Vietnam is undergoing a historic administrative transformation that promises to reshape its political landscape and economic future. Following the recent National Assembly resolutions, the country has streamlined its local government structure, reducing the number of provincial-level units from 63 to 34 and reorganizing commune-level administrations into a more efficient two-tier system. This sweeping reform, effective from July 1, 2025, aims to enhance governance, boost economic development, and better serve citizens and businesses.
At the heart of this change is the transition to a two-level local government model, replacing the previous cumbersome three-tier system. Vice Minister of Home Affairs Truong Hai Long emphasized at an international press conference that this new structure addresses overlapping functions and promotes decentralization, autonomy, and accountability. "This model is especially important for the commune level, which is closest to the people and directly serves their needs," he explained. The National Assembly's adoption of the Law on Organization of Local Government (Law No. 72/2025/QH15) and related resolutions mark the formal legal foundation for this transformation.
Under the new arrangement, Vietnam will have 34 provinces, including six cities and 28 provinces, and 3,321 commune-level units comprising communes, wards, and special zones. This reorganization is designed not only to streamline administrative operations but also to respond to higher demands for economic management and social services. The government has prepared thoroughly, ensuring that cadre placements prioritize competence, legal knowledge, and management experience. Local authorities are also actively planning training programs to equip officials for their new roles.
Infrastructure upgrades are a key component of the reform. Digital infrastructure has been enhanced to connect all 3,321 new commune-level units, enabling seamless electronic administrative procedures. Additionally, public housing provisions for officials affected by mergers aim to provide stability amid the changes. As Vice Minister Long noted, "From July 1, the government will simultaneously launch local governments across all provinces and communes, ensuring smooth and continuous operations without interruption to administrative services." This commitment aims to alleviate public concerns about potential disruptions during the transition.
The reform also presents a significant opportunity to restructure Vietnam's economic development space. By merging provinces and expanding administrative units, the government seeks to foster stronger regional linkages and enhance competitiveness both domestically and internationally. Larger provinces with improved transport connections—including road, sea, and air links—are expected to attract greater investment and facilitate more coordinated development. The streamlined apparatus is projected to save budget costs and improve efficiency.
Economist Nguyen Hoang Dung highlighted the economic potential of these changes, describing the period as a "special transition" with vast opportunities for businesses. He pointed out that the mergers create a "new prosperity train" for enterprises and investors to board, emphasizing the importance of proactive engagement to seize emerging benefits. "Businesses will undoubtedly gain from the new administrative structures," he said, citing recent institutional reforms and clear administrative boundaries established as of June 12, 2025.
One striking example is the merger of Ho Chi Minh City with Binh Duong and Ba Ria - Vung Tau. This consolidation combines urban economic strength, industrial capacity, and logistics-tourism advantages. The newly formed Ho Chi Minh City will boast an industrial park area of 33,000 hectares, linked by major transport corridors such as the Ho Chi Minh City-Long Thanh-Dau Giay Expressway, Ring Roads 3 and 4, National Highway 51, and key seaports including Cai Mep and Tan Cang Cat Lai. This integration is set to create a cross-provincial industrial-logistics-export hub, with Cai Mep Thi Vai port serving as the main gateway for exports.
The merger also allows smaller localities to focus on their comparative advantages without inefficiently competing across multiple economic sectors. For instance, industrial land use targets, previously allocated on a province-by-province basis, will now be aggregated regionally, providing greater flexibility. This arrangement enables high-investment areas to expand or restructure industrial parks in line with actual demand, maximizing benefits and fostering clusters of suppliers around major international corporations—often called "Queen bee" enterprises—such as Samsung, Foxconn, and Goertek.
Moreover, the administrative consolidation reduces procedural overlaps that previously trapped businesses "between two localities" during investment approvals. It curtails unhealthy competition among provinces for foreign direct investment (FDI), preventing uncontrolled tax incentives and land price wars. For example, if the old Ho Chi Minh City exhausts its industrial land quota, projects can be shifted to former Binh Duong or Ba Ria - Vung Tau territories, optimizing land use and investment potential.
Infrastructure development benefits as well. Stronger provinces are incentivized to invest in connecting transport and logistics infrastructure to neighboring, less developed areas, avoiding the fragmentation of projects at administrative borders. This approach enhances the efficiency of logistics chains, ports, and industrial zones. A similar dynamic is anticipated in the North, where the merger of Bac Ninh and Bac Giang creates over 11,700 hectares of industrial land, enabling the formation of a deep, high-tech industrial region. This consolidation strengthens negotiation power with major investors and alleviates traffic and labor pressures by redistributing projects.
While the reforms bring promise, they also present challenges, particularly regarding human resources and the welfare of public officials. During a provincial-level meeting, Nguyen Hoai Anh, Provincial Party Secretary, acknowledged the significant contributions of district-level authorities but stressed the need to complete remaining tasks carefully. These include finalizing handover of finances, assets, and documents, digitizing records, and preparing new offices to ensure uninterrupted service delivery. He urged local party committees to establish task forces to supervise these processes, emphasizing the avoidance of loss or waste.
However, the transition has led to difficulties, especially in digitizing documents and upgrading infrastructure in merged communes and wards. Some localities face slow progress in financial and asset handover, and human resource shortages hamper digital transformation efforts. The preparation of grassroots Party congresses has also seen delays, with some units struggling to coordinate document compilation.
At the National Assembly's 9th session, delegate Hoang Duc Thang of Quang Tri voiced concerns about the impact of administrative mergers on officials. He noted that many skilled public servants, including well-trained ethnic minority cadres, are resigning or moving to the private sector, threatening the balance and effectiveness of the civil service. He poignantly described the forced relocations of officials as "farewells in peacetime," highlighting the personal sacrifices involved, such as families living apart and children cared for by relatives.
To address these issues, Thang proposed comprehensive measures focused on improving remuneration, including competitive salaries and performance-based bonuses, especially for highly skilled roles. He advocated creating a professional, innovative work environment with transparent recruitment and promotion processes that attract young, talented personnel. Special contracts for experts and greater decentralization in personnel management were also recommended. Importantly, he called for unified national policies to support officials working far from home, covering housing, accommodation, and transportation, to ensure fairness and alleviate hardships.
Other delegates echoed these sentiments. Nguyen Hoang Bao Tran of Binh Duong emphasized the urgency of salary reforms to match increased workloads and travel demands following mergers. Duong Van Phuoc of Quang Nam stressed the critical role of well-trained, ethical grassroots officials in implementing policies effectively at the commune level. He urged the government to issue binding guidelines and invest heavily in human and material resources to empower local administrations.
Hoang Ngoc Dinh of Ha Giang highlighted the need for quality over quantity in cadre arrangements, noting that with the removal of the district level, commune officials now manage over a thousand state tasks, from civil affairs to national defense. He underscored the importance of local and ethnic minority cadres who understand community customs and languages, acting as vital links between the government and the people. Dinh recommended clarifying commune functions, enhancing training, and providing special allowances and working conditions to strengthen this foundational level of governance.
In sum, Vietnam's administrative reforms mark a bold step toward modernizing governance and fostering economic growth. While the path forward includes challenges—particularly in human resources and infrastructure—the coordinated efforts of government bodies and the commitment to inclusive policies aim to ensure a smooth transition. As the new local governments begin operations on July 1, 2025, the nation embarks on a journey to a more streamlined, effective, and citizen-focused administration, ready to embrace the opportunities of a new era.
