In the recent years, Foreign Direct investment (FDI) capital flows into Vietnam has been quite high. The effects of foreign direct investment (FDI) on economic growth has for long been an issue of intense argument for a long time. There have been a lot of studies into the attraction and implementation of FDI capital, evaluation of FDI enterprise operations; however, there is a very few studies on determinants of FDI in Vietnam. Most of the previous studies on FDI in Vietnam have focused on economic impacts of FDI such as promotion of trade, employment generation and technology spillover. The lack of thorough studies on FDI in general and determinants of FDI in particular has partially affected the formulation of appropriate policy for promoting FDI in Vietnam.
Moreover, an important issue to be concerned is that in December 2001 a Bilateral Trade Agreement (BTA) between Vietnam and the United States came into effect (Abbott, Bentzen, & Tarp, 2009). So this research also aims to address some of these gaps how the effects of the BTA on the determinants of FDI inflows into Vietnam before and after this agreement to be signed.
This study comes to contribute to on-going discussion on the determinants of FDI in Vietnam by utilizing series data of quarterly time over the period of 20 years from 1990 to 2009. The data on FDI are taken from various issues of the Global Development Finance published by World Bank and supplemented by the World Bank’s World Development Indicators and the IMF’s Balance of Payment Yearbook. The data consist of gross inflows of FDI into Vietnam with no restrictions on the source. The data on GDP are taken from the various issues of the International Financial Statistics published by the IMF. Moreover, the research was undertaken with the objectives to: (1) Study the determinants affecting Foreign Direct Investment (FDI) in Vietnam, (2) Study the potentials for increasing inflow of FDI in Vietnam. The conceptual framework is adopted from the Eclectic Paradigm or the “OLI” paradigm developed by Dunning.

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