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PCI 2018: Local and foreign enterprises plan to expand

Released at: 18:22, 28/03/2019

PCI 2018: Local and foreign enterprises plan to expand

Photo: vietnamplus.vn

2018 Provincial Competitiveness Index (PCI) Report released on March 28.

by Minh Do

Forty-nine per cent of respondents see optimistic prospects for their businesses in the private sector and 56 per cent of foreign-invested enterprises (FIEs) planned to expand their operations over the next two years, Dr. Vu Tien Loc, Chairman of the Vietnam Chamber of Commerce and Industry (VCCI) told the announcement for the release of the 2018 Provincial Competitiveness Index (PCI) Report on March 28 in Hanoi.

Jointly announced by VCCI and the US Agency for International Development, the PCI Report provides an independent, unbiased view of the provincial business environment and surveyed 10,681 private and domestic enterprises, 2,000 newly-registered enterprises in 63 cities and provinces, and 1,577 FIEs from 36 countries and territories operating in 20 cities and provinces. The report actively promotes dialogue between local government officials and the business community.

The FDI survey results revealed a number of bright spots: high-tech subsectors such as electronics account for an increasing share of FDI; the regulatory burden has been alleviated; and informal charges have been declining significantly, according to Mr. Dau Anh Tuan, General Director of the Legal Department at VCCI. He also noted areas that require attention. It is critical to improve labor quality, especially among high-skilled and management professionals. The size of FDI projects is decreasing, which may indicate an influx of satellite FIEs seeking to supply larger FDI projects. While large investment into infrastructure is paying off, some provinces are lagging behind.

Dr. Edmund Malesky from Duke University said that Vietnam’s entry into the CPTPP will have a positive impact on the country’s integration into global value chains. Both foreign and domestic companies feel more confident about dispute resolution procedures and are more likely to engage in long-term contracting. Both will increase sales by 4 per cent above and beyond current partnerships. Increases will most likely occur in partnerships with companies in international supply chains (multi-national companies, third party buyers), he added.

Ironically, the US’s 10 per cent across-the-board tariffs on Chinese products are likely to lead to a significant improvement in labor conditions in Vietnam’s factories. To take advantage of new export opportunities to the US, the companies need to recruit higher skilled labor, managers and technicians. Labor condition improvements will primarily occur in increased wages and social benefits, Dr. Malesky said.

The report highlighted three positive trends: declining corruption, a less biased business environment, and continued progress in administrative reforms. Sixty-nine per cent of respondents said the time needed to complete administrative procedures is shorter than specified in regulations, while the figure in 2017 was 67 per cent.

Meanwhile, three worrisome trends are regulatory procedures remaining cumbersome, transparency not improving, and land access declining slightly, according to Mr. Tuan.

Quang Ninh province has emerged at the top as the most competitive province in Vietnam, with 70.36 points. Its rise in rankings has been largely attributed to strong administrative reforms and the province has consistently ranked among the top five since 2013.

Dong Thap province took over second place from Da Nang, with 70.19 points, followed by Long An (66.67), and Ben Tre (67.55). Hanoi ranked ninth, while Ho Chi Minh City ranked 10th. The provinces with the lowest rankings were Binh Phuoc, Lai Chau, and Dak Nong.

Mr. Tuan summarized the results of domestic private enterprises that sustained improvements in many areas of provincial economic government in Vietnam. Continuous effort is required to create a more enabling environment and private enterprises are still facing many difficulties in their production and business activities. Therefore, timely and effective policy measures that stem from careful attention to the issues raised will play a vital role in the development of a healthy, productive, and sustainable private sector in Vietnam.

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