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REVIEW of FINANCE - Issue 4, 2022

THE IMPACTS OF FREE TRADE AGREEMENTS

ON FOREIGN DIRECT INVESTMENT INFLOWS INTO VIET NAM

NGUYEN THI CAM GIANG, BUI THI MEN

Abtract: After more than 30 years of implementing policies to encourage foreign direct investment (FDI) attraction, Viet Nam has
received optimistic results, significantly contributing to socio-economic development. The paper collects and synthesizes data from
the Ministry of Planning and Investment to analyze the situation of attracting FDI into Viet Nam during the period 2011-2022 in
the context that our country have participated in many new generations of free trade agreements (FTAs). On the basis of objective
assessment, main recommendations are proposed to improve the competitiveness of enterprises and reform investment policy
institutions with the aim of promoting good quality FDI into Viet Nam.

Keywords: Foreign direct investment, free trade agreements, Viet Nam.

Received: September 7 , 2022 policy factors directly, removing barriers to market entry
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Revised: October 15 , 2022 for internal investors, create favorable conditions for
Accepted: November 15 , 2022 businesses to expand their investments in the region where
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Introduction commitment to open service is effective (Sayek S ,1999).
Thirdly, the commitment to liberalize investment
After more than 30 years of attracting FDI capital, towards non-discrimination in the investment
the foreign-invested enterprise sector has increasingly environment will have a positive impact on policy factors
developed, becoming one of the most dynamic areas of the and business factors; indirectly reduce operating costs
economy. Accumulated to October 20 , 2022, Viet Nam for internal enterprises (economic factors), promoting
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has 35,895 valid projects with a total registered capital international investment flows (Pinto M, 2010).
of over USD 435.2 billion. The accumulated realized Fourthly, new generation FTAs such as CPTPP, EVFTA
capital of foreign investment projects is estimated at more also expand their scope of applications in order to create
than USD 269 billion, equaling 61.9% of the total valid favorable business conditions; reduce transaction costs
registered investment capital (Ministry of Planning and and business risks due to information imtransparency,
Investment, 2022). In addition, the attraction of FDI in burden of administrative procedures and risks of
recent years has actively contributed to the improvement infringing technology copyright secrets.
of economic institutions and investment environment. Fifthly, the signing of FTAs means a commitment to
Currently, following the inevitable trend, Viet Nam is implement the strict provisions of the agreement in a
facing the process of deep integration into the world spirit of mutual benefit, which provides assurance of a
economy with new generation free trade agreements better political and institutional environment, helping
(FTAs). The year 2000-2022 remarks a difficult period for to increase foreign investor confidence and improve FDI
the global economy under the impact of the COVID-19 inflows into member countries (Schneider, 1985)
pandemic. However, under the timely and appropriate
direction and management of the Government, Viet The status of FDI inflows into Viet Nam through
Nam still attracts a large number of investment projects, FTA highlights
creating confidence for investors about an attractive and
safe destination. - Regarding typical FTAs:
In 2015, Viet Nam signed FTAs with the Eurasian
The conceptual relationships between free trade Economic Union, the European Union, Korea. At the end
agreements and foreign direct investment inflows of 2015, Viet Nam officially joined the ASEAN Economic
Community (AEC). In 2018, the National Assembly
Firstly, the commitment to eliminate tariffs and ratifies the Comprehensive and Progressive Agreement
facilitate trade in goods in the FTA has a direct impact for Trans-Pacific Partnership (CPTPP), which is the
on economic factors through market expansion and third largest free trade agreement in the world. In 2019,
reduction of production costs. Joining the FTA also Viet Nam and the EU signed the Free Trade Agreement
brings benefits in terms of economic and income growth (EVFTA) and Investment Protection Agreement (IPA);
for member countries, leading to further expansion of the In 2021, after Brexit, the UKVFTA (Viet Nam – UK)
market size (Quere et.al, 2007). Agreement was officially signed on December 29 , 2020.
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Secondly, the commitment to open services affects Viet Nam and the UK completed domestic procedures to

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