Hanoi: Vietnam, under Communist leadership, is preparing to launch its most significant bureaucratic overhaul in decades, aimed at streamlining the government by reducing ministries, agencies, and state broadcasters. The goal is to cut through red tape and alleviate bureaucratic bottlenecks, although officials and investors warn this could cause temporary "paralysis."

According to Communist Party documents reviewed by Reuters and reports in state media, the proposed plan would see the dissolution of five ministries, four government agencies, and five state-run TV channels. This reform is still in its early stages, with adjustments expected before it is presented to parliament for a vote in February. While no official figures on job cuts have been released, the scale of the reductions suggests thousands of state employees could be impacted.

As a key Southeast Asian industrial hub, Vietnam's economy relies heavily on foreign investment, particularly in manufacturing, which fuels its export-driven growth. However, recent years have seen increasing frustration among investors due to delays in project approvals, regulatory inefficiencies, and a widespread anti-corruption campaign.

In response to these concerns, Vietnam's newly appointed Communist Party leader, To Lam, initiated the overhaul shortly after assuming office, aiming to address the bureaucratic hurdles hindering economic progress. The home and foreign ministries declined to comment on the reform plans.

This bold move comes ahead of the 2026 Communist Party congress, which will decide whether Lam will retain his position. It also aligns with similar government cost-cutting measures seen globally post-pandemic, such as those by Argentina’s libertarian President Javier Milei and U.S. President-elect Donald Trump.

One key aspect of the reform is the merger of the Ministry of Investment, responsible for industrial project approvals, with the Ministry of Finance. As a result, investors may face delays and uncertainty during the restructuring process, as the new governance framework takes shape. Leif Schneider, head of international law firm Luther in Vietnam, noted that while short-term disruptions are expected, the long-term outlook could improve if the reform is executed properly, making Vietnam a more attractive destination for investors.

Interviews with nine investors, diplomats, and officials revealed a mixed outlook, with many predicting temporary delays in administrative processes. "Expect paralysis for a while," said a Western diplomat based in Hanoi, who also suggested that the reform might serve as a power consolidation move by Lam.

Two foreign investors expressed cautious optimism, predicting that the reform could lead to more streamlined business procedures in the long run, though acknowledging potential delays in project approvals during the transition period.

Australia’s ambassador to Vietnam, Andrew Goledzinowski, compared the reform to Vietnam’s economic transformations of the 1980s, which turned the country into a major trading power. "Vietnam's New Era is dawning at a critical time," Goledzinowski wrote on social media. However, he cautioned, "Money is like water—when it is blocked, it goes elsewhere."