For decades, low labor costs and a large workforce were Vietnam’s primary competitive advantages. Today, a more sustainable and persuasive asset is emerging: institutional trust. In the first six months of 2025, foreign direct investment (FDI) into Vietnam surged by 32.6% year-on-year, reaching $21.52 billion.

This positions Vietnam as a critical investment destination in the region, closely trailing Thailand, which saw a 34% increase over the first five months.

But the numbers only tell part of the story. Behind them lie deep policy reforms, infrastructure upgrades, and increasing administrative transparency - key forces reshaping Vietnam’s entire investment ecosystem.

Once praised for its dynamic, high-potential environment, Vietnam is now actively cultivating predictability and transparency to build long-term investor confidence.

The country is transitioning from informal, improvised agreements to a rules-based system. This shift redefines how investors perceive and engage with the Vietnamese market.

More than a mechanism to attract capital, it is also the key to drawing strategic investors with long-term vision - those who prioritize certainty and operational transparency. Vietnam is no longer just a low-cost manufacturing hub but a destination for high-quality, value-added, and sustainable capital.

This transformation is driven in part by administrative reforms that reflect dual motivations: domestic demands for governance efficiency and global expectations amid increasingly complex investment conditions - particularly in response to the OECD’s BEPS 2.0 (Base Erosion and Profit Shifting) framework.

Vietnam’s government has taken bold steps. According to the Ministry of Home Affairs, 2025 saw a major restructuring of central administrative agencies, cutting 20% of ministries and ministerial-level bodies. This included merging five ministries, four specialized agencies, and five national news organizations.

Such efforts mark a shift in the role of the state - from a traditional gatekeeper to a flexible, transparent enabler. The transition from informal, discretionary systems to structured and predictable governance is vital to building sustainable institutional trust.

A foundation of trust through reform

Vietnam’s journey toward a “smart government” began with its 2030 E-Government Development Strategy, launched in 2021. The goal is to fully digitize public services by the end of 2025 and establish a digital government and society by 2030.

This vision is grounded in practical regulations, including a unified administrative procedure standard introduced in 2024. Long-standing investor pain points - such as licensing and land management - are being redesigned with standardized, replicable, and digitally integrated processes.

Transparency, consistency, and enforceable legal frameworks now lie at the core of Vietnam’s FDI strategy. The legal environment is being realigned with environmental, social, and governance (ESG) priorities and digital transformation goals. Investment criteria for priority sectors and strategic projects are now more precise, moving beyond the overly broad definitions found in previous ASEAN-wide agreements.

This shift offers two key advantages. First, it boosts compatibility with global tax norms - particularly the OECD’s Global Minimum Tax (Pillar Two), which Vietnam codified in 2023. This reduces fiscal uncertainty and tax dispute risks. Second, it sends a strong signal to strategic investors: Vietnam is serious about institutional reform and playing by global rules.

Today, institutional clarity and regulatory reliability are as crucial to investors as traditional factors like labor, location, or supply chain access. Vietnam no longer needs to be the “easiest” market but the most trustworthy. The new competitive edge lies in elevating transparency - not lowering barriers. This model is especially attractive to long-term, visionary investors.

The three-pillar strategy for effective investment

To succeed in Vietnam’s evolving environment, investors must master regulatory complexity and identify true market potential. Many high-performing investors now adopt a “three-pillar strategy”:

First, digital due diligence - using digital tools and data analytics to evaluate legal, market, and operational risks. This includes verifying the functionality of online licensing systems, procedural consistency, and infrastructure quality at the local level.

Second, engagement with trusted legal advisors - local experts who understand the nuances of regulation interpretation, implicit practices, and unwritten expectations. These professionals play a key role in translating rules into actionable business strategies.

Third, a strong ESG framework - non-negotiable in today’s landscape. Since 2021, ESG reporting has been mandatory for listed companies. Vietnam is also developing broader disclosure requirements, and proactive ESG monitoring positions businesses for both current and future compliance.

Investors willing to engage deeply with Vietnam’s institutional landscape - and patient enough to understand the unique intersection of policy and practice - are more likely to thrive long-term. Local insights gained through ongoing involvement are invaluable for navigating complexity and uncovering new opportunities.

Accelerating with intention, not haste

Vietnam today embodies the pragmatic, reformist spirit of its Doi Moi (economic renovation) era - focused, practical, and non-ideological. Rather than reacting passively to external pressures, the government is proactively shaping a reliable institutional foundation.

This reform drive may temporarily lengthen certain administrative processes or require procedural adjustments. However, it lays the groundwork for something far more valuable: sustainable institutional trust.

This trust minimizes short-term risks and fosters a stable environment in which domestic and foreign investors can confidently make long-term commitments. Vietnam is no longer competing primarily on cost. Its core asset is now credibility.

This strategic shift is essential for attracting and retaining high-quality capital - critical to sustainable development, technological innovation, and inclusive growth. As Vietnam deepens integration into global standards, including expanding ESG disclosure frameworks, it is sending a clear message: “Vietnam is not just open for business - we are building the institutional strength to realize our biggest economic ambitions.”

PV