Vietnam's Market Liberalization and the Rise of Foreign Institutional Investment

Vietnam's 2025 market liberalization agenda has catalyzed a surge in foreign institutional investment, positioning the country as a pivotal player in global supply chains and sustainable development. By dismantling trade barriers, streamlining FDI processes, and prioritizing high-tech and green industries, Vietnam has attracted record capital inflows. In the first nine months of 2025, foreign direct investment (FDI) reached $28.54 billion, a 15.2% year-on-year increase, with manufacturing and processing absorbing 60% of new commitments and over 80% of disbursed capital, according to a VnEconomy report. This acceleration reflects a strategic shift from cost-driven growth to institutional trust, driven by reforms in governance, digital infrastructure, and legal transparency, as highlighted in a Broadsheet analysis.

Capital Inflow Acceleration: A New Era of Institutional Trust

Vietnam's transition to a rules-based economy has been a cornerstone of its success. By simplifying business registration, offering tax incentives for high-tech sectors, and enhancing digital governance, the government has created a more predictable environment for foreign investors. For instance, newly registered capital in Q3 2025 totaled $12.39 billion across 2,926 projects, while adjusted capital for existing projects surged by 48% to $11.32 billion, according to a VIR analysis. VIR also reported that institutional investors contributed an additional $4.84 billion through share purchases and capital contributions, marking a 35% year-on-year increase.

This trust-driven model is paying dividends. Singapore, China, and Hong Kong remain top investors, but European and Japanese firms are increasingly targeting Vietnam's renewable energy and semiconductor sectors. For example, Envision Energy plans a $420 million wind power project in Dien Bien, while LG Display added $1 billion to its OLED operations, according to a PLF analysis. These investments underscore Vietnam's ability to attract capital not just for cost arbitrage but for long-term strategic alignment with global trends.

Sectoral Outperformance: Semiconductors and Renewable Energy Lead the Charge

The semiconductor industry has emerged as a standout performer. By early 2025, Vietnam hosted 174 foreign-invested semiconductor projects, totaling $11.6 billion in registered capital, as reported in The Investor report. Global giants like Intel, Samsung, and Nvidia are expanding operations, with Nvidia establishing an AI R&D center and data hub-a landmark partnership that signals Vietnam's integration into the global tech value chain. Amkor Technology, for instance, plans to triple its production capacity in Bac Ninh, aiming to produce 3.6 billion semiconductor units annually by October 2025, according to The Investor.

Renewable energy is another high-growth sector. Vietnam's National Power Development Plan aims for 70% renewable electricity capacity by 2050, supported by corporate tax incentives and streamlined project approvals, according to an S&P Global report. The S&P Global report also noted European investors are prioritizing offshore wind and green hydrogen projects, with estimated investments of $8–$12 billion. In Q3 2025, the electricity, gas, and steam sector received $598.7 million in FDI disbursements, reflecting growing confidence in Vietnam's green transition, according to a VnExpress report.

Challenges and the Path Forward

Despite these gains, challenges persist. Regulatory complexities, infrastructure bottlenecks, and rising labor costs remain hurdles, cautioned in a GreenNRJ analysis. Small and medium enterprises (SMEs) and trade unions have also raised concerns about foreign competition's impact on domestic players, a point Broadsheet explored. However, the government's focus on infrastructure development-such as Long Thanh International Airport and highway expansions-aims to mitigate these issues, VIR noted.

For investors, the key lies in balancing short-term opportunities with long-term risks. While manufacturing and semiconductors offer immediate returns, renewable energy and green agriculture present sustainable growth avenues. As Vietnam navigates its dual goals of economic modernization and social stability, its ability to address these challenges will determine whether it sustains its current momentum.

Conclusion

Vietnam's 2025 market liberalization policies have redefined its economic trajectory, transforming it from a low-cost manufacturing hub to a high-tech and green energy leader. With FDI inflows surging and strategic sectors outperforming, the country is well-positioned to meet its GDP growth targets and global competitiveness aspirations. For foreign institutional investors, Vietnam offers a compelling mix of scale, policy support, and sectoral diversification-provided they navigate the evolving regulatory landscape with agility.