Breakthrough in economic institutions, initiating the fourth wave of FDI

The February 2025 issue of the Financial Times assessed Viet Nam as one of the fastest-growing economies in the world, averaging about 7% per year since 1990, with FDI being a crucial driving force.

Unforgettable milestones

Over nearly 40 years of attracting FDI, since January 9, 1988, when the Law on Foreign Investment came into effect, the period 1988–2000 was considered the starting phase, with the first FDI licence granted in Ba Ria–Vung Tau (1988).

From 1991, especially after February 3, 1994, when US President Bill Clinton announced the lifting of the trade embargo on Viet Nam, FDI began to increase rapidly, with project numbers and registered capital continuously setting new records. Entrepreneur Do Cao Bao, Member of the Board of Directors and Co-founder of FPT Group, recalled the lively atmosphere when US IT giants such as IBM, DEC, HP, Compaq, Microsoft, and Oracle flocked to Viet Nam to meet, explore, assess and seek partners. “At that time, IBM was still the largest technology company in the world, a symbol of American technology. When IBM Viet Nam was established, they sent three European-American executives from the US to directly manage it. The first lessons in business and customer management models that we learned were from them,” Bao shared.

During this period, Viet Nam’s GDP grew by an average of 7.56% per year, with GDP in 2000 doubling that of 1990 (2.07 times higher). This was the first FDI “wave”: somewhat cautious, but full of excitement.

In the 2001–2010 period, registered capital and implemented capital were 3.32 and 2.85 times higher, respectively, than in 1991–2000. The FDI sector played an important role in shifting the growth model from extensive to intensive. In 2006, Viet Nam welcomed its first billion-dollar projects from Intel (the US) and steelmaker Posco (the Republic of Korea). In 2008, registered capital reached a record nearly 72 billion USD. That year also marked Samsung, currently the largest FDI investor in Viet Nam, starting construction of its first factory in Bac Ninh, signalling the second wave.

The third wave (2011–2020) saw total registered capital reach 270.69 billion USD, with implemented capital at 152.3 billion USD – not the leap of 2005–2008, but steady growth. Mergers and acquisitions (M&A), starting in 2014, gradually became a new investment trend. The COVID-19 pandemic in 2020 caused inevitable disruption to the global economy. Yet Viet Nam’s economy in general, and FDI inflows in particular, avoided recession.

Between 2021 and 2023, total registered FDI reached 94.98 billion USD, with 65.32 billion USD implemented. In 2023, the FDI sector contributed 16.1% of total social investment. Global corporations such as Apple, Dell, Foxconn, Pegatron, Nike shifted supply chains and production to Viet Nam. Major electronics and semiconductor groups like Samsung, Synopsys, Qualcomm, Infineon, Amkor, AND Nvidia expanded cooperation and investment. These were optimistic signs of the fourth wave. In 2024, registered FDI reached 38.23 billion USD, with 25.35 billion USD implemented – the highest level to date. In 2025, by June 30, registered FDI stood at 21.52 billion USD, up 32.6% year-on-year; implemented FDI was estimated at 11.72 billion USD, the highest six-month figure of the 2021–2025 period.

Of course, the FDI picture has not been without shadows. Some giant projects remained only on paper: Guang Lian Steel (Taiwan–China) in Dung Quat EZ, Quang Ngai, once with registered capital inflated to 4.5 billion USD, had its licence revoked in 2016; the Nam Van Phong mega-project (Khanh Hoa) with committed capital of 6–8 billion USD was suspended.

Expectations for the fourth wave of FDI

There is no doubt that FDI has contributed significantly to Viet Nam’s socio-economic development and international economic integration. In 1995, domestic enterprises and FDI enterprises contributed 73% and 27%, respectively, to exports. Today, the ratio has reversed, with the FDI sector accounting for over 70%. In the early days, most capital was invested in labour-intensive, low value-added sectors such as garment and footwear processing, whereas by the end of 2024, cumulative investment in manufacturing and processing industries had risen to nearly 50%.

To leverage this momentum, Resolution No. 50-NQ/TW of the Politburo on foreign investment cooperation strategy to 2030 set more ambitious goals, including raising the share of investment from the United States and increasing by 50% the number of multinational corporations among the world’s top 500 ranked by Fortune (the US) that have a presence and operations in Viet Nam

To push the “fourth wave” to its peak, the prerequisite is a breakthrough in economic institutions.

Phan Huu Thang, former Director-General of the Foreign Investment Agency

To achieve these goals and truly drive the “fourth wave,” Phan Huu Thang, former Director-General of the Foreign Investment Agency (Ministry of Planning and Investment, now Ministry of Finance), emphasised that the prerequisite is a breakthrough in economic institutions. According to him, Resolution No. 57-NQ/TW of the Politburo on orientations for science, technology and innovation development to 2030 is one such breakthrough, introducing tax incentives, financial support and administrative reforms, shortening investment and licensing procedures. It also enhances Viet Nam’s attractiveness to FDI corporations in sectors such as semiconductors, digital technology, and artificial intelligence applications.

At the same time, by encouraging enterprises and research institutes to increase investment in research and development (R&D), the resolution helps improve production technology quality and the application of new technologies. It also promotes the establishment of linkages and international cooperation in science and technology, connecting Viet Nam to global resources, technologies and markets; and sets requirements for a complete legal framework and a monitoring and periodic evaluation system for the effective use of capital in science and technology.

Naturally, for the resolution to be truly effective, much remains to be done. For example, when domestic supporting industries have not developed quickly enough, when training of high-tech human resources and linking top Vietnamese firms with FDI enterprises have not been given due attention, then even with goodwill, it will not be feasible for FDI investors to transfer “core” technologies.

Clearly, efforts to build and strengthen a transparent, open and predictable business environment must be further intensified. In the strong digitalisation trend, the entire investment process – from registration and licensing to project operation – needs to be carried out through a national digital platform, integrating accurate information on planning, logistics costs and land policies. Alongside this is the task of building a contingent of civil servants who are both virtuous and competent, capable of meeting work requirements and the urgent demands of today’s reform process.

If these factors are implemented and coordinated effectively, FDI flows will certainly continue to surge.

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