Limitations to be solved in supply chain realignment

Vietnam continues to be a big attractor of foreign funding, but improved connectivity between domestic and foreign enterprises is necessary for the country to level up even further.

- By Khoi Nguyen

A study released in mid-May by the World Bank indicates that Vietnam has been a key beneficiary of regional restructuring of supply chains, helped by structural advantages that include low labour costs, an expanding domestic market, export-oriented logistics infrastructure and extensive trade agreement coverage.

A relatively favourable reciprocal tariff agreement under the US International Emergency Economic Powers Act (IEEPA) reached in mid-2025 reinforced Vietnam’s relative tariff advantage compared to others in the East Asia region, further accelerating the shift of supply chains towards Vietnam.

The shift from a differentiated IEEPA reciprocal rates to a flat 10 per cent surcharge following the US Supreme Court decision in February has broadly maintained this relatively advantage, and is expected to benefit labour-intensive, lower value-added sectors including apparel, footwear, toys, and basic manufacturing. These are categories disproportionately affected by IEEPA tariffs, the study pointed out.

“The supply chain realignment helped drive foreign direct investment (FDI) to a five-year high in 2025,” said the World Bank report.

Figures from the Foreign Investment Agency under the Ministry of Finance showed that Vietnam last year attracted $38.42 billion in FDI, up 0.5 per cent on-year. A record $27.62 billion was disbursed, a 9 per cent increase.

FDI continues to play a pivotal role in the economy, accounting for over 54.7 per cent of total investment in the processing and manufacturing industry, and about 75-76 per cent of total export turnover, and recording a trade surplus of nearly $50 billion.

In the first four months of this year, FDI into Vietnam continued to post positive results. Disbursed FDI reached over $7.4 billion, up 9.8 per cent on-year. Total newly registered capital, adjusted capital, and capital contributions through share purchases reached more than $18.72 billion, up 35.5 per cent on-year.