On 1 July 2025, Vietnam is set to undergo one of the most significant administrative reforms in its history, consolidating 63 provinces and municipalities into just 34. This sweeping change will eliminate district-level administrations and dissolve a large number of wards and communes, marking Vietnam’s most comprehensive administrative overhaul since reunification. As a result, the implications extend far beyond state governance; they touch on economic growth and the consolidation of political power within the Communist Party of Vietnam.
The reform is the brainchild of General Secretary To Lam, who has made it a central aspect of his vision for Vietnam since taking office in July 2024. With ambitions to elevate the nation to high-income status by 2045, Lam views this administrative restructuring as a necessary initial step towards that ambitious goal. This ambitious change is not merely an end in itself but aligns with the broader aspiration for national development.
At its core, the reform embodies two key messages. The first underscores the need to tackle what the Party describes as the “bottleneck of all bottlenecks.” Prior to this initiative, a staggering 70 percent of Vietnam’s annual state budget was consumed by routine expenditures. This left little room for developmental funding, while overlapping administrative functions and inconsistent policies severely hindered business operations and slowed down investment projects.
The second message is a recognition that past reform efforts have been neither timely nor comprehensive enough. Thus, the current initiative is characterized by its unprecedented scale and velocity. Various resolutions aimed at downsizing the government were approved earlier in 2025, setting the stage for these monumental changes to take effect by summer.
As a result of these administrative changes, Vietnam anticipates a reduction of its public sector workforce by approximately 250,000 personnel and projected savings of around 190 trillion dong (about $7.2 billion) in administrative costs by 2030. This significant trimming of government personnel reflects an effort to streamline operations and redirect financial resources toward more pressing developmental challenges.
The reforms are not merely focused on reducing the workforce; they promise to fundamentally change the ethos of state governance. Instead of a rigid focus on administrative control, there is a new emphasis on service orientation. Citizens and businesses can complete administrative procedures at any communal service center, breaking free from the constraints of their localities. Furthermore, the introduction of online administrative services through a centralized National Public Service Portal simplifies processes that previously tangled businesses and citizens alike.
Simultaneously, the approach to combatting corruption is evolving. Historically reliant on high-profile crackdowns, Vietnam’s anti-corruption strategy is now shifting to a preventive framework. By reducing bureaucratic layers and automating administrative tasks, the government can diminish the opportunities for corrupt practices, thus fostering a more credible and effective governance environment.
Beyond governmental modernization, the reform paves the way for new economic growth patterns. It complements the traditional North-South development axis with a dynamic East-West orientation, merging resources from inland regions with the advantages of coastal access. The merger of major economic centers such as Ho Chi Minh City with neighboring provinces is particularly pivotal, creating a regional megacity poised to lead in diverse sectors like finance and coastal tourism.
This regional integration also anticipates increased infrastructure investment, exemplified by key projects like the Lao Cai–Hanoi–Hai Phong railway. The aim is to bolster regional trade and create a nexus of economic activity that facilitates smoother connectivity and integrates various developmental resources. The reduction in administrative costs will free up funds for crucial social programs, public salary reforms, and advancements in science and technology.
Politically, these changes are slated to influence the structure of Vietnam’s leadership. The consolidation of provinces is expected to alter the dynamics of senior leadership roles, potentially leading to a smaller Central Committee and Politburo. This reconfiguration has implications for political power, likely further centralizing authority around General Secretary To Lam.
However, centralizing power poses its own set of challenges. Local officials may become increasingly risk-averse, fearing the consequences of decision-making amidst fewer opportunities for promotion. This tension raises questions about whether future leaders will embrace decentralization, which could serve as a check on power within the Party.
Moreover, the financial implications of these large-scale administrative changes are considerable. Vietnam has already allocated substantial resources to compensate affected public employees, and ambitious infrastructure projects, such as the $67 billion high-speed railway, will place additional strain on the budget. Commune-level officials will also face a significant adjustment, tasked with adapting to a heavier workload while simultaneously navigating new directives from provincial authorities.
Despite these complexities, this moment appears ripe for administrative reform. With low public debt and a favorable budget surplus, Vietnam is well-positioned to invest in essential infrastructure improvements that enhance public services and foster economic synergy. The necessity for internal reforms is magnified by external economic uncertainties, prompting a need for a solid and responsive governance framework.
As traditional growth engines begin to slow down, Vietnam must pivot towards enhancing efficiency and fostering innovation. This administrative reform marks a significant leap towards more effective governance and sets the stage for a revitalized investment landscape, seamlessly aligning with Vietnam’s four development pillars.
Hai Thanh Nguyen is a Lecturer at the Faculty of Business Administration, Ton Duc Thang University, Ho Chi Minh City, Vietnam.
Phan Le is a Lecturer in Economics at Thanh Do University, Hanoi, Vietnam.