Over the span of 35 years, Vietnam has seen its economy bolstered by billions of U.S. dollars in foreign investment, a factor that has also made it vulnerable to external economic shifts. From a modest US$2 million in 1988, Vietnam’s registered foreign direct investment (FDI) has surged to a staggering US$524 billion. By the close of 2022, Vietnam was home to over 36,000 active FDI projects, with total capital pledges amounting to $441 billion, of which 57% has been realized.
The year 1988 marked a pivotal moment for Vietnam’s economy with the inauguration of its very first FDI project in the southern province of Ba Ria – Vung Tau. Initial foreign investment was tentative, resulting in a slow influx of projects and capital. Momentum picked up by 1991, igniting a significant surge in foreign investment as Vietnam began to continuously break its own records in both project numbers and capital volume.
Major industry players, including Taiwanese footwear manufacturers PouChen and Feng Tay, as well as Japan’s Honda with its motorcycle production, set up shop in Vietnam to capitalize on its manufacturing capabilities. After three and a half decades, South Korea, Singapore, and Japan have emerged as the top three FDI contributors to Vietnam, with the United States not ranking within the top 10.
The elevation of Vietnam-U.S. relations to a Comprehensive Strategic Partnership in early September of this year paves the way for what is anticipated to be the fourth major wave of FDI, potentially bringing substantial investment from the world’s largest economy. Currently, FDI is responsible for 19% of Vietnam’s GDP and employs 35% of the workforce, despite representing a mere 3% of the total number of businesses.
In the case of Vietnam’s eight principal export commodities that each bring in over US$10 billion in sales, the FDI sector claims more than half of the market share for six of them. Significantly, FDI enterprises are behind approximately 98% of the country’s high-tech product exports, which include items like computers, electronics, mobile phones, and their components.