The Role of Vietnam’s FDI Inflows in Global Value Chains Participation and Economic Growth

Vietnam has posted strong and robust economic growth since the opening-up of its economy in the late 1980s. More recently, it has seen an explosive growth in exports amid strong foreign direct investments (FDI). This study aims to explore the role of Vietnam’s FDI inflows in spurring its exports via global value chains (GVC) participation, as well as boosting economic growth. Strong FDI inflows are found to have helped Vietnam successfully transform into a manufacturing-oriented economy, with intensified GVC participation over the past decades.

As Vietnam continues its developmental path, some of the weakening pull factors require the authorities’ well-planned efforts to maintain the country’s attractiveness as an investment destination. To gain tractions in its growth momentum spurred by FDI and GVC participation, Vietnam should further strengthen the domestic business sector and skilled labor supply, while continuing to enhance the business environment. The pandemic-induced GVC reconfiguration provides a good opportunity for Vietnam to upgrade its GVC participation, where a careful strategy to attract the “right” projects will be critical.

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