Foreign Direct Investment

Vietnam's FDI inflows in 2022 amounted to USD 17.9 billion, up by 14.3% year-on-year and above their pre-pandemic level, while the total stock of FDI reached USD 210.4 billion (around 51.8% of the country’s GDP), according to the UNCTAD's World Investment Report 2023. 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 Vietnam attracted around USD 36.6 billion in foreign investment in 2023, marking a 32.1% year-on-year increase. During the same year, foreign investors allocated funds to 18 out of 21 economic sectors in the country, with processing-manufacturing receiving USD 23.5 billion or 64.2% of the total FDI capital, a rise of 39.9% compared to the previous year. In 2023, foreign investments in Vietnam originated from 111 countries and regions, with Singapore leading the way with over USD 6.9 billion, constituting 18.6% of the total FDI inflow.

Vietnam has emerged as one of the fastest-growing and relatively stable economies in Asia in recent years. The country boasts several favorable business conditions, including a stable political system, a consistent track record of high economic and market growth, a plentiful workforce of young and skilled laborers, strategic proximity to East Asia's top emerging economies, and a relatively open FDI environment. Its business-friendly policies distinguish it among 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 labor, restrictive labor 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 labor 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 defense. 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 46th among the 132 economies on the Global Innovation Index 2023 and 59th out of 184 countries on the latest Index of Economic Freedom.