PCI and PGI 2023 Advancing Conducive Business Climate

In the 2023 rankings, Quang Ninh, Long An, Hai Phong, Bac Giang and Dong Thap have emerged as the top performers in the Provincial Competitiveness Index (PCI). Meanwhile, Quang Ninh, Da Nang, Dong Nai, Hung Yen and Ho Chi Minh City have excelled in the Provincial Green Index (PGI).

VCCI President Pham Tan Cong presents the PCI trophies and certificates of recognition to the best performers in the 2023 PCI rankings

The 2023 PCI and PGI Report, jointly released by the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID), is based on feedback from 10,676 companies. This includes 9,127 domestic private firms and 1,549 foreign-invested enterprises (FIEs) operating in Vietnam.

Low rate of businesses planning operation expansion

Mr. Pham Tan Cong, VCCI President highlighted key insights from the 2023 PCI and PGI Report, noting the Vietnamese business community's positive recognition of provincial and municipal governments' efforts to improve the business environment. The quality of provincial economic governance has been on an upward trajectory, with the median PCI composite score rising to 66.66 in 2023, an increase of nearly 1.44 points from 2022. Numerous provinces and cities have introduced innovative measures to enhance the business climate, with previously underperforming regions leveraging their "laggard advantages" by adopting best practices from more successful areas.

Business support policies have shown significant improvement, with most evaluation indicators surpassing those of 2022. The incidence of informal charges has markedly decreased, with only 33.3% of respondents reporting such payments in 2023, compared to 66% in 2015-2016 and 70% in 2006.

Market entry procedures have become more streamlined, reflected in improved administrative processes for business registration. Administrative reforms, particularly the shift to online procedures, have yielded substantial benefits, with 77% of respondents indicating that online processes save more time and cost compared to traditional methods. These changes underscore the positive impact of local digital transformation efforts.

Mr. Dau Anh Tuan, Deputy General Secretary of VCCI and Director of the Provincial Green Index Initiative Project, observed that the challenging economic environment is evident in this year’s report, as a low rate of respondents have plans for operation expansion. Businesses are grappling with difficulties in accessing credit, finding customers, navigating market fluctuations, recruiting skilled workers and managing administrative procedures. Additionally, they face severe natural disasters and climate change impacts, alongside external challenges such as geopolitical tensions, high inflation, weakening global trade, consumption and investment, and increased protectionism.

“To foster business recovery and development, local governments must implement practical solutions to enhance the business environment, streamline administrative procedures, and reduce business costs. In light of the economic slowdown, proactive and innovative governance is crucial. Amid global uncertainties, businesses require stability, consistency and reliability in policymaking and enforcement,” said VCCI President Pham Tan Cong.

 VCCI President Pham Tan Cong said that the Vietnamese business sector holds in high regard the commendable endeavors of provincial and municipal governments in their sustained efforts to enhance the business environment

PGI - Fostering sustainable economic development

In 2023, following a successful pilot in 2022, VCCI introduced the Provincial Green Index (PGI). This set of indicators draws on business practices to support provincial and municipal governments in balancing economic growth with environmental sustainability.

US Ambassador to Vietnam Marc E. Knapper highlighted the continued partnership between the US Mission to Vietnam and VCCI, particularly through USAID, to enhance Vietnam's global competitiveness by transitioning to a green economy. The PGI Index, by promoting environmentally friendly regulatory reforms and investment, aims to advance Vietnam’s sustainable economic development and achieve its goal of net-zero emissions by 2050.

The 2023 PCI and PGI Report indicates that higher PGI scores correlate with better environmental quality, increased local climate resilience, and improved disaster response. However, provincial and municipal governments face challenges, such as implementing local environmental initiatives, resource constraints, professional expertise gaps, and insufficient business awareness and motivation for change.

Thirty provinces and cities having the best economic governance quality in 2023 (Top 30)

The report recommends that areas prone to natural disasters prioritize Indicator 1 (Reducing pollution and natural disasters). Regions focused on improving environmental quality, particularly reducing atmospheric NO2 levels, should concentrate on Indicator 2 (Ensuring compliance) to mitigate health impacts and support business operations. Localities aiming to reduce fine dust pollution should target Indicator 3 (Promoting green practices), which assesses efforts to encourage green production and procurement practices.

By establishing the PGI alongside the PCI, VCCI aims to encourage Vietnamese localities to advance business climate reforms and integrate economic development with environmental protection. The 2023 PCI and PGI Report offers valuable insights for policymakers and public administrators at all levels, serving as a reliable reference for investors to make informed decisions and promote greener projects. This initiative is expected to be a catalyst for stronger sustainability practices across the country.

By Lan Anh, Vietnam Business Forum