the province in 2013, 2014
and 2015, respectively were 99.6%, 99.65% and 76.68%.
(7). To determine the factors affecting the satisfaction of investors in industrial
zones in Thai Nguyen province, the author and her partners have conducted a survey of
246 investors holding management positions in 82 enterprises in operation in the
industrial zones in the province by the questionnaire. The number of valid questionnaires
collected has been 236. Based on primary information collected from the questionnaires,
the author has compiled and analyzed the survey samples (236 respondents) based on the
criteria of gender, work position, number of years of work experience. The study has also
synthesized, analyzed some general characteristics of the 82 enterprises in operation in
the industrial zones, such as the location of the enterprise, type of enterprises (enterprises
with 100% foreign capital account for 60.98%, enterprises with 100% domestic capital
account for 39.02%), Business categories (enterprises operating in the sector of
manufacture and processing account for 93.9%, enterprises operating in the service sector
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account for 3.66%, enterprises in the field of Construction account for 2.44%), the
number of operation years of enterprises, their capital investment and number of
employees. Through the collection of information on employee scale and capital scale of
the surveyed enterprises, the study has found that the majority of businesses in operation
in the industrial zones of the province are enterprises of small and medium scales, and the
proportion of FDI enterprises in the total enterprises was more than 60%.
(8). The study has entered the data on satisfaction levels of 236 investors on the
industrial zones under 5-point Likert scale into SPSS 20.0 software. Through the processing
steps in SPSS, the study has showed the average value of the evaluation of the investors of
each items and their standard deviation. Before putting 6 scales (TAN, REL, RES, ASS, EMP
and SAT) with 42 observed variables into exploration factor analysis model, the study had
tested the quality of these scales and had eliminated 4 observed variables of RES scale. The
study has carried out exploration factor analysis for the scales (independent variables)
including TAN, REL, RES, ASS, EMP. The analysis result showed the KMO coefficient
equal to 0.831, and Bartlett test had statistical significant of 0.0000, which meaned that the
exploratory factor analysis model was suitable for real data, and observed variables were
correlated linearly with the representative factors. EFA analysis results also showed that there
were 6 elements extracted at Eigenvalue of 1,076, Eigenvalue of these 6 elements had the
value of more than 1, therefore the number of factors that had been identified is 6. Besides,
the total variance extracted is 62.722% (greater than 50%). This meaned that 62.722% change
of the factors explained by the observed variables (the items). Based on the results shown in
Rotated Component Matrix Table, the study has shown that there were six factors that
represent the issues affect the satisfaction of investors with the observed variables of factors
arranged differently from initial theoretical models, namely: F_ABI; F_TAN; F_RES;
F_UND; F_EMP; F_CRE. The results of exploratory factor analysis for the dependent
variable (SAT) showed the KMO coefficient equal to 0.712 satisfying the conditions of
0
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