Enhancing capacity and institutional changes are crucial for disadvantaged localities to heighten Foreign Direct Investment (FDI) attracted to them.

Vietnam is taking strategic steps to attract foreign investment to less developed regions, aiming for inclusive and balanced economic growth. The focus is on institutional trust, transparent reforms, targeted incentives, and flexible investment policies.

Shifting Focus from Low Labor Cost to Institutional Credibility

Vietnam is emphasizing the importance of building strong institutional trust and administrative accountability. This foundation, which supports sustainable high-quality investment and technological advancement, is crucial across regions, including less developed ones [1].

Infrastructure and Regulatory Reforms

Significant policy changes, including new laws and decrees in 2024–2025, are simplifying customs procedures, enhancing transparency, and providing incentives particularly in technology, science, and manufacturing sectors. These improvements reduce barriers to entry for investors in various regions [1][3].

Financial Incentives and Tax Breaks

Tax deductions (up to 200% for R&D spending) and the allowance to allocate part of corporate income to tech development are designed to encourage investments in innovation and technology sectors countrywide, supporting growth in less developed areas [4].

Investment Location Choices with Licensing Incentives

For the electronics sector—one key driver of exports—choosing investment locations is critical. Licensing sequences and investment locations often come with specific incentives aimed at attracting FDI to regions outside the major metropolitan centers [5].

Public-Private Partnerships and Support for Startups

Government programs foster startup growth with capital, regulatory sandboxes, and risk guarantees, helping to distribute innovation-driven investment across the country [4].

Smaller and Localized Investments Encouraged

The recent trend in mergers and acquisitions shows a move toward smaller deals and localized investments, which helps promote investment flow into diverse regions rather than concentrating in a few large metropolitan areas [2].

A unified national policy is needed, one that leverages the unique strengths of each locality while minimising unhealthy competition and fostering inter-regional cooperation. The development of synchronised infrastructure and next-generation industrial parks is essential. Localities are encouraged to proactively develop their own foreign investment attraction strategies, aligning them with broader regional and sectoral development plans [4].

It's vital to optimise land use, invest in high-quality technical infrastructure and support services, particularly logistics and clean energy, to better meet the demands of high-tech and sustainable investors. These support policies must be flexible, sustainable, and aligned with the unique potential of each region.

Enhancing the local business environment is essential to drawing more foreign investment. This includes streamlining licensing processes, ensuring transparency in planning and land-use data, and shortening the time required for administrative approvals. Essential steps to overcome foreign investment being concentrated in a few key locations include fostering institutional reforms and strengthening local management capacity.

Encouraging and supporting small and medium-sized enterprises to integrate into foreign investment supply chains is essential. Workers of a foreign-invested company are located in Quảng Ngãi Province. However, many localities struggle to secure high-tech projects due to shortages of skilled workers and a limited network of supporting suppliers.

The nationwide rollout of the two-tier local administration model presents a key opportunity to advance decentralisation, streamline administrative procedures, and enhance transparency. Preferential policies and customised investment promotion are needed to attract foreign investment in less developed areas. HCM City is among the leading localities in attracting foreign investment, but the unbalanced influx of foreign investment remains a concern, with a few advantageous localities receiving the majority of investment. These strategies aim not just to increase the overall volume of foreign investment but also to ensure it is more evenly spread across Vietnam's less developed regions.

Enhancing capacity and institutional changes are crucial for disadvantaged localities to heighten Foreign Direct Investment (FDI) attracted to them.