PCI 2010: Better Labor Training, Worse Transparency
By Duc Hoang
For the first time, the Provincial Competitiveness Index 2010 (PCI 2010)—developed by the Vietnam Chamber of Commerce and Industry and the USAID-funded Vietnam Competitiveness Initiative—expanded its survey to the foreign investment sector with 1,155 businesses. It also provided clear evidences of informal charges paid by the PCI respondents during their course of doing business.
From the viewpoint of the firms polled, provincial governance which plays a crucial role in the economy was in decline last year, the PCI 2010 shows. Some smaller provinces, however, indicated their stability and improvement although they lag far behind the biggest counterparts in terms of infrastructure and labor training. The fact that the biggest provinces acting as Vietnam’s economic growth engines were scored badly by business people should not be considered a good sign for the economy.
In the PCI Rankings 2010, Danang has retained its number-one position in three consecutive years. However, respondents in Danang showed a lower rate of satisfaction compared with the previous year, rating the city 6.19 points lower than in 2009. Binh Duong stunned pollsters when it lost 8.28 points and sank to the fifth slot, after five consecutive years in which it ranked either first or second. BinhDuong also tumbled out of the tier of excellent performers. The southern province failed to keep its position mainly due to low scores of market access and business supporting services.
The fall of three remaining metropolises—HCM City, Hanoi and Haiphong—was even more dramatic. HCM City was seven notches down and for the first time tumbled out of the excellent performing group. Hanoi fell 10 slots and Haiphong 12. Hanoi and HCM City have shown advantages in geographical position, infrastructure, business supporting services and labor training. However, the PCI 2010 has excluded all these items and focused solely on economic governance. Notably, these two biggest growth engines were both in the bottom group in terms of market access.
Meanwhile, the smaller provinces indicated stability and radical improvement, particularly the Mekong Delta, where nine out of its 22 provinces were in the excellent and high-performing tiers. Other regions, like the Red River Delta, the Central Highlands and the central coast, also showed significantly better performances. Of these, Lao Cai, a province in the northern uplands, ranked second after Danang. Last year, 20 provinces issued documents related to improving their business environment and raising provincial competitiveness. Ten of them made remarkable progress.
The quality of human resources has always been a hurdle to businesses, especially the private sector. The PCI 2010 shows that labor training changed positively. The rate of respondents claiming satisfaction of popular education and vocational training in the median provinces reached almost 47%, a 12-point jump over the two previous years. The quality of job placement services also made great strides, as 62.5% of firms said they would keep on using this service, compared with only 27.78% in 2009. PCI pollsters considered it a positive change because firms always moan about the quality of labor training.
Business supporting services were also a bright spot in the PCI 2010. The number of entities providing this kind of services also soared to more than double from 2009.
In addition, the pro-activity of provincial leadership was scored better by respondents. Up to 75.5% said provinces were proactive in the legal framework to create favorable business environment for the private sector. Overall, this sub-index increased by 3.2 points over 2009 although it remained lower than in 2008. The number of respondents giving high scores to provincial authorities’ creativity and cleverness in removing obstacles to business communities rose by 3.25 points. However, firms giving positive remarks accounted for only 47% of the respondents.
In previous PCI reports, market access was always the best performance of the nine aspects of provincial business environment. From 2006 to 2009, reforms cut the time needed for business registration by a half. However, this pace seemed to slacken in 2010. The time required for business registration or revision remained the same as in 2009, being 10 and seven days, respectively. This duration is longer than that stipulated in Government Decree 43 issued in April 2010.
Aside from business registration, 14.68% of the respondents said they had to submit other documents. The PCI 2010 shows that most of the component indicators of the market access sub-index went against their own trends in the previous years.
Most of the component indicators related to land access show little improvement compared with 2009. Some may have become worse when the rate of firms claiming they faced no difficulty in land dropped from 30.72% to 23.89%.
Another worse performance was transparency. The PCI 2010 indicates that most of the transparency component indicators fell compared with 2009. Access to information and documents related to production or legal framework also declined. On a five-point scale, the average point for these indicators was 2.31 points (2009: 2.44 points), the lowest since 2005, of which the highest scoring province reached only 2.62 points.
Worse still, the number of firms claimed to have to resort to “relationships” to access information or documents was on the rise with 78.64% of them claiming so.