Challenges
The lack of skilled labor and low local supply chain integration are the two major challenges in the country. Due to this, the quality of investments in the country hasn’t improved in the last 10 years. Low-cost labor and government incentives continue to remain the major determinants of FDI in Vietnam.
However, as labor cost grows and government incentives and exemptions expire, the government must focus on increasing the quality of FDI to remain competitive. The government also needs to focus on supporting local firms in addition to foreign enterprises, if they want them to move up the value chains and benefit from FDI spillovers, which is still limited in Vietnam.
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