Giles Cooper, partner at Allens in Hanoi

Vietnam's investment environment has undergone remarkable transformation in the 25+ years I have been here. When I arrived in 1999, foreign and domestic investors operated under distinctly separate regimes, with material and systematic differences in establishment procedures, permitted sectors, investment forms, incentives etc.

The 2005 unified Law on Investment was a watershed moment, consolidating the previously fragmented and oft-amended foreign investment law into a single, coherent framework applicable to all investors. World Trade Organization accession in 2007 was another critical juncture, codifying market access reforms, opening up previously restricted sectors and materially improving investment process transparency.

Building on that foundation, the amended Law on Investment 2025 represents another ambitious reform cycle, developed on the back of an ambitious policy agenda by a government that understands the importance of clear regulation to encourage and facilitate investment.

Ultimately, the statistics speak for themselves: in 2005, Vietnam attracted around $5.8 billion in registered foreign direct investment (FDI), already a remarkable result after just 15 years of opening to foreign investment; by 2025, that annual figure had grown to nearly $38 billion, a testament to 25 years of sustained, purposeful reform.

Last year was a memorable one for Vietnam's FDI and that shows little sign of slowing down.

Vietnam has been a clear beneficiary of the accelerating shift in global production and supply chains. This doesn't happen accidentally or solely due to external geopolitical impacts: it is due to factors including consistent government policy, regulatory reform, continuing international integration and macro country fundamentals.

In the next five years Vietnam has both a substantial challenge and significant opportunity to cement its strategy for attracting FDI with a focus on high-quality capital flows with strong technology content, high value added, and broad spillover effects.

This means moving away from broad incentives towards conditional and targeted incentives designed to attract strategic capital flows while protecting long-term economic interests.

On the regulatory side, the amended Law on Investment introduces key reforms, including reducing pre-inspection procedures, shifting strongly to post-inspection, moving from licensing to registration or notification, narrowing dozens of conditional business lines, and giving priority to high technology, innovation, and the green economy.

Deepening linkages between domestic enterprises and the FDI sector is equally important: policies should encourage, rather than mandate, foreign-invested enterprises to raise the share of local procurement, support Vietnamese suppliers in improving quality standards, and jointly participate in research and development projects.

Despite Vietnam's strong FDI momentum, structural challenges in licensing procedures, land access, and contract enforceability remain significant factors in investor decision-making, often determining whether a project reaches financial close or stalls at an early stage.

The transition from government-designated developers to competitive tendering, while a positive structural reform, still has unresolved issues around investment registration and licensing that create timeline uncertainty for investors. Land access remains one of the most complex operational risks, as clearance processes can be lengthy, inconsistent across localities, and difficult to predict at the planning stage.

Contract enforceability is also equally critical: foreign investors, unlike domestic partners, cannot rely on local relationships and channels to navigate regulatory complexity, making well-structured agreements, clear dispute resolution mechanisms, and robust contractual protections absolute prerequisites for committing capital.

The energy sector has long been an attractive sector for FDI, spurred by a stable single-buyer market and functional or attractive commercial terms, such as can be found in build-operate-transfer power projects and renewable energy project enjoying favourable feed-in tariffs.

This is one area however where, without bold decisions and steps, Vietnam now risks lagging behind in light of the government's move away from public-private partnership structures and incentivised tariffs for power projects in favour of more market-driven commercial terms. Competition for infrastructure and energy investment dollars is fierce, and regional countries in particular are often chasing the same dollars.

Vietnam needs to work hard to differentiate itself through a more consistent legal framework, a clearer pipeline of investment-ready projects, and, ideally, a landmark deal that proves the market works in practice.

This isn't just a matter of having enough power, it is absolutely fundamental to attracting the kind of high-value, high-tech investments that form a pillar of this government's ambitious development plans.

The foreign investors best positioned to succeed in Vietnam are those who take a pragmatic and eyes-open approach, and invest in strong local legal and operational expertise from the outset, rather than waiting for a level of institutional predictability that may only arrive after the most attractive opportunities have passed.