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RESEARCH THINKTANK


Howrefugees foster foreign investment


CROSS-BORDERTRADE SUBJECT


REFUGEES HAVE BECOME ADEPT AT RISING ABOVE DIFFICULT SITUATIONS TO STRENGTHEN INTERNATIONAL INVESTMENT LINKS, WRITES PIERRE-LOUIS VEZINA


Refugees demonstrate remarkable drive. They have experienced perse- cution and harrowing political conditions and yet they are more entrepreneurial than anyone else. And they often excel. Examples include Madeleine Albright in government, Sergey Brin in technol- ogy, Albert Einstein in science or Wyclef Jean in music. In this piece we show that refu-


gees also contribute to the economic development of their origin coun- tries, sometimes many years after they have left, by fostering foreign direct investment.


Evidence fromthe Vietnamese Boat people David Thai fled Saigon by boat in 1975, when the communist North invaded the South. At age six he found himself in Seattle. There he witnessed the success of Starbucks. Years later he established his own chain of coffee shops in Vietnam, Highlands Coffee. It nowoperates 230 coffee shops. Than Phuc also fled Vietnam in


1975. As the former CEO of Intel Vietnam, he was responsible for the first bigtech foreign investment in the country. In 2006 Intel invested $1bn in a chip testing facility that created 4000 jobs. Henry Nguyen was not even two


years old when he landed in the US. He grew up flipping burgers in suburban Virginia. In 2014, he brought McDonald’s to Vietnam. David Duong’s family had to be


92


rescued at sea after fleeing on a small boat. They started a recycling business after settling in California. In 2015 David expanded into Vietnam with a $450m investment that created more than 400 jobs. Our research suggests that these


are not isolated examples. The Fall of Saigon triggered an exodus of hundreds of thousands of Vietnamese. The first wave of some 125,000 Vietnamese refugees were admitted to the US in 1975. Our research shows that FDI to


Vietnam in the past 15 years came mostly from those US cities that hosted greater numbers of refugees. A 10% increase in 1975 Vietnamese refugees is associated with a 0.41% increase in FDI to the south of Vietnam between 2005 and 2015. These numbers are based on data from fDi Markets and from the Office of Refugee Resettlement, a division of the US Department of


Health and Human Services. These effects are not driven by


the fact that Vietnamese refugees all chose to live in Los Angeles or New York, to be best placed to do interna- tional business. When refugees first settled, there was no prospect of doing business with Vietnam due to US sanctions. Moreover, refugees did not even decide where to settle down.


Congress mandated that the


refugees be scattered across the country, to avoid a similar agglomer- ation as had occurred with Cubans in Miami. Vietnamese refugees ended up dispersed across 400 different locations in the US, and in places like Houston and Minneapolis. These initial resettle- ment locations persisted, as the first comers attracted waves of refugees in the following 20 years. It is this initial quasi-randomresettlement process that allows us to interpret


www.fDiIntelligence.com February/March 2021


Illustration by John Holcroft


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