Provinces’ business acumen revealed

The index, which was released for the first time last week in Hanoi, is a result of calls for Vietnam to improve the competitiveness and business environment of its provinces in a bid to attract greater investment.
Head of the government’s economic research board Tran Xuan Gia said: “Recently competitiveness and how to improve competitiveness has been talked about. Yet, this is the first time a PCI on business environment has been produced in Vietnam.”
Gia also expressed his hope for a regular production of the PCI and stressed that the PCI was a very significant index for provincial governments to determine their effectiveness.
“This will offer an opportunity for 42 provinces and cities to review themselves through the index they scored. Then, they will be better able to see where they are standing, why they rank in that position and how to rise up the rankings,” he added.
The PCI assesses and ranks 42 provinces by their business environment for private sector development. The PCI was produced from a synthesis of many sub-indices over nine factors, which have been highlighted by researchers and practitioners, including entry costs, access to land, transparency and access to information, time costs and regulatory compliance, informal charges, implementation and consistency of policies, state sector favouritism, proactivity of provincial leadership and private sector development policies.
Among the provinces and cities included in the rating, Binh Duong was listed number one, which was expected due to its recent outstanding achievements in business environment improvement.
However, some lesser known and smaller provinces such as Vinh Long, Ben Tre, Vinh Phuc and Quang Ninh ranked in the “high” performing group whereas the two biggest economic centres Hanoi and Ho Chi Minh City just reached the “mid-high” performing group.
Ha Tay, despite enjoying better infrastructure, human resources and location than many other provinces such as Vinh Long, scored the lowest PCI.
This is because the PCI measures provincial economic governance, not economic development and allows for provincial differences in initial conditions and advantages, including infrastructure, market size, human resources, and location. Under the PCI the key factor determining differences in provincial scores is the quality of provincial economic governance.
Thus, the PCI will help provincial governments to better identify their strengths and weaknesses in private sector development, highlighting effective ways to lure investors. The PCI also will serve as a valuable policy tool to undertake diagnostic activities focusing on the economic governance of particular provinces or a group of provinces.
“The most important target of this survey is that every provincial leadership can identify its strengths, what they do well and find the areas they need to improve, so they can work with private firms to create a business environment that is more conducive to firms in their provinces,” said Edmund Malesky, consultant of Vietnam Competitiveness Inititative (VNCI).
According to Le Dang Doanh, a Ministry of Planning and Investment economist, the PCI suggested that it was more feasible for the provincial government to stimulate private sector investment in the short term by addressing the weaknesses relating to regulatory frame work than improving the infrastructure and human resources.
The PCI was the result of research conducted by the VNCI and the Vietnam Chamber of Commerce and Industry (VCCI). The VNCI and the VCCI are planning to jointly produce the PCI on an annual basis.
“We would like to continue the research regularly so that we can compare how provinces do over time and we also would like to work with individual provinces and be able to give them their individual scores, so a province can know how it did and what can be improved,” said Malesky.