How can governance be improved in countries where current practice is “just the way things are?" External actors can call for change, but until there is innovative, peaceful disruption that can guide and motivate local leaders, there is usually little progress.
Vietnam’s Provincial Competitiveness Index (PCI) was launched in 2005 and is a long-running example of this type of peaceful intervention. The PCI assesses the ease of doing business, the quality of economic governance, and the results of administrative reforms led by local governments in Vietnam’s 63 provinces and cities. Its primary purpose is to promote private sector development through positive pressure and constructive competition.
The 2022 PCI report, based on the responses of over 10,000 domestic firms, reveals the tremendous efforts of both businesses and provincial governments to navigate through the rough waters of the COVID-19 pandemic. Firms reported improvements in administrative procedures, reductions in the time costs of bureaucratic compliance, and liberation from the burdens of informal charges. However, the effects of the challenging economic context are also clear in this year’s report, as reforms in many policy areas slowed and business optimism remained low. Many firms report multiple difficulties in access to finance and hiring employees, limited infrastructure growth, and a gap between central policy and implementation at the grassroots level.
Methods and Results
The index is the result of a collaborative effort with the Vietnam Chamber of Commerce and Industry (VCCI), the United States Agency for International Development (USAID), Edmund Malesky and the Duke Center for International Development, and private sector partners. It is compiled in a three-step sequence, referred to as the “three Cs.” First, business survey data and published data sources are collected for analysis. Second, scores from ten subindices are calculated, with the results standardized on a 10-point scale. Last, the composite PCI is calibrated to reflect relative importance to private sector performance as the weighted mean of the ten subindices, with a maximum score of 100 points.
The PCI is more than an external survey of domestic firms. Since 2010, the PCI has included a separate analysis of foreign firms (over 2,00 in 2022), and since 2014, USAID has contracted directly with the Vietnam Chamber of Commerce and Industry to administer the program. Over time, this collaboration has led to widespread adoption by the government. In 2016, 95% of subnational government officials reported using PCI data in their work, with 73% saying they use it daily. All 63 provinces have a PCI Action Plan, and the PCI is now a regular part of selecting provincial leaders. The 2022 report also launched the Provincial Green Index (PGI), which evaluates and ranks provinces’ environmental policy, with the goal of promoting better business behavior and practices, including the application of new green technologies.
A key component in the PCI methodology is facilitation. It is one thing to collect data and publish it, hoping governments respond. It is quite another thing to invest in training government officials in how to understand and apply the data. To this end, the PCI team visits dozens of provinces for diagnostics each year. Since its launch, the PCI has reported steady gains, including gains in reduced levels of corruption and a greater ease of doing business.
Edmund Malesky (Duke University); Dau Anh Tuan, Pham Ngoc Thach, Le Thanh Ha, Tran Minh Thu, Phan Tuan Ngoc, Truong Duc Trong, Nguyen Thi Le Nghia, Nguyen Le Ha (Vietnam Chamber of Commerce and Industry, Legal Department)
- Vietnam Chamber of Commerce and Industry
Economic Governance, Governance, Citizen Participation, Economics, eGovernance, Southeast Asia, Vietnam