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Quang Ninh leads in competitiveness

Released at: 10:17, 05/05/2018

Quang Ninh leads in competitiveness

Photo: Viet Tuan

Quang Ninh province is now the most competitive locality in Vietnam, the 2017 Provincial Competitiveness Index finds.

by Nghi Do

Northern Quang Ninh province took top spot from Da Nang, which dominated from 2013 to 2016, in the 2017 Provincial Competitiveness Index (PCI), released by the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID) in March, after its provincial people’s committee introduced a host of reform initiatives over recent years. 
Top of the list

Quang Ninh has moved up and down in the PCI rankings over the last decade. After being in the bottom places in 2007 it has been among the leading cities and provinces with the best economic management for the last five years. 

It thoroughly reviewed all issues during that time and if it failed to reach consensus with enterprises, “we focused on resolving the matter to their satisfaction,” Mr. Nguyen Duc Long, Chairman of the Quang Ninh Provincial People’s Committee, told local media. Reform of administrative procedures and its business and investment environment has been ongoing, and it has collected opinions from enterprises in its Department and District Competitiveness Index (DDCI). Analyzing evaluations from enterprises allowed it to identify the cause of any failures in management at the local level, with appropriate resolutions introduced as soon as possible.

It also launched a DDCI fanpage on Facebook last year to resolve problems in administrative procedures facing enterprises. The launch of a “business café”, in 2015, helped bridge the gap between management agencies and enterprises through dialogue and facilitated and promoted enterprises operating in the province. “It helps identify ways for enterprises and the province to develop,” Mr. Pham Van The, Chairman of the province’s Enterprises Association, was quoted as saying. 

The investment climate in Quang Ninh has indeed been healthy over recent years. A host of foreign investors have poured in capital, including KinderWorld from Singapore, with the Singapore International Education Complex in Ha Long city, and the Thai-based Amata and Vietnam’s Tuan Chau Group’s high-tech industrial-urban complex straddling Ha Long city and Uong Bi district. Many foreign investors, such as the Toray Group and the Sozitaz Group from Japan, Serra Sunger ve Petrol Urunleri San.Tic.AS from Turkey, the VINA - CPK Company from the UK, and the Vinci Group from France have researched investment in the province. Thanks to an improved business climate, total investment in Quang Ninh enjoyed a year-on-year surge of 10.1 per cent in 2017, totaling VND60.6 trillion ($2.68 billion). Choosing Quang Ninh as the destination for its textiles plant, China’s Texhong Group said it has received ongoing support from provincial leaders. Site clearance and technical infrastructure are being deployed quickly, to handover to the group as soon as possible. “We greatly appreciate the ease in completing the province’s administrative procedures, which can be done quickly,” Chairman Mr. Hong Thien Chuc told local media.

Top 10, 2017 PCI

Source: 2017 PCI

Major breakthroughs have been made in the province’s infrastructure, technology, and human resources, as part of efforts to attract investments from major enterprises. Billions of dollars have been splashed out on upgrades to local infrastructure, providing momentum for economic development. Such efforts include the VND7.5 trillion ($330.4 million) Quang Ninh Airport, which serves as a lifeline in turning Van Don Island into a special economic administrative unit in the northern region, the Ha Long-Hai Phong Expressway, Bach Dang Bridge, and the Ha Long-Van Don Expressway. The latter two projects will link the Hanoi - Hai Phong - Quang Ninh economic triangle and contribute to increasing the socioeconomy in the Key Northern Economic Region, which comprises seven cities and provinces: Hanoi, Hung Yen, Hai Phong, Quang Ninh, Hai Duong, Bac Ninh and Vinh Phuc.

Business expansions 

Quang Ninh, Da Nang, and the Mekong Delta’s Dong Thap province all found a place in the “very good” group this year, with many ideas improving their business environments. “The business environments in these cities and provinces have seen impressive improvements under the direction of the Prime Minister,” Dr. Vu Tien Loc, Chairman of VCCI, said at the release of the 2017 PCI. Economist Mr. Le Dang Doanh told local media that the Prime Minister and the governance team have stepped up and urged ministries to cut business conditions and increase dialogue with businesses. 

The 2017 PCI showed that FIEs assess the business environment in Vietnam more positively. The time required to complete investment licensing procedures has been reduced significantly. The burden of post-registration procedures for FIEs, such as social insurance, tax payments, and labor recruitment has also been eased compared to previous years. FIEs said that the payment of unofficial fees and harassment in general have diminished compared to previously. The report affirmed that anti-corruption efforts over recent years headed in the right direction, though unofficial fees do still exist. A similar view was expressed in the 2017 Corruption Perceptions Index (CPI), released by Towards Transparency (TT), the national contact of Transparency International in Vietnam. “The slight increase in Vietnam’s CPI score for two consecutive years (in 2016 and 2017) is indicative of a positive signal for its anti-corruption efforts in recent years,” the CPI report stated. Vietnam scored 35 points out of 100 on the Index, ranking its 107 out of 180 countries surveyed.

Dr. Loc, who also chairs the PCI Steering Committee, said that belief among the business community about the business environment is growing. Fifty-two per cent of domestic private enterprises and 60 per cent of FIEs said they would expand their business scale in the next two years. One notable finding in this year’s PCI is the high level of confidence expressed by both local and foreign companies, according to Mr. Michael Greene, Mission Director at USAID. Both international and domestic investors look at a range of factors when deciding where to invest to expand their businesses, from political stability and geographic location to workforce, infrastructure, and the legal system. All are factors reflected in the PCI.

Not so positive

FDI continued to recover in 2017, albeit slowly, according to the PCI report, and FIEs have increased production and business activities over the past year. Turnover at medium-sized FIEs averaged $2.43 million; three times higher than in previous years. At the same time, however, business costs also increased, to an average of $2.02 million, affecting profitability. The rate of FIEs recording a profit fell to 54.3 per cent; the lowest in many years. Meanwhile, 37.9 per cent of businesses reported losses; a new record. It’s unclear whether such numbers are merely temporary or indicative of a longer-term trend. 

One explanation for this is FIEs are in the midst of expansions and require much investment in capital and labor, meaning they may temporarily discount short-term profit targets and expectations for future growth. The report also showed that the number of enterprises providing support services to foreign investors. FIEs accounted for nearly 15 per cent of total enterprises in the wholesale and retail sectors in 2014, while in 2017 the figure was less than 10 per cent.

The 2017 PCI is the 13th iteration and is based on responses from 12,000 enterprises, including more than 10,200 private firms in 63 cities and provinces, and nearly 1,800 foreign-invested enterprises from 47 countries operating in 21 cities and provinces. Conducted since 2005, the PCI is comprised of sub-indices such as entry costs, land access and security of tenure, transparency, time costs, informal charges, the proactivity of the city or provincial leadership, policy bias, business support services, labor training policies, and law and order.

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