PRESS RELEASE: THE PROVINCIAL COMPETITIVENESS INDEX 2015

PRESS RELEASE

THE PROVINCIAL COMPETITIVENESS INDEX 2015

“Results Show Continued Improvements in Local Economic Governance”

 

Ha Noi,  March 31, 2016: This morning, the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S. Agency for International Development (USAID) launched the annual Provincial Competitiveness Index Report 2015 (PCI 2015).   

Started in 2005 by VCCI and USAID, the PCI is designed to assess the ease of doing business, economic governance, and administrative reform efforts by local governments of the provinces and cities in Vietnam in order to promote the development of the private sector. The 2015 PCI is the 11th iteration of the report, based on responses from 11,700 enterprises, being comprised of 10,200 domestic private firms in 63 provinces and cities and 1,500 foreign invested enterprises in 14 provinces of Vietnam.

2015 is the third consecutive year that Da Nang topped the rankings with a score of 68.34, marking the sixth time the city has led the rankings since the first PCI report in 2006. Following Da Nang are the two provinces of Dong Thap (66.39 points) and Quang Ninh (65.75 points), which both have been consistently high performers in the PCI and also demonstrated unique innovations for streamlining local regulatory practices and enhancing the transparent evaluation of personnel involved with the local business sector. Vinh Phuc (62.56 points) and Lao Cai (62.32 points), consistent top performers, round out the top five. The top ten best performers in PCI 2015 also include Ho Chi Minh City, Thai Nguyen, Quang Nam, Long An and Thanh Hoa, which received positive assessments by domestic enterprises.

 

Dr. Vu Tien Loc, Chairman and President of the Vietnam Chamber of Commerce and Industry commented: “The national competitiveness is mainly determined by economic governance and the ease of doing business in cities and provinces. Therefore, the proactivity of provincial leaders, and professionalism and effectiveness of local government officials are deciding the speed and direction of Vietnam’s development in the time to come. The PCI represents the strong encouragement of the business community for such drastic change at provincial level in Vietnam.”

 

In general, the economic governance of the cities and provinces in Vietnam continues to improve.  Positive improvements were observed in the area of business registration, access to information, and administrative procedure reform. The PCI 2015 survey, however, showed continued stagnation with reducing informal charges and creating a fair playing field for private sector competition

 

The PCI 2015 survey again revealed signs of a positive business environment. About 10.9 percent of domestic firms planned to increase their operations after two years at a historical nadir. Inflation-adjusted average investments rose to VND16.5 billion ($737,000), the highest level in ten years, and well over twice the amount recorded in 2006. The number of firms adding employees also almost rose to 12 percent, double the record low levels of 2012. In 2015, nearly half the firms (49 percent) expected to expand their businesses in the next two years, the highest increase over the past five years of the PCI report.

 

This year, the PCI report includes a chapter to present the opinions of small and medium enterprises (SMEs) regarding the business environment in order to contribute to the drafting process of the Law on Supporting SMEs. As the 2015 PCI survey shows, most of SMEs do not appear to be well-prepared to take advantages of market opportunities. Their customer base is mainly domestic and they are experiencing relatively poor performance. The report documents how SMEs find it difficult to get access to land, and capital and regulatory information.  They are also beset by obstacles like the burdens of informal charges and the poor quality of business support services with unreasonable prices. A worrying trend is that as firms grow bigger they face a greater burden of administrative procedures as well as inspections from local authorities.

 

“The PCI program has consistently promoted the voices of the private sector while engaging provincial governments in business environment reforms," said Ted Osius, the U.S. Ambassador to Vietnam. “Efforts to improve competitiveness will be critical to Vietnam’s success and particularly to developing a more inclusive economy.”

As the 2015 PCI report shows, 1,584 foreign invested enterprises (FIEs) perceive that Vietnam continues to have advantages over its competitors in terms of policy stability, low expropriation risk, business involvement in policy making, and a reasonable tax burden. However, foreign investors ranked Vietnam below its competitors with regard to informal costs, regulatory burdens, the quality of infrastructure, and public services such as health and labor training. FIEs are primarily concerned about two major types of risk, namely macroeconomic and regulatory risks that may reduce their profitability. Improving transparency is considered an important way to reduce these concerns of the foreign invested enterprises.

Analyzing the absorptive capacity and spillover effects of FIEs, the 2015 PCI report documents the limited technology and labor productivity spillovers that come with close cooperation with foreign partners to domestic businesses, especially in high tech industries as policymakers hope. To improve the impacts of spillovers, Vietnam would benefit most from educational improvements that enhance the capacity of its labor force and technological sophistication of domestic enterprises.

As the 2015 PCI report shows, awareness of and support for the Trans-Pacific Partnership (TPP) Agreement remain generally high among all parties. Average awareness increased from 68 percent in 2014 to 78 percent in 2015, while average support increased 62 percent to 72 percent. Domestic firms, however, demonstrated the lowest awareness of the TPP compared to foreign invested enterprises. Providing more TPP-related information for businesses, thus, is essential for them to take better advantage of the opportunities as well as better deal with challenges from the agreement.

 

Launched since 2005, the PCI is comprised of sub-indices such as entry costs, land access and security of tenure, transparency, time costs, informal charges, proactivity of the provincial leadership, policy bias, business support services, labor training policy and legal institutions. The index is developed by a team of international and national experts from VCCI with the support of USAID. The 2015 PCI report and survey data can be downloaded at www.pcivietnam.org or www.pcivietnam.vn

 

For further information, please contact Ms. Le Thanh Ha, Email: halt@vcci.com.vn, Tel: 04.35742022 (ext.: 325).






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The Provincial Competitiveness Index (PCI) Project

Legal Department | Vietnam Chamber of Commerce and Industry (VCCI)

9 Dao Duy Anh St, Hanoi | Tel: (84-24) 3577 1460, 3574 6983 | Fax: (84-24) 3577 1459, 3577 0632 | Email: pci@vcci.com.vn & vcci.pci@gmail.com