Domestic capacity key to next phase of FDI attraction: expert

Domestic capacity key to next phase of FDI attraction: expert

Việt Nam News spoke with Nguyễn Đức Kiên about the shift, challenges in technology spillovers, and the outlook for foreign investment in 2026.

Nguyễn Đức Kiên, former head of the Prime Minister's economic advisory group. — Photo nhadautu.vn

As global minimum tax rules erode traditional tax incentives and supply chains are reshaped, Việt Nam is rethinking how it attracts foreign investment. Former government economic adviser Nguyễn Đức Kiên tells Việt Nam News reporter Mai Hương why infrastructure, skilled labour and deeper integration into global value chains will define the country’s next phase of FDI attraction.

As supply chains are reshaped and global minimum tax rules weaken tax incentives, how should Việt Nam position itself to attract foreign investment?

Over the past three years, tax incentives have no longer been the main policy tool for attracting investment. Instead, the Government has focused on improving infrastructure and preparing a skilled workforce for investors.

This shift reflects Việt Nam’s commitments under the global minimum tax framework and aligns with its obligations under bilateral agreements, particularly with partners such as the United States and the European Union.

The new approach helps avoid double taxation while ensuring that investors’ interests are protected. Despite global economic volatility in 2024 and 2025, total registered FDI in Việt Nam has remained relatively stable. Disbursement levels have also been positive, reflecting a policy framework that investors consider workable.

One issue often raised is that FDI in Việt Nam has had limited spillover effects into the domestic economy. What are the main bottlenecks?

The key bottleneck is that many Vietnamese companies are not yet strong enough to become suppliers or partners to large foreign investors.

For example, Vietnamese firms still struggle to produce highly specialised components required in advanced electronics manufacturing, where even relatively small parts require sophisticated technology.

Around a decade ago, when Samsung began building its supply chain in Việt Nam, even the production of certain specialised screws used in smartphones was beyond the capabilities of domestic companies. The investment required for a production line was not particularly large, but local firms lacked both capital and guaranteed markets.

Some businesses expected the Government or foreign investors to guarantee purchase contracts, but that is not compatible with a market economy. As a result, integrating deeply into global value chains remains challenging.

Việt Nam has been attracting foreign investment for more than four decades. Why has this issue persisted?

This situation is quite normal. Many other countries industrialised hundreds of years earlier than Việt Nam. Even today, some countries still struggle to access new technologies.

As a latecomer, Việt Nam needs to find its own path. If the country simply follows the industrialisation model of earlier economies, it will always remain behind.

However, there are examples where Việt Nam has managed to move quickly. In telecommunications, for instance, the country took a shortcut in deploying fibre-optic networks and mobile telecommunications infrastructure.

By around 2025, Việt Nam had become one of the countries with the largest numbers of 5G base stations in the world, ranking among the global top ten, even surpassing some G7 countries.

This experience shows that Việt Nam can focus on adopting and applying science and technology rather than necessarily starting with basic research. 

Nguyễn Đức Kiên, former head of the Prime Minister's economic advisory group. — Photo nhadautu.vn

Can recent policies on science, technology and innovation help domestic firms participate more deeply in global supply chains?

Recent resolutions [issued by the Communist Party of Việt Nam] clarify that the State will provide incentives for businesses that can demonstrate they are applying science and technology. Resolution 57 mainly addresses issues of mindset, while the Government has issued several laws to support technological development.

For example, the revised Energy Law in 2024 contains provisions related to renewable and nuclear energy. The revised Law on Technology Transfer in 2025 also supports enterprises that receive foreign technologies and apply them in production in Việt Nam.

Legally, the framework is being developed quite well. However, the biggest obstacle lies in the structure of Vietnamese enterprises, most of which are small- or micro-sized firms without sufficient resources to absorb advanced technologies.

Previously, Việt Nam believed the model of small- and medium-sized enterprises, similar to those in Chinese Taipei or Germany, would be suitable. More recently, policies have returned to the view that without large enterprises acting as leading forces, it will be difficult for Việt Nam to approach global industrial markets.

With rising investment in digital infrastructure, AI and advanced technologies, how should Việt Nam balance openness and economic security?

The concept of economic security has evolved over time. Before the economic reforms of 1986, it was often understood as self-sufficiency in all sectors. Later, as Việt Nam integrated into the global economy, the focus shifted to participating in global value chains and defining the country’s position within them.

Today, in a changing geopolitical and economic landscape, economic security also means having competitive products or capabilities developed in Việt Nam that can create mutual benefits in international cooperation.

Foreign investors ultimately make decisions based on profitability, so the policy environment must balance the interests of investors with those of the State and the workforce.

If Việt Nam opens its domestic market to foreign investors, the country’s position within FDI partnerships will become stronger. Otherwise, if companies only produce in Việt Nam and export elsewhere, the country’s role will mainly be limited to providing labour and infrastructure.

How do you assess the outlook for FDI in Việt Nam in 2026?

FDI flows in 2026 could face certain downward pressures. One factor is the economic policy direction of the United States. If US policies strongly encourage companies to relocate production back to the domestic market with large tax incentives, many countries, including Việt Nam, will find it difficult to compete. Even the European Union or Japan may struggle to match such incentives.

Another issue is that Việt Nam’s administrative system remains relatively complicated, and some foreign investors say navigating procedures can feel like entering a maze.

Nevertheless, global investment decisions ultimately depend on profitability, and investors will choose destinations where they see clear economic benefits.

For Việt Nam, maintaining an attractive business environment and demonstrating competitive advantages compared with other countries in the region will remain essential factors in sustaining FDI inflows in the coming years.

Bizhub