Problem statement
In recent years, globalization has presented both opportunities and challenges for policymakers and businesses in Vietnam The establishment of regional and international organizations has led to the development of new standards that significantly impact business activities across various sectors As a result, enhancing competitiveness has emerged as a crucial issue for the economy Understanding the concept of competitiveness and its vital role in driving economic growth is essential for navigating this evolving landscape.
Competitiveness, defined by the National Council for Competitiveness and Development (2006) as the ability to improve living standards, enhance the business environment, strengthen employment, promote cohesion, protect the environment, and boost productivity in a global context, is crucial for Vietnam's economic success following its WTO membership The Vietnamese government is prioritizing efficiency to enhance national and provincial competitiveness, making the country an increasingly attractive destination for foreign investors.
Investors often face challenges due to complicated procedures, which involve significant time and costs associated with overlapping laws, regulations, and bureaucratic processes (vietnamnet.vn, 2006) This complexity leads to high transaction costs that must be navigated before achieving any results Understanding transaction costs and their impact on modern society is crucial, as reducing these costs is essential for enhancing competitiveness and addressing urgent demands in the investment landscape.
This thesis aims to develop a measurement model for Provincial Competitiveness in Vietnam and assess how transaction costs influence this competitiveness By identifying the relationship between transaction costs and provincial performance, the study seeks to propose effective strategies for reducing these costs, ultimately enhancing the competitiveness of provinces in Vietnam.
Research objectives
+ Evaluating and giving conformable policies and strategies that can improve the Provincial Competitiveness.
Research questions
1 What factors will be directly influence to the Competitiveness level?
2 How can these factors affect the Provincial Competitiveness?
3 How has the competitiveness level improved overtime?
4 What the policies that should be suggested to improve the Provincial Competitiveness?
Research hypotheses
1 Whether an increase in Entry cost; Informal charges; Time cost of regulatory compliance (transaction costs) will give lager negative effect on the Provincial Competitiveness?
2 Whether an increase in Transparency and access to Information; Pro- activity of Provincial Leadership (transaction costs) will give lager positive effect on the Provincial Competitiveness?
3 Whether a decrease the transaction cost will improve the Provincial Competitiveness?
4 Is there a positive improvement for competitiveness level in Vietnam provinces in the two different periods?
This thesis aims to assess the impact of transaction costs on provincial competitiveness in Vietnam from 2005 to 2006 It utilizes data from the Vietnam National Competitiveness Index (VNCI) and the Vietnam Chamber of Commerce and Industry (VCCI) to identify the determinants of transaction costs, while competitiveness is measured through GDP per capita, sourced from the General Statistics Office (2002-2005) The analysis employs a double-log regression econometric model using the Ordinary Least Squares technique Additionally, descriptive statistics and charts will be used to analyze both independent and dependent variables, enhancing the clarity and richness of the thesis.
Research limitation
The economic landscape is significantly influenced by transaction costs and competitiveness, which are multifaceted aspects of an economic entity in a market economy This thesis specifically aims to measure the impact of transaction costs on competitiveness levels, acknowledging that it cannot provide a comprehensive or detailed evaluation of all related factors.
The analysis of transaction costs affecting provincial competitiveness in Vietnam focuses on 42 provinces, as reported by VNCI and VCCI in 2005, which collectively represent 90% of the national GDP With Vietnam comprising 64 provinces, the data for 2005-2006 is primarily derived from these 42 provinces Competitiveness is evaluated using GDP per capita, with data sourced from the General Statistics Office covering the period from 2002 to 2005 Consequently, the GDP per capita for the 42 provinces in 2006 is estimated based on the available data from 2002 to 2005.
LITERATURE REVIEW
Definitions
The World Bank (2006) highlights that business transaction costs significantly influence the competitiveness of countries, enterprises, and regions To clarify this topic, it is essential to define key concepts such as competitiveness and transaction costs, ensuring readers understand their implications.
Competitiveness is a multifaceted characteristic of economic entities operating within market economies, attracting significant interest from both researchers and business practitioners Despite its frequent usage in economic literature, the term often lacks a clear definition, leading to misunderstandings and contradictions This study aims to clarify various aspects of competitiveness by examining its key concepts.
Competitiveness, as defined by Porter (1990), Trabold (1995), and Garelli (1997), represents the standing of an economic entity—such as a country, region, industry, or enterprise—when compared to others This comparison is based on the quality or outcomes of activities that highlight either superiority or inferiority Competitiveness can be understood in both a narrow and broad context.
Competitiveness can be understood as a scenario where the interests of different entities clash, meaning that the success of one entity in achieving its goals directly hinders another entity's ability to fulfill its own interests.
+ In a broader approach to the concept encompasses also the indirect and potential competition between entities, analyzing the areas where entities' direct interests are not contrary
A broader approach to competitiveness analysis resembles comparative analysis by highlighting the significance of comparison in assessing an entity's qualities and performance Evaluating any quality or performance requires a comparison with similar entities to gain meaningful insights However, an overly general competitiveness analysis can obscure the establishment and execution of specific managerial tasks, making it essential to balance general insights with concrete applications.
A focused competitiveness analysis reveals the interests at stake, helping to identify solutions for resolving conflicts In operational management, the primary focus is on direct market conflicts and the tactical measures needed to gain a competitive edge Conversely, strategic management involves examining indirect and potential future controversies, along with developing strategies to address them effectively.
Competitiveness is "the ability to provide products and services as or more effectively and efficiently than the relevant competitors" (The Competitiveness Institute (2007))
According to the National Competitiveness Council (2007), The Competitiveness is the ability of a country to achieve sustained high rates of growth in GDP per capita
Competitiveness in Vietnam, as defined by VNCI and VCCI (2005, 2006), is influenced by the productivity and quality of the business environment across provinces Key factors that measure this competitiveness include entry costs, access to land, transparency and access to information, regulatory compliance time costs, informal charges, state sector bias, provincial leadership proactivity, private sector development policies, labor training, and the effectiveness of legal institutions.
According to Porter (1998), the Microeconomic Competitiveness Index (MICI) was developed through common determinants analysis, revealing a strong correlation between a nation's MICI score and its GDP per capita This thesis posits that competitiveness is defined by the ability to foster a favorable business environment that attracts diverse investments within a province Key factors influencing this competitiveness include transaction costs, regional economic policies, the level of human capital development, the quality of infrastructure, and proximity to major markets.
It's easy to understand about the basic concept of transaction cost that are those costs of buying and selling in markets which are not passed on in the transaction
Transaction costs, as defined by Ronald Coase in 1937, refer to the "cost of using the price mechanism," highlighting the expensive nature of exchanges and the importance of information as a scarce and valuable resource Similarly, Arrow (1969) also contributes to the understanding of transaction costs, emphasizing their significance in economic interactions.
Transaction costs encompass the expenses associated with operating an economic system, including both direct and indirect costs These costs involve labor, energy, raw materials, semi-manufactured goods, components, machinery depreciation, and maintenance Understanding transaction costs is crucial for evaluating the overall efficiency and effectiveness of economic activities.
Williamson (1975) introduces the concept of transaction cost market imperfection within his analytical framework, emphasizing the importance of identifying the most efficient governance structure for specific transactions Defined as the transfer of goods or services across a separable interface (Williamson, 1985), a transaction's efficiency is measured by the total costs of production and transaction being lower in the long term compared to any alternative governance structure Transaction costs encompass expenses related to finding contractual partners, specifying agreements, and ensuring that predefined objectives are achieved post-transaction.
Transaction costs encompass the time, effort, and money involved in a transaction, including commission fees, the cost of transferring assets from seller to buyer, and factors such as the bid/ask spread and price impact costs These costs can also involve round-trip transaction expenses, information costs, and search costs Today, transaction costs are primarily influenced by fees associated with acquiring and managing information, as well as costs related to searching, bargaining, policing, and enforcement.
This thesis focuses on the impact of transaction costs within the context of government and business, specifically analyzing how these costs affect new institutional economics, public services, and public policies It identifies various types of transaction costs, including entry costs (EC), transparency and access to information (TAl), time costs of regulatory compliance (Tc), informal charges (IC), and the proactivity of provincial leadership (PSD) These factors are deemed critical and serve as the primary units of analysis for this research.
Theoretical backgrounds
According to The Competitiveness Institute (2007), a region's competitiveness is defined by its residents' ability to achieve a high and improving standard of living, which is largely influenced by the productivity of its resources This productivity is measured by the economic output per unit of labor and capital employed To ensure a sustained high standard of living for all, continuous improvements in productivity are essential, whether through enhancing existing businesses or successfully transitioning to higher productivity sectors Therefore, the competitiveness level is assessed based on the growth and level of the region's standard of living.
Aggregate productivity is crucial for a region's firms to enhance their presence in global markets via exports or foreign direct investment This concept is closely linked to transaction costs, economic performance, government efficiency, and the overall efficiency of the business environment.
This thesis focuses on measuring competitiveness through key factors such as transaction costs, human resources, infrastructure, and market proximity Transaction costs encompass aspects like business environment efficiency, public institutions, entry costs, time costs, and management, which are crucial for attracting investment and enhancing provincial competitiveness It highlights that an entity must systematically enhance its qualities and performance to strengthen its competitive position The effectiveness of these efforts is significantly influenced by the performance of other entities and various objective factors shaping the competitive landscape.
Porter's (1990) traditional model of competitiveness emphasizes that productivity is influenced by key determinants such as human resources, new knowledge, technologies, and capital This framework has significantly shaped how governments, organizations, and firms across developed, transition, and developing countries approach competitiveness Furthermore, the World Bank (2006) highlights that the cost of business transactions plays a crucial role in determining the competitiveness of a firm or region Research in this area has focused on measuring the competitiveness of the business environment through the analysis of transaction costs, which evaluates the impact of these costs on overall competitiveness.
High transaction costs in the private sector hinder investment and competitiveness both domestically and internationally These elevated costs often stem from excessive regulations, inefficient government enforcement, high infrastructure service fees, poor contract enforcement, and prolonged conflict resolution processes Thus, competitiveness is influenced not only by transaction costs but also by factors such as human resources, technological advancements, and physical capital.
Through the above literatures, it can be concluded that competitiveness 1s depending on:
Competitiveness = f(Transaction costs, Human resources, New knowledge and Technologies, Physical Capital) (2.1)
The World Competitiveness Scoreboard (WCS), developed by the International Institute for Management Development (IMD) in Geneva, evaluates competitiveness based on four key determinants: economic performance, government efficiency, business efficiency, and infrastructure Each determinant is further broken down into five sub-factors that highlight essential elements within the respective domains.
Economic performance would be performed by the health and stable level of domestic economy, international trade, international investment, employment, and prices
Government efficiency can be included public finance, fiscal policy, institutional framework, business legislation, societal framework
Business efficiency can be included productivity, labor market, finance, management practices, attitudes and values
Infrastructure can be included basic infrastructure, technological infrastructure, scientific infrastructure, health and environment, education
The analysis reveals that competitiveness is influenced by a total of twenty determinants, categorized into five sub-factors Notably, several key factors significantly contribute to overall competitiveness.
Co = f(Economic performance, Government efficiency, Business efficiency, Infrastructure) (2.2)
While the existing theories may not be exhaustive, they highlight key connections between various instruments and the levels of competitiveness involved This study aims to identify and concentrate on specific factors that effectively measure competitiveness across different regions.
From the 2.1 & 2.2 models, therefore Competitiveness can be expressed as a following function:
Co = f(Transaction costs, Human resources, Infrastructure, Government efficiency) (2.3)
One of the most significant indicators of regional competitiveness is the ability to earn, which is closely linked to GDP per capita (Poter, 1998) According to Gardiner (2003), GDP per capita serves as a key measure of competitiveness, influenced by various factors, and is regarded as the best representation of productivity This measure can be further analyzed through its individual components, each providing distinct economic insights (Gardiner, 2003).
GDPicapita = GDP/Total Population= (PIB 1 1 Total number of hours worked)* (Total number of hours worked I Employment) * (Employment I Working age population)* (Working age population I Total Populationf (2.4)
So, we have a function of competitiveness:
GDP/capita = f (Transaction costs, Human resources, Infrastructure,
PIB is GDP which can be translated by French (Produit Interieur Brut)
Considering the total hours worked reveals significant regional implications, particularly due to sectorial specialization, such as in agriculture Adjusting for various characteristics of hours worked provides a more accurate representation of the actual labor effort involved in production, compared to traditional measurements.
Transaction costs, as originally formulated by Coase in 1937 and 1961, are defined as "the cost of using the price mechanism" or "the cost of executing a transaction through open market exchanges."
15) explains, "in order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on" However, at that time, his these theories are limited, which only focus to solve certain economic tasks by firms and when they would be performed transaction clearly on the market (fixed cost)
Arguably, transaction cost reasoning became most widely known through Oliver E Williamson's Transaction Cost Economics (1975, 1985, 1996, 1998,
Transaction costs play a crucial role in economic development, as highlighted by Wallis and North, who suggest that the costs associated with transactions may have historically constrained economic growth just as much as transformation costs They identify two distinct types of transaction costs that impact this dynamic.
1 Ex ante costs of drafting, negotiating, and safeguarding an agreement In the case of partnerships, these costs arise at the beginning
2 Ex post costs that emerge when a contract's execution is misaligned with the costs of running the economic system, as a result of gaps, errors, omissions, and unanticipated disturbances In the case of partnerships, these costs occur during the partnership's lifespan
Ex ante costs can be categorized into search costs and contracting costs In the context of partnerships, search costs refer to the expenses incurred in identifying and assessing potential partners, while contracting costs involve the negotiation and drafting of partnership agreements These costs are primarily incurred prior to the official commencement of the partnership (Wallis & North, 1987).
Empirical studies
Empirical studies have explored the relationship between transaction costs and competitiveness, highlighting how various factors influence these costs This overview examines the findings of such research, demonstrating the significant role that transaction costs play in shaping competitive dynamics within markets.
In his 1998 study, "The Institutional Transaction Cost Framework for Public Policy Analysis," Dale B Thompson synthesized various insights into a cohesive framework that evaluates the impact of institutional factors on public policy This framework enables a systematic comparison of policies based on their cost-effectiveness, considering expenses associated with their enactment, implementation, enforcement, and operation.
The article outlines a checklist of essential variables for estimating costs related to institutional factors, enabling analysts to evaluate their significance It employs a methodology based on the social welfare function (SWF) by Polinsky and Shavell to ascertain optimal fines and detection costs The study highlights various policy instruments, including direct lobbying of the legislature, engaging with regulatory agencies, self-monitoring to prevent penalties, compliance actions, and the implications of noncompliance, all while operating under imperfect information The empirical study aims to maximize profits, incorporating utility aspects to assess the influence of these factors on public policy.
The Model by Thompson (1998) is briefly presented as following:
They used the following social welfare function (SWF) to determine optimal fines and detection costs (Let= PdPpPc):
SWF = f f (SB - Cc + PdPpCp)r(Cc)dCc g(W)dW +
0 0 oo yF f J (SB- Cc + PdPpCp)r(Cc)dCc g(W)dW- Cd- PdPpCp (2.11)
SB: the social benefit from compliance with the policy
Cc: the compliance cost of an individual party r(Cc), R(Cc): the Probability and Cumulative distribution functions of the compliance cost variable (the PDF(Cc) and CDF(Cc), respectively)
W: The wealth of individuals who are responsible to comply with the policy g(W), G(W): the Probability and Cumulative distribution functions of individuals' Wealth (the PDF(W) and CDF(W), respectively)
F: the Fine imposed on those convicted of noncompliance, if it is not higher than their wealth
Cp: the Cost of Prosecution each individual for noncompliance with the policy Cd: the Cost of Detection incurred while enforcing this policy
Pd: the Probability of Detection someone in noncompliance
Pp: the Probability of Prosecuting a detected non-complier
Pc: the Probability of Conviction of someone prosecuted
After that Dale B Thompson has some modification & SWF is:
SWF= - Ce - Ci + ~ 0 [ (SB - Cct)r( Cct )dCctg( W)dW + t=to 0 0
f J (SB- Cct)r(Cct )dCctg(W)dW- cl- PdPpCp {I- (II- Ilw)]] (2.12)
II= J r(Cc )dCcg(W)dW (2.13) & Ilw = J J r(Cc )dCcg(W)dW (2.14)
0: the time discount rate te: the year a policy is enacted to: the year a policy is operational
Ce: the Cost of Enacting this policy
Ci: the Cost of Implementing this policy
SWF = - Enactment Costs - Implementation Costs + (Proportion of
Compliance) * (Discounted Social Benefit from Compliance - Discounted
Compliance Costs) - Discounted Detection Costs - ( 1 - Proportion of
The Social Welfare Function (SWF) represents the total social benefits, encompassing the complete range of social costs, which include both private compliance costs and institutional transaction costs Understanding these social costs is crucial, as they illuminate the broader implications of transaction costs, highlighting a significant positive relationship between transaction costs, public policy, and public service.
Table 2.1: Checklist for the Institutional Transaction Costs Framework
Social Cost Parameters Variables Directly Variables Indirectly component Directly Affecting this cost Affecting this cost
Number of Firms whether site-specific
Compliance quantity of whether substitution of
Lower-cost firms experience a significant impact on their average yearly cost reduction due to initial investments in technological innovation This ongoing reduction in operational costs is crucial for maintaining competitive distribution and compliance costs Additionally, the enactment of new regulations introduces opportunity costs, measured in the number of days required for compliance, further influencing overall financial performance.
Costs of legislature's Degree of committee Specificity time
Degree of number of days in general Contention sessiOn represented by policy Hourly Cost of
How much time staff Staff spends for background Technical nature of research, drafting, and policy other things Proportion of actual
The financial implications of lobbying efforts vary significantly among different interest groups, with each group facing potential losses that influence their monetary expenditure The implementation costs associated with agency operations are critical, as they depend on the number of employees dedicated to determining policy goals and the necessary background knowledge Additionally, agencies must consider the time required for policy implementation and the social inefficiencies that may arise during this process Understanding these factors is essential for assessing the overall impact of policy decisions on affected interest groups.
I are incurred during the implementation process Detection Costs what is the which group is responsible relative for monitoring efficiency of the different
I monitoring groups how many sites need to be how frequent do the sites monitored need to be monitored
Monitoring tests vary in duration, typically depending on the specific requirements and scope of the evaluation Wages for monitoring personnel can differ based on experience and industry standards The size of the team conducting the tests also influences the overall efficiency and effectiveness of the monitoring process Equipment costs for monitoring tests can range widely, depending on the technology and tools required Audits should be conducted regularly to ensure compliance and effectiveness, with the duration of each audit varying based on the complexity of the operations being assessed.
I wages of auditing how many people are personnel involved in an audit
Prosecution what is proportion of
Costs inducement versus penalty procedures the duration of the inducement period cost of agency
;; staff agency are used during
Understanding the legal process involves recognizing the time and costs associated with penalties and legal procedures It's essential to identify the specific issues at hand, as these can significantly impact the overall expenses, including legal fees incurred throughout the court system.
I defendants the cost of time spent on the process agency staff by the prosecuting agency General time discount length of time between rate proposal and operation of policy
Table 2.1 outlines the key parameters and variables influencing various cost components within the Institutional Transaction Cost framework, serving as a valuable checklist for effectively utilizing this framework.
From this empirical study, it can be shown that the social welfare function
(SWF) is a part of Institutional Transaction Cost framework, which include a lot of variables of Transaction cost function (direct costs & in direct costs) as
Compliance Costs, Enactment Costs, Implementation Costs, Detection Costs,
The empirical study reveals that transaction cost variables significantly influence public policies and services, establishing a positive relationship with new institutional economics Key variables identified include Compliance Costs as Entry Costs and General Costs as Time Costs associated with regulatory compliance These variables will be integrated into the research model to enhance clarity and depth in the thesis, facilitating a better understanding of the underlying concepts.
Wang (2003) studied "Measuring Transaction Costs: An Incomplete Survey"
As in Transaction cost model, which are introduced by Collins and Fabozzi
In financial economics, as defined by Wang (2003) and initially established in 1991, transaction costs refer to the expenses associated with investing in financial markets These costs encompass brokerage fees and the differences between asking and bidding prices, which can significantly impact investment returns.
(Demsetz 1968; Stoll and Whaley 1983; Bhardwaj and Brooks 1992)
However, empirical studies in this area do not suffer from lack of attention
A specialized business offers international transaction cost measurement services tailored for investment professionals, influenced by demand factors and two key supply-side elements: a consensus on the definition of transaction costs in financial markets and the availability of financial data While this research largely operates independently from the broader New Institutional Economics literature, there are notable exceptions, such as Demsetz (1968).
The Model by Wang (2003) is briefly presented as following:
Transaction costs = fixed costs + variable costs;
Fixed costs= commissions+ transfer fees+ taxes;
Variable costs= execution costs+ opportunity costs;
Execution costs = price impact + market timing costs;
Opportunity costs = desired results - actual returns - execution costs - fixed costs (2.19)
Price impact refers to the change in an asset's price resulting from a trade, including the market-maker's spread Additionally, market timing costs involve the price fluctuations of an asset at the moment of a transaction.
Execution costs arise from the need for immediate trades, reflecting both liquidity demand and trading activity Opportunity costs represent the difference between the actual investment performance and the desired investment performance, taking into account fixed and execution costs.
This empirical study highlights the role of transaction costs in the stock market, demonstrating their positive relationship with the broader financial market It identifies several unmeasured variables, including execution costs, opportunity costs, and fixed costs To enhance the research model, we propose incorporating relevant variables such as entry costs (fixed costs), transparency and access to information (execution and opportunity costs), time cost of regulatory compliance, and informal charges.
Chapter Remarks
The theoretical frameworks discussed highlight that various transaction cost factors influence competitiveness, which is closely linked to productivity as measured by GDP per capita This relationship allows us to propose a conceptual research model.
C= f (Transaction costs, human resources, Infrastructure, Government efficiency)
In developing an empirical model for the thesis, it is essential to address four key factors: transaction costs, human capital, quality of infrastructure, and proximity to market.
Co = f (HK, QI, PM ,TC)
This thesis offers a thorough review and evaluation of empirical studies focused on transaction costs in Business to Business and Government to Business contexts Its primary objectives are to deliver a detailed analysis of transaction costs and competitiveness, leading to clear and straightforward definitions, and to investigate the impact of transaction cost reasoning on public services and policies Minimizing transaction costs is essential for enhancing competitiveness.
The USAID-funded Vietnam Competitiveness Initiative (VNCI) and the Vietnam Chamber of Commerce and Industry (VCCI) conducted a survey in 2005-2006 to gather insights from businesses about their perceptions of local business environments This initiative aimed to compile credible and comparable data from official sources to assess local conditions The findings highlighted that variable transaction costs significantly impact competitiveness in the region.
TER 3: DATA AND ECONOMETRIC MODEL FINDINGS
The impact of transaction costs on provincial competitiveness will be analyzed using data collected from various sources, including the VNCI, VCCI, and the General Statistics Office from 2006 This study aims to evaluate how these costs influence the competitive landscape of provinces.
~r is to measure the conceptual framework by an empirical research rl •ã This chapter includes some parts, such as: the econometric design, the
~ition of variables, data collection method, main hypothesis, estimation of :ult by regression equation, explanation of coefficient
This section presents the suitable econometric models for evaluating the primary hypothesis of the research Based on the literature review and empirical analysis from the previous chapter, competitiveness can be defined as a specific function.
Co= f(HK, QI, PM ,TC) (3.1)
Where C: Competitiveness measured by GDP per capita is dependent variable
TC: that transaction costs & Human Capital (HK); Quality of Infrastructure (QI); Proximity to Market (PM) are independent variables
Transaction costs encompass various components, including Entry Cost (EC), Transparency and Access to Information (TAl), Time Cost of Regulatory Compliance (Tc), Informal Charges (IC), and the Pro-activity of Provincial Leadership (PSD) Additionally, the time factor has emerged as a critical determinant of competitiveness, serving as a key metric for assessing both economic growth and the competitiveness level of a region or nation, as highlighted in "The Role of Intellectual Property System in the Use of ICTs by SMEs" (2001).
So, fnJm 3.1 function, it can be made model specification by the regression doubltt-Iog econometric model with Ordinary Last Square technique:
Log(GPP/capita)= Po+ PILog(HK) + P2Log(QI) + P3Log(PM) + P4Log(EC) +
PsLogCfAI) + P6Log(TC) + P7Log(IC) + PsLog(PSD) + P9 X+ E (3.2)
Elasticity measures how responsive a dependent variable, like GDP, is to changes in independent variables such as EC, TAl, Tc, IC, PSD, HK, QI, PM, and X Additionally, a logarithmic specification tends to demonstrate lower heteroscedasticity compared to a linear model, as noted by Ramu Ramanathan (2002).
Thus, the competitiveness is affected by Human Capital (HK); Quality of
'j Infrastructure (QI); Proximity to Market (PM); Entry cost (EC); Transparency
J and access to Information (TAl); Time cost of regulatory compliance (Tc);
Informal charges (IC); Pro-activity of Provincial Leadership (PSD) & Time of researching (X).
Competitiveness are measured by GDP per capita covered 42 provinces in
Vietnam, accounting in total 90% of the national GDP, which is calculated by
Human capital refers to the economic value derived from an employee's skill set, encompassing education, experience, and abilities This concept builds on the traditional labor input measure, which assumes all labor is equal The economic significance of human capital is reflected in its positive impact on productivity, which in turn drives economic growth and enhances competitiveness (The Competitiveness of Nations, 2004) Human capital is quantified through index weightings and a scoring system ranging from 1 to 10, indicating that higher levels of education and experience contribute to increased productivity and overall economic performance.
The quality of infrastructure is a crucial indicator of a province's economic value, encompassing essential facilities and services such as transportation and communication systems, water and power lines, and public institutions like schools and post offices High-quality infrastructure positively influences development and enhances competitiveness, as highlighted in "The Competitiveness of Nations" (2004) In this context, the expected outcome for the Quality of Infrastructure variable is a positive correlation, and it is assessed through index weightings and a scoring system ranging from 1 to 10.
Proximity to market is a crucial factor that determines how close businesses are to their primary market, influencing their operational efficiency Provinces with shorter distances to their main markets enjoy a competitive advantage over others, enhancing their ability to attract customers and increase profitability This geographical advantage fosters greater competitiveness, positioning these regions as more favorable for business operations.
Proximity to market has a positive relationship with competitiveness level
(The socio-economic & enviromental research institute (2002)); And, the expected sign for variable of proximity to market is positive ( +) in the model
The Proximity to market variable is measured by index weightings as well as quantity of points (from 1 to 10)
Entry cost: A measure of the time and difficulty it takes firms to register, acquire land, and receive all the necessary licenses to start business So, the
The entry cost negatively impacts the level of competitiveness in a region When investors face significant challenges, such as lengthy registration processes, difficulty in acquiring land, and obtaining necessary licenses, they are less likely to invest in that area Consequently, regions with high entry costs become less attractive for investment, leading to a decrease in their competitiveness (Nguyen Hiep & Hiroshi, 2007) In the model, the entry cost variable is expected to have a negative sign (-) and is measured using index weightings and a scoring system ranging from 1 to 10.
Transparency and access to information are crucial for businesses, as they rely on proper planning and legal documents to operate effectively This includes equitable access to these documents, timely communication of new policies and laws, and the utility of provincial web pages for business needs The measurement of transparency is assessed through index weightings and a scoring system from 1 to 10 Moreover, research indicates a negative correlation between firm competitiveness and the corruption perception index, highlighting the importance of transparency in fostering a competitive business environment.
Transparency and access to Information is positive ( +) in the model
The time cost of regulatory compliance reflects the significant hours firms spend on bureaucratic processes and the frequency and duration of operational shutdowns required for inspections by local regulatory agencies.
The article examines two key dimensions of time costs—Bureaucratic Procedures and Time Lost to Inspections—assigning them equal weight It suggests that excessive time spent on bureaucratic compliance negatively impacts a firm's competitiveness (Nguyen Hiep & Hiroshi, 2007) Consequently, the model anticipates a negative relationship for the Time Cost of Regulatory Compliance variable This variable is quantified using index weightings and a scoring system ranging from 1 to 10.
Informal charges: A measure of how much firms pay in informal charges and how much of an obstacle those extra fees pose for their business operations