Determinants of Foreign Direct Investment in Vietnam

Since the first law on foreign direct investment (FDI) in December 1987, the FDI sector has continuously played an important role in the economic growth of Vietnam. It is, therefore, important to find out what factors helps facilitate the FDI inflows into the country. By using the gravity model, the paper aims to identify determinants of FDI into Vietnam from 16 main FDI partners during the period from 2003 to 2014. The empirical results suggest that geographical distance, along with GDP, GDP per capita, trade openness and labor cost have significant impact on facilitating FDI inflows into Vietnam. The empirical results are then expected to provide useful insights for policy recommendations in area of macroeconomics, bilateral trade, logistics and transportation system and labour quality to attract larger volume of FDI into Vietnam in the future.