The hidden costs of Vietnam’s new era
Vietnam is entering what its leadership terms the ‘new era’, anchored by double-digit growth targets, sweeping administrative reforms and the most ambitious infrastructure push in its modern history. With nominal GDP poised to overtake Thailand’s in 2026, the new era narrative is being increasingly promoted both at home and abroad. Yet beneath the headline growth numbers are emerging frictions that risk undermining social resilience, affordability and public trust.
The new era ambition is fuelling a top-down redesign of society. Despite good intentions, top-down policies often clash with lived complexity and implementation capacity. Without robust consultation, clear accountability and effective transitional safeguards, new era policies have inflicted disproportionate costs upon vulnerable populations.
The acquisition of agricultural land is a case in point. Under Resolution 254, if a developer or the state reaches an agreement with 75 per cent of land users, provincial authorities can reclaim land from the remaining 25 per cent. The policy aims to address Vietnam’s site clearance challenges and expedite major infrastructure projects.
But it does not address the primary cause of holdouts: state-determined compensation for agricultural land is often hundreds of times lower than its market value once converted to residential or commercial use. By weakening farmers’ bargaining power, this well-intentioned policy accelerates a de facto wealth transfer from farmers to corporations and the state.
Decree 46 is another reminder of how siloed policymaking without accountability can backfire. Intended to strengthen food safety after a string of poisoning incidents in 2025, the decree’s January 2026 debut triggered an immediate logistical meltdown. New inspection requirements were imposed without phased transition, stakeholder consultation or adequate preparation, leaving thousands of tonnes of perishables stranded in ports and border crossings during Lunar New Year. The implementation gap was so severe that the decree was suspended just 10 days after taking effect. No official has been held accountable for the fiasco.
Top-down policymaking without grassroots consultation and transitional safeguards is also unfolding across Vietnam’s major cities. Hanoi’s removal of makeshift markets and Ho Chi Minh City’s crackdown on the sidewalk economy reflect a legitimate intent to improve food safety and urban order.
Yet instead of working with street vendors to raise hygiene standards, authorities have opted to dismantle this essential price-stabilisation channel for the urban poor. Informal markets supply food at significantly lower prices than formal retailers and provide flexible livelihoods for older workers and women with limited access to formal employment. They also function as safety nets within a welfare system that remains narrow in scope and capacity. Erasing grassroots social systems without credible alternatives leaves vulnerable vendors with few choices and risks damaging social resilience.
Small vendors also bear the brunt of new era tax reform. Starting in January 2026, 5.2 million household businesses have been obliged to move from a lump-sum tax system to a declaration-based regime requiring investment in sales software, e-invoicing systems and accounting support. The reform aims to improve tax transparency, reduce counterfeiting and gradually formalise Vietnam’s vast informal sector.
But the new law caused immediate disruption and pain for many small traders, especially older vendors with limited technological skills. Any tax mistake or late filing can trigger escalating penalties which, if left unpaid, can lead to the seizure of personal assets from any member of a household business. Following mass stall closures, the government was forced to raise the taxable revenue threshold for household businesses and introduce a one-year grace period for filing errors.
This tougher enforcement approach extends beyond taxation. Under Decree 168, penalties for traffic violations have become detached from the economic reality facing the average citizen, with the fine for a motorcyclist running a red light amounting to roughly two-thirds of Vietnam’s average monthly income. This creates a fear-based mobility environment where the most vulnerable may be one mistake away from poverty.
It also erodes public trust in law enforcement as traffic police are permitted to retain 85 per cent of traffic fine revenue to fund their operations. When the agency enforcing the law also benefits directly from the volume of fines, the public may begin to view traffic stops as revenue collection rather than safety enforcement.
Macroeconomic risks exacerbate the burden on vulnerable populations. Consumption and private investment growth have slowed markedly since COVID-19. Loose monetary policy puts downward pressure on the Vietnamese dong, raises import costs and transmits inflationary pressure. Capital has also disproportionately flowed into real estate, worsening housing affordability for younger households.
These outcomes are not inevitable, but reflect policy choices that prioritise speed over resilience and top-down mandates over grassroots realities. Ignoring these hidden costs risks eroding the very social stability that made Vietnam’s development model successful in the first place. The path forward requires a shift toward robust consultation processes, clear accountability and phased transitions that reflect implementation capacity and complexity. The true test of Vietnam’s new era will not be how fast the economy grows, but what kind of society it builds in the process.
By Phan Le & Hai Thanh Nguyen – Eastasiaforum.org – March 21, 2026