Lao
Cai and Bac Ninh have made history by becoming the first northern provinces to
top the rankings of Vietnam’s annual Provincial Competitiveness Index (PCI)
followed by Mekong Delta’s Long An province,
according to results released today at a ceremony in Hanoi.
These provinces invested considerably to
improve governance, leading to gradual improvements in their PCI scores over
time. Other strong performers include Ha
Tinh and Binh Phuoc, which have risen to the top 10 after the creation of local
legislation and task forces aimed specifically at targeting areas for
improvement in their PCI scores.
With the support of the U.S. Agency for
International Development (USAID) and jointly implemented by the Vietnam
Chamber of Commerce and Industry (VCCI) and the USAID’s Vietnam Competitiveness
Initiative (USAID/VNCI) since 2005, the PCI is the most comprehensive annual
survey of local firms in Vietnam about provincial business environment in
Vietnam.
The PCI 2011 surveyed almost 7,000 Vietnamese
businesses across all 63 cities and provinces. It reflects perceptions of
provincial government performance regarding ease of doing business, economic
governance, and administrative reform efforts that support private sector
development.
“The PCI has provided valuable feedback from
businesses to guide provincial reforms to attract more domestic and foreign
investment and promote economic development,” said U.S.
Ambassador David B. Shear. “As Vietnam and the United States negotiate
the Trans Pacific Partnership to further expand trade and investment, Vietnam
can increase the positive benefits from such trade agreements by implementing
institutional and market reforms at both central and local levels to achieve
the full advantages of economic integration in the global economy.”
Overall, the past year showed a slight
improvement in provincial governance. The weighted 2011 PCI score for a median
province is over 59 point, about one point higher than in 2009 and 2010.
The improvement in scores reflects continued
commitment to reform in economic governance by most provinces. However,
responses were not uniformly positive.
Firms registered increased dissatisfaction with: 1) the inability of provincial land
compensation prices to keep up with market prices; 2) massive declines in the
assessment of pro-activity and attitude of local leaders toward private
business; and 3) more limited use and satisfaction with the supply and quality
of business support services.
The index is based on provinces’ economic
governance for private sector development, with key indicators on business entry costs, land access and
security of business premises, transparency, labor training, time spent on
administrative procedures, quality of provincial leadership in solving problems
for enterprises and other issues critical for businesses.
“In the context of economic difficulties,
positive business perceptions about provincial governance is a bright signal in
the 2011 PCI report,” noted Dr. Vu Tien Loc, Chairman of VCCI. “We do hope that
from this important message sent by the business community, the central and
local governments will continue efforts to improve the business climate and
enhance the competitiveness of Vietnam’s economy.”
The PCI research team travels each year to
over 20 provinces to participate in Provincial Diagnostics which analyze the
provinces’ strengths and weaknesses in economic governance, as well as
providing a set of best practices from the top provinces which help improve
performance. Many donor agencies use the PCI to monitor progress in their
provincial projects to improve economic reform. Investors also use the index
when evaluating the investment climate, making decisions about new business
ventures and their locations.
In addition to the index, the PCI team also
surveyed nearly 2,000 foreign invested enterprises (FIEs) in 61 provinces,
providing the largest sample of the current profile of foreign direct
investment in the country, and helping identify the challenges for building a
competitive economy with dynamic growth of both foreign and domestic
enterprises.
Key findings from the FIE survey revealed that
although FIEs had increased revenues in 2011, there is greater pessimism for
the next two years due to economic challenges.
In addition, firms reported that they continue to select Vietnam for its
labor cost advantage and political stability, but heavily discount other
governance factors.
These results reflect the type of investor
Vietnam has attracted thus far. Low-cost manufacturing primarily seeks cost
savings through labor and tax incentives, while higher value added investors
require enforcement of intellectual property rights and contracts, less
corruption, and higher quality labor.
Corporate partners for the PCI 2011 include
the American Chamber of Commerce and the European Chamber of Commerce, who
emphasize the importance of the PCI in improving economic governance to benefit
the business community.
vir.com.vn
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