Vietnam must continue attracting foreign direct investment to achieve double-digit economic growth, Finance Minister Ngo Van Tuan told lawmakers, while stressing the need to strengthen domestic industries and technological capabilities.
During a group discussion at the National Assembly on Saturday morning, lawmakers examined proposed amendments to the Law on Investment, focusing on how Vietnam can attract foreign capital while ensuring that investment delivers greater benefits to domestic businesses.
National Assembly deputy Tran Hoang Ngan, representing Ho Chi Minh City, described the amendments as both necessary and urgent.
He noted that investment plays a crucial role among the economy's three major growth drivers, which he compared to a three-horse carriage.
National Assembly deputy Tran Hoang Ngan speaks during the discussion. Photo: National Assembly Media.
Beyond economic growth and exports, Ngan argued that the effectiveness of foreign investment should also be measured by its contribution to state budget revenue, technology transfer, integration with domestic manufacturing, green transformation, the digital economy and spillover benefits for local industries.
Another Ho Chi Minh City deputy, Le Quang Manh, focused on the relationship between foreign-invested enterprises and domestic businesses.
He acknowledged efforts by the drafting agency to include provisions encouraging foreign-invested companies to disclose their procurement needs, technical standards and localization plans.
However, Manh warned that merely encouraging companies to do so would be unlikely to produce meaningful results.
He observed that foreign direct investment (FDI) enterprises are deeply integrated into global production and supply chains, yet their connections with the broader domestic business community remain limited.
This has created what he described as an "island" phenomenon, in which foreign-invested businesses operate with relatively little integration into the local economy.
Manh called for stronger mechanisms to turn the procurement needs of foreign-invested enterprises into development opportunities for Vietnamese companies.
He suggested linking specific investment incentives to the disclosure and fulfillment of commitments, while providing direct support to domestic businesses seeking to become suppliers.
National Assembly Chairman Tran Thanh Man also emphasized that investment incentives should depend on investors' actual performance rather than their initial promises.
He called for clear, measurable and verifiable performance indicators, including localization rates, the establishment of research centers, technology transfer and the participation of Vietnamese enterprises in supply chains.
Under such an approach, investors would receive incentives proportionate to the extent to which they fulfill their commitments.
The National Assembly chairman stressed that policies designed to attract foreign investment must also improve the capabilities of domestic enterprises, particularly small and medium-sized businesses.
Attracting multinational corporations and high-tech projects, he said, should create opportunities for Vietnamese companies to participate more deeply in global production networks, supply chains and value chains.
"We must find ways to ensure that small and medium-sized enterprises have room to survive and develop. They cannot be squeezed out or deprived of opportunities to grow in their own domestic market," Man said.
He added that investment incentives should deliver tangible economic benefits, create added value and generate broader spillover effects rather than simply increase the amount of capital flowing into Vietnam.
Escaping the middle-income trap requires moving beyond assembly work
Responding to lawmakers' concerns, Finance Minister Ngo Van Tuan said rapidly changing domestic and international conditions have made attracting investment increasingly important as Vietnam pursues its double-digit growth target.
Finance Minister Ngo Van Tuan addresses lawmakers during the discussion. Photo: Pham Hai.
Under the country's five-year financial plan, achieving that ambition would require total social investment to reach 40% of GDP.
At the same time, Vietnam would need to reduce its incremental capital-output ratio (ICOR), a measure of how much additional investment is required to generate economic growth, from 6.4 to between 4.5 and 4.8.
The country's capital requirements for 2026-2030 are projected to be 2.67 times those of the 2021-2025 period, creating enormous demand for financial resources, particularly foreign direct investment.
"The demand for capital is extraordinarily high," Tuan said.
He then raised a fundamental question about Vietnam's growth strategy.
"Can we achieve growth without FDI? The answer is very simple: We cannot," the minister stressed.
According to Tuan, Vietnam still urgently needs foreign investment and must continue improving its investment environment as competition for international capital becomes increasingly intense.
The country faces significant competitive pressure from India and several regional economies.
The Philippines, Thailand, Indonesia, Malaysia and Singapore, he noted, all have their own investment attraction strategies.
Malaysia, for example, is concentrating on semiconductor chips and electronic equipment, sectors that Vietnam is also seeking to develop.
Such intense competition, Tuan argued, makes amendments to the Law on Investment necessary to ensure that Vietnam remains an attractive destination for international investors.
Addressing lawmakers' concerns about technology absorption, the minister acknowledged the practical difficulties Vietnamese enterprises face when attempting to acquire advanced technologies from foreign-invested companies.
He cited the semiconductor industry as an example.
According to Tuan, the most technologically advanced and highest-value segments of semiconductor production are tightly controlled by the companies that own them, leaving Vietnam with very limited opportunities to participate.
A more realistic opportunity, he suggested, lies in advanced semiconductor packaging and testing.
The minister said expectations that multinational corporations would transfer technology to Vietnam were reasonable, but such ambitions must be considered against the country's current capabilities, industrial conditions and position in global value chains.
"To acquire technology and escape the middle-income trap, we must move from processing and assembly to mastering technology," Tuan said. "The most important step in making that transition is developing supporting industries. Only then can we gradually participate more deeply in value chains."
However, he also questioned whether Vietnam currently has enough supporting-industry enterprises with the necessary capabilities.
Although the country wants to secure technology transfers, persuading multinational corporations to provide them remains extremely difficult.
This underscores the need to strengthen the technological and operational capabilities of domestic enterprises and institutions so they can effectively absorb advanced technologies when opportunities arise.
According to the minister, as of August, Vietnam had approximately 47,796 active foreign direct investment projects, with total registered capital of around $561.6 billion.
These projects represent a major source of resources for the country's economic development.
Looking ahead, Tuan said Vietnam must continue improving its investment environment to compete effectively for international capital while ensuring that the country captures the greatest possible added value from foreign investment.
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