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Vietnam’s business environment: businesses and informal costs

Wednesday 06, 05 2020
The PCI-2019 report (Provincial Competitiveness Index 2019) prepared by VCCI experts with the participation of about 12,400 businesses
Vietnam’s business environment: businesses and informal costs

Difficulties in land clearance procedures

The PCI-2019 report (Provincial Competitiveness Index 2019) prepared by VCCI experts with the participation of about 12,400 businesses across the country shows that 59% of surveyed businesses had difficulties in land clearance procedures.

Moreover, 53% of enterprises had problems with procedures related to construction and planning. Over 50% of businesses said that they had to pay a lot of informal costs. The business community also expressed concern about the fact that while the provinces and cities at the bottom of the rankings had made great efforts, the top-ranked localities had not yet achieved any significant reform breakthroughs in recent years. This implies a great need for new incentives for grassroots reform.

The PCI-2019 report also shows positive trends in reform at the local level. The provincial competitiveness index PCI-2019 has the highest median score ever. The trend of narrowing the gap in operating quality among provinces and cities is clear. In mid-2019, when VCCI conducted the survey, more than 50% of domestic and foreign enterprises said that they would expand their business scale in the next 2 years. In 2019 alone, an average of nearly 380 new businesses were established every day with increasing scale of registered capital.

The theme of the PCI-2019 report is automation and digital transfer within enterprises, opportunities and challenges for labor and employment. Survey results show that the automation rate is getting higher: 67% of businesses said that they have partially applied automation in production in the past 3 years while about 75% of businesses informed that they would have automatic production in the next 3 years.

Both domestic private enterprises and FDI enterprises are expected to automate from one to one-third of the amount of work which is currently undertaken manually. The tendency of automation in enterprise production is praiseworthy but also poses a challenge to employment, when the majority of workers in Vietnam are still low in skills. The PCI-2019 report emphasized that the Government's policies are on the right track, but education reform must be accelerated more strongly. It is necessary to enhance the voice and the cooperation of enterprises in investment in education and training programs.

Vietnam’s business environment: businesses and informal costs

Ranking of business environment in provinces and cities in Vietnam

In the PCI 2019 rankings, Quang Ninh topped with 73.4 points, followed by Dong Thap (72.10 points), Vinh Long (71.30 points) and Bac Ninh (70.79 points). Other provinces and cities in the top 10 include Da Nang, Quang Nam, Ben Tre, Long An, Hanoi and Hai Phong. In addition, Can Tho, Thai Nguyen, Binh Duong, Ho Chi Minh City, Tay Ninh and Ba Ria - Vung Tau are among high-ranked cities while Lai Chau, Ha Giang, Bac Kan are placed at the bottom of the list.

According to Mr. Dau Anh Tuan, Head of VCCI's Legal Department, the PCI survey 2019 showed that the quality of local economic management in Vietnam has maintained the improvement trend. The work of solving problems and difficulties for enterprises has improved markedly; the business environment has become fairer; businesses have more favorable access to information; informal cost burden has been partly eased; administrative reforms have witnessed positive results, etc.

However, there are still many problems that local authorities have to try to resolve and improve, especially land clearance procedures, procedures related to construction planning, urban planning and investment policy.

​>> Top 10 largest companies in Vietnam 2019

Source: VCCI

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