Article 8, paragraph 1 of the Law on the Organization of Local Government establishes the principles governing the organization and reorganization of administrative units. These principles include compliance with the Constitution and laws, administrative stability and continuity, alignment with socio-economic development, and administrative capacity for the effective provision of public services.
A central justification for provincial mergers is fiscal. Official projections indicate that the reform could save over VND 190 trillion during 2026–2030, primarily through reduction in administrative units, downsizing of leadership and support staff and consolidation of public service units.
From Cost Savings to State Capacity
From a policy perspective, these savings are not merely about austerity. The Government has emphasized that reduced recurrent expenditure should enable:
- Increased development investment;
- Higher public sector wages tied to performance; and
- Greater investment in digital government and public service quality.
If these savings are effectively redeployed, the reform could strengthen the productive capacity of the state, rather than simply shrinking it.
Human Resource Restructuring and Institutional Memory
The merger process involves substantial reallocation of personnel. Some positions become redundant, others are reassigned to new roles or locations and institutional memory risks being lost during consolidation. Administrative performance during 2025–2027 will depend heavily on how human resources are managed. If downsizing is mechanical and insufficient attention is paid to retaining experienced officials, service delivery and regulatory enforcement may suffer.
Conversely, if mergers are used as an opportunity to professionalize the civil service and align staffing with functional needs and introduce merit-based evaluation, the reform could significantly enhance long-term governance performance.
Costs and Centralisation Risks
On the other hand, centralising power poses potential challenges. Challenges involve costs and implementation. Vietnam has already spent 130 trillion dong (US$5 billion) in 2025 to compensate affected public employees. Another issue is the abrupt adjustment required of commune-level officials, who must now handle a heavier administrative workload while simultaneously adapting to new, direct engagement with provincial authorities.
Governance Capacity and Risk of Overload
Gaps in governance capacity is another risk that arises from the reform. While larger provinces may enjoy economies of scale, they also face greater governance complexity. The expanded territorial scope increases demands on planning coordination, budget allocation, monitoring and supervision and crisis and disaster management. There is a real risk that some provinces may experience capacity overload, particularly in the early years of the reform. Provinces with strong leadership, robust civil services, and sound fiscal management are likely to adapt more successfully than those with weaker institutional foundations. Thus, the reform may inadvertently widen inter-provincial performance gaps, unless accompanied by targeted capacity-building measures.
In practical terms, this capacity pressure is already visible in areas such as licensing timelines and inter-departmental coordination. Newly merged provinces must process higher volumes of applications while simultaneously adapting to new internal structures. This creates a temporary mismatch between formal authority and operational readiness, which may not be fully resolved until administrative routines stabilize.
Technical Infrastructure: Administrative Codes and Systems
One of the often overlooked aspects of the reform is the introduction of standardized administrative codes for the newly reorganized provincial and commune units. These codes form the technical foundation for tax administration, land and property registries, social insurance systems, population databases, and digital public service platforms.
Resource Allocation and Territorial Equity
Finally, mergers reshape how resources are distributed within provinces. Larger provinces must balance investment in former growth centers and development needs of peripheral or less developed areas.
If resource allocation becomes overly centralized, marginalized districts or communes may feel neglected, undermining the reform’s legitimacy. Conversely, if provinces use their expanded scale to cross-subsidize weaker areas and improve service access, mergers could enhance territorial equity.
Conclusion: Managing Risks for Effective Governance
The success of the reform ultimately depends on how effectively these risks are managed and whether institutions can adapt without disrupting core administrative functions. The key issue is therefore not whether the reform introduces risks, but whether institutions can absorb and manage them without undermining governance effectiveness. This will require:
- Careful transition management;
- Investment in human and digital capacity; and
- Continuous monitoring of fiscal and governance outcomes.
Read more: Transforming Local State Territorial Design and Administrative Systems After the Mergers
