Vietnam’s Emerging Military-Industrial Complex and Defense Self-Reliance Drive

Vietnam is undergoing a transformative shift in its defense and industrial strategy, driven by a dual focus on self-reliance and strategic privatization. As the country navigates regional security challenges and economic modernization, its military-industrial complex is emerging as a focal point for both domestic and international investors. This analysis explores the strategic and financial opportunities arising from Vietnam’s defense privatization initiatives, public funding allocations, and evolving policy landscape.

Public Funding and Infrastructure Modernization

Vietnam’s 2023–2025 socio-economic plan has elevated infrastructure spending to 7% of GDP, a significant increase from previous targets [1]. This funding is directed toward critical projects such as the $67 billion high-speed rail line connecting Hanoi and Ho Chi Minh City, the $8 billion Lao Cai-Hanoi-Hai Phong railway, and the expansion of Ho Chi Minh City’s metro system [1]. These projects are not merely logistical investments but foundational to Vietnam’s ambition to enhance freight efficiency, workforce mobility, and foreign direct investment (FDI) inflows.

The Ministry of National Defense and Ministry of Public Security play pivotal roles in overseeing these initiatives, particularly in ensuring national security against foreign funding threats [4]. For instance, the government has established a multi-agency framework to monitor financial transactions and combat terrorism-related funding, with the Ministry of Finance and State Bank of Vietnam collaborating to enforce stringent controls [4]. This coordinated approach underscores the integration of defense and economic priorities in Vietnam’s strategic planning.

Privatization and Public-Private Partnerships (PPPs)

Vietnam’s push for private sector participation in infrastructure and defense is anchored in its 2020 revised Law on Investment and Public-Private Partnership (PPP) Law [1]. These reforms aim to attract both domestic and foreign investors by streamlining regulations and offering tax incentives. As of 2025, $30 billion has been mobilized for traffic infrastructure via PPPs, though challenges such as regulatory uncertainty and weak enforcement persist [2].

The government has identified 20 critical factors grouped into five categories—legal frameworks, investment environments, coordination agencies, franchise partner selection, and project lifecycle participation—to ensure PPP success [1]. For example, the General Department of Defense Industry (GDDI) under the Ministry of National Defense is tasked with directing military production and R&D, while private companies can enter the sector with permits from relevant ministries [3]. This hybrid model balances state oversight with private innovation, creating opportunities for niche players in defense manufacturing.

Key Players and Strategic Collaborations

Vietnam’s defense industry is witnessing a surge in domestic capabilities, led by state-owned enterprises (SOEs) like Viettel and Vanxuan Corporation. Viettel, in particular, has emerged as a global contender, unveiling advanced systems such as the VCS-01 Truong Son coastal defense missile [3]. The 2024 International Defense Expo in Hanoi showcased these innovations, alongside collaborations with South Korean firms for artillery and aviation systems [1]. Such partnerships reflect Vietnam’s strategy to blend local production with foreign expertise.

International cooperation is also pivotal. The U.S. has delivered T6-C training aircraft and plans to supply Coast Guard cutters, signaling a deepening security alliance [2]. Meanwhile, South Korea’s K9A1 self-propelled howitzers highlight the diversification of Vietnam’s arms procurement away from traditional suppliers like Russia [3]. These relationships not only bolster Vietnam’s military capabilities but also open avenues for foreign investors in joint ventures and technology transfer agreements.

Financial Opportunities and Policy Reforms

The privatization of SOEs is a cornerstone of Vietnam’s economic strategy, with Deputy Prime Minister Hồ Đức Phớc accelerating equitization efforts to generate VNĐ48 trillion in revenues between 2024 and 2025 [1]. This includes the restructuring of 118 enterprises and the divestment of 15 SOEs, which have already raised VNĐ656.9 billion in 2024 [1]. These reforms are supported by Resolution 68 (2025), which emphasizes private sector participation in strategic sectors, including defense [2].

Investors should also note Vietnam’s focus on high-tech industries and sustainable development. The EU-Vietnam Free Trade Agreement and Regional Comprehensive Economic Partnership (RCEP) are expected to amplify FDI inflows, particularly in clean energy and advanced manufacturing [1]. For instance, solar power generation has surged, aligning with Vietnam’s broader economic shift toward innovation-driven growth [4].

Challenges and Considerations

Despite these opportunities, challenges remain. Corruption, regulatory ambiguity, and the dominance of SOEs continue to hinder private sector growth [1]. U.S. investors, for example, have reported delays in approvals and retroactive tax policy changes [1]. Additionally, foreign ownership limits persist in sectors deemed critical to national security, such as defense equipment production [1].

However, the government’s commitment to transparency—evidenced by its 2025 privatization targets and FTSE Russell’s recognition of Vietnam’s reform efforts—suggests a trajectory toward resolving these issues [2]. Investors must also consider geopolitical risks, such as South China Sea tensions, which could influence defense spending priorities.

Conclusion

Vietnam’s military-industrial complex is poised for significant growth, driven by strategic privatization, public funding, and international collaboration. While challenges like regulatory hurdles and SOE dominance persist, the government’s policy reforms and revenue projections present compelling opportunities for investors. By leveraging Vietnam’s evolving legal framework and aligning with key players like Viettel or U.S. defense partners, stakeholders can capitalize on a market that is reshaping the regional security landscape.

Source:
[1] Vietnam's increased infrastructure investment target and its implications, [https://theinvestor.vn/vietnams-increased-infrastructure-investment-target-and-its-implications-d14697.html]
[2] U.S. Relations With Vietnam, [https://2021-2025.state.gov/bureau-of-east-asian-and-pacific-affairs/releases/2025/01/u-s-relations-with-vietnam/]
[3] Vietnam - Defense and Security Sector, [https://www.trade.gov/country-commercial-guides/vietnam-defense-and-security-sector]
[4] Regulation to combat foreign funding of terrorism and national security threats, [https://vietnamnews.vn/society/1724523/regulation-to-combat-foreign-funding-of-terrorism-and-national-security-threats.html]