INTRODUCTION

Since 1986, economic reform (Doi Moi) in Vietnam has made significant strides towards transition to a market-oriented economy and improvement in the living standards of the people. Vietnam' economic growth rates have been high for nearly twenty years. Many of the Millennium Goals have also been achieved before the target dates. One of the important driving forces of this achievement is Vietnam' open policy and integration into the global economy. During this process, FDI has played a very important role.

The flow of FDI into Vietnam has brought with it many benefits in the development of Vietnam. FDI assists in enhancing the competitiveness of industries by bringing in financial resources, know-how, and management skills for the economy. This flow of capital helps develop many supporting industries and, via these industries, creates a lot of opportunities for jobs creation in the domestic market. At the same time, there are a number of challenges related to FDI flows that require the attention of the government. Thus, identifying the challenges and issues related to FDI flows is important in formulating appropriate policies.

This chapter aims to review the integration processes and developments of FDI in Vietnam. It also discusses the impact of FDI on economic development. The relationship of FDI and development of production networks and supporting industries are also within the scope of the research. The chapter also intends to point out challenges and issues related to the attraction of FDI, which require attention at both central and local government level.

The results of the research are based on the analysis of secondary data obtained from different sources. The sources include the General Statistical Office (GSO), Ministry of Planning and Investment (MPI), Ministry of Industry and Trade (MOIT), Ministry of Labour, Invalids, Social Affairs (MOLISA), and various publications in Vietnam. The timeframe of consideration is the last two decades, since FDI attraction has accelerated the progress of Vietnam' integration into the international market.

The chapter has the following structure: section II discusses industrial policies and FDI policies in Vietnam; section III reviews the development and recent changes in FDI in Vietnam; section IV analyses the impact of FDI; section V discusses the production networks and development of supporting industries in Vietnam; section VI points out the challenges and existing issues related to FDI, and section VII provides some policy recommendations.