Vietnam's Q1 FDI up 42.9% YoY: A New Phase of ASEAN Supply Chain Migration and Deepening Regional Industrial Division of Labor

Vietnam Q1 FDI up 42.9% YoY: A New Phase in ASEAN Supply Chain Relocation and Deepening Regional Industrial Division

In the first quarter of 2026, Vietnam attracted over $15.2 billion in foreign direct investment (FDI), a year-on-year increase of 42.9%. Behind the seemingly impressive numbers lie structural changes underway in ASEAN's regional production network. Newly registered capital surged sharply while capital increases for existing projects remained weak; manufacturing still dominated but energy projects emerged strongly; Singaporean and South Korean capital led the way—these signals together point to a fact: Vietnam is accelerating its transformation from a "low-cost assembly base" to a "high-value-added manufacturing node," and the overall ASEAN supply chain layout is accordingly entering a new phase of restructuring.

Data Highlights: Surge in New Registered Capital and Large Project Drivers

According to data from the Foreign Investment Agency (FIA Vietnam), total FDI registered capital in the first quarter grew substantially, driven almost entirely by new projects: 904 newly registered projects, up only 6.4% year-on-year, but registered capital exceeded $10.2 billion, surging 136.2% year-on-year. Meanwhile, the number and value of capital adjustment projects fell by 37.3% and 55.1% respectively, while M&A transaction value increased by 128.2%.

This divergent structure of "surge in new projects, cautious expansion of existing ones" was particularly evident in March: monthly total registered capital reached $9.1 billion, a sharp month-on-month increase of 165%. Among this, newly registered capital grew 227% month-on-month, while capital contributions and share purchases increased 618% month-on-month. This was no accident but the result of large projects being concentratedly landed—especially the Hoang Lap LNG gas-fired power project in Nghe An Province, with total investment exceeding $2.2 billion, led by South Korean investors, becoming the quarter's landmark investment.

The concentrated emergence of large projects indicates, on the one hand, global capital's recognition of Vietnam's long-term industrialization potential, and on the other hand, that investment decisions increasingly depend on strategic positioning in specific industries rather than general, dispersed capacity expansion. This means the quality of FDI growth deserves more attention than its quantity.

Investment Structure: Manufacturing Dominates, Energy Rises, Mirroring ASEAN Industrial Layout

By industry distribution, manufacturing and processing still firmly hold the top position, attracting $9.2 billion, accounting for 60.8% of registered capital. Electricity production and supply ranked second, attracting $2.3 billion, accounting for 15%. Wholesale and retail, real estate, and professional technology services followed.

Notably, the substantial growth in energy projects is consistent with the pace at which ASEAN countries are generally advancing energy transition and upgrading power infrastructure. As a regional manufacturing hub, Vietnam has an urgent need for stable and clean electricity supply. The implementation of LNG power projects not only meets domestic demand but may also lay the foundation for regional grid interconnection and cross-border electricity trade. Energy cooperation under the ASEAN Economic Community (AEC) framework is moving from the policy level down to the concrete project level.In terms of project numbers, wholesale and retail trade leads in both new registrations and M&A activities, showing that foreign investors' interest in Vietnam's domestic consumer market continues to heat up. This also aligns with the broader expansion trend of the ASEAN consumer market—a rising middle-class population and increasing e-commerce penetration have led multinational companies to view Vietnam as a gateway to the entire regional market.

Country and Region Analysis: Singapore and South Korea Lead, Regional Capital Network Strengthens

In the first quarter, 68 countries and regions made investments in Vietnam. Singapore led with US$6.3 billion, accounting for 41.6%; South Korea followed with US$4.4 billion, accounting for 28.7%; Indonesia, China, and Hong Kong ranked third to fifth, respectively.

Singapore's leading position is not surprising. As ASEAN's capital allocation hub, Singapore has long been a "transit station" for investment into Vietnam. Large amounts of capital from Europe, the United States, Japan, and even China enter Vietnam through Singapore to leverage its legal, financial, and tax advantages. This model has become increasingly common amid the deepening of RCEP and the ASEAN Economic Community, reflecting a "hub-and-spoke" structure in regional capital flows.

South Korean capital, for its part, directly targets manufacturing and energy infrastructure. For instance, the aforementioned LNG project shows that South Korean capital is extending from traditional electronics manufacturing into new fields such as energy and biotechnology. Notably, China leads in the number of projects and M&A transactions (accounting for 31.8% and 28.3%, respectively), although its total amount ranks relatively low. This indicates that Chinese investors prefer to enter the Vietnamese market through flexible approaches such as joint ventures and acquisitions, rather than large-scale greenfield projects. This model helps avoid geopolitical risks and may also bring more SMEs into Vietnam's supply chain.

By geographic distribution, Thai Nguyen province ranked first with US$5.7 billion, accounting for 37.6%, mainly driven by a large manufacturing project; Ho Chi Minh City ranked second with US$2.9 billion, but held an absolute advantage in the number of new projects and M&A deals (accounting for 52.5% and 70.4%, respectively); Nghe An province ranked third with US$2.3 billion, benefiting from energy projects. This coexistence of concentration and dispersal shows that Vietnam's industrial landscape is expanding, with foreign investment no longer limited to the traditional north-south corridors but extending to the north-central and central-western regions. This is a positive signal for the resilience of ASEAN regional supply chains—a more dispersed industrial space helps reduce the risk of a single hub.

Trend Outlook: Supply Chain Relocation Enters a "Project-Based" Stage, ASEAN Division of Labor Readjusts

Combined with full-year 2025 data, although Vietnam's FDI growth is affected by the base effect of a few large-scale projects, the overall trend is clear: foreign investors' interest in Vietnam has shifted from "seeking low costs" to "building regional nodes."In 2025, Vietnam's registered FDI capital reached US$38.42 billion, a year-on-year increase of 40.9%. Singapore, China, and South Korea ranked in the top three, among which China grew by 20.4% year-on-year while South Korea fell by 25%. The surge in capital from Malaysia, Thailand, Sweden and others reflects that supply chain relocation is now taking on the characteristics of multiple sources and multiple pathways. This is not simply "China+1," but rather an "intra-ASEAN redivision of labor" — countries are undertaking production capacity at different links based on their respective comparative advantages.

Vietnam is evolving from a pure assembly and export base toward higher value-added segments encompassing design, R&D, and core component manufacturing. At the same time, Indonesia, Thailand, and Malaysia are also vying for similar positioning. Vietnam's structural FDI highlights — energy projects, high-tech manufacturing, and consumption-driven investment — are a microcosm of ASEAN's overall industrial upgrading.

The deepening implementation of RCEP and the maturation of CPTPP rules have further lowered the institutional costs of regional trade. Vietnam's performance in export growth and FDI utilization in fact reflects the enhanced competitiveness of the entire ASEAN supply chain network. In the first quarter, FDI-sector exports accounted for 80% of Vietnam's total exports — a ratio that shows foreign-invested enterprises have become the core organizers of the regional production network.

Conclusion: The Linkage Effects of Vietnam as an ASEAN Manufacturing Hub

Vietnam's first-quarter FDI data is not merely a barometer of country-specific investment momentum; it is also a micro-level sample of ASEAN Economic Community building. The landing of large-scale projects, capital flows from Singapore and South Korea, and the acceleration of energy infrastructure are all reshaping the geography of regional supply chains.

For enterprises and policy researchers, the key insight is: future competition is no longer between individual countries, but between regional production ecosystems. The structural changes in Vietnam's FDI indicate that ASEAN supply chains are undergoing an evolution from "vertical division of labor" to "networked collaboration." When formulating Southeast Asia strategies, multinational corporations should view Vietnam's behavior as part of a broader regional transformation, rather than an isolated market.

The data shows that Vietnam has become a core node in global manufacturing relocation, and the function of this node is deepening — it is not just the "final assembly point," but also the "organizer of regional value chains." For other ASEAN economies, this is both a challenge and an opportunity for cooperation. How to transform Vietnam's growth dividends into regionally shared development momentum through infrastructure connectivity, energy coordination, and digital trade rules will be a key proposition for ASEAN economic integration in the next phase.