Fostering an equal and transparent business environment
Compared with 2015, the most visible positive changes can be seen in areas such as the proactivity of provincial and municipal authorities, labour training and business registration. However, administrative procedures, land access, legal institutions and policy bias remain areas causing significant obstacles for domestic enterprises.
The 2016 PCI survey has revealed signs of a positive business environment with 65% of enterprises reporting profits, the highest level in five years. For the first time in 12 years, the average capital size of domestic enterprises has reached a record of VND18.1 billion, more than double the 2016 size at VND7.5 billion. Enterprises continue to be optimistic about the business outlook with 48% expected to expand their businesses in the next two years, roughly equivalent to the 2015 level. There are also positive signs in the FDI sector when 11% of foreign firms increased their investments in existing operations and 63% added new employees to their payrolls. In addition, more than 50% of investors plan to expand their operations over the next two years.
However, many firms are still concerned about an unequal business environment and difficulty accessing budget and planning documents. Post-registration procedures still need to be simplified to reduce the costs of compliance. According to the report, 38% of businesses claimed that provincial authorities usually favour State-owned enterprises in land access, credit and government procurement. More than 42% agreed that provincial authorities seem to prioritise FDI attraction over domestic private sector development.
Although the PCI rankings only have a relative significance, they can be a necessary source of reference for provincial and municipal authorities because they reflect the exact nature of what enterprises think about their economic governance.
Thanks to the PCI, many provinces and cities have taken bold reforms to promptly address difficulties facing enterprises by introducing appropriate policies and mechanisms. The importance of the PCI does not lie in the level of rankings but each locality’s degree of business friendliness.
Equal competition is one of the ten sub-indices of the PCI, reflecting the evaluation and expectations of the domestic business community about an equal business environment. In other words, improving a province or city’s performance is not intended to improve their position in the rankings but to create the best possible conditions to help firms develop their business.