The Detriments of Vietnam’s Outward Foreign Direct Investment: Does Political Stability Matter?

This paper analyses the motivations of outward Foreign Direct Investment pattern of Vietnam using the gravity theory and panel data of 159 economies worldwide during the 2007-2021 period. The author extends the gravity model proposed by Zhang & Daly (2011) to test the determinants of Vietnam's OFDI, divided into two strategy groups namely location selection and the amount of new registered OFDI capital. Results indicate that Vietnamese OFDI’s location choice was positively impacted by high levels of political stability, export relations, and proximity to Vietnam. Meanwhile, natural resource advantages and the other good governance factors in one economy do not have statistically significant effects on the location choice, whereas Vietnamese new registered OFDI amount is negatively affected by governance effectiveness, rule of law, and regulatory quality. Relatively, among all the determinants, low regulatory quality is the most powerful factor in increasing the new registered OFDI scale. As the main practical policy implications, issuing policies for promoting trade relations, launching the novel strategy of FDI neighbourhood policy are recommended.