PCI Methodology

Brief Methodology: The PCI is constructed in a three-step sequence, referred to as “the 3 Cs”: 1) collect business survey data and published data sources, 2) calculate ten sub-indices and standardize to a 10-point scale, and 3) calibrate the composite PCI as the weighted mean of ten sub-indices with a maximum score of 100 points.

Sampling: Firms are selected using random sampling to mirror provincial populations. Stratification is used to make sure that firm age, legal type, and sector are accurately represented.

10 sub-index of PCI

1. Entry Costs

The goal of this sub-index is to assess the differences in entry costs for new firms across provinces. A measure of:

- Length of business registration in days
- Length of business re-registration in days
- Percentage of firms that need additional licenses/permits
- Number of licenses and permits necessary to start operations after 2010
- Number of days to wait for Land Use Rights Certificate
- Percentage of firms waiting more than a month to complete all steps necessary to start operations
- Percentage of firms waiting more than three months to complete all steps necessary to start operations
- Percentage of firms registering or re-registering through one-stop-shop. NEW INDICATOR
- Procedures at one-stop-shop are transparently listed (% Agree) NEW INDICATOR
- Guidance and instruction on procedures at one-stop-shop are clear and adequate (% Agree) NEW INDICATOR
- Staffs at one-stop-shop are professional and knowledgable (% Agree) NEW INDICATOR
- Staffs at one-stop-shop are friendly (% Agree) NEW INDICATOR
- IT application at one-stop-shop is good (% Agree) NEW INDICATOR
- None of the statements above are true (% Agree) NEW INDICATOR

2. Land Access and Security of Tenure

A measure combining two dimensions of the land problems confronting entrepreneurs: how easy it is to access land and the security of tenure once land is acquired, including:

- Percentage of firms that own land and are in possession of an LURC
- Percentage of land that has been registered and provided with official LURCs
- Percentage of firms that say nonstate enterprises do not have difficulties in accessing land or expanding premises
- Firms' rating of expropriation risk (1: Very High to 5: Very Low)
- Percentage of firms that say compensation for land is always or highly likely fair
- Percentage of firms that agree that changes in government land prices reflect changes in market prices
- Percentage of firms that have completed land procedures in the last two years and have encountered no difficulties in land-related procedures NEW INDICATOR
- Percentage of firms that want to have LURCs but don't have LURCs because of complicated procedures and troublesome staffs NEW INDICATOR

3. Transparency and Access to Information

A measure of whether firms have access to the proper planning and legal documents necessary to run their businesses, whether those documents are equitably available, whether new policies and laws are communicated to firms and predictably implemented, and the business utility of the provincial webpage.

- Access to planning documents (1=easy to access; 5= impossible to access)
- Access to legal documents (1=easy to access; 5= impossible to access)
- Relationship important or very important to get access to provincial documents (% Important or Very Important)
- Negotiations with tax authority are an essential part of doing business (% Agree or Strongly Agree)
- Predictability of implementation of central laws at the provincial level (% Usually or Always)
- Firm gives comments on government regulation (%)
- Openness and quality of provincial webpage
- Business Associations's role in advising and countering provincial polices (% Important or Very Important)
- Percentage of firms have accessed provincial websites (%) NEW INDICATOR
- Budget documents have enough details for use in business activities (% YES) NEW INDICATOR
- Budget documents are published right after being approved (% YES) NEW INDICATOR

4. Time Costs and Regulatory Compliance

A measure of how much time firms waste on bureaucratic compliance, as well as how often and for how long firms must shut their operations down for inspections by local regulatory agencies.

- Percentage of firms spending over 10 percent of their time on understanding and complying with regulations
- Median number of inspections (all agencies)
- Median tax inspection hours
- Government officials are effective (% Strongly agree or Agree) NEW INDICATOR
- Government officials are friendly (% Strongly agree or Agree) NEW INDICATOR
- Firms don't have to travel many trips to obtain stamps and signatures (% Strongly agree or Agree) NEW INDICATOR
- Paperwork is simple (% Strongly agree or Agree) NEW INDICATOR
- Fees are listed publically (% Strongly agree or Agree) NEW INDICATOR
- No noticeable improvements are made (% Strongly agree or Agree) NEW INDICATOR

5. Informal Charges

A measure of how much firms pay in informal charges, how much of an obstacle those extra fees pose for their business operations, whether payment of those extra fees results in expected results or "services," and whether provincial officials use compliance with local regulations to extract rents.

- Enterprises in my line of business usually have to pay for informal charges (% agree or totally agree)
- Percentage of firms paying over 10 percent of their revenue for informal charges
- Rent-seeking phenomenon is popular in handling administrative procedures for businesses (% strongly agree or agree)
- Percentage of firms saying that informal charges usually or always deliver expected results
- Informal charges are at acceptable levels (% Strongly agree or Agree) NEW INDICATOR

6. Policy Bias – New Sub-index

- Provinces give privileges to state-owned economic group, corporations, causing difficulties to your business (% Agree)
- Land access as a privilege to state-owned economic group (% Agree)
- Credit access as a privilege to state-owned economic group (% Agree)
- Mineral exploitation license as a privilege to state-owned economic group (% agree)
- Faster and simpler administrative procedures as a privilege to state-owned economic group (% agree)
- Ease in getting state contracts as privilege to state-owned economic group (% agree)
- Province give priority to FDI attraction than private sector development (% agree)
- Province give priority in solving problems and difficulties to foreign companies over domestic one (% agree)
- Advantage in land access for FIEs (% agree)
- CIT reduction and holiday for FIEs (% agree)
- Advantage in procedures (faster, simplifier) for FIEs (% agree)
- More government support during FIEs operation (% agree)
- "Contracts, land,... and other economic resources mostly fall in the hands of enterprises that have strong connections to local authorities" (% agree)
- Preferential treatment to big companies (both state-owned and nonstate) is an obstacle to their business operations (% agree)

7. Proactivity of Provincial Leadership

A measure of the creativity and cleverness of provinces in implementing central policy, designing their own initiatives for private sector development, and working within sometimes unclear national regulatory frameworks to assist and interpret in favor of local private firms.

- Firms' assessment of the attitude of provincial government toward private sector (% Positive or Fairly Positive)
- The PPC is flexible within the legal framework to create favorable business environment for nonstate firms (% Strongly Agree or Agree)
- The PPC is very proactive and innovative in solving new problems (% Strongly Agree or Agree).
- There are good initiatives at the provincial level but they are not well implemented by departments (% Strongly Agree or Agree).
- Provincial leaders have good policies they are not well implemented at district level (% Strongly Agree or Agree).
- Province's reaction to lack of clarity in central policies/documents: % "delay and seek instructions" and "do nothing".

8. Business Support Services

Used to be named "Private Sector development services", this is a measure of provincial services for private sector trade promotion, provision of regulatory information to firms, business partner matchmaking, provision of industrial zones or industrial clusters, and technological services for firms.

- Number of trade fairs held by province in previous year and registered for present year
- Ratio of the total number of service providers to the total number of firms (%)
- Ratio of the number of nonstate and FDI service providers to the total number of service providers (%)
- Firm has used business information search services (%)
- Firm used private provider for above business information search services (%)
- Firm intends to use above service provider again for business information search services (%)
- Firm has used consulting on regulatory information (%)
- Firm used private provider for consulting on regulatory information (%)
- Firm intends to use above service provider again for consulting on regulatory information (%)
- Firm has used business match making services(%)
- Firm used private provider for business match making services (%)
- Firm intends to use above service provider again for business match making services (%)
- Firm has used trade promotion services (%)
- Firm used private provider for trade promotion services (%)
- Firm intends to use above service provider again for trade promotion services (%)
- Firm has used technology related services (%)
- Firm used private provider for technology related services (%)
- Firm intends to use above service provider again for technology related services (%)
- Firm has used accounting and financing training services (%) NEW INDICATOR
- Firm used private provider for above accounting and financing training services (%) NEW INDICATOR
- Firm intends to use above service provider again for accounting and financing training services (%) NEW INDICATOR
- Firm has used business administration training services (%) NEW INDICATOR
- Firm used private provider for above abusiness administration training services (%) NEW INDICATOR
- Firm intends to use above service provider again for business administration training services (%) NEW INDICATOR

9. Labor and Training

A measure of the efforts by provincial authorities to promote vocational training and skills development for local industries and to assist in the placement of local labor.

- Services provided by provincial agencies: general education (% Very Good or Good)
- Services provided by provincial agencies: vocational training (% Very Good or Good)
- Firm has used labor exchange services (%)
- Firm used private provider for above labor exchange services (%)
- Firm intends to use above service provider again for labor exchange services (%)
- Percentage of total business costs spent on labor training
- Percentage of total business costs spent on labor recruitment
- Overall Satisfaction with Labor (% Agreeing labor meets firm needs)
- Ratio of vocational training school graduates to untrained laborers
- Secondary school graduates as % of workforce
- Percentage of workers having completed training at vocational schools NEW INDICATOR

10. Legal Institutions

A measure of the private sector's confidence in provincial legal institutions; whether firms regard provincial legal institutions as an effective vehicle for dispute resolution, or as an avenue for lodging appeals against corrupt official behavior.

- Legal system provided mechanism for firms to appeal against officials' corrupt behavior (% Always or Usually)
- Firm confident that legal system will uphold property rights and contracts (% Strongly Agree or Agree)
- Cases filed by by non-state entities at Provincial Economic Court per 100 firms.
- Business used courts or other legal institutions to resolve disputes (%)
- Non-state claimants as a percentage of claimants at Provincial Economic Court.
- Median months to resolve court cases
- Median formal and informal costs as a percentage of case
- Provincial court judge economic cases by the law (% Agree or strongly agree) NEW INDICATOR
- Provincial court resolve economic cases quickly (% Agree or strongly agree) NEW INDICATOR
- Court judgements are enforced quickly (% Agree or strongly agree) NEW INDICATOR
- Legal aid agencies support business to use laws to sue when disputes arise (% Agree) NEW INDICATOR
- Formal and informal costs are acceptable (% Agree or strongly agree) NEW INDICATOR
- Judgement by the court is fair (% Agree or strongly agree) NEW INDICATOR
- Willingness to use court in case a dispute arises (% Yes) NEW INDICATOR






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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: (84-4) 3577 1460, 3574 6983 | Fax: (84-4) 3577 1459, 3577 0632 | Email: pci@vcci.com.vn & vcci.pci@gmail.com