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Political Risk Impacts on Foreign Direct Investment in Vietnam

Tran Binh Nguyen

University of the West of England, United Kingdom

The research explores the impact of political risk on foreign direct investment in Vietnam. The dataset for political risk employed in this research consists of twelve factors from the International Country Risk Guide, offering a comprehensive assessment of Vietnam's political landscape. The research utilises Principal Component Analysis to consolidate twelve political risk items, examining their influence alongside GDP growth, inflation rate and trade openness. With data spanning from 1994 to 2021, ARIMA models are employed due to non-stationarity issues from secondary data set. The findings indicate that while economic factors contribute to FDI, political risk variables like governance quality, military involvement, and economic stability have profound impacts. The study suggests that enhancing governance and reducing military politics are key to attracting FDI, offering insights for policymakers and investors to navigate Vietnam's investment landscape.



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