Comparing Investment Environments in Southeast Asia: Vietnam, Thailand, and Indonesia

Intro 

Southeast Asia is an increasingly attractive destination for foreign investors, driven by economic growth, a young workforce, and expanding consumer markets. Each market offers distinct advantages: Vietnam as a competitive manufacturing hub, Thailand with advanced infrastructure and investment incentives, and Indonesia with the largest domestic market in ASEAN.

However, investors still face challenges ranging from regulatory complexity to logistics and labor quality. This article compares the investment environments of Vietnam, Thailand, and Indonesia, highlighting their strengths, limitations, and strategic fit.

Economic Landscape: Growth and Scale

Vietnam, Thailand, and Indonesia are three of the most attractive destinations for foreign investors in Southeast Asia, each offering unique strengths within the region’s fast-growing economy.

• Vietnam recorded a nominal GDP of approximately USD 459 billion in 2024 with sustained annual GDP growth of 5–7% over the past decade. The country’s integration into global supply chains, particularly in electronics, textiles, furniture, and multiple free trade agreements. 

• Thailand’s GDP grew at a rate of 2.53 percent and contributed USD 526 billion in 2024, offering slower momentum but stronger purchasing power per capita. It has built resilience through tourism, automotive, and high-tech manufacturing. For investors seeking stability and established infrastructure, Thailand presents lower risk even if growth is modest.

• Indonesia is the largest economy in the region, with a GDP of USD 1.396 trillion and a growth rate of 5.0%. Moreover, with over 286 million people, Indonesia is an attractive destination for companies seeking long-term market penetration, driven by rapidly expanding middle-class consumption and growing demand for retail, fintech, and consumer goods.

For investment, Vietnam’s sustained growth and export orientation make it attractive to manufacturing and technology investors, while those prioritizing a large consumer base could consider Indonesia. Thailand remains attractive for companies that value regulatory clarity and infrastructure over sheer speed.

Labor Market Dynamics

Labor costs and workforce readiness are decisive factors for FDI. However, low wages do not guarantee efficiency. Therefore, investors must consider productivity, education levels, and workforce adaptability.

• In Vietnam, average wages range between USD 160–260 per month, keeping it cost-competitive for textiles, footwear, and furniture. The country has also developed mid-level capacity in electronics and assembly work. However, management talent and advanced technical skills remain limited, requiring training investment.

• Thailand offers a more skilled workforce, particularly in the automotive and precision industries. Wages are higher at USD 250–350 per month, but investors benefit from greater efficiency and stronger vocational training systems. Thailand is also a hub for regional headquarters with bilingual managerial talent and supportive policies.

• Indonesia provides a massive labor pool with wages of USD 120–220 per month. However, skills range widely between regions, and investors often need to invest heavily in training. Labor regulations can also be rigid, complicating large-scale workforce adjustments.

Regulatory and Business Environment

Regulations can make or break investment plans. The speed of company formation, the clarity of licensing, and the stability of policy are crucial to operational efficiency.

• Vietnam has improved significantly in regulatory transparency, supported by its commitments in trade agreements such as the EVFTA and CPTPP. Yet, practical hurdles remain. Licensing can take months, and foreign investors often rely on local consultants to avoid compliance risks.

• Thailand stands out with a business environment ranked among the easiest in Southeast Asia. The Board of Investment (BOI) provides structured incentives, streamlined licensing, and clear sector priorities. Investors in BOI-approved projects benefit from land rights, tax exemptions, and simplified procedures.

• Indonesia has introduced reforms through the Omnibus Law on Job Creation, aiming to reduce bureaucracy. However, implementation varies, and foreign ownership rules still restrict participation in several sectors such as logistics and telecom. Delays in licensing are common, and investors often need local partners.

Investment Incentives and Fiscal Policy

Governments across the three countries actively compete with tax incentives and sector-specific policies to attract FDI. Furthermore, corporate tax rates, exemptions, and access to special zones directly influence investor returns.

To conclude, Vietnam attracts export-oriented manufacturers with cost-effective incentives, Thailand targets high-tech industries and advanced services, while Indonesia focuses on large-scale and resource-linked investment.

Case Studies

Vietnam: Samsung’s Manufacturing Hub

Samsung has invested a total of $22.4 billion USD in Vietnam with six manufacturing plants, one research and development (R&D) center, and a sales entity established across the country. This has made Vietnam become Samsung’s largest smartphone production base and achieved an impressive export turnover of US$55.7 billion in 2023. The success underscores Vietnam’s ability to integrate global supply chains while offering competitive labor and incentives.

Thailand: Toyota and the Automotive Cluster

Toyota had units sold of 241,495  in Thailand and has leveraged Thailand’s automotive ecosystem to develop one of its largest global production bases in 2024. Thailand’s infrastructure and supply chain depth highlight its advantage in high-value, capital-intensive industries.

Indonesia: Nickel Advantage and Hyundai–LG Battery Partnership

Indonesia has attracted major EV investment, driven by its vast nickel reserves and battery policy push. Hyundai entered in 2021 with a 20,000-unit annual EV factory and later partnered with LG Energy Solution and Indonesia Battery Corporation to build a lithium-ion cell plant, reinforcing Indonesia’s ambition to become a regional EV hub.

Strategic Recommendations

To succeed across these markets, investors should:

1. Align capital deployment with sectoral advantages: prioritize electronics and high-tech manufacturing in Vietnam, leverage Thailand’s established automotive ecosystem, and capture opportunities in electric vehicles and resource-based industries in Indonesia.

2. Mitigate operational risks through geographic diversification: adopt a strategy that integrates complementary strengths across markets, ensuring resilience against supply chain disruptions and policy shifts.

3. Strengthen compliance and governance frameworks: regulatory volatility and political risks remain a consistent feature across Vietnam, Thailand, and Indonesia, requiring investors to maintain robust monitoring, transparent practices, and proactive engagement with authorities.

4. Invest in human capital development: close skills gaps in rapidly industrializing economies such as Vietnam and Indonesia by supporting training programs, technical education, and knowledge transfer initiatives that align labor capacity with industry demand.

Conclusion

Vietnam, Thailand, and Indonesia each offer compelling yet distinct investment environments. Vietnam stands out for export competitiveness and global trade integration, Thailand for infrastructure and industrial maturity, and Indonesia for market scale and resource-driven potential. The optimal choice depends on sector priorities, risk appetite, and long-term strategy.