From Jobs to Skills: Rethinking Vietnam’s FDI success

Vietnam has attracted substantial foreign direct investment (FDI), with registered investment reaching $34.65 billion in the first half of 2026 - a 61 percent increase from the same period in 2025. Realized investment stood at $13.03 billion, its highest first-half level in five years. Experts suggest Vietnam's export base is becoming more diverse and sophisticated, signaling robust long-term growth potential.

Despite these positive indicators, the economy is facing a labor-market challenge. The wage premium for holding higher education has been declining, particularly for university graduates, since the late 2000s. This trend doesn't imply education's diminished value, but rather that the economy isn't generating enough jobs that utilize advanced skills effectively.

If left unchecked, this could hinder Vietnam's goal to reach high-income status by 2045. The country's strategy has primarily focused on creating jobs rather than enhancing occupational skills. While FDI has led to a one-to-one local employment multiplier, the nature of these new roles is predominantly in services and low-skilled, informal enterprises.

This imbalance in job creation poses a risk of a graduate mismatch - educated workers being underemployed in low-productivity services. While FDI has contributed to Vietnam's growth, structural transformation, and employment creation, policymakers should consider additional factors beyond registered capital, exports, and job numbers.

Measures like local-content or skills quotas may be counterproductive, as foreign investors might simply relocate. Instead, the focus should be on creating an investment environment that encourages sophisticated activities, such as advanced training, research, and technology transfer. Vietnam's challenge lies in ensuring that capital, technology, and skills complement each other to drive sustained productivity and economic growth.