Da Nang extends its dominant rank in Provincial Competitive Index

By Ha Phuong   March 13, 2017 | 11:14 pm PT
This is the fourth consecutive year the city leads the pack.

Vietnam's central city of Da Nang dominates the Provincial Competitive Index (PCI) among 63 provinces and cities nationwide for the seventh time, gaining the top score of 70.00, according to PCI 2016 report jointly launched Tuesday by the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S. Agency for International Development (USAID).

The PCI 2016 sent out questionnaires to 11,600 enterprises, of which around 14 percent are foreign invested enterprises in Vietnam.

“The PCI program has consistently promoted the voices of the private sector while engaging provincial governments in business environment reforms,” said Vu Tien Loc, VCCI President.

The northern province of Quang Ninh and the Mekong Delta province of Dong Thap were the two runners-up, scoring 65.6 and 64.96 points respectively, the report said.

This is the first time Quang Ninh surpassed Dong Thap to secure the second spot.

Both runners-up have been consistently high performers in the PCI and have also demonstrated unique innovations for streamlining local regulatory practices and enhancing the transparent evaluation of personnel involved with the local business sector, said Dau Anh Tuan, VCCI’s Legal Affairs Department Director.

The 2016 report witnessed a strong surge from Hanoi. The capital scored over 60 points for the first time, putting it among the top 15.

“The national competitiveness is mainly determined by economic governance and the ease of doing business in cities and provinces,” said the VCCI president. "The proactivity of provincial leaders, and professionalism and effectiveness of local government officials are deciding the speed and direction of Vietnam development in the times to come,” Loc added.

Economic governance of provinces nationwide and cities continued to improve, with positive improvements seen in such areas such as business registration, access to information and administrative procedure reforms.

Foreign firms have noted that entry costs have been reduced substantially, which they attribute to the 2014 Enterprise Law and 2014 Investment Laws, said Ted Osius, U.S. Ambassador to Vietnam.

According to PCI 2016, nearly half of the surveyed firms said they would expand business in the future. The average capital size reached VND 18.1 billon ($795,000), the highest in the past 12 years of the survey. “This is the good sign for the economy, especially given the sluggish global economy,” Tuan commented.

However, he expressed concern over the stagnation in the authorities’ efforts to create a level playing field for private sector competition. Small and medium-sized enterprises still struggle to get access to land, funds and regulatory information.

Macroeconomic and regulatory risks continued to be one of the most concerning risks among foreign invested firms when doing business in Vietnam.

“This year’s report notes that optimism is growing among both domestic and foreign firms,” Osius emphasized. The recent environmental incident caused by steel firm Formosa has raised awareness of the importance of the environment while doing business among enterprises.

As such, half of FDI enterprises and domestic firms said that environmental protection was important and they were willing to pay a premium for specific activities, as well as further regulations to avoid any harm to the environment.

Vietnam’s business environment is still hindered by informal costs, regulatory burdens, the quality of infrastructure, and public services such as healthcare and labor training.

To improve this situation, Vietnam would benefit most from educational improvements that enhance the capacity of its labor force and the technological sophistication of domestic enterprises.

“Efforts to improve competitiveness will be critical to Vietnam’s success and particularly to its developing a more inclusive economy,” the U.S. ambassador said.

The PCI is comprised of 10 sub-indices such as entry costs, land access and transparency. It also includes time costs, informal charges and policy bias. Proactiveness, business support services, labor training and legal institutions make up the 10.

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