The Impact of New Generation FTA on FDI Transfer into Vietnam: A Qualitative Analysis

Abstract

In the context of Vietnam's increasing integration into the global economy, new-generation Free Trade Agreements (FTAs) such as CPTPP, EVFTA, and RCEP have emerged as powerful drivers of foreign direct investment (FDI) flows into the country. These FTAs not only eliminate tariffs but also encompass advanced commitments in areas such as investment protection, environmental and labor standards, and market access, thereby enhancing Vietnam’s appeal to foreign investors. This paper examines the influence of new-generation FTAs on the shifting of FDI inflows into Vietnam by applying Dunning's eclectic paradigm and the World Bank's investment environment framework. The research utilizes a qualitative analysis approach to construct an impact model that identifies how new-generation FTAs affect key determinants of FDI attraction. Empirical evidence is drawn from the movement of FDI from CPTPP, EU, and RCEP countries to Vietnam between 2018 and 2024, highlighting notable trends and sectoral shifts in investment. The findings demonstrate that FTAs significantly improve Vietnam's competitive position, not only in terms of quantity but also in the quality and structure of FDI inflows. However, challenges remain in legal harmonization, institutional capacity, and human resources. Based on the results, the paper proposes strategic policy recommendations to strengthen Vietnam’s position as an attractive destination for sustainable and high-quality FDI.