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THE IMPACT OF FDI, LABOUR FORCE AND INNOVATION ON VIETNAM'S
ECONOMIC GROWTH: THE IMPLICATIONS OF STATE MANAGEMENT
POLICIES IN THE NEW CONTEXT

Ngo Ngan Ha* , Nguyen Thanh Tuan 2
1

1 Thuongmai University, Hanoi, Vietnam.
2 Hanoi University of Mining and Geology, Hanoi, Vietnam.
(*E-mail: ha.nn@tmu.edu.vn)

ABSTRACT
This research employs the VECM estimation method and Johansen cointegration
analysis to examine the short run and long run impacts of FDI, labour force (LF), and
innovation on economic growth (EG) in Vietnam during the period 1996–2024. The
empirical results indicate that in both the short and long run, FDI has a negative impact on
EG. Meanwhile, LF has a positive impact on EG. Innovation is not statistically significant.
Based on these results, the study proposes policy recommendations aimed at promoting
EG in Vietnam in the new context.
Keywords: FDI, LF, innovation, EG, Vietnam.

1. Introduction
Since the launch of the Đổi mới reforms in 1986, Vietnam has become one of the
fastest-growing economies in Southeast Asia. The transition toward a socialist-oriented
market economy has enabled rapid industrialization, export expansion, and deeper global
integration. Among the key drivers of this growth, FDI, LF (LF) development, and
innovation have played central roles. However, in the context of global economic
volatility, digital transformation, and structural change, the effectiveness of these drivers
increasingly depends on the quality of state management policies.
FDI has been a major engine of Vietnam’s economic expansion. Following its
accession to the World Trade Organization and participation in new-generation trade
agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific
Partnership and the Regional Comprehensive Economic Partnership, Vietnam has
attracted substantial foreign capital inflows. FDI has contributed to capital formation,
export growth, job creation, and technology transfer. Nevertheless, concerns remain
about the quality of FDI, limited spillover effects on domestic firms, and heavy reliance on
foreign-invested enterprises.
Vietnam’s relatively young and abundant LF has also supported EG (EG). Yet, the
shift toward Industry 4.0 and knowledge-based production requires higher-skilled labour
and stronger human capital development. Without improvements in labour productivity
and skill levels, the long-term contribution of the workforce may be constrained.
In addition, innovation is increasingly recognized as a crucial determinant of
sustainable growth. Vietnam aims to transition from factor-driven to innovation-driven
development, but institutional limitations and weak linkages between research
institutions and enterprises remain challenges.
Given these conditions, effective state management policies are essential to
enhance the synergy among FDI, LF development, and innovation. This study examines

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