From 1 July 2025, Vietnam will begin implementing a two-tier administration model (province–commune/ward), abolishing the operational role of district-level governments in many areas, as part of broader efforts to streamline the political system’s apparatus. Parallel to this, the National Assembly Standing Committee has adopted resolutions to rearrange district- and commune-level administrative units across multiple provinces for the 2023–2025 period. Vietnam’s 63 provinces and centrally-run cities have been reduced to around 34 through remapping. 
Transition to a Two-Tier Administrative Model: Legal Certainty and Investor Confidence
As mentioned above, Vietnam has transitioned to a two-tier administration model. Although this change affects many areas, it should not create uncertainty, especially for investors. This change is not an indication of sudden, frequent administrative changes. On the contrary, Decree No. 321/2025/ND-CP establishes structured public consultations, institutional responsibilities and a formalized procedure for administrative boundary adjustments. For investors, one of the key issues is the existence of a stable investment environment: predictability, transparency and institutional control. The decree in question is one of the important guarantors of a stable investment environment.
Impacts on public service delivery
Eliminating the district level and consolidating provinces can improve efficiency and professionalization, but only if provincial capacity, digital government, and inclusion mechanisms are strengthened in parallel.
Potential for more professional, better-resourced service delivery
Consolidation can reduce the number of small, under-resourced district units, enabling provinces to centralize technical capacity (planning, finance, digital systems) and invest in modern one-stop service centres at provincial and commune levels.
Vietnam-focused analyses argue that a more integrated framework should, in principle, streamline interactions with authorities and accelerate decision-making for both citizens and businesses.
Risks of increased distance and uneven access
For residents in remote or mountainous areas, the abolition of district governments and the merger of communes can mean longer travel distances to reach administrative offices or public services if not compensated by mobile units or digital access.
Vulnerable groups (the poor, elderly, ethnic minorities) may struggle more if face-to-face services are centralized without strong digital inclusion measures.
Provincial capacity becomes decisive
With more powers and larger territories, provinces will become much stronger centres of decision-making. Their capacity to manage planning, budgeting, and service delivery will directly shape outcomes.
Provinces with stronger leadership, better fiscal capacity, and more advanced digital infrastructure may become “winners”, while weaker provinces risk governance overload.
Public Sector Workforce Reform and Service Delivery Capacity
Vietnam’s state apparatus reform explicitly targets a large reduction and restructuring of public-sector employment, with several key elements:
The Government plans to cut the civil service workforce by at least 20% as part of the current overhaul, while still maintaining service quality. 
As of late 2025, about 145,000–146,800 staff had already left their posts due to streamlining, generating an estimated 39,000 billion VND in reduced recurrent expenditure per year. 
The MoHA estimates that about 130 trillion VND (≈ USD 5.1 billion) is needed to finance severance and benefit packages for officials and employees affected by restructuring, and as of mid-2025 nearly 29.8 trillion VND had already been disbursed. 
Policy shift away from “job for life” and toward talent-based recruitment: Vietnam News reports that the country is abolishing the “job for life” mentality in its civil service, opening pathways for experienced professionals from outside government to enter directly into senior posts under a merit-based system. 
Workforce Risks: Redundancy, Skill Mismatches and Transition Gaps
Redundancy, reassignment, and skill mismatches
Rapid structural change plus headcount targets can lead to skill mismatches: some critical functions (e.g. digital transformation, complex project appraisal) may be under-staffed, while less critical units still carry surplus staff if not well managed.
Greater physical distance to services: Merging communes and abolishing district administrations can mean that citizens especially in remote, mountainous or ethnic minority areas have to travel further for administrative services, healthcare referrals, or social-policy procedures if mobile or digital options are insufficient.
Digital divide may be an obstacle to a smooth transition. Many reforms rely on online portals, e-government platforms, and digital signatures. Studies on digital transformation in Vietnam show it significantly improves satisfaction for those who can access and use it, but also reveals limitations and challenges, especially among older, low-income, and rural populations. 
During the transition (2025–2027), citizens must learn new procedures, new office locations, and new organisational names. For vulnerable groups with low literacy or mobility constraints, this increases the hidden cost of accessing services.
Influence on land management, zoning, infrastructure planning, and investment incentive regimes
For investors, provincial merger and administrative rearrangement have several structural consequences. Provincial mergers create new opportunity maps in terms of industrial zones, logistics corridors, and land prices but they also demand active monitoring of zoning changes, incentive revisions, and planning updates at the provincial level:
More integrated planning and land-use management
When two or more provinces merge, their separate land-use plans, zoning frameworks, and socio-economic development plans must be harmonized into a single provincial plan.
Reconfiguration of infrastructure priorities
A merged province may re-rank road, port, airport, and industrial-park projects in light of its new geography; some projects may be accelerated, others delayed or re-scoped.
Review and rationalisation of investment incentives
Changes in provincial classifications (e.g., re-defining disadvantaged or priority areas) can trigger a review of investment incentives, tax breaks, and land rent policies.
Businesses with projects in districts that become part of a more developed merged province may see incentive regimes revised over time, while newly defined priority zones may offer more generous packages to draw investment.
Opportunities for large-scale, cross-district projects
With larger provinces and fewer administrative boundaries, it becomes easier to design and implement regional infrastructure corridors, logistics chains, and industrial clusters spanning former provincial borders.
Impact on Local-Level Business Interactions
During the transition to a two-tier local government and merged provinces, businesses can expect:
Changing administrative contact points
Many district-level agencies for land, construction, business registration, and environment will be abolished or reorganized, with responsibilities shifting mainly to provincial departments and commune-level one-stop shops. 
Companies must update their registered addresses and other corporate information to match the new administrative units for licensing, tax, and accounting compliance, after provincial mergers. 
Temporary “red light” risks for ongoing projects
Projects in the middle of land-conversion, planning adjustments, construction permits, or environmental impact assessment (EIA) procedures may experience delays as files are transferred and responsibilities are clarified between old and new authorities.
In the short term, there may be inconsistent interpretations of which level (province vs commune) handles certain steps, increasing transaction costs and consultation needs.
Tax and revenue administration adjustments
Tax offices at district level may be merged or re-designated; companies may be reassigned to new managing tax authorities and must ensure that declarations, payments, and invoices are aligned with new codes and addresses.
Guidance indicates that businesses should fully comply with address-change notification obligations to avoid obstacles in tax refunds, audits, and bank transactions. 
Chance to standardise and digitalise procedures: On the positive side, restructuring is being coupled with e-government and digital public-service platforms. If implemented effectively, new workflows can become more uniform, transparent, and online, reducing face-to-face contacts and opportunities for petty corruption. 
Practical Implication for Enterprises
Treat 2025–2027 as a transition window build in extra time for local procedures, maintain close contact with both old and new authorities, and ensure legal/tax documentation is updated to reflect the new administrative map.
Governance risk at local levels
Even as reforms aim at efficiency, several governance risks are being flagged by Vietnamese lawmakers and observers:
Risk of “distance” between citizens and government
By abolishing district administrations and merging communes, there is a concern that authorities may become physically and institutionally more distant from citizens, particularly in rural and mountainous areas. If not accompanied by better representation and outreach, could weaken citizen access and voice. 
Potential weakening of local accountability mechanisms
As provinces grow larger and communes cover broader territories, existing mechanisms for local accountability (People’s Councils, grassroots mass organizations, inspection bodies) may struggle to monitor larger jurisdictions with the same resources.
Lawmakers have explicitly warned that draft reforms to the Constitution and the Law on Local Government Organisation might dilute local checks and balances, if they centralise too much power at provincial level without strengthening oversight. 
Capacity gaps during and after the rearrangement
Merger and streamlining inevitably lead to staff reallocations and redundancies. Without careful talent management retaining high-capacity staff and investing in training the system may lose experienced officials at grassroots level.
Provinces with weaker administrative capacity may find themselves overloaded with new functions, exacerbating delays and administrative errors.
Uneven implementation and regional disparities
Stronger provinces may successfully turn consolidation into governance and investment advantages, while weaker ones fall behind, widening gaps in public service quality, local business climate, and citizen trust. Vietnam-focused advocacy and advisory pieces note this divergence risk in the context of provincial mergers.
Read more: The impact of Vietnam’s governmental reform on business operations and foreign investment
