Short Report on Impact of Provincial Restructuring on the Economy and Investment in Vietnam

This article examines the impact of the 2025 administrative restructuring on the economic situation and investment environment. The transition to a two-tier administrative system aims to simplify administrative procedures and enhance efficiency. While growth and investment opportunities are anticipated, challenges such as legal inconsistencies and uneven implementation across regions may also arise.

Why Provincial Administrative Reform Must Proceed

Since the reunification of North and South Vietnam after the Vietnam War, administrative reorganizations have been implemented several times to align with socio-economic development goals. In 1975, approximately 72 provincial-level units existed, but in 1976, they were consolidated into 38 to centralize and streamline administration 26 . Over the following decades, Vietnam adopted a decentralized approach to promote regional development, gradually reestablishing provinces. The number increased to 53 in 1991, 61 in 1997, 64 in 2003, and 63 in 2008. However, throughout this period, the three-tier administrative structure- provinces/ centrally administered cities, districts, and communes- remained unchanged. According to Resolution 18-NQ/TW27 , while the administration has undergone significant reform efforts, it remains limited in efficiency and retains complexity. Key underlying factors are also identified. Political-administrative organizations have not kept pace with modern demands, partly 26 VnExpress (2025) <Access> due to differing perceptions and responsibilities among organizations regarding the need for reform. Furthermore, there is a lack of consistency in organizational structure, personnel management, and decision-making, with room for improvement in situational awareness, leadership, and incentives. Persistent challenges such as legal overlap, inadequate personnel policies, and insufficient audit and evaluation capabilities hinder the simplification of the administrative system. These challenges have prompted the government to adopt more efficient and practical approaches to restructure the public administration system and provide better services to citizens. Local Administration Restructuring: Introduction of a Two-Tier System Overview In early 2025, following multiple rounds of discussion, a reorganization of public administration was decided upon, introducing a two-tier local system to reduce fragmentation and duplication of tasks.