Great Strides in Improving Investment Climate

Quang Ninh, Dong Thap, Long An and Binh Duong provinces earned the highest positions for economic governance, according to the latest report of Provincial Competitiveness Index 2020 (PCI 2020) released by Vietnam Chamber of Commerce and Industry (VCCI) and United States Agency for International Development (USAID).

Earning an aggregate score of 75.09 points in 2020, Quang Ninh province topped the PCI 2020 rankings. With 1.69 points higher than the previous year, the province surpassed itself to strengthen its No. 1 place in the PCI rankings for four consecutive years. Besides, Quang Ninh was the first to get more than 75 points since 2010.

Dong Thap province held the second place with a score of 72.8 points, followed by Long An province with 70.37 points at No. 3 position, two places higher than the previous rankings.

The next in the Top 10 included Binh Duong (70.16 points), Da Nang (70.12 points), Vinh Long (69.34 points), Hai Phong (69.27 points), Ben Tre (69.08 points), Hanoi (66.93 points) and Bac Ninh (66.74 points).

Notably, Binh Duong province had the strongest improvement as it advanced nine places on the rankings from 2019, driven by market entry index (up 1.22 points) and business support (0.91 points). Mr. Dau Anh Tuan, Director of PCI Project, Director of VCCI Legal Department, said that this strong performance resulted from the province’s review and completion of the single-window mechanism for settlement of business registration and investment procedures; public and transparent application of mechanisms, policies, processes and administrative procedures on business registration and investment registration; strengthened coordination of concerned agencies and localities in attracting and managing investment projects; support for fast deployment and operation of projects.

2020 was the fourth year in a row that the PCI median score stood above 60 points and saw an increasingly narrow gap between the top-placed and the bottom-placed localities. Lower-ranked provinces and cities are making great efforts to close the gap with leading provinces. 

The PCI 2020 survey showed that the quality of provincial economic governance in Vietnam tended to pick up over time. The positive progress came from the continued decline in informal costs, continued security and order, more dynamic and proactive provincial administration, and significantly improved administrative reform and a more equal business environment. However, the survey also pointed out that provincial governments needed to drastically enhance the transparency of the business environment, improve the quality of enforcement of the grassroots government system, accelerate procedural reform, reduce inspection burdens for businesses, and extend efforts to cut informal costs for them.

Moreover, the FDI business survey in 2020 revealed that Vietnam continued to be an attractive investment destination thanks to its stable politics, more open administrative procedures and eased financial burdens on inspection. However, Vietnam needed to further make good changes to two weak fields, namely “regulatory and procedural system" and "infrastructure". And, although Vietnam made some progress, "tax" and "enterprises’ role in policymaking” are still weak points of the business environment in Vietnam. Around 60% of FDI enterprises are considering investment choices in Vietnam due to these factors.

Vietnam’s emerging advantage as considered by foreign investors is that Vietnam is increasingly a destination "with lower risks of having business locations revoked and lower risks of policy instability" after impressive progress made over the years. After the Law on Land 2013 was enacted, the rate of FDI firms saying that “the risk of business locations revoked is low” in Vietnam increased from 64% to 80%. The rate of FDI firms believing that Vietnam has “lower risks of policy instability" also rose from 60% in 2013 to 82% in 2020.

Foreign investors expect Vietnam to continue to control corruption, improve the quality of public service delivery, enhance procedural and regulatory systems, and drastically upgrade infrastructure quality.

Acting USAID Vietnam Director Brad Bessire said that PCI has played an important role in boosting transparency and accountability in economic governance of provinces and cities. This is truly a tireless reform effort during the past 16 years.

Launched and published since 2005, PCI is composed of ten sub-indices. A province considered to be performing well on the PCI is one that has: 1) low entry costs for business start-ups; 2) easy access to land and security of business premises; 3) a transparent business environment and equitable business information; 4) minimal informal charges; 5) limited time requirements for bureaucratic procedures and inspections; 6) minimal crowding out of private activity from policy biases toward State, foreign, or connected firms; 7) proactive and creative provincial leadership in solving problems for enterprises; 8) developed and high-quality business support services; 9) sound labor training policies; and 10) fair and effective legal procedures for dispute resolution and well-maintained law and order.

Source: Vietnam Business Forum