Vietnam’s Surge in Foreign Direct Investment: A Closer Look at the Numbers

BANGKOK — The landscape of foreign direct investment (FDI) in Southeast Asia is changing rapidly, and Vietnam is leading the charge. According to the Ministry of Planning and Investment, Vietnam saw a dramatic increase in FDI during the first half of 2025, attracting a total of US$21.51 billion. This figure marks a remarkable 32.6% increase compared to the same period the previous year, indicating strong investor confidence in the country’s burgeoning economy.

Breakdown of the Investment Landscape

Between January and June 2025, Vietnam welcomed 1,988 new projects, amounting to a significant $9.29 billion. Additionally, there were 826 capital expansion projects that contributed another $8.95 billion—more than double the investment observed in the previous year. Foreign investors showed considerable interest in acquiring stakes in Vietnamese companies as well, with 1,708 share acquisition deals totaling $3.28 billion, reflecting a 73.6% increase.

The manufacturing and fisheries sectors were the clear winners, attracting the largest share of investment at $12 billion. Other notable sectors included real estate at $5.17 billion, professional, scientific, and technical activities at $1.18 billion, and water supply and waste management, which garnered $902.9 million.

The Mix of Investment Sources

Singapore emerged as the top source of new FDI, investing $2.41 billion, followed closely by China at $2.13 billion. Other significant contributions came from Sweden, Japan, and Taiwan, reflecting a diverse array of investor interests. Interestingly, Thailand found itself in 14th place among 92 investing countries, with just $59.4 million in new projects, a stark contrast to the massive inflows from other nations.

Thailand’s Competitive Landscape

In parallel with Vietnam’s FDI achievements, Thailand has also reported a surge in applications for investment incentives through its Board of Investment (BOI). A total of 1,369 FDI projects sought BOI incentives, equating to an impressive combined investment of 737.6 billion baht, a staggering 132% increase year-on-year. Foreign projects accounted for 73% of all applications, underscoring the growing interest in Thailand’s investment potential.

Diving deeper into the data, the largest number of projects were seen in the metals and materials sectors, followed by machinery and automotive, and electrical appliances and electronics. Notably, the digital industry led the investment value with 410 billion baht, signaling a shift towards more technologically advanced industries.

Shifting Investment Focus

However, not all signals are positive for Thailand. A prominent researcher at the Thailand Development Research Institute (TDRI), Nonarit Bisonyabut, has cautioned that global competition for foreign investment is intensifying. Countries are rushing to implement effective policies to attract and retain investors, while Thailand has struggled to enact meaningful reforms despite recognizing its economic challenges.

Current government initiatives often prioritize short-term returns, such as cash handouts and unsustainable ventures like cannabis legalization and casino establishments. Critics argue that these measures divert attention from crucial structural reforms needed for long-term economic viability.

The Risk of Being Left Behind

As both China and South Korea appear to shift their investment focus towards Vietnam, concerns arise about Thailand’s competitiveness. With Vietnam branding itself as a rising star in the digital age, the urgency for Thailand to overhaul its investment policies becomes more pronounced. Without significant reforms, there’s a risk that Thailand will lag behind, hampering its economic growth and attractiveness to foreign investors.

Addressing Weaknesses for Improvement

The Asean FDI Attractiveness Index highlights three critical areas that Thailand must improve to become more appealing to foreign investors:

1. Labour and Wages: Thailand’s average wage is currently higher than that of Vietnam, necessitating greater productivity from Thai workers to justify wage disparities.

2. Talent and Innovation: Strengthening research, development, and innovation is essential. Attracting global talent in sectors like artificial intelligence, semiconductors, and biotechnology is necessary for future-focused growth.

3. Regulations and Governance: Streamlining outdated regulations and reducing bureaucratic hurdles will foster a more inviting investment climate. Transparency, fair competition, and a crackdown on corruption are integral to restoring Thailand’s reputation among investors.

Regional Competition Heating Up

Kriangkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), warns that Vietnam’s aggressive infrastructure plans could outpace Thailand’s development if no decisive action is taken. Vietnam has unveiled a significant infrastructure investment plan worth roughly 10% of its GDP, aiming for economic growth of 8% by 2025 and targeting high-income status by 2045.

Although the immediate effects may not be felt, the clarity of Vietnam’s long-term vision could hold potential investors in a waiting pattern, assessing the progress of Vietnam’s initiatives before committing their resources.

In the realm of regional competition, Singapore is also taking steps to enhance its appeal, launching the Johor–Singapore Special Economic Zone (JS-SEZ) alongside Malaysia to better attract foreign capital.

With the stakes higher than ever, it is imperative for Thailand to reflect on these developments and strategize optimally to retain and attract foreign investment.