For the first time since the the launch of the provincial competitiveness (PCI) index report in 2005, Hanoi has been named among the top 10 ranking nationwide, claiming the 9th rank out of 63 provinces and cities with a score of 65.40, up four places compared to last year's report.
Top 10 provinces and cities of the 2018 PCI Index report. Source: PCI report.
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The report, jointly launched by the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID), has been produced annually since 2005 to assess the ease of doing business, economic governance, and administrative reform efforts by the provincial and city governments in Vietnam in order to promote the development of the private sector.
Loc said Vietnam’s national competitiveness will largely be determined by the quality of provincial economic governance and the business enabling environment.
“Therefore, the proactive and pioneering efforts of local leaders, coupled with the diligence and professionalism of provincial civil servants, will decide the speed and direction of Vietnam’s future development,” Loc stated.
“The PCI, thus, serves as a source of encouragement from the business community for a strong transition from the local level in Vietnam,” he continued.
Overview of the conference. Source: Nguyen Tung.
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“The PCI report has become a highly respected and impactful report that promotes economic reform to encourage transparency, robust investment, trade, and economic growth,” added Kritenbrink.
Ho Chi Minh City stood at 10th with 65.34 points, up 2 places from last year’s ranking.
Increasing number of MSMEs facing difficulties in business activities
Dau Anh Tuan, director of VCCI’s Legal Department, said the 2018 PCI survey results showed noticeable improvement in some areas of provincial business environment, including declining informal charges, less biased business environment, and encouraging progress in administrative reforms.
“However, constant efforts by provincial governments are required to create a more enabling environment,” Tuan said.
In this regard, transparency has yet to be improved, labor quality and business support services must be further enhanced, and administrative procedures need to be accelerated in areas such as business registration, land, taxes, social insurance, market management, transportation and construction, Tuan stated.
Tuan informed the level of business optimism demonstrated in the PCI and PCI-FDI business thermometers remains relatively high with 49% of surveyed private firms and 56% of surveyed foreign invested enterprises planning to expand their operations in the following two years.
Despite this fact, however, there are signs of an increase in the percentage of firms having difficulties in their business activities, most of which are micro and small sized enterprises.
“In this process, the role of provincial governments matter more than ever,” Tuan stressed.
Positive improvement of business environment
Tuan said foreign invested enterprises have provided positive insights about Vietnam’s business environment.
This included time costs for regulatory compliance have been reduced, informal charges have been significantly lessened, and harassment related to inspections has diminished.
Moreover, infrastructure enhancements in Vietnam are also acknowledged.
“However, several areas require the government’s immediate attention, such as customs clearance, social insurance, taxes and inspections,” Tuan added.
In addition, labor quality, especially high-skilled labor supply, remains the bottleneck in the investment environment in Vietnam, as perceived by foreign invested enterprises.
With regard to the ability of Vietnamese private enterprises integrating into global value chains, Tuan said the results showed limited progress.
“One of the factors hindering this process is the absence of an effective mechanism to ensure contract enforcement. This is an area where breakthroughs in innovations are needed,” he stated.
“What needs to be done in the future is to keep businesses well informed and updated on domestic legal regulations, as well as international commitments on available dispute settlement mechanism.”
Additionally, friendly and explicit guidelines on commercial arbitration should be developed to make it easier for businesses to best employ it.
An effective dispute resolution mechanism should be built and placed as one among the pillars to enhance Vietnam’s competitiveness along with improvements in infrastructure, human resources, and regulatory and governance reforms.
The 2018 PCI report is the 14th iteration and is based on responses from over 12,000 enterprises, including nearly 11,000 domestic private enterprises from 63 provinces and cities and more than 1,500 foreign invested enterprises in 20 provinces in Vietnam .
