PCI: Momentum for Local Business Environment Improvement

The 2014 PCI survey is based on responses from nearly 10,000 domestic private enterprises across 63 provinces in Vietnam. Besides, PCI 2014 has remarks from foreign-invested companies in Vietnam on Vietnamese business environment and remarks of Vietnamese companies on opportunities and challenges from Trans-Pacific Partnership (TPP) and labour relations in companies.

 

Dr Vu Tien Loc, VCCI President, said, PCI Report 2014 is launched when the Government of Vietnam is pushing for institutional reform and improving national competitiveness. The Government’s Resolution No. 19 clearly defines the objectives Vietnam needs to reach in many fields of administration and places the ambitious target that Vietnam must reach the average of Top 4 ASEAN countries. Thus, the Government and the head of the Government have accepted the race with other countries for the goal that the business environment and competitiveness of Vietnam cannot be inferior.

 

He pointed out that the local level also has similar racing. PCI gives rise to a race and stipulates provinces and cities to change faster and act more to create a favourable business environment for enterprises. PCI Report 2014 records initial successes. Provinces and cities tend to improve their governance quality and the median score of PCI 2014 is higher than previous years. Reform has been accelerated and broadened in many provinces and cities. Lowest-ranked localities are narrowing the gap with top-ranked ones. Such indicators as entry costs, transparency, time costs, labour training and business support services have been significantly improved.

 

Da Nang continues its reign as the top performing province with a PCI score of 66.87 points, followed by Dong Thap with 65.28 points and Lao Cai with 64.67 points. These two localities also scored high PCI rankings in previous years. Notably, after 10 years in the PCI Survey, Ho Chi Minh City with 62.72 points achieved the distinction of being one of the five best-governed provinces and cities in Vietnam. This group also includes Quang Ninh province with 62.16 points at the fifth position.

The remaining top ten provinces and cities include Vinh Phuc, Long An, Thai Nguyen, Kien Giang and Bac Ninh. Ca Mau, Bac Kan, Ha Giang, Cao Bang, Lai Chau and Dien Bien are in the bottom range.

 

Notably, after being listed last in the PCI rankings for the past two years, Tuyen Quang province climbed to the 50^th position. The rise can be attributed to significant changes in its approach to business-government interactions and responsiveness.

 

Representing PCI 2014 results, Dau Anh Tuan, Director of VCCI Legal Department, said, PCI is measurement of the actual provincial economic governance or governance quality, and best governance practices already found in localities. PCI consists of 10 sub-indices, reflecting economic governance fields that can affect private sector development. A locality has good governance quality when it has (1) low entry cost, (2) easy land access and stable security of tenure, (3) transparency of business environment and publicity of business information, (4) low informal charges, (5) a short time for requirements for bureaucratic procedures and inspections; (6) a fair competitive environment, (7) proactive and creative provincial leadership in solving problems for enterprises, (8) developed and high-quality business support services, (9) sound labour training policies, and (10) fair and effective legal procedures for dispute resolution.

 

He said the PCI 2014 shows a signs of progress in business environment. Both domestic and foreign enterprises are more optimistic about business prospects. Specifically, up to 46.1 percent of private enterprises expect to expand business operations in the next two years, up from the rate of 32.5 percent in the PCI Survey of 2013. This rate in FDI companies is 50 percent. This is the first time in the past five years the business confidence index has showed positive signs of recovery.

Up to10.8 percent of domestic businesses increased investment capital after two years at the lowest rate. For the first time in nine years, the median scale of investment capital of enterprises has risen to the highest level, averaging VND15.1 billion, doubling that in 2006. The ratio of businesses hiring more employees also almost doubled (11.5 percent) compared with 2012 and 2013, two years at the bottom.

 

This year, the median PCI score climbs from 57.81 in 2013 to 58.58. The score gap among provinces and cities continues to narrow. Top-rate provinces and cities do not have many breakthroughs while low ranked ones continue to improve their sub-indices by reforming business registration procedures or shortening the time for administrative procedures.

 

The ability of businesses to participate in the policy, tariffs are reasonable and the location is appreciated and reasonable tariffs. Businesses’ involvement in policymaking and reasonable tax rate are also pluses.

 

According to the PCI Report 2014, remarks from 1,491 FDI companies surveyed show that Vietnam continues to be praised for policy stability and low asset recovery risks.

 

According to the survey, 70 percent of domestic and foreign enterprises know TPP Agreement but their knowledge of it is limited. In general, domestic enterprises (66 percent) strongly support Vietnam’s entry into the TPP while FDI firms express their cautious attitude, only 25 percent of supporters. Businesses think that the TPP, once signed, will bring many opportunities and prospects for Vietnam. However, a lot of things need to be done before this agreement takes effect.

 

Besides, consumers surveyed also said that Vietnam needs to reduce informal charges while enhancing the quality of infrastructure and public services, reviewing and simplifying regulations and procedures to be more competitive. Vietnam has thus become an attractive destination for foreign investors.