Examination of Potentialities of Vietnam as FDI Destination

Globalization has made worldwide mobility of money extremely easy. The investors prefer to invest in places that offer attractive returns and are relatively less risky. The inflow of FDI gives developing countries access to capital that would otherwise be not available. FDI also provides much needed foreign exchange and therefore helps to adjust some of the macroeconomic imbalances in developing countries. Vietnam is in the growth mode, trying to boost the growth rate from all corners, but the resources available is limited and very often insufficient, hence the country is competing against others to make the investment climate more investor-friendly and project itself as an investor-friendly destination for the FDI. The main objectives of this study are to find out the status of Vietnam as a destination for FDI, the factors that attracts FDI into Vietnam and how these can be enhanced, and the factors that hinder the flow of FDI into Vietnam and how these can be reduced. This study is based on secondary data and covers a period of five years. The study analysis various determinants of FDI like market size, economic growth, infrastructure, political risk, corruption, labor market, raw materials, technological readiness, innovation, financial system, taxation, cost of capital, ease of doing business and government policies. The study reveals that Vietnam has the potential, decent growth, political stability, organized financial system and acceptable policy that makes it attractive to foreign investors and suggests measures to enhance the attractiveness, similarly highlights the hindrances to the inflow of FDI into Vietnam and suggests measure to reduce them.