Investment Opportunities for Foreign Investors in Vietnam

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Investment Opportunities for Foreign Investors in Vietnam

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1. Introduction:

Vietnam has emerged as a promising destination for foreign direct investment (FDI), undergoing a remarkable economic transformation since implementing the Đổi Mới (Renovation) policy in 1986. This landmark policy opened the doors to FDI, playing a crucial role in driving the nation’s growth and development.

Vietnam’s economy has demonstrated strong and stable growth, attracting the attention of international investors seeking high-potential investment opportunities. With its strategic location at the heart of Southeast Asia, Vietnam serves as a key hub for manufacturing and trade, benefiting from a young, abundant, and increasingly skilled workforce.

Moreover, Vietnam actively participates in multiple free trade agreements, not only expanding market access opportunities but also promoting investor-friendly reforms.

This article aims to provide a comprehensive overview and in-depth analysis of the available investment opportunities for foreign investors interested in the Vietnamese market. The article's structure follows a chronological approach, exploring the history of foreign investment in Vietnam, assessing the current landscape with a focus on development cooperation and potential investment sectors, and offering predictions for a new era of investment.

2. History of Foreign Investment in Vietnam:

The First Wave of Investment

Post-Subsidy Period and the Impact of the Đổi Mới (Renovation) Policy (1986)

The "Đổi Mới" policy, initiated in 1986, marked a fundamental shift in Vietnam’s economic model, transitioning from a centrally planned economy to a socialist-oriented market economy. Before Đổi Mới, Vietnam’s international trade was primarily limited to exchange programs with other socialist countries. However, with the introduction of Đổi Mới, the economy opened up, trade was liberalized, and foreign investment began to flow in.

A significant milestone during this period was the introduction of the "Law on Foreign Investment" in 1987, which provided a formal legal framework for foreign direct investment (FDI) in Vietnam. Early reforms also allowed provincial governments to establish trading companies, breaking the central government's monopoly on foreign trade. Notably, the 1987 Foreign Investment Law permitted foreign investors to own 100% equity and included a commitment not to nationalize assets—an important move to build trust with international investors.

However, in the first three years after Đổi Mới (1988-1990), FDI attraction remained modest, with only 211 licensed projects and a total registered capital of $1.6 billion. One of the early notable foreign investments was from Telstra (Australia) in the telecommunications sector, highlighting initial investor interest in Vietnam’s potential. The Đổi Mới policy brought about a revolutionary shift, laying the legal foundation and changing perspectives to accept and attract FDI. Nevertheless, it took time for these policies to generate significant investment flows. The initial caution of foreign investors was understandable, given that Vietnam was a newly opened and transitioning economy.

Impact of the Normalization of Relations with the United States and the Lifting of the Trade Embargo (1994)

The U.S. decision to lift its trade embargo on Vietnam on February 3, 1994, was a pivotal factor, opening a new chapter in bilateral economic relations and facilitating FDI inflows. This was followed by the formal normalization of diplomatic relations between Vietnam and the United States in 1995, further strengthening bilateral ties.

After the embargo was lifted, Vietnam’s exports to the U.S. experienced steady growth. Particularly, the entry into force of the U.S.-Vietnam Bilateral Trade Agreement (BTA) in December 2001 provided a major boost to Vietnam’s economic growth. By 2022, total bilateral trade between Vietnam and the U.S. had reached an impressive $139 billion, more than 300 times the modest figure recorded in 1995. The U.S. became Vietnam’s largest export market and its second-largest trading partner globally.

As of 2023, total cumulative investment from U.S. companies in Vietnam stood at approximately $12 billion across 1,374 projects, making the U.S. one of the top 10 foreign investors in the country. The lifting of the embargo and normalization of relations not only opened significant economic opportunities with the U.S. but also facilitated Vietnam’s deeper integration into regional and global markets. This was exemplified by Vietnam’s accession to the Association of Southeast Asian Nations (ASEAN) in 1995 and the Asia-Pacific Economic Cooperation (APEC) forum in 1998. This historic decision by the U.S. not only provided Vietnam with a vast export market but also significantly enhanced its international standing, boosting investor confidence from many other countries.

Initial FDI Attraction Policies and Achievements

To attract foreign investment, Vietnam continuously adjusted and improved its legal framework, with the 1987 Foreign Investment Law serving as the foundation, followed by amendments in 1990, 1992, 1996, and 2000. Early FDI attraction policies focused on providing tax and land incentives while simplifying administrative procedures to encourage capital and technology inflows.

Between 1991 and 1995, Vietnam witnessed a significant increase in FDI, with 1,409 licensed projects and a total registered capital of $18.3 billion. In 1995 alone, 415 investment projects were approved, with nearly $8 billion in registered capital, marking a strong start in attracting foreign capital.

However, the following period (1996-2000) saw a decline in both registered capital and FDI project scale, partly due to regional and global economic factors. While the early FDI attraction policies yielded positive results, particularly in the early 1990s, Vietnam’s investment environment still had many limitations and was vulnerable to external economic fluctuations. This underscored the need for continued policy improvements and adjustments to maintain and promote sustainable FDI inflows.

Period of Prosperous Growth (1995-2016)

Economic and Political Factors Driving FDI Growth (ASEAN Accession, U.S.-Vietnam Bilateral Trade Agreement, WTO Membership)

The period from 1995 to 2016 saw a significant surge in FDI in Vietnam, driven by crucial economic and political milestones. Vietnam's accession to ASEAN in 1995, the signing of the Bilateral Trade Agreement (BTA) with the U.S. in 2000, and its entry into the World Trade Organization (WTO) in 2007 were key turning points that provided strong momentum for FDI inflows.

Vietnam’s ASEAN membership enabled participation in the ASEAN Free Trade Area (AFTA), reducing tariffs and enhancing regional economic integration. The BTA with the U.S. opened a vast market and facilitated both trade and investment. Particularly, Vietnam's accession to the WTO in 2007 marked its deep integration into the global economy, strengthening its international credibility and creating a transparent investment environment based on international rules and regulations.

Additionally, Vietnam signed multiple free trade agreements with major partners such as China, Japan, South Korea, and Chile, diversifying its markets and attracting FDI from various sources. The proactive approach to international economic integration fostered a favorable business environment, reduced risks, and enhanced investor confidence in Vietnam as an investment destination.

Industrial and Service Sector Development Driven by FDI

During this prosperous growth phase, FDI played a crucial role in establishing and expanding various industries and services in Vietnam. Industries such as oil and gas, automobiles, motorcycles, and electronics flourished thanks to foreign capital and technology. Traditional industries like textiles, footwear, and food processing were also upgraded and expanded.

Notably, the manufacturing and processing sector consistently attracted the largest share of FDI, reflecting foreign investors' interest in Vietnam’s production potential. FDI also spurred the development of high-quality service industries, including banking, insurance, legal consulting, logistics, education, healthcare, and tourism, contributing to economic diversification.

Major investors from Japan, South Korea, and Taiwan heavily invested in electronics, automobile, motorcycle, and footwear manufacturing, transforming Vietnam into a key regional production hub. Leading global electronics corporations such as Samsung and LG exemplified large-scale investments in Vietnam, establishing major production facilities and creating tens of thousands of jobs. Clearly, FDI not only provided essential capital but also facilitated technology transfer, advanced management skills, and expanded export markets, helping Vietnam diversify its economic structure and enhance its global competitiveness.

FDI Contributions to Economic Growth and Structural Transformation

The substantial increase in FDI during 1995-2016 made a significant contribution to Vietnam's economic growth and structural transformation. The FDI sector's share of Gross Domestic Product (GDP) rose from 6.3% in 1995 to 19.6% in 2017, highlighting its growing importance. The FDI sector also made substantial contributions to state revenue through taxes and fees.

Thanks to FDI, Vietnam’s annual GDP growth rate reached high levels, such as 8.2% after a decade of Đổi Mới. FDI also played a crucial role in boosting exports, accounting for an increasing share of the country’s total trade volume. Furthermore, FDI-generated employment opportunities helped reduce poverty and improve living standards nationwide.

Thus, FDI was not just a vital source of capital but also a key driver of Vietnam’s economic growth during this period, contributing both quantitatively—through macroeconomic indicators—and qualitatively—through economic restructuring, job creation, and enhanced national competitiveness.

The Recession Period to the Present

Analysis of Factors Leading to the Decline in Foreign Investment After 2016 (Competition, Policy Changes, External Factors)

Although FDI inflows into Vietnam continued to grow after 2016, there were periods of slower growth or fluctuations due to the impact of various internal and external factors. One major reason was the increasing competition from other countries in the region and globally in attracting foreign capital.

Additionally, changes in Vietnam’s FDI policies, such as prioritizing higher-quality and technology-intensive projects, have led to shifts in the structure and number of FDI projects. External factors, including trade tensions between major economies (notably the U.S.-China trade war), the COVID-19 pandemic, and global geopolitical instability, also significantly affected FDI inflows into Vietnam.

Past global financial crises, such as the 2008–2009 financial crisis and the 1997–1998 Asian financial crisis, had lasting impacts on Vietnam’s FDI inflows. Clearly, the post-2016 period has presented a more complex FDI landscape, requiring flexible and proactive policies from Vietnam to address these new challenges.

Impact of Global Events such as Trade Wars and the COVID-19 Pandemic

Recent global events, particularly the U.S.-China trade war, have led to supply chain reallocation worldwide, with Vietnam emerging as a key beneficiary of this trend. Many companies relocated or expanded their manufacturing operations in Vietnam to avoid U.S. tariffs imposed on Chinese goods. However, this trade war also increased Vietnam’s trade deficit with the U.S.

The COVID-19 pandemic, which erupted in 2020, severely disrupted global supply chains, affecting production and investment worldwide, including in Vietnam. Despite these challenges, Vietnam remained an attractive FDI destination due to its effective pandemic control measures and stable political environment. Additionally, the growing trend of nearshoring (relocating production closer to consumption markets) may also influence FDI flows into Vietnam.

These global events have created both opportunities and challenges for Vietnam in attracting FDI. Vietnam must leverage supply chain restructuring while simultaneously managing risks and overcoming challenges posed by external uncertainties.

Recent FDI Trends and Changes in Investment Structure

In recent years, FDI in Vietnam has increasingly concentrated in the manufacturing and high-tech sectors. Investors from South Korea, Singapore, Japan, and China remain Vietnam’s largest FDI partners, continuing to inject capital into various economic sectors. Notably, compared to previous periods, real estate investment has declined.

Vietnam is currently making strong efforts to attract FDI into high-value-added sectors, such as information technology, renewable energy, and research & development, to enhance competitiveness and drive sustainable growth. These structural investment shifts reflect a positive transition, aligning with Vietnam’s strategy for deeper and more sustainable economic development.

A luxury boutique on Đồng Khởi Street, Saigon, Vietnam.

Forecasting a New Era

Potential Factors for FDI Recovery and Growth (Supportive Policies, Trade Agreements, Supply Chain Shifts)

Vietnam is on the verge of a new era of FDI attraction, with several promising factors for recovery and strong growth. The Vietnamese government continues to demonstrate a strong commitment to improving the investment environment, simplifying administrative procedures, and creating the most favorable conditions for foreign investors.

Vietnam’s participation in next-generation free trade agreements (FTAs), such as CPTPP, EVFTA, and RCEP, opens new opportunities to access large markets and attract more FDI inflows. The global supply chain shift, particularly the relocation of manufacturing from China, presents a golden opportunity for Vietnam to establish itself as a major regional and global manufacturing hub.

Additionally, Vietnam maintains a competitive labor cost advantage while possessing a young, dynamic, and increasingly skilled workforce. With these inherent strengths and proactive policy planning, Vietnam has great potential to attract a new wave of FDI, particularly in high-tech and high-value-added industries.

Outlook for High-Tech Sectors and Emerging Industries

In this new investment era, the semiconductor industry is emerging as a promising sector in Vietnam, attracting the attention of leading global tech corporations such as Nvidia and Intel. The Vietnamese government has introduced special incentives to attract investment in this field, recognizing its strategic importance for future economic development.

Additionally, industries such as renewable energy (wind and solar power), information technology and telecommunications, high-tech healthcare, and smart agriculture are projected to experience significant growth and attract substantial FDI.

Vietnam is implementing a clear strategy to prioritize FDI in high-tech industries, while also promoting technology transfer and the development of a highly skilled workforce to meet the demands of these sectors.

The new era of FDI in Vietnam is expected to focus on high-tech and emerging industries, generating higher value-added contributions to the economy and fostering long-term sustainable development for the country.

3. Present: Development Cooperation in the New Growth Phase

Economic Development Cooperation

Analysis of economic cooperation between Vietnam and countries/regions (ASEAN, the U.S., EU, Japan, South Korea, China)
In this new growth phase, Vietnam has established and strengthened extensive economic cooperation with various countries and regions worldwide. As an active member of ASEAN, Vietnam benefits from regional trade and investment agreements, facilitating the inflow of FDI from member states. Economic relations between Vietnam and the U.S. have grown significantly, especially after the two countries established a Comprehensive Strategic Partnership, opening up numerous cooperation opportunities in economic, trade, and investment sectors. The EU-Vietnam Free Trade Agreement (EVFTA) has also created new economic collaboration opportunities with the European Union by reducing tariffs and improving investment regulations. Japan and South Korea remain Vietnam’s key and traditional investors, focusing on manufacturing and high-tech industries, significantly contributing to the country’s economic development. China has increasingly become a major investment partner, particularly in manufacturing and processing sectors, leveraging cost advantages and market potential. This extensive economic partnership network has laid a solid foundation for development cooperation and diversified FDI attraction into Vietnam.
The role of free trade agreements (CPTPP, EVFTA, RCEP) in promoting investment cooperation
The free trade agreements (FTAs) that Vietnam has joined play a crucial role in promoting international investment cooperation. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) has allowed Vietnam to access major markets in the Asia-Pacific and the Americas with preferential tariffs, encouraging foreign investors to expand their operations in Vietnam to take advantage of these benefits. The EVFTA also facilitates trade and investment between Vietnam and EU member states through tariff reductions and improved investment regulations, attracting more European investors. The Regional Comprehensive Economic Partnership (RCEP), one of the world's largest trade agreements, enhances economic integration between Vietnam and Asia-Pacific countries, including key investment partners such as China, Japan, and South Korea, creating a vast and attractive free trade area. These FTAs not only reduce trade barriers but also drive institutional reforms, making Vietnam’s investment environment more transparent, stable, and appealing to foreign investors.

Potential and Attractive Investment Sectors

Manufacturing and processing industries (electronics, automobiles, textiles, and footwear)
The manufacturing and processing sector remains one of the top FDI-attracting industries in Vietnam, especially amid the ongoing global supply chain shift. Vietnam is gradually establishing itself as a key electronics manufacturing hub in the region, with major corporations like Samsung and LG continuing to expand their investments. The country’s textile and footwear industries maintain competitive advantages due to relatively low labor costs and trade incentives from FTAs. Additionally, Vietnam’s automotive industry is gaining increasing interest from foreign investors, especially as the domestic automobile market experiences significant growth.
Information and communication technology, digital transformation
The information and communication technology sector, along with the ongoing digital transformation across the country, presents a highly promising investment field that the Vietnamese government prioritizes for development and FDI attraction. Vietnam boasts a young, dynamic, and increasingly skilled workforce in the IT sector, a major advantage for attracting investors. Digital transformation is profoundly impacting all aspects of economic and social life in Vietnam, creating numerous investment opportunities in areas such as e-commerce, financial technology (fintech), cloud computing, and artificial intelligence (AI).
Renewable energy
Vietnam has significant potential for renewable energy, particularly wind and solar power, thanks to favorable natural conditions. The government has introduced various policies to promote renewable energy development, ensuring national energy security and reducing greenhouse gas emissions in alignment with international environmental commitments. Vietnam’s participation in the Just Energy Transition Partnership (JET-P) is expected to mobilize substantial capital from international partners to accelerate the growth of the domestic renewable energy sector.
High-tech agriculture
As a country with strong agricultural advantages, Vietnam is actively encouraging the application of advanced technology in agricultural production to enhance productivity, quality, and added value. Investments in agricultural processing, logistics infrastructure for agriculture, and the development of sustainable agricultural value chains offer significant potential for investors.
Service industries (healthcare, education, finance, logistics, tourism)
With a young population and a growing middle class, the demand for high-quality services such as healthcare, education, finance, logistics, and tourism in Vietnam is increasing rapidly. Logistics plays a vital role as a service industry supporting both manufacturing and trade, making it a highly promising investment sector.

Government Policies and Incentives

Tax, land, and other investment incentives for foreign investors
The Vietnamese government has introduced attractive incentive policies, including corporate income tax reductions, import tax exemptions, and land lease incentives, to attract foreign investment, particularly in priority sectors and economic zones. Investments in high-tech industries, large-scale projects, and projects in economically disadvantaged areas often receive higher levels of incentives. In addition to tax and land incentives, the government also offers support policies related to workforce training, infrastructure development, and investment promotion to facilitate foreign investors’ operations in Vietnam.
Efforts to improve the investment environment and simplify administrative procedures
The Vietnamese government continuously works to enhance the business and investment environment by simplifying administrative procedures to reduce barriers and costs for enterprises, including foreign-invested businesses. The development of e-government and online public services is a key initiative to increase transparency and administrative efficiency, making investment procedures more convenient. However, challenges remain regarding legal system complexity and law enforcement effectiveness, necessitating further strong reforms.
Selective FDI attraction strategy focusing on quality and technology
In the new development phase, Vietnam is shifting from a quantity-based FDI attraction approach to a quality-focused strategy, prioritizing high-tech, environmentally friendly projects that provide high added value to the economy. This strategy aims to enhance Vietnam’s economic competitiveness and promote long-term sustainable development.

Recent Reports and Statistics

Overview of FDI attraction in recent years (registered and implemented capital)
In recent years, Vietnam’s FDI attraction has maintained a positive growth trend. In 2023, the country attracted a total of USD 36.6 billion in registered FDI, marking a significant 32.1% increase from the previous year, with implemented capital reaching USD 23.18 billion. This growth trend continued in early 2025, demonstrating Vietnam’s strong appeal to foreign investors. In 2024, total FDI inflows reached USD 25.35 billion, a 9.4% increase compared to 2023, reaffirming Vietnam’s position as an attractive investment destination.
FDI structure by country, region, and investment sector
Vietnam’s FDI structure by country shows that South Korea, Singapore, Japan, and China are among the largest investors. By sector, manufacturing and processing consistently account for the highest share of total FDI, reflecting investor confidence in Vietnam’s manufacturing potential. Major cities like Hanoi and Ho Chi Minh City remain key FDI hubs, attracting large-scale and high-value projects.
Indicators assessing Vietnam’s investment environment and competitiveness
Vietnam is regarded as one of the most dynamic and open economies in Asia. The country’s Global Competitiveness Index (GCI) has improved significantly in recent years, reflecting the government’s efforts to enhance the business environment. However, challenges remain concerning infrastructure, workforce quality, and administrative efficiency, requiring further solutions to improve the investment climate.

4. Conclusion:

Vietnam offers numerous attractive opportunities for foreign investors, built on the foundation of a growing market, competitive costs, deep international economic integration, and government incentive policies. The potential for development in high-tech industries and emerging sectors such as renewable energy and high-tech agriculture further enhances Vietnam’s appeal. However, investors must also be aware of existing challenges, including legal and administrative barriers, underdeveloped infrastructure, the need for an improved workforce, competition from other countries in the region, and external uncertainties.

To maximize investment opportunities in Vietnam, foreign investors should conduct thorough market research and understand relevant legal regulations. Gaining in-depth knowledge of government incentive policies and investment support will help investors optimize their benefits. Additionally, identifying promising sectors and selecting those that align with their capabilities and strategic goals is crucial. Building strong relationships with local partners and authorities will facilitate more effective operations in the Vietnamese market. Lastly, careful risk assessment and management are essential to ensuring the success of investment projects. With continuous efforts to improve its investment environment and deepen international economic integration, Vietnam is set to remain an attractive destination for FDI in the coming years.

Although Vietnam currently has a relatively low per capita income, its large population makes it a highly potential market with strong purchasing power for investors looking to tap into consumer demand. As incomes rise, purchasing power is expected to grow significantly.

Additionally, income disparity among different social classes creates a diverse consumer market with multiple segments, providing opportunities for various industries to capitalize on.

Saigon 3/2025

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