Prof. Dr. Edmund Malesky indicated that the Provincial Competitiveness Index (PCI) is more than simple proximity to the business environment of the provinces and cities across Vietnam. In particular, the changes of the PCI will help the provinces to make policy reforms and directly improve the business environment, rather than relying on the previous policies.
After many years of researching the PCI, the research team has made changes in the PCI as well as research methods. What are the changes of this year?
A major challenge to implement the PCI survey in recent years is to keep up with the dynamics of Vietnam’s economy and the institutional changes in the law. To ensure that the PCI is really useful for policy makers, since 2005, the team committed revise the index every 4 years. In 2009, we made this commitment that the index was adjusted in 2013. The most important change in 2013 is to introduce the level of disparity of local environmental policies among the state-owned enterprises, private enterprises and foreign companies.
The second important change is to update the scale of transparency on the website. In this regard, the information will strongly link to the PCI. The local website is diversified and informative. The third change relates to the update of the index through a series of indicators to keep track with the challenges that businesses are facing. Finally, we will update each sub-index to reflect the new index and other important aspects of the direction and administration of the province.
Could you please analyse the effects of the new content that the research of the PCI research will bring this year?
These changes have made the PCI more accurate to forecast and evaluate the business environment of Vietnam and allow us to better meet the overall goals of the business incentives. Moreover, these changes will direct the provinces to reform and directly improve the business environment rather than relying on previous policies.
The country in general and the provinces in particular are constantly improving their competitiveness in order to attract investment and develop the whole economy, Based on your international experience and many years of working in Vietnam, what do you think about the level of improvement in the business environment of the provinces in Vietnam?
There are two significant changes that make me pay attention. First, there is a significant reduction in the cost of initial registration. Some provisions such as one-stop registration, reduction of the licensing time, improvement of the operational efficiency of the licensing department at local areas have contributed significantly to reduce the initial costs for the establishment of businesses. Moreover, many provinces have consensus on making reforms so there are very few disagreements that occur. However, unfortunately, the reforms and efforts just focus on reducing the costs of inputs rather than creating fundamental reforms such as reduction of the legal costs for the existence of enterprises, enhancement of transparency, improvement of labour quality, and enhancement of trust in legal institutions.
Second, the reduction of the daily charges the businesses have to pay for officials has improved significantly. This does not indicate that Vietnam has “no corruption“, but annually the Vietnamese businesses report that there are informal charges they have to pay more or less, which affect the success of businesses and cause reduction of the incomes of enterprises. Moreover, these expenses are not officially included in the total budget so the companies can predict and calculate their budget easier.
It is said that geographical reform is shrinking. Therefore, each province must actively seek ways to make their area be more potent to appeal investors. What do you think about this trend?
Indeed, we have observed a narrowing of the gap of the PCI each year; this indicates that the reform in the top provinces has levelled off while other provinces in lower rankings are quickly catching up. This leads to the accumulation of the PCI. On the other hand, we can clearly see a major change in improving business environment for investors among the provinces in the first group. For example, we found that the province has made great efforts to keep the information updated on the website for better quality and more transparency and create more favourable conditions in the land acquisition process and create a more level playing field for private investors.
Both domestic and foreign companies are very eager to seek provinces with favourable business and investment environment. Each province in particular and the country in general are also trying to create favourable conditions for investors. However, not all investors fully comply with the policy regimes and laws of the host country. What recommendations do you give to create an open investment environment to welcome potential investors while reinforcing the restrictions or penalties for infringing investors?
This is a big question. In the chapter 3 of the report, we have studied how to improve the drafting of regulations of the provinces to give best legal guidelines for the firms. Theoretically, this process will be improved once the knowledge of the regulations is enhanced; which helps gain the promulgators’ confidence and improve the quality of regulations as well as conformity with the needs of businesses. However, based on our own experience, we have found that the enterprise can implement the business rules well once they have opportunities to involve in the drafting of the legal documents and policies through the business forums or online dialogues. More importantly, we have found the evidence that this is true only when the businesses and the government share the same concerns. This is reason to believe that the government is indifferent to participate in this linkage.
Therefore, the recommendations to the policy makers in Vietnam are that the businesses should be allowed to contribute their comments to the regulations and this will be followed up in a mechanism: first, how to put the comments on the draft regulations and second, why the drafts can not be used by the policy makers.
Vu Tien Loc, President & Chairman of VCCI “The PCI continues to be an important measure to help provincial governments better understand economic operating efficiency, as well as give recommendations to improve the business environment in order to promote domestic and foreign investment, create jobs and boost economic development. We believe that the PCI study will provide some ideas and direction for policy makers to help Vietnam reach a new development age”. Virginia Foote, Co-chair of the Vietnam Business Forum (VBF) Vietnam, when compared with neighbouring countries, has proved its quite good performance in investment attraction and trade but now the regional countries are striving to create fierce competition and Vietnam cannot fall sleep on the success of the past. In my opinion, the key to successes in attracting investment is to ensure a good infrastructure, rich electricity power, and a standardised transportation system of roads, railways and airlines. Particularly, the ports should be improved to reach many countries and regions in the world. Not only Vietnam but also other countries in the region are promoting systems of education, banking, internet, legal environment, and software infrastructure because these are the core values to growth and success of Vietnam and other countries in the future. When assessing the business environment, the VBF always gives an overview, including what to do and not do. Similarly, the PCI was the result of a survey of 8,000 domestic companies and 1,600 foreign investors. The results showed that the domestic and foreign firms are concerned about corruption, administrative bottlenecks, confusion in regulations, land use rights, taxation, customs, employment issues, permits and other difficulties which can affect directly the business environment. The PCI will help us all see the “bottlenecks” and work together to address these issues to make the investment environment better. The government plays an important role in improving the investment environment, and vice versa. Therefore, I think that the goal of the government now is how to ensure a good infrastructure for the investors. The investment environment in general must be fair, transparent and user-friendly. |
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