Four decades have passed since Vietnam launched Doi Moi, the economic renovation that abandoned communist central planning in favor of market-oriented reforms. This year also marks one of the most intense periods of institutional change the country has seen since those reforms began.
At the heart of Vietnam's transformation lies an unwritten social contract: the ruling Communist Party of Vietnam (CPV) delivers economic progress and rising living standards, and in return, its authoritarian governance faces little domestic challenge. That bargain has been renegotiated several times over the years, but the current reshaping under national leader To Lam—a former minister of public security—is the most far-reaching yet.
A new era of centralization
In January, the CPV held its 14th National Congress, confirming an extraordinary target first set the previous year: sustained double-digit GDP growth through 2030. To Lam was returned as general secretary for a full five-year term, and within months he was formally installed as state president, consolidating the two most powerful positions in Vietnamese politics for the first time as a planned structure.
The pace of change has been dizzying. In 2025, government ministries were consolidated from 22 to 17, provinces were merged from 63 to 34, and the entire district tier of government was eliminated. Such rapid restructuring has not been seen since the early days of Doi Moi.
Rewind to December 1986, when the Sixth Party Congress broke with central planning because the country faced an existential economic crisis. GDP per capita was around US$230, Soviet support was contracting, and the communist command economy had plainly failed. Doi Moi was, from the start, a survival strategy.
The compact has been redefined in stages since: through normalization with former adversaries and regional integration in the 1990s; through World Trade Organization (WTO) accession and opening to foreign investment in the 2000s; and under General Secretary Nguyen Phu Trong, whose anti-corruption campaign from 2016 onwards became the defining feature of Vietnamese politics during his tenure. Now, under To Lam, the CPV is reshaping the compact again—this time by centralizing power at a pace and scale not seen in decades.
Economic pressures mount
The economic transformation that has underwritten the social compact has been genuinely remarkable. GDP per capita has risen from around $230 in 1986 to over $5,000 now. Extreme poverty has fallen from 14% to under 4% since 2010 alone. GDP grew 8% in 2025, the highest rate in the region. In July this year, the World Bank reclassified Vietnam as an upper-middle-income economy.
The country has joined the WTO, signed the CPTPP and EVFTA free trade deals, and emerged as one of the world's most open, trade-oriented economies. Alongside this, Vietnam has undertaken successive waves of legal and regulatory reform to bring the commercial environment closer to the demands of a market economy.
But the compact with Vietnamese citizens depends on continued delivery, and the model's structural weaknesses have become harder to ignore. The economy remains heavily dependent on foreign direct investment (FDI). The domestic private sector now contributes nearly half of GDP, but continues to face structural constraints limiting productivity, innovation and participation in global value chains. The middle-income trap is no longer a theoretical risk—it is starting to squeeze in real time.
The property and financial sectors show where governance has fallen short. All land remains state-owned under the constitution, and although the 2024 Land Law has moved toward more market-based valuation, a gap persists between the legal framework and economic reality. Access to land use rights and infrastructure contracts has been one of the most important engines of wealth accumulation, generating disproportionate gains for the politically well-connected and forming the commercial base of several of Vietnam's largest conglomerates.
The 2024 Van Thinh Phat case, in which property tycoon Truong My Lan was convicted and sentenced to life imprisonment for embezzlement of $12.5 billion—the largest financial scandal in Southeast Asian history—laid bare the rot in the system. The case showed that when property rights are ambiguous and enforcement is uneven, capital flows to those with political access. As Vietnam's banking cleanup continues, the deeper infrastructure gaps remain unresolved.
Foreign policy as part of the bargain
Vietnam's foreign policy has been integral to the compact's success, even if it is often analyzed separately. Normalizing relations with the United States in 1995, deepening engagement with China even amid persistent South China Sea tensions, and elevating to a comprehensive strategic partnership with Washington in September 2023 all reflect a deliberate strategy of diversifying dependencies and embedding Vietnam in institutional frameworks that constrain larger states.
Vietnam has also built comprehensive strategic partnerships with Australia, India, Japan and South Korea, and anchored itself in multilateral trade frameworks from the WTO to the CPTPP. This external positioning has directly served the domestic compact: it has opened markets, attracted FDI and helped underwrite the growth on which the CPV's legitimacy depends.
Through this web of relationships, Vietnam has also reshaped how it is perceived in international society, actively building an identity as a responsible stakeholder and rules-based actor through diplomatic practice and institutional participation, though its human rights record remains a sore point with many in the West and activist groups. The South China Sea remains the most sensitive test of this balancing act, with the CPV managing nationalist sentiment against China carefully, aware that it cannot always be controlled once stirred and mobilized.
The CPV's survival through four decades of market transformation is itself central to the compact's durability. Where the Soviet Union and its satellites saw economic reform accelerate political collapse, Vietnam has managed to keep political control firmly in party hands. But To Lam's gamble is that he can accelerate growth while tightening control—a bet that may prove riskier than any previous renovation of the compact.
