Introduction
Since the implementation of the “Doi Moi” reforms in 1986, international integration and foreign investment have been pivotal to Vietnam's economic growth From 1996, when Vietnam joined the ASEAN Free Trade Agreement, to early 2018, the country signed 12 FTAs, with plans for additional agreements and ongoing negotiations Additionally, following its accession to the WTO, Vietnam experienced a fivefold increase in foreign direct investment (FDI) inflows, establishing itself as one of the largest FDI recipients in ASEAN and ranking among the top five most attractive foreign investment destinations globally in 2016, according to UNCTAD.
Participation in Free Trade Agreements (FTAs) significantly boosts international trade and attracts Foreign Direct Investment (FDI) by providing market access, ensuring a stable and non-discriminatory environment, and protecting foreign investment interests However, Vietnam's commitments and the level of liberalization vary across different FTAs, leading to diverse impacts on the attraction of FDI inflows.
This study aims to clarify Vietnam's commitments to investment within various Free Trade Agreements (FTAs) and to assess the extent of investment liberalization, ultimately identifying its impact on Foreign Direct Investment (FDI) inflows into the country The influence of FTA investment agreements on investor perceptions and decisions extends beyond merely opening markets for foreign investors; it also creates opportunities, protects investments, and fosters a favorable environment that promotes investment while safeguarding investor interests in disputes However, this study focuses specifically on the principles of investment liberalization that Vietnam has committed to for foreign investors, particularly emphasizing the effectiveness of liberalization in Mode 3 (Commercial presence) as well as other modes.
The article discusses the stringent regulations surrounding the eligibility of individuals to enter the market, specifically focusing on Vietnam's commitments to market access under Mode 3 outlined in specific schedules.
This study assesses the ASEAN Free Trade Area (AFTA), the ASEAN-Korea Free Trade Agreement (AKFTA), and the ASEAN-Australia/New Zealand Free Trade Agreement (AANZFTA) In 2016, ASEAN and Korea emerged as Vietnam's largest investors, while Australia represented a lower investment capital among FTA partners Both the AKFTA and AANZFTA agreements were implemented between 2009 and 2010 Additionally, the ASEAN Comprehensive Investment Agreement (ACIA) was signed in 2009 and became effective in 2012 Despite the ASEAN Framework Agreement on Services (AFAS) being signed in 1995, Vietnam's service commitments remained comparable to or lower than those under the WTO until the 8th Package of Commitments was enforced in 2010, which introduced higher commitments and opened new subsectors for trade and investment This study focuses on the investment and services agreements outlined in these chapters.
- For ASEAN-Korea FTA: o Agreement on investment o Agreement on trade in services o Schedule of Specific Commitments of Vietnam – Annex of Agreement on trade in services
- For ASEAN - Australia – New Zealand FTA
6 o Chapter 8: Trade in services o Chapter 11: Investment o Vietnam’s Schedule of specific services commitments
The ASEAN Comprehensive Investment Agreement (ACIA) and the ASEAN Framework Agreement on Services (AFAS) are pivotal in enhancing regional economic integration Vietnam's commitments under AFAS, particularly the 8th Package of Commitments established in 2010, outline specific obligations that bolster the service sector Additionally, Vietnam's schedule of commitments regarding air transport services under AFAS further emphasizes the country's dedication to facilitating trade and investment within the ASEAN framework.
7 th Package (2011) o Vietnam’s schedule of commitments on Financial services under AFAS – The 5 th Package (2011)
This paper is structured into several key sections: Section 2 presents a literature review on the effects of Free Trade Agreements (FTAs) on Foreign Direct Investment (FDI) Section 3 offers an overview of Vietnam's economy and its FDI regulatory framework Methodology is discussed in Section 4, while Section 5 analyzes Vietnam's inward FDI alongside the country's commitments in FTAs Section 6 provides a discussion, culminating in the final section, which includes conclusions and recommendations.
A brief literature review of the impacts of FTAs on FDI
Foreign Direct Investment (FDI) is a crucial driver of economic development, particularly for developing countries, as it generates technology spillovers, enhances international trade integration, and creates jobs, especially for skilled labor Additionally, FDI fosters a competitive business environment, supports enterprise development, and provides access to international markets and production networks These factors collectively contribute to economic growth, increased welfare, and poverty reduction in host countries Although empirical studies on the impact of FDI on economic growth yield mixed results, particularly between developed and developing nations, global FDI flows have surged in recent years, especially towards emerging markets.
The attractiveness of a country for Foreign Direct Investment (FDI) is influenced by several key determinants Effective macroeconomic management, characterized by high growth, low inflation, and openness, along with a more independent judiciary and robust infrastructure, are essential for fostering FDI, as noted by Walsh and Yu (2010) Additionally, developing nations must focus on creating a flexible labor market and a strong financial sector to further enhance their FDI appeal Mottaleb and Kalirajan (2010) emphasize that, when comparing successful FDI-attracting countries, factors such as a large market size, high GDP growth rate, a business-friendly environment, and economic openness are critical for lower-income and lower-middle-income nations seeking to attract investment.
Openness is a crucial factor influencing the attractiveness of developing countries for foreign direct investment (FDI) (Mottaleb & Kalirajan, 2010; Sekkat, 2007; Liargovas & Skandalis, 2012) Studies indicate that international trade agreements positively affect FDI, with regional integration agreements significantly boosting FDI inflows in developing nations (Daude, Stein & Yeyati, 2003; Kreinin & Plummer, 2008; Büthe & Milner, 2008) Recent research by Medvedev (2012) highlights that while the relationship between preferential liberalization and FDI was notable primarily from the late 1990s to early 2002, preferential trade agreements have a substantial impact on increasing net FDI inflows for member countries, particularly driven by developing nations Additionally, an analysis of bilateral data from 30 OECD and 9 ASEAN countries between 2000 and 2009 further supports these findings.
& Narjoko (2014) observes that FTAs also resulted in the increase of FDI in ASEAN countries and they can expect a larger FDI inflows by developing infrastructure, human capital and technologies
Joining trade agreements enhances a country's appeal to foreign investors through several channels, as highlighted by Nguyen & Cao (2016) Trade liberalization increases foreign direct investment (FDI) by creating a signaling effect, commitment effect, expanding commerce, and improving efficiency By entering free trade agreements, a country demonstrates its commitment to fostering a friendly investment environment and pursuing economic development policies, making it more attractive to foreign investors Furthermore, these commitments help alleviate investor concerns regarding regulatory inconsistencies, such as changes in regulations, higher tax rates, or political instability.
The implementation of Free Trade Agreements (FTAs) can significantly benefit investors by ensuring consistent key policies and regulations, while also opening up markets and facilitating investment opportunities Investors can leverage preferential treatments from FTAs to lower costs, enhance productivity, and expand their market reach Furthermore, research by Daude et al (2003) highlights that capital flow liberalization, legal harmonization, and cooperation in cross-border disputes among member countries help reduce transaction costs, allowing investors to maximize profits through tariff reductions and economies of scale resulting from larger market sizes.
Vietnam's commitment to openness and participation in Free Trade Agreements (FTAs) plays a crucial role in driving substantial Foreign Direct Investment (FDI) growth According to Pham (2010), the impact of Vietnam's accession to the World Trade Organization (WTO) has been significant in shaping FDI dynamics from 1990 onwards.
Research from Nguyen, Zhong & Tran (2012) indicates that legal factors are a significant determinant of foreign direct investment (FDI) inflows from 2006 to 2010 Additionally, studies by Hoang, Tran & Dong (2015) and Nguyen and Cao (2016) reveal that membership in free trade agreements (FTAs) has a strong and significant impact on attracting FDI, although the effects of individual FTAs vary While AFTA, ASEAN-China FTA, and ASEAN-Japan FTA did not significantly influence FDI inflows, the ASEAN-Korea Free Trade Agreement (AKFTA) notably facilitated FDI into Vietnam Conversely, the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) had a negative impact, potentially due to tariff reductions that allow investors to export to Vietnam at lower rates.
Research on the impact of Free Trade Agreements (FTAs) on Foreign Direct Investment (FDI) often views FTAs as uniform entities, neglecting the diverse provisions and commitments of individual member countries This variability contributes to differing effects of FTAs on FDI across nations, leading to ongoing debates regarding the findings of various studies.
Background
Macroeconomics
Vietnam stands out as one of the most dynamic and stable economies in Southeast Asia, with an average GDP growth of over 6% over the past two decades, projected to remain at 6.4% from 2017 to 2020 (World Bank, 2017) Despite global economic challenges, including the 2009 crisis, Vietnam has shown resilience through strong domestic demand, increased investment, and export-oriented manufacturing (KPMG, 2016) The government successfully controlled inflation, reducing it from a peak of 22.9% in 2008 to an average of 7% from 2011-2015, with projections of 4% for the following five years (World Bank, 2017) Additionally, the country's political stability and the government's commitment to economic development have contributed to a steadily improving macroeconomic environment (World Bank, 2018a).
Integration to global economy
While the first and important step in trade integration of Vietnam is joining ASEAN in
Vietnam's accession to the ASEAN Free Trade Agreement in 1996 and its membership in the World Trade Organization (WTO) in January 2007 marked significant milestones in the country's economic integration Since then, Vietnam has actively sought to deepen its participation in the global economy by engaging in Free Trade Agreements (FTAs) as an ASEAN member and negotiating its own bilateral FTAs The year 2015 stands out as a particularly successful period for Vietnam in this ongoing journey of economic integration.
Vietnam has signed four key agreements with major trading partners, including Korea, the Eurasian Economic Union, the EU, and TPP 2 To date, the country has established 12 Free Trade Agreements (FTAs) and plans to sign an additional FTA in 2018, while three more FTAs are currently under negotiation.
The Political Stability Index, created by the World Bank, evaluates a government's potential for instability or the risk of being overthrown through unconstitutional or violent means, such as political violence and terrorism This index ranges from -2.5 to 2.5, with higher scores indicating better stability In 2016, Vietnam achieved a score of 0.2, surpassing the scores of most ASEAN countries.
3 Including Regional Comprehensive Economic Partnership (RCEP), Vietnam – Israel and Vietnam – EU
Vietnam has increasingly established itself as a hub for Free Trade Agreements (FTAs) in Southeast Asia, primarily with partners in the Asia Pacific region, while also expanding its reach to Europe and the Middle East The country has engaged in negotiations and signed comprehensive 'new generation' FTAs, including the CPTPP, EVFTA, and RCEP, which encompass a wide range of commitments beyond traditional trade in goods and services These agreements address critical areas such as intellectual property, labor, environment, competition, state enterprises, public procurement, and e-commerce As a result, Vietnam has opened its markets to foreign investors across various sectors, including manufacturing, real estate, and services, solidifying its position as an attractive investment destination.
Before joining the CPTPP, ASEAN represented Vietnam's most significant and comprehensive free trade agreement (FTA) Vietnam is nearing the completion of its tariff reduction commitments outlined in the agreement, having signed and implemented nine packages under the ASEAN Framework Agreement on Services (AFAS), which includes higher commitments and a broader range of service sectors for trade and investment Additionally, a comprehensive investment agreement established in 2012 has enhanced investment opportunities within the region Vietnam's domestic regulations now foster a more investor-friendly environment, contributing to ASEAN becoming the second-largest investor in Vietnam as of 2016.
The Framework Agreement on Comprehensive Economic Cooperation between ASEAN and Korea, signed in 2005, laid the foundation for enhanced trade relations, culminating in the Agreement on Trade in Goods in 2007 and the agreements on Trade in Services and Investment in mid-2009 This comprehensive agreement aims to bolster economic cooperation by reducing or eliminating tariffs on up to 90% of tariff lines and addressing significant trade barriers Additionally, it encompasses key sectors in services, striving to create a liberal, transparent, and competitive investment environment between Korea and ASEAN nations.
After the signing of the FTA, investment capital from Korea to ASEAN only grew by 30% until 2016, according to ASEAN Statistics (2017) In contrast, Korea has emerged as a crucial trading partner for Vietnam, with foreign direct investment (FDI) from Korea to Vietnam surging 2.7 times during the same timeframe.
The ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), effective since 2009, encompasses comprehensive commitments on trade in goods, services, and investments Under this agreement, Vietnam has pledged to reduce or eliminate tariffs on 90% of tariff lines, significantly benefiting key products from Australia and New Zealand, including beef, lamb, dairy, and wood products While the trade in services commitments align closely with WTO standards, there are enhanced standards and commitments in the investment chapter, particularly regarding investment protection.
Regulation and FDI Regulatory
Policy development is crucial for enhancing economic integration by fostering a conducive environment for trade and investment The Vietnamese government has made significant strides in improving the business and investment landscape, particularly through its WTO accession, which necessitated aligning domestic policies with international standards Revisions to legal and regulatory frameworks have focused on transparency and equality, with the Investment Law 2005 and Enterprise Law 2005 serving as pivotal legislation These laws establish a foundation for non-discrimination among domestic and international investors, as well as between public and private enterprises, addressing gaps in previous regulations.
The government is actively developing policies to enhance the business environment, promote further liberalization, and stimulate competition, all while aligning with Vietnam's commitments in Free Trade Agreements (FTAs) (KPMG, 2016).
The revised Law on Investment and Enterprise, effective July 2015, replaces the 2005 Investment Law and introduces significant changes aimed at alleviating the challenges faced by foreign investors Key updates include a reduction in prohibited and conditional business lines, a clearer definition of "foreign investor" and "foreign invested enterprise," and enhanced efficiency in registration procedures Additionally, the law shortens the timelines for mergers and acquisitions and streamlines processes for foreign investors, including share acquisition and legal representation.
Since 2003, Vietnam has made significant strides in reducing its FDI Restrictiveness Index, demonstrating the government's commitment to fostering a welcoming and non-discriminatory environment for foreign investors The level of restrictions on foreign direct investment has notably decreased from 0.434 in 2003 to 0.115 in 2016, indicating a more open investment climate over the past two decades.
Figure 1 FDI Restrictiveness index of Vietnam in total and by industry (2006 – 2016)
Figure 1 also represents dramatic changes in the level of restriction after 2 times when Vietnam revised its Law on Investment and Enterprise Law, in 2005 and 2015
The FDI Regulatory Restrictiveness Index (FDI index), developed by the OECD in 2018, assesses the restrictiveness of a country's regulatory framework It takes into account factors such as foreign equity limitations, approval mechanisms, restrictions on hiring foreign key personnel, and various operational constraints.
Figure 2 FDI restrictiveness index of ASEAN countries
Source: OECD (2018) and calculated by author
In 2016, Vietnam ranked 15th among 27 non-OECD countries in terms of investment ease, with an index score of 0.152, below the non-OECD average Compared to other ASEAN nations, Vietnam features a less restrictive legal system, second only to Cambodia The secondary sector, which encompasses manufacturing and electricity, faces the lowest investment barriers, followed closely by the primary sector, including agriculture and mining In contrast, the tertiary sector and real estate investments are highly restricted, particularly in sensitive areas like media, communication, and transport services, which have an index above 0.4 Conversely, sectors such as electricity, construction, manufacturing, business services, and financial services exhibit lower barriers to investment, with indices below 0.05.
Methodology
This study aims to evaluate foreign direct investment (FDI) inflows into Vietnam and the degree of investment liberalization under free trade agreements (FTAs) through both quantitative and qualitative analysis It begins by gathering statistics and data to analyze FDI trends in Vietnam from 1995 to 2016 Additionally, it examines the commitments outlined in free trade agreements to discuss Vietnam's investment liberalization efforts.
An analysis on FDI inflow into Vietnam
Overview and distribution by sector and by countries
In 1995, when Vietnam became a member of ASEAN and joined the first FTA in 1996, FDI inflows into Vietnam was just around 2 billion USD (see Figure 3) After reaching a peak in
From 1996 to 2002, foreign direct investment (FDI) in Vietnam plummeted from 2.3 billion USD to 1.6 billion USD, largely due to the Asian economic crisis and sluggish economic reforms However, starting in 2003, FDI began to rise again, driven by Vietnam's focus on industrial development, low labor costs, and an increasingly favorable investment climate The country's accession to the WTO in 2007 significantly transformed the investment framework, creating numerous opportunities for foreign investors who benefited from Vietnam's commitments and favorable conditions Consequently, FDI inflows surged, increasing from an average of 1.7 billion USD per year between 1995 and 2006 to over 9 billion USD annually from 2007 to 2016, establishing Vietnam as one of the most attractive investment destinations in ASEAN.
Figure 3 FDI flow into Vietnam, 1995 – 2016 (BoP)
Source: Word Bank – World Development Indictors (2018)
Between 2009 and 2011, foreign direct investment (FDI) in Vietnam declined significantly, dropping from $9.5 billion in 2008 to $7.4 billion over three years, primarily due to the global economic crisis and rising inflation that diminished the country's attractiveness to investors Despite this downturn, Vietnam signed several free trade agreements (FTAs) during this period, which could pave the way for a resurgence in FDI projects and inflows starting in 2012.
Since 2012, foreign direct investment (FDI) inflows into Vietnam have consistently grown at an annual rate of 11%, reaching a record high of $12.6 billion in 2016, even amidst a global decline in FDI This growth has positioned Vietnam as one of the top five host economies in 2016 and the 12th most attractive destination for FDI from 2017 to 2019, reflecting a two-level improvement from the previous year (UNCTAD, 2017) The country has attracted investments from various Asian nations, including Korea, Japan, Singapore, and Malaysia, thanks to its trade liberalization, stable regulatory environment, low production costs, and tax incentives, solidifying its status as a major manufacturing hub in the region (UNCTAD, 2017).
Figure 4 FDI into ASEAN countries, 2010 – 2016
Compared with other ASEAN countries, Vietnam has been one of the countries that have seen continuous FDI flows since 2010, along with Philippines, Cambodia and Lao (see Figure 4)
In recent years, FDI into ASEAN has decreased by nearly 30%, from 133 billion USD in 2014 to
In 2016, foreign investment in Vietnam surged, positioning the country as one of the most attractive destinations in the region, following only Singapore This rise in interest comes amid a notable decline in investments from more advanced countries like Singapore, Indonesia, and Thailand, which collectively saw a drop to 98 billion USD.
Over the past two decades, Vietnam has emerged as a key manufacturing hub, attracting the largest share of Foreign Direct Investment (FDI) inflows, with the manufacturing sector accounting for nearly 50% of total registered capital between 2005 and 2007 This share declined during the global financial crisis in 2009 and 2010 but rebounded post-recovery, with FDI inflows to manufacturing reaching approximately two-thirds of total registered capital since 2012 Additionally, the export share of FDI enterprises surged from 37% in 2006 to over 70% in 2016 However, in recent years, the proportion of FDI in manufacturing has slightly decreased, reflecting a shift towards the growing service sector, alongside a similar trend in real estate investments.
2010 it accounted for 26% of total FDI in average, its share then decreased to only 9% for the period from 2011 to 2016
Figure 5 Registered FDI into Vietnam by industry, 2005 - 2016
Source: General Statistics Office of Vietnam (2018)
Figure 6 Share of total registered capital by industry (percentage of total),
Source: General Statistics Office of Vietnam (2018)
The service sector in Vietnam has represented approximately 20% of total registered foreign direct investment (FDI) over the past two decades From 2005 to 2010, significant foreign investment flowed into hotel, restaurant, transport, storage, and construction services; however, since 2010, the hotel and restaurant sector has seen a notable decline Conversely, the last five years have witnessed a surge in investment in distribution, transport, communication, and other services, particularly professional and business services Notably, in the past three years, while the manufacturing sector's growth has slowed and real estate investment has decreased, the service sector has experienced a remarkable increase, surpassing $7 billion by 2016—the highest level since 2010 This growth is partly attributed to the expansion of various service sectors following Vietnam's accession to the WTO and its commitments under the General Agreement on Trade in Services (GATS).
The primary source countries for Foreign Direct Investment (FDI) in Vietnam are predominantly from the Asia-Pacific region, many of which have Free Trade Agreements (FTAs) with Vietnam In 2016, eight of the top ten countries with the highest registered capital, representing 84% of total FDI in Vietnam, were located in Asia, with Taiwan being the only exception that has not signed an FTA with Vietnam.
Figure 7 Top 10 source countries of FDI into Vietnam in 2016 (percentage of total FDI)
Source: General Statistics Office of Vietnam (2018)
Figure 8 FDI into Vietnam from FTA partners in 2016 (percentage of total FDI)
Source: General Statistics Office of Vietnam (2018)
Total foreign direct investment (FDI) from countries with free trade agreements (FTAs) with Vietnam exceeds $21 billion, representing approximately 81% of the country's total FDI The primary investors include Korea, Japan, and ASEAN nations, contributing 57% of the overall capital, with a cumulative registered investment exceeding $145 billion over the past two decades In contrast, India, New Zealand, and Russia account for less than 1% of Vietnam's FDI as of 2016 Despite the ASEAN-Hong Kong FTA not being fully effective, Hong Kong remains one of the top sources of FDI to Vietnam in recent years.
FDI from Korea, ASEAN and Australia
For over twenty years, Korea has been the largest foreign investor in Vietnam, with total registered capital reaching approximately 46 billion USD since 2005, which is nearly 30% more than Japan's investment in the country.
Figure 9 Registered FDI from Korea, 2005 - 2016
Source: General Statistics Office of Vietnam (2018)
Registered foreign direct investment (FDI) from Korea to Vietnam peaked at 5.3 billion USD in 2007 but began to decline in 2008, averaging less than 2.5 billion USD annually over the next five years However, starting in 2013, the inflows surged significantly, reaching 4.5 billion USD that year and hitting a record nearly 7 billion USD in 2016 This upward trend continued for three consecutive years.
From 2014 to 2016, South Korea emerged as the largest source of foreign direct investment (FDI) in Vietnam, with Korean investments representing 30% of Vietnam's total FDI in 2016 This figure also accounted for 46% of South Korea's total FDI in ASEAN, significantly surpassing Singapore's 23% and Indonesia's 13% Korean businesses in Vietnam employed approximately 7,000 individuals and contributed around 30% to the country's total export value in 2016, highlighting their critical role in the Vietnamese economy.
Korea's Foreign Direct Investment (FDI) in Vietnam has evolved through three distinct waves, primarily centered on the manufacturing sector The first wave began in 1992, focusing on labor-intensive light-industrial projects By 2009, the emphasis shifted significantly toward the manufacturing and assembly of electronic and high-tech equipment, with this sector's share rising from 60% to over 80% (Shira, 2017) Recently, the third wave has diversified into services such as real estate, construction, and distribution, driven by the growth potential of domestic markets and supply chains Despite this diversification, manufacturing remains the primary focus for Korean investors, with major companies like Samsung and LG leading the way in capital investment in Vietnam.
Figure 10 Registered FDI from Australia, 2005 - 2016
According to the General Statistics Office of Vietnam (2018), the majority of Australian investments in Vietnam are concentrated in the manufacturing sector, with 119 projects totaling 884 million USD, representing 48% of the total registered investment capital The hotel and catering services sector follows with 18 projects and approximately 147 million USD, accounting for 8% of the total Australian investors are also active in various other sectors, including banking, education, insurance, construction, travel, and logistics With the implementation of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the strengthening of strategic partnerships since 2018, the flow of Australian investment to Vietnam is anticipated to rise in the coming years.
ASEAN is the second largest investor in Vietnam, following Korea, accounting for approximately 37% of total registered foreign direct investment (FDI) from 2005 to 2016 Notably, in 2008, ASEAN countries contributed 44% to Vietnam's record FDI levels Since the signing of the ASEAN Comprehensive Investment Agreement (ACIA) in 2009, registered FDI from ASEAN has shown a significant and stable increase.
Among the ASEAN countries, Singapore, Malaysia and Thailand are the main investors in Vietnam, added up to 91% FDI from ASEAN in 2016 (see Figure 12) FDI from Brunei accounts
22 for 7% and other countries contributes to only 2% of the total Myanmar is the only country in ASEAN has not invested in Vietnam yet
Since the implementation of the ASEAN Investment Agreement, Singapore has experienced the highest growth rate in foreign direct investment (FDI) and has been the leading source of FDI in Vietnam since 2005 From 2005 to 2009, Singapore's average annual registered capital investment in Vietnam was $1.7 billion, which nearly doubled during the 2010 to 2014 period.
2016, at around 3 billion USD per year Since 2007, Singapore has always been in the top three countries with the highest investment capital in Vietnam, excluding the year of 2008 and 2009
In 2016, Singapore contributed 9% of the total registered capital in Vietnam, following Korea and Japan The majority of Singaporean investments, nearly 45%, were directed towards the manufacturing industry, while the real estate sector accounted for 30% of the total investment Additionally, Singapore has also invested in various other sectors in Vietnam, including legal services, banking, IT, and education.
Foreign Direct Investment (FDI) from Malaysia is significantly lower than that of Singapore, averaging less than 1 billion USD annually, with a notable spike in 2008 reaching nearly 15 billion USD After a slight increase to over 2 billion USD in 2015, FDI fell the following year Unlike Singapore and other ASEAN nations, Malaysia's FDI is predominantly directed towards the real estate sector, which accounts for over 50% of total investments, followed by manufacturing at nearly 18% Additionally, Malaysia has made substantial investments in water supply and waste treatment A significant 40% of Malaysian companies view Vietnam as their preferred investment destination in Southeast Asia for the next 3-5 years.
Figure 11 FDI from ASEAN countries in 2016 (percentage of total FDI from ASEAN)
Figure 12 Registered FDI from Singapore, Malaysia and Thailand, 2005 - 2016
Thailand was among the first nations to invest in Vietnam following the country's decision to embrace international trade and foreign investment Since 2005, Thailand has launched 350 projects in Vietnam, accumulating a total registered investment of 6.7 billion USD.
Singapore Malaysia Thailand Brunei Philippines
Foreign Direct Investment (FDI) from Thailand peaked in 2008 at over $4 billion but plummeted to approximately $100 million the following year Since 2010, however, Thai FDI has steadily recovered, reaching over $700 million by 2016, making Thailand the 9th largest source of FDI Thai investors primarily focus on sectors such as manufacturing, distribution, wholesale, and retail, while also holding the largest share of agricultural capital among ASEAN countries.
Since Vietnam joined the WTO, foreign direct investment (FDI) inflows have significantly increased, particularly from Korea, Australia, and ASEAN countries following the signing of free trade agreements in 2010 While Australia has experienced the fastest growth rate in FDI, its total capital remains modest compared to Korea, which holds the largest investment share in Vietnam The manufacturing and real estate sectors have attracted the majority of FDI, while investment in services, although still limited, has shown an upward trend in recent years.
An analysis on Vietnam’s commitments in FTAs
The relationship between investment and services chapters
The liberalization of Foreign Direct Investment (FDI) is governed by both investment and services chapters within Free Trade Agreements (FTAs) Investment chapters encompass comprehensive commitments on various investment issues, including non-discrimination treatment, performance requirements, fair and equitable treatment, expropriation and compensation, and dispute resolution In contrast, services chapters focus on a narrower scope of investment, specifically 'commercial presence' as defined by the General Agreement on Trade in Services (GATS) under Mode 3 While these chapters provide general provisions for transparency and Most-Favored-Nation (MFN) treatment, commitments regarding market access and national treatment are limited to specific sectors outlined in separate schedules Consequently, the interaction between investment and services chapters varies significantly depending on the specific content of each FTA.
Free Trade Agreements (FTAs) are generally categorized into two types: NAFTA-inspired and GATS-inspired agreements NAFTA-inspired agreements maintain a clear separation between investment and services chapters, with the investment chapter governing all investments related to goods and services, while the services chapter addresses service-related issues based on GATS, excluding commercial presence In contrast, GATS-inspired agreements integrate investment disciplines within both chapters, allowing for greater interaction Here, the investment chapter protects investments in services, while the services chapter focuses on the liberalization of supply modes, including commercial presence (Mode 3) Thus, the relationship between investment and services is articulated within both chapters in GATS-inspired agreements.
The three FTAs analyzed in this research are categorized within the GATS-inspired group, with a clear interaction between their investment chapters and agreements concerning services Notably, the investment agreement provisions exclude the agreement on Trade in Services, except for specific articles related to Treatment of Investment, Transfer, Expropriation and Compensation, Compensation for losses, Subrogation, and ISDS Each FTA outlines market access commitments for various service sectors within their respective service schedules.
Liberalization provisions in investment chapters
The ASEAN Comprehensive Investment Agreement, along with the Agreement on Investment under AKFTA and the Investment chapter of AANZFTA, establishes a comprehensive framework for investment that exceeds WTO standards These agreements encompass a wide array of principles, including investment liberalization, protection, and support for the investment framework, as well as mechanisms for investor-state dispute settlement (ISDS) By committing to these agreements, member countries effectively lower barriers that previously hindered investors, such as foreign equity restrictions, performance requirements, and insufficient regulatory transparency.
5 In some cases, the interaction is not be stated in agreements The last version of ASEAN agreements on investment and trade in services is an example (Houde et al., 2007)
The 26 agreements offer investors a more liberal environment with transparent and predictable conditions, enhancing legal safeguards for investment liberalization and promotion in various regions Key market access principles, such as Most-Favored-Nation (MFN) treatment, foreign equity restrictions, and regulatory transparency, significantly influence investor confidence and opportunities Additionally, regulations concerning post-establishment factors, including expropriation risks, profit repatriation restrictions, and legal protection, are crucial in investment expansion decisions Foreign investors are also concerned about their interests and protections in disputes Consequently, all principles within investment agreements impact foreign investment decisions This study specifically analyzes and compares investment liberalization provisions, including National Treatment, MFN, performance requirements, senior management nationality requirements, and reservation schedules across three Free Trade Agreements (FTAs).
Defining the investment framework of each Free Trade Agreement (FTA) is crucial for understanding their liberalization principles, which govern the assets and transactions that are protected under these agreements All three FTAs adopt a broad, asset-based definition of investment, encompassing various tangible and intangible assets, such as shares, property, business concessions, and intellectual property rights These agreements benefit investors from any participating country while excluding government procurement, subsidies, grants, and services provided under governmental authority A key distinction among the agreements is that the ASEAN Comprehensive Investment Agreement (ACIA) covers both existing investments at the time of its enactment and future investments made by member countries, whereas the Investment Agreement of the ASEAN-Korea Free Trade Area (AKFTA) and the Investment Chapter of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZ) only apply to investments existing at the date of entry into force The liberalization provisions of these three investment agreements will be further discussed.
All three Free Trade Agreements (FTAs) include national treatment provisions that mandate host countries to eliminate discriminatory measures against investors and investments However, the application of the Most-Favored-Nation (MFN) obligation varies across these FTAs Despite this difference, the core principle of non-discrimination remains consistent, ensuring equitable treatment for all investors.
The article highlights that the investment framework under ACIA covers all stages, including pre-establishment, and offers greater commitments compared to AKFTA Specifically, the Most Favored Nation (MFN) obligation in ACIA ensures that any preferential treatment granted under existing or future agreements by one ASEAN Member State is automatically extended to all other ASEAN members In contrast, AKFTA does not provide for such automatic extensions and excludes preferential treatments among ASEAN countries Thus, while ACIA promotes seamless investment benefits across the region, AKFTA requires negotiation for similar treatments, limiting its effectiveness.
Performance requirements in host countries mandate that investors adhere to specific behaviors or achieve set goals All three FTAs maintain uniform commitments, prohibiting any measures that conflict with the WTO Agreement on Trade-related Investment Measures (TRIMs) However, the ACIA elevates these standards by obligating Member States to assess current performance requirements and evaluate the necessity for further commitments under this Article.
Under the AANZFTA, Vietnam is not obligated to adhere to nationality requirements for senior management positions, unlike the ACIA and AKFTA, which prohibit member countries from restricting investors' control over their investments by mandating the appointment of individuals of a specific nationality.
The ACIA employs a negative list approach for market access, meaning Vietnam commits to fully opening its industries unless specified in a reservation list This list primarily includes sectors such as Agriculture, Forestry, Fishery, Mining, and manufacturing of sensitive products like tobacco and alcoholic beverages The retained measures in these industries focus on National Treatment and Senior Management and Board of Directors In contrast, while both AKFTA and AANZ FTA include commitments related to this obligation, their reservation lists remain subject to ongoing Work Programmes.
In summary, the ACIA demonstrates a stronger commitment to liberalization compared to the AKFTA and AANZFTA due to its broader investment agreement scope, more extensive non-discrimination provisions, and performance requirements While both AKFTA and AANZFTA cover investments from the date the agreements come into force, AANZFTA is more restrictive than AKFTA regarding Most-Favored-Nation (MFN) clauses and senior management nationality requirements.
Vietnam’s commitment on investment in trade in services chapters
The Trade in Services Agreement under AKFTA and the Trade in Services Chapter under AANZFTA outline the principles and commitments of member states, encompassing all service sectors Currently, the ASEAN Trade in Services Agreement (TiSA) is still under negotiation, while ASEAN Member States have advanced the liberalization of trade in services through various commitments under the AFAS framework established in 1995 Notably, financial services and air transport are managed through distinct packages From 1996 to 2015, ASEAN countries negotiated and released nine packages for Trade in Services, six for Financial Services, and eight for Air Transport Services, all aimed at enhancing service liberalization as per the AEC Blueprint All three FTAs emphasize liberalization principles, ensuring equality and non-discrimination based on Most-Favored-Nation (MFN) and National Treatment (NT) provisions, although specific commitments regarding market access for commercial presence (Mode 3) vary across sectors and sub-sectors.
In Free Trade Agreements (FTAs), two primary techniques for making commitments and exceptions in schedules are the positive list and negative list approaches The positive list approach involves a Party explicitly detailing all sectors and subsectors where it commits to market access and national treatment, alongside any exceptions or limitations Conversely, the negative list approach only identifies sectors and subsectors where a Party reserves the right to impose measures that could hinder liberalization, leaving all other sectors open to foreign suppliers under the same conditions as domestic ones Reflecting the trend among Asian countries, the three FTAs of ASEAN adopt a positive list approach for commitments regarding market access and national treatment.
The agreement with Korea often follows the NAFTA model, utilizing a negative list approach in its Free Trade Agreements (FTAs) The degree of liberalization is influenced more by the specific content and sectoral reservations of the agreement rather than its structural format Notably, the negative list method offers greater transparency compared to the positive list approach in identifying restricted industries within an agreement.
In the services schedule, horizontal commitments outlined in the first part are crucial for analyzing sectoral commitments, as they impact all sectors and sub-sectors detailed in the second part Typically, these commitments impose restrictions across various modes of supply, with significant limitations often found in commercial presence (Mode 3) and the presence of natural persons (Mode 4) (WTO, 2018) For Vietnam, the horizontal commitments in its three FTAs regarding direct investment align closely with its WTO commitments, granting foreign suppliers full market access to establish a commercial presence through business cooperation contracts, joint ventures, or 100% foreign-owned enterprises, unless specified otherwise for particular sectors Additionally, while Vietnam permits foreign enterprises to set up representative offices, it has not committed to allowing the establishment of branches These commitments govern all sectors and sub-sectors in the schedule, except where specific regulations apply.
Vietnam's commitments under the ASEAN Framework Agreement on Services (AFAS) are broader than those under the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) This is due to Vietnam's greater obligations regarding market access and national treatment for other ASEAN countries, surpassing the commitments made during its accession to the World Trade Organization (WTO) and under AKFTA and AANZFTA The extent of Vietnam's liberalization is reflected in the number of sectors and sub-sectors it has agreed to open.
Vietnam's government is dedicated to liberalizing various service sectors and sub-sectors; however, the level of commitment varies across the three Free Trade Agreements (FTAs) Notably, Vietnam's obligations under the ASEAN-Korea Free Trade Area (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA) are comparable to or even lower than those in other agreements.
Vietnam's commitments under the ASEAN Framework Agreement on Services (AFAS) include nine packages, with the first seven offering liberalization levels that are equal to or lower than those established under the World Trade Organization (WTO) Notably, the eighth package, introduced in 2010, features commitments in certain sectors and sub-sectors that surpass those of the WTO, along with new commitments in various sub-sectors This study focuses on the eighth package.
The Services Sectoral Classification List (MTN.GNS/W/120 or W/120) outlines the sectors and sub-sectors included under the General Agreement on Trade in Services (GATS) This World Trade Organization (WTO) document is derived from the Provisional Central Product Classification (CPC) established in 1991, which provides a comprehensive classification of both goods and services, prepared by the United Nations (CPCv2.1).
Vietnam's commitments under the WTO regarding market access for Mode 3 in trade in services exceed its obligations under the ASEAN Framework Agreement on Services (AFAS) While some commitments made during Vietnam's WTO accession are not reflected in AFAS, the country offers broader opportunities for investors from ASEAN nations compared to the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) Among the service sectors, the levels of restriction on market access vary significantly, ranging from complete liberalization to limited access.
- Services sectors with commitments on fully market access
Full commitment entails that a Member refrains from imposing restrictions on market access or national treatment in specific sectors and modes of supply, in accordance with Articles XVI (Market Access) and XVII (National Treatment) of GATS Nevertheless, applicable limitations outlined in the horizontal section of the schedule remain in effect Table 1 details the sectors and sub-sectors that have full market access commitments across the three FTAs.
Table 1 Sector/Subsector with commitment on full of market access
Sector/Subsector (CPC code) AEC AANZ AK
Accounting, auditing and bookeeping services (CPC 862)
Urban planning and landscape architectural services (CPC
Consultancy services related to the installation of computer hardware (CPC 841)
Computer and related services (CPC 845; CPC 849)
R&D services on natural sciences (CPC 851)
Market research and public opinion polling services (864)
Services related to man Consulting (CPC 866)
Related scientific and technical consulting services (CPC
General construction work for buildings (CPC 512)
General construction work for civil engineering (CPC 513)
Installation and assembly work (CPC 514; 516)
Building completion and finishing work (CPC 517)
Pre-erection Work at Construction Site (CPC 511)
Renting services related equipment for Construction or
Demolition of Building or Civil Engineering Works with
Cleaning services of exhaust gases (CPC 94040)
Environmental impact assessment services (CPC 9409)
Sanitation and similar services (CPC 9403) X O O
Nature and landscape protection services (CPC 9406) X O O
HEALTH RELATED AND SOCIAL SERVICES
Medical and Dental services (CPC 9312) X X X
TOURISM AND TRAVEL RELATED SERVICES
Hotels and restaurants (incl catering) (CPC 641- 643) X X X
Container station and Depot services
Services auxiliary to all modes of transport
Storage and warehouse services (CPC 742)
Freight transport agency services (CPC 748)
Rental of aircraft with crew (CPC 734)
Sales and marketing air products services Narrow Narrow
Note: X – Full of market access
Vietnam has fully opened several sectors and sub-sectors to all investors under three Free Trade Agreements (FTAs), particularly in areas requiring specialized expertise and high skills, such as Professional Business Services The country aims to attract investment for infrastructure development in sectors like construction and engineering, as well as to promote socialization in education, environmental, and tourism-related sectors Additionally, Vietnam commits to fully liberalizing certain sub-sectors under the ASEAN Framework Agreement on Services (AFAS), which are not included in the ASEAN-Korea Free Trade Agreement (AKFTA), ASEAN-Australia-New Zealand Free Trade Agreement (AANZ), or the World Trade Organization (WTO) commitments These include Sanitation services (CPC 9403), Nature and landscape protection services (CPC 9406), and specific air transport services from the 7th package, such as Rental of aircraft with crew (CPC 734) and Air freight forwarding services While Sales and marketing air product services are fully opened under the ASEAN Economic Community (AEC), they remain limited under AKFTA and AANZFTA.
- Services sectors with wide market access
Wide market access are committed for the following sectors in 3 FTAs:
Table 2 Sector/Subsector with wide market access Sector/Subsector (CPC code)
Technical testing and analysis services (CPC 8676)
Service incidental to manufacturing (CPC 884, 885)
Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment (CPC 633)
Tourism and travel related services
Travel agencies and tour operators services (CPC 7471)
Higher secondary education services (part of CPC 9222)
Technical and vocational secondary education services (part of CPC 9223)
The service sectors in Vietnam have relatively few restrictions for foreign investors, with some limitations based on national security and economic needs In technical testing and analysis services, access to certain areas may be restricted, while retail service outlets require an Economic Needs Test Foreign investors can engage in distribution services through joint ventures with local partners, with no limits on capital contribution In educational services, Vietnam offers a range of study fields under AANZFTA, despite committing to narrow market access There are no commitments on secondary education services under three FTAs, but higher secondary and technical vocational secondary education services are open only under AANZFTA.
- Services sectors with narrow market access
Vietnam boasts a diverse array of service sectors and sub-sectors with limited market access commitments under three Free Trade Agreements (FTAs) Notably, several sub-sectors are committed to being opened under the ASEAN Framework Agreement on Services (AFAS) but remain restricted under the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA).
Table 3 Sector/Subsector with narrow market access
Sector/Subsector (CPC code) AEC AANZ AK Note
Leasing and rental services relating to other machinery and equipment (CPC 83109) x O O
Production management consulting services (CPC x O O
Services incidental to agriculture, hunting and forestry (CPC 881) O x x WTO
Services incidental to mining (CPC 883) O x x WTO
Portrait photography services and Special photography services except aerial photography
Motion picture production (CPC 96112, exclude video tape) x x x
Motion picture distribution (CPC 96113, exclude video tape) x x x
All insurance and insurance-related services (CPC
Banking and other financial services (excl insurance)
HEALTH RELATED AND SOCIAL SERVICES
(other than those listed under 1.A.h-j.)
Other Human Health Services (CPC 9319) x O O
SPORTING SERVICES (other than audiovisual services)
Entertainment services (including theatre, live and circus services) (CPC 9619)
Sporting and other recreational services cultural services (CPC 964) x x x
Rental of vessels with crew (CPC 7213) x O O
Maintenance and repair of vessels (CPC 8868*) x O O
Maintenance and repair of vessels (CPC 8868*) x O O
Maintenance and repair of aircraft (CPC 8868**) x x x
Maintenance and repair of rail transport equipment
Services auxiliary to all modes of transport
Container handling services, except services provided at airports (part of 7411) x x x
Others (including bill auditing; freight brokerage services; freight inspection, weighing and sampling services; freight receiving and acceptance services; transportation document preparation services (part of 749) x x x
Vietnam's services with limited market access are primarily linked to public interest sectors such as social services, culture, security, communication, human health, and finance, as well as transport services where Vietnam lacks competitiveness Under the ASEAN Framework Agreement on Services (AFAS), Vietnam has committed to opening 15 sub-sectors to ASEAN investors, which are mainly in business and transport services, but not to those under the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) Notably, freight transportation (CPC 7112) in rail transport has more favorable commitments under AFAS, allowing joint ventures with Vietnamese partners at a 51% foreign capital limit, compared to a 49% limit under AKFTA and AANZFTA While only a few sub-sectors are accessible under AKFTA and AANZFTA, some sub-sectors not covered by these FTAs are still available to WTO member investors.
The commitments on market access in various service sectors include restrictions on foreign investors, such as requirements for business cooperation contracts or joint ventures Additionally, limitations on foreign capital investment range from 30% to 70%, and restrictions on Vietnamese partners and foreign legal entities are prevalent in these sectors.
- Services sectors without commitments on market access
Discussion
By analyzing FDI inflows from ASEAN, Korea and Australia and Vietnam’s commitments on investment liberalization in the three FTAs, there are some notable points as followed:
Since the signing of FTAs, capital flows from Korea, Australia, and ASEAN (excluding Malaysia) to Vietnam have surged by over 50% Notably, Singapore stands out as the leading investor in Vietnam among ASEAN nations and is also the largest recipient of Australian FDI in the region This trend can be attributed to the strong trade ties fostered by SAFTA, recognized as one of Australia's most effective FTAs A pertinent question arises regarding whether Australian investments in Vietnam via Singaporean companies can leverage the incentives provided by ASEAN countries Among the top 100 Singaporean companies operating in Vietnam, most are indeed Singaporean, yet they may also receive Australian investment capital for reinvestment in Vietnam Due to limitations in data collection, further investigation with more reliable data is essential Additionally, there is a possibility that Australian firms invest in Singapore and subsequently export goods and services to Vietnam, benefiting from preferential tariffs and enhanced trade liberalization under AFTA.
Korea has been the largest source of foreign direct investment (FDI) in Vietnam over the last two decades, particularly since the implementation of the ASEAN-Korea Free Trade Agreement (AKFTA) in 2010 However, Vietnam's most extensive commitments to investment liberalization, especially in the services sector, are with ASEAN rather than Korea The commitments made under AKFTA are relatively limited in comparison.
Vietnam's commitments under the AANZ FTA are fewer than 39, particularly in investment chapters where the MFN principle is broader than that of the AANZFTA, although the reservation lists for both agreements remain incomplete In terms of investment in services, Vietnam's commitments under the AKFTA align with its WTO obligations However, Vietnam has pledged to expand access to additional subsectors for Australia under the AANZ FTA, notably in educational services and others, which represent higher commitments than those in the AFAS.
Vietnam has made the highest commitment to investment liberalization under the ASEAN Free Trade Agreement (FTA) compared to AKFTA and AANZFTA The ASEAN agreement enforces principles such as non-discrimination, market access, and performance requirements for investments made both before and after the agreement's enactment, unlike AKFTA and AANZFTA, which only apply to post-agreement investments Additionally, privileges granted by ACIA member countries to other parties will extend to all ASEAN members, a provision not present in AKFTA and AANZFTA While most industries are open for investment, exceptions exist for specific sectors such as Agriculture, Forestry, Fishery, Mining, and certain manufacturing industries, which are listed as sensitive in the reservation list, still under development in AKFTA and AANZFTA.
Under the ASEAN Framework Agreement on Services (AFAS), the level of market openness surpasses the commitments made under the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA), both in terms of the number of sectors and the extent of liberalization Over 100 industries and sub-sectors are accessible to foreign investors from ASEAN, Korea, Australia, and New Zealand However, 14 sub-sectors remain exclusive to ASEAN investors, as Vietnam has not committed to these under the AK and AANZ FTAs Furthermore, Vietnam's commitments within ASEAN exceed those in the other two FTAs in two specific sectors.
Vietnam demonstrates the highest commitment level under ASEAN compared to AKFTA and AANZFTA; however, its agreement on investment in services lacks exceptional liberalization Approximately two-thirds of the sectors listed by the WTO still face significant reservations and restrictions Typically, these limitations apply to sensitive sectors and those where Vietnam lacks strong competitiveness.
Vietnam does not commit for market access or limit for FDI This is one of the reasons why FDI inflows into the service sector are still limited.
Recommendation and Conclusion
Over the past two decades, Vietnam has significantly enhanced its appeal to foreign direct investment (FDI), experiencing a remarkable growth of over six times, positioning itself among the top five global FDI host economies by 2016 This influx of investment has been crucial for job creation and economic development Additionally, Vietnam has actively engaged in international economic integration, entering into numerous free trade agreements (FTAs) that encompass broader commitments beyond trade, including investment This study will evaluate the extent of investment liberalization in Vietnam based on its commitments under three key FTAs: AFTA, AKFTA, and AANZFTA.
Korean Foreign Direct Investment (FDI) significantly surpasses that from ASEAN and Australia; however, Vietnam's highest commitment in terms of investment and services is within the ASEAN Free Trade Agreement (FTA) Liberalization principles for investments are applicable both pre- and post-agreement, with member countries extending privileges to all ASEAN nations Most non-service sectors are open to foreign investment, barring those on the reservation list While the investment liberalization provisions of the ASEAN-Korea Free Trade Agreement (AKFTA) and the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) are similar, AKFTA exhibits slightly higher commitments regarding Most-Favored-Nation (MFN) treatment and senior management requirements Vietnam's commitments in the services sector within ASEAN are notably broader, offering greater market access for investors In contrast, AANZFTA has higher commitments than AKFTA in certain sectors Overall, investment liberalization in services remains lower than in manufacturing, reflecting the limited FDI inflow into the service sector compared to manufacturing investments.
All three Free Trade Agreements (FTAs) include clauses for ongoing negotiations aimed at improving investment liberalization Notably, ASEAN presents a more defined trajectory for increased commitments, as outlined in the AEC Blueprint 2025 Furthermore, the VKFTA has also made significant progress over the past two years.
The implementation of Package 9 under AFAS, along with the signing of CPTPP, is set to boost foreign direct investment (FDI) flows from ASEAN, Korea, and Australia into Vietnam, indicating a positive outlook for future investment growth in the region.
To enhance economic development and foster the growth of export-oriented service markets, Vietnam must liberalize additional service sectors This strategic move will not only attract increased foreign investment but also improve competitiveness and create a more conducive environment for domestic industries to thrive.