Tran Phuong Minh Trang
Kommunikationsmanagerin & Vertretung Spielwarenmesse
+84 (28) 3823 9085 trang.tran@vietnam.ahk.de
Introduction
Vietnam's rapid development over the past decades is a story of transformation, resilience, and strategic reforms. As the country now explores another significant structural change -the consolidation of provinces and cities - it is crucial for foreign investors, including those from Germany, to understand what these changes mean for their market entry, business planning, and long-term strategies. This blog traces Vietnam's administrative journey since 1975 and provides an outlook on how such changes could impact the country's economic potential and investment climate.
Vietnam in 1976: 38 Provinces and a Reunified Nation
After reunification in 1975, Vietnam’s National Assembly approved a major administrative overhaul. The newly formed Socialist Republic of Vietnam reduced its 72 provincial-level units to 38 by merging many provinces and cities—an effort to centralize governance and rebuild the war-torn economy. This restructuring laid the foundation for national integration and more efficient administration. However, the resulting large units often proved unwieldy, prompting gradual re-separation in the following decades. At the time, Vietnam operated under a highly centralized planned economy with minimal foreign trade and investment. In the years that followed, the country would gradually move toward reform, setting the stage for one of Southeast Asia’s most significant economic transitions.
Figure 1. Vietnam’s administrative units in 1976 vs. today. Source: thuvienphapluat.vn
From Unity to Reform: Vietnam’s Economic Transformation Since 1976
Vietnam’s path to global economic integration has been shaped by major milestones in reform and trade policy. The 1986 Doi Moi reform marked a shift from a planned economy to a socialist-oriented market model. WTO accession in 2007 deepened Vietnam’s global engagement, followed by the 2020 EU-Vietnam Free Trade Agreement (EVFTA), which opened new opportunities for German and European investors. Vietnam has also joined major trade pacts like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Regional Comprehensive Economic Partnership (RCEP), positioning itself as one of Asia’s most open economies.
Administrative restructuring has supported these developments by enabling more localized economic planning. Smaller, more manageable provinces have improved efficiency, attracted foreign investment, and tailored development to regional strengths. This reshaping has also facilitated the growth of industrial clusters, special economic zones, and focused investment areas.
Today's Vietnam: A Dynamic Economy with Regional Hotspots
Vietnam today comprises 63 administrative units, 58 provinces, and 5 centrally governed cities, each playing a vital role in shaping the country’s dynamic and diversified economy. In the north, Hanoi stands as both the political capital and a thriving center for services, technology, and startups. Surrounding provinces such as Bac Ninh, Hai Phong, and Quang Ninh have emerged as industrial powerhouses, boasting large-scale electronics manufacturing facilities and strategic logistics hubs.
Moving to Central Vietnam, cities like Da Nang are gaining prominence in the IT and service sectors while also maintaining their appeal as leading tourist destinations. Neighboring provinces such as Quang Nam and Thua Thien Hue are capitalizing on improved infrastructure and coastal advantages to attract investment and expand industrial activity.
In the south, Ho Chi Minh City remains the country’s economic engine, driving national growth with its vibrant business ecosystem. Surrounding provinces, including Binh Duong, Dong Nai, and Long An, have become focal points for industrial manufacturing and foreign direct investment (FDI), supported by well-developed industrial parks and export-driven infrastructure.
Figure 2. Vietnam’s main regions and cities in 2024. Source: GTAI, AHK Vietnam
Across these regions, Vietnam’s key economic hotspots are being propelled by rapid industrialization, the expansion of high-tech zones, a surge in renewable energy initiatives such as wind and solar, and a booming digital economy fueled by e-commerce growth.
What’s Next? Administrative Restructuring in Vietnam
Vietnam is currently contemplating a new phase of administrative restructuring, with plans to merge several provinces to reduce the total number of administrative units. This initiative is driven by the ambition to streamline governance, cut overhead costs, and enhance the overall competitiveness and investment appeal of provincial regions. The government sees greater administrative efficiency, improved policy implementation, and more effective infrastructure planning and budget allocation as key benefits of the proposed mergers. While specific combinations have yet to be finalized, the Ministry of Home Affairs has indicated that provinces with smaller populations or overlapping administrative functions are likely candidates for consolidation. Reflecting on the sweeping changes of 1976, it is clear that such large-scale restructuring, though complex, holds significant potential to modernize governance, optimize investment opportunities, and promote more targeted regional development.
Figure 3. Expected names of 34 provincial administrative units after merger and consolidation. Source: Tuoi Tre Online Newspaper
Outlook: Impacts on Business and Investment
The ongoing restructuring of Vietnam’s administrative map is expected to bring notable implications for businesses and investors. Changes in provincial boundaries could reshape logistics networks, potentially altering transport routes, port accessibility, and customs zones. Taxation policies and investment incentives may also be revised as local governments adjust to their new administrative landscapes.
Foreign direct investment (FDI) processes might benefit from more streamlined procedures or updated regulatory frameworks. Additionally, access to land—particularly for industrial development—could become more efficient, with larger provinces offering better-planned and consolidated industrial zones.
For German companies, this period presents a valuable opportunity to position themselves strategically in regions poised for growth or consolidation. With reduced bureaucratic hurdles and improved coordination at the local level, regional mergers could pave the way for stronger partnerships and smoother business operations. Throughout this transition, AHK Vietnam will continue to be a trusted partner, guiding German firms through the evolving investment environment.
Strategic Recommendations for German Businesses
As Vietnam moves forward with its administrative restructuring, German businesses are encouraged to stay closely informed and adapt their strategies accordingly. Monitoring government announcements about potential mergers or boundary shifts can help companies align future investments with emerging growth areas. Strategic planning tailored to regional dynamics will become even more essential as administrative adjustments may influence investment conditions, infrastructure priorities, and workforce availability.
Close engagement with experienced local partners will continue to be essential, especially when navigating evolving regulations, infrastructure plans, or policy priorities. Understanding regional dynamics early on can help companies respond effectively to shifts in the business environment.
AHK Vietnam offers practical insights and support for German businesses exploring or expanding their presence in Vietnam. With a long-standing presence in the market, we provide services such as market orientation, location analysis, basic legal and tax information, and introductions to potential partners or suppliers. These offerings are designed to help companies make informed decisions and develop sustainable, locally grounded business strategies.
Conclusion
Vietnam’s administrative evolution reflects its dynamic journey from a war-torn country to a regional economic leader. For German companies, these changes are not roadblocks but rather roadmaps for growth.
As Vietnam prepares for another shift, proactive planning and on-the-ground knowledge will be crucial. AHK Vietnam is ready to support you in identifying the right regions, the right time, and the right partners to ensure long-term success.
Additional Resources
AHK Vietnam publications: