Plenty of room for improvement in provincial competitiveness index

Hanoi (VNA) – The Report on Provincial Competitiveness Index 2020 (PCI 2020) shows that the gap between the best and worst performing provinces in both the annual PCI and core PCI rankings is narrowing and there is room for improving management quality in localities.

According to the report, this is the fourth year in a row that the median province has scored above 60 points on the 100-point scale. Nevertheless, there was a slight decline to 62.91 from the all-time high of 63.44 achieved in 2019.

In addition to progresses, the PCI 2020 report also points out a number of areas with plenty of room for improvement.

Local business environment has become fairer with less favouritism toward state and foreign investors overall. The share of domestic firms perceiving difficulties in doing business due to provincial authorities’ favouritism towards state-owned enterprises (SOEs) dropped from 37.9 percent in 2016 to 24.7 percent in 2020.

Only 29 percent of firms felt provincial governments prioritised FDI attraction over domestic investment, a significant decline from 42.3 percent in 2016.

Similarly, administrative procedure settlement and land access are perceived as becoming less biased over time, except for the priority given to handling foreign-invested enterprises (FIEs)’ problems. There are also signs of declining favouritism towards large and connected firms.

About 57.9 percent of respondents agreed that “government procurement contracts, and other business resources mostly fall into the hands of enterprises that have strong connections with the provincial authorities,” compared to 72.3 percent in 2016.

The ceremony honours top PCI performers in 2020. (Photo: VietnamPlus)

In spite of this more balanced business environment, favouritism towards big and connected firms remains high, at 53.9 percent. It necessitates more efforts by provincial authorities to create a fair playing field for the private sector, said General Director of the VCCI’s Legal Department and head of the PCI project.

He said most localities have progressed well across easy-to-reform areas, such as simplifying public administrative procedures, cutting time for delivery of public administrative services and improving their transparency. But those “harder” areas, like information transparency, favourable land policies, effective dispute settlement, and dynamic governance, were moving very slowly, he noted.

The private sector’s perception of the efficacy of the fight against corruption and informal charges at the provincial level is increasing. The share of firms reporting that they paid informal charges in 2020 dropped to 44.9 percent from a height of 66 percent in 2016.

The burden of informal charges has shrunk over time, with 84.4 percent of firms rating it as at an “acceptable” level in 2020, compared to 79.2 percent of firms in 2016.

Tuan said access to planning documents has grown, but there is room for improvement when obtaining other important forms of information.

On a scale of 1 – 5, ranging from Impossible (1) to Very Easy (5), access to planning documents remained at 2.5 points and access to legal documents was rated 3.03 points, showing little sign of improvement over prior years.

The quality of provincial websites only marginally improved to 34.5 points on a 50-point scale, a slight increase from 31 points in 2016.

The report also highlights the widespread negative impact of COVID-19 on business operations, with shrinking domestic market and disrupted supply chains were main issues faced by businesses.

For domestic firms, which disproportionately operate in wholesale/retail and other services, the biggest challenges were caused by the shrinking domestic market, which led to declining cash flow (47 percent) and fewer domestic customers (44 percent).

COVID-19 has also caused major disturbances to FIEs, mainly affecting their access to international markets (63 percent), reducing cash flow (42 percent), and disrupting their supply chains (41 percent).

Business confidence was hit quite hard by the COVID-19 pandemic with only 41 percent of respondents planning to expand their business operations, compared to 51 percent in 2019.

This is the lowest confidence recorded in Vietnam since the 2012-2013 hyperinflation crisis, Tuan said./.