European companies are increasingly favouring Vietnam over Thailand for investments in Southeast Asia, driven by trade deals and political stability. Thailand remains competitive, but political uncertainty is seen as a constraint on attracting further foreign investment. Get today's headlines by email According to Chris Humphrey, Executive Director of the EU-ASEAN Business Council, business sentiment surveys show Vietnam has become the top destination for European investment. Vietnam’s extensive network of trade agreements makes it easier for companies to manufacture there and export globally. In comparison, Thailand is diversifying its supply chains but lacks the same trade connectivity. Thailand achieved a five-year high in foreign direct investment, reaching 10.4 billion dollars in 2025. Vietnam, however, attracted 38.42 billion dollars during the same period. Political stability remains a critical factor, with Thailand having seen three prime ministers in the past two years, raising concerns over policy continuity and regulatory reform. Vietnam’s advantage is reinforced by its free trade agreement with the European Union, signed in 2019. Thailand is still negotiating its own deal with the EU, with Maroš Šefčovič aiming to conclude the agreement by the end of 2026. The seventh round of negotiations in Bangkok last month showed progress, though compromises on quotas and financial services market access are still required. Humphrey highlighted that global supply chain shifts amid geopolitical tensions in the Middle East are creating opportunities across Southeast Asia. He noted that Thailand remains strategically well-positioned due to its geographic location and industrial base. Sustained political stability and consistent economic policies under the government led by Anutin Charnvirakul will be crucial to boosting investor confidence. The Nation reported that European firms are increasingly investing in the region not only as an export hub but also to tap into expanding domestic markets driven by a rapidly growing middle class. Analysts suggest that Thailand’s ability to retain competitiveness will depend on advancing economic reforms and providing a clear policy direction. Join the discussion? Already a member? Adapted by ASEAN Now Nation 22 Mar 2026
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