Story on a strategic investment approach transitioning from profit-focused to garnering institutional faith
In a bold move towards economic growth and global competitiveness, Vietnam is embracing comprehensive reforms that reflect both domestic demands for improved governance and international expectations shaped by the global investment context.
The country's transition from a cost-based manufacturing hub to a destination for sustainable, high-value investment is driven by several key factors.
Strategic Industrial Modernization and Supportive Policies
Vietnam is actively modernizing its supporting industries, particularly in textiles, garment fabric production, and dyeing, where localization rates are reaching 45-50%. Decree 205 encourages technological autonomy and high-impact technology transfer, facilitating deeper industrial linkages and advancement up the global value chain.
Export and Industrial Development Strategies
Long-term strategies, such as the Export and Import Strategy with a vision to 2030 and the Industrial Development Strategy through 2025 with a vision to 2035, emphasize developing high-tech and advanced manufacturing products, supporting industries integration, and prioritizing sectors like mechanical engineering, metallurgy, electronics, and textiles. The focus is shifting from low-cost to higher-value output.
Extensive Free Trade Agreements (FTAs)
Vietnam has signed 17 FTAs, providing wide market access and tariff advantages, which attract forward-looking investors seeking long-term growth and strategic supply chain repositioning.
Stable Political and Business Environment
Improvements like the transition to a two-tier local government system and administrative reforms reduce bureaucracy and streamline business operations. A crackdown on counterfeit goods also supports legitimate manufacturers' expansion.
Focus on Sustainable and High-Quality Production
Companies like Hoa Phat are investing in capacity expansion for specialty and high-quality steel segments, aiming to capture higher-value markets. There is also a strong push toward cleaner manufacturing, smart production, and greater IT applications, which, while costly, enhance sustainability and value proposition.
Challenges that Drive Upgrading
Domestic and global challenges such as fluctuating demand, trade tensions including new US tariffs on Vietnamese exports, and rising production costs create pressure for firms to upgrade capabilities and move beyond cost-competitiveness to innovation and higher value-added manufacturing.
To address these challenges and attract foreign investment, Vietnam is focusing on reforming challenging areas for investors, such as licensing and land administration, by introducing standardised, repeatable, and digitally enabled processes. The criteria for sectoral eligibility and strategic project classification are now more clearly defined.
Foreign direct investment inflows to Vietnam increased by 32.6% in the first half of 2025, amounting to $21.52 billion. Vietnam has emerged as a significant investment destination, with neighboring countries like Thailand also experiencing increased foreign investment.
Vietnam is shifting towards a model of predictability, transparency, and trust in its economic approach. The country communicates a clear and confident message to the world: Vietnam is not only open for business, but it is committed to building institutions that can support its most ambitious economic goals.
Digital due diligence is increasingly important for investors in Vietnam, leveraging advanced digital tools and data analytics to assess regulatory, market, and operational risks. Building strong relationships with trusted Vietnamese legal and advisory firms is essential for navigating regulatory complexity in Vietnam.
These reforms aim to improve efficiency and provide more consistent investor experiences across provincial and sectoral boundaries. Vietnam's strategic pivot towards institutional trust significantly enhances its capacity to attract and retain high-quality investment.
The government's reform efforts are focused on digital transformation, with the goal of full digitalisation of public services by the end of 2025. The transition to predictable systems in Vietnam serves as a form of "confidence infrastructure", enhancing trust between the state and investors.
Vietnam's approach to foreign funding strategy emphasizes greater transparency, procedural consistency, and enforceable legal frameworks. The transformation in Vietnam's investment climate is not just about headline figures, but also about profound policy changes, infrastructure enhancements, and a culture of administrative accountability.
The revised legal environment in Vietnam aligns investment incentives with environmental, social, and governance (ESG) priorities and digital transformation objectives. The government's response to administrative reform includes a 20% reduction in ministries and central agencies, consolidating five ministries, four regulatory bodies, and five national media institutions.
Lastly, the revised legal environment brings Vietnam closer in line with global tax norms such as those outlined under the Organisation for Economic Co-operation and Development's Pillar Two framework and enshrined domestically through 2023 regulations on global minimum tax. ESG reporting has been mandatory for publicly listed companies in Vietnam since 2021, and broader disclosure requirements are under development. Proactive ESG monitoring ensures operational alignment with both current and emerging investor standards.
- In line with its commitment to economic growth and global competitiveness, Vietnam is pursuing investments in high-tech and advanced manufacturing products, facilitating the shift from low-cost output to greater value addition.
- To foster a conducive business environment, Vietnam is addressing challenging areas for investors, such as licensing and land administration, by introducing digitally enabled, more transparent, and streamlined processes, ultimately aiming for full digitalization of public services by the end of 2025.
