Viet Nam's shift from mere FDI attraction to strategic selection

In reality, although FDI inflows continue to maintain positive growth momentum, the added value generated remains limited, linkages with domestic enterprises are still weak, and competitive advantages are largely based on geographical location. This means Viet Nam is still positioned at the "bottom" of the global value chain, where profit margins are low and technology spillover effects remain modest.

Pressure of strategic selection

Looking back at the 2021–2025 period — marked by post-COVID-19 recovery and macroeconomic stabilization amid global uncertainties — the FDI landscape has shown many bright spots. Disbursed FDI rose from US$19.7 billion in 2019 to US$27.6 billion in 2025, reflecting continued confidence among foreign investors in Viet Nam's investment environment.

However, after nearly 40 years of attracting and managing FDI (1987–2025), despite achievements being "predominantly positive," Viet Nam has reached a point where it needs to transform its strategy. The focus should no longer be on attracting FDI in terms of quantity, but on selecting high-quality projects capable of generating spillover effects across the entire economy.

To achieve this orientation, several key priorities should be addressed: institutional breakthroughs to strengthen policy credibility; selective FDI attraction in strategic industries; synchronized infrastructure upgrades, especially in energy and digital infrastructure; development of a high-tech workforce; stronger linkages between FDI enterprises and domestic firms; and promoting green FDI associated with innovation.

If these solutions are implemented comprehensively, under the prerequisite of "utilizing FDI while ensuring the building of an independent and self-reliant economy associated with national defense, security, and social order," in line with Politburo's Resolution No. 50-NQ/TW dated August 20, 2019, FDI will continue to serve as an important resource for Viet Nam in its new development phase.

However, the current context poses numerous challenges. First is increasingly fierce global competition for FDI, as many countries simultaneously adjust policies to gain advantages. In addition, investment relocation trends such as "friend-shoring" and "near-shoring" are causing capital flows to become more concentrated and selective. At the same time, pressures related to green transition and the need to absorb and master high technologies are growing, requiring Viet Nam not only to attract capital but also to enhance its absorptive capacity.

As a result, the attraction of "new-generation FDI" needs to be more clearly oriented toward green investment, high technology, innovation, and deeper participation in global value chains. Experiences from Singapore and South Korea show that success comes from consistent strategies. Singapore relies on transparent institutions to attract high-tech FDI, while South Korea closely links FDI with domestic enterprises to form large conglomerates. Thanks to these approaches, they have not only expanded FDI inflows but also effectively utilized foreign capital to boost exports and establish globally competitive manufacturing hubs. These are valuable lessons for Việt Nam in reshaping its FDI attraction and utilization strategy in the coming years.

Although shortcomings in Viet Nam's FDI attraction and utilization have been identified through multiple reviews, they have yet to be comprehensively addressed. FDI quality remains relatively low, with most investment concentrated in processing and assembly activities that generate limited added value. Connections between the FDI sector and domestic enterprises remain weak, reflected in low localization rates and limited technology transfer. Furthermore, environmental pressures are increasing, as several projects have already caused serious pollution incidents, while future risks remain significant.

Regarding administrative procedures, although regulations are relatively clear, delays still occur in practice, indicating that the "one-stop-shop" mechanism in FDI management at both ministerial and local levels has not operated effectively. The process of seeking opinions among state management agencies on issues arising during the operations of FDI enterprises also remains slow, affecting project implementation and production expansion while creating a less favorable impression of Viet Nam's investment environment.

Suggestions to attract new-generation FDI inflows

Supporting industries remain weak, human resources are insufficient, and infrastructure is still underdeveloped — shortcomings in administrative procedures are becoming a serious bottleneck. If unresolved, these factors will undermine the competitiveness of the investment environment, especially as Viet Nam seeks to attract new-generation FDI associated with high technology and green development.

Global developments are also exerting strong impacts on FDI flows, particularly through the restructuring of supply chains under increasingly complex and unpredictable geopolitical pressures. The Fourth Industrial Revolution is entering a new phase centered on AI, semiconductors, and automation, while also imposing higher requirements for green investment, Net Zero commitments, and ESG (environmental, social, and governance) standards. Meanwhile, competition among countries to attract FDI is becoming increasingly intense, forcing economies to continuously upgrade their investment environments.

Under such conditions, Viet Nam needs to further enhance the competitiveness of its investment climate, as FDI remains an important source of capital for growth. However, to maximize long-term benefits, the country must clearly define strategic objectives and reform management approaches. The overarching view is that FDI is an important driver but cannot replace domestic capacity, while the focus must shift from quantity-based attraction to prioritizing quality, innovation, and sustainable development.

Accordingly, by 2030, the key focus should be improving FDI quality and increasing localization rates; during the 2035–2045 period, Viet Nam should aim to become a regional technology hub, with FDI shifting strongly toward R&D and innovation.

To realize this vision, comprehensive solutions must be implemented simultaneously: institutional breakthroughs associated with policy stability and investor protection; administrative reform through digitalization, shorter licensing timelines, and faster handling of operational issues, eventually moving toward data-driven governance. At the same time, selective FDI attraction should focus on priority sectors such as semiconductors, AI, renewable energy, and supporting industries, with clear criteria regarding technology, ESG, and domestic linkages.

Infrastructure will continue to be a critical pillar, with emphasis on synchronized transport infrastructure development, energy security, and digital infrastructure such as 5G and data centers. Alongside this, Viet Nam needs to develop high-quality human resources through training aligned with the demands of the Fourth Industrial Revolution, strengthening cooperation between businesses and educational institutions, and attracting international talent.

In addition, stronger linkages between FDI enterprises and domestic firms are needed through the development of supporting industries, especially among small- and medium-sized enterprises, while encouraging localization and fostering leading domestic enterprises. Incentive policies also need to be redesigned to support R&D and innovation rather than relying solely on tax incentives, while promoting green FDI in line with ESG standards and carbon emission reduction goals.

Based on these solutions, the implementation roadmap is divided into three phases: 2025–2030 focusing on institutional improvement and attracting high-tech FDI; 2031–2035 upgrading Viet Nam's position in global value chains; and 2036–2045 establishing and effectively operating innovation centers that meet the requirements of a developed economy.

These breakthrough recommendations highlight the urgent need to change the approach to FDI management and attraction. First, the "one-stop-shop" mechanism must be implemented substantively to shorten administrative processing time, reduce compliance costs, and enhance transparency. This is not merely an administrative reform, but also a direct competitive factor in attracting green and high-tech FDI, whose investors place high demands on speed and policy stability.

At the same time, developing new industrial parks and gradually transforming existing ones into "eco-industrial parks" is a suitable direction in line with sustainable development trends. This model helps optimize resource use, reduce emissions, protect the environment, and create competitive advantages in attracting high-quality FDI, especially as ESG standards increasingly become a "mandatory ticket" for global capital flows.

Viet Nam is now standing at a critical turning point — moving from simply "attracting FDI" to "governing and strategically selecting FDI." If implemented effectively, by 2030 the economy could undergo a substantial upgrade, while by 2045 the goal of becoming a developed country would have a much stronger foundation, not only in terms of scale but also in the quality of growth and internal capabilities.

* Dr. Phan Huu Thang, former director of the Foreign Investment Agency under the former Ministry of Planning and Investment (now the Ministry of Finance)./.