This chapter assesses the contribution of foreign direct investment (FDI) to productivity, innovation, and Viet Nam’s integration into global value chains (GVCs), and examines the policies needed to maximise these benefits. It reviews the governance, regulatory, and policy frameworks related to investment, innovation, and SME and entrepreneurship development, and provides targeted recommendations to strengthen the productivity-enhancing effects of FDI and improve the conditions for technology transfer from foreign multinationals to Vietnamese firms.
FDI Qualities Review of Viet Nam
Powering the Next Growth Phase
Abstract
Foreign direct investment (FDI) inflows into Viet Nam have increased substantially since the late 1980s, contributing to the structural transformation of the economy, with a marked acceleration and shift in composition following WTO accession in 2007 and, especially, in the post-global financial crisis period. These inflows have supported the emergence of new sectors, productivity gains, and export growth. However, these benefits have been primarily driven by the activities of foreign firms, with limited evidence of productivity spillovers to domestic enterprises. Productivity growth has been a key driver of rising incomes in Viet Nam, underpinned by both structural transformation and within-sector improvements. Looking ahead, several past sources of growth –such as high labour utilisation– are expected to diminish, underscoring the need for new drivers of productivity. Enhancing innovation and the use of technology will be essential, though both remain underdeveloped relative to Viet Nam’s broader economic performance. While FDI has contributed to productivity through the expansion of more productive sectors, notably manufacturing, foreign firms are not consistently more productive than domestic firms in the same sectors. They are more likely to adopt advanced technologies but contribute relatively little to domestic innovation. FDI has also played a central role in increasing Viet Nam’s integration into global trade, as foreign firms are highly export-oriented and embedded in global value chains (GVCs). In contrast, domestically owned firms remain largely disconnected from international markets, including through indirect exports. This limited engagement reflects the high reliance of foreign firms on imported inputs and the dominance of assembly-based manufacturing, which constrains opportunities for domestic value addition and knowledge transfer.
Attracting productivity-enhancing FDI and facilitating knowledge transfer to the domestic economy requires strong co-ordination across ministries and agencies, supported by a clear strategic framework. Following recent government restructurings, the Ministry of Finance, the Ministry of Science and Technology, and the Ministry of Industry and Trade are the main institutions shaping policies at the intersection of investment, innovation, and productivity. Their subordinate agencies have formally defined and distinct mandates. However, given the cross-cutting nature of investment, innovation and enterprise development policies, effective implementation depends on robust inter-agency co-ordination mechanisms. In practice, co-ordination has supported progress in several areas, yet there remains scope to further strengthen alignment across institutions to maximise synergies. These governance arrangements influence how the Foreign Investment Agency (FIA) – a department within the Ministry of Finance– aligns investment promotion with national innovation and productivity goals. While FIA is responsible for promoting investment across all sectors, the National Innovation Centre (NIC), also under the same ministry, focuses on strengthening the innovation ecosystem, including through partnerships with multinational enterprises. At the subnational level, provincial investment promotion agencies (IPAs) are central to investment facilitation, while provincial assistance centres for small and medium-sized enterprises (SMEs) play a key role in building domestic supplier capabilities. Strengthening co-ordination between national and provincial bodies could enhance complementarities, reduce administrative complexity, and reinforce linkages between MNEs and local firms. Although Viet Nam has adopted several strategies recognising the role of FDI in enhancing productivity and innovation, these often overlap and may fall short of creating coherent synergies across innovation, entrepreneurship, and investment policy domains. The strategies tend to set broad policy goals but would benefit from clearer prioritisation, sequencing and measurable implementation mechanisms to ensure effective impact.
Viet Nam has made significant progress in improving the investment climate over the past three decades; yet, regulatory barriers remain in knowledge-intensive services sectors, and weak enforcement of intellectual property rights (IPR) continues to hinder technology transfer. Having removed FDI restrictions in some knowledge intensive sectors, like high-tech manufacturing, restrictions are still pronounced in telecommunications and financial services, where a potential for knowledge transfer also exists. These restrictions, including limitations on foreign entry and barriers to competition are more stringent than in less knowledge-intensive sectors and higher than in peer economies. Despite welcomed efforts to strengthen the IPR framework by creating a National Strategy for IPR and signing multiple key international agreements, there is room to improve the enforcement of IPR rights and enable foreign firms to engage in technology and knowledge transfer to Vietnamese enterprises. In addition, regulatory disparities across provinces, such as differences in issuing investment certificates and land use permits, have led to inconsistent communication with investors and duplications in administrative requirements.
Investment promotion and facilitation efforts, along with Viet Nam’s broader investment incentive framework, remain broad. FIA’s objective of leveraging FDI to support the knowledge economy is aligned with national goals on facilitating technology transfer. Developing a clear investment targeting and prioritisation framework would further enhance the agency’s ability to attract and support knowledge-intensive activities. At the provincial level, there is an opportunity to strengthen investment facilitation services to better help foreign MNEs identify and connect with suitable domestic suppliers. Within Viet Nam’s generous tax incentive framework, incentives are also offered for knowledge-intensive activities. The effectiveness of investment incentives and their impact on productivity could be further improved by undertaking regular evaluations and simplifying the incentive system to place greater emphasis on expenditure-based incentives –such as those targeting R&D– over income-based approaches.
Efforts to integrate multinational enterprises into the domestic economy are hampered by weak local supplier capacity. Domestic firms often struggle to meet international standards, lack sufficient R&D capacities, and face challenges achieving economies of scale. As a result, linkages between foreign and domestic firms are limited. Viet Nam is addressing these challenges by providing financial assistance through the SME Development Fund and the National Technology Innovation Fund, organising technical assistance for domestic firms through the National Productivity Institute, Agency for Enterprise Development and regional SME Assistance Centres. It is also supporting cluster formation through policy support for industrial park development. However, these efforts fall short from closing the skill gap and creating strong linkages between foreign and domestic firms. This is due to the lack of uptake of financial support, weak co-ordination between financial and technical assistance as well as concentration of support in industrial hubs. There also is scope to target the support for domestic enterprises in those areas that MNEs report as weaknesses and invest in infrastructure that can support knowledge-transfer in clusters.
Leverage recent institutional reforms and national strategies to enhance accountability, clarify mandates, and strengthen co-ordination across investment, innovation and SME agencies.
Translate high-level strategic objectives into actionable policy measures with clear institutional responsibilities. National strategies should outline concrete actions to (a) simplify the regulatory framework, (b) attract knowledge-intensive FDI, (c) support the integration of MNEs into Viet Nam’s innovation ecosystem, and (d) strengthen the capacity of local SMEs to benefit from MNE presence. Implementation should be assigned to designated agencies, supported with adequate resources, and subject to regular monitoring and evaluation to enable timely course correction where needed.
Establish stronger intra-agency co-ordination mechanisms at both national and provincial levels. This could include the creation of thematic policy networks, dedicated communication platforms, and cross-representation of agency leadership – such as including representatives from innovation and entrepreneurship agencies in investment agency board meetings, and vice versa – to ensure alignment of priorities and reinforce policy coherence.
Build upon recent reform efforts to further streamline the regulatory environment for knowledge-intensive FDI and strengthen conditions for technology transfer.
Reduce entry barriers for FDI in knowledge-intensive services sectors such as telecommunications and finance to foster competition and improve the availability of high-quality services. This could include removing time limits on foreign property ownership and easing commercial presence requirements.
Continue efforts to reduce regulatory complexity by simplifying the process for obtaining investment registration certificates and land use permits and by ensuring consistency of regulatory requirements across provinces.
Strengthen intellectual property rights enforcement to enable technology transfer. This should include increasing IPR awareness among key institutions, enhancing inter-agency co‑ordination, and continuing efforts to establish a specialised IP court.
Strengthen Viet Nam’s strategic investment promotion framework to better target productivity- and innovation-enhancing FDI.
Develop a data-driven prioritisation model that identifies sectors and investment projects with high potential for spillovers. This can build on the indicators recently established by the Prime Minister Decision to assess the R&D and knowledge transfer potential of prospective investment projects and could be informed by data from national innovation surveys and other ecosystem assessments.
Upgrade FIA’s investment generation tools and institutional capacity by equipping the agency with modern investor targeting systems, dedicated resources, and greater operational flexibility. Consideration could be given to establishing an Executive Board – similar to the Netherlands Foreign Investment Agency – to strengthen strategic governance, enable more proactive promotion, and improve co-ordination with subnational agencies.
Ensure the alignment of investment incentives with Viet Nam’s strategic goals of raising productivity and leveraging technology transfer.
Shift from income-based to expenditure-based incentives to encourage R&D and long-term productivity enhancing investments.
Establish an online tool with information on all investment incentives targeting knowledge-intensive activities to increase transparency and clarity. Information should be provided by sector, activity and province in different languages. The FIA could oversee the development of the tool and regularly update it in co-operation with relevant national and subnational bodies.
Align support for strengthening domestic R&D and supplier capacity with the needs of foreign MNEs.
Improve the effectiveness of R&D financing instruments by monitoring uptake of the SME Development Fund and the National Technology Innovation Fund, and adjusting eligibility criteria where needed. Provide innovation vouchers for SMEs to tap into the public R&D funding provided for Academies of Sciences.
Ensure that financial and technical support programmes are aligned by establishing joint programming – for example, between the National Productivity Institute and the National Technology Innovation Fund to build enterprise innovation capacity, and between the Agency for Enterprise Development and the SME Development Fund to support SME integration into clusters and value chains.
Co-design supplier development programmes with MNEs to ensure they address real capability gaps. Ensure that programme design reflects the sourcing needs of foreign investors while it complements technical assistance with financial support and targeted interventions – such as a dedicated product certification support scheme with co-financing for SMEs – to help domestic firms meet international standards. Expand sector-specific training and advisory services for standards compliance, and continue aligning Viet Nam’s national standardisation system with global norms to reduce market access barriers for local suppliers.
Expand technical support and infrastructure to foster linkages between foreign and domestic firms.
Develop an online database of domestic suppliers by industry and province to improve MNE knowledge of domestic suppliers. It could be regularly updated by FIA in co-operation with MoIT and subnational agencies.
Enhance aftercare services provided by provincial IPAs to promote local sourcing, including supplier referrals and matchmaking events.
Increase technical and financial support for SMEs aiming to join clusters and consider developing cluster-specific action plans that include targeted regulatory reforms and policy measures to address sector-specific constraints.
Promote collaboration within industrial and technology parks by incentivising private investment in shared R&D infrastructure. Industrial park authorities could directly inform agencies working with domestic suppliers of potential co-operation opportunities.
2.2.1. Viet Nam’s economic growth has been driven by rising productivity and structural change, but future gains may be limited by an ageing population and regional disparities
Averaging 6% annually over 2013-2023, real GDP growth in Viet Nam has exceeded that of all other ASEAN member countries and the lower middle income country group average for this period (4.7%) (World Bank, 2024[1]). A favourable age structure and high labour utilisation have underpinned this performance. The population is already getting older, however, leading to a smaller share of the population of working age, affecting output, savings, and demand on public services. Viet Nam’s age dependency ratio remains low but has been climbing gradually since 2012. The employment to population ratio (72.9 per cent of the population aged 15 years and older) in Viet Nam exceeds its income group average (55.8 per cent) (World Bank, 2024[1]). These growth drivers face inevitable limitations, as the demographic dividend wanes and the economy approaches fuller employment, and the dependency ratio is expected to climb more quickly in coming decades (United Nations, 2024[2]).
Income growth has also been the result of improvements in labour productivity. While GDP per person employed remains below the ASEAN average as of 2023, it is increasing faster than in many peer economies, growing by an average 4.5% per year over 2000-2023 (Figure 2.1). Capital deepening has played a major role in driving these improvements, accounting for about three-quarters of labour productivity growth over 1970-2022. Growth in total factor productivity has also exceeded that of many other Asian economies in recent years, however (APO, 2024[3]).
GDP per person employed (in thousand 2021 PPP USD), 2000-2023
Source: OECD based on World Bank (2024[1]), World Development Indicators, https://databank.worldbank.org/source/world-development-indicators.
Productivity growth has been the result of both structural transformation and within-sector improvements. The reallocation of workers into more productive activities has been substantial - the share of total employment in agriculture has more than halved in the past three decades, falling from 72.5% in 1993 to 33.0% in 2023 (World Bank, 2024[1]). Structural change is not the only driver of growth, however. Within-sector improvements not attributable to shifts in employment shares between sectors have been responsible for most productivity growth in the recent past (Figure 2.2). With the agricultural share much lower than in the 1990s, the scope for further growth from reallocation is narrowing, placing greater weight on the need for technology adoption, skills and management upgrades within sectors.
While growth has been uneven across the country – the five largest provincial economies together account for more than half of GDP – productivity levels appear to be beginning to converge. Recent rates of labour productivity growth are generally lower in higher-productivity provinces (Figure 2.3). While a few provinces home to urban and industrial centres are among the most productive – Ho Chi Minh City and Ha Noi are both among the top five – productivity growth has been led by smaller provinces, including northern and largely agricultural provinces such as Lang Son, Yen Bai, and Cao Bang.
Annual change (%) in value added per person employed decomposed across 19 sectors
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
2.2.2. Despite limited domestic R&D and innovation capacity, Viet Nam benefits from high-tech exports and ranks relatively well on innovation outputs
While the development and adoption of new products and services or production processes is critical in sustaining productivity growth, innovation remains limited in Viet Nam in spite of recent economic development and diversification. Domestic capacities are limited and most firms are not innovative or technology-intensive. While progress is being made in education and the development of skills supportive of increased use of technology, human capital constraints still hinder innovation. The number of researchers – just 767.9 per million inhabitants – is lower than in most comparison countries (UNESCO, 2024[5]). As a result, neither the public nor private sector are significantly engaged in research and development. Gross domestic expenditure on R&D (GERD) was just 0.4% of GDP in 2021 (Figure 2.4). This is well below the rates in a number of comparison counties, including the expenditure of 1.2% of GDP in Thailand.
Source: OECD based on UNESCO (2024[5]), UIS Data Browser, https://databrowser.uis.unesco.org/.
Investment is generally focused on lower-skill and less innovative or technology-intensive activities. Information and communication technologies do not make significant contributions to growth, for example. Capital deepening of non-ICT capital exceeds the ASEAN average, accounting for about half of Viet Nam’s labour productivity growth in 2015-2022 (APO, 2024[3]). New technologies will nevertheless be needed to drive continued productivity and income growth. This may include embodied technology in imported capital goods and improved management and organisation accessed through FDI, though domestic innovation will also be needed eventually (OECD/The World Bank, 2014[6]).
Despite this lack of focus on research and development, Viet Nam manages to reap some of the benefits of innovation. According to WIPO’s Global Innovation Index, Viet Nam ranks higher in terms of innovation outputs (36th out of 133 economies), based on knowledge and technology and creative outputs, than innovation inputs (53rd), which includes R&D as well as measures of institutional and other capacities (WIPO, 2024[7]). Not surprisingly, given the focus on electronics manufacturing, the share of high technology exports in all manufacturing exports (44.3% in 2023) significantly exceeds the OECD average (20.8% in 2023) (World Bank, 2024[1]).
2.3.1. Foreign firms are more productive within sectors, but their aggregate contribution to productivity growth is constrained by FDI’s sectoral composition
Foreign firms in Viet Nam are, on average, more productive than their domestic counterparts within most sectors. This reflects the advantages often associated with multinational enterprises (MNEs), including access to superior technology, managerial know-how, and international networks. Foreign multinationals tend to operate at higher levels of capital intensity and formalisation, contributing to better performance outcomes in terms of revenue per worker and compensation. However, at the aggregate level, foreign firms appear less productive than domestic firms –a seemingly paradoxical finding that stems not from inferior firm-level performance, but rather from the concentration of FDI in lower-productivity sectors.
Foreign firms demonstrate significantly higher productivity in several capital-intensive sectors such as mining, electricity and construction, although these productivity advantages do not translate into equally large wage differentials (Figure 2.5). For example, in the electricity sector, foreign firms were 3.5 times more productive than their domestic counterparts in 2023. Despite this large productivity gap, foreign firms typically pay only two to three times higher wages, suggesting that the productivity advantage is driven primarily by differences in capital intensity and technological sophistication, rather than labour quality or human capital. In contrast, in labour- or skill-intensive sectors such as education, professional services, wholesale and retail trade, and manufacturing, the productivity premium of foreign firms is below 10%, yet foreign firms still tend to pay significantly higher wages –often around 1.5 to 2 times those paid by domestic firms. In some service sectors –notably information and communication, and arts, entertainment and recreation– foreign firms appear less productive than their domestic peers, while still offering higher wages. This may be due to differing business models, or the strategic positioning of foreign affiliates in niche markets such as content licensing or digital services.
Note: Labour productivity is calculated as revenues divided by total employment. The productivity gap refers to the percentage difference in average labour productivity between foreign and domestic firms, calculated at the sectoral or aggregate level
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
Over the past two decades, foreign productivity premia have generally narrowed in several sectors, indicating possible convergence between foreign and domestic firms and absorptive capacity gains. Time-series evidence suggests that the productivity advantage of foreign firms in some capital-intensive sectors has declined significantly. In electricity, for example, foreign firms’ productivity advantage fell from extremely high levels in the mid-2000s –exceeding seventeen times that of domestic firms– to around 3.5 times higher by 2022. In construction and professional services, foreign firms remain substantially more productive than domestic firms, although the productivity gap has gradually narrowed over time. In manufacturing, by contrast, the productivity premium has remained relatively modest throughout the period, fluctuating around single-digit levels. Meanwhile, in the ICT sector, foreign firms have consistently underperformed relative to domestic ones. This likely reflects differences in the roles played by foreign affiliates, such as content distribution or service delivery, rather than fundamental productivity disadvantages.
Note: Labour productivity is calculated as revenues divided by total employment. The productivity gap refers to the percentage difference in average labour productivity between foreign and domestic firms, calculated at the sectoral or aggregate level
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
At the aggregate level, foreign firms’ productivity advantage has been negative. In 2023, foreign firms were about 18% less productive than domestic firms overall, even though they paid wages about 20% higher (Figure 2.7, Panel A). When manufacturing is excluded –a sector with many low-margin, assembly-based foreign firms– the productivity premium becomes positive: foreign firms were nearly 15% more productive than domestic firms outside manufacturing. The negative performance of foreign firms does not stem from their weaker performance in manufacturing –where they actually perform slightly better (Figure 2.5)– but rather from their limited presence in higher-productivity sectors that are dominated by Vietnamese firms.
Foreign investment is concentrated in lower-productivity manufacturing segments such as electronics assembly, footwear, and garments, where thin margins and heavy reliance on imported inputs constrain value added per worker. Conversely, domestic firms are more active in higher-productivity service sectors, such as finance and real estate. A shift-share decomposition of the productivity gap confirms this interpretation (Figure 2.7, Panel B). The within-industry effect –capturing productivity differences between foreign and domestic firms within the same sector– is consistently positive over time, indicating that foreign firms outperform domestic peers in most sectors. By contrast, the cross-industry reallocation effect –capturing the impact of sectoral concentration– is persistently negative, suggesting that foreign firms are under-represented in high-productivity sectors and over-represented in sectors with lower value-added per worker. These findings should be interpreted with some caution, as firm-level data from Viet Nam’s National Statistics Office may not fully capture informal employment, which is likely more prevalent among domestic firms and could depress their measured productivity. International benchmarks further suggest a stronger performance of foreign firms at the aggregate level: for example, the World Bank Enterprise Survey indicates that foreign firms in Viet Nam may be up to three times more productive than domestic ones on average (Box 2.2).
Note: Panel B shows the productivity gap of foreign and domestic firms in Viet Nam for the total economy and decomposes it into two main components: the within-industry effect and the cross-industry reallocation effect. The within-industry effect captures differences in average productivity between foreign and domestic firms operating in the same industry. The cross-industry reallocation effect reflects the impact of the sectoral distribution of foreign versus domestic firms – that is, whether foreign firms are concentrated in industries with higher or lower average productivity. A negative reallocation effect implies that foreign firms are concentrated in lower-productivity sectors, which drags down their aggregate productivity despite higher performance within individual industries.
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
Foreign firms have made a consistent and meaningful contribution to Viet Nam’s labour productivity growth, despite their smaller footprint in the economy. While domestic firms account for most of the gains – reflecting their dominant share of employment and firm count – foreign firms contributed over one-third of aggregate productivity growth in several years over the past two decades (Figure 2.8). By contrast, the reallocation effect – productivity gains from resources shifting from less to more productive firms – has been negligible or slightly negative throughout the period. This indicates that Viet Nam’s productivity growth has largely been driven by within-firm improvements rather than structural transformation across sectors or firms. It also underscores the importance of supporting firm-level upgrading – especially among domestic enterprises – and better leveraging the presence of foreign firms to stimulate dynamic reallocation and knowledge spillovers across the economy. To enhance the impact of FDI on productivity, Viet Nam will need to foster greater linkages between foreign and domestic firms and enable stronger structural transformation. Encouraging local sourcing, supporting supplier upgrading, and facilitating employment shifts into higher-productivity sectors can help translate Viet Nam’s large FDI stock into broader economy-wide benefits.
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
Limited or negative productivity premia relative to comparable firms may also hinder the realisation of positive productivity spillovers benefitting the Vietnamese economy. While backwards spillovers through domestic firms supplying foreign-owned firms appear to be an important channel for productivity improvement, domestic firms that compete with or are supplied by foreign firms may experience negative productivity effects from increased foreign competition (Huynh et al., 2019[8]). At the regional level, the relationship between the expansion of foreign firms and productivity growth appears mixed. Regions with larger increases in foreign firms’ shares of manufacturing employment between 2012 and 2023 do not systematically exhibit faster productivity growth relative to the national average (Figure 2.9), suggesting that the presence of foreign firms alone is not sufficient to generate broad productivity gains. Firm-level characteristics may also matter; productivity spillovers tend to be strongest for domestic firms with fewer workers and those with greater capital intensity (Ngo and Tran, 2020[9]).
Unlocking the full productivity potential of FDI will require a shift in sectoral focus and stronger domestic linkages. Foreign firms outperform domestic firms within sectors and pay better wages, but their broader impact is constrained by sectoral concentration. Policy efforts should aim to attract FDI into higher-value-added activities, promote linkages with domestic suppliers, and support the functional upgrading of existing foreign affiliates. Enhancing firm-level absorptive capacity and workforce skills will be essential to generate stronger spillovers and sustained productivity gains over time.
Change in percentage points
Note: The figure shows the relative contributions of foreign and domestic firms to aggregate labour productivity growth, excluding the reallocation effect.
Source: OECD based on NSO (2026[4]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises.
Measuring the labour productivity of foreign and domestic firms depends heavily on the data source and the method used to calculate labour productivity. In the main analysis of this section, labour productivity is measured using data from the National Statistical Office (NSO), defined as revenues divided by the number of employees. While this measure allows for economy-wide and sectoral comparisons, it can be distorted by differences in pricing, mark-ups and input costs across firms, and does not account for the value added created by each worker.
An alternative, more accurate measure of labour productivity is value added per employee, which directly reflects the economic contribution of each worker. This metric is used in the World Bank Enterprise Survey, which samples formal sector firms across a range of countries. Using this approach, foreign firms in Viet Nam show a significantly positive productivity premium at the aggregate level, with labour productivity nearly twice as high as that of domestic firms in the 2023 survey (Figure 2.10). This is more in line with theoretical expectations and empirical patterns in other emerging economies, such as Egypt, Portugal, or Indonesia. However, World Bank enterprise surveys are based on a limited sample of firms, typically concentrated in urban areas and selected sectors, and therefore may not fully capture the structure and diversity of the national economy. This sampling issue can affect comparability across countries and limit the generalisability of results.
While the World Bank data provide valuable insights using a more appropriate productivity metric (value added per employee), results should be interpreted with caution given the sample-based nature of the data, which may not fully reflect the structure or diversity of the Vietnamese economy. Similarly, while NSO data allow for comprehensive, economy-wide analysis, the use of revenue rather than value added as a proxy for productivity limits comparability across firms and sectors. Each approach involves trade-offs: administrative data offer broader coverage but rely on cruder proxies, while survey data allow for more refined measures but suffer from limited representativeness. Taken together, the results underline the importance of triangulating findings across data sources and interpreting productivity differences in light of both methodological and contextual limitations.
Note: Foreign firms are defined as those with at least ten percent foreign ownership. Labour productivity in foreign firms is higher if index > 0.
Source: OECD based on World Bank (World Bank, 2024[10]), Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
2.3.2. Foreign firms contribute little to innovation, with low R&D investment and limited process or product innovation compared to peers
Foreign direct investment is also not making significant contributions to boosting innovation, as foreign firms in Viet Nam are not particularly innovation-intensive. Just 3.09% of foreign firms surveyed in 2023 said that they had introduced a process innovation in the previous three years, while 7.8% of domestic firms had done so (Figure 2.11). Foreign businesses were slightly more likely to introduce new products or services (7.6% of domestic firms, compared with 8.5% of foreign firms), but these innovations remained low among all businesses in Viet Nam in comparison to similar economies (which averaged 15.6% of domestic firms and 19.2% of foreign firms across ten comparator countries). Similarly, few firms invest in research and development; in the previous year, just 2.3% of foreign firms and 4.7% of domestic firms reported R&D expenditure (which averaged 7.2% of domestic firms and 13.7% of foreign firms across ten comparator countries). Foreign-owned firms are somewhat more technology-intensive, however. They are more likely to use a website to manage business relationships, though this is not common, regardless of ownership. As in most comparator countries, foreign businesses are also much more likely than businesses to use technology licensed from foreign companies (10.3% of domestic firms, compared with 29.9% of foreign firms).
Limited investment in innovation is partly a result of the composition of FDI inflows. Over 2020-2024, greenfield investment in healthcare was the most R&D intensive, with 91% of capital expenditure in R&D, though this sector accounted for a negligible share of greenfield FDI in this period and had no greenfield FDI R&D expenditure in the preceding five-year period (Figure 2.12). In absolute terms, nominal investment in R&D was greatest in the industrial equipment (USD 562.7 million), software and IT services (USD 457.3 million), and semiconductors (USD 333.6 million) sectors, however. While research and development expenditure has accounted for a generally growing share of greenfield FDI inflows over the past two decades in Viet Nam, this share remains relatively small at just 1.9% of capital expenditure over 2020-2024. In comparison, the figures for the OECD and ASEAN were 3.7% and 2.4% respectively.
Note: Foreign firms are defined as those with at least ten percent foreign ownership.
Source: OECD based on World Bank (2024[10]), Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
R&D as a share of total capital expenditure in greenfield investment, 2015-2024
Source: OECD based on Financial Times (2024[11]), fDi Markets database, https://www.fdimarkets.com.
2.3.3. Export-oriented FDI has deepened Viet Nam’s trade integration, but rising global trade pressures and limited domestic value addition expose vulnerabilities
Ongoing shifts in the global and regional environment – such as rising tariffs, tighter rules of origin, and stricter enforcement of sustainability and traceability standards – are reshaping production networks in Asia. As a highly trade-dependent economy, Viet Nam remains particularly exposed to these shifts. In recent years, Viet Nam attracted significant FDI inflows as multinationals relocated production – particularly assembly and processing – to avoid tariffs on Chinese goods. However, new U.S. tariffs on Vietnamese exports are expected to dampen export prospects, with the United States accounting for nearly 30% of Viet Nam’s gross exports (about half in domestic value added). Export growth is projected to decline from 15.4% in 2024 to 5.4% in 2026 (OECD, 2025[12]). These pressures expose the vulnerability of Viet Nam’s low-value manufacturing model and highlight the growing importance of meeting evolving international requirements on compliance, traceability, and sustainability.
Trade tensions could affect Viet Nam’s ability to sustain FDI inflows over the medium term. While the country continues to offer cost advantages and broad market access through trade agreements, future FDI is likely to become more selective, favouring locations with robust supplier ecosystems, reliable compliance infrastructure, and capacity for greater value addition. Viet Nam risks losing competitiveness in tariff-sensitive, assembly-heavy sectors unless it can strengthen domestic sourcing, improve traceability and certification systems, and support investors in upgrading local operations. Sustaining high-quality FDI – and maximising its contributions to productivity and innovation – will require a stronger enabling environment, including investment in skills, logistics, testing and standards infrastructure, and more efficient administrative procedures to support higher-value and more resilient investment activities.
FDI has increased Viet Nam’s integration in international trade, though few domestically-owned firms export directly or indirectly. Expanding involvement in trade and participation in global value chains would help to foster growth, improve access to international knowledge and technology, and support productivity. Vietnamese firms engaging in international trade tend to be more productive than their peers (Ngo and Tran, 2020[9]).
Growth in exports has exceeded income growth since the late 1980s; between 1988 and 2023, goods and services exports as a percent of GDP increased from 4.0% to 87% (World Bank, 2024[1]). This growth has largely been driven by the expansion of the export-oriented manufacturing sector. Manufacturing goods accounted for 92.5% of exports in 2023 (GSO, 2024[13]). Electronics assembly is particularly important. Exports of electrical machinery and equipment (HS 85) alone accounted for 37.6% of goods exports in 2023. Over the past two decades, Viet Nam has become one of the world’s top electronics exporters, increasing its share of global electronics trade from 0.1% in 2003 to 3.9% in 2023 (ITC, 2024[14]). With lower labour costs than in neighbouring countries, Viet Nam benefitted from investment from major consumer electronics brands and others as production costs increased in China and trade disputes limited access to the United States (OECD, 2020[15]).
Export-oriented FDI has contributed to Viet Nam’s integration into global value chains. Imports have grown alongside exports and are also mostly (84.5%) composed of manufactured goods, many of which are destined to be exported following assembly or other further processing. As a result, backward participation in GVCs is high. Close to half (48%) of the value of gross exports is foreign value added. This share has increased significantly from 23.1% in 1995, the earliest year for which data are available. In contrast, forward participation is relatively limited, with little growth; domestic value added accounts for just 10.8% of foreign gross exports.
Source: OECD (2025[16]), TiVA database, https://data-explorer.oecd.org/s/4lp.
This pattern is typical of developing countries with large manufacturing sectors, though it may involve missed opportunities for domestic value addition. Higher backward participation is common in economies that are engaged in neither the export of resources nor the more technologically advanced activities in production (Kowalski et al., 2015[17]). A focus on assembly work leads to a large share of foreign value added in Viet Nam’s exports. As such, focusing on these activities can represent missed opportunities for growing domestic production (Kowalski et al., 2015[17]). Along potentially expanding assembly and similar work, GVC upgrading might include targeting greater forward participation. Increasing domestic value added in foreign gross exports may be part of a process of supporting growth by moving from assembly and into more technologically sophisticated activities along the value chain in areas including manufacturing, innovation, and design (Kowalski et al., 2015[17]). Greater forward participation in GVCs may also have more positive impacts on the productivity of Vietnamese firms, as a result of the benefits of engaging in exporting and in learning-by-supplying (Korwatanasakul and Hue, 2022[18]).
Despite the high degree of export-orientation of FDI, foreign investment does not appear to support much additional indirect exporting and involvement in GVCs among domestically-owned firms. Foreign-owned firms are far more export-oriented than their domestically-owned counterparts. While the former group exports 30% of total sales, exports account for just 2.8% of the latter’s sales (Figure 2.14). Including indirect exporting does not significantly change these patterns; total exports are 36.7% of foreign firms’ sales and 3.6% of domestic firms’ sales. The implied share of indirect exports sold domestically and ultimately exported in Vietnamese firms’ sales (0.8%) is well below that of Indonesia (2.2%), but higher than that in Mexico (0.4%), for example.
Note: Foreign firms are defined as those with at least ten percent foreign ownership.
Source: OECD based on World Bank (2024[10]), Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
2.3.4. Limited local sourcing by foreign affiliates constrains the potential for productivity spillovers
Foreign affiliates’ limited use of domestic inputs reduces the potential for productivity spillovers and deeper GVC integration in Viet Nam. Foreign firms can play a catalytic role in upgrading domestic capabilities by sourcing locally, which enables domestic suppliers to access more advanced technology, quality standards and managerial practices. Yet in Viet Nam, local sourcing by foreign affiliates remains relatively low. Between 2016 and 2020, only 61% of inputs used by foreign firms were sourced domestically, compared to 69.1% for domestic firms and over 80% for foreign firms in Colombia, Indonesia and Peru (Figure 2.15, Panel A). Viet Nam performs worse than most ASEAN and emerging economy comparators, suggesting that the spillover potential of foreign firms remains underexploited.
The sourcing structure of foreign affiliates in Viet Nam is more externally oriented than in other regions, with limited engagement of Vietnamese MNEs and non-MNEs. In 2019, 40% of the inputs used by foreign affiliates in Viet Nam were sourced from abroad through imports, while only 34% came from the domestic economy – 21% from other foreign affiliates operating in Viet Nam and just 13% from Vietnamese MNEs (Figure 2.15, Panel B). This international sourcing (imports) share is significantly higher than in OECD or non-OECD economies, where domestic sourcing – especially from non-MNEs – plays a much larger role. In non-OECD economies, for example, nearly half of inputs are sourced from domestic non-MNEs, while only 22% come from abroad. This underscores the weak integration of Vietnamese firms into foreign affiliates’ supply chains, limiting opportunities for knowledge transfer and industrial upgrading.
Source: OECD based on the OECD (2025[19]), Analytical AMNE database, https://www.oecd.org/en/data/datasets/multinational-enterprises-and-global-value-chains.html.
Low local sourcing reflects persistent gaps in domestic supplier capacity and weak sectoral alignment with export-oriented foreign firms. Foreign investors in Viet Nam often cite concerns about the quality, consistency, and certification of domestic inputs, particularly in sectors with demanding production standards such as electronics and automotive. While local sourcing is relatively high in food and beverages, financial services and cultural industries, these sectors have lower input intensity and limited trade exposure. In contrast, key export industries like electronics, garments and footwear rely heavily on imported components and tend to have thin local supplier networks. This misalignment reduces the likelihood of spillovers from foreign to domestic firms, despite the scale of FDI in these sectors.
In addition to supplier linkages, business partnerships between domestic and foreign firms offer another potential channel for knowledge transfer and upgrading. Box 2.3 shows that in Viet Nam, domestic firms are more likely to engage in cross-border partnerships with foreign firms abroad than with foreign affiliates operating in the country – suggesting limited embeddedness of foreign investors and missed opportunities for local spillovers. Strengthening domestic supplier readiness and facilitating linkages with foreign firms is essential to unlock FDI’s full contribution to productivity and innovation. Policies that improve supplier capabilities – through quality upgrading, access to finance, certification support, and skills development – can help domestic firms meet the requirements of foreign buyers.
Business partnerships, broadly understood as recurring transactions between firms with shared business objectives, often involve some level of knowledge transfer, regardless of whether they are formalised through equity stakes or contracts. In practice, these partnerships can take various forms, including strategic alliances, joint ventures, contractual agreements, technology licenses, franchises, research collaborations, or even informal arrangements. Both affiliates of foreign firms operating within the host economy and foreign firms that do not have a physical presence but engage in cross-border partnerships with domestic firms can participate in these collaborations. Such partnerships may include sharing products, distribution channels, manufacturing capabilities, capital equipment, expertise, or intellectual property, which can foster innovation spillovers and enable domestic firms to enhance their capabilities and competitiveness.
Domestic firms in Viet Nam engage more frequently in cross-border partnerships with foreign firms than in local linkages with foreign affiliates, limiting opportunities for knowledge transfer and capability upgrading. Just 4% of reported partnerships in Viet Nam occur between domestic firms and foreign affiliates based in the country, compared to 16% involving foreign firms abroad and 24% between two foreign firms (Figure 2.16). While the dominance of domestic–foreign firm partnerships is broadly in line with patterns across emerging markets, Viet Nam stands out for the relatively low involvement of foreign investors with a physical presence in the country. By contrast, economies such as Singapore, Hong Kong (China), and Poland exhibit greater integration between foreign affiliates and domestic partners, reflecting more embedded investment ecosystems. Developing further partnerships – including through attracting more investment in the kind of knowledge-intensive and high-tech sectors where partnerships are increasingly common – will nevertheless be critical in fostering additional spillovers.
Note: Foreign affiliates are enterprises based in the host economy that operate as subsidiaries or branches of a foreign parent company. These entities are legally established within the host country but maintain ownership ties to a foreign firm. In contrast, foreign firms are businesses headquartered in another economy that do not have a physical presence in the host country but engage in partnerships or collaborations with domestic firms through cross-border agreements.
Source: OECD elaboration based on Refinitiv (2024[20]), SDC Platinum database.
2.4.1. The complexity of the institutional framework for FDI, productivity and innovation has been reduced, but policy overlaps at the agency level remain
The Ministry of Finance plays a central role across the investment, innovation and entrepreneurship policy areas, overseeing three key agencies: FIA, NIC and the Agency for Private Enterprise and Collective Economy Development (APED). Unlike most OECD countries, where the majority of investment promotion agencies (IPAs) are autonomous agencies, FIA operates as a department in MoF. FIA operates as a generalist IPA with a broad mandate, but its role is formally limited to ‘state management functions’ – that is investment promotion policy design, regulation and oversight rather than direct implementation (MPI, 2024[21]; OECD, 2018[22]). Similarly to other cases internationally where the IPA is a department in a ministry, FIA holds regulatory responsibilities, including the development and revision of laws related to inward and outward investment, as well as the compilation of FDI statistics (MPI, 2009[23]). By contrast, the NIC has an operational mandate focused on targeted policy implementation, leveraging dedicated staff and programmes to promote innovation and attract knowledge-intensive investment (NIC, 2024[24]). Similarly, while APED is the primary agency responsible for SME development and fostering linkages with foreign investors, NIC’s training and capacity building programmes target SMEs’ innovation and technological capabilities necessary to enable effective technology transfer.
Innovation policy in Viet Nam is anchored in the Ministry of Science and Technology (MoST) which oversees several key agencies supporting start-ups and enterprise-level innovation. The Viet Nam National Productivity Institute (VNPI) provides technological trainings and dedicated innovation capacity building programmes for enterprises (VNPI, 2025[25]). The recently restructured Department of Technology Development and Innovation – also known as the State Agency for Technology and Innovation (SATI) – has an explicit mandate to promote international technology transfer (SATI, 2024[26]; 2024[27]). The National Agency for Technology Entrepreneurship and Commercialisation Development (NATEC) is responsible for facilitating knowledge transfer from academia to industry, and within it, the National Start-up Support Centre (NSSC) focuses on supporting the startup ecosystem (Government of Viet Nam, 2025[28]). The key department responsible for establishing and enforcing a favourable intellectual property rights (IPR) framework is the Intellectual Property Office (2025[29]). MoST is also in charge of the National Technology Innovation Fund (NTIF), which provides financial support for innovative enterprises through commercial banks (Government of Viet Nam, 2024[30]; NATIF, n.d.[31])
MoIT designs policies to strengthen productive capabilities and support internationalisation of domestic firms and oversees several implementing agencies. The Viet Nam Industry Agency (VIA) is the lead institution responsible for strengthening domestic supplier capacity, while the Trade Promotion Agency (Vietrade), supports export promotion but also undertakes supplier development activities (Vietrade, 2022[32]). Vietrade also hosts a centre for digitalisation (INTEC), which offers innovation support to enterprises, creating potential overlap with the NIC. As part of the 2025 government restructuring, a new agency for Innovation, Green Transition and Industry Promotion has been established as a department within MoIT with the aim to advise and implement policies related to innovation and sustainable development (Government of Viet Nam, 2025[33]).
Source: OECD elaboration.
The 2025 government restructuring, which significantly reduced the number of ministries, is a positive step towards improving institutional coherence; yet, the institutional landscape remains fragmented, with overlapping mandates and broadly defined responsibilities. These challenges are common in many economies, where responsibilities for investment, innovation, and entrepreneurship are distributed across multiple ministries and agencies. The MoF, MoST, and MoIT all share responsibility for strengthening enterprise innovation and productivity, often resulting in mandate overlaps among their subordinate agencies. Technical capacity building is carried out by several bodies, including APED, VNPI, SATI, NIC, and VIA, while agencies primarily focused on innovation, such as NIC and SATI, also engage in investment promotion and collaborate with multinational enterprises in the knowledge economy. NIC’s growing autonomy and its strong capacity to attract high-tech partners represent important assets for Viet Nam. At the same time, while NIC’s activities align with the government’s strategic investment orientations and do not conflict with FIA’s role, the fragmentation and absence of clearly defined and institutionalised co-operation mechanisms across agencies creates risks of duplication and missed synergies. Consolidation therefore needs to take place not only at the ministerial but also at the agency level. Even where agencies have different functions – for instance, state management versus policy implementation – they frequently operate in the same policy domains, creating unnecessary overlaps and challenges for policy coherence. In some cases, merging agencies with closely related mandates could help streamline responsibilities, reduce duplication, and strengthen the overall effectiveness of Viet Nam’s institutional framework.
FIA’s mandate is primarily focused on “state management functions”, including investment policy design, regulation and oversight and the agency officially performs investment promotion functions. While this positioning allows FIA to ensure coherence between investment policy and regulation, it does not equip the agency with the practical tools and resources required to directly target and service knowledge-intensive, productivity-enhancing investment. As a result, Viet Nam’s investment promotion system lacks a central institution with the capacity to pro-actively attract and facilitate strategic FDI. By contrast, the NIC, which receives both public and private funding, benefits from greater operational flexibility, higher salaries, and the ability to attract specialised staff to design and implement targeted programmes for innovation-focused investment. NIC’s activities with foreign high-tech multinationals are consistent with established national strategies and criteria. Nevertheless, international experience suggests that formalised co-ordination frameworks between policy-design agencies such as FIA and implementation-focused bodies such as NIC can help ensure policy coherence and maximise synergies. To strengthen effectiveness, FIA could be restructured so that it acquires a more operational and autonomous investment promotion role and a strong co-ordinating function, enabling collaboration with sectoral ministries and agencies. This would align Viet Nam’s institutional set-up with international practice, where leading IPAs operate under ministerial oversight but with an independent board, budget, and mandate for proactive promotion.
The institutional complexity is further heightened by the important role that provincial authorities play in investment facilitation, which is particularly important to embed foreign multinationals in local supply chains and foster knowledge and technology transfer. Although FIA holds a national mandate, facilitation is typically carried out at the provincial level either by regional IPAs (IPA Vinh Phuc, 2025[34]; IPA Da Nang, 2025[35]) regional departments of finance (Phu Yen DPI, 2025[36]; Binh Dinh DPI, 2025[37]; Hai Duong DPI, 2025[38]; Ho Chi Minh City DPI, 2025[39]; HAPI, 2025[40]) or directly by economic zones. Local governments are often better positioned to connect investors with domestic suppliers and understand regional innovation ecosystems, making them valuable actors in strengthening FDI spillovers. However, the involvement of multiple actors –national, regional and provincial– creates a risk of overlapping responsibilities, duplicated requirements and inconsistent messaging to investors. This is a common challenge, also faced by subnational IPAs across OECD and non-OECD economies, where mandate clarity remains a key concern (OECD, 2023[41]).
2.4.2. Institutional co-ordination on FDI, productivity and innovation could be further improved
Despite recent improvements in co-ordination, there is room to improve communication between investment and innovation agencies as well as national and provincial agencies. The creation of the National Council for Science, Technology and Innovation will help increase the co-ordination of innovation policies across ministries (MoST, 2024[42]). Yet on an agency level, agencies responsible for innovation policy (like NIC or SATI) are more likely to undertake investment promotion activities themselves than co‑ordinate with FIA. Similarly, on a provincial level, the agencies responsible for investment facilitation (such as the Investment and Trade Promotion Centre in Ho Chi Minh City) and those responsible for increasing the productivity of domestic firms (such as the Centre for Supporting Industries Development in Ho Chi Minh City) have not established strong co-ordination mechanisms, weakening their efforts to connect MNEs to local suppliers. Furthermore, while most subnational agencies work in accordance with national strategies – and MoF provides instructions to provinces on investment incentives, the only instance were subnational agencies have an opportunity to provide feedback to FIA is the annual revision of National Investment Promotion Program.
Inter-institutional co-ordination can be improved either by establishing agency networks, collaborating in the framework of specific programmes or organising management level exchanges. Because of the wide array of agencies involved in the ecosystem that can support knowledge and technology transfer from MNEs to domestic firms, aligning efforts between these agencies is important to increase policy efficiency. For example, by establishing clear co-ordination mechanisms between agencies providing technical assistance for SME innovation such as the VNPI and agencies providing financial support for the same goals, such as the NTIF, can significantly improve the efforts to strengthen domestic firm absorptive capacity. Viet Nam could consider bringing the key agencies of investment and innovation ecosystems together in a joint network. In Finland, for example, this is done by bringing together all institutions relevant for business internationalisation in the Team Finland Network, that co-ordinates operations at regional, national and international level (Team Finland, 2019[43]). Similarly in France, all agencies that are active in economic development and attractiveness regularly convene under the Team France Invest Network (Business France, 2022[44]). Establishing such networks can not only improve the operational efficiency of agencies but also facilitate FDI by creating stronger links between the different agencies the investor works with. In Malaysia such agencies meet in councils and working groups under the framework of National Fourth Industrial Revolution strategy (Prime Minister's Department, 2023[45]). Another way to foster inter-institutional alignment is establishing links between agency staff by ensuring other agency representative presence in board meetings. In Portugal, the SME and entrepreneurship agency (IAPMEI) sits in the board of the national innovation agency (ANI) (OECD, 2022[46]).
Viet Nam would benefit from establishing regular information exchange between provincial IPAs as well as ensuring clear co-ordination mechanisms between national, regional and provincial level agencies. Given the high provincial disparities in FDI attraction and the practice of providing provincial level investment incentives in addition to national ones, there persists a risk of inconsistent messaging to investors, duplication of government services and furthering of regional disparities. These risks can be mitigated by co-ordination across regional IPAs on priority sectors and industries, as done in 29% of OECD IPAs (OECD, 2023[41]). FIA should play a key role in designing regionally balanced and targeted national investment policies, however, to do so it should have access to the data collected on FDI by the provincial authorities and the economic zones. The Provincial Innovation Index, introduced by MoST in 2024 is a good practise example that allows national authorities to gain a more granulated insight in performance of policies across provinces (MIC, 2024[47]; MoST, 2024[48]).
Collaboration of agencies on a supra-national level is good practice for knowledge exchange among implementing agencies. APED, responsible for SME support in Viet Nam, is a member of ASEAN Access, ensuring shared regional expertise and extending the available support services targeted at SMEs (ASEAN Access, n.d.[49]). Co-operation with agencies in other countries in the region can prove beneficial also to facilitate productivity enhancing FDI given the practice of investors first screening potential investment regions before settling on a country (GIZ, 2020[50]). The ASEAN Access portal which provides information for foreign investors on matchmaking events across the region as well as market access information by country is a welcomed and good practice. Creating partnerships with other agencies in the region also by agencies directly responsible for investment policy, can increase efficiency of investment promotion efforts. EU’s Interreg initiative showcases how co-operation across IPAs can not only serve as a platform for exchanging knowledge and best practices, but it is also a useful tool to integrate regional value chains and improve MNE access to them (European Commission, 2024[51]).
The Netherlands Foreign Investment Agency (NFIA) operates as a department in the Ministry of Economic Affairs and Climate Policy while its activities take place under the umbrella of the Netherlands Enterprise Agency (RVO). In 2021, there were 28 NFIA offices abroad, including own premises in countries of strategic importance for FDI attraction, as well as agency representatives located across the Dutch embassies and consular offices. Although the agency has no subnational offices, it manages the Invest in Holland Network, which comprises 14 organisations, including regional development agencies, city administrations and other non-profit entities. The network aims to provide a continuum of support services to foreign investors and connect them with the right public and private sector partners depending on the type and location of their investments. The Invest in Holland Strategy 2020-2025 describes the policy areas for which the network operates jointly while indicating that each partner is free to undertake complementary investment promotion activities in line with their own priorities. In the period 2015-2019, approximately 1 800 investment projects were successfully completed with the help of the Invest in Holland Network, with a total investment value of EUR 12 billion and having created or maintained approximately 57 000 jobs.
The network is co-ordinated through the National Acquisition Platform (NAP), which is chaired by the NFIA Commissioner, and includes representatives of each organisation. Members meet once per quarter to discuss on the basis of joint short-term activity plans, take stock of progress in achieving FDI targets and evaluate the implementation of the Invest in Holland Strategy. Throughout the year members benefit from networking and knowledge sharing events as well as brainstorming meetings on how “working together” can be further simplified. To ensure consistency in the quality of services provided to foreign investors, the Invest in Holland Academy has been established to provide courses and seminars for new employees that join one of the 14 organisations as well as for more senior members and investment promotion staff located in the Dutch diplomatic missions abroad.
Investment prioritisation takes place through inter-agency Focus Teams that work on promoting investments in high-priority activities (ICT, Agri food, Life sciences and health, sustainable energy). Focus Teams hold regular meetings with companies and research institutions operating in various industries with the aim to identify new investment opportunities. They are also responsible for monitoring the business climate and bringing opportunities and threats to the attention of policymakers. For instance, in 2019, the Focus Team ICT, with NFIA and 5 regional partners, developed various value propositions, drew up target lists and visited conferences and events to generate new investment leads. Thanks to these efforts, a total of eight high-quality ICT investment projects were attracted in 2019.
The increased attention that investment generation activities receive in the Netherlands is reflected in the annual resources dedicated for that purpose. Roughly 70% of the NFIA resources are spent to find and guide potential initial investments, 20% of them are spent to find and guide potential follow-up investments (i.e. maintaining and expanding activities), 5% is spent for the role of the NFIA in the Invest in Holland network (i.e. co-operation between regional partners) and 5% to collect feedback from foreign companies on opportunities for improvement of the business climate.
Source: OECD based on NFIA (2020[52]), Evaluatie van de NFIA 2010-2018, https://open.overheid.nl/repository/ronl-2342ca2e-27ee-4da1- a407-ea24af4d63ad/1/pdf/bijlage-evaluatie-van-de-nfia.pdf, and NFIA (2020[53]), Invest in Holland Strategie 2020-2025, https://open.overheid.nl/repository/ronl-1b3f0055-62a6-4757-80e7-7f32236d8f43/1/pdf/bijlage-invest-in-holland-strategie.pdf.
2.4.3. Aligning Viet Nam’s strategies and action plans on investment, innovation, entrepreneurship could improve policy coherence
Ensuring that national strategies promote a whole-of-government approach to FDI, productivity, and domestic enterprise innovation is instrumental in creating a coherent policy framework. To establish a long-term approach to technology transfer, FDI perspectives should be integrated in domestic entrepreneurship strategies and vice versa. Coherent strategies with clear, measurable, and adequately funded goals support the setting of direct objectives and tracking their fulfilment. They also can help to assign responsibilities across agencies and define specific actions for implementation.
The objective of strengthening domestic enterprises is included both in investment and trade promotion strategies; aligning these strategies could support fulfilling this objective. The Strategy for Foreign Investment Cooperation 2021-2030 reflects the government’s ambition to leverage FDI to boost productivity and innovation (Prime Minister of Viet Nam, 2022[54]). Similarly, the project Encouraging Vietnamese Enterprises to Participate Directly in Foreign Distribution Networks by 2030 aims to strengthen links between domestic and foreign enterprises and improve the capacity of domestic enterprises (Prime Minister of Viet Nam, 2022[55]). While the latter project outlines more specific actions for agencies to build these connections, it does not refer to the strategy where the policy framework for these actions was designed. Nor do they mention the Strategy for Domestic Trade Development by 2030, despite its focus on enhancing domestic enterprise innovation and integration in global value chains (GVCs) (Prime Minister of Viet Nam, 2021[56]). Creating synergies between efforts to increase domestic firm exporting capacity and supplier capacity to FDI enterprises could foster a more systematic approach, given their similar preconditions. Firms can internationalise either by creating linkages with MNEs or directly exporting themselves. However, in practice, those that build technological capacity and foreign market knowledge often pursue multiple paths simultaneously, meaning that openness to trade can also enhance firm opportunities to benefit from FDI spillovers (Havranek and Irsova, 2011[57]; Qiang, Liu and Steenbergen, 2021[58]). Strengthening strategic coherence across these efforts would therefore be beneficial.
While strategies on industrial development acknowledge the importance of technology transfer from MNEs, they often fall short from outlining specific actions necessary to achieve this goal. It is referenced in at least four of the strategies relevant for FDI spillovers on productivity and innovation, summarised in Box 2.5. These strategies include broad directions that have proven to facilitate technology and knowledge transfer, such as strengthening ties between academic and entrepreneurial ecosystems through cluster formation or strengthening intellectual property rights (Williams and Pouder, 2020[59]; Fioravanti, Stocker and Macau, 2023[60]; Falvey and Foster, 2006[61]). However, despite recognising FDI’s role in entrepreneurship and innovation, there is a systemic lack of outlining specific actions to foster these synergies. Clearly outlining planned policies, assigning tasks to ministries and agencies, and setting measurable targets for each would enhance their effectiveness.
Strategy for foreign investment co-operation for the period 2021-2030 aims to attract FDI projects with high added value that expand technology usage in the domestic market. It also aims to increase Vietnamese domestic enterprise involvement in GVC and emphasises promotion of technology transfer between foreign and domestic firms (Prime Minister of Viet Nam, 2022[54]).
Resolution on orientations towards improvement of regulations and policies to enhance quality and efficiency of foreign investment by 2030 was adopted in 2019. It is a broad strategy which identifies the challenges in the current FDI framework, including incentive inconsistency and lack of FDI company integration with the domestic economy. It proposes solutions to these challenges by pointing to policy areas where improvements are required (Central Committee, 2019[62]).
Strategy for domestic trade development by 2030, with visions towards 2045 was adopted in 2021 with the objective to grow domestic trade, limit dependence on MNEs and increase domestic company participation in GVC. Strengthening the skills of workforce, strengthening SMEs and investing in infrastructure are outlined as tools to achieve these goals (Prime Minister of Viet Nam, 2021[56]).
Project for encouraging Vietnamese enterprises in directly participating in foreign distribution networks by 2030 was adopted in 2022 with the objective to develop and expand Viet Nam's import and export markets. The strategy focuses on supporting Vietnamese enterprises to become active participants in GVC by providing market information, training and consultation services and matchmaking opportunities (Prime Minister of Viet Nam, 2022[55]).
National strategy for 4th Industrial Revolution was adopted in 2020 to encourage economy wide adaptation to new technologies. Its primary objectives are to improve the business environment for adaption of new technologies. It also sets objectives for increasing Viet Nam’s innovation capacity, developing an e-government and growing the digital economy (Prime Minister of Viet Nam, 2020[63]).
National Technology Innovation Programme to 2030, adopted in 2021 provides a framework for improving the contribution of science, technology and innovation to economic growth. It also lays out the tasks of assisting SMEs in innovating and facilitating technology transfer from science and technology organisations (MOST, 2021[64]).
Strategy for development of Science, Technology and Innovation by 2030 adopted in 2022 sets objectives for increasing innovation in high technology sectors. The strategy is aimed both at universities and enterprises and recognises the necessity of synergies between both to facilitate technology transfer from FDI enterprises (Prime Minister of Viet Nam, 2022[65]).
Strategy for breakthrough in the development of science, technology, innovation and national digital transformation adopted in December 2024, focuses on strengthening Viet Nam’s technological potential with the aim to restructure the economy. Its key objectives are strengthening technological innovation in universities, research centres and enterprises, by providing the necessary infrastructure and conducting institutional, policy and regulatory reforms. Knowledge transfer from FDI enterprises to the local economy is also considered key to foster innovation (Central Executive Committee, 2024[66]).
Including clear deadlines and quantifiable milestones could strengthen the governance framework for FDI, productivity, and innovation. While Viet Nam’s strategies contain both general and specific objectives, some rely on achieving broad macroeconomic indicators, such as industry contribution to GDP or global rankings (Prime Minister of Viet Nam, 2020[63]; 2021[56]; 2022[54]). Setting overarching goals is valuable but accompanying action plans should include measurable targets assigned to specific institutions to better guide implementation. For example, the Project for Encouraging Vietnamese Enterprises to Participate Directly in Foreign Distribution Networks by 2030 sets a clear target for the number of enterprises to receive training (Prime Minister of Viet Nam, 2022[55]). Such concrete metrics offer institutions a defined objective within a set timeframe. Expanding the use of such targets would support effective implementation of broader strategic goals.
Viet Nam could use government strategies to clarify institutional responsibilities and improve accountability. While most strategies include an implementation section naming responsible ministries, these responsibilities are often vague and overlapping. Strategies would be more effective if they specified the responsible agencies and clarified their roles, rather than using broad terms like “relevant agencies”. This is especially important given the many institutions with overlapping mandates in FDI and innovation policy (see Figure 2.17). Accountability is easier to ensure when responsibilities are concrete such as assigning the Ministry of Finance to “promote NIC activities aimed at innovative start-ups” or directing the SME Development Fund to “increase the rate of supporting capital” rather than broadly instructing agencies to “take charge and co-operate with relevant entities” (Prime Minister of Viet Nam, 2020[63]; 2022[54]). Setting out clear expectations for specific agencies can help to ensure targeted and systematic implementation.
Viet Nam would benefit from explicitly embedding co-ordination mechanisms between agencies and ministries in its FDI and innovation strategies. Many strategies relevant to FDI spillovers into domestic entrepreneurial productivity (summarised in Box 2.5) emphasise the need for cross-ministerial co-operation, yet they rarely outline concrete co-ordination mechanisms – one exception is the establishment of the Council for Science, Technology and Innovation. Embedding co-ordination efforts directly into strategies can improve implementation and prevent agencies from working in silos. For example, if a strategy aims to incentivise technology transfer, it should involve institutions responsible for SME absorptive capacity, IPR enforcement, and FDI facilitation. Specifying how these institutions will interact is essential for achieving broad, cross-cutting policy goals.
Integrating monitoring and evaluation (M&E) mechanisms into strategies is essential to track output delivery and goal achievement. M&E mechanisms in FDI-related innovation strategies are often vague. For example, the Strategy for Foreign Investment Cooperation required the Ministry of Planning and Investment (now MoF) to submit a single report during the 10-year strategy period and annually inform the Prime Minister on implementation (Prime Minister of Viet Nam, 2022[54]). Embedding more frequent and detailed evaluations for each specified solution is critical to ensuring full implementation. Moreover, as many strategy objectives are expressed through economic indicators, regularly tracking these metrics is key for assessing progress and enabling timely corrective action if needed.
2.4.4. Viet Nam has significantly liberalised market access, but there is still scope to ease regulatory restrictions in certain knowledge-intensive sectors
Viet Nam has gradually opened its economy to investors over the past three decades, yet there is room to further improve market access. Since the Doi Moi reforms in 1986, Viet Nam has considerably opened its economy, although the pace of liberalisation has slowed in recent years. According to the OECD FDI Regulatory Restrictiveness Index (FDIRRI), market access restrictions in Viet Nam now are lower than in other economies in the region (OECD, 2024[67]). However, foreign firms still face higher restrictions in Viet Nam than in OECD countries. The most recent substantial improvement of Viet Nam’s FDIRRI performance resulted from the entry into force of the 2014 Law on Investment, which adopted a “negative list” approach to foreign investment. The 2020 revision of the law retained this approach while narrowing the list to 25 sectors fully closed to foreign investment and 59 sectors subject to conditions (Government of Viet Nam, 2021[68]; National Assembly, 2020[69]). Despite these reforms, barriers to foreign entry remain the main contributor to Viet Nam’s FDIRRI score.
Viet Nam could further ease FDI restrictions in selected knowledge-intensive services sectors to attract more diversified and high-value investment. While the country has made notable progress in liberalising high-tech manufacturing – removing most restrictions in sectors such as computer and electronic products, electrical equipment, pharmaceuticals, and chemicals – barriers remain substantial in several services sectors. In particular, data localisation requirements, limitations on foreign commercial presence, and market access restrictions continue to constrain FDI in telecommunications, financial services, and transport. According to the OECD FDI Regulatory Restrictiveness Index, these sectors rank among the most restricted and correspondingly attract lower levels of FDI (World Bank, 2024[70]). Significant restrictions also remain on investment in real estate; though the potential for innovation spillovers is limited in this sector. Telecommunications and banking, along with media and transportation services, are among the 59 sectors subject to specific conditions for foreign entry under Viet Nam’s current legal framework (Government of Viet Nam, 2021[68]).
Easing restrictions in these areas – particularly where peer countries have already moved towards more open regimes (see Figure 2.18) (OECD, 2024[67]) – could help Viet Nam unlock greater FDI-driven productivity gains in services.
Open to FDI = 0, closed to FDI = 1
Source: OECD (2024[67]), FDI Regulatory Restrictiveness Index,
www.oecd.org/en/topics/sub-issues/sustainable-investment/fdi-regulatory-restrictiveness-index.html.
Regulatory barriers in knowledge-intensive services can have far-reaching negative effects on economy-wide productivity and innovation. Cost-efficient and high-quality service inputs –particularly in sectors such as telecommunications, finance, logistics, and insurance – are essential for strengthening the productive capacities of both manufacturing and services firms (OECD, 2025[12]; 2022[71]). Evidence from India shows that increased competition in services has led to productivity gains in manufacturing sectors that rely on these inputs (Arnold et al., 2016[72]). In Viet Nam, however, both foreign entry restrictions and behind-the-border regulatory burdens limit the competitive provision of key service inputs. The Services Trade Restrictiveness Index (STRI) indicates that Viet Nam maintains a higher level of regulatory restrictions than most OECD countries, particularly in banking, insurance, telecommunications, and logistics (see Figure 2.19) (OECD, 2025[73]). These are also the sectors where the FDI Regulatory Restrictiveness Index identifies the most significant barriers to foreign investment.
Reducing behind-the-border barriers in these services could increase competition and improve access to quality service inputs for both foreign and domestic firms. Regulatory complexity – including licensing requirements, restrictions on cross-border data flows, and the limited operational space for foreign firms – raises compliance costs and can deter innovation (Aghion, Bergeaud and Van Reenen, 2023[74]). Moreover, the dominant position of state-owned enterprises in several of these sectors limits market contestability and reinforces structural barriers to entry (OECD, 2025[12]; World Bank, 2024[75]). Addressing these constraints would not only attract higher quality FDI into services, but also raise productivity across the broader economy by enabling more efficient service delivery to domestic firms.
Note: The STRI indices take values between zero and one, one being the most restrictive. The STRI database records measures on a Most Favoured Nation basis.
Source: OECD (2025[73]), Services Trade Restrictiveness Index,
https://www.oecd.org/en/topics/sub-issues/services-trade-restrictiveness-index.html.
Regulatory complexity continues to hinder market access for foreign firms. The 2024 adoption of the Law on Investment reduced the number of business licences subject to conditional investment from 247 to 143. Foreign firms in Viet Nam view licensing and permits as a significantly greater obstacle than domestic enterprises (Figure 2.20). This may be due to complexities in the process of obtaining investment registration certificates and land use permits for brownfield investments. Additional regulatory barriers that Viet Nam could consider removing include time limits on property ownership for foreigners and the requirement that at least one company manager be a resident of Viet Nam. Regulatory uncertainty is further compounded by inconsistencies in the interpretation and implementation of the Law on Investment across provinces, leading to variation in registration timelines and the quality of administrative support. Provinces with more streamlined regulatory practices such as Da Nang have attracted more new business registrations compared to those with higher regulatory barriers such as Lai Chau (World Bank, 2024[70]; VCCI and USAID, 2023[76]). Enhancing the clarity, consistency and transparency of investment registration procedures across provinces would make it easier for smaller foreign innovators to enter the Vietnamese market.
Note: Firms with 10% or more foreign ownership are represented as foreign
Source: OECD based on World Bank (2024[10]), Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
2.4.5. Enforcing intellectual property rights and further strengthening competition rules may support technology transfer
Despite establishing a national intellectual property right (IPR) framework and aligning it with international standards, enforcement remains a significant challenge. Viet Nam’s 2005 Intellectual Property Law, amended in 2009, provides the legal framework for intellectual property protection, while the 2019 National Strategy on Intellectual Property with a Vision to 2030 provides guidelines for the framework’s future (Prime Minister of Viet Nam, 2019[77]; National Assembly, 2009[78]). Viet Nam is a signatory of multiple international IPR agreements, such as the Paris Convention for the Protection of Industrial Property, the WTO Trade-Related Aspects of Intellectual Property Rights (WTO TRIPS) Agreement, the World Intellectual Property Organization, the Patent Cooperation Treaty, the Madrid Protocol and The Hague Agreement concerning the International Deposit of Industrial Designs (OECD, 2021[79]). However, challenges exist in the enforcement and implementation of intellectual property laws and regulations (ITA, 2024[80]; OECD, 2021[79]). Ranking 85 out of 125 countries in the International Property Rights Index, which measures the institutional and policy landscape for physical and intellectual property right regime, Viet Nam underperforms in judicial independence and copyright protection (Property Rights Alliance, 2024[81]). It has also been listed on the Watch List in the United States Trade Representative’s Special 301 Report, which annually reviews the global state of IPR protection and enforcement, for over a decade due to the lack of criminal investigations and prosecutions in copyright offense cases (Office of the United States Trade Representative, 2024[82]; ITA, 2024[80]).
Strengthening the enforcement of IPR is crucial to facilitate productivity enhancing investment and technology transfer to Vietnamese enterprises. Viet Nam’s Technology Transfer Law itself requires the technology transfer to happen in accordance with regulations of the Law on Intellectual Property, thus it is key to enforce the Law of Intellectual Property for the legal landscape of technology transfer to be meaningful (National Assebly, 2017[83]). Technology intensive firms are reluctant to transfer their activities to countries with weak IPR enforcement. Thus, innovation spillovers from foreign to domestic firms is stronger in economies with higher levels of IPR enforcement (Yi et al., 2015[84]; Andrenelli, Gourdon and Moïsé, 2019[85]). IPRs create strong incentives for innovation as they ensure that investors earn a fair return on their technological innovations. Consequently, their enforcement is particularly important for technology intensive investments which have the highest prospect for spillover to the local economy. IPRs can generate revenues from licences, encourage partnerships, or create a market advantage and be the basis for productive activities (OECD, 2022[71]).
Viet Nam could strengthen IPR enforcement by improving familiarity of IP law across relevant agencies, strengthening co-ordination among them, and establishing a specialised IP court. Since the Criminal Code of 2018 there has been limited guidance to Economic Police, the People’s Procuracy, and the Court on how to conduct criminal prosecution for IP infringement (National Assembly, 2015[86]; Office of the United States Trade Representative, 2024[82]; Eurocham, 2024[87]). Yet raising awareness and increasing knowledge among enforcing agencies is necessary to ensure that every day practises reflect the law. Furthermore, improving co-ordination and communication among these agencies is important to ensure fair, equitable and consistent enforcement practises (Andrenelli, Gourdon and Moïsé, 2019[85]). To further strengthen judicial authority and thus the investor confidence, Viet Nam should streamline the bureaucratic mechanisms for enforcement. One option to do this is to continue the work on establishing a specialised IP court, which could ensure faster case-handling timelines and equip judges with the necessary expertise to handle IPR cases (National Assembly, 2024[88]). This could in turn improve the consistency in the enforcement landscape and encourage property right holders to pursue litigation.
Viet Nam could further strengthen competition rules to foster technology and knowledge transfers from FDI. Competition rules are necessary to ensure a level playing field for foreign and domestic firms- they are both necessary to facilitate the entry of foreign firms while also incentivising domestic firms to innovate and improve product quality (OECD, 2022[71]). With state-owned enterprises accounting for approximately 40% of Viet Nam’s GDP, there is scope to improve competition, particularly in the transportation sector (OECD, 2025[12]). With bank-specific credit growth targets still in place, barriers to competition also exist in the banking sector, which is necessary to improve credit allocation across the economy. The lack of clarification between state as an owner and regulator of the same companies limit competition in multiple service sectors (OECD, 2025[12]; World Bank, 2024[75]). The establishment of a National Competition Commission is a welcome development (Government of Viet Nam, 2023[89]). Empowering the Commission to act against public and private companies that abuse their market power, could strengthen competition and thus give potential for new firms to enter the market.
2.4.6. Recently international trade and investment agreements include innovation and SME provisions
Integrating innovation and SME provisions in international investment agreements can strengthen domestic innovation capacities and promote technology transfer. The inclusion of such provisions in free trade agreements (FTAs) and international investment agreements (IIAs) specifically with regards to encouraging enterprise co-operation on technology and innovation has become more popular also in the Asia-Pacific region (OECD, 2022[71]; WTO, 2016[90]; Qian and Zhang, 2024[91]; Stone, Kim and Engen, 2017[92]). Since often such provisions are found in the chapters on intellectual property, the agreements can be leveraged to strengthen the domestic legal framework and prevent IPR policy reversal, thus indirectly strengthening the technology transfer potential and the innovation ecosystem.
Among Viet Nam’s wide network of bilateral and plurilateral trade and investment agreements, the most recently concluded ones include science, technology and innovation provisions and provide incentives for further improvements of Viet Nam’s IPR framework. The Regional Comprehensive Economic Partnership (RCEP), EU Viet Nam Trade and Investment Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) all include chapters on intellectual property that stipulate the need for enforcement and protection of IPRs. CPTPP’s intellectual property chapter is explicitly based on the principles of a) promoting innovation and creativity, b) facilitating diffusion of information, knowledge, technology, culture and the arts, and c) fostering competition and open and efficient markets. Entering these agreements can support Viet Nam’s regulators in their efforts to strengthen the IPR framework as well as Vietnamese companies in co-operating on innovation. Establishing working groups on IPR, as stipulated in EVFTA, or further co-operation mechanisms for intellectual property offices as stipulated in CPTPP, are good mechanisms that Viet Nam should use to strengthen its IPR framework. Amendments of the Law on Intellectual Property in 2019 and 2022 indicate that FTAs and IIAs can have a positive impact on the domestic regulatory framework, however Viet Nam should continue its efforts to strengthen enforcement (National Assembly, 2019[93]; 2022[94]; Anh and Thao, 2019[95]). While Viet Nam, together with Malaysia and Singapore compared to other signatories exhibit relatively high intra-CPTPP co-operation on R&D, the CPTPP provides further opportunities to increase such co-operation among enterprises (Tan, Xie and Zhang, 2023[96]).
Recently signed FTAs and IIAs also include SME specific provisions, giving possibility for enhancement of international collaboration in strengthening SME absorptive capacities, which are an important determinant of knowledge and technology spillovers from FDI. The CPTPP and RCEP agreements include separate chapters on SMEs and stipulate the need to ensure information provision through the establishment of easily accessible websites for SMEs that include information on how they can benefit from the agreements and international collaboration. In EVTFA, the need to ensure regulatory predictability for SMEs is stipulated in the Transparency chapter. It is important that Viet Nam honours such commitments within these agreements to support SME integration in GVCs increase their capacity to collaborate with foreign multinationals. Similarly, as with the science, technology and innovation and IPR framework, Viet Nam would benefit from leveraging the opportunities provided by the establishment of working groups on SMEs and economic and technical co-operation within these agreements.
2.4.7. FIA could further target knowledge-intensive investment in its promotion activities
Viet Nam's investment promotion policies could play a stronger role in advancing the country’s strategic goal of fostering productivity and technology transfer. International evidence shows that investment promotion agencies (IPAs) are more effective when they target and prioritise sectors with strategic potential for spillovers and upgrading (Crescenzi, Cataldo and Giua, 2021[97]; Miškinis and Byrka, 2014[98]; Heilbron and Kronfol, 2020[99]). FIA has already established criteria for promoting and prioritising investments in digital technologies, semiconductors, electronics, and software (Prime Minister, 2023[100]), but also continues to target sectors such as agriculture and basic metals, which remain relevant for job creation and inclusive growth (Prime Minister, 2021[101]). Attracting innovation-enhancing investment is referenced in multiple strategic documents. Identifying high-tech and medium-tech sectors where Viet Nam has existing comparative advantages, and where foreign and domestic capabilities are relatively aligned, is a step in the right direction. This may also include higher value-added segments of traditional industries such as textiles or food processing. However, FIA’s mandate centres on strategy, rule-making and inter-provincial co-ordination rather than proactive investor targeting and project development. Equipping the FIA with more sophisticated investment generation tools and processes, such as structured lead generation, investor targeting systems, and aftercare frameworks, would enable more effective promotion of quality FDI. By contrast, NIC’s more operationally autonomous set-up allows it to design and implement initiatives that involve foreign technology-intensive firms (NIC, 2024[102]; 2025[103]; 2024[104]).
Policy emphasis should be placed on strengthening FIA’s capacity to pro-actively target and generate productive and innovative investments. Granting greater operational flexibility, such as an extended mandate and an executive board with a dedicated budget, consistent with practice in several OECD and partner countries, could enable the development and implementation of strategic promotion instruments aligned with Viet Nam’s productivity and innovation goals. While full autonomy may not be immediately feasible, targeted institutional leeway – dedicated resourcing, implementation responsibilities, enhanced visibility, and structured co-ordination with provincial authorities – would improve effectiveness. This will require developing modern investment generation tools and ensuring adequate financial and human resources to support their implementation. FIA’s investment-generation measures can include: developing sector and value propositions that map technology-upgrade pathways; organising targeted investor missions and roadshows; pursuing lead generation for investors with engineering, design and R&D-centre mandates; offering facilitation services that provide access to skills, site selection, research partners, testing/certification and sandbox infrastructure; co-designing with NIC and provinces supplier development and technology diffusion programmes involving lead MNEs and universities; and undertaking systematic aftercare to secure reinvestments in R&D and product/process upgrading.
Strengthening the evidence base on the impact of FDI on innovation and productivity would further support FIA in identifying and prioritising high-quality investments. FIA has already identified specific indicators related to foreign firms’ R&D activities and knowledge transfer potential, which could be used to assess prospective investment projects and determine their eligibility for priority status and government support (Prime Minister of Viet Nam, 2025[105]). This is a step in the right direction as long as it is accompanied by the necessary resources and specialised staff that can effectively undertake these assessments within FIA, especially as they can translate into special treatment such as in the form of faster replies to inquiries and tailored investment facilitation solutions. Various data sources can inform this process, including Viet Nam’s Provincial Innovation Index, the Survey of Innovation in Enterprises, and innovation ecosystem reviews by NSSC and NATEC (MOST, 2022[106]; 2024[48]; MIC, 2024[47]; WIPO, 2024[107]; BambuUP Innovation Platform, 2024[108]). Aggregating national-level data on the productivity and innovation effects of FDI would allow FIA to develop a more strategic prioritisation model based on key performance indicators (KPIs). For example, Ireland’s Annual Business Survey of Economic Impact enables IDA Ireland to track FDI contributions to R&D and workforce training, supporting evidence-based adjustments in its investment promotion strategies.
Given regional disparities in investment promotion capacity and objectives, it is essential that FIA maintains a strong national co-ordination role and co-organise investment promotion campaigns together with sectoral and provincial bodies. The annual National Investment Promotion Programme, aligned with the Ministry of Finance’s strategic priorities, serves as the main mechanism for transmitting national goals to provincial IPAs (Government of Viet Nam, 2021[68]). While this process includes self-assessments from provincial agencies, variation in provincial competitiveness and regional advantages (VCCI and USAID, 2023[76]) suggests a need for more structured dialogue and alignment. Regular co‑ordination between FIA and provincial IPAs could help avoid fragmented promotion efforts, reduce inter-provincial competition, and promote more balanced FDI distribution in line with national development objectives. Similarly, strengthening complementarities between FIA and NIC could further support Viet Nam’s ability to attract quality investment. Greater co-ordination – through shared targeting criteria, joint promotion activities for select high-tech and productivity-enhancing sectors, and aligned aftercare strategies – could ensure that Viet Nam captures a diverse range of FDI aligned with its multifaceted development goals. Formalising this co-ordination through thematic working groups would allow both agencies to build on their comparative advantages while reinforcing national objectives.
The recent establishment of International Financial Centres (IFCs) in Ho Chi Minh City and Da Nang (effective 1 September 2025) provides an opportunity to target and prioritise high value added investments. The IFCs are specialised zones intended to host and develop financial-services activities – banking, capital markets, insurance, asset and fund management, and fintech – alongside selected adjacent functions (e.g. greater FX flexibility among IFC participants and, subject to implementing rules, trading platforms such as commodities/derivatives or carbon). From an investment promotion perspective, the IFCs create a clearer, sector-specific value proposition to attract services FDI and diversify inflows beyond manufacturing; from an investment facilitation perspective, they signal streamlined establishment and operating procedures, dedicated governance/aftercare, and alignment with international practice. If effectively implemented, the IFCs could deepen domestic capital markets, broaden access to long-term finance (including green finance), and generate spillovers that support domestic firms’ productivity and technological upgrading. Implementation will hinge on forthcoming decrees and the government’s action plan led by the national IFC steering committee. To ensure effectiveness, the designated IFC authorities should clarify eligible activities and membership criteria and implement a digital one-stop procedure with explicit service commitments – such as published maximum processing times for admission/licensing and work-permit/visa applications, named case managers, standardised document checklists, and online application tracking. National and subnational investment promotion bodies should align outreach with the IFC value proposition and establish formal referral and aftercare arrangements with the IFC authorities, while communicating predictable parameters for taxation, access to skilled workforce, and dispute resolution as implementing decrees are finalised.
IDA Ireland employs a comprehensive data collection strategy for monitoring and evaluation, with a specific focus on innovation, export, and regional development indicators. It relies on project data to address challenges related to data availability, calculating metrics such as R&D expenditures in the investment projects it facilitates. Furthermore, the agency keeps track of the number and scale of investment projects in various regions. These indicators undergo monitoring through surveys conducted by IDA Ireland’s parent ministry, enabling a holistic assessment that considers both short-term direct effects and long-term indirect effects of FDI. While ensuring a thorough evaluation, there exists a potential risk of emphasising short-term, direct effects at the expense of fully capturing long-term and indirect impacts. IDA Ireland has explicitly identified increased productivity and innovation support as a strategic priority. The agency utilises R&D expenditure as a key metric in determining the prioritisation of specific investment projects. By amalgamating industry-level FDI and R&D expenditures per unit of value added into a single indicator, IDA Ireland assesses whether sectors receiving larger FDI shares exhibit higher or lower R&D intensity. This metric serves a dual purpose by not only informing prioritisation decisions but also functioning as a tool to retrospectively evaluate the effectiveness of the prioritisation strategy and overall work of the agency. The systematic recording of these applications in the CRM system over time provides a comprehensive view of the IPA's impact on Ireland's overall investment promotion and facilitation strategy, aligning with broader economic development goals.
Source: Sztajerowska, M.; Volpe Martincus, C, (2021[109]), Together or apart: investment promotion agencies’ prioritisation and monitoring and evaluation for sustainable investment promotion,
2.4.8. Investment facilitation services can be improved to encourage linkages between foreign and domestic firms
MNEs in Viet Nam have limited information about existing domestic suppliers, hindering FDI-SME linkage formation. According to OECD’s Activity of Multinational Enterprises database and World Bank's 2023 Multinational Enterprises Pulse Survey, MNEs in Viet Nam source a lower share of their inputs domestically than in other countries in East Asia and Pacific region (World Bank, 2024[75]) (see Figure 2.15). Some reasons for this include MNE dissatisfaction with the skill level and management capacity of Vietnamese firms. However, often times MNEs simply lack the information about available domestic suppliers (Akhlaque, Ong Lopez and Coste, 2017[110]). Foreign firms in Viet Nam tend to rely on their network of other foreign firms or on industrial zones to establish linkages with local suppliers, indicating that there is scope to improve the provision of knowledge of local suppliers for MNEs (Tusha, Jordaan and Seric, 2017[111]).
Improving the quality of investment facilitation services can encourage linkages between foreign and Vietnamese firms. In 2020, with the support of IFC, Australia, and Switzerland, MoIT launched the Supporting Industry Portal, including in it a database of companies operating in the mechanical engineering, auto industry, electronics as well as textile sector. However, in the 2022 project “Encouraging Vietnamese enterprises in directly participating in foreign distribution networks by 2030” a task is outlined for establishing and maintaining an online database of industries and enterprises in the supply chain. The plan also indicates a need to integrate tools in this database that support the potential investor in analysing the information according to their needed business connection (Prime Minister of Viet Nam, 2022[55]). In parallel, the Vietrade (2022[32]) mission statement also indicates a goal to establish and regularly update a local supplier database. Such overlaps and information mismatches indicate that even among domestic actors there is a lack of clarity on the tools available to connect MNEs to local suppliers. Establishing one clear digital portal that provides information on local suppliers and popularising its use among all national and provincial agencies involved in the investment facilitation process is an important step to minimise the local supplier search costs for FDI companies.
The quality of investment facilitation services and thus the ability to support FDI-SME linkage formation largely depends on Viet Nam’s provincial authorities. While FIA provides strategic guidance to provincial departments of the MoF, government-business interactions take place on a provincial level, including business and investment registration and grating of land-use permits. Investors are only redirected to national level authorities in cases of significant investment amounts considered of national importance. This decentralised nature of investment facilitation can prove advantageous for encouraging linkages between foreign and domestic enterprises due to a better market knowledge of the local agencies. Yet provincial differences in investment and business registration procedures can increase regulatory complexity and prove burdensome for foreign companies. Nguyen, Sun and Welters (2024[112]) find a significant moderating effect of the provincial institutional quality in positive spillover effects of FDI on R&D investment of domestic SMEs in Viet Nam. Thus, it is important to ensure that all provincial IPAs have the capacity to support foreign firms in establishing connections with local enterprises.
Amidst relatively high regulatory burden, Viet Nam performs well in ensuring regulatory transparency for investors. According to the ASEAN (2025[113]) investment facilitation monitor, Viet Nam performs well in comparison to its peers in providing information on business registration and investment licensing. The success in ensuring regulatory transparency is also reflected by the STRI where despite weak performance in the restrictions to foreign entry, Viet Nam performs best in the regulatory transparency field (OECD, 2025[73]; 2025[114]). Transparency is ensured by the portal on foreign investment procedures, which provides information on the different provincial processes for obtaining investment certificates, opening a company or establishing co-operation contract with a Vietnamese company in one online interface (MPI, 2025[115]). The National Investment Information System also compiles information on the conditions foreign investors must meet to invest in the 59 restricted sectors (FIA, 2025[116]).
Online databases of local suppliers and sector-specific opportunities
Examples of national level local supplier database include the platform operated by Hungary’s National Innovation Centre, which in one digital interface combines information on all operating startups, scale ups and SMEs in the country. Created as a public private partnership, it is a good balance between quality and cost efficiency. It also provides information on investors and MNEs that have established some operations in the country. Similarly, the Irish Innovation Directory in a user-friendly interface provides a list of exporting companies that any interested party, including foreign investors, can find by filtering by sector. Another way to showcase sectors with high potential for technology transfer is by summarising the information on available investment opportunities in them alongside information on incentives and regulations affecting these sectors, as done by Egypt’s Industrial Modernisation Centre (IMC). The Buy from Portugal platform is also an example Viet Nam could follow. Within this online platform the investors are provided with information on the certificates the domestic suppliers have obtained, allowing the investor to directly focus their search on suppliers meeting the standards they require. It also indicates to which markets the domestic companies are exporting already, further providing information on the relevant international standards the company has met.
Interactive maps of investment locations
Another option that Viet Nam could consider in its attempts to improve the foreign MNE knowledge of the domestic market is the provision of an interactive map that indicates all zones available for greenfield and brownfield investments in the country. Such a tool can serve as centralised source of information on investment opportunities across the country. It is suitable to facilitate the investing process for investors targeting specific locations in the country in which they seek to establish operations. Good examples of such online maps that are regularly updated include those available for investors looking to invest in Slovenia, Croatia, Sweden or Egypt. Croatia has structured its map based on the size of active business zones and the ports available near them. A useful feature of the map designed by Slovenia Business is the inclusion of the types of infrastructure available in the various investment locations. The practice of including the location of the nearest regional IPA in the map, as done in the Business Sweden’s Site Finder, can further inform investors of the support services available to them. The map operated by Egypt’s General Authority for Investment (GAFI) also includes a feature that enables investors to directly submit and follow up on their proposals.
Matchmaking services for foreign and domestic firms
As part of its investment aftercare services, the Portuguese investment promotion agency, AICEP, implements two programmes that help foreign investors identify local suppliers, targeting traditional SMEs as well as young innovative start-ups. The Sourcing in Portugal Initiative involves B2B meetings between foreign investors and Portuguese suppliers to identify local sourcing opportunities, while the Startups Connecting Links Programme introduces Portuguese startups to foreign MNEs to help mobilise financing and investment for the growth of the startup ecosystem. Several matchmaking platforms and local supplier databases are also in place to bring down information barriers and allow foreign and domestic firms to identify local sourcing and partnership opportunities. For instance, AICEP has developed a new platform, which relies on AI technology to deliver customised matchmaking services, while the National Innovation Agency (ANI) operates the Business and Technology Exchange platform, which serves as a single access point for Portuguese technology offers and requests.
Source: NIU (2025[117]), Explore Hungary's innovation and startup ecosystem, https://startupbase-hungary.dealroom.co/intro, Enterprise Ireland (2025[118]), Irish Innovation Directory, https://directory.enterprise-ireland.com/vendors?limit=10, AICEP (2025[119]), Buy from Portugal: Portuguese Suppliers Directory, https://www.buyfromportugal.com/export/, Slovenia Business (2025[120]), Invest in Slovenia- Business Locations, https://www.sloveniabusiness.eu/invest-in-slovenia/locations/, Invest Croatia (2025[121]), Business Zones, https://investcroatia.gov.hr/en/zone/, Business Sweden (2025[122]), Site Finder, https://www.business-sweden.com/invest-in-sweden/online-tools/site-finder/, IMC (2025[123]), Industrial Modernisation Centre, https://invest.imc-egypt.org/en.
There is scope to improve aftercare services targeting co-operation between foreign and Vietnamese firms in higher added value activities. FIA and provincial IPAs could strengthen their relationship with MNEs by conducting investor surveys as done by 78% of OECD IPAs. This helps identify which services have been successful and where investors require further support (OECD, 2019[124]). On the other hand, FIA could proactively support foreign firms with administrative procedures and regulatory reporting and compliance. Even if an FDI company, after relocating to Viet Nam has kept its previous suppliers, aftercare services can further expose companies to collaborations and partnerships available domestically. In Slovenia, this is conducted though the Further Growth Programme, which aims to support MNEs in addressing the challenges they face in the domestic market when they already have established their workstreams there. It also supports MNEs to create new connections with domestic suppliers in other areas where the FDI company initially preserved its foreign suppliers (Spirit Slovenia, 2020[125]).
FIA could increase its efficiency by regularly monitoring and evaluating its investment promotion and facilitation services to identify gaps and enable corrective action. In contrast to 63% of OECD IPAs, FIA does not have a separate unit responsible for monitoring and evaluating if investment promotion and facilitation tools reached their goals (OECD, 2019[124]; 2018[22]). Monitoring if the investment projects the provincial IPAs have supported have had a positive impact also on the productivity and innovation of the domestic partners of the FDI company is key to identify which activities the agencies should focus on in the future. Allocating resources to M&E in long run could also save resources by enabling more efficient allocation to programmes that bring the desired benefits.
The recent adoption of a new Law on Investment strengthens investment facilitation by narrowing the scope of activities subject to prior licensing, including in several knowledge-intensive and innovation-relevant segments of the economy. Adopted by the National Assembly in late 2024 and taking effect in 2025, the new law removes business licensing requirements for 38 conditional business lines and adjusts the regulatory scope of a further 20 activities following a comprehensive review of their necessity and proportionality. While the full consolidated list of the adjusted sectors has not yet been publicly standardised across implementing decrees, the reforms extend beyond traditional low-risk activities to include selected professional and technical services and digital-economy enablers. These include, for example, data centre services supporting cloud computing and digital infrastructure, as well as specialised technical services such as energy auditing and certain forms of commercial inspection, which rely on professional standards rather than ex ante licensing. By shifting a wider range of activities from prior approval towards post-investment compliance and supervision, the new Law on Investment reduces administrative frictions at the entry stage and improves regulatory predictability, with potential benefits for productivity-enhancing and innovation-oriented investment, particularly in knowledge-intensive services linked to Viet Nam’s digital transformation objectives.
Thailand Board of Investment established the Industrial Linkage Development (BUILD) unit, focusing on supporting business linkages and the utilisation of locally manufactured industrial parts. BUILD facilitates this through several initiatives.
Vendors Meet Customers: Acting as an intermediary, BUILD introduced the Vendors Meet Customers Program, bringing together vendors/parts manufacturers and customers/buyers. This initiative involves parts manufacturers visiting selected buyers' plants, providing them with insights into the overall processes. This interaction facilitates the initiation of business relationships, allowing parts manufacturers to supply components to buyers. Simultaneously, buyers gain valuable information about potential new suppliers, contributing to sourcing suitable parts locally and benefiting from reduced difficulties, cost savings, and time efficiency in the procurement process.
Marketplace: BUILD created a marketplace to serve as a comprehensive sourcing centre, connecting buyers and parts manufacturers. In this platform, buyers showcase sample parts, present their procurement policies, and outline parts requirements. The marketplace streamlines the sourcing process for buyers seeking localised parts and components, resulting in easier procurement, cost reduction, and time savings.
Sourcing Service: BUILD offers a sourcing service to aid both Thai and foreign buyers in locating parts and components in Thailand. Upon receiving inquiries, BUILD identifies potential suppliers based on buyers' requirements. The supplier information is then submitted to buyers for screening and approval. Additionally, one-on-one meetings can be arranged for buyers to individually discuss their needs with potential suppliers, enhancing the efficiency of the sourcing process.
Source : BOI, (2025[126]), BUILD programme, https://build.boi.go.th.
2.4.9. Viet Nam provides investment incentives targeting productive and knowledge intensive FDI, but their design can be improved to increase their effectiveness
Within Viet Nam’s generous tax incentive framework, some incentives target investments in knowledge-intensive activities. Similarly to the OECD countries (see Figure 2.21), increasing productivity and innovation is among the top three policy objectives underlying Viet Nam’s investment incentive framework. Incentives targeted at this goal are provided mainly by the 2020 Law on Investment, its accompanying decision prescribing special investment incentives, and the amended Corporate Income Tax Law of 2025 (National Assembly, 2020[69]; Prime Minister, 2021[127]). However, investment incentives for high-technology activities and R&D are only one part of the wide incentive framework that also supports textile industry, steel products and processing of agricultural products among other sectors (FIA, 2020[128]). Viet Nam should ensure that the incentives provided in these sectors support productivity increases within them. This could be done by targeting investments in higher value-added segments within these value chains. Considering the wide array of sectors where incentives are provided, Viet Nam should remain mindful of potential government revenue losses linked to overly broad and inefficient frameworks and thus keep its investment incentive framework aligned with its strategic goals (OECD, 2018[129]; IMF, 2023[130]).
Note: Viet Nam’s top three policy objectives are in dark red.
Source: OECD based on OECD (2024[131]), The Role of Incentives in Investment Promotion: Trends and Practices in OECD Member Countries, https://doi.org/10.1787/e3338264-en
Reducing the reliance on tax incentive framework could contribute to attracting more investment in knowledge-intensive activities. Evidence from developing countries shows 58-98% of firms receiving incentives would have invested in the respective countries regardless (James, 2013[132]). Tax incentives are not among the top factors driving investment decisions. Instead, skilled labour availability, market size, and growth prospects matter more (Johnson and Toledano, 2022[133]). Viet Nam would therefore benefit from reducing reliance on its complex tax incentive scheme to attract and retain quality FDI. Instead, it could also explore the potential of non-financial incentives. The 2024 adoption of the Law on Investment introduces a special investment procedure that reduces the project commencement timeline for investments in R&D centres, semiconductor industry and other high-technology fields is one example of welcomed developments in this direction (National Assembly, 2024[134]).
FIA could play an instrumental role in increasing the transparency and clarity of investment incentives available in Viet Nam. Another reason why complex tax incentive schemes are less likely to achieve their intended objectives, is the unclear administrative procedures investors must navigate. This is particularly challenging for smaller innovative firms and startups lacking legal capacity to identify incentives dispersed across various ministry and agency websites. According to the OECD IPA survey, FIA does not appear to have a complete overview of the full scope of investment incentives provided in Viet Nam. This contrasts with 80% of OECD IPA’s, who report an extensive awareness of the full spectrum of incentives available in their countries (OECD, 2024[131]). The three key principles FIA can follow to improve transparency of available incentives are: ensuring information availability, providing access to the relevant legal basis, and presenting it in a clear manner (OECD, 2023[135]; World Bank, 2022[136]). For example, FIA may envisage creating an online platform which consolidates information on the various incentives provided by different agencies and ministries to support investments in the knowledge economy.
Invest Bulgaria Agency (IBA) Incentive Calculator
The Investment Incentive Calculator is an online portal providing incentive assessments to prospective foreign investors based on the provisions of the Investment Promotion Act. By filling an electronic information form with the main characteristics of the investment project (size, economic sector, expected jobs creation, location) potential investors receive information on available incentives in Bulgaria and administrative procedures for application.
Czech Invest digital interface on incentive availability and effectiveness
In Czechia, the IPA homepage includes detailed information on all available incentives by category that allows investors easily identify what they could qualify for. The website also features a tool that highlights in which regions and to what extent incentives are used, including information on the business sector, the origin country of investors and number of new jobs created. This feature not only supports Czechia in ensuring incentive transparency, but it also ensures prudent spending of public funds since information of effectiveness of incentives is publicly available.
Source: OECD based on IBA (2024[137]), Investment Calculator, https://investbulgaria-virtualoffice.com/services/calculator, Czech Invest (2025[138]), Investment Incentives, https://czechinvest.gov.cz/en/For-Investors/Investment-Incentives.
Viet Nam should continue its shift towards expenditure-based R&D incentives. In OECD countries, expenditure-based incentives (tax credits and allowances) are more commonly employed than income-based incentives (CIT exemptions and reduced CIT rates), with 60% of OECD economies using tax credits and 51% using tax allowances (see Figure 2.22, Panel B). Conversely, Viet Nam continues to rely on income-based incentives to stimulate investment. While concessions on CIT have supported Viet Nam’s position as a favourable FDI destination, a shift towards expenditure-based incentives will be key to support long-term knowledge diffusion, particularly as Viet Nam aims to move to higher value-added investments. While reductions in CIT for innovative companies can still lead to increased R&D, more targeted R&D support tends to have a greater effect (OECD, 2020[139]). It is also more likely to ensure incentive contribution towards long term infrastructure and productivity enhancement rather than short term profits of companies. A notable shift in Viet Nam’s policy towards directly supporting R&D is the establishment of Investment Support Fund (National Assembly, 2024[134]; Government of Viet Nam, 2024[140]). While the effectiveness of the fund remains to be seen, including in its design direct support for R&D expenses as well as expenses of training Vietnamese employees and establishing social infrastructure is a welcome shift towards directly supporting productive investments. Ensuring that support is only provided for enterprises explicitly applying for it and limiting the support period to five years are also welcomed design features. The inclusion of initial investment support for projects in sectors strategically important for Viet Nam, such as AI and semiconductors, is a good example of incentive targeting.
Note: Tax incentives offered in Viet Nam are in dark red.
Source: OECD based on OECD (2024[131]), The Role of Incentives in Investment Promotion: Trends and Practices in OECD Member Countries, https://doi.org/10.1787/e3338264-en.
While investment incentives exist to promote technology transfer, without strengthening the domestic enterprise absorptive capacity, the efficiency of such incentives will remain limited. The tax framework provides incentives to include Vietnamese enterprises in the value chain, as well as conduct technology transfer projects to them. However, consultations with stakeholders indicate that these incentives have had limited effectiveness, since within the first year of provision, not a single company had applied to receive them. Similarly, foreign enterprises also are rewarded for establishing R&D centres in the country and employing university level researchers. Yet, for these incentives to be effective, Viet Nam must ensure that the foreign companies who wish to establish these R&D centres can then easily access domestic firms and skilled local employees to be employed at these centres. Incentives can only be as attractive as the broader investment climate is. Based on international experience, the incentive schemes that have been most successful to promote linkages and technology transfer were those that were coupled with other policy tools, such as support for domestic suppliers in targeted sectors and matchmaking with foreign firms (Sabha, Liu and Douw, 2020[141]).
Viet Nam should monitor the use of incentives and regularly evaluate if they reach the desired outcome. Given the costs and risks associated with tax incentives, the instruments should be monitored to ensure they are adequate for addressing their target objectives. This extends to non-fiscal incentives, for example by incorporating a cost monitoring mechanism in the Investment Support Fund to ensure its success. The broader impact of incentives should also be taken on board and evaluated, extending beyond the associated costs. Understanding the effects investment incentives have on the productivity and innovation of specific firms and provinces as a whole is important to be able to adjust the framework if it is not reaching its desired benefits.
Ex ante and ex post evaluations of R&D funding programmes in Czechia
The Technology Agency of the Czech Republic (TACR) provides a virtuous example of evaluation culture as part of the government’s innovation policy. TACR’s R&D and innovation funding programmes are evaluated ex ante, interim and ex post. Interim evaluation – e.g. evaluation performed in the middle-life of a programme, to assess if it is working towards its aims – is voluntary, while ex ante and ex post evaluations are mandatory. Outcome evaluations to be performed 5 years after the closure of programmes are also scheduled to be implemented soon. All the evaluation reports are publicly available online. The evaluation methodology is based on a combination of desk research, data analysis and consultation of the programmers’ beneficiaries via voluntary questionnaires and surveys. Visits to unsuccessful applicants are also regularly performed. Evaluations are performed both in-house by a dedicated evaluation department and externally by contracted specialists.
Source: OECD (2024[142]), Strengthening FDI and SME Linkages in Czechia, https://doi.org/10.1787/4c97d104-en.
2.4.10. Strengthening the productive capacities and innovation potential of Vietnamese firms can enhance their integration into the supply chains of foreign multinationals
It is necessary to increase the absorptive capacity of Vietnamese firms to benefit from productivity and innovation spillovers arising from supplier linkages and partnerships with foreign multinationals. Newman et al. (2015[143]) found that Vietnamese manufacturing firms that served as suppliers for MNEs between 2009 and 2012 experienced greater gains in productivity and innovation than those that did not. Yet, domestic firms, in particular SMEs, must first develop sufficient productive capacities to acquire, assimilate and apply external knowledge and technology effectively (OECD, 2023[144]). A case study on Samsung’s mobile phone production in Viet Nam found that domestic firms must first reach a minimum capability level before being considered as suppliers (Tong, Kokko and Seric, 2019[145]). Empirical evidence from transition economies in Europe and Southeast Asia confirms that absorptive capacity is a critical determinant of the extent to which domestic firms can capture the benefits of FDI spillovers (Sugiharti et al., 2022[146]; Orlic, Hashi and Hisarciklilar, 2018[147]).
Strengthening R&D efforts in domestic enterprises is instrumental to enhance their absorptive capacity – an essential condition for Viet Nam to move up the value chain by leveraging technology transfer from MNEs. Low levels of domestic firm investments in R&D limit their potential to benefit from technology transfer (Phi et al., 2024[148]). In 2023 only 5.1% of all firms operating in Viet Nam reported R&D spending, in contrast to 13.8% in East Asia & the Pacific and 25.6% in OECD economies (World Bank, 2024[10]). Boosting absorptive capacity requires both a shift in domestic firms’ orientation towards innovation and more targeted government support. Viet Nam’s public spending on R&D remains low at 0.4% of GDP – below most peer countries – with a quarter of this allocated to public research institutions such as the Academies of Sciences (OECD, 2025[12]) (see Figure 2.4). The range of support Viet Nam could provide to incentivise R&D in SMEs is wide and can involve financing, technical assistance, training, capacity building and infrastructure provision (OECD, 2022[149]; 2023[144]). Viet Nam could also introduce vouchers to allow SMEs to work with Academies of Sciences in addressing their R&D challenges.
Despite the availability of multiple financial instruments to support innovation in SMEs, capital and resource constraints continue being among key challenges faced by Vietnamese firms. The SME Development Fund , operational since 2016, was created to improve access to finance for R&D and business expansion, and has since refocused to better target innovative SMEs and those operating in clusters (Prime Minister of Viet Nam, 2013[150]; Government of Viet Nam, 2024[151]). Similarly, the National Technology Innovation Fund provides lower-interest loans to support innovation among SMEs. In addition, Resolution 68-NQ/TW, adopted in 2025, introduced new policies to stimulate innovative start-ups and R&D activities, including a 200% “super deduction” on R&D expenses when calculating taxable income, as well as corporate income tax deductions and funding support from science and technology funds for investments in machinery, technological innovation, and digital and green transformation. Resolution 68-NQ/TW also allows enterprises to establish their own Innovation Development Funds by deducting up to 20% of taxable income. These funds can be used by firms to conduct in-house research or to contract external research providers, creating an additional instrument to strengthen absorptive capacity and innovation activity at the firm level.
These initiatives align with Viet Nam’s broader goal of enhancing SME absorptive capacity and enabling their shift toward higher value-added activities. Recent government strategies, as discussed in Section 2.4.3, also introduce new financing mechanisms such as the Strategic Industry Development Investment Fund established under the Strategy for Breakthrough in Science and Innovation (Central Executive Committee, 2024[66]). Although the impact of this new fund remains to be seen, 21.9% of domestic firms still cite access to finance as the most significant obstacle in doing business – matched only by concerns over informal sector practices (World Bank, 2024[10]). Improving access to finance is crucial for small domestic firms to invest in productivity-enhancing equipment and R&D, helping them compete more effectively with foreign suppliers retained by MNEs relocating to Viet Nam.
Viet Nam could increase the uptake of financing available for SMEs by addressing challenges arising from stringent access conditions or limited awareness. While the conditions of the SME Development Fund appear to be suitable to increase innovation among domestic firms, 76% of the available funding had been provided to 56 SMEs as of mid-2025, highlighting the limited number of beneficiaries and the need to mobilise additional financing to broaden coverage and deepen support for firm-level innovation. Uptake challenges included low bank participation – due to capped interest rates that limited profitability – and low SME demand, partly because firms were still required to cover 20% of project costs (OECD, 2021[152]). Further uptake issues included lack of awareness of the fund among Vietnamese firms and potential reporting and other compliance constraints that Vietnamese firms face during the application process. These requirements may be burdensome for less competitive and internationally exposed enterprises that do not have the internal capacities to comply with the necessary procedures. To increase uptake, certain countries offer financing with preferential provisions for SMEs and loss-making firms and organise information campaigns in collaboration with regional and municipal authorities and local chambers of commerce. Viet Nam could consider adopting similar approaches by offering more flexible financing terms for SMEs with limited collateral or lower credit ratings, and by launching co-ordinated outreach campaigns through provincial departments, business associations, and industry clusters to raise awareness of available support instruments. Tailoring application procedures to the capacities of smaller firms and providing advisory services to guide them through the process could further help ensure that public support reaches a broader and more diverse base of domestic enterprises.
Viet Nam would benefit from carefully monitoring whether its financial instruments for SME innovation are achieving their intended impact. Joint programming and the establishment of formal communication channels among ministry departments and agencies supporting SME innovation (e.g. shared customer relationship management system) to track the number of unique firms that benefit from public support could facilitate measurement of the impact of these policies. The recently established National Council for Science, Technology and Innovation could be tasked with producing an annual report that presents the actual uptake, outcomes and policy lessons from existing SME innovation support instruments. This annual report could consolidate data from various implementing agencies, identify gaps in support coverage and provide recommendations to improve the effectiveness of public programmes. Over time, such monitoring could ensure that resources are directed towards Vietnamese firms with the greatest potential for productivity gains and technology absorption.
Beyond financing, it is equally important to support SMEs that lack the technical capacity and human capital to innovate and become successful partners of global R&D firms. While the SME Support Law includes provisions for training (National Assembly, 2017[153]) and its 2021 revision expanded support for innovative SMEs and those operating in clusters (Government of Viet Nam, 2021[154]), a misalignment remains between policy ambitions to promote high-tech production and the limited innovation capabilities of most Vietnamese firms (OECD, 2021[152]). Complementing financial support with technical assistance programmes that aim to improve innovation capacity though skills upgrading and ICT adoption could help close this gap. Technical assistance should be tailored to address the specific weaknesses that MNEs report when engaging with domestic suppliers. Common barriers include difficulties in meeting international technical standards, lack of scale, and limited understanding of intellectual property rights (IPR). Training in these areas could directly address capability gaps and raise awareness of key enablers of technology transfer, such as IPR. For example, in Lithuania and Estonia, innovation agencies provide firms with consulting on patenting and IPR protection (OECD, 2023[144]). Collaborating with MNEs to deliver sector-specific training – such as the practices of NIC and VIA – can further support SME integration into global value chains and enhance their capacity to absorb FDI spillovers. In addition, Viet Nam’s technical and vocational education and training (TVET) system currently is largely geared towards providing basic labour market skills for the unemployed (OECD, 2021[152]), but could be adapted to support workplace-based training that improves the technical skills of the local workforce.
Viet Nam would benefit from better co-ordination between financial and technical support programmes targeting innovative and scaling SMEs. While institutions like the National Technology Innovation Fund and the National Productivity Institute (both under MoST) offer subsidised loans and technical assistance for SMEs aiming to raise their innovative capacities respectively, their efforts are not aligned. Similarly, the SME Development Fund specifically targets SME participation in clusters. In parallel the APED has technical assistance projects to support SMEs in joining clusters and value chains, yet no funding to realise the program. Aligning these complementary programmes would improve SME absorptive capacity and maximise the impact of public support.
The geographical reach of business support services should be carefully monitored to avoid negative distributional effects of FDI. The APED support for businesses currently is provided through the Assistance Centres for SMEs (commonly known as TAC) established with support of Japan’s government and the goal to strengthen enterprise productivity. They are located only in Ha Noi, Da Nang and Ho Chi Minh City (OECD, 2021[152]). Ensuring that services aimed at strengthening SME absorptive capacity have wider geographical reach could also mitigate the negative distributional consequences of FDI effects on economy across provinces (McLaren and Yoo, 2017[155]). Creating the National Business Portal, managed by APED, as a one-stop-shop for SMEs is a welcomed step towards ensuring access to information and technical support for SMEs across the country. The APED SME Consulting Network that connects SMEs with management, digitalisation and research commercialisation training providers could be expanded by including training providers also beyond major industrial hubs.
Recent targeted programmes to strengthen supplier capacity could be expanded. The Supplier Development Programme –initially piloted by the World Bank (2020[156]) and later adopted by VIA– is a good example of facilitating connections between Vietnamese firms and foreign MNEs. Its advisory board, which included representatives from several ministries as well as MNEs and SMEs, helped ensure that the technical assistance provided by the programme was responsive to the needs of foreign investors. Expanding Viet Nam’s “Supporting Industry” initiatives to include upstream service suppliers and second-tier suppliers could further broaden domestic linkages and increase opportunities for knowledge and technology transfer from FDI (OECD, 2021[152]). Combining financial support with dedicated trainings for SMEs could enhance the programme’s effectiveness. In addition, the Ministry of Industry and Trade could play an important role by establishing Industrial Development Technical Support Centres and implementing supplier development programmes that would help Vietnamese firms obtain international industrial certifications and integrate into supply chains for electronics, precision engineering and other high-tech industries. Involving industry associations with foreign firm representation in programme design can help align support with the practical challenges MNEs face in sourcing locally. Providing targeted support to Vietnamese firms that have recently formed partnerships with FDI companies may also be help deepen and diversify these linkages over time.
Egypt
Egypt’s Industrial Modernisation Centre (IMC) plays a pivotal role in fostering supply chain development through targeted programmes aimed at strengthening local manufacturing and integrating domestic suppliers into global and national value chains. A key initiative is the National Industrial Localisation Programme, which encourages local production of imported goods, thereby increasing domestic value-added, reducing trade deficit, and supporting the export of industrial components. IMC’s National Supplier Development Programme builds on these efforts by identifying large anchor multinational enterprises, mapping their import needs, and matching them with capable local suppliers. Through gap analyses and tailored support services – including consultancy, technical assistance, and certification – IMC enables local suppliers to meet the performance standards of foreign investors, fostering supplier-MNE relationships. IMC also implements matchmaking initiatives aimed at import substitution by showcasing imported items that foreign multinationals currently rely on but could potentially source locally. IMC organises exhibitions where they display imported goods and components that are used by foreign MNEs, emphasising details about each product – such as the demand volume, product specifications, and quantities required, and attracting local suppliers, particularly Egyptian SMEs, who may have the capacity to manufacture or provide these components. The programme allows local suppliers to express interest in producing these items and creates a direct link between the demand (from companies currently importing these goods) and potential domestic suppliers.
Portugal
In Portugal, the national investment promotion agency, AICEP, and the SME Competitiveness and Innovation Agency, IAPMEI, jointly implement the Supplier Clubs programme, which is a good example of how public policy can mobilise actors across the business ecosystem to help local SMEs collaborate with foreign affiliates. The programme combines matchmaking services to help foreign and domestic firms identify collaboration opportunities and agree on jointly implemented projects; business consulting and training programmes provided by foreign affiliates to their suppliers based on an assessment of their performance; and financial support through EU-funded incentive schemes to help SMEs upgrade their technological capabilities for the implementation of the agreed joint projects.
Source: OECD (2022[46]), Strengthening FDI and SME Linkages in Portugal, https://doi.org/10.1787/d718823d-en; and OECD (2026[157]), FDI Qualities Review of Egypt: Connecting Foreign and Domestic Firms for Productivity and Better Jobs, https://doi.org/10.1787/04ed341a-en.
While Viet Nam has made progress in aligning its national standardisation system with international norms, further efforts are needed to help Vietnamese manufacturing firms certify the quality and safety of their products. Empirical evidence shows that Vietnamese SMEs with international quality certifications, such as ISO 9000 or ISO 9001, are more likely to export, innovate, and adopt formal business practices (Duy and Tran, 2021[158]). Such certifications are also associated with improved financial performance, including higher return on assets and sales, particularly among firms that invest in new technologies or quality management systems. Recent analysis confirms that compliance with international standards significantly increases the participation of Vietnamese SMEs in GVCs and raises labour value-added, particularly through subcontracting relationships with foreign multinationals (Le and Chu, 2023[159]). Currently, around 60% of standards in the national TCVN system are harmonised with international standards (MoST, 2020[160]) and the alignment of Viet Nam’s Accounting Standards (VAS) with the International Financial Reporting Standards (IFRS) has improved financial transparency for foreign investors (Ministry of Finance, 2020[161]). However, remaining divergences continue to pose challenges for domestic enterprises seeking to supply their goods and services to foreign multinationals operating in Viet Nam and abroad (ITA, 2024[162]). For instance, at the government-supported “Samsung Sourcing Fair”, none of the 200 participating domestic suppliers met Samsung’s product quality requirements (OECD, 2025[12]).
To strengthen Viet Nam’s standardisation system and increase SME adherence to international standards, targeted policy measures should be adopted across financial, technical, and institutional dimensions. First, the government could introduce a dedicated certification support scheme that provides co-financing for SMEs to obtain internationally recognised certifications (e.g. ISO 9001, ISO 14001, ISO 22000). This would help address cost-related barriers that often prevent smaller firms from pursuing certification. Second, technical assistance efforts could be scaled up by equipping agencies such as the National Productivity Institute, APED and Vietrade with a clearer mandate and additional resources to deliver sector-specific training, on-site mentoring, and advisory services related to standards implementation and compliance. Third, strengthening national quality infrastructure – including testing, metrology, and conformity assessment services – would reduce reliance on international certifiers and improve the accessibility of accredited local certification. In parallel, Viet Nam could explore mutual recognition agreements (MRAs) with key export markets to enhance the international acceptance of domestic certifications. These efforts would benefit from being integrated into a national action plan on standardisation and supplier readiness, with clear institutional responsibilities and co-ordination mechanisms across MoST, the Directorate of Standards, Metrology and Quality (STAMEQ), industry associations, and provincial governments.
The CSID operations in Ho Chi Minh City are a good example of how SME support can be leveraged in forming the linkages between MNEs and domestic enterprises. The CSID works directly with the MNEs which have decided to base their factories in Ho Chi Minh City to explore what inputs are they supplying from elsewhere and in which areas they could benefit from a domestic supplier. They then, leveraging their local market knowledge identify potential suppliers and support them both technically and financially to meet the standards required by the MNE. The CSID also co-ordinates its operations with the local industrial Ho Chi Minh City High-Tech Park and Ho Chi Minh City Export Processing and Industrial Zones Authority (HEPZA), where the MNEs tend to locate to benefit from the tax incentives discussed in Section 2.4.9 as well as further provincial incentives. Furthermore, together with these parks they also annually organise fairs to connect supporting industry representatives with foreign MNEs as well as sectoral conferences to inform local suppliers of international trends. The CSID operations are a great example that integrates combination of networking events, financial support and technical trainings with the purpose of strengthening domestic supplier capacities precisely in those areas MNEs report as necessary.
However, the financial support provided for SMEs to obtain necessary equipment, the interest rate subsidies for loans to suppliers in priority sectors, as well as the operations of the CSID itself are funded through the Ho Chi Minh City budget. While these initiatives are all welcomed and in line with the recommendations of this section, MOIT should consider the funding of such centres across the country. The centres could further specialise their support in the relevant supply chains present regionally.
Source: CSID (2025[163]), Introduction to Ho Chi Minh City Center for Supporting Industries Development (CSID), https://congthuonghcm.vn/gioi-thieu/, CSID (2024[164]), Invitation to participate in training courses to improve capacity for supporting industry enterprises in Ho Chi Minh City in 2024, https://congthuonghcm.vn/moi-tham-gia-cac-khoa-dao-tao-tap-huan-nang-cao-nang-luc-cho-doanh-nghiep-cong-nghiep-ho-tro-tren-dia-ban-thanh-pho-ho-chi-minh-nam-2024/.
2.4.11. Viet Nam has prioritised cluster development and technology parks; yet further investment in knowledge transfer infrastructure would enhance their effectiveness
The potential for FDI-SME linkages can be influenced by the quality of the knowledge transfer infrastructure, which may include industrial and technology parks, cluster organisations, collaborative laboratories, universities and other facilities that contribute to the creation and diffusion of knowledge through synergies. These facilities provide a physical environment for foreign firms to collaborate with domestic actors, and for local SMEs to access technological premises, equipment, manpower and activities provided by universities and public research institutions that they could not afford independently. Firm-level studies show that geographic proximity is a key factor enabling FDI spillovers on the innovation of domestic firms (Huang and Zhang, 2020[165]; Wang and Wu, 2016[166]; OECD/UNIDO, 2019[167]; Tong, Kokko and Seric, 2019[145]).
Viet Nam has stepped up its policy efforts to support cluster development. Decree No. 32/2024/ND-CP, effective from 2024, provides a framework for the establishment, management, and development of industrial clusters across the country and in several sectors, including knowledge-intensive ones such as electronics, digital technology, and ICT (Government of Viet Nam, 2024[168]). The Decree establishes a procedure for provinces to develop cluster development plans, offers investment incentives, and improves infrastructure within industrial clusters, particularly in socioeconomically challenged areas. Under this policy, the government supports up to 30% of the total investment capital required for technical infrastructure construction in industrial clusters, with a focus on environmental protection and the development of essential shared facilities. The decree also emphasises the importance of linking industries, specialisation, and the preservation of traditional crafts within these clusters. By encouraging the relocation of SMEs and co-operatives to designated industrial clusters, the policy seeks to foster synergies among businesses, and facilitate access to shared resources. In addition, SMEs that operate in clusters and are a part of GVC are also financially rewarded through the SME Development Fund.
Moving forward, financial and technical support for cluster development will need to be complemented by public-private dialogue, regular consultations and regulatory reform plans that address market failures in clustered industries. Viet Nam should closely monitor how the new administrative procedures under Decree 32 impact the formation of clusters and aim to scale up support mechanisms for SMEs seeking to access clusters and collaborate with FDI firms. For instance, matchmaking events and capacity-building to help SMEs meet the operational standards and demands of foreign companies should be among the cluster activities supported by the new government support schemes. Challenges may also arise in the effective implementation of these policies, including the need for improved co-ordination among local authorities, adequate funding, and the development of skilled labour to meet the demands of clustered industries. Portugal’s Sectoral Pacts for Competitiveness and Internationalisation represent a good example of how such collaboration among various sectoral stakeholders could take place, by integrating clear-cut targets, a diverse range of support instruments – including reforms to the regulatory environment – and a robust monitoring and evaluation framework to ensure the alignment of government initiatives with regional and sectoral needs (see Box 2.13).
Viet Nam has made significant efforts to leverage industrial and technology parks as tools to attract productivity-enhancing and knowledge-intensive FDI. By the end of 2024, the country had 447 established industrial parks with a total natural land area of about 134.6 thousand hectares, playing a particularly important role in boosting Viet Nam’s industrial capacity (Oqubay, 2025[169]). Of these, 304 industrial parks were in operation and 143 industrial parks were under construction. In addition, 19 coastal economic zones covering 877 600 hectares had been set up nationwide. These facilities have attracted more than 11 200 foreign and 10 600 domestic investment projects, with total registered capital of USD 292.9 billion and 126.1 billion respectively. Realised investment reached around 59% of registered foreign capital and 45% of domestic capital, highlighting both the scale of mobilisation and the scope for further deepening implementation. Empirical evidence shows that sectoral innovation and knowledge spillovers within Viet Nam’s industrial clusters are strongest when companies operate inside the industrial parks (Nguyen and Nguyen, 2024[170]). Looking ahead, the government has signalled its intention to diversify the model of industrial park development. New types of parks – including high-tech, supporting-industry, specialised and eco-industrial parks – are encouraged to attract investment in high-tech and strategic sectors, and to accelerate the application of science, technology and digital transformation within industrial and economic zones (Resolution No. 57-NQ/TW; Resolution No. 71/NQ-CP; Decree No. 35/2022/ND-CP) (National Assembly, 2024[134]).
As Viet Nam seeks to leverage industrial parks as enablers of knowledge exchange and technology transfer, further investments in infrastructure may support this goal. While most industrial parks are developed by Vietnamese developers, those built by foreign developers and under joint ventures tend to be larger in scale and better equipped with infrastructure and research facilities (Oqubay, 2025[169]). The government’s renewed focus on strengthening R&D infrastructure within parks is encouraging and could potentially address these infrastructure disparities. The 2024 amendment to Article 36 of the 2020 Law on Investment simplifies registration procedures for companies investing in innovation and R&D centres located within industrial parks, export-processing zones, high-tech zones, centralised IT zones, free trade zones, and functional areas of economic zones (National Assembly, 2024[134]). Furthermore, the government of Viet Nam has undertaken targeted infrastructure investments to facilitate operations of high technology enterprises. The specialised focus of the Ho Chi Minh City High-Tech Park and the establishment of training centres and research laboratories within it, supported not only the capacity building on domestic firms, but also established linkages between them and FDI enterprises (OECD, 2018[129]). Further making public investments in industrial park infrastructure and encouraging private investment in R&D facilities should be continued. For instance, in the Suzhou Industrial Park of China, the establishment of a testing laboratory for the endurance of electronic products, helped to transform the industrial park into a high-tech hub where thousands of innovative start-ups invest in R&D and develop their products using the parks facilities (UNIDO, 2019[171]).
Viet Nam could further encourage linkage formation between foreign and domestic firms within industrial parks by prioritising information services and capacity building. As the number of industrial parks continues to increase to attract FDI, policymakers should ensure that their operations are aligned with Viet Nam’s strategic ambitions and that domestic companies operating inside and in proximity to the parks benefit from technology transfer opportunities (ERIA/OECD, 2024[172]). While tax incentives are offered to companies operating in IT and high-tech parks, information services, networking platforms and capacity-building may be more suitable to support domestic SME operations in these parks. In a case study on Quang Trung Software City industrial park Nguyen et al. (Nguyen et al., 2022[173])found that only 10 out of 165 IT companies operating in the park were engaging in informal networking activities. In addition, industrial parks and zones process important data on the type of FDI they receive. Sharing this information with the provincial IPAs and ensuring that it is also available to provincial departments of Industry and Trade responsible for SME and industrial policy development would allow these agencies to better react and connect FDI firms with domestic suppliers. Since the industrial parks are focused on attracting large enterprises, emphasis could be also placed on creating space for small domestic enterprises and innovative startups which could benefit from collaborations with foreign multinationals (CSID, 2025[174]).
Ireland’s Regional Technology Cluster Fund
Enterprise Ireland established a Regional Technology Cluster Fund to increase the number of companies engaged in clustering and expand SME participation. The programme aimed to strengthen collaboration between enterprises and regionally based knowledge providers, such as institutes of technology and technical universities. Twelve education outreach managers were appointed to these institutions to engage with MNEs, SMEs, and start-ups in their assigned sectors. By fostering collaboration, the fund supported enterprises in developing marketable technologies, products, and services. Financial support was directed toward R&D projects, helping SMEs become cluster members, and funding networking events. In addition, the programme provided technical assistance to build hard and soft skills, including knowledge transfer, intellectual property management, and leadership training.
Slovakia’s cluster certification programme and working group on cluster development
The Slovak Republic currently has 16 certified cluster organisations, spanning several industries (e.g. IT, automotive, engineering, plastic products, and tourism). In recent years, the Slovak Innovation and Energy Agency (SIEA) and the Ministry of Economy have increased the resources dedicated to support business networks. There has been also greater involvement of cluster organisations and their representatives – such as the Union of Slovak Clusters – in the design of public support programmes. In 2020, a working group consisting of the SIEA and representatives of industrial clusters was involved in the preparation of a Business Networking Support Scheme. In 2018-2020, more than 23 Slovak clusters were awarded a certificate of excellence by the European Secretariat for Cluster Analysis (ESCA). This was possible through a SIEA certification programme that helps clusters improve their organisational capacities and join international networks. The SIEA also operates a monitoring platform, which includes presentations of clusters, data on their contribution to the socio-economic development of Slovak regions as well as information on national and international support programmes.
Support for competitiveness and internationalisation of Portugal’s clusters
Since 2017, the Portuguese SME Competitiveness and Innovation Agency, IAPMEI, has recognised 18 industrial clusters to enhance collaboration among companies, academia, and research institutions, helping SMEs pursue smart specialisation, overcome performance bottlenecks, and provide feedback to government agencies on the implementation of effective SME policies. The clusters were also eligible for financial support through the Portugal 2020 Incentives Scheme, which provided financial incentives for collective actions, networks and other forms of business-to-business and science-to-business partnerships. In 2019, “Sectoral Pacts for Competitiveness and Internationalisation” were signed between the Ministry of Economy and Digital Transition and some of the recognised clusters. The Pacts take the form of a mutual agreement between the government and the clustered industries and provide a framework to strengthen their innovation and internationalisation, including: measures that promote industry 4.0; training and skills development programmes; innovation activities; actions to promote the brand and strengthen the attractiveness of Portuguese clusters; and targeted reforms in the regulatory environment to address barriers to innovation and internationalisation in specific sectors and value chains. A Monitoring Committee was also set up to ensure the implementation of the agreements.
Source: OECD (2022[175]), Strengthening FDI and SME Linkages in the Slovak Republic, https://doi.org/10.1787/972046f5-en, Enterprise Ireland (2024[176]),Regional Technology Clusters, https://www.enterprise-ireland.com/en/supports/regional-development/regional-technology-clusters, IAPMEI (2021[177]), Clusters de Competitividade: Pactos para a Competitividade e Internacionalização, https://www.iapmei.pt/getattachment/PRODUTOS-E-SERVICOS/Empreendedorismo-Inovacao/Eficiencia-Coletiva-e-Clusters/BrochuraClusters04052021.pdf.aspx.
Viet Nam could better leverage its universities to attract R&D investments and promote industry-science partnerships. The presence of specialised universities in sectoral and regional cluster organisations can support the transition from lower value added activities to a technology-driven economy by supporting regional specialisation (Lee, 2021[178]). Ensuring the presence of universities and R&D centres within clusters can also support research commercialisation and bring Vietnamese innovators and researchers closer to foreign investors. Certain universities and research centres have established co‑operation agreements with foreign multinationals. Samsung R&D centres have co-operated with the Posts and Telecommunications Institute of Technology (2023[179]), the Ho Chi Minh City University of Technical Education to organise workshops on talent development and deliver technology-focused courses (Samsung Viet Nam, 2025[180]). Recent policy efforts have set ambitious targets with the aim to increase the number of researchers in science, technology and innovation to 12 per 10 000 people by 2030 (Central Executive Committee, 2024[66]). The programmes implemented by the National Agency for Technology Entrepreneurship and Commercialisation Development (NATEC) in partnership with universities, are welcomed and could be expanded (ULIS, 2022[181]). However, stakeholder consultations suggest that heavy bureaucracy and lengthy contracting procedures often prevent universities from effectively using funds allocated for co-operation with the private sector. This can discourage private companies from engaging with universities and limits the commercialisation of research outcomes.
Future policy efforts should therefore focus not only on providing incentives to universities to engage with external stakeholders, in particular the private sector, but also on streamlining administrative processes and updating infrastructure and laboratories so that collaboration can take place more effectively. The government could consider establishing institutional contracts that tie a portion of higher education funding to specific performance criteria such as developing activities related to innovation promotion and entrepreneurship development, implementing R&D projects with foreign multinationals, and partnering with cluster organisations and technology parks.
Resolution No. 57-NQ/TW of 2024 and Resolution No. 68-NQ/TW of 2025 should further strengthen the role of public research infrastructure and innovation ecosystems in supporting private sector development. Private enterprises and organisations are now allowed to access state-owned laboratories, testing rooms and shared research equipment at reasonable fees, helping SMEs reduce costs while benefiting from high-quality facilities. At the same time, the State is prioritising public investment in innovation centres that provide incubation, research, testing and technology transfer services to support start-ups and private sector innovation. These initiatives, if combined with efforts to modernise university infrastructure and ease access to collaborative spaces, could play an important role in broadening access to innovation resources. By addressing both the regulatory and physical barriers to collaboration, Viet Nam can ensure that universities and public research institutions become more effective anchors of regional entrepreneurial ecosystems and stronger partners for domestic and foreign investors.
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