PCI: Start with Why?

There are a lot of books but if I can only choose one, I will pick the book "Start with Why?" by Simon Sinek. Sure enough, I do not have any "commission" from Simon for this yet and I do not intend to advertise his book. However, after many years tracking reform efforts of provincial/municipal governments for better provincial competitiveness index (PCI) ratings, I think the message of this book, to a certain extent, will probably be well suited to reformers and regulators in Vietnam.

 

Simon introduced a relatively simple model, called the Golden Circle, to explain why some individuals or organisations have great success. According to him, all of us know what they are doing (What); some know how they are doing (How); but only very few people know why they are doing what they are doing (Why). And, the persons who understand this are successful.

 

Here, I take the liberty to refer what he says to reform work and PCI improvement in Vietnamese provinces and cities. Up to now, PCI is considered the only measure to gauge and rate the quality of economic governance of local governments. While Vietnam eagerly follows its position in the Global Competitiveness Index (World Economic Forum) or Doing Business (World Bank), its 63 provinces and cities also closely await their PCI rankings when the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID) release the PCI Report.

 

How can they feel “easy” if their efforts throughout the year do not produce the expected fruits? How can they feel “easy” when many worse provinces than them secure higher rankings? These are questions and concerns many provinces raise when they look at the ranking table. So, how can we explain why a mountainous province with a lot of unfavourable conditions and disadvantages like Lao Cai can secure a very high position in the PCI ranking year after year? How can we explain when a province with few advantages and without any remarkable achievements in investment attraction like Dong Thap topped the PCI ranking list in 2012? Lao Cai or Dong Thap shares many of the same policies and laws as other localities and they even face more difficulties and disadvantages than others in access to resources and infrastructure. Why are they successful?

 

Let’s try looking at Simon's model. After the PCI is announced, all provinces and cities (100 percent) know what they should do. Some provinces and cities know how they should do it by organising in-depth analytic workshops and launch action programmes and plans. However, successful localities are very few, including Lao Cai, Dong Thap, Da Nang, An Giang, Long An, and Bac Ninh. Success is defined as the continued standing in Good or Very Good groups in many consecutive years. The increase or decrease of some positions in the ranking is ordinary. These successful localities understand why they do what they are doing. This “why” does not mean a “higher position in PCI ranking” but just a result. This why means what is the purpose of PCI improvement? What drives them to take actions? What is their trust in every action? Why do they have to care?

 

Clearly, all want to raise their competitiveness or ranking. However, at present, the ways localities think, act and communicate are normally from the clearest thing (what) to the most obscure thing (why). On average, each year, nearly 15 provinces and cities issue action programmes and plans to improve PCI and nearly 25 localities organise PCI workshops. All these activities come from the desire of achieving the above results. But, successful provinces go in the opposite direction. They start with why.

 

Lao Cai can be considered typical for this case. The province did not say: We are determined to achieve high PCI ranking, we have devised Programme A or Programme B. It says its slogan “Businesses succeed, Lao Cai develops.” From this guideline, all directions, policies or activities are aimed to support and facilitate local enterprises to do business and develop, from the one-door mechanism for business registration and enterprise establishment procedures in 2004 to direct dialogues with businesses to listen to difficulties and adopt solutions to assist them. Recently, Lao Cai completed a set of methods and components for assessment of governance capacity of district-level government in the 2012-2016 phase, in order to better the investment environment and support the business community, becoming the first province to apply this model.

 

With these efforts, more enterprises are willing to invest in Lao Cai. According to the 2011 PCI survey with 7,087 participating enterprises, 35 said they would choose Lao Cai province to expand their production and business operations. In 2012, 45 enterprises out of 8,053 respondents said they would choose to invest in Lao Cai, triple the number in neighbouring provinces of Ha Giang and Yen Bai, or even Tay Ninh province with a more favourable position. Notably, one-third cited governance quality as the cause, while almost no enterprises chose Yen Bai, Lai Chau and Thai Nguyen for this reason (See Figure).

 

Obviously, if other factors such as infrastructure, human resources, business opportunities and market size are excluded and only governance quality is kept to decide the ranking, investors also decide the same way buyers do. They not only simply buy a product from sellers, but they buy because they create such a product. Enterprises or investors of course do not select a province for its PCI ranking but its treatments for enterprises.