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[HO CHI MINH CITY] The Vietnamese government on Wednesday (Jan 1) rolled out three decrees regarding policies to support officials, civil servants and public employees affected by the ongoing bureaucratic reform, as well as to attract and promote talent in the state apparatus.

The restructuring scheme, which Vietnam’s Communist Party chief To Lam described as a “revolution” in organisational reform, is designed to increase governance efficiency and relieve strain on the state budget.

The implementation of the policies will require about 130 trillion dong (S$7 billion), with the streamlined system expected to save 113 trillion dong from the state budget in the next five years, according to estimates of the Ministry of Home Affairs. 

The funds will cover financial support, insurance benefits and other payments for affected workers, including those retiring early, resigning from their jobs or being demoted, as well as provide bonuses and training costs for new appointments and qualified talent.

Around 100,000 people are facing employment changes amid the country’s biggest bureaucratic reform in decades, which is expected to be finalised by the end of the first quarter of 2025. 

The overhaul includes the abolishment and mergers of ministries, party organisations and government agencies, among others. The move aims to reduce the size of both central and local administration by at least 15 per cent. 

This is also taking place amid a sweeping anti-corruption campaign that implicated thousands of party and government officials and corrupt businesspeople in the South-east Asian country over the past few years.

Vietnam is currently spending more than 70 per cent of the state budget revenue on regular expenses of a bloated bureaucracy, which employs around 2.5 million workers, leaving less than 30 per cent for investment and development. 

Speaking at a conference in December, Minister of Finance Nguyen Van Thang deemed such a ratio “problematic” for the next growth stage of the country.

While the new arrangements spark concerns over short-term administrative delays and uncertainties for investors, many believe the reform is necessary to bring about long-term improvements in Vietnam’s business environment.

Better execution

Richard McClellan, country director for Vietnam at Tony Blair Institute for Global Change, said that the restructuring also promises boosted investor confidence and better execution of mega-projects, which benefit from a leaner and more responsive administration.

“The state apparatus overhaul demonstrates the political will to pursue transformational change,” he said. 

The government has aimed for a higher economic growth of a double-digit rate this year, identifying the 2025-2030 period as a springboard for the country to reach its high-income ambition by 2045.

Vietnam, which is still in the lower-middle income rank, posted 6.8 per cent year-on-year growth of its gross domestic product in the first nine months of this year, with the annual rate to be announced next Monday (Jan 6). It comes after a slower expansion of 5.05 per cent in 2023 and an average annual growth of about 6.1 per cent in the decade to 2022.

Sam Korsmoe, co-author of Vietnam: Asia’s Rising Star, viewed the recent round of reform as a type of “Doi Moi 2.0”, which was originally a revolutionary period in which Vietnam’s ruling Communist Party mandated a series of free-market reforms in 1986.

“This not just reform, but a concentrated effort to bring more highly educated people into the government,” Korsmoe said, underlining that more efficient governance is crucial for Vietnam to grow as the next Tiger economy, like what South Korea and Taiwan did in the 20th century. 

Linh Nguyen, lead analyst for Vietnam at London-based consultancy Control Risks, highlighted the role of leadership and reform in securing political stability, governance quality, and institutional efficiency to sustain growth at a high pace.

“However, new leaders are likely to emerge in Vietnam following the 14th Party Congress in early 2026,” she noted. “There might be unpredictable changes which will affect economic trajectory over the next decade.”