Reformed business environment and emerging appeal

According to the Financial Times, Hanoi, the thousand-year-old capital, today blends its rich traditions with the dynamism of an emerging economic hub.
Ancient streets filled with cafés, modern high-rises by serene lakes, and lush green parks vividly illustrate the country’s transformation. Beyond its cultural and lifestyle appeal, Vietnam stands out internationally as one of the world’s fastest-growing economies.

Since 1990, Vietnam’s GDP has grown at an average rate of nearly 7% per year. Even during 2020, when the COVID-19 pandemic caused recessions across most economies, the country managed to maintain positive growth. This rare achievement demonstrates the national economy’s remarkable resilience. Both the World Bank (WB) and the Asian Development Bank (ADB) have issued optimistic forecasts for 2025, projecting growth rates of 6.5% and 6.6%, respectively, further reinforcing confidence in the nation’s development prospects.

Notably, Vietnam has moved beyond relying solely on low labor costs, gradually developing a dynamic and flexible business environment. Since the Doi Moi (Renewal) process of the late 1980s, the government has continuously taken measures ranging from trade liberalization and state-owned enterprise equitization to streamlining administrative procedures. According to the Economist Intelligence Unit, Vietnam ranks among the countries that have most significantly improved their business environment worldwide over the past two decades.

Recent reforms show consistency in policy direction. The government has prioritized the development of clean energy, logistics, and modern infrastructure, while also accelerating the application of digital technology to simplify procedures for businesses. As a result, the investment environment has become more transparent, operating costs have decreased, and multinational corporations are increasingly viewing Vietnam as a strategic destination.

Global trade tensions, particularly the trend of shifting supply chains away from China, have created further opportunities for Vietnam to surge ahead. Thanks to its strategic location, young workforce, and competitive costs, the country has become Asia’s “new manufacturing gateway.” The presence of major companies such as Apple, Boeing, Intel, Coca-Cola, and Samsung not only brings substantial investment capital but also spurs the development of supporting industrial ecosystems.

High-tech products, ranging from smartphones and microchips to electronic components, now account for nearly half of total manufacturing exports, cementing Vietnam’s position as a production hub rather than a mere “transshipment point.”

In addition to attracting considerable capital, Vietnam has demonstrated policy sustainability. Several new-generation free trade agreements (FTAs), such as the CPTPP and EVFTA, have helped expand the country’s integration opportunities. This positions Vietnam as a key “link” in the global trade network while enhancing its reputation for policy stability and predictability –factors highly valued by foreign investors.

FDI inflows and growth prospects

While a favorable business environment provides the foundation, foreign direct investment (FDI) serves as a powerful growth engine helping Vietnam sustain its development momentum. According to EuroCham, Vietnam is one of the few countries in the region to record rising FDI even amid global downturns. In 2024, total disbursed FDI exceeded US$25 billion, showing the strong confidence of international investors.

The European business confidence index in Vietnam reached 61.8 points, a 33% increase compared to the previous year. Notably, 75% of surveyed companies regard Vietnam as a priority destination for long-term investment plans. Corporations from the US, Japan, the Republic of Korea (RoK), and Singapore continue to expand operations in Vietnam, thereby transforming the country into a multi-sector production hub, spanning electronics, technology, garments and textiles, and renewable energy.

A key factor driving growth is Vietnam’s workforce. With a population of more than100 million, more than 50% under 35, the country possesses a plentiful labor pool capable of quickly adapting to new technologies. Vietnam ranks highly in the region on the World Bank’s Human Capital Index, demonstrating comprehensive development potential across education, healthcare, and vocational skills. The startup ecosystem is also booming, with six tech unicorns surpassing those in some long-established European economies, making Vietnam a fertile ground for both FDI and domestic enterprises to grow together.

The role of women in the workforce is another advantage. Vietnam ranks among the countries with the highest female labor participation globally. This not only expands productive capacity but also contributes to balance and diversity in the workplace – qualities increasingly valued by multinational corporations.

Nevertheless, challenges remain ahead. The nation needs to continue upgrading infrastructure, investing in green technologies and high-value services, and enhancing transparent governance to maintain investor confidence. Since FDI is sensitive to geopolitical fluctuations, skillful foreign policy and a stable business environment will be key to sustaining its attractiveness.

Looking at data and forecasts, the prospects for a breakthrough remain clear. The World Bank emphasizes that only countries that invest heavily in human capital, reform institutions, and curb vested interests can escape the “middle-income trap.” Vietnam currently meets all three criteria.

In particular, emerging sectors such as artificial intelligence (AI), green technology, healthcare, and logistics are attracting new waves of investment. With an expected annual growth rate of nearly 28% in AI, Vietnam has entered the group of countries capable of competing in advanced technologies.

This creates opportunities to maintain FDI inflows while also enhancing Vietnam’s position on the global technology map.

From a resilient economy, Vietnam has emerged as a rising production hub and is gradually shaping its image as a global investment bright spot. The combination of institutional reforms, a solid manufacturing base, a young and energetic population, and high-quality FDI has created a distinctive success story. Amid global uncertainties, the country stands out as a remarkably optimistic exception, a Southeast Asian nation poised to break through and join the rank of high-income economies.

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