Local Governance Quality Keeps Improving

1:51:53 PM | 12/5/2020

Quang Ninh province took the lead in the Provincial Competitiveness Index (PCI) rankings for a third consecutive year, scoring 73.40 points, followed by Dong Thap (72.10 points), Vinh Long (71.30 points) and Bac Ninh (70.79 points). Other localities in the Top 10 group include Da Nang, Quang Nam, Ben Tre, Long An, Hanoi and Hai Phong. Other high-ranked provinces and cities are Can Tho, Thai Nguyen, Binh Duong, Ho Chi Minh City, Tay Ninh and Ba Ria-Vung Tau.

At the online launching ceremony of the Annual Report on PCI 2019 organized by the Vietnam Chamber of Commerce and Industry (VCCI) in collaboration with the U.S. Agency for International Development (USAID) in Hanoi, Dr. Vu Tien Loc, President of VCCI, said that, in the past 15 years, PCI has been persistent in conveying the message of improving the quality of economic management and creating a more favorable business environment. This will generate employment, increase budgetary revenue, sharpen competitiveness and enhance national prosperity.

U.S. Ambassador to Vietnam Daniel J. Kritenbrink said, “Over the past 15 years, PCI has played an important role in promoting transparency and accountability in local economic governance and facilitating private sector development in Vietnam, thus enhancing Vietnam's competitiveness in the international arena. The United States supports PCI as well as other programs that are designed to raise the livelihoods of Vietnamese people across the country.”

Developed and first released in 2005, PCI is a set of indicators including many component indicators such as market entry costs, access to land and stability of land use, transparency, time costs, informal charges, local government action, fair competition, business support services, labor training, legal institutions and security and order.

The 2019 PCI survey shows that the quality of local economic governance has improved over the time. It records positive changes in the dynamism and creativity of the provincial governments, and how they handle difficulties and problems faced by enterprises. The business environment is getting more equal, enterprises have more favorable access to information and legal institutions while informal cost burdens continue to ease and administrative reforms produce positive results.

Notably, PCI 2019 has the highest average score ever. In 2005, the province at the bottom scored only 36 points, while in the last year, the lowest score was approximately 60 points on the 100-point scale. The average score of PCI reached over 65 points last year, the highest ever, showing a narrow gap in reform quality. The trend of a narrowing gap in governance quality among provinces and cities is becoming clearer.

The 2019 PCI report is based on feedback from nearly 12,500 businesses, including about 11,000 private businesses active in 63 provinces and cities and over 1,500 foreign-invested enterprises in 21 localities in Vietnam.

In the middle of 2019 when VCCI conducted a business survey, more than 50% of respondents, both domestic and foreign, said they would expand business in the next two years. In 2019 alone, an average of nearly 380 new businesses were established a day. The registered capital per business entity increased.

The PCI 2019 survey also showed that five biggest problems faced by private businesses are finding customers (63%), accessing capital (35%), recruiting suitable personnel (34%), seeking business partners (28%) and market volatility (27%).

Besides, according to VCCI, there is still significant room for improvement in local governance, especially in transparency of public procurement information and administrative procedure reform in some fields, especially land and ground clearance procedures, construction planning and urban planning.

Micro, small and medium-sized businesses have more difficulties than larger ones. Business difficulties will certainly be more serious in 2020 and beyond due to negative impacts of the Covid-19 epidemic. Many companies are at risk of operational suspension or even bankruptcy. Therefore, more than ever, they are in urgent need of timely and effective support from the government.

FDI firms continue to appreciate Vietnam's business environment. The most impressive improvements are seen in ​​business registration, access to land, and lower informal costs and compliance costs. They also said that Vietnam needs to further promote administrative procedures related to operational lifespan, import and export procedures, social insurance and taxes and expect Vietnam to have effective strategies and policies to improve labor quality, especially skilled labor.

Mr. Dau Anh Tuan, Director of VCCI Legal Department

The transparency of local business environments has shown signs of improvement. The PCI 2019 report records a more comfortable access to information but room is still available for improving some important information access indicators. For example, enterprises need to have ‘relationships’ to obtain provincial documents, negotiate tax rates and predict local government enforcement of central laws.

The PCI 2019 survey continued to receive positive feedback from the business community about the government's efforts to prevent corruption and cut informal costs in localities, showing the effective fight against corruption and effective information technology application to reforms. However, despite having fallen to its lowest level in the past six years, the rate of enterprises reporting informal payments in the PCI 2019 survey is still over 50%.

The PCI 2019 survey also showed positive changes in administrative reforms through perception about the quality of administrative procedure settlement in provinces and cities. However, companies still complain about some troublesome administrative procedures like land, tax, fee, social insurance, construction and transportation.

Business feedback shows that companies have a lot of problems with administrative procedures when carrying out their projects. In particular, procedures related to land, ground clearance, construction planning, urban planning and investment licensing are among the toughest for them.

Mr. Nguyen Van Thang, Chairman of Quang Ninh Provincial People’s Committee

With the systematic and scientific deployment of PCI initiatives in the past 15 years, provincial leaders have figured out bottlenecks in economic governance and adopted appropriate solutions to carry out the most effective economic administration reforms. PCI has helped us clearly identify areas for improvement. Quang Ninh has always determined that raising PCI is a key task.

To follow and support businesses effectively, we have been constantly reforming administrative procedures and proactively setting up many dialogues, creating an open friendly space for authorities at all levels with investors and businesses. We have many practical solutions to take care of and serve investors and businesses from the smallest things to strengthen their confidence.

To engage enterprises in sustainable socioeconomic development, Quang Ninh has adopted consistent solutions: restructuring public spending, saving recurrent expenditures, increasing development investment spending; carrying out three strategic breakthroughs, especially prioritizing investment resources for synchronous technical and social infrastructure systems to help businesses reduce production costs; diversifying investment forms toward the public-private partnership (PPP) form to ensure harmonized benefits of all stakeholders, namely the government, the public and the business, to encourage their cooperation. In practice, the creativity, flexibility and initiative of the government will be a solid foundation for the private sector to develop production and business activities, effectively use their capital fund. This will bring value to businesses and investors and thus create and maintain a healthy business environment, a safe, friendly and attractive investment environment in Quang Ninh province.

Anh Mai (Vietnam Business Forum)