Vietnam’s business environment continues to improve, PCI report shows

Wednesday, 2019-04-24 11:07:47
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Manufacturing electrical boxes at an industrial park on the outskirts of Hanoi. (Photo: NDO/Minh Ha)
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NDO - The Provincial Competitiveness Index (PCI) 2018 report shows that Vietnam’s business climate has seen significant improvement compared with the previous year, especially in criteria such as informal costs, administrative procedures and infrastructure.

Introduced in 2005, the PCI in 2018 continued to receive a positive response from the community of nearly 11,000 domestic and 1,500 foreign-invested enterprises, based in 63 provinces and centrally-governed cities, providing a diverse view on the quality in handling of administrative procedures, human resources and infrastructure in Vietnam.

The majority of enterprises stated that the business environment in Vietnam is becoming more equal. The proportion of enterprises reporting the local authorities’ preference for state-owned firms fell from 41.2% to 32.4%. Those stating that priority was given to attracting foreign investment over developing the domestic private sector also dropped to 37% from 49% in 2015.

Other metrics also saw improvements, with only 30.7% of surveyed companies having reported a need to spend more than 10% of their time on learning and implementing legal regulations. Nearly three quarters of firms reported that civil servants worked efficiently and that the administrative paperwork was less simple.

In addition, informal costs fell sharply in comparison to a few years ago. Although more than half of enterprises still reported having to pay informal costs, the 54.8% figure was the lowest in five years. Corruption has also showed signs of dwindling as only 39.3% reported paying informal costs to inspection officials, down 26.3% from 2014. Only 7.1% of enterprises stated that they had to spend over 10% of their revenue on informal costs, down from 11.1% in 2015.

Furthermore, the proportion of enterprises subject to at least five inspections dropped to a mere 6.42%. A little more than 10% reported that the contents of inspections were overlapping, compared with 25.8% in 2015.

These positive signs show that provincial governments have taken reforms seriously and simplified business registration and investment licencing procedures in order to help enterprises save more time. The above-mentioned figures also affirm the government’s recent reform efforts to facilitate enterprises have materialised and brought real benefits to enterprises.

Therefore, the business community’s confidence in the business environment has been maintained at a high level, with nearly half of enterprises having stated that they would expand their business and only 8.3% are expecting their business size to go down.

However, reforms are still needed in a number of areas, such as post-registration procedures, information transparency and access to land data, said Dau Anh Tuan, head of legal affairs at the Vietnam Chamber of Commerce and Industry.

Tuan stated that in order to continue improving the business environment, it is necessary to push through institutional reform and fine-tune the economic legal system so as to pave the way for greater local reforms.

At the same time, measures are needed to increase dialogue between the government and the business community so that the government’s support policies are truly effective.