In Hồ Chí Minh City—Việt Nam’s most significant labor market, home to nearly five million people of working age – a paradox persists: while most workers seek jobs that pay over 10 million VND per month, a majority of companies, especially those backed by foreign direct investment (FDI), offer salaries below that amount. In many cases, wages fall under 5 million VND.
This glaring mismatch between labor supply and demand raises important questions about whether the long-held mindset of hiring “cheap labor” still exists in many companies operating in the country.
The practice of hiring “cheap labor” refers to a development model that relies on low-cost, low-skilled workers to attract foreign investors—particularly in industries like textiles, footwear, and electronics. This concept became prominent in Việt Nam during the early 1990s, when the country started to attract significant levels of FDI.
FDI plays a crucial role in a nation’s economy by boosting growth, creating jobs, and facilitating technology transfer between a country and the rest of the world. In Việt Nam, FDI has been a catalyst for the country’s remarkable transformation—from being one of the world’s poorest nations, with a per capita income under 700 USD per year in 1986, to around 4,500 USD in 2023. In addition, the national poverty rate dropped from 34% in 1992 to just 1% by 2022.
While many economies suffered during the COVID-19 pandemic in 2020, Việt Nam made its debut on the list of the world’s top 20 FDI destinations. According to the United Nations Conference on Trade and Development (UNCTAD), the country amassed nearly 16 billion USD in FDI that year, securing 19th place globally.
Establishing Export Processing Zones
Following the unification of North and South Việt Nam on April 30, 1975, the country faced a grim economic crisis, driven by the U.S. trade embargo and the inefficiencies of a centrally planned economy. In their attempt to maneuver Việt Nam out of this predicament, many Vietnamese leaders began seeking external support. Their efforts laid the foundation for Đổi Mới (Renovation), a series of economic reforms that would significantly affect the country’s economic trajectory.
According to The Winning Side (Bên Thắng Cuộc) – Volume 2: Power by Huy Đức, during this period, Võ Văn Kiệt appointed Nguyễn Văn Đức—also known as Charles Đức, a Vietnamese expatriate in France—as deputy director of the Imexco Company. The company was authorized to collaborate with foreign firms, assist domestic enterprises in transitioning to market-based accounting practices, and devise strategies to bypass the U.S. embargo.
Charles Đức established a finance company in Switzerland to collect remittances from overseas Vietnamese entrepreneurs and intellectuals. He also reached out to Dr. Võ Tá Hân—the CEO of Singapore Finance and President of the Canadian Business Association—inviting him to serve as an advisor to the reform efforts.
According to an article published in the Tuổi Trẻ Newspaper, Võ Tá Hân graduated with a master’s degree from the Massachusetts Institute of Technology (MIT) in 1973. During his studies, he conducted research on “Export Processing Zones and Post-war Vietnam,” aimed at creating jobs and generating foreign currency for the country.
In April 1988, Võ Tá Hân led a delegation of Canadian Business Association (CBA) members from Singapore to Hồ Chí Minh City. His initiatives established a vital link between Việt Nam and the capitalist world, starting with Singapore.
The State Committee for Science and Technology would later translate Võ Tá Hân’s research into a reference document for studying foreign economic relations. The research highlighted the export processing zone model as particularly well-suited for Việt Nam, especially during its transition from a centrally planned economy to a market-oriented system.
Even under the pressure of the U.S. embargo, Việt Nam strategically sought support from overseas Vietnamese to navigate its economic challenges. Võ Tá Hân helped open flight routes and paved the way for the 1992 Việt Nam–Singapore trade agreement. Similarly, Johnathan Hạnh Nguyễn aided Vietnam Airlines in opening a flight route to Manila, Philippines, in 1985.
By 1991, Việt Nam established its first export processing zone: the Tân Thuận export processing zone, located in District 7, Hồ Chí Minh City. Designed as a specialized area for manufacturing and providing goods and services for export, Tân Thuận was a significant milestone in transitioning Việt Nam’s economic model and attracting FDI.
In 1992, through cooperation between Việt Nam and Singapore, Hồ Chí Minh City opened the Linh Trung 1 export processing zone. Building on this momentum, Việt Nam continued expanding its export zone network by launching Linh Trung 2 in 1997.
Today, Hồ Chí Minh City has 17 export processing zones and industrial parks. As of 2023, according to data from the former Ministry of Planning and Investment, Việt Nam had four export processing zones and 414 industrial parks nationwide. Among them are the many Việt Nam – Singapore Industrial Parks (VSIP) in the country, Thăng Long Industrial Park in Hà Nội, Phú Mỹ Industrial Park in Bà Rịa-Vũng Tàu, and Trà Nóc Industrial Park in Cần Thơ—the largest in the Mekong Delta.
The creation of these economic zones successfully attracted FDI on a remarkable scale. For instance, by 2023, the Tân Thuận export processing zone hosted 236 enterprises from 21 countries and employed approximately 60,000 workers. The zone had attracted a total investment of around 2.1 billion USD, with about 1.6 billion USD coming from 170 FDI projects. The Tân Thuận export processing zone generates about 2 billion USD in annual import-export revenue.
Since the U.S. lifted its trade embargo on Việt Nam in 1994, FDI into the country has grown strongly.
According to the Ministry of Planning and Investment, Việt Nam attracted about 45.49 billion USD in FDI from 1991 to 2000. The total realized capital reached 20.67 billion USD, accounting for 12% of the country’s gross domestic product in 2000.
Many international corporations, such as PouChen (Taiwan), Feng Tay (Taiwan), and Honda (Japan), also began investing in Việt Nam. These companies were among the first “labor-intensive” industries to enter the country.
In 2002, Singapore emerged as the largest foreign investor in Việt Nam, with over 254 projects and nearly 6.9 billion USD in registered capital. Taiwan followed closely, leading in the number of projects with 832 and registering approximately 5.3 billion USD. Japan ranked third with 339 projects and around 4.1 billion USD in capital, while South Korea came next with 403 projects and nearly 3.5 billion USD in registered investment.
Billion-dollar projects began emerging increasingly in Việt Nam during the 2000s, including chip manufacturer Intel (USA) and steel group Posco (South Korea) projects.
By 2007, Việt Nam officially joined the World Trade Organization (WTO).
Between 2006 and 2007, foreign direct investment (FDI) in Việt Nam more than doubled, from 10 billion USD to 21.3 billion USD. In 2008, FDI surged to a record-breaking 71.7 billion USD, nearly matching the cumulative total of 77.8 billion USD received over the previous two decades, from 1988 to 2007.
As a result, more foreign companies, such as Canon (Japan) and Samsung (South Korea), began expanding their production in Việt Nam.
During the global financial crisis and economic recession in 2009, FDI in Việt Nam dropped. However, the country has recovered and maintained a hefty amount of FDI.
FDI in Recent Years
Faced with the COVID-19 pandemic, many investors hesitated to launch projects in Việt Nam. In response, the Vietnamese government issued several policies to retain FDI enterprises. Tax reductions, land lease payment extensions, and promoting public investment capital disbursement were used to maintain and entice foreign investors.
Notably, FDI into the country maintained steady growth in 2021 even as the COVID-19 pandemic peaked in Việt Nam. Total registered capital reached 31.15 billion USD—up 9.2% compared to 2020—while disbursed capital amounted to 19.74 billion USD, a slight decrease of 1.2% compared to 2020.
Hồ Chí Minh City—the locality most affected by the pandemic—still ranked third in the country regarding FDI attraction, reaching 3.74 billion USD. Hải Phòng led with 5.26 billion USD, followed by Long An with 3.84 billion USD. However, Hồ Chí Minh City quickly recovered post-pandemic, reclaiming its position as the leading FDI destination.
In 2022, Việt Nam regained momentum in attracting new FDI projects, with disbursed capital reaching 22.4 billion USD, up 13.5% compared to the previous year.
After the pandemic, many foreign tech companies based in China shifted their production and assembly chains to Việt Nam. Among them was the Foxconn Group (Taiwan), which invested four billion USD across five provinces and cities and employed 80,000 local workers as of mid-2024.
In 2023, Southeast Asia became the region with the most FDI inflows, reaching 621 billion USD—nearly half of global FDI capital. Among the countries in the area, Việt Nam ranked third by attracting almost 19 billion USD in FDI, bringing its cumulative total to approximately 229 billion USD, according to UNCTAD’s 2024 report.
FDI inflows into Việt Nam began shifting toward high-tech sectors- artificial intelligence, semiconductors, electronics, and software—and renewable energy, including wind, solar power, and clean energy equipment. These trends align with the Vietnamese government’s focus on sustainable development, a green economy, and digital transformation.
Many global tech giants have invested in Việt Nam and are expanding their investment scale to focus on high-tech projects, electronics manufacturing, and semiconductors. For example, Samsung (South Korea) committed an additional one billion USD annually. Intel (USA) added a project: a chip testing plant in Hồ Chí Minh City worth four billion USD.
By 2024, Việt Nam’s total registered FDI capital reached 38.28 billion USD and disbursed FDI capital reached a record level of 25.35 billion USD.
In the first quarter of 2025, FDI inflow into Việt Nam continued to grow with the total registered capital reaching 98 billion USD, an increase of 34.7% compared to the same period last year.
A total of 114 countries and territories have invested in Việt Nam through FDI. The countries with the largest investments in Việt Nam include: South Korea (92 billion USD), Singapore (84 billion USD), and Japan (78.28 billion USD).
By the end of March 2025, Việt Nam had 42,760 valid FDI projects across 50 provinces and cities. Bắc Ninh (1.93 billion USD), Hồ Chí Minh City (1.43 billion USD), and Hà Nội (1.42 billion USD) were the three localities that attracted the most foreign investment in the first three months of the year.
The primary sectors attracting FDI in Việt Nam are processing and manufacturing, accounting for approximately 70% of total investment, followed by real estate, which contributes around 16.5%.
The Majority of Workers in FDI Enterprises are Exploited
Việt Nam’s FDI sector employs around five million people—a number that continues to grow with an estimated annual increase of 360,000. Notably, young workers aged 15 to 34 account for around 60% of this workforce. According to additional reports, approximately 80% of these workers do not have degrees or professional certificates.
This rate has remained almost unchanged since 2011. The number of workers with education above university level only accounts for about 15%, while only half of the workforce has received vocational training.
This indicates that a vast majority of Vietnamese workers in FDI enterprises often do not meet the professional requirements of these companies, making them prime targets for exploitation and abuse.
In Southeast Asia, Việt Nam is among the countries with the lowest FDI labor wages, alongside Laos, Cambodia, and Myanmar. According to the Chính phủ (the Government) Newspaper in 2022, the average monthly salary of Vietnamese workers was about one-third lower than those in the ASEAN-4 group—Thailand, Malaysia, Indonesia, and the Philippines—with an average salary of 236 USD per month, or around 5.5 million VND. This wage is significantly lower than in other countries in the region, such as Thailand, Malaysia, and Indonesia, where average monthly salaries range from 350 to 500 USD.
Low wages made Việt Nam a lucrative destination for investors in the manufacturing sector, and by 2022, Việt Nam became known for “cheap labor.” This is reflected in the average wage data, the regional minimum wage data, and the hiring practices of many FDI enterprises; Vietnamese workers have been equated to low-cost, easily replaceable labor.
What is FDI Capital?
Many major global organizations have defined the term “foreign direct investment.” For instance, the International Monetary Fund (IMF) defines FDI as a flow of capital invested directly from abroad into a business operating within the territory and economy of another country with the goal of gaining control or significant influence over its management.
The Organisation for Economic Co-operation and Development (OECD) considers that the investor participates in management by acquiring the entire company, establishing or expanding branches or subsidiaries, providing long-term credit over five years, or holding more than 10% of a company’s shares or voting rights.
According to the World Investment Report 2007 by the United Nations Conference on Trade and Development (UNCTAD), FDI capital consists of three main components: equity capital, the investor purchases company shares; reinvested earnings, the profits retained for reinvestment instead of being repatriated; and intra-company loans/transactions.
In Việt Nam, FDI capital is currently governed by the Ordinance on Foreign Exchange (amended in 2013), the Law on Investment 2020, and other accompanying guiding documents.
Accordingly, FDI into Việt Nam refers to foreign investors contributing capital and participating in managing investment activities in the country. Typical forms of investment include: establishing new enterprises with 100% foreign capital, mergers and acquisitions (M&A), participating in an investment project, and investing under a Business Cooperation Contract (BCC), among others.
These definitions suggest that the concept of FDI is somewhat relative; it varies depending on the historical stage and broader international context in which it is applied.
A recent UNCTAD report sees FDI as a vital resource for achieving the Sustainable Development Goals (SDGs) and the 2030 Agenda. The current FDI trend mainly focuses on new investments in greenfield projects, International Project Finance, and Cross-border Mergers and Acquisitions.