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PCI 2012

Transcript of PCI 2012 Report_final

  • Over time, PCI has become an important too

    l used to bring economic governance

    insight to provincial leaders and to help them

    fi nd ways of improving governance

    and promoting local socio-economic developm

    ent. For businesses, PCI provides

    the most important channel to voice opinions

    and expectations towards the

    government. For the central government, PCI g

    auges the gaps to be fi lled between

    policy design and implementation, between ce

    ntralization and decentralization,

    between policy ideas and what is needed in r

    eal life, by businesses and citizens

    the key subject of every policy.

    Mdm. Pham Chi Lan,

    Senior Economist PCI is increasingly appreciated at the provincial level, partly because of its usefulness to provincial leaders, as it gives insight into areas needing improvement and change from the local businesses perspectives. Yet another reason showing PCIs infl uence is that it has become an important reference for investors considering investment decisions. The effects of PCIs infl uence in the community can be considered to have been a crucial incentive for making the recent reforms in provincial business environment in Vietnam. Nguyn Cao Cng,

    Chief Editor, Foreign Investment Review

    Besides hard infrastructure, local economic governance, soft infrastructure, is one of key determinants for location decisions of foreign investors. From the perspective of FDI, PCI plays a role to state the absolute and also compare different business environments in Vietnam. Foreign investors use PCI data and fi nd it as a valuable information for consideration in the overall decision making process in the context of - investment/ expansion of their investment in a certain province/city in Vietnam. Mr. Gaurav Gupta,General Director, General Motors Vietnam Company Ltd.

    As lead donor on anti-corruption, the UK uses the Provincial Competitiveness Index data

    to help inform policy dialogue and policy makers respond positively. PCI forms a bedrock

    of data for what we know about the challenges that corruption poses to business. It is an

    invaluable survey which gives, over time, strong evidence of provincial performance against

    critical parameters that affect how fi rms and enterprises can do business. In 2012 we

    triangulated PCI data with other surveys to show cross-provincial comparisons on the status

    of corruption: what the situation is, and what can be done about it. In 2013, the Anti-

    Corruption Dialogue will focus specifi cally on business and private sector corruption. We

    expect that PCI will be central to shedding light on this complex issue.

    Fiona Louise Lappin,Head of Department for International Development (DFID) in Vietnam


    E VIET


    M PRO



    L CO








    CI - V


    I Policy Paper # 17




    USAID/VNCI-VCCI Policy Paper # 17



  • Primary Author and Lead Researcher:Ph.D. Edmund Malesky

    Research Team:Dau Anh TuanLe Thanh HaLe Thu HienDang Quang VinhNguyen Ngoc LanPham Ngoc ThachNguyen Le Ha

  • USAID/VNCI-VCCI Policy Paper # 17 I


    This eight edition of the Provincial Competitiveness Index (PCI) presents the latest views of 8,053

    Vietnamese enterprises on economic governance and the business environment across 63 provinces. The

    report also analyzes the results of the third annual survey of 1,540 foreign invested enterprises (FIEs)

    currently operating in Vietnam, providing an analysis of foreign views of the countrys current risk profi le,

    strategies foreign investors are using to mitigate the impact of risk on their business operations, and

    challenges faced by foreign investors in the current labor market.

    The PCI has been supported by the U.S. Agency for International Development (USAID) with major

    collaboration from the Vietnam Chamber of Commerce and Industry (VCCI) since 2005. USAID

    development partner, Development Alternatives, Inc. (DAI), has carried out this fruitful partnership with

    VCCI under the USAID project, the Vietnam Competitiveness Initiative (USAID/VNCI).

    Over the years, the PCI has sought to deliver critical information and analyses to several groups of

    stakeholders. First, the PCI provides valuable insights to provincial leaders about their economic governance

    performance and how to improve the business environment to foster domestic and foreign investment,

    jobs, and economic development. The PCI report demonstrates how some provinces have taken advantage

    of these lessons, reforming local regulations, searching for best practices, and ultimately rising up in the

    PCI rankings. Second, for central government leaders, the PCI offers a valuable comparison of provincial

    performance in different parts of the country and helps identify areas where the central government

    may wish to strengthen supervisory functions and improve decentralization, infrastructure and regional

    integration. Third, the PCI also grants investors and businesses considering investment or expansion of

    existing investments in Vietnam with useful data regarding the business climate in each province. Finally,

    for researchers and journalists, the PCI has sought to deliver a comprehensive database of governance

    indicators to track over time and motivate further research.

    The 2012 PCI report has some worrisome news to deliver. According to the surveyed fi rms, economic

    governance has actually declined in the past year. In fact, the median provincial score was the lowest

    achieved since the re-calibration of the index in 2009. Moreover, not a single province this year reached the

    Excellent threshold of 65 points-the fi rst time this has ever occurred in the PCI.

    As the report demonstrates, part of the decline has to do with pessimism about business prospects.

    Many entrepreneurs are struggling and they blame their bad fortune on government policies. Yet, this is

    only part of the story. Another narrative that emerges from this years data is that provincial leaders have

  • 2012

    USAID/VNCI-VCCI Policy Paper # 17II

    done as much as they can to tackle easier reforms, especially the reduction in waiting periods for business

    entry and reducing inspections. However, they had a much harder time tackling more challenging business

    obstacles, such as rooting out local corruption and establishing credible property rights protections and

    legal institutions. As a result, top ranked provinces from previous PCIs, such as Binh Duong and Da Nang,

    which had a head start on the easy reforms have seen their scores plateau, while formerly low-ranked

    provinces have caught up. The disappointing bottom line is that governance is converging around middling


    Over the past eight years, the PCI report has provided the voice of the business community to highlight key

    issues in economic governance to enhance the quality and speed of market-based reforms. Our goal has

    always been to offer an objective tool that can inform policy and business decisions. In the midst of the

    current economic crisis, rigorous analysis of the current challenges could not be more valuable. We hope

    that the pages that follow generate momentum and new ideas for policy-makers to take Vietnam to the

    next level of economic development and prosperity.

    Vu Tien Loc, Ph.D.

    ChairmanVietnam Chamber of Commerce & Industry

    Joakim Parker

    Mission DirectorUSAID/Vietnam

  • USAID/VNCI-VCCI Policy Paper # 17 III


    The Provincial Competitiveness Index (PCI) 2012 is the result of a major, ongoing collaborative effort between the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S. Agency for International Developments Vietnam Competitiveness Initiative (USAID/VNCI), implemented and managed by DAI.

    Edmund Malesky, Associate Professor of Political Economy at Duke University, led the development of the PCIs research methodology and authored the presentation of its analytical fi ndings.

    Professor Malesky was supported by a PCI research team that included Dau Anh Tuan, Acting General Director of the Legal Department; Le Thanh Ha, Nguyen Le Ha of VCCI; Le Thu Hien, Nguyen Ngoc Lan, and Dr. Dang Quang Vinh of USAID/VNCI and Pham Ngoc Thach of VCCI, who assisted in the construction of the index.

    Trang (Mae) Nguyen, Juris Doctor Candidate at New York University School of Law was the primary author of Chapter 2. Yana Margolis, Ph.D. Candidate in Economics at the University of California San Diego (UCSD), contributed to Chapter 3. Anh Le, graduate student at Duke University, Weiyi Shi, Ph.D. Candidate at UCSD, and Ben Graham, Assistant Professor at the University of Southern California, assisted in the data analysis and authorship of Chapter 4. Layna Mosely, Professor at the University of North Carolina, provided the data analysis for Chapter 5.

    The PCI was developed under the overall leadership of Vu Tien Loc, Chairman of VCCI, Scott Jazynka, USAID/VNCI Project Director and James P. Winkler, former USAID/VNCI Project Director, and benefi ted from assistance and input provided by Todd Hamner, Director of Economic Growth for USAID/Vietnam, and Le Thi Thanh Binh, Project Manager for U