Vietnam’s centralization drive faces external economic headwinds
Communist Party chief To Lam has embarked on a radical program of administrative reform that is increasingly vulnerable to forces beyond Hanoi’s control.
While the official media coverage of Vietnam’s sweeping governance reforms remains overwhelmingly celebratory, a quiet but growing unease is palpable among many retired officials, mid-level cadres, and workers across sectors over the pace, scope, and implications of the reforms. In private conversations, many expressed shared concerns not just about implementation challenges, but about whether the Communist Party of Vietnam (CPV) is overreaching at a time of heightened international uncertainty. The resurgence of U.S. protectionism, and its recently imposed import tariffs, has cast doubt on the economic foundations supporting the CPV’s domestic political consolidation. These anxieties have been sharpened by the CPV’s order to amend the Constitution before July 2025 to facilitate these forms, a move that underscores the urgency and political irreversibility of what is unfolding.
The reforms, introduced by CPV General Secretary To Lam since late last year, represent the most far-reaching institutional recalibration since the Doi Moi economic reforms of the late 1980s. Under the CPV’s ambitious plan, the number of provinces will be cut from 63 to as few as 34, the district level of government eliminated, and the number of communes and wards reduced by up to 70 percent. The public sector workforce is also set to shrink by at least 20 percent. These moves, couched in the language of efficiency, cost saving and streamlining, also reflect a strategic intent: power consolidation through administrative restructuring.
Spearheaded by Lam, the CPV is effectively pursuing a vertical consolidation of power: removing intermediary state actors and intensifying the center’s control over local governance. The CPV leadership has long viewed bloated local government as not only inefficient but also politically unruly: difficult to control, prone to rent-seeking, and in some cases resistant to Hanoi’s top-down directives. This administrative consolidation will also further tip the balance of power inside the CPV itself. With the number of provinces almost halved, the number of seats allocated to provincial leaders in the CPV Central Committee, already in decline, will be significantly reduced. This move diminishes the role of regional actors in national decision-making and further strengthens the relative dominance of the central government, security institutions, and Party apparatus. This is not merely technocratic rationalization; it is a political realignment.
The impetus behind these reforms is personal as much as institutional. To Lam, who will be close to 69 years of age at the next CPV Congress in early 2026, is widely believed to be positioning himself for an exceptional extension in order to serve a full second term. To secure such an outcome, he must present himself as a transformative strategist: a leader capable not only of maintaining order but of reshaping the state to meet what the Party increasingly describes as Vietnam’s 100-year vision for national development.
Unlike his predecessor Nguyen Phu Trong, whose leadership style emphasized ideological discipline and consensus-building through intra-Party rectification and anti-corruption, Lam appears to favor structural intervention and assertive centralization to leave a legacy of decisive transformation. For Lam, time is short, and the stakes are high. Delivering visible, irreversible reforms before the 14th CPV Congress will be central to building his case for staying in power.
Yet this drive for centralization has now collided with renewed global instability. This intersection between accelerated domestic restructuring and external economic exposure forms a major risk at the current moment. The Party’s attempt to remold the state and recentralize authority depends on continued economic growth and fiscal stability. Yet those very conditions are now vulnerable to forces beyond Hanoi’s control. Under the new U.S. administration, tariffs have returned as a central policy tool, and Vietnam is dangerously exposed. The U.S now absorbs nearly 30 percent of Vietnam’s total exports, more than any other single trading partner. Already, reports have emerged of Vietnamese goods facing enhanced inspection and delays at U.S. ports, including electronics and garments, both key drivers of employment in the northern and southern industrial corridors.
Washington’s protectionist turn poses several interrelated risks for the CPV’s domestic agenda. First is the revenue risk: Any major trade disruption, such as the currently suspended 46 percent U.S. tariff on Vietnamese goods, could slow GDP growth, reduce customs and corporate tax revenues, and strain central transfers to local governments. According to the research firm BMI, the tariff shock alone could cause Vietnam to miss its 7.4 percent growth forecast by as much as 3 percentage points. This revenue decline would coincide with rising transitional costs tied to the reforms, including early retirements, severance payments, and the establishment of new inter-provincial service systems, compounding fiscal pressures at a precarious time.
Second is the social risk. Many of the affected regions, particularly in the Red River Delta and Mekong Delta, are also labor-exporting and migration-prone. Layoffs in export-oriented factories, combined with the withdrawal of locally anchored governance, could generate local disaffection, resulting in a legitimacy gap that the Party is not well-positioned to fill. A centralized bureaucracy may become more efficient on paper, but it risks being more remote in practice.
Third is the narrative risk. The CPV has tightly bound its political legitimacy to its economic performance: its ability to deliver stability, growth, and rising living standards. Structural reforms are being sold as the next phase of that model: smarter government for a modernizing society. But should reforms result in short-term disorder, with unclear benefits and rising hardship, that performance legitimacy may erode. Moreover, the CPV’s recent diplomatic successes, including its recent establishment of comprehensive strategic partnerships with countries including the U.S., Australia, Japan, and South Korea, may appear hollow to segments of the public, particularly if these diplomatic gains fail to translate into economic resilience.
Finally, by dismantling decentralized provincial governance structures, the CPV risks losing valuable institutional flexibility. Research shows that while often criticized for policy failure, provincial autonomy in Vietnam also allows pragmatic adaptation of central policies and diversified experimentation. Removing these adaptive structures may make Vietnam’s governance system more brittle and less able to respond effectively to unexpected shocks, precisely at a moment when global volatility demands greater adaptability.
To mitigate these pitfalls, the CPV may still be able to temper some of the risks of recentralization by improving implementation transparency and accountability. While broad participatory governance is politically unlikely under current conditions, structured feedback mechanisms, through mass organizations or controlled consultative processes, could help maintain the Party’s legitimacy. Paired with clearer public communication and service responsiveness, such measures would show that efficiency does not come at the expense of responsiveness.
Second, Vietnam’s overreliance on the U.S. market as a growth engine has left it strategically exposed. To build greater economic resilience, trade diversification must move beyond official statements and into concrete execution. This includes further deepening engagement with ASEAN neighbors, accelerating access to European markets under existing free trade frameworks, and more actively cultivating economic partnerships with major and middle powers such as India, Australia and Canada. Domestically, policy should shift toward fostering higher value-added production, particularly in manufacturing and agro-industry, to reduce vulnerability to external shocks and improve national competitiveness.
Ultimately, the CPV is attempting to do something rare in contemporary politics: restructure the administrative state, consolidate political control, and ride the wave of global economic uncertainty all at once. But sequencing matters. If the reforms get ahead of the country’s economic carrying capacity, or if their implementation amplifies social dislocation during a trade shock, the political costs could be steep, including declining trust in central leadership, weakened implementation capacity, and intra-party dissent.
By Vu Lam – The Diplomat – May 7, 2025