VietNamNet Bridge – In early March, the Vietnam Chamber of Commerce and Industry (VCCI)
made public the provincial competitiveness index (PCI) 2011, which reveals some
problems.
PCI 2011: Mountain province tops the list
PCI 2011: Mountain province tops the list
Administrative
reform makes progress
According to the PCI 2011 report, some indexes measuring Vietnamese enterprises’ ability to enter the market were improved.
In 2006, if 25 percent of businesses said that it took them over a month to put their companies into operation. The rate was 15 percent in 2011.
The number of days waiting for business licenses also reduced from 20 days in 2006 to 8.5 days in 2011. Similarly, the time to get a land use right certificate fell from 60 days in 2007 to 30 days in 2011.
These are important factors that promote the establishment of new private firms. According to the General Department of Taxation, nearly 332,400 companies registered and paid taxes by early 2011. This figure was 2.7 times over the number of 2006.
Easy tasks have done, difficult tasks are undone
It is very easy to recognize that the gap between the province at the top (Lao Cai province with 73.53 points) and the one at the bottom (Cao Bang with 50.81 points) of the PCI 2011 report was narrowed, with only 22.72 points. In 2009, this gap was over 30 points.
However, the gap was narrowed thanks to the reduction of point of the top province (it was 75.9 in 2009 and 73.53 in 2011).
The PCI research group explained that provinces which were at the bottom of the list in the previous years tried to increase their PCI by a very simple strategy: making changes in the fields that are easy to reform. These areas do not require major changes in institutions or efforts to balance interests of interest groups; for example, cutting down the time for granting business license or land use right certificate.
Thanks to this simple policy, some provinces that do not have favorable conditions like Lao Cai and Bac Ninh have taken the lead. Poor provinces of Ha Tinh and Binh Phuoc were also in the top ten of PCI 2011, jumping up nearly 30 grades.
Meanwhile, for the first time since the PCI index is released, Binh Duong and Danang lost the top position. Binh Duong had its point falling for transparency, and access to land and supportive services for businesses. Danang declined in labor training and assistance to businesses.
The other two provinces – Binh Dinh and Vinh Long – which were considered as typical examples in improving governance quality are also on the downhill. Is this the sign of standstill, when initiatives have been exhausted or are there barriers for reforms that local government could not overcome?
According to the PCI research group, it seems that the provinces that ranked highly on the PCI list of the previously years – Danang, Binh Duong, Vinh Long, etc – are at a standstill in economic management. They have not had new initiatives of reform and had not issued breakthrough decisions.
Transparency – the biggest hindrance
One of the most disappointed results in the PCI reports in recent years is the transparency of business environment in provinces has not been improved.
The access to legal documents of businesses and citizens seemed to be better after Vietnam became a member of the World Trade Organization (because the country has to perform its WTO commitments). The peak for this trend was in 20008. This trend has gradually gone down and it is now over average (3.03/5 points).
However, it is extremely difficult for businesses and citizens to have access to some kinds of documents, for instance land use plans, infrastructure development plans or big investment projects, etc.
Up to 75 percent of interviewed investors said that they must have good relations with state agencies to have these documents. More importantly, this rate is on the rise (this rate was 50 percent in 2008).
When investors have to use part of their resources to build relations with the authorities, the resources for production and business will reduce.
The PCI 2011 report also shows that notable change in corruption.
Most of interviewed businesses agreed that corruption in the form of tips for local officials, who perform administrative formalities reduction and the ratio of businesses that had to spend over 10 percent of their total revenue to pay unofficial costs, fell from 13 percent in 2006 to 7 percent in 2011. Harassment related to administrative formalities also reduced.
This change is explained by promoting administrative reforms, making public legal regulations and the issuance of the Law on Anti-corruption in 2008. However, some say that perhaps the private sector has developed strongly in recent years so only big private firms have to pay unofficial fees.
However, the PCI 2011 report also reveals corruption at larger scale, in the form of commission for signing public procurement contracts or lucrative land deals tends to rise. Up to 56 percent of businesses that participated in bids for state-owned projects said that they had to pay commissions. The rate was 41 percent in 2010. The PCI research group said that the consequence of this situation is injustice and declined trust on the government.
Provincial officials
The PCI index was launched for the first time in 2005 to measure and evaluate economic management and administrative reform at provincial levels. PCI 2011 report was the result of a survey at 6,922 enterprises in 63 provinces and cities in Vietnam.
The PCI index consists of nine elements: the cost for entering the market, the access to land, the transparency, unofficial cost, the time for inspection and implementation of administrative formalities, the activeness of provincial leaders, supportive services for businesses, labor training and the index on legal institution.
The index on the activeness of provincial leaders felt in the PCI 2011 report, especially at provinces on the top.
In 2006, up to 75 percent of businesses said that provincial officials were very flexible within the law to create a favorable business environment for private companies. But this rate has been gradually falling in recent years to only 65 percent in 2011.
Also in 2006, 62 percent of businesses said that when regulations set by the central government were unclear, provincial governments were active and creative in dealing with newly-emerged matters. The rate reduced to 50 percent in 2010 and less than 50 percent in 2011.
The PCI research group did not know why but they said that the change of leaders in many provinces before and after the 11th National Party Congress might affect their PCI 2011 survey.
In fact, officials work in terms of 3-5 years and there is the so-called “though of term” among them, which has made impact on their performance.
DNSGCT
According to the PCI 2011 report, some indexes measuring Vietnamese enterprises’ ability to enter the market were improved.
In 2006, if 25 percent of businesses said that it took them over a month to put their companies into operation. The rate was 15 percent in 2011.
The number of days waiting for business licenses also reduced from 20 days in 2006 to 8.5 days in 2011. Similarly, the time to get a land use right certificate fell from 60 days in 2007 to 30 days in 2011.
These are important factors that promote the establishment of new private firms. According to the General Department of Taxation, nearly 332,400 companies registered and paid taxes by early 2011. This figure was 2.7 times over the number of 2006.
Easy tasks have done, difficult tasks are undone
It is very easy to recognize that the gap between the province at the top (Lao Cai province with 73.53 points) and the one at the bottom (Cao Bang with 50.81 points) of the PCI 2011 report was narrowed, with only 22.72 points. In 2009, this gap was over 30 points.
However, the gap was narrowed thanks to the reduction of point of the top province (it was 75.9 in 2009 and 73.53 in 2011).
The PCI research group explained that provinces which were at the bottom of the list in the previous years tried to increase their PCI by a very simple strategy: making changes in the fields that are easy to reform. These areas do not require major changes in institutions or efforts to balance interests of interest groups; for example, cutting down the time for granting business license or land use right certificate.
Thanks to this simple policy, some provinces that do not have favorable conditions like Lao Cai and Bac Ninh have taken the lead. Poor provinces of Ha Tinh and Binh Phuoc were also in the top ten of PCI 2011, jumping up nearly 30 grades.
Meanwhile, for the first time since the PCI index is released, Binh Duong and Danang lost the top position. Binh Duong had its point falling for transparency, and access to land and supportive services for businesses. Danang declined in labor training and assistance to businesses.
The other two provinces – Binh Dinh and Vinh Long – which were considered as typical examples in improving governance quality are also on the downhill. Is this the sign of standstill, when initiatives have been exhausted or are there barriers for reforms that local government could not overcome?
According to the PCI research group, it seems that the provinces that ranked highly on the PCI list of the previously years – Danang, Binh Duong, Vinh Long, etc – are at a standstill in economic management. They have not had new initiatives of reform and had not issued breakthrough decisions.
Transparency – the biggest hindrance
One of the most disappointed results in the PCI reports in recent years is the transparency of business environment in provinces has not been improved.
The access to legal documents of businesses and citizens seemed to be better after Vietnam became a member of the World Trade Organization (because the country has to perform its WTO commitments). The peak for this trend was in 20008. This trend has gradually gone down and it is now over average (3.03/5 points).
However, it is extremely difficult for businesses and citizens to have access to some kinds of documents, for instance land use plans, infrastructure development plans or big investment projects, etc.
Up to 75 percent of interviewed investors said that they must have good relations with state agencies to have these documents. More importantly, this rate is on the rise (this rate was 50 percent in 2008).
When investors have to use part of their resources to build relations with the authorities, the resources for production and business will reduce.
The PCI 2011 report also shows that notable change in corruption.
Most of interviewed businesses agreed that corruption in the form of tips for local officials, who perform administrative formalities reduction and the ratio of businesses that had to spend over 10 percent of their total revenue to pay unofficial costs, fell from 13 percent in 2006 to 7 percent in 2011. Harassment related to administrative formalities also reduced.
This change is explained by promoting administrative reforms, making public legal regulations and the issuance of the Law on Anti-corruption in 2008. However, some say that perhaps the private sector has developed strongly in recent years so only big private firms have to pay unofficial fees.
However, the PCI 2011 report also reveals corruption at larger scale, in the form of commission for signing public procurement contracts or lucrative land deals tends to rise. Up to 56 percent of businesses that participated in bids for state-owned projects said that they had to pay commissions. The rate was 41 percent in 2010. The PCI research group said that the consequence of this situation is injustice and declined trust on the government.
Provincial officials
The PCI index was launched for the first time in 2005 to measure and evaluate economic management and administrative reform at provincial levels. PCI 2011 report was the result of a survey at 6,922 enterprises in 63 provinces and cities in Vietnam.
The PCI index consists of nine elements: the cost for entering the market, the access to land, the transparency, unofficial cost, the time for inspection and implementation of administrative formalities, the activeness of provincial leaders, supportive services for businesses, labor training and the index on legal institution.
The index on the activeness of provincial leaders felt in the PCI 2011 report, especially at provinces on the top.
In 2006, up to 75 percent of businesses said that provincial officials were very flexible within the law to create a favorable business environment for private companies. But this rate has been gradually falling in recent years to only 65 percent in 2011.
Also in 2006, 62 percent of businesses said that when regulations set by the central government were unclear, provincial governments were active and creative in dealing with newly-emerged matters. The rate reduced to 50 percent in 2010 and less than 50 percent in 2011.
The PCI research group did not know why but they said that the change of leaders in many provinces before and after the 11th National Party Congress might affect their PCI 2011 survey.
In fact, officials work in terms of 3-5 years and there is the so-called “though of term” among them, which has made impact on their performance.
DNSGCT
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