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As Businesses Multiply, Vietnam Becomes Trading Player
FrontLines - March 2009
By Richard Nyberg
At the Leather and Shoe Research Institute in Hanoi, designers like Cap Thi Hang learn how to improve their product lines and gain an edge over their competitors in other parts of the country.
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Hanoi—Vietnam’s exports to
the United States increased 1,229 percent from 2001 to 2008, according to the U.S. International Trade Commission, and two years ago, the country gained full membership in the World Trade Organization, following 10 years of negotiations.
The southeast Asian nation has emerged as one of America’s stalwart trading partners, more than three decades after the long war with the United States and its financial assistance from the former Soviet Bloc ended.
Now in its fourth year, the Vietnam Provincial Competitiveness Index (PCI) is making friendly business competition
work for the country as it strives to maintain an economic
growth rate of nearly 7 percent and fights poverty by creating new jobs.
The PCI, developed by USAID and the Vietnam Chamber of Commerce and Industry (VCCI), measures the economic governance of each province based on its private-sector business development, and ranks them against each other. The idea is that competition
drives each province to improve economically.
The opinions of more than 7,820 Vietnamese entrepreneurs and managers of small and medium enterprises across 64 provinces helped create the rankings.
The friendly rivalry it has produced is one of the economic success stories of the year in a country increasingly attuned to global economic integration.
In 2008, Danang province edged out Binh Duong province, the defending leader, to take the top ranking.
Spurred on by the attention the PCI brings—the news has been featured on numerous front pages of the country’s national press—Vietnam’s business leaders
are taking action. The state-owned daily, Vietnam News, reported that Hanoi is “stinging” from its 31st place ranking and plans to climb 10 slots by next year. Entrepreneurs in the capital reported an increase in time spent on regulatory compliance and a decrease in “proactivity of local leadership” and labor training.
This “pioneering work in Vietnam on aspects of economic governance and competitiveness is relevant—and worthy of emulation
in other parts of the world,” said David Brunell, USAID economic growth program
manager.
The report notes that waiting periods to register a business are at an all-time low and that more respondents in provinces have received formal Land Use Rights Certificates. Provincial legal gazettes—many of them now online—are making it easier for businesses to access the information
they need.
The number of business disputes
resolved through Provincial Economic Courts has nearly doubled, according to the report. It also shows that better-governed provinces are able to use their resources efficiently and to influence business performance
and income.
“We strongly appreciate the reform efforts of other provinces,
who acquired valuable experience and the motivation to further improve their investment environments,” said Chairman Vu Tien Loc of VCCI.
More than 40 provinces and state agencies have used the PCI to better understand competitive factors
that drive economic growth. Investors use the index when considering
new business ventures.
There are 300,000 domestic enterprises in Vietnam today. According to VCCI, the country would like that number to grow to 500,000 by 2010.
The biggest obstacles facing businesses in 2008 according to media reports: complicated administrative
procedures, unskilled labor, and poor infrastructure.
The PCI is one of several economic and legal reform measures
USAID has carried out with Vietnam since 2001 to quicken the country’s transition to a market-driven economy.
★ – B.B.
FrontLines is published
by the Bureau for Legislative and Public Affairs
U.S. Agency for International Development
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