Received: 07-01-2013 / Accepted: 19-02-2013
Foreigndirect investment (FDI) plays a crucial role in the process of development for Vietnam. Over the two decades of Renovation, a large number of FDI capital flowed into the country, especially after joining the WTO in 2007, an amount reaching up to approximatelyUSD 229,913.7 million. Agravity model constructed using the Hausman – Taylor(1981) estimatorwasapplied to 1995 to 2011panel data that included18 of Vietnam’s major country partnersandprovided by Vietnam’s authorities and international organizations. Thepurposewasto reexamine the possible effect of trade liberalization under the WTO regime and various FTAs on FDI flows. The estimates wereconsistent in line with the prediction that the WTO exerted great impact onFDI flows to Vietnam. By contrast, there is no evidence that demonstrates convincingly that the various FTAs in which Vietnamhas signed/joined recently, increased FDI capital into the country. The paper also proposes recommendations for attracting FDI and using FDI capital more effectively.