PROVINCIAL COMPETITIVENESS INDEX (PCI) AND RECOMMENDATIONS TO THE VCCI RECORDING TO THE PROVINCIAL COMPETITIVENESS INDEX

FOREIGN TRADE UNIVERSITY
SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS
---------***--------

MID-TERM INTERNSHIP REPORT
Major: International Business Economics
PROVINCIAL COMPETITIVENESS INDEX (PCI) AND
RECOMMENDATIONS TO THE VCCI RECORDING TO THE
PROVINCIAL COMPETITIVENESS INDEX

Full Name: Nguyen Thi Hong Ha
Student ID: 1515150041
Class: English 26 – High quality program
Course: 54
Instructor: MA Nguyen Huyen Minh

Hanoi, August 2018


TABLE OF CONTENTS
LIST OF ABBREVIATIONS ................................................................................... 4
LIST OF FIGURE ................................................................................................... 5
PREFACE ................................................................................................................. 6
CHAPTER 1: GENERAL ISSUES ON THE PROVINCIAL
COMPETITIVENESS INDEX ................................................................................ 8
1.1. Overview of The provincial competitiveness index (PCI) Agencies ............. 8
1.1.1. About USAID ............................................................................................ 8
1.1.2. About VCCI ............................................................................................... 9
1.1.2.1. General information ............................................................................ 9
1.1.2.2. History of formation ............................................................................ 9
1.1.2.3. Functions and missions of VCCI ........................................................ 10

1.1.2.4. Organization structure of VCCI ......................................................... 13
1.2. About The provincial competitiveness index (PCI)..................................... 14
CHAPTER 2: THE COLLECTING DATA PROCESS AND ASSESSING THE
QUALITY OF THE PROVINCIAL COMPETITIVENESS INDEX ................. 16
2.1. The process of implementing the provincial competitiveness index ........... 16
2.1.1. Indicators constituting the provincial competitiveness index .................. 16
2.1.2. Methodology of data collection and PCI building ................................... 23
2.1.3. The actual process of implementing the provincial competitiveness index
in recent years ................................................................................................... 24
2.2. The PCI collecting data process ................................................................... 25
2.2.1. Position in mid-term internship process at VCCI ................................... 25
2.2.2. Details of the PCI collecting data process ............................................... 26
2.2.2.1. Source data........................................................................................ 26
2.2.2.2. The process of collecting data for PCI ............................................... 26
2.2.3. Response Rate ......................................................................................... 28
2.2.4. Distribution of PCI respondents.............................................................. 29
2


2.3. Assessing the quality of the provincial competitiveness index ................... 31
2.3.1. Utility of the provincial competitiveness index ........................................ 31
2.3.1.1. Advantages of the provincial competitiveness index with related parties
....................................................................................................................... 31
2.3.1.2. Impacts of the provincial competitiveness index with related parties . 32
2.3.2. Some disadvantages of the provincial competitiveness index .................. 34
CHAPTER 3: RECOMMENDATIONS TO VCCI RECORDING TO THE
PROVINCIAL COMPETITIVENESS INDEX..................................................... 37
3.1. Recommendations to improve the quality of PCI collecting data process . 37
3.2. Recommendations to increase the benefits of PCI for related parties ....... 38
3.3. The lesson learnt and personal experiences................................................. 40

REFERENCES ....................................................................................................... 43
APPENDIX ............................................................................................................. 45

3


LIST OF ABBREVIATIONS
No.

Abbreviation

Full name

1

VCCI

Vietnam Chamber Commerce and Industry

2

USAID

The United States Agency for International
Development

3

PCI

The provincial competitiveness index

4

CDCS

The USAID Country Development and Cooperation
Strategy

5

SOEs

State owned enterprises

6

CIT

Corporate incomes tax

7

FIEs

Foreign invest enterprises

8

PPC

Proactivity and Provincial Leadership

9

SMEs

Small and Medium enterprises

10

GTD

General Department of Taxation

11

GSO

General Statistics Office of Vietnam

12

CEO

Chief executive officer

13

LLC

Limited liability companies

14

DDCI

Initiative of District/Department level Competitiveness
Index

15

FDI

Foreign direct investment

4


LIST OF FIGURE
Number of

Name of figure

figure

Page

Figure 1.1

Diagram of organizational structure of VCCI

12

Figure 2.1

The component index of PCI

15

Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5
Figure 2.6

The actual process of implemeting the PCI over the
years
Distribution of PCI respondents by sector
Distribution of PCI Respondents by legal form, size
and age
Statistics on PCI’s impacts
Graph of the number of responded enterprises year by
year

24
28
29
32
33

5


PREFACE
Rationale
In the process of deep integration into the world economy, Vietnam has many
opportunities to develop and also face many difficulties and challenges. By the time of
2018, the time when the market for goods and services is fully expanded, the issue of
raising the competitiveness of the country becomes more urgent. National
competitiveness is derived from the ability to operate the business environment of
each province or city, hereafter referred to as the provincial level.
Many economists consider the Provincial Competitiveness Index (PCI) to be the
most objective indicator of the ability of the local government to regulate the business
environment. However, the PCI highlights the strengths and weaknesses of provincial
governance without indicating the cause or finding a remedy. Therefore, the results of
the study only help to classify and identify provinces based on PCI, but there are no
solutions to help provinces improve this indicator.
With the knowledge of learning at school, the initial perceptions of approaching
the practice and derived from the above thinking, I decided to choose the topic
"Provincial Competitiveness Index (PCI) and recommendations to the VCCI
recording to the provincial competitiveness index " as internship report. The report
consists of three chapters:
Chapter 1: General issues on the provincial competitiveness index
Chapter 2: The colleting data process and assessing the quality of the provincial
competitiveness index
Chapter 3: Recommendations to the VCCI recording to the provincial
competitiveness index
I would like to express my gratitude to MA Nguyen Huyen Minh, for his
insightful guidance and continuous support. He has not only oriented topic for me so

that it can match with current situation and my ability but also given me thorough
comments for my research from the start. I also would like to thank for helps in the
Provincial Competitiveness Index Team of the Vietnam Chamber of Commerce and
Industry, especially Ms. Luu Ngoc Anh – PCI Project Manager and Mr. Dang Van
6


Truong – No.1 PCI Team Leader. I hope to receive the comments of teachers and
friends, so that the ideas in your topic will soon come true.

7


CHAPTER 1: GENERAL ISSUES ON THE PROVINCIAL
COMPETITIVENESS INDEX
1.1. Overview of The provincial competitiveness index (PCI) Agencies
1.1.1. About USAID

Address: 15/F, Tung Shing Building, 2 Ngo Quyen, Hanoi ,Vietnam
Tel: (84-24)3935 1260
Fax: (84-24) 3935 1265
Website: www. usaid.gov/vietnam
The United States Agency for International Development (USAID) is an
independent federal agency that provides economic, development and humanitarian
assistance around the world in support of U.S. foreign policy goals. Currently, USAID
programs in Vietnam support the country’s progress by focusing resources in health,
economic growth and governance, higher education, environment and climate change
and vulnerable populations, including persons with disabilities.
USAID played a key role in helping Vietnam reach out to global markets through its
accession to the World Trade Organization and the Vietnam-US. Bilateral Trade

Agreement. In partnership with the Government of Vietnam, USAID continues to
promote greater market integration through its support for the Trans-Pacific
Partnership under negotiation. USAID also supports efforts to strengthen the rule of
law and improves economic governance while seeking to further Vietnam’s
integration into the global economy as it continues its transition to a market-driven
system. Working with the Government of Vietnam, USAID promotes transparency in
law making, accountability, access to information and increased competitiveness.
Under the USAID Country Development and Cooperation Strategy (CDCS) for
Vietnam for the 2014-2018 period, USAID assistance will be focused on collaborative
efforts that support the goal of Vietnam’s continued transformation into a responsible,
more inclusive partner.
8


1.1.2. About VCCI
1.1.2.1. General information

Address: 9 Dao Duy Anh St, Dong Da District, Hanoi
Tel: 84-24-35742022
Fax: 84-24-35742020
Email: www.vcci.com.vn
1.1.2.2. History of formation
Vietnam Chamber of Commerce and Industry (VCCI), formerly known as the
Chamber of Commerce of the Democratic Republic of Vietnam, was established in
1963 to promote trade between Vietnam and other countries in the world. Starting
with only 93 member organizations, VCCI has experienced a series of development
periods corresponding to the periods of Vietnamese history.
During the war years, VCCI has focused on the maintenance of trade relations
between Vietnam and some countries and territories according to the import and
export demand of the country.

After the war, VCCI expanded its operations throughout the country,
establishing relations with many countries around the world, participating in the
activities of many economic organizations. In 1982, VCCI changed its name to the
Chamber of Commerce and Industry of the Socialist Republic of Vietnam and
expanded its operations to the manufacturing sector.
Since Vietnam “opened up”, VCCI has entered a new stage of development
through the Second National Congress in 1993 and the third in 1997. VCCI continues
to grow in size wide as well as depth, catch up with the pace of development of the
country. Through its domestic and foreign activities, VCCI has actively contributed to
the country's renewal process, playing an important role in the country's economic
development and transformation, as well as its integration with international and
regional markets.
9


In 1998, VCCI became an official member of the National Fatherland Front and
expanded its contribution to the development of Vietnam.
As the representative of the entire business community in Vietnam, Vietnam of
Commerce and Industry has been a dynamic and effective consultant to the
government in the development of the laws, mechanisms, policies and business and
investment environment system in Vietnam. VCCI has maintained close coordination
with government agencies in guiding business operations and policy change proposals
to facilitate economic and trade development.
VCCI has protected the interests of Vietnamese enterprises in the relationship at
home and abroad. In promoting trade, VCCI has jointly organized governmental
activities such as investment, information and consulting, brokerage in investment and
business, marketing, exhibitions, trade fairs, industrial arbitration, etc. Thanks to the
above activities, the Chamber has become the trustworthy representative and the
largest trade and investment promotion center in Vietnam.
With admiration for organized development, VCCI will play a central role in

restoring trade associations, corporations, expanding the Chamber's trade promotion
network and in particular attracting more small and medium enterprises.
VCCI has made a great contribution to improving the business environment in
Vietnam and effectively supporting domestic and foreign entities in business activities
of households in Vietnam.
1.1.2.3. Functions and missions of VCCI
The Vietnam Chamber of Commerce and Industry (VCCI) is a national
organization that brings together and represents the business community, employers
and business associations in Vietnam for the purposes of development, protection and
support enterprises, contribute to the socio-economic development of the country,
promote the economic, trade and scientific-technological cooperation between
Vietnam and other countries on the basis of equality and win-win co-operation. The
Chamber of Commerce and Industry of Vietnam is an independent, nongovernmental, non-profit organization with legal status and financial autonomy.
v Function:

10


- Representing to promote and protect the legal and legitimate interests of the business
community and employers in Vietnam in domestic and international relations
- Promote the development of enterprises, entrepreneurs, the linkages between
enterprises, business associations, promotion and support of trade, investment,
scientific and technological cooperation and other business activities of enterprises in
Vietnam and abroad.
v Mission:
- To gather and study opinions of enterprises in order to reflect, propose and advise
the State on legal matters and socio-economic policies in order to improve the
business environment
- Participate in the elaboration and implementation of socio-economic development
strategies and international economic integration, attend conferences, trade and

economic delegations in accordance with the regulations of the State
- Organizing forums, dialogues and meetings between enterprises and employers with
state agencies, laborer's representatives and other concerned organizations at home
and abroad to exchange information and ideas on issues related to business and
business environment
- To carry out necessary activities to protect the legitimate interests of enterprises and
employers in domestic and international business relations
- Organizing activities of propagandizing and mobilizing enterprises to strictly
observe the law, raise social responsibilities, ethics and business culture, build labor
relations in harmony and protect the environment and participate in other social
activities in accordance with the VCCI's objectives
- Collect and link with business associations in Vietnam, cooperate with Chambers of
Commerce and Industry, other relevant foreign organizations, join appropriate
regional and international organizations for the purposes of VCCI and for the
assistance of enterprises engaged in activities in such organizations
- Conducting activities of building, promoting and enhancing the prestige of
enterprises, entrepreneurs, goods and services of Vietnam; promoting business
development support services; assist the business to develop business and investment
relations at home and abroad through measures such as clues and referrals, providing
11


information, guidance and advice to enterprises and research organizations, market
research, seminars, conferences, fairs, exhibitions, advertisements and other
promotion activities
- Organize training in appropriate forms to develop human resources for enterprises,
help entrepreneurs improve their knowledge and capacity in management and
business;
- Helping to register and protect intellectual property rights and technology transfer in
Vietnam and abroad

- To issue certificates of origin for Vietnamese export goods and certify other
necessary documents in business; certify force majeure cases
- Helping domestic and foreign businesses solve disputes, disputes through
negotiation, reconciliation or arbitration; general avarage allocation upon request;
- To perform other tasks entrusted by the State of Vietnam or other organizations.

12


1.1.2.4. Organization structure of VCCI

Figure 1.1. Diagram of organizational structure of VCCI
13


1.2. About The provincial competitiveness index (PCI)
Introduced in 2005, the Provincial Competitiveness Index (PCI) on Vietnam’s
business environment conducts an annual business survey, assessment and ranking of
the economic governance quality of provincial authorities in creating a favorable
business environment for development of the private sector.
Provincial Competitiveness Index is the measure of the effectiveness of local
economic policy government. This index removes the natural and social factors that
can make this locality more advantageous than other localities in economic
development. Thus, the localities have the opportunity to compete equally before the
economic policies of the State. The position of the locality in the rankings is a
measure of capacity and represents in a real way the perception, thinking and method
of governance of the local authority.
The Vietnam Competitiveness Index (PCI) is a result of research cooperation
between the Vietnam Competitiveness Initiative (VNCI) and the Vietnam Chamber of
Commerce and Industry (VCCI). By the comments of enterprises, PCI assesses and

ranks provinces based on the attitudes and implementations policies of provincial
government towards the private economy sector. The provincial competitiveness
index refers to two aspects. The first aspect is the quality of governance of the
provincial government. PCI does not include internal business elements such as
management quality, corporate value chain,… because it is completely out of control
of local government. The second aspect is the exclusion of the effects of available
traditional conditions such as infrastructure, human resources, the distance from the
place of production to the market of the product ... because they are also not under the
control of local government. PCI only covers conditions that local governments can
fix in the near future.
In other words, PCI was developed as a measure of the competitiveness of
provinces which is independent of the traditional local conditions. In fact, provinces
with better infrastructure, higher skilled and technically skilled workforce,
geographically located closer to the large consumer markets, the economy grows more
favorably. Moreover, the advantages from the traditional conditions are reinforced by
the particularity of the Vietnamese financial system. Provinces with favorable
14


conditions, with large revenue sources, are allowed to deduct part of their revenues
beyond the plan for further development. If using traditional conditions as a measure
of economic development, the results will be inaccurate. Since traditional conditions
themselves are the result of development. Traditional factors are often not directly
influenced by attitudes and policies implementation of current government in the short
to medium term.
Differences in traditional conditions between provinces are usually maintained
for a long time. For example, Ho Chi Minh City has a bigger market than Ha Tinh,
Binh Duong has always better position than Ca Mau, infrastructure of Ha Tay is better
than Ha Giang,.... Developers will certainly be higher competitive ranked by having
good traditional conditions. Thus, the exclusion of traditional elements will create the

basis of equal comparison between provinces and cities; more accurately assess the
efforts of local governments to improve the business environment. The ultimate goal
of the PCI is to identify the provinces that operate well when the initial conditions are
the same.

15


CHAPTER 2: THE COLLECTING DATA PROCESS AND
ASSESSING THE QUALITY OF THE PROVINCIAL
COMPETITIVENESS INDEX
2.1. The process of implementing the provincial competitiveness index
2.1.1. Indicators constituting the provincial competitiveness index
PCI is calculated on the basis of 10 components as follows:

Labor
and
Training

Entry
costs

Land
access and
Security
of tenure
Transpar
ency and
Access to
informati

on

Legal
Institutio
ns

PCI
INDEX

Time
costs and
Regulator
y
complianc
e

Business
support
services

Proactivit
y of
Provincial
Leadershi
p

Informal
Charges
Policy
Bias

Figure 2.1. The component index of PCI
Requirements for each indicators:
v Entry costs

The goal of this sub-index is to assess the differences in entry costs for new firms
across provinces. Entry cost is the cost that is calculated based on the measurement of
the time a business needs to register a business, apply for land and receive all kinds of
16


permits, the time it takes to do all the procedures for commencing business operations,
the number of licenses to be completed, and the perceived difficulty of obtaining such
licenses. To establish an index of entry costs, data on:
-

Percentage of businesses that take more than a month to start a business.

-

Percentage of businesses that take more than 3 months to start a business.

-

Percentage of firms having difficulty obtaining all the papers necessary for
business.

-

Time of business registration (number of days).

-

Time to re-register (number of days).

-

Number of registration papers, business license and approval decision the
existing business.

-

The actual waiting time to be allocated land (based on the main effort of local
government, not supply/demand conditions).

v Land access and Security of tenure

Considering the access and use of land, two aspects are considered. First and foremost
is the status of enterprises having land use right certificates, having enough premises
to meet the requirements of business expansion or enterprises which are leased land
by state enterprises. In addition, we also need to pay attention to the implementation
of land transfer in the locality. Next is the feeling of the business about the risks in the
process of land use.
This sub-index measures the difficulty encountered by the business in the process of
searching for business premises and obtaining land use right certificates. Difficulties
faced in the process of obtaining land use right certificates have limited businesses
access to credit sources due to lack of papers to mortgage at the bank.
It also measures the stability of land use. Stable land use will make the company
secure long-term investment capital. On the contrary, if businesses are not
comfortable with the stability of their business premises, they will have short-term

investment plans, less capital.
To qualify for this sub-index, it is necessary to consider:
-

Percentage of enterprises having a certificate of land use right.

-

Percentage of enterprises leasing land from SOEs.
17


-

Percentage of enterprises assessing the efforts of the provincial government in
conversion of agricultural land use purpose is good or very good.

-

Percentage of total land area in the province with a certificate of land use right
land.

-

Assess the company's risk of land acquisition.

-

Assess the company's compensation policy if the land is recovered.

-

Risks of changes in land lease conditions.

-

Assessment of fairness in the way disputes of land leasing are settled

v Transparency and Access to information

In today's information age, businesses have a high demand for transparency and
access to government information. When government activity is transparent,
businesses reduce the costs, time spent on transactions with government. Access to
information necessary for business such as information on planning, socio-economic
development plan of the province, land use planning,… information on infrastructure
development projects, major events of the city will help businesses have better
forecast conditions in their business plans.
A measure of whether firms have access to the proper planning and legal documents
necessary to run their businesses, whether those documents are equitably available,
whether new policies and laws are communicated to firms and predictably
implemented, and the business utility of the provincial webpage. This indicator is
expressed in the following aspects:
-

Transparency of the planning documents.

-

Transparency of legal documents.

-

The role of "relationships" to obtain provincial planning documents.

-

The role of family and friends when negotiating with government officials.

-

Negotiation with tax officials is an essential part of business.

-

Ability to predict the implementation of local regulations and policies.

-

The provincial government has consulted with the enterprise on changes in
legal regulations.

-

The quality of consultancy services provided by provincial authorities
regarding regulations at central and local levels.
18


-

Openness: Review the provincial website.

v Time costs and Regulatory compliance

A measure of how much time firms waste on bureaucratic compliance, as well as how
often and for how long firms must shut their operations down for inspections by local
regulatory agencies. According to the Law on Inspection in 2010, inspection activities
must not affect the production and business activities of enterprises. However, in
practice, businesses still have to stop business to serve the state agencies to conduct
inspection and examination for themselves. This quantitative index is synthesized
from:
-

Percentage of firms spending over 10 percent of their time on understanding
and complying with regulations

-

Median number of inspections (all agencies)

-

Median tax inspection hours

-

Government officials are effective

-

Government officials are friendly

-

Firms don't have to travel many trips to obtain stamps and signatures

-

Paperwork is simple

-

Fees are listed publically

-

No noticeable improvements are made

v Informal Charges

A measure of how much firms pay in informal charges, how much of an obstacle
those extra fees pose for their business operations, whether payment of those extra
fees results in expected results or "services," and whether provincial officials use
compliance with local regulations to extract rents.
-

Enterprises in my line of business usually have to pay for informal charges

-

Percentage of firms paying over 10 percent of their revenue for informal
charges

-

Rent-seeking phenomenon is popular in handling administrative procedures for
businesses

-

Percentage of firms saying that informal charges usually or always deliver
expected results
19


-

Informal charges are at acceptable levels

v Policy Bias – New Sub-index

This sub-index reflects the attitude of the provincial government between state-owned
enterprises and private enterprises, domestic enterprises and foreign enterprises, large
enterprises and small enterprises.
-

Provinces give privileges to state-owned economic group, corporations,
causing difficulties to your business

-

Land access as a privilege to state-owned economic group

-

Credit access as a privilege to state-owned economic group

-

Mineral exploitation license as a privilege to state-owned economic group

-

Faster and simpler administrative procedures as a privilege to state-owned
economic group

-

Ease in getting state contracts as privilege to state-owned economic group

-

Province give priority to FDI attraction than private sector development

-

Province give priority in solving problems and difficulties to foreign companies
over domestic one

-

Advantage in land access for FIEs

-

CIT reduction and holiday for FIEs

-

Advantage in procedures (faster, simplifier) for FIEs

-

More government support during FIEs operation

-

"Contracts, land,... and other economic resources mostly fall in the hands of
enterprises that have strong connections to local authorities"

-

Preferential treatment to big companies (both state-owned and nonstate) is an
obstacle to their business operations

v Proactivity of Provincial Leadership

A measure of the creativity and cleverness of provinces in implementing central
policy, designing their own initiatives for private sector development, and working
within sometimes unclear national regulatory frameworks to assist and interpret in

favor of local private firms. This of each locality is expressed through the following
specific expressions:

20


-

Firms' assessment of the attitude of provincial government toward private
sector

-

The PPC is flexible within the legal framework to create favorable business
environment for nonstate firms

-

The PPC is very proactive and innovative in solving new problems

-

There are good initiatives at the provincial level but they are not well
implemented by departments

-

Provincial leaders have good policies they are not well implemented at district
level Province's reaction to lack of clarity in central policies/documents: %
"delay and seek instructions" and "do nothing".

v Business support services

Used to be named "Private Sector development services", this is a measure of
provincial services for private sector trade promotion, provision of regulatory
information to firms, business partner matchmaking, provision of industrial zones or
industrial clusters, and technological services for firms.
-

Number of trade fairs held by province in previous year and registered for
present year

-

Ratio of the total number of service providers to the total number of firms

-

Ratio of the number of nonstate and FDI service providers to the total number
of service providers

-

Firm has used business information search services

-

Firm used private provider for above business information search services

-

Firm intends to use above service provider again for business information
search services

-

Firm has used consulting on regulatory information

-

Firm used private provider for consulting on regulatory information

-

Firm intends to use above service provider again for consulting on regulatory
information

-

Firm has used business match making services

-

Firm used private provider for business match making services

21


-

Firm intends to use above service provider again for business match making
services

-

Firm has used trade promotion services

-

Firm used private provider for trade promotion services

-

Firm intends to use above service provider again for trade promotion services

-

Firm has used technology related services

-

Firm used private provider for technology related services

-

Firm intends to use above service provider again for technology related
services

-

Firm has used accounting and financing training services

-

Firm used private provider for above accounting and financing training services

-

Firm intends to use above service provider again for accounting and financing
training services

-

Firm has used business administration training services

-

Firm used private provider for above a business administration training services

-

Firm intends to use above service provider again for business administration
training services

v Labor and Training

A measure of the efforts by provincial authorities to promote vocational training and
skills development for local industries and to assist in the placement of local labor.
Enterprises also pay close attention to this index when deciding to invest in a
particular province or city as labor is a decisive factor in any production and business

project.
-

Services provided by provincial agencies: general education

-

Services provided by provincial agencies: vocational training

-

Firm has used labor exchange services

-

Firm used private provider for above labor exchange services

-

Firm intends to use above service provider again for labor exchange services

-

Percentage of total business costs spent on labor training

-

Percentage of total business costs spent on labor recruitment

-

Overall Satisfaction with Labor
22


-

Ratio of vocational training school graduates to untrained laborers

-

Secondary school graduates as % of workforce

-

Percentage of workers having completed training at vocational schools

v Legal institutions

A measure of the private sector's confidence in provincial legal institutions; whether
firms regard provincial legal institutions as an effective vehicle for dispute resolution,
or as an avenue for lodging appeals against corrupt official behavior. Legal
institutions are often stable, long-term and difficult to change. But the degree of
influence of legal institutions on business activity can change year by year. This
depends on the following factors:
-

Legal system provided mechanism for firms to appeal against officials' corrupt
behavior

-

Firm confident that legal system will uphold property rights and contracts

-

Cases filed by by non-state entities at Provincial Economic Court per 100 firms

-

Business used courts or other legal institutions to resolve disputes

-

Non-state claimants as a percentage of claimants at Provincial Economic Court

-

Median months to resolve court cases

-

Median formal and informal costs as a percentage of case

-

Provincial court judge economic cases by the law

-

Provincial court resolve economic cases quickly

-

Court judgements are enforced quickly

-

Legal aid agencies support business to use laws to sue when disputes arise

-

Formal and informal costs are acceptable

-

Judgement by the court is fair

-

Willingness to use court in case a dispute arises

2.1.2. Methodology of data collection and PCI building
The PCI is constructed in a three-step sequence, referred to as “the 3 Cs”:
Step 1: Collect business survey data and published data sources,
Step 2: Calculate ten sub-indices and standardize to a 10-point scale
Step 3: Calibrate the composite PCI as the weighted mean of ten sub-indices with a
maximum score of 100 points.
23

Sampling: Firms are selected using random sampling to mirror provincial
populations. Stratification is used to make sure that firm age, legal type, and sector
are accurately represented.
2.1.3. The actual process of implementing the provincial competitiveness index in
recent years
In 2005, the first year PCI was announced experimentally, the PCI was
composed of eight components, with the ranking of 47 provinces and cities.
Immediately, it has attracted the attention of various parties such as the business
community, provincial government authorities, press agencies or domestic and foreign
investors. According to the plan, the provincial competitiveness index research project
in Vietnam will be studied and produced once a year. Over the years, the scale of the
survey is extended, the higher the response rate.
In 2006, two new component indicators were Legal institutions and Labor and
Training, were assessed in all provinces and cities in Vietnam. In 2009, after
considering the incentives for state-owned enterprises no longer because the
equitization of state-owned enterprises took place strongly, the PCI remove the index
incentives for SOEs. At the same time, the 2009, PCI also renamed The private sector
development policies index to Business support services.
By 2013, the index of Policy bias is added. Apart from incentives for SOEs like
the old ones, the new index adds incentives to large enterprises and FDI enterprises.
This is due to the fact of unequal competition between state-owned and private
enterprises, between domestic and foreign-invested enterprises, between small and
large enterprises.
The 2017 PCI is the 13th iteration of the report, based on rigorous surveys of the
perceptions of domestic and foreign firms. The PCI strives to augment the collective
voice of investors in Vietnam regarding governance in the provinces where they invest
and the country as a whole (Result can be found in Appendix 1). The number of
private enterprises participating in the survey in 2017 continues to exceed 10,000
enterprises. Specifically, there are 10,245 private enterprises, of which 2,003 newly

established enterprises in 2016 and 2017. Data also collected from the 21 provinces
and cities with the highest concentration of foreign direct investment (FDI). The
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unadjusted PCI-FDI response rate is 30 percent with only limited variation by
province. Over 80 percent of respondents hold the positions of General Director or are
the top-level manager of their company in Vietnam. The survey includes FIEs from 47
different countries with the highest concentration from Asia, especially South Korea,
Japan, and Taiwan.

Figure 2.2. The actual process of implemeting the PCI over the years
Source: PCI User Giude 2017
2.2. The PCI collecting data process
2.2.1. Position in mid-term internship process at VCCI
From 02/07/2018 to 02/08/2018, I was admitted to Vietnam Chamber of
Commerce and Industry as an intern at the Legal Department. My task in the time of
the internship was to learn about the provincial competitiveness index project and
directly involved in the data collection process for the project "Competitiveness Index
at provincial level 2018 In the first period, I was led by Ms. Luu Ngoc Anh - Project
Manager and Mr. Dang Van Truong - Team Leader to learn about the process of
implementing PCI and the ways of contacting the enterprises. Having understood the
nature of work, I was assigned the task of contacting private enterprises in Hanoi, new
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