Outlook for businesses and foreign investors in Vietnam in the next decade
Vietnam’s mergers of provinces and centrally run cities represent one of the most consequential state reforms since the decentralization wave of the early Đổi Mới period. The reform is not merely a reduction in the number of administrative units from 63 to 34; it is a reconfiguration of the territorial operating system of the Vietnamese state.
A Strategically Coherent and Legally Grounded Reform
First, the reform is strategically coherent and legally grounded. It is anchored in long-standing Party resolutions on streamlining the political system, codified through National Assembly resolutions, and operationalized through administrative guidance, standardized codes, and fixed implementation timelines. This coherence distinguishes the reform from ad hoc territorial adjustments of the past.
Transformation of Sub-National Governance
Second, the mergers fundamentally alter how governance is exercised at the sub-national level. Larger provinces with broader functional scope are expected to act not only as administrative units, but as regional development platforms capable of integrated planning, investment coordination, and infrastructure delivery.
Transition Management as the Key Determinant of Success
Third, the reform’s success hinges on transition management, not on design. The period from 2025 to 2027 is decisive. Administrative ambiguity, risk-averse bureaucratic behavior, loss of institutional memory, and uneven capacity across merged territories pose genuine threats to reform outcomes if not actively mitigated.
Short-Term Adjustment Costs vs Long-Term Gains
Fourth, the reform introduces short-term adjustment costs for enterprises and investors particularly in land-intensive and infrastructure-dependent sectors but does not undermine Vietnam’s fundamental openness to investment. On the contrary, if well executed, the reform can improve long-term predictability and coherence in the business environment.
Social and Political Dimensions of the Reform
Finally, the mergers are as much a social and political reform as an administrative one. Public trust, service access, and perceptions of fairness will determine whether the reform is seen as a modernization success or a technocratic imposition.
Read more: A Monitoring and Evaluation Framework for Measuring the Effectiveness of Provincial and City Mergers
