Behind Vietnam’s 9% Growth: The Test of FDI, Exports and Domestic Industrial Capacity
By Yuanyin in Tokyo
Vietnam’s economic data for the third quarter of 2026 were striking.
GDP grew 9.95% year on year, bringing growth for the first nine months to 9.01%, the fastest pace in 15 years. The IMF expects full-year growth of 8.4%, while nominal GDP per capita is projected to reach US$5,259, surpassing Indonesia’s US$5,153.
On the surface, Vietnam looks like an economy accelerating toward upper-middle-income status.
But once the growth is broken down, the real question is not whether Vietnam depends on external markets. It is whether the country can convert external opportunities into domestic capabilities.
The 9% growth is real. But there is still some distance between rapid growth and sustainable growth — and the length of that distance will depend on how quickly Vietnam strengthens its own industrial base.
Where Did the 9% Growth Come From?
Industry and construction grew 12.5% in the third quarter and contributed 51.57% of GDP growth.
That figure is often cited as evidence of strong manufacturing performance. But it needs to be interpreted carefully.
The industry-and-construction category includes manufacturing, mining, construction and other activities. The 12.5% figure is a combined result and cannot simply be attributed to public investment.
Vietnamese statistical officials have said that faster public-investment disbursement supported production and construction activity. State-budget investment disbursement rose 19% year on year in the first nine months.
What can safely be said is that public investment accelerated and construction benefited. What cannot be concluded from the available data is that a large share of the entire industry-and-construction expansion was directly driven by public investment.
The trade data are clearer.
Exports rose by roughly 24.5% to 25% in the first nine months, while imports increased 36.7%, resulting in a merchandise trade deficit of around US$19.4 billion.
Exports are rising, but imports are rising faster.
Much of what Vietnam imports consists of electronic components, machinery, equipment and raw materials used in products that are later assembled and re-exported.
Vietnam has operated under this model for years, and there is nothing inherently problematic about it. Importing intermediate goods for re-export is common in global production networks.
The more important question is how much local value added Vietnam retains within that network.
The U.S. Trade Surplus Is Both Leverage and Vulnerability
In January 2026, Vietnam recorded a US$1.9 billion trade surplus with the United States, surpassing China and Mexico for the first time to become the largest source of the U.S. bilateral trade deficit that month.
For the full year of 2025, the U.S. trade deficit with Vietnam reached US$178 billion.
Vietnamese exports to the United States surged 53% year on year in January, while Chinese exports to the U.S. fell 46% over the same period.
Vietnam understands the sensitivity of this position.
A potential 40% tariff on goods deemed to be transshipped remains a threat, although the White House has yet to publish clear criteria defining what would qualify as transshipment.
Vietnam’s 20% reciprocal tariff treatment depends in part on proving that the country is not simply serving as a back door for Chinese goods entering the U.S. market.
Hanoi has responded seriously. A transshipment-monitoring system has been introduced, while U.S.-Vietnam trade negotiations continue.
But the structural contradiction remains.
The larger Vietnam’s surplus with the United States becomes, the more scrutiny it attracts. Yet maintaining that export surplus still depends heavily on imported intermediate goods from China.
In the first half of 2026, Vietnam imported US$115.2 billion from China and ran a US$77.3 billion trade deficit with its northern neighbor. Over the same period, it recorded a US$114 billion surplus with the United States.
This triangular structure — Chinese components, Vietnamese assembly, U.S. exports — remains a defining feature of Vietnam’s manufacturing model.
Vietnam can crack down on high-risk practices such as relabeling products or falsifying origin.
What it cannot easily eliminate is the fact that its assembly sector itself depends heavily on imported intermediate goods.
The larger the surplus becomes, the more visible that structure will be.
FDI Conversion Matters More Than Registered Capital
Registered foreign direct investment reached US$50.36 billion in the first nine months, up 76.4%, while actual disbursement totaled US$21.07 billion, up 12.1%.
Both figures increased, but registered investment grew more than six times as fast as actual disbursement.
An earlier version of this article incorrectly used one month of data to conclude that additional investment in existing projects was shrinking.
That conclusion was wrong.
In the first nine months, additional investment in existing projects reached US$14.15 billion, up 25.1% year on year.
The more meaningful issue is not which category is shrinking, but the time lag between registered investment and actual capital deployment.
The two indicators refer to different investment stages and should not be treated as though they represent a direct conversion ratio for the same projects.
The real question is whether the surge in registered FDI can continue to translate into actual investment over the next several years — and whether that investment can ultimately strengthen Vietnam’s own industrial capacity.
The structure of FDI deserves equal attention.
Manufacturing and processing accounted for 82.7% of realized FDI, reinforcing Vietnam’s role as an assembly and processing base.
Samsung’s four major factories in Vietnam generated around US$62.1 billion in revenue in 2025, equivalent to about 13.7% of the country’s total exports.
Yet many of Samsung’s suppliers remain foreign-invested satellite companies, while participation by Vietnamese domestic firms remains limited.
During the first five months of 2026, exports by domestic companies grew just 2.5%, compared with 24.7% growth among foreign-invested firms.
Vietnam’s low localization rate in electronics is also openly acknowledged by the government.
At an October meeting, a deputy director of the Ministry of Industry and Trade’s Import-Export Department said electronics production still relies heavily on imported components and raw materials, while localization and domestically created value added remain insufficient.
Vietnam is already among the world’s top ten electronics exporters.
But its transition from an assembly-based production center to a country deeply embedded in higher-value segments of the global value chain is still under way.
Administrative Reform Is a Slow Variable — but Not the Only One
Vietnam has reduced the number of provincial-level administrative units from 63 to 34, abolished the district-level tier and shifted toward a two-tier provincial and commune governance structure.
If these reforms successfully reduce institutional costs, they could generate meaningful economic benefits.
But administrative reform is not the only factor under Vietnam’s control.
Education and skills training, energy supply, logistics, the financial system and the development of local suppliers are all areas where domestic policy can make a difference.
Administrative reform is important, but describing it as the “only variable entirely within Vietnam’s control” would be inaccurate and would understate the country’s policy options.
The more important issue is timing.
Administrative reform takes time to generate productivity gains. Tariff windows, technology cycles and foreign-investment decisions move much faster.
When the Asian Development Bank raised its 2026 growth forecast for Vietnam in September, its country director emphasized that Vietnam needs to ensure investment-led growth translates into productivity gains.
That is the key point.
If investment-driven growth raises productivity, it becomes more sustainable.
If it merely adds more capital and labor without improving efficiency, diminishing returns will eventually emerge.
The Real Test Is Conversion, Not the Headline Growth Rate
Vietnam’s growth is not illusory.
A quarterly growth rate of 9.95%, FDI disbursement at a five-year high, and per-capita GDP surpassing Indonesia are all genuine achievements. The direction of administrative reform is also broadly clear.
But whether 9% growth can be sustained depends less on the headline number itself than on a series of conversion rates:
Can registered FDI continue to turn into actual investment?
Can realized foreign investment foster stronger domestic suppliers?
Can export growth be accompanied by a rising share of local value added?
And can administrative reform move quickly enough to stay ahead of external risks?
Vietnam’s Ministry of Industry and Trade has already articulated the direction: the country wants to move from being primarily a production and assembly center toward higher-value positions in the global electronics supply chain.
The direction is clear.
The difficulty is that industrial upgrading is a slow variable, while scrutiny over the U.S. trade surplus, tariff uncertainty and fluctuations in the global technology cycle are fast-moving variables.
The IMF expects Vietnam to continue growing at around 7.5% in 2027.
If that forecast proves correct, Vietnam still has a few years of opportunity.
If localization rises, registered FDI continues to turn into real investment, and administrative reform lowers institutional costs, the current 9% growth rate could mark the beginning of a new growth phase.
If domestic upgrading fails to keep pace with the closing of external windows, however, the 9.95% quarterly growth rate may instead prove to be the peak of the current cycle.
Vietnam does not have unlimited choices, but neither is it without options. The real weakness in its growth story is that the chapter it can write for itself is still too thin.
And the thickness of that chapter will not be determined by how high GDP growth rises, but by how many Vietnamese companies truly become part of the supply chain.
