After more than three decades of reform, Vietnam’s private sector has firmly established itself as a driving force of the national economy, contributing over 43% of GDP, creating more than 80% of employment, and accounting for up to 90% of all enterprises. However, most of these firms remain at the “lower tiers” of the global value chain—engaged mainly in outsourcing, assembly, or low-level supply for foreign corporations. Innovation capacity, technological competence, and regional integration remain significantly behind ASEAN peers.
As the ASEAN Economic Community (AEC) enters its 2025–2035 phase, the regional landscape will transform profoundly. While AEC 2015 primarily focused on trade and investment liberalization, the next-generation AEC aims to develop intra-regional value chains, promote green transformation, deepen digitalization, and strengthen technological self-reliance. The next wave of foreign direct investment (FDI)—often referred to as “new-generation FDI”—will no longer target low-cost labor but seek destinations capable of co-creation, data sharing, environmental compliance, and governance transparency.
This presents both an opportunity and a challenge for Vietnam. If the country continues to attract FDI under the old model—“land incentives, low taxes, cheap labor”—it risks falling behind within ASEAN itself. Meanwhile, Thailand has positioned itself as the “Southeast Asian EV hub,” Malaysia is advancing the “Penang–Kulim high-tech cluster,” and Indonesia is emerging as a magnet for clean energy and lithium battery investments. Without a timely repositioning, Vietnam could find itself excluded from the evolving “ASEAN intra-regional supply chain.”
In fact, Vietnam possesses many favorable conditions: a central geographic location in Southeast Asia, a domestic market of 100 million consumers, the region’s widest network of free trade agreements, and a young, dynamic workforce. Yet its weakness lies in limited technology absorption capacity and weak linkages between domestic enterprises and FDI firms. Many local businesses still serve as third- or fourth-tier subcontractors, lacking access to design, standards, or production data. As a result, while Vietnam attracts large FDI inflows, the value-added benefits remain limited.
The case of Penang, Malaysia offers a valuable lesson. In the early 2000s, Penang—once dubbed the “Silicon Island of Southeast Asia”—faced stagnation as major electronics manufacturers shifted production to China and Thailand. Confronted with the threat of decline, Penang authorities chose not to “retain FDI with incentives,” but to upgrade local enterprises’ capabilities to absorb and co-develop with FDI investors.
The state government established the Penang Development Corporation (PDC)—a public–private investment promotion agency acting as a “concierge center” for investors. PDC went beyond administrative support: it assisted with site selection, infrastructure connections, supplier data, and workforce training coordination. It also partnered with Intel, Bosch, AMD, and technical universities to design engineer training programs tailored to factory needs, ensuring graduates were “job-ready upon completion.” Small and medium enterprises (SMEs) joined a Supplier Development Program, receiving support in ISO, Lean, and IATF certification, process improvement, and quality control.
In parallel, Penang implemented a “Green Factory” strategy, mandating environmental standards, renewable energy usage, and wastewater recycling for all new plants. Post-investment, PDC provided Aftercare support—helping resolve operational issues, connect with local partners, and facilitate reinvestment.
Thanks to this ecosystem, Intel expanded its investment in Penang to over USD 7 billion, establishing Asia’s largest chip assembly and testing line. More than 3,000 local enterprises became satellite suppliers, 30% of which met international standards and directly joined global production chains. Today, Penang contributes over 30% of Malaysia’s electronics exports and stands as a high-tech R&D–manufacturing–services hub with superior productivity and income levels.
The Penang experience demonstrates that local governments, domestic enterprises, and investors must form a “technology absorption ecosystem,” where authorities act as orchestrators, domestic firms as the core, and FDI as the catalyst. Success is not measured by project count or total registered capital, but by technology transfer rate, localization capacity, and productivity spillovers across the private sector.
Vietnam already has several regions well-positioned for this approach:
- Bac Ninh – Bac Giang for electronics,
- Hai Phong – Quang Ninh for ports and logistics,
- Binh Duong – Dong Nai for manufacturing, and
- Da Nang for information technology.
However, transforming potential into action requires a professional, independent coordination hub with real connective capacity—a “VAPEDCO of each region.”
As a center for private sector promotion and development, VAPEDCO could become the nucleus for shaping Vietnam’s new integration map. The center could implement several strategic initiatives:
- Develop “FDI-Ready” and “Supplier-Ready” standards for private enterprises, including indicators on governance, quality, ESG compliance, data management, safety, and human resources. Enterprises would be assessed, scored, and advised to upgrade toward eligibility for ASEAN and global supply chains.
- Establish the “ASEAN Connect Hub,” a digital platform serving as a tri-party gateway linking private enterprises, local governments, and international investors. The platform would provide project data, supply chain maps, enterprise capability profiles, and investment needs—significantly shortening the matchmaking process between investors and Vietnamese partners.
- Organize the “FDI Partnership Program,” an annual forum convening 30–50 high-quality international investors in electronics, renewable energy, agro-processing, and logistics. Parallel “Match & Meet” sessions would allow Vietnamese firms to engage directly with investors, exploring technical collaboration or joint-venture opportunities.
- Found the “ASEAN Supplier Academy,” offering training and consulting for private enterprises on integration standards, digital trade, traceability, and ESG reporting. Beyond a knowledge center, it would cultivate a network of regional integration experts and entrepreneurs.
Once these initiatives are operational, VAPEDCO would evolve from a promotion agency into the soft infrastructure of Vietnam’s private sector integration—where data, capabilities, and investment opportunities converge.
At the policy level, Vietnam must also shift its FDI mindset—from “incentivizing to attract projects” to “selecting to create value spillovers.” Every FDI project should be evaluated on four pillars: technology transfer, localization capacity, workforce training commitment, and ESG compliance. Only when FDI and the private sector advance together can integration generate sustainable productivity.
In the new integration map of the coming decade, success will no longer be measured by the amount of registered capital, but by how much domestic technological capacity is enhanced, how many Vietnamese firms join regional supply chains, and how far local value-added grows.
Integration is no longer about “opening the door for others to enter,” but about “unlocking one’s own capacity to step out.” When every Vietnamese private enterprise becomes “FDI-ready,” “ESG-ready,” and “ASEAN-ready,” Vietnam will not just be an investment destination—it will be a strategic partner within regional value chains.
At that point, the nation’s integration map will no longer be a mosaic of disconnected zones, but a cohesive network—where Vietnam’s private sector takes center stage, confidently co-creating value with the world.
