Vietnam has established itself as an indispensable link in the global supply chain and a leading strategic manufacturing base in Asia after consistently implementing an open-door policy over the course of three decades. However, in the era of next-generation FDI attraction, the central challenge is no longer the volume of registered capital but a strategic repositioning: how Vietnam can maximize the surplus value retained domestically and ensure its economy captures tangible benefits commensurate with the success of multinational corporations.
FDI performance vs. domestic value
Over almost four decades, FDI has acted as a critical external driver behind Vietnam’s remarkable economic transformation. As of the end of 2025, the FDI sector accounted for 72 per cent of total trade turnover and contributed approximately 23 per cent of national GDP. The presence of global corporations such as Samsung, Intel, and LG has placed Vietnam firmly on the global technology map, turning it into a strategic and essential node in global value chains.
Yet behind these impressive figures lie increasingly visible structural shortcomings. According to the Vietnam Chamber of Commerce and Industry (VCCI), only 15 per cent of domestic enterprises are capable of supplying goods and services to FDI enterprises, far below the 40 per cent in Thailand and 50 per cent in Malaysia.
A particularly concerning issue is the emergence of a “dual-track economy,” in which the FDI sector thrives but fails to sufficiently diffuse its benefits into the domestic economy. Many FDI projects operate under a “transit pipeline” model, importing components from parent countries, leveraging tax incentives and low-cost labor in Vietnam for processing and assembly, then exporting finished goods while repatriating profits to parent companies.
These profit flows return to home countries through both formal channels such as dividends and informal mechanisms such as management fees, royalties, and transfer pricing, leaving Vietnam with only modest value-added. Meanwhile, the cost of this “build the nest to attract eagles” strategy is rising, as the government continues to invest heavily in power infrastructure, transport networks, and specialized industrial parks. This reality calls for a reassessment of the true balance of benefits between investors and the host country.
Measuring effectiveness
Under Decision No. 315/QD-TTg issued by the Prime Minister on February 18, 2025, Vietnam introduced a framework of 42 indicators to evaluate foreign investment effectiveness. These indicators cover scale, operational efficiency, socio-economic contributions, budget revenues, spillover effects, technology, labor and wages, the environment, gender equality, and other aspects of the FDI sector and foreign-invested enterprises (FIEs). The issuance of the Decision represents a notable effort by Vietnam to standardize the monitoring of foreign capital flows.
However, the framework still contains several critical gaps. Many indicators reflect the internal growth of the FDI sector or the success of investors, but they do not quantify how much value Vietnam actually retains from that growth, aside from tax contributions. In essence, the framework does not yet capture the net surplus value left in the country.
It also does not account for the cost of incentives provided by Vietnam, as there is no metric measuring net benefits after deducting tax exemptions, specialized infrastructure investments, or hidden costs related to resources and the environment. In other words, the country still lacks visibility into net income after costs.
Furthermore, indicators on spillover effects and technology remain somewhat superficial. Localization metrics do not clearly distinguish between genuinely domestic enterprises and foreign satellite suppliers operating in Vietnam, while technology indicators focus on the number of certifications rather than the depth of actual technology transfer or the number of Vietnamese engineers capable of mastering core technologies.
International experience
In the global competition to attract high-quality FDI, many countries have shifted toward performance-based incentive policies. At their core, these policies represent a fair exchange, in which host governments grant incentives based on quantifiable surplus value that investors commit to delivering to the domestic economy.
Thailand and Malaysia have upgraded frameworks similar to Decision No. 315 into performance-linked evaluation systems that tie incentives directly to investor outcomes. Under Thailand’s Investment 4.0 strategy, a Board of Investment operates a tiered incentive system in which projects are classified into categories such as A1, A2, and A3 based on their performance.
The country also applies a Fiscal Return on Investment metric, which measures how long it takes for tax revenues generated by a project, after incentives expire, to offset the value of tax exemptions and public infrastructure investments. Projects with payback periods exceeding ten years are considered fiscally risky.
Malaysia, meanwhile, emphasizes domestic spending and high-value employment. Projects that fail to generate employment including at least 30 per cent high-income jobs or do not meet commitments to local supplier networks face immediate reductions in financial incentives through automated post-audit systems.
In South Korea and Taiwan (China), the success of domestic enterprises has been closely tied to policies that enforce economic links. Financial incentives for FDI projects are directly linked to verified localization rates and the extent of technology transfer to domestic small and medium-sized enterprises. Technology transfer is assessed based on the number of production processes that domestic firms can independently operate after the transfer is completed.
In economies with limited resources but advanced governance, such as Singapore and Ireland, evaluation systems focus on efficiency per unit of resource. Singapore’s Economic Development Board uses value-added per worker as a primary screening metric. Given constraints on land and energy, FDI projects must meet strict benchmarks for fiscal contribution per square meter of land and per unit of electricity consumed. Projects that are resource-intensive but generate low value-added are rejected at the application stage. At the same time, tax incentives are tied to commitments to fund scholarships and overseas training programs for local engineers.
Ireland follows a model centered on domestic embeddedness. Its Industrial Development Authority evaluates the extent to which FIEs integrate into the national education and research ecosystem. The country also applies a Net Economic Contribution metric, calculated as the difference between the value retained within the economy, including wages, taxes, and local procurement, and the cost of public support, including subsidies, tax incentives, and infrastructure investments.
New evaluation framework
To capture the next wave of greener, more technology-intensive, and more sustainable FDI, Vietnam needs to upgrade the indicator system under Decision No. 315 based on clear principles. Incentives granted to FDI projects should be treated as public investments, requiring defined payback periods and measurable net returns. Incentive structures should be tiered, based on quantifiable contributions to the Vietnamese economy rather than applied broadly.
Economic indicators, particularly those measuring retained surplus value, should serve as the core of the framework. Evaluation should focus on the country’s ability to retain value after accounting for outward profit flows. Links with domestic supply chains should be verified through actual financial data, with priority given to projects that demonstrate deep integration into the domestic business ecosystem rather than operating as isolated enclaves.
Technology indicators should be redesigned to measure the depth of core technology transfer and the number of Vietnamese professionals holding key technical and managerial roles. Human capital indicators should assess the contribution of enterprises to upgrading workforce quality, with an emphasis on income levels and advanced skills training aligned with international standards. In the context of net-zero commitments, the framework should prioritize projects that demonstrate high efficiency in the use of resources such as electricity, water, and land relative to the value they generate.
Upgrading Vietnam’s next-generation FDI evaluation framework is not about creating administrative barriers but about establishing a transparent, fair, and accountable set of rules. While Decision No. 315 provides a relatively comprehensive foundation, it requires stronger metrics to capture retained surplus value. Such improvements will help address the “dual-track economy,” ensuring that foreign investment generates real value that strengthens domestic capacity and reinforces Vietnam’s economic sovereignty in the new era.
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