Vietnam's strategic positioning in a changing global landscape

Vietnam definitely needs foreign direct investment (FDI), but more importantly, it must cultivate internal strength, says Dr. Vu Thanh Tu Anh, a senior lecturer at the Fulbright School of Public Policy and Management.

Anh made the remark at a working lunch hosted by the Leading Business Club (LBC) in Ho Chi Minh City on Monday, under the theme "The U.S.-China trade war and the response of Vietnamese enterprises”.

He noted that global fluctuations present both challenges and opportunities. While they carry obvious risks, they can also act as catalysts for necessary change.

“If Vietnam has enough determination and resilience to build strong foundations, the country can completely restructure its economy and achieve the dual goals of growth and sustainable development in this new era,” Anh commented.

A balancing act in a complex world

Vietnam is currently striving to maintain balance amid an increasingly complex global environment. Within this context, its reform goals are both bold and ambitious.

As one of the most deeply integrated economies - not just in Asia, but globally - Vietnam is intricately connected to international developments. “Whatever happens in the world has a direct impact on Vietnam, yet we are not in a position to shape the global game,” Anh argued. “In essence, we are deeply affected, but in a subordinate role.”

He highlighted three key points shaping Vietnam's strategic context. Firstly, Vietnam’s extensive free trade agreement (FTA) network covers 87% of global GDP. Secondly, while Vietnam once positioned itself as an alternative manufacturing hub to China, it must now reposition itself as a reliable and resilient partner in the global supply chain. Thirdly, the country must strive to avoid taking sides.

FDI as a catalyst - not the core

While FDI remains important, Vietnam must focus on developing internal strength. FDI is just a catalyst. Internal strength is the key. This includes a dynamic private sector, an effective state apparatus, and a socially resilient population.

A new policy axis is emerging around semiconductors, digital transformation, green transition, and energy. This represents a major shift in development strategy, added Anh.

Vietnam’s trade openness is among the highest in the world. Thirty years ago, exports accounted for 60% of GDP. Today, that figure is nearly 200% - comparable to Singapore.

From 2010 to 2020, Vietnam’s net FDI accounted for 5.9% of GDP, far surpassing countries like Malaysia (3.4%). This reflects remarkable success in attracting FDI and leveraging it for export-driven growth.

However, the domestic value added remains limited. “Out of every $100 in Intel’s exports from Vietnam, only $3 comes from local contributions. For LG, it's just $2.4,” he noted.

"A colleague of mine at Fulbright estimated the impact of U.S. tariffs on GDP; in the ideal case, the reciprocal tariff is from 10% to 15%, then exports are still competitive, FDI is strong, and GDP decreases by 0.5%-0.7%.

"In the worst case, the reciprocal tariff is from 30% to 40%, exports lose competitiveness, FDI leaves Vietnam, and GDP decreases by 1.5-2.5%. In the expected case, the reciprocal tariff is 15-20%, and GDP decreases by 0.7-1%,” Anh said.

He stressed that businesses should not only care about tariffs but also understand the non-tariff measures of their export markets, as tariffs can still be predicted, but non-tariffs are very difficult to predict.

“We are talking too much about taxes but forgetting another important point, which is non-tariff measures. This is the key point of global trade in the coming period. Tariffs can be negotiated once and for all, but non-tariffs will persist from now on. It is a mistake to only focus on tariffs and forget about non-tariffs," Anh added.