VietNamNet Bridge – Analysis provided by the 2012 provincial competitive index (PCI) has revealed a sharp decline in economic governance across the country, leading to calls for local authorities to hasten reform.

The US Agency for International Development and the Viet Nam Chamber of Commerce and Industry held a ceremony in Ha Noi yesterday, March 14, to jointly reveal the results of last year's PCI, now in its eighth year. And Dong Thap ranked as this year's number one province, followed closely by An Giang and Lao Cai.

The US Agency for International Development (USAID) and the Viet Nam Chamber of Commerce and Industry (VCCI) held a ceremony in Ha Noi yesterday, March 14, to jointly reveal the results of last year's PCI, now in its eighth year.

Dong Thap ranked as this year's number one province, followed closely by An Giang and Lao Cai. Meanwhile, top performers from previous years, such as Binh Duong and Da Nang, slipped in this year's index. The rural mountainous provinces of Dien Bien, Tuyen Quang and Cao Bang finished bottom of the rankings.

The report, based on a survey of 8,053 domestic firms and 1,540 foreign-invested enterprises across 63 provinces, showed that economic governance actually declined in the past year.

The median score decreased from 59.15 last year to 56.2 this year, the lowest mark since 2009.

In addition, not a single province this year reached the "Excellent" threshold of 65 points – the first time this had ever occurred in the PCI.

In addition, the report found that both foreign and domestic firms were far more negative about their prospects than in previous years. This year, 33 per cent of respondents said that they wished to expand their business in comparison to 76 per cent in 2006 – a historic low.

According to Dau Anh Tuan from the VCCI, "business performance was reported at an all-time low this year" with only 6.5 per cent of respondents saying that they had increased operations and fewer than 60 per cent claiming to be profitable.

In comparison, the figures recorded in 2007 were 27 per cent and 82 per cent respectively.

VCCI President Vu Tien Loc said that some improvements had been made due to the implementation of "easy" reforms such as reducing waiting periods for business licences and making inspections more efficient.

However, reforms making governance more transparent and fair failed to come into being last year.

According to the report, businesses believe that access to provincial planning documents is purposefully difficult and unfair and informal charges and fees are crippling their operations.

Alarmingly, the report also revealed that 42 per cent of firms admitted to paying commission to government officials to ensure they won a contract, a dramatic 23 per cent rise on the figure recorded in 2011.

Regarding the views of foreign investors, the report noted a growing pessimism. Business confidence and performance were at their lowest levels since the survey first began, with only 33 per cent of foreign–invested firms expecting to expand their business over the next two years.

Profitability, capital and labour growth in the foreign sector were lower than in previous years.

The arrest of the former vice chairman of the Asia Commercial Bank Founding Council, Nguyen Duc Kien, on August 20 last year, sent a strong signal to investors that Viet Nam was facing severe economic difficulties.

The report found that within 20 days of the news, both foreign and domestic investor confidence in the country reduced by half.

Further analysis revealed that respondents believed that the crisis was macroeconomic in nature. Forty-eight per cent of foreign investors consider macroeconomic instability as one of the top three primary risks they face in Viet Nam.

"Viet Nam should focus reforms on mechanism-related issues, such as improving transparency, restructuring the real estate market, enhancing corruption prevention and increasing the quality of human resources to create an advantageous business environment for enterprises," Loc said.

Source: VNS