Regional Integration and Benefits from Foreign Direct Investment in ASEAN Economies: The Case of Viet Nam

Abstract

In recent years Viet Nam has been pursuing the twin goals of promoting inward foreign direct investment (FDI) and regional development in the context of the Association of Southeast Asian Nations (ASEAN). The paper surveys transnational corporations (TNCs) with operations in ASEAN, and finds that Viet Nam has now largely achieved its initial objective of being a major FDI recipient. The regional aspect is especially manifest in consumer electronics, although most subsidiaries in Viet Nam still perform assemblytype operations oriented toward the local market. This has to change if Viet Nam is to maintain its development momentum. Under the threat of international competition and in order to maximize the dynamic gains from FDI, Viet Nam has to reorient its policies and emphasize a shift toward targeting efficiency-seeking investments and developing more advanced links with TNC regional and global value chains. This new approach would benefit from a full-scale development of the ASEAN Free Trade Area (providing access to a regional market) and the ASEAN Investment Area (securing capabilities in Viet Nam and other ASEAN countries), as well as other regional trade and investment initiatives.