The Effects of ODA in Infrastructure in FDI Inflows in Provinces of Vietnam, 2002-2004

The study investigates the impacts of official development assistance (ODA) on the inflows of foreign direct investment (FDI) in 64 provinces of Vietnam in 2002–2004. These impacts are examined using both the two-stage least squares method and the fixed effects/random effects model. The regression results give evidence of the positive impacts of ODA in infrastructure on FDI inflows, not only by direct channels, but also by indirect channels through improving the human capital base of the respective provinces. However, the short term impacts of the current level of ODA disbursement are ambiguous. Robust evidence only proves the long-term impacts of ODA in infrastructure on FDI attraction. At the donor level, we found that Japanese ODA has a positive and significant impact on the allocation of the FDI of Japanese private investors in both the short-run and