PCI 2009: Filling the 'Gap' between Business and Local Authorities

This is the fifth year in a row VCCI in collaboration with the Vietnam Competitiveness Initiative (VNCI) to conduct the survey and announce the result of provincial competitiveness index in Vietnam. Possibly, this project has the largest involvement of businesses and local authorities.  Mr Tran Huu Huynh, Deputy General Secretary of VCCI, said at the PCI 2009 announcement ceremony held recently Hanoi that PCI 2009, in nature, gathers the voices of 9,890 private enterprises in 63 provinces, assessing the quality of the economic governance and the facilitation of province-level business environment.

 

As many as 61 out of 63 provinces and cities have improved their scores in the provincial competitiveness index ranking in 2009, in which Da Nang continues to lead the country, followed by Binh Duong province (top place holder in 2005, 2006 and 2007). PCI 2009 also indicates that the provinces of Dien Bien, Ca Mau and Long An have the best results in economic governance reform quality according to the PCI surveys from 2006 to date.

 

Dien Bien made substantial improvements in reducing informal costs, increasing the proactivity of leadership, and enhancing the quality of the labor force. Ca Mau found ways to reduce entry costs and informal charges. Long An’s leaps were propelled by increases in transparency, exemplified by a computer monitor outside Long An’s Department of Natural Resources and the Environment where individuals can access land-use plans, legal documents, and application materials.

 

Sharing the experience in governance Ca Mau province, Mr Nguyen Xuan Hong, Vice Chairman of Ca Mau People’s Committee, said: Ca Mau has effectively and completely implemented all incentive policies of the Government, and drastically directed the administrative procedure reform. Provincial leaders have always listened to the opinions of enterprises to know about their problems and arranged the time to meet enterprises if they requested.

 

As regards the workforce, such localities as Binh Duong, Ho Chi Minh City and Da Nang have tried to build a quality labour force to meet the growing needs of domestic and international investors, and according to studying groups, these localities deserved the de facto recognition of the community.

 

Binh Duong, Dong Nai and HCM City, which are three industrial locomotives of the southeast region of Vietnam and currently account for a fourth of the country’s GDP (exclusive of oil and gas), score the highest scores for infrastructure. Meanwhile, as forecast, northern mountainous provinces of Bac Kan, Lai Chau, Cao Bang and Lang Son have a low scores for infrastructure.

 

This year’s report tracks changes in provincial governance over time by using changes in the median provincial score for each indicator. Sustained increase in the median province’s score is evidence of improvement in the indicator throughout the country as a whole. Measures of Entry Costs, Access and Security of Land, Time Costs, Labor Quality, and Confidence in Legal Institutions show signs of definitive improvement over the past year.

 

The PCI 2009 result also shows that Entry Costs is the brightest point for the past years, which has made certain impact on policy mechanism and local leaders’ efforts. 

 

For the median province, Time Costs of Regulatory Compliance improved the most, after several years of stagnation. The total amount of time thatmanagers spend on bureaucratic procedures hasdeclined from 22 percent to 15 percent, while thenumber of hours for the tax inspection declinedfrom 8 to 5 hours. In addition, 47 percent ofrespondents report that the government-requiredpaperwork has declined in the past two years, and44 percent of firms acknowledge that civil servantshave become more effective at dealing withbureaucratic procedures. These results indicate that project 30 and the administrative reforms have gained the significant achievements.

 

Policy makers should be proud of these accomplishments. Worrisome declines, however, are evident in terms of Transparency, Informal Charges, and the Proactivity of local leaders. Transparency, an area of tremendous achievement in the country in the past years, shows remarkable decline in 2009. Access to provincial planning documents and the percentage of firms that believe relationships are necessary to receive business documentation (61.3 percent) are back to 2006 levels after consistent improvement over time. Similarly, the percentage of firms claiming that implementation of central laws is predictable (8.4 percent) and the share of businesses negotiating with the local tax authority (41 percent) are back to 2007 levels.

 

According to VCCI, more than 40 workshops were held in different provinces to assess strengths and weaknesses of local business environments. Also at these events, many lessons were put forth for provinces to learn from each other. Top-placed localities like Da Nang and Binh Duong also organised conferences to review their weaknesses.

 

The provincial/municipal Departments of Planning and Investment have become the advisors to help provincial/municipal authorities to build plans and supervise competitiveness improvement. Last year, leaders in Hanoi directed outlining and applying a scheme to improve the local PCI.

 

Remarking on the PCI results, US Ambassador to Vietnam, Michael W. Michalak, said that the Government of Vietnam can use PCI as an effective tool in the process of policymaking.

 

Dr Vu Tien Loc, President of VCCI, affirmed, the provinces are very interested in PCI as the annual CPI results have helped leaders of many localities know their governance capacity and have motivations to implement reforms to upgrade their business environments. Also according to Mr Loc, PCI improvement not only beautifies the image but also helps attract investment and increase State budget revenues.

 

 

In the light of the above guideline, the biggest improvement in the province is to implement a one-door mechanism to work with investors to help them reduce the cost and the time for completing administrative procedures, access and use land sources, execute policies to develop the private sector, and improve information transparency and access.

 

Long An has made resounding successes by mobilising private capital for socioeconomic development investment with 20 industrial zones, 43 industrial complexes and over 50 residential urban areas, covering 15,000 ha.

 

At present, the province is trying to implement online business registration from 2010.

 

In 2009, Long An was ranked 12^th in PCI ranking - a good position.

 

Bac Ninh was ranked 23^rd out of 42 in the PCI 2005 - the first year VCCI and VNCI announced the index. The provincial People’s Committee was very interested in methodology and the meaning of PCI as the province based on contents of index components to outline and implement solutions to improve the economic governance quality, better the business environment and enhance the competitiveness. Specifically, the province has placed emphasis on improving market entry conditions of enterprises and simplifying the formalities of business establishment.

 

Since 2007, the province developed and applied the “one-door” policy in order to shorten the duration of business registration and establishment from 30 days to seven days or less and reduce the number of visits for permissions 13 times to 3 times. This model has positive impacts on the robust increase in the number of enterprises and registered capital and has double-effect impacts on three component indexes: Cost of time, informal costs and transparency improvement.

Bac Ninh province jumped to the 10^th in the PCI 2009 ranking.

 

After implementing the plan for improvement of PCI launched in 2006, Ben Tre had achieved much progress in business environment improvement in comparison with Mekong Delta provinces in particular and the whole country in general.

 

The province has adopted the policy of transparency and publicity in governing and developing its economy to help businesses access full information about planning and provisions relating to production and business activities. The province has established socioeconomic information portal, hosted direct meetings with businesses annually, and reformed administrative procedures in the one-door model. As regards investment certification, the duration for obtaining the investment licence is 15 days as stated in the Law on Investment.

 

Ben Tre Province is applying the TCVN ISO 9001:2000 quality management system standards to its subordinated administrative units. Presently, 15 units with 93 departments are applying the standard.

 

Until now, the province has 3,488 enterprises with a total registered capital of VND4,359 billion, including 26 FDI enterprises with a total investment US$170 million.

 

The business community in the province has highly appreciated the strengths Binh Dinh province has effectively implemented like market entry cost reduction, land access, information transparency and access, dynamic and pioneer of provincial leaders.

 

Most of administrative procedures in the province can be finalised sooner than provided by the laws. The duration for completing business registration is only five days, shortening the time by 73 percent compared with the provisions of Government.

 

The "serve - approve" thinking has been applied to all tiers of authorities. The provincial authorities want to become a true fellow-traveller of investors.