Foreign Direct Investment

Vietnam's FDI inflows in 2023 amounted to USD 18.5 billion, up by 3.4% year-on-year and above their pre-pandemic level, while the total stock of FDI reached USD 228.9 billion (around 52.8% of the country’s GDP), according to the UNCTAD's World Investment Report 2024. Traditionally directed towards the light industry, FDI inflows quickly turn towards heavy industry, real estate, and tourism. Inflows are expected to continue, confirming the country's position as one of the most attractive countries in terms of FDI in Asia. The General Statistics Office reported that, in 2024, Vietnam approved 3,375 new projects worth USD 19.7 billion, marking a 1.8% increase in number but a 7.6% decrease in capital compared to the previous year. Additionally, 1,539 projects saw capital adjustments totalling USD 14 billion, up 11.2% in number and 50.4% in capital. Foreign investors spent about USD 4.54 billion on 3,502 capital contributions and share purchases, down 48.1% and 2.4% year-on-year. The processing and manufacturing sector led with USD 25.58 billion, representing 66.9% of the total and up 1.1%. Real estate followed with USD 6.31 billion (16.5% of the total, up 18.8%), while power production, distribution, wholesale, and retail received USD 1.42 billion and USD 1.41 billion, respectively. In the same year, Vietnam attracted investments from 114 countries and territories, with Singapore leading at nearly USD 10.21 billion, making up 26.7% of the total and increasing 31.4% year-on-year. South Korea ranked second with USD 7.06 billion, accounting for 20.7% of the total and up 37.5%. Other key investors included China, Hong Kong (China), and Japan. In terms of project numbers, China led with 28.3% of new projects, while South Korea topped the capital adjustments (22.8%) and capital contributions and share purchases (25.2%).

Vietnam has emerged as one of the fastest-growing and relatively stable economies in Asia in recent years. The country boasts several favourable business conditions, including a stable political system, a consistent track record of high economic and market growth, a plentiful workforce of young and skilled labourers, strategic proximity to East Asia's top emerging economies, and a relatively open FDI environment. Its business-friendly policies distinguish it from its Southeast Asian counterparts and foster a robust inflow of foreign capital. Despite boasting a relatively high level of FDI net inflows as a percentage of GDP compared to its regional counterparts, Vietnam confronts notable challenges within its investment climate. These challenges encompass widespread corruption, the entrenched dominance of state-owned enterprises (SOEs) in specific sectors, regulatory uncertainty across key industries, a weak and opaque legal framework, inadequate enforcement of intellectual property rights, a scarcity of skilled labour, restrictive labour practices, and sluggish government decision-making processes. Moreover, with significant reliance on inputs from the People’s Republic of China, Vietnamese manufacturing faces vulnerabilities related to forced labour risks within supply chains, although both the government and industry are actively engaged in addressing these concerns. Foreign and domestic private entities enjoy the privilege to establish and possess business enterprises in Vietnam and participate in various legal remunerative activities in unregulated sectors. However, Vietnam imposes statutory restrictions on foreign investment, such as foreign ownership limits (FOLs) and joint partnership requirements, particularly in sectors like banking, network infrastructure services, non-infrastructure telecommunication services, transportation, energy, and defence. Recent regulations, implemented in March 2021, specify 25 business lines where foreign investment is prohibited and outline market access requirements for 59 other business lines. Although Vietnam's Law on Investment stipulates equal treatment for foreign and domestic investors, foreign investors have voiced grievances regarding encountering additional obstacles in obtaining routine government approvals. Furthermore, the government maintains foreign ownership limits (FOLs) in industries deemed vital to national security. Vietnam ranks 44th among the 133 economies on the Global Innovation Index 2024 and 61st out of 184 countries on the latest Index of Economic Freedom.