ESP 4 - IE - Unit 2 + 4 Revision

What does "Foreign Direct Investment (FDI)" refer to?

• Investment in a country made by local businesses

• Investment made by foreign entities in a local business

• Government subsidies for local businesses

• Investment in foreign stock markets

Answer explanation

Foreign Direct Investment (FDI) specifically refers to investment made by foreign entities in a local business, distinguishing it from local investments or government subsidies.

What is the main purpose of a "Free Trade Agreement (FTA)"?

• To raise tariffs between participating countries

• To create new national markets

• To reduce regional conflicts

• To reduce or eliminate trade barriers between countries

Answer explanation

The main purpose of a Free Trade Agreement (FTA) is to reduce or eliminate trade barriers between countries, facilitating easier and more efficient trade.

What does "Rules of Origin (ROOs)" determine?

• Whether a product can be taxed

• The origin of a product for customs purposes

• The price of a product in different markets

• The number of workers needed for production

Answer explanation

"Rules of Origin (ROOs)" determine the origin of a product for customs purposes, which is crucial for applying tariffs and trade agreements. This makes the second option the correct answer.

The "____" rule allows products made from raw materials in one country to be considered as originating in another, under certain conditions.

Answer explanation

The 'cumulation' rule allows products made from raw materials in one country to be considered as originating in another country, facilitating trade by recognizing the contribution of multiple countries in the production process.

In countries that apply a "____" for FDI, certain sectors are closed to foreign investment, while others are open.

Answer explanation

In countries using a 'Negative List System' for FDI, specific sectors are explicitly closed to foreign investment, while all others are generally open. This contrasts with a positive list system, where only listed sectors are open.

The Vietnamese government uses "____" to attract foreign businesses by offering benefits like infrastructure and favorable legal conditions.

Answer explanation

The correct choice is 'Special Economic Zones' as these are designated areas where the Vietnamese government provides incentives like improved infrastructure and favorable legal conditions to attract foreign businesses.

What is the primary reason for Vietnam’s increasing foreign direct investment (FDI) in recent years? (Unit 4)

• Vietnam has a higher GDP than China.

• Vietnam’s labor force is more skilled than other ASEAN countries.

• Vietnam is benefiting from the disruption of supply chains due to China’s “Zero-Covid” policy.

• The Vietnamese government has eliminated all tariffs for foreign companies.

Answer explanation

Vietnam's FDI has surged due to supply chain disruptions caused by China's 'Zero-Covid' policy, prompting companies to seek alternative manufacturing locations, making Vietnam an attractive option.

Choose the correct definition for: Decoupling

• The separation of a country's economic reliance on another, often due to political tensions.

• The process of increasing economic ties between countries.

• The act of raising tariffs on goods from specific countries.

• A method used to boost local economic growth by increasing exports.

Answer explanation

Decoupling refers to the separation of a country's economic reliance on another, often due to political tensions. This definition highlights the shift away from dependency, making it the correct choice.

The process of businesses in similar industries clustering together in a specific geographic area to reduce costs, share resources, and benefit from proximity is known as ___________.

Answer explanation

The correct term for the clustering of businesses in similar industries to reduce costs and share resources is 'agglomeration'. This phenomenon allows companies to benefit from being close to each other.

The Vietnamese government is also quite consistent in enforcing the ___________, providing investors with the assurance that they will know what to expect under the current political system, which looks set to continue for the foreseeable future.

Answer explanation

The correct choice is 'rule of law' as it refers to the consistent enforcement of laws, which provides investors with stability and predictability in the political system.