In The News

In Vietnam: Improving the Regulatory Environment for Business

November 14, 2007

Since its accession to the World Trade Organization in 2006, Vietnam has continued to improve its regulatory environment for business. The 2007 Provincial Competitiveness Index (PCI) report, which measures economic governance for private sector development, was released last week. This survey – the third annual edition – is the largest and most comprehensive assessment ever done. It is a ranking of the performance of provincial governments based on the views expressed by over 6,700 entrepreneurs and managers of small and medium (SME) enterprises across Vietnam’s 64 provinces.

The 2007 PCI findings show that, as provincial governments strive to create a better business environment, the private sector has flourished and economic welfare has improved. Findings reveal that the overall standard of provincial economic governance in Vietnam has improved over the past year. The aggregate PCI 2007 score for the median province was up 3.2 points from 2006 and significant achievements have been made in the area of entry costs, registration, administrative requirements, and inspections. For example, the number of days it takes to register for a new business has decreased from 20 to 15.

Top performers this year include the provinces of Binh Duong, Da Nang, Vinh Long, Binh Dinh, Lao Cai, An Giang, Vinh Phuc, Dong Thap, and Ho Chi Minh City. Provinces demonstrating the greatest single year improvements ” a 7-13 point increase ” were Thua-Thien Hue, Ca Mau, Tien Giang, Soc Trang, Ba Ria-Vung Tau, Long An, Ben Tre, Quang Ngai, and Thanh Hoa.

Despite some important improvements, economic governance still needs to improve in a number of key areas, like legal institutions, transparency, labor, and private sector development policies, so that Vietnam’s domestic enterprises can compete in the global economy. The PCI report focuses on four national policy challenges: 1) addressing growing inequality between higher and lower ranking provinces; 2) strengthening the formalization process of household enterprises; 3) improving the post-equitization performance of enterprises so there are more medium and larger enterprises; and 4) analyzing how domestic enterprises can benefit more from reforms related to WTO and Bilateral Trade Agreements.

Developed and implemented by the Vietnam Chamber of Commerce and Industry and The Asia Foundation, with funding from the United States Agency for International Development’s Vietnam Competitiveness Initiative (VNCI), the 2007 PCI results can be compared to previous reports in 2005 and 2006 to gauge improvements as well as identify areas in need of reform.

In the past three years, the PCI surveys have become an important tool used by government leaders, academics, financial analysts, entrepreneurs, and the media as a way of understanding how leadership can influence economic performance as well as guide provinces on how to increase economic competitiveness.

Interestingly, the PCI has also entered into the wider world of social awareness; it even found its way into the final question for Vietnamese university students competing in the country’s well-known television game show, Ring the Golden Bell. Together, these landmark reports have consistently demonstrated direct links between good economic governance and positive investment and economic growth.

Janice Stallard is the Deputy Project Director of the Vietnam Competitiveness Project.

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