FDI attraction: Time to shift from “red carpet rollout” to long-term partnership

FDI attraction: Time to shift from “red carpet rollout” to long-term partnership

An expert said that Việt Nam needs to move towards a new-generation investment attraction model – one that seeks not only capital but also advanced technology, modern governance, innovation and stronger spillover effects on domestic enterprises.

Workers manufactures camera modules and electronic components for export at the factory of the RoK-invested MCNEX VINA Co., Ltd. in the Phúc Sơn Industrial Park, Ninh Bình province. — VNA/VNS Photo

As Việt Nam enters a new phase of development driven by ambitions for fast and sustainable growth, the question of attracting foreign direct investment (FDI) is no longer simply about the scale of capital inflows. Increasingly, the focus is turning to the quality of investment, its spillover effects and its ability to strengthen the economy’s intrinsic capabilities. 

From “FDI at any cost” to selective attraction of high-quality investment 

Việt Nam currently hosts more than 46,500 valid foreign-invested projects, with total registered capital exceeding US$543 billion and cumulative disbursed capital reaching around $357.6 billion. The FDI sector now contributes more than 20 per cent of GDP, accounts for roughly 70 per cent of export turnover and provides employment for millions of workers. 

According to experts, Việt Nam will require enormous investment resources to achieve its high and sustainable growth targets for the 2026–30 period, with the FDI sector and the domestic private sector expected to account for around 80 per cent of the country’s total investment demand across society. 

Associate Professor and Dr Hoàng Văn Cường, Vice Chairman of the Việt Nam Economic Science Association, said that Việt Nam’s earlier FDI strategy focused primarily on mobilising foreign capital to expand production and make use of low labour costs. However, that model is increasingly revealing its limitations. 

“If Việt Nam continues with the old approach to investment attraction, domestic enterprises will remain peripheral to the foreign-invested sector, while Vietnamese workers will largely participate only in low value-added stages of production. That cannot deliver breakthroughs in labour productivity or growth quality,” he said. 

Cường said that Việt Nam needs to move towards a new-generation investment attraction model – one that seeks not only capital but also advanced technology, modern governance, innovation and stronger spillover effects on domestic enterprises. 

More importantly, FDI and domestic businesses must be viewed as partners developing side by side, rather than as two separate economic sectors operating within the same economy. Many economists have also argued that foreign-invested firms and Việt Nam’s private companies should become strategic partners capable of sharing benefits, creating new value and generating sustainable growth momentum together. 

Weak linkages remain biggest bottleneck 

Despite the strong expansion of the FDI sector over recent years, the linkages between foreign-invested and domestic firms remain limited. 

Việt Nam is now home to more than one million active businesses, yet only around 5,000 are directly connected to global supply chains or multinational corporations. Notably, only about 100 Vietnamese firms have become tier-one suppliers to major global groups, a figure regarded as strikingly modest. 

This highlights the fact that while FDI has grown rapidly, its spillover effects on domestic enterprises are still constrained. 

Dr Lê Duy Bình, Director of Economica Việt Nam, noted that the country in the coming period needs not simply “more FDI”, but rather “next-generation FDI” focused on high technology, environmental sustainability, modern governance and deeper integration with local enterprises. 

Cường said that achieving such a change will require a fundamental adjustment in investment incentive policies. Rather than relying mainly on investment scale, incentives should be linked to tangible outcomes delivered by FDI enterprises. 

These could include the degree of technology transfer, localisation rates, the number of Vietnamese firms participating in supply chains, or the effectiveness of high-quality workforce training programmes.

Many experts believe this approach is better suited to today’s increasing competition in the investment environment, in which Việt Nam can no longer rely chiefly on low-cost advantages but must instead build competitiveness through institutional quality, skilled human resources and innovation capacity. 

According to analysts, Việt Nam needs to redesign its investment incentive system centred on measurable outputs rather than simply tax breaks or registered capital. At the same time, the country should accelerate experimental policy mechanisms, improve the investment climate and build ecosystems for high technology, the green economy, artificial intelligence and innovation. 

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