Does Foreign Direct Investment Promote Economic Growth Through Exports? Evidence from Vietnam

Abstract

This study examines whether foreign direct investment (FDI) fosters Vietnam’s economic growth via the export channel over the 2000–2024 period, during which FDI served as a cornerstone of the country's export-led development strategy. Using annual time-series data from the General Statistics Office, the Ministry of Planning and Investment, and the Ministry of Industry and Trade, we combine an Autoregressive Distributed Lag (ARDL) framework with Baron–Kenny mediation analysis and Sobel, Aroian, and Goodman tests. All regressors are integrated of order one, I(1). The error correction coefficient is negative and significant (−1.214, p < 0.01); its magnitude implies an overshooting adjustment process rather than a monotonic one, warranting cautious interpretation. Over the full sample, the long-run effects of FDI (−0.173, p = 0.631) and exports (−0.032, p = 0.274) on GDP growth are statistically insignificant, as are all short-run coefficients; hypotheses H1 and H2 are therefore rejected. Furthermore, the export channel does not significantly mediate the FDI–growth relationship: the indirect effect accounts for merely 7.8% of the total effect, with the Sobel test confirming its non-significant role (z = −0.234, p = 0.815), rejecting H3. These findings demonstrate that FDI's growth dividend in Vietnam is conditional rather than automatic, underscoring the imperative for policies that strengthen domestic absorptive capacity, supporting industries, and local value capture alongside FDI attraction.