HCM CITY — The merger of provinces and cities will not only facilitate localities in developing infrastructure and public services but also boost investment activities in the near future.

Significant administrative reforms currently underway are expected to help unlock resources, remove bottlenecks for the private sector and strengthen investor confidence.

From July 1, the two-tier local government apparatus in 34 provinces and cities will officially begin operating in unison.

Party General Secretary Tô Lâm emphasised that the reorganisation of administrative boundaries and the operation of a new local government model were an objective and inevitable requirement for the country's development in the context of globalisation, digital transformation and the fourth industrial revolution.

The restructuring of administrative units will not only give the local government system an overhaul but will also open up vast and promising development spaces for each region and locality as well as the entire country.

Experts from the Vietnam Securities Company Limited Bank for Foreign Trade (VCBS) said that the merger of provinces and cities would result in larger geographic areas, populations and economies, creating favourable conditions for infrastructure and public service development.

For example, after merging with Bình Dương and Bà Rịa-Vũng Tàu, HCM City will become a 'super city' on a regional scale in ASEAN with the largest economy in the country, covering an area of over 6,700 square kilometres, a population of nearly 14 million people and a GRDP of over VNĐ2.7 trillion.

Not only will the merger expand the scale, but the new provinces will also integrate various types of terrain and development advantages.

The newly-expanded HCM City will have a comprehensive economic advantage, including an urban economy from the former city, industry and FDI from Bình Dương and seaport, logistics and tourism services from Bà Rịa-Vũng Tàu.

Moreover, the combination of geographic features like the sea, the plains and the mountains will enhance the economic and social links for the provinces.

According to VCBS, with abundant area, population and resources, local governments now have the flexibility to plan economic development zones and transport systems across large areas, minimising the risks of disconnection that previously occurred in certain regions.

This is especially significant for large industrial projects, which often require a synchronised logistics system and convenient connections to raw materials, labour and major port and airport infrastructure.

Additionally, the merger of provinces and cities can significantly enhance the effectiveness of capital allocation and budget management by concentrating resources.

This could overcome previous issues, in which some localities faced limitations in population, economy and financial resources, making it difficult to realise their development vision due to dependence on central budget supplementation.

Experts from the Vietnam Investors Service and Credit Rating Agency Joint Stock Company (VIS Rating) said that the streamlining of administrative structures and government support policies would accelerate infrastructure projects and ensure more sustainable economic growth.

VIS Rating analysts said that with the Government's increased infrastructure spending plans in the second half of the year, the domestic business environment will likely receive significant positive support, and the reform process will proceed more smoothly, thus strengthening investor confidence.

They also expect Việt Nam's credit conditions to remain stable in the second half of this year, thanks to proactive fiscal policies and positive institutional reforms, mitigating the impact of global uncertainties. — VNS