Competitiveness benchmark drives local reforms in Vietnam

Monday, 2018-03-26 17:10:50
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Quang Ninh province tops the PCI rankings this year.
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NDO - The provincial competitiveness index (PCI), which was first launched in 2005 as an optional tool to measure the business friendliness of Vietnam’s provinces and cities, has now evolved into a driver that stimulates local reforms.

In the first edition, only two thirds of Vietnam’s province-level localities were ranked but now all of the country’s provinces and centrally-governed cities have become compulsory participants.

As a measure of how local authorities facilitate businesses, the PCI has provided inspiration for and exerted pressure on them to take action in order to improve the business climate for private enterprises based in their jurisdiction.

The 2017 PCI report recently released by the Vietnam Chamber of Commerce and Industry recognises the impressive reform efforts by local governments across the
country. Compared to previous years, the local authorities have taken swift actions to remove any obstacles for businesses.

Overall, the quality of economic governance in provinces and cities is improving with many sub-indexes achieving the highest scores ever. This shows marked improvements in the local business climates.

Accordingly, the business community’s confidence in the business outlook has risen, with up to 52% of domestic private enterprises and 60% of foreign-invested enterprises stating that they will expand their businesses in the next two years.

However there is still much room for improvement. Transparency and legal institutions to resolve investor issues remain stagnant. The informal charges index has dropped but there are still up to 59% of enterprises (down 7% from the previous year) reporting that they have had to pay informal charges. In addition, there are still 28% of enterprises that are unsatisfied with the service quality and attitude of public administrative agencies.

Several new obstacles have emerged recently such as worsening land access, security of tenure and law and order in a number of localities.

Therefore, in the time ahead, the local governments need to continue improving the business environment by effectively implementing enterprise support programmes and building a mechanism to receive feedback from, and increase interaction with, the business community so that the authorities can have a better understanding of the needs of enterprises and make the appropriate policy changes.

In addition to traditional measures, such as holding dialogues with enterprises, the local governments should expand the information receiving channels to surveys and independent social studies and promote the establishment and effective function of the representative organisations of enterprises.

The ultimate goal of improving the business climate is bringing the highest satisfaction and confidence to investors and enterprises.