In 2024, total investments, capital contributions, and share purchases by foreign investors in Vietnam reached 38.23 billion USD, an all-time high for foreign direct investment (FDI) in the country. This remarkable figure may continue to rise in the coming years. It raises the question: why is Vietnam attracting such high levels of FDI, while neighboring countries like Thailand, Malaysia, and Indonesia considered to have stronger economies are not experiencing the same trend?
The Vietnamese government has heavily invested in human resource development. With a literacy rate exceeding 90%, the country allocates more than 20% of its national budget to education. Vietnamese students consistently rank among the top in Southeast Asia in competency programs focused on writing, reading, and math.
The education budget is not limited to academic needs but also supports vocational and career training programs.
A highly skilled workforce would mean little without supportive policies. Vietnam has introduced tax incentives, competitive income tax rates, active participation in Free Trade Agreements (FTAs), and streamlined administrative processes. These policies result in competitive labor costs combined with high human capital, benefiting businesses. Notably, only 3% of enterprises in Vietnam contribute to 35% of the nation’s jobs, delivering significant advantages to both corporations and citizens.
Political stability is another critical factor attracting foreign investors. Vietnam enjoys a relatively stable domestic political environment while maintaining a delicate balance between the interests of two superpowers, China and the U.S. in its foreign policies.
Vietnam strategically keeps its military ties with China limited, focusing instead on political cooperation to ensure internal stability. At the same time, it relies on defense cooperation with the U.S., particularly in external defense and regional maritime security.
Vietnam also benefits from its geographic proximity to China, sharing an open land border with the regional giant. Both nations collaborate to increase the volume of freight train transport, which facilitates their growing trade relationship. This partnership integrates China as a regional supplier and Vietnam as a production base for the Chinese market or a transit hub for exports through China.
In the future, if tensions between China and the U.S. escalate, U.S. corporations may look to Vietnam as an alternative for relocating their businesses. Should a trade war between the two superpowers intensify, Vietnam’s similarities with the Chinese business environment make it an ideal destination for such relocations.
