Vietnam: A Rising Star in Foreign Direct Investment

Vietnam has continued to establish itself as one of the region’s most appealing and secure destinations for foreign investors. In 2025, the country reached a remarkable milestone, with disbursed Foreign Direct Investment (FDI) hitting a five-year high of approximately $27.62 billion, reflecting an increase of 9% compared to 2024. This robust performance underscores Vietnam’s growing importance in the global market, particularly in the context of fierce investment competition with countries like India, Indonesia, and Thailand.

FDI Trends and Performance

According to the National Statistics Office under the Ministry of Finance, the total registered FDI in Vietnam for the previous year amounted to $38.42 billion, a modest rise of 0.5% from 2024. This achievement is particularly noteworthy, given the intense competition for foreign investment in the region. Vietnam had set an ambitious target of $38 to $40 billion at the year’s outset, and achieving this figure, albeit with a slight increase, indicates that the country remains a strong contender for foreign capital.

Composition of Capital Flows

A deeper dive into these capital flows reveals intriguing trends. Newly-registered capital reached $17.32 billion, marking a decline of 12.2% in value but a notable increase of 20.1% in the number of projects, totaling 4,054. This points to a cautious approach from new investors who seem to prefer lower initial investment sizes as they assess the market. Conversely, existing investors appear more committed, as evidenced by an uptick in additional capital, which reached $14.07 billion, a slight rise of 0.8%.

One of the most striking developments has been in capital contributions and share purchases, which surged by an impressive 54.8%, reaching $7.03 billion. This increase is indicative of a booming mergers and acquisitions (M&A) market, where foreign investors are increasingly seeking partnerships with promising local firms for quicker market entry.

The Manufacturing Powerhouse

The record-high levels of disbursed capital signal that FDI projects are not just on paper; they are being translated into tangible assets like factories, machinery, and jobs. The manufacturing and processing sector has remained the backbone of foreign investments, accounting for a substantial 82.8% of total disbursed capital at around $22.88 billion. This underscores Vietnam’s strengthening role as a critical manufacturing hub within global supply chains, particularly for electronics, end devices, and semiconductor components.

Government Initiatives

The surge in disbursed capital isn’t coincidental; it reflects the Vietnamese government’s concerted efforts to eliminate bottlenecks regarding infrastructure, logistics, and administrative procedures—factors critical for facilitating project implementation post-registration. These improvements are paving the way for smoother operations for foreign investors.

Key Players in the Investment Landscape

Singapore has solidified its position as Vietnam’s largest source of FDI in 2025, contributing $4.84 billion and accounting for 27.9% of newly-registered capital. Meanwhile, China and Hong Kong have also significantly boosted their investments, accounting for 21% and 10% of newly-registered capital, respectively. This shift is emblematic of the ongoing “China + 1” strategy among investors looking to diversify their supply chains, further enhancing Vietnam’s attractiveness as an investment destination.

Another noteworthy development is the emergence of Sweden, which contributed $1 billion, or 5.8% of newly-registered capital. This is a positive indication of Vietnam’s growing ability to attract high-tech and sustainable investment from Northern Europe. Japan and South Korea, though ranking lower in terms of new capital, continue to play vital roles with established projects and considerable disbursement volumes.

Advantages and Evolving Challenges

Despite fluctuations in monthly FDI inflows, the overall trend lines up with international assessments. A report by HSBC stated that “Vietnam is no longer merely an alternative to China; it is becoming an indispensable link in the global value chain.” The country’s transition from low-cost manufacturing to high-tech production has captivated major US and European tech companies, particularly in sectors like semiconductors and clean energy.

Vietnam’s investment environment is deemed increasingly conducive to foreign businesses, aligning more closely with international standards. However, the introduction of the Global Minimum Tax in 2025 presents challenges, as Vietnam traditionally relied on tax incentives to remain competitive. Rather than viewing this as a setback, the country has pivoted towards non-tax investment supports, such as training a skilled workforce, enhancing digital infrastructure, and promoting green energy solutions.

Global Economic Context

In the “East Asia and Pacific Economic Update,” the World Bank recognized Vietnam as one of the most adaptable economies in the region, further emphasizing that the nation’s participation in next-generation free trade agreements acts as a protective barrier for investment flows against global trade instability.

Simultaneously, the International Monetary Fund acknowledges that Vietnam’s macroeconomic stability and effective inflation control are crucial factors in maintaining healthy FDI levels. Their forecasts suggest that Vietnam will continue to be a pivotal growth engine in ASEAN through 2026, retaining its attractiveness for international investors.

Future Directions

Recent findings from the Organisation for Economic Co-operation and Development (OECD) highlight a shift in modern investor priorities. Today, access to renewable energy, infrastructure quality, and transparency in legal systems hold more significance than mere tax incentives. In response, Vietnam is actively promoting offshore wind energy projects and developing smart grid initiatives, thereby aligning with the stringent environmental, social, and governance (ESG) criteria set by multinational corporations.

Looking ahead, international organizations predict that FDI inflows into Vietnam in 2026 will increasingly gravitate toward higher-quality investments. Sectors like semiconductors, the digital economy, and green energy are anticipated to become new hotspots for foreign capital. However, to fully leverage these opportunities, the country must decisively enhance its transport and energy infrastructure while concurrently bridging the skills gap, ensuring readiness to incorporate cutting-edge technologies from leading global investors.