Vietnam’s 2025 provincial mergers and administrative restructuring represent a decisive shift in how the state organizes power, resources, and development. Far from a technical redrawing of administrative boundaries, the reform reflects a strategic recalibration of national planning aimed at building a leaner, more capable government that can coordinate growth at scale, eliminate institutional bottlenecks, and compete more effectively in a regional and global economy. By consolidating provinces and streamlining governance structures, Vietnam is repositioning the state as a master planner of development, unlocking internal resources while laying the institutional foundations for sustained, inclusive, and internationally competitive growth.
Economic Impact and Fiscal Efficiency
Merging provincial administrative units brings a plethora of economic benefits. First of all, it helps streamline the state apparatus and significantly cut budget expenditures. According to the Ministry of Home Affairs, each successfully merged province can save hundreds of billions of VND each year from regular expenses such as salaries, allowances, headquarters and vehicle costs. This money can be reinvested in economic development, infrastructure and social welfare. The Communist Party of Vietnam has identified institutions as the ‘bottleneck of all bottlenecks’. Prior to reform, around 70 per cent of Vietnam’s annual state budget was consumed by regular expenditures, leaving minimal funds for development. Excessive administrative layers with overlapping functions and inconsistent policies slowed investment projects and business operations. These changes are projected to cut Vietnam’s public sector workforce by 250,000 people and save 190 trillion dong (US$7.2 billion) in administrative expenses by 2030.
Mergers strongly promote regional connectivity and sustainable economic development. When localities with similarities in geographical location, culture and economic potential are merged, they will form larger-scale economic-administrative centers. This not only helps attract investment more effectively, reduce resource dispersion, but also enhances the overall competitiveness of the economy, in line with the national development strategy towards regionalization and urbanization.
Investment Incentives and FDI Dynamics
The change of administrative boundaries may raise questions about determining investment incentives, especially for projects that are being or will be implemented in merged areas. To remove obstacles for investors, the Ministry of Finance issued Official Letter No. 4525/BTC-PC dated April 9, 2025, providing specific guidance on the principles for determining investment incentive areas and procedures for adjusting projects in case of changes in administrative boundaries.
These principles and guidelines are built on the basis of current legal regulations such as the Investment Law 2020 and Decree 31/2021/ND-CP, to ensure investors’ rights and maintain stability in the business environment.
The merged provinces/cities are expected to become “capitals” of attracting new FDI thanks to the expansion of development space and optimization of advantages. For example, after merging with Ba Ria – Vung Tau and Binh Duong, Ho Chi Minh City has become the largest FDI attraction locality, with a total value of FDI capital attraction in the first 5 months of 2025 of 4.027 billion USD. Similarly, Bac Ninh (merging with Bac Giang), Dong Nai (merging with Binh Phuoc), Hai Phong (merging with Hai Duong), Ninh Binh (merging with Ha Nam, Nam Dinh), Tay Ninh (merging with Long An), and Hung Yen (merging with Thai Binh) all recorded impressive FDI attraction levels.
The merger is considered an important “institutional boost”, helping to improve the investment environment, remove bottlenecks, and promote stronger production and business development. Success in attracting investment will depend on the new local government’s ability to develop consistent, transparent policies and create a favorable, competitive business environment in the expanded development space.
Beyond modernising governance, the reform opens growth opportunities by complementing Vietnam’s traditional North–South development axis with a new East–West orientation, combining inland resources like forestry with coastal advantages such as maritime access. Their merger is expected to unlock significant regional connectivity potential: from high-tech agriculture in Lam Dong to renewable energy and mineral resources in Dak Nong, and coastal economy and tourism in Binh Thuan. Merging Ho Chi Minh City with Binh Duong and Ba Ria–Vung Tau creates a major regional megacity and logistics hub, making the new city a key player in a wide range of industries, including finance, oil, gas and coastal tourism.
Infrastructure and Regional Integration
This approach also anticipates a new wave of infrastructure investment, like the Lao Cai–Hanoi–Hai Phong railway, which will boost regional trade and integration. By reducing administrative costs, the reform frees up funds for greater investment in social programs, public salary reform and science and technology.
Party General Secretary To Lam underlined that the merger is not a mere administrative combination but a convergence of intellect and shared development aspirations. He described the new HCM City as a megacity with the potential to become a regional and global centre of finance, manufacturing, logistics, and innovation.
He stated that the newly defined urban space is built on a long-term vision for sustainable, integrated and scientific development. The reform, he noted, symbolizes strategic thinking and innovation in public administration, aimed at bringing government closer to the people and serving them more efficiently.
The move, the Party leader said, represents a bold and pioneering step with breakthrough significance in urban governance reform, one that will allow for rapid, robust, and effective growth in Vietnam’s most urbanized region.
Political Implications of the Reform
The provincial merger is expected to alter the composition of senior leadership as fewer local officials will be promoted to national roles. This will likely result in a smaller Central Committee and Politburo at the 14th National Party Congress in early 2026 and further centralise power around To Lam.
Strategic Context of Vietnam’s Territorial Reform
Vietnam’s mergers of provinces and centrally run cities must be understood as part of a systemic reconfiguration of the state, rather than a standalone territorial adjustment. The reform sits squarely within the Communist Party of Vietnam’s long-term effort to modernize governance, enhance state capacity, and sustain economic growth as the country transitions toward upper-middle-income and eventually high-income status.
The ideological and strategic anchor of this reform is Resolution 18-NQ/TW (2017), which identified the political–administrative apparatus as cumbersome, fragmented, and inefficient, with overlapping mandates and excessive intermediate layers. While Resolution 18 initially focused on streamlining ministries and public institutions, it explicitly included territorial reorganization as a necessary component of state reform. Provinces and cities were recognized not merely as administrative units, but as fundamental nodes of economic management, planning authority, and public service delivery.
By the early 2020s, it became evident that Vietnam’s 63 provincial-level units many of which were small in population, fiscally weak, or administratively under-capacitated were increasingly misaligned with the demands of modern governance. Fragmentation at provincial borders complicated infrastructure planning, industrial clustering, logistics development, and environmental management. In this context, territorial consolidation emerged as both a governance reform and a development strategy.
Legal Instruments Governing the Merger Process
Vietnam’s approach to provincial and city mergers is legally cautious, sequential, and highly centralized. The reform is implemented through a layered legal architecture, ensuring political control while preserving administrative continuity.
At the highest level, Party resolutions and conclusions provide strategic direction, framing mergers as a political task linked to improving governing capacity and strengthening the socialist rule-of-law state. These Party directives are then translated into binding legal instruments by the National Assembly (NA) and its Standing Committee.
The decisive legal step was the National Assembly Resolution adopted on 12 June 2025, which approved the reorganization of provincial-level administrative units nationwide. This resolution formally established a new national configuration of 34 provincial-level units, comprising 28 provinces and 6 centrally run cities, to be operational from 1 July 2025. The resolution also authorized the Government to issue detailed implementation guidance.
Complementing this, the National Assembly Standing Committee issued multiple resolutions reorganizing district- and commune-level units, ensuring vertical consistency between the new provincial map and grassroots administration. This was followed by Government decisions specifying official names, administrative centers, and standardized administrative codes, which are essential for taxation, land registries, population management, and digital public services.
The legal architecture is thus not merely declaratory. It creates the operational backbone for the reform, allowing the new territorial system to function across all state databases and administrative processes from the effective date.
Policy Objectives Embedded in the Legal Framework
The legal texts and official explanations consistently point to four interlocking policy objectives:
Administrative efficiency
Reducing the number of provincial units is expected to lower administrative overhead, eliminate duplication of departments, and simplify coordination between central and local authorities.
Enhanced governance capacity
Larger provinces are presumed to possess greater fiscal resources, professionalized civil services, and stronger planning capabilities.
Regional development coherence
Mergers are intended to enable planning and investment at a regional scale, transcending artificial administrative borders that previously hindered infrastructure and industrial integration.
Fiscal sustainability
The reform is projected to generate substantial savings in recurrent expenditure during 2026–2030, creating fiscal space for development investment and public service modernization.
Crucially, the legal framework emphasizes continuity and stability. The reform is designed to avoid administrative vacuums, ensure uninterrupted public services, and maintain legal certainty for citizens and enterprises during the transition.
Read more: Vietnam Merges 63 Provinces into 34: What It Means for the Country’s Future
