As ASEAN economies compete for foreign direct investment (FDI) amid slowing global growth and shifting supply chains, Vietnam’s aggressive approach to investor incentives is testing the region’s traditional balance. With policies such as free land leases and government-funded facilities, Hanoi is reshaping the FDI playbook—raising questions about sustainability, fairness, and long-term economic sovereignty.
Vietnam’s strategy reflects a high-risk, high-reward calculus. By removing major entry barriers for global investors, it seeks to accelerate industrial relocation from China and position itself as Southeast Asia’s default manufacturing hub. The timing is deliberate: global firms are reassessing supply chain dependencies, and Vietnam wants to be first in line.
But the ripple effects are already being felt. Indonesia’s investment leadership, for one, has publicly responded with a firm stance of strategic restraint. “We’re not going to overextend just to stay competitive,” said Nurul Ichwan, Deputy Minister for Investment Promotion, pointing to Indonesia’s abundant natural resources as a more grounded form of investment magnetism.
Indonesia’s response speaks to a deeper strategic divergence in the region. While Vietnam leverages aggressive fiscal tools, Indonesia is relying on long-term structural advantages: downstream industrialization, energy transition, demographic momentum, and natural capital.
From a policy perspective, both models offer lessons. Vietnam is capturing immediate attention and inflows, but may face future risks such as overdependence, fiscal pressure, and regulatory backlash. Indonesia, meanwhile, is taking a slower, steadier path that favors resilience over reaction.
The broader question now facing ASEAN is how far individual member states are willing to go to secure investment—and at what cost. While healthy competition is expected, excessive incentive races may dilute regional cohesion and undercut shared goals around sustainable development and fair investment practices.
The emerging divergence between Vietnam and Indonesia also reflects their differing economic baselines. Vietnam, a trade-dependent economy with limited natural resources, must rely more heavily on policy leverage. Indonesia, with its resource wealth and domestic market size, has more room to pursue strategic patience.
Yet both countries are shaping the future of investment dynamics in Asia. Their policy choices, incentives, and political signals will influence investor expectations—not only in ASEAN but across the Indo-Pacific.
In this unfolding contest of strategies, Vietnam may be the disruptor—but Indonesia may yet prove to be the stabilizer.
