FDI: From First Steps to Driving Economic Growth

On the occasion of the 80th anniversary of National Day September 2, Hanoi Moi Newspaper reporter had an interview with Dr. Phan Huu Thang, former Director of the Foreign Investment Department (Ministry of Planning and Investment, now the Ministry of Finance ) about attracting FDI capital from the early days to the present.

- Can you tell us about the first documents on attracting FDI?

- It can be said that the August Revolution of 1945 was a great turning point in the history of the Vietnamese nation. Not only did it have political significance, the August Revolution also paved the way for the formation of an independent and self-reliant economy.

Thanks to independence, Vietnam can formulate appropriate domestic and foreign policies, including policies to attract foreign investment. Vietnam issued Decree No. 115-CP dated April 18, 1977 promulgating the Foreign Investment Charter. This was the first document institutionalizing the Party's foreign economic policies and guidelines after the country entered the stage of rebuilding the economy severely devastated by war.

Dr. Phan Huu Thang, former Director of the Foreign Investment Agency (Ministry of Planning and Investment, now the Ministry of Finance). Photo: NVCC

However, Decree No. 115-CP did not bring about the expected results, so in 1984, the Politburo decided to supplement and complete it, moving towards building a complete investment law. After many rounds of discussion, on December 29, 1987, the 8th National Assembly passed the Law on Foreign Investment in Vietnam. This is considered a landmark law, marking a new era in attracting FDI.

After that, the Foreign Investment Law has been amended and supplemented many times to become more open, attractive, and consistent with international practices, creating favorable conditions for investors and contributing to the strong growth of FDI capital flows, making an important contribution to the innovation process.

- In the early stages, what difficulties did you encounter in attracting FDI capital, sir?

- The biggest internal challenge in the early opening period (1977-1987) was the need to innovate thinking about attracting foreign investment for socio-economic development.

The remaining challenges are also not small, seemingly insurmountable. These include the severe destruction of economic infrastructure such as roads, bridges, airports, ports, train stations, factories, and other industrial facilities; the limited state budget; the small number of state-owned enterprises, small scale, and the absence of private enterprises.

Not to mention, after the prolonged war, the economy was besieged and embargoed, so it had to implement a subsidy regime, so people's lives became more and more difficult, food and essential consumer goods were lacking...

Regarding external challenges, the country is under embargo so no foreign investors dare to invest in Vietnam. Countries in the socialist bloc, of which the Soviet Union is considered a stronghold, still mainly provide non-refundable aid.

That is why attracting foreign investment at that time had many memorable stories, such as not having many industrial production projects, even foreign investors came to Vietnam to grow bananas for export. The first industrial projects were projects to assemble motorbikes and cars of Honda, Toyota, Ford, etc.

In the early days, Vietnamese representatives and foreign investors surveyed and searched for auxiliary production facilities, but almost no facility could participate in the production process of motorbikes and cars at that time...

All parties could only smile and shake hands to share the common difficulties in this initial stage. It is this understanding and sharing that foreign investors have committed to ensuring that the production rate in Vietnam will be gradually increased.

- After nearly 40 years, how has FDI developed and contributed to Vietnam's economy?

Foreign investment capital registered in Vietnam in the first 7 months of 2021-2025 (billion USD). Photo: CTK

In nearly four decades of attracting FDI (1987–2025), Vietnam has consistently attracted foreign capital to serve strategic goals for socio-economic development. A miraculous change proves Vietnam's socio-economic development over the past nearly 40 years (since December 1987, the year the Law on Foreign Investment in Vietnam was issued).

Comparing only FDI capital, if FDI capital implemented in the first 5-year plan 1991-1995 on socio-economic development only reached over 7.1 billion USD, then up to now in the period 2021-6/2025, FDI capital implemented has reached over 102.3 billion USD, more than 14 times higher than the first 5-year plan.

In 2005, we merged the Investment Law (between domestic and foreign investors) to create a fair and transparent "playing field" for all economic sectors. This reform, along with Vietnam becoming a member of the World Trade Organization (WTO), participating in a series of free trade agreements with many world powers, such as CPTPP - Comprehensive and Progressive Agreement for Trans-Pacific Partnership, EVFTA - Vietnam - European Union Free Trade Agreement... (a total of 16 FTAs in effect to date) has greatly increased the confidence of international investors.

FDI has become a major driving force for GDP growth, export expansion and Vietnam’s deeper participation in the global value chain. Through each period of policy adjustment, FDI capital flows into Vietnam have increased in both quantity and quality. To date, the FDI sector has contributed about 25% of total social investment capital, created more than 4 million direct and indirect jobs, and accounted for over 70% of Vietnam’s export turnover.

Honda electric motorbike production in Vietnam. Photo: Hoang Linh

The above results of attracting and using FDI capital have actively contributed to adding new production capacity, increasing the scale of the economy and creating remarkable development, and Vietnam's position in the international arena has been enhanced.

- According to you, what solutions need to be implemented to improve the quality and efficiency of FDI projects?

- The above question is always the top concern today not only for state management agencies from central to local levels on foreign investment but also for the business community and the people. The reason is because the influence and spread of FDI is currently very large.

The best way now is to look straight at the truth to see what still exists in attracting and managing FDI to find the fastest solution, quickly improving the quality and efficiency of FDI projects in the coming period.

- What are those existences, sir?

- There are many shortcomings pointed out by central and local state management agencies, but the most important ones are institutional and policy shortcomings and human resources. Infrastructure also needs to be focused on and resolved soon to ensure the quality and efficiency of FDI capital in Vietnam in the coming period.

First, overcome institutional and policy barriers. Difficulties in administrative procedures, land transfer and land rental prices are still limitations.

According to a JETRO survey, 62.4% of Japanese enterprises surveyed in 2024 said that licensing procedures are still complicated; 57% of enterprises said that the legal system is not complete and enforcement lacks transparency.

Second, although human resources have been focused on development, they are still lacking and weak, especially high-quality human resources, human resources for electronics, semiconductor, AI, digital projects, etc. in all current fields and professions.

Third, although infrastructure has been strongly developed in recent times, it still cannot meet the requirements of FDI capital flows.

Thank you very much!

Source: https://hanoimoi.vn/fdi-tu-nhung-buoc-di-dau-tien-den-dong-luc-tang-truong-kinh-te-714763.html