This publication presents the results of the first Policy Framework for Investment assessment of Viet Nam. This assessment is the product of a joint collaborative effort between Viet Nam and the OECD. It particularly reflects contributions by an interagency team in the Vietnamese government under the leadership of the Ministry for Planning and Investment.

In the last few years, Viet Nam has emerged as one of the world’s leading destinations for foreign direct investment, fuelled by the country’s accession to the WTO in 2006, a strong and stable growth rate and an ambitious reform program, which is very much welcomed by foreign investors.

After more than two decades since the launch of the country’s renovation strategy (1986 – 2009), Viet Nam has made an extensive effort to establish its legal framework and implement policies to mobilise investment from the private sector, including international investment, to stimulate economic growth and improve the standard of living of the Vietnamese people. Throughout this period, the Vietnamese economy has been transformed from a centrally planned model to a market-based one, featuring a dynamic private economic sector developing side by side with the state-owned sector for the good of the economy. Huge domestic economic resources have been unleashed. The economy has gone through important changes, both in quantity and quality. It has led to impressive growth of the private sector and to large inflows of foreign investment. Viet Nam is now seen as one of the most attractive destinations for foreign direct investment (FDI) FDI in the world, particularly for FDI from Asian and most developed countries as the figures for 2007-2008 clearly show.

In 1987, early in the process of transition to a more market-oriented economy, the Vietnamese National Assembly adopted the Law on Foreign Investment. Follow-up steps have been taken in the past two decades to encourage, protect and improve the quality of foreign investment. Such efforts resulted in strong investment flows in the mid-1990s (see Figure 2.1). Due to the Asian financial crisis, net foreign investment inflows dropped significantly in 1997, but began to grow again in 2001. Since 2006, there has been a major increase in the level of FDI in Viet Nam. Disbursed FDI in 2007 totalled USD 8 billion, and estimates from Viet Nam’s Foreign Investment Agency show that disbursements totaled USD 11.5 billion in 2008. Foreign direct investment as a percentage of total investment has increased also recently reached and exceeded the pre-Asian financial crisis levels, as FDI accounted for 30% of total investment in Viet Nam in 2008. Registered FDI in Viet Nam in 2008 totaled USD 71.7 billion.

This section evaluates Viet Nam’s reform efforts and provides an anatomy of the regulatory framework for investment based on the general matrix of the Policy Framework for Investment (PFI) (see Box 3.1).1 This assessment, as a cooperative endeavour, builds upon Viet Nam’s self-evaluation under the PFI. It focuses on the first four chapters and part of Chapters 9 of the PFI relating to investment policies, investment promotion and facilitation, trade policies, competition policies, tax policies and development of the service sector.