Vietnam's Government Restructuring: Updates on Conclusion 127

Vietnam’s government restructuring is among the most significant changes in the country this year, with profound implications for businesses and investors. This article details the latest developments in its provincial restructuring, emphasizing the consequences for businesses and investors while suggesting the best strategies for adapting to these changes.

To implement Resolution 18, which aims to optimize the political system, Vietnam’s Politburo and the Secretariat have issued various directives outlining specific guidelines for ministries and agencies. Conclusion No. 127-KL/TW (“Conclusion 127”), issued on February 28, 2025, by Vietnam’s Political Bureau (Politburo) and Secretariat, serves as the latest guide detailing specific tasks for restructuring Vietnam’s political system.

The restructuring framework is further outlined under Law No. 65/2025/QH15 on the Organization of Local Governments. These documents serve as essential resources for all stakeholders to navigate the ongoing process.

While it is expected to significantly reduce bureaucratic obstacles for businesses, the reorganization is also likely to impact the current operations of companies in Vietnam. This article presents the latest updates on Vietnam’s provincial restructuring, discusses its implications, and recommends the best approach for businesses and investors.

Conclusion 127: Most notable directions on Vietnam’s government restructuring

Issued on February 28, 2025, by Vietnam’s Politburo and Secretariat, Conclusion 127 outlines the key tasks for further reorganizing the political system’s apparatus. Accordingly, the Politburo and the Secretariat appointed competent authorities to oversee the implementation of the plan.

Mergers of local administrative units

Under Conclusion 127, the Party Committee of the Government is tasked with collaborating with relevant agencies to draft proposals for merging certain provincial administrative units, eliminating the district level, and continuing the merger of commune-level administrative units. 

The key directions include: 

• Implementing a two-tier local governance model: The merger should ensure streamlined, efficient, and effective operations through a two-tier local governance model. This involves abolishing the district level, merging certain provincial administrative units, and continuing the merger of commune-level administrative units.
• Requirements for provincial reorganization: The mergers must align with the national master plan, regional plans, local plans, and economic development strategies. Factors such as population size, land area, sector development, spatial expansion, comparative advantages, and the developmental needs of each locality in the new era should be considered.
• Requirements for commune-level reorganization: The reorganization at the commune level must identify suitable local government models for urban, rural, mountainous, plain, and island areas, as needed.

Restructuring affiliated agencies and organizations

The Politburo and Secretariat have tasked the Party Committee of the Vietnam Fatherland Front and central-level mass organizations to conduct a thorough assessment of the functions, responsibilities, and organizational frameworks of provincial and district agencies and organizations. This review will focus particularly on media outlets, with the goal of ensuring cohesive management and optimal efficiency by retaining only the most essential units.

Streamlining the judiciary system

The district-level court and procuracy systems will be eliminated as part of the restructuring plan. This plan for abolishment needs to be presented to the Politburo for guidance, with feedback sought from Party committees and organizations.

Timeline for research on reorganizing local administration, the judiciary, and affiliated agencies

At the request of the Politburo and the Secretariat, the Government Party Committee must urgently implement the above requirements for the restructuring of local administration, the judiciary system and affiliated agencies. The specific progress is promulgated as follows:

• By March 9, 2025: Report to the Politburo and organizations at all levels on policy direction.
• By March 12, 2025: Gather opinions from the Politburo, Secretariat, and Party committees and finalize the project.
• Before March 27, 2025: Collect opinions from the competent Party committees and report to the Politburo and the Secretariat.
• By April 7, 2025: Present to the Central Committee of the Communist Party.

Implementation of constitutional and legal changes

To align Vietnam’s legal system with restructuring efforts, Conclusion 127 directs amendments to the Constitution and various laws.

Amendments to Vietnam’s Constitution

The Party Committee of the National Assembly is tasked, in coordination with the Government’s Party Committee, to direct research on amending certain articles of the Constitution, specifically regarding the political system’s organizational structure, with the following timeline:

• Early March 2025 – Report to the Politburo;
• April 7, 2025 – Draft submission to the Central Committee; and
• June 30, 2025 – Finalization by the National Assembly.

Amendments to legal documents

The Party Committees of the Government and National Assembly will research and propose amendments to laws such as:

• Law on Local Government Organisation;
• Law on Cadres and Civil Servants;
• Law on Inspection;
• Law on Planning;
• Law on Elections of National Assembly and People’s Council Deputies;
• Law on Promulgation of Legal Normative Documents;
• Law on Organisation of the People’s Court;
• Law on Organisation of the People’s Procuracy; and
• Other related laws.

Additionally, decrees and regulations regarding the mechanisms and policies for cadres, civil servants, public employees, and workers affected by local administrative reorganization will also be developed.

All amendments must be finalized by June 30, 2025.

Framework for merging local administrative units

Standardized procedures

On February 19, 2025, Vietnam’s National Assembly completed its ninth extraordinary session by approving the 2025 Local Government Organization Law, which will take effect on March 1, 2025. This law outlines the procedures for establishing, dissolving, merging, and dividing administrative units, including regulations for adjusting local boundaries and renaming administrative entities.

Merging provinces and cities procedures effective March 1, 2025, have to follow specific steps, including:

• Step 1 – Project development: The Government will lead the project to establish, dissolve, merge, divide administrative units, adjust boundaries, and rename them for National Assembly submission. Provincial-level People’s Committees will handle similar projects at district and commune levels.
• Step 2 – Dossier requirements: Submission must include:
  • Project proposal for administrative changes.
  • Public opinion synthesis report from relevant councils and agencies.
  • Draft National Assembly resolution regarding these changes.
• Step 3 – Public opinion collection: The public must be consulted in affected commune administrative units. The provincial People’s Committee will organize this collection following Government guidelines.
• Step 4 – Project proposal completion: After gathering opinions, the development agency finalizes the project and submits it to relevant People’s Councils for review.
• Step 5 – Project appraisal: The proposal must be evaluated prior to its submission to the government and reviewed before being presented to the National Assembly and its Standing Committee for a final decision.
• Step 6 – Compliance with regulations: All procedures for establishing, dissolving, merging, and dividing administrative units must adhere to the Standing Committee’s regulations.

Conditions for central cities and provincial administrative units

Vietnam’s current standards to determine central cities and provincial administrative units are outlined under Article 1 of Resolution 1211/2016/UBTVQH13, amended by Resolution 27/2022/UBTVQH15.

Implications for businesses

Benefits of Vietnam’s government restructuring

The merging or provinces is expected to bring about several merits to businesses, such as:

• Improved administrative efficiency and cost savings: Reducing administrative units can enhance governance and decision-making while lowering costs due to fewer offices and personnel. Public services may also improve through better resource management.
• Motivating economic growth: Larger areas may improve resource allocation and attract investment due to increased market size.
• Streamlined court structure and proceedings: Eliminating district courts allows higher courts to handle cases, promoting consistency in rulings and reducing overhead. Continuous innovation in court processes will improve legal proceedings, ensuring fairness and transparency.
• Updated legal framework: Amendments to laws will clarify and predict legal processes, including procedural changes.

Challenges from the evolving process

Although the government’s streamlining efforts are expected to yield positive results, the current process may present new challenges for businesses, including:

• Operational disruptions: New administrative units may take time to become fully functional, delaying permits and licensing.
• Regulatory uncertainty: New agencies might not be fully operational, which can delay license issuance and crucial decision-making. Changes to regulatory procedures may happen before laws are officially updated, creating legal uncertainties and prolonging decision times.
• Possible requirement for new licenses and permits: Current licenses under the previous agency framework will stay valid until their expiration or the occurrence of certain changes. Businesses may need to update registration documents and obtain new permits under the restructured system.

Impact on e-invoice issuances

Companies must ensure that their e-invoices reflect the address stated on their enterprise registration certificate or other relevant documents, such as the taxpayer registration certificate, tax code notification, or investment registration certificate, even if the company has not yet updated its address following changes in administrative boundaries.

Takeaways

As Vietnam’s political system undergoes significant change, businesses should adopt flexible strategies to effectively navigate this period. The necessary steps may include: 

• Monitoring regulatory updates: Regularly tracking changes in laws, regulations, and organizational frameworks to guarantee adherence to new compliance standards.
• Preparing for the unexpected: Foreseeing potential confusion and delays in the early stages of restructuring, especially concerning licensing and governmental issues.
• Ensuring effective communication: Establishing clear and timely communication with pertinent government bodies during regulatory processes to prevent avoidable delays and expenses.