At a notary’s office, long lines of businesses still wait to sign documents. Outside, the climb up the “ladder of procedures” continues - layer upon layer of inspections, verifications, and stamps often just to place a seal in the right spot.

This prolonged reality is one of the driving forces behind the implementation of the two-tier local government model, launched on July 1. It’s a model expected to usher in a new era: a more streamlined, effective government that is closer to both citizens and businesses.

Improving the relationship between government and business

Among sectors most entangled in red tape, real estate is frequently the hardest hit. Whether transferring land-use rights, converting usage purposes, subdividing land, or executing transactions, businesses must navigate a complex maze involving approvals and seals from three levels of government.

At the 5th Executive Committee Meeting (2022–2027 term) of the Vietnam Real Estate Association (VNREA), Nguyen Duc Cay, Chairman of Constrexim Housing Development JSC, candidly highlighted a barrier blocking investment flows: the reluctance of local authorities to approve investment decisions due to fear of accountability. This avoidance is widespread and leaves real estate developers waiting indefinitely. Many projects stall for extended periods, causing substantial financial losses and anxiety for investors.

Cay noted that in developed countries, investors can calculate returns clearly from the outset since land prices are defined in the investment approval. In Vietnam, however, prolonged approvals and unpredictable costs make it nearly impossible to estimate profitability. This uncertainty forces businesses to bear added financial burdens and inflates property prices, distorting the market and burdening buyers.

The infrastructure and construction sectors face similar hurdles. Tran The Tuyen, Director of Long Hai Investment Construction and Trading Co., said infrastructure projects must go through countless administrative steps - construction permits, design appraisals, bidding approvals, planning sign-offs - requiring clearance from multiple government levels. This leads to weeks or even months of delays, driving up opportunity costs and affecting project timelines.

Tuyen emphasized that bureaucratic intermediaries often result in informal costs. Each additional layer of authority can open doors to abuse of power or buck-passing, compelling businesses to pay unofficial fees just to move files forward. A leaner administrative structure could accelerate information flow, empower grassroots levels, and shorten the processing time for business procedures.

Agreeing with the business community, Dr. Mac Quoc Anh, Vice Chairman and General Secretary of the Hanoi Association of Small and Medium Enterprises, affirmed that simplifying administrative procedures will significantly benefit businesses - especially the small and medium-sized enterprises (SMEs) that account for roughly 98% of Vietnam's active firms.

These enterprises often struggle to access policies, capital, and new markets, largely due to prolonged bureaucratic bottlenecks. A streamlined process reduces compliance costs and waiting times, allowing firms to reallocate resources toward production, growth, and expansion.

Administrative reform depends on human capital

Dr. Mac Quoc Anh stressed that a transparent, low-barrier business environment is key to attracting investment, especially foreign capital. Easier access to the Vietnamese market not only encourages international cooperation and technology transfers but also boosts foreign direct investment (FDI) inflows.

As Vietnam deepens its integration through free trade agreements such as the EVFTA and CPTPP, reforming the investment environment is no longer optional - it’s imperative. Delay in institutional reforms may weaken competitiveness and leave domestic enterprises at a disadvantage on the global stage.

Beyond investment attraction, administrative reform fosters a genuine partnership between the state and enterprises. When businesses feel the government’s support is real, they become more cooperative and aligned with long-term development goals. This is also critical to improving provincial competitiveness index (PCI) scores, particularly in areas like land access, time costs, transparency, and public service quality.

Experience shows that provinces leading in administrative reform tend to have dynamic business communities and more favorable investment climates. In contrast, areas with bloated bureaucracies and overlapping authorities often rank low in PCI and struggle to draw investor interest.

While the two-tier local government model is expected to bring breakthroughs, Dr. Nguyen Si Dung, former Deputy Director of the National Assembly Office, warned of inevitable challenges in implementation.

One issue is the capacity of commune- and ward-level officials. Many are accustomed to handling only routine administrative tasks. Now, they must make real decisions - from budget management to investment approval and handling local social issues. Without sufficient expertise and leadership skills, they risk being overwhelmed by these new demands.

Another challenge is resource allocation. Decentralizing authority without funding or staffing support makes empowerment symbolic at best. To make commune-level administration truly effective, Vietnam must urgently refine fiscal mechanisms and invest in infrastructure, equipment, and human resources.

A further obstacle is the fear of making mistakes among grassroots officials. Although they are closest to the people, they also face the most public scrutiny. Without proper protections, the spirit of initiative and accountability could be stifled, undermining the goals of reform.

To address these concerns, the government is finalizing decrees that will expand decentralization and delegation to localities. At the same time, it is pushing for the application of digital technologies and building e-government systems at both provincial and communal levels to eventually process all administrative tasks online.

Minister of Home Affairs Pham Thi Thanh Tra acknowledged that challenges are inevitable during the implementation of two-tier governance. However, the key to success lies in the quality of public servants. Restructuring and improving human resources is no longer optional - it’s a critical requirement as local governments shift from administrative management to citizen-focused governance.

Delegate Tran Thi Hong Thanh (Ninh Binh delegation) also underscored the role of labor markets in this reform process. According to her, developing a sustainable labor system is not only a short-term necessity but also a long-term engine for growth. The government should focus on creating a transparent, interconnected labor market; reforming vocational education to match market demands; promoting sustainable employment; and supporting the transition from informal to formal employment. Strategic investments in digital and innovative human capital will be key to enhancing national competitiveness.

In short, the support of local governments plays a crucial role in stimulating business activity. But eliminating procedural hurdles will only truly empower enterprises if it is driven by innovation and commitment from every official and every business. Reform is never a short journey, but determined steps will always open new paths - for governments and enterprises alike.

Nhan Dan