The Provincial Competitiveness Index (PCI) Report 2008, released last week and jointly made by the Vietnam Chamber of Commerce and Industry (VCCI) and the USAID-funded Vietnam Competitiveness Initiative (VNCI) project, found that even provinces which ranked top in creating a pro-business climate had made no sound progress in dealing with the three bottlenecks.

The PCI Report 2008 collected opinions from 7,820 firms, including private, joint stock, equitised and household businesses across the nation, measuring economic governance for private sector development. Almost all enterprises said stronger administrative reform efforts were needed at a local level. The survey found that 23 per cent of the firms spent more than 10 per cent of their time tangled in bureaucratic procedures while 27.7 per cent of them found “additional payments” or informal charges a major obstacle to their operation.

According to the report, the percentage of time spent on bureaucratic procedures continued to increase annually.
San Diego-based University of California professor Edmund J. Malesky said while there were some amelioration in documentary transparency, there was much to do to reduce informal charges enterprises had to pay.

“The authorities also really need to think seriously how they can improve regulatory procedures since firms are facing a lot of burdens that are unnecessary,” Malesky said. Leading provinces such as Danang, Binh Duong, Vinh Long, Long An, Lao Cai and An Giang, while recording high scores for entry costs, transparency still received low scores for informal charges.

Labour training and human resources are big issues as only 18.5 per cent of the questioned firms were satisfied the quality of local labour satisfied enterprises, while 23.6 per cent claimed workers’ quality matched their tasks.
Only 20 per cent of firms rated the overall quality of provincial vocational training good this year, down from 55.9 per cent last year.

Senior economist Pham Chi Lan said human resources had become a massive challenge for Vietnam in the mid and long term. “The unimproved quality of the labour force has also diminished Vietnam’s advantages of cheap labour costs to both local and foreign-invested enterprises,” she said. According to PCI report experts, provincial efforts to improve the skills sets of their local labour forces were a critical determinant of a successful business environment.

Businesses’ request for an improvement in the quality of human force in the PCI report was also similar to a recent survey carried out by the Japan External Trade Organisation (Jetro), which concluded that the low quality of local labour was one of the major problems resulting in a lower satisfaction rate of the Japanese firms with Vietnam’s business environment.

The satisfaction rate fell from 75.4 per cent in 2006 to 41.7 per cent in 2007. Jetro stressed labour quality needed to be improved in Vietnam to gain competitiveness against increased labour costs. Poor infrastructure in all the corners of the country also cost firms a lot of time and money, said Tran Huu Huynh, head of the VCCI’s Law Department.

On average, roads from a firm’s location to a province’s centre were blocked 7.5 days a year due to floods or landslides.
More than 70 per cent of the surveyed firms reported their products being damaged from bad roads, causing losses of VND43 million ($2,471) per firm, per year on average.

Eight of the top 12 provinces in road quality are Red River provinces, including Hanoi, Haiphong, Nam Dinh, Thai Binh and Vinh Phuc. The lowest road quality is found in Ca Mau in the south and the northern mountainous provinces of Tuyen Quang, Thai Nguyen, Son La and Phu Tho.

Danang for the first time ranked first in the Provincial Competitiveness Index this year. It is followed by Binh Duong, the champion in the last three consecutive years.

Source: VIR.