Significance of PCI for better business environment in Vietnam period of 2016-2018: Issues and policy implication

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN HOANG LONG SIGNIFICANCE OF PCI FOR BETTER BUSINESS ENVIRONMENT IN VIETNAM PERIOD OF 2016-2018: ISSUES AND POLICY IMPLICATION MAJOR: PUBLIC POLICY CODE: PILOT RESEARCH SUPERVISOR: Prof YUTAKA TSUJINAKA Assoc Prof TRAN THI THANH THUY Hanoi, 2019 Contents LIST OF TABLE iii ACKNOWLEDGEMENT iv ABSTRACT v CHAPTER INTRODUCTION 2.1 Research background .1 2.2 Research statement 2.3 Research questions 2.4 Scope of the study 2.5 Significance of the study .3 2.6 Structure of the study CHAPTER 3.1 LITERATURE REVIEW AND FRAMEWORK Business environment 3.1.1 Definition and components .5 3.1.2 Impact on economics 3.1.3 Influences of policies on business environment .8 3.2 Facilitating government 3.2.1 Definition of facilitating government .9 3.2.2 Characteristics of facilitating government 11 3.2.3 Factors affecting the construction of facilitating government 12 i 3.3 Provincial competitiveness index (PCI) 13 3.3.1 Research methodology of PCI 13 3.3.2 Result and impact 15 CHAPTER RESEARCH METHODOLOGY 17 4.1 Research design 17 4.2 Research approach .17 4.3 Research strategy 17 4.4 Research method 18 4.5 Data collection .19 4.6 Data analysis technique .20 CHAPTER FINDING AND IMPLICATION 22 5.1 The impacts of Vietnam business environment on the economy 22 5.2 PCI as a business environmental measurement 26 5.2.1 Evaluation of business environment on economic development 27 5.2.2 Correlation between PCI and DBS Index .30 5.3 Hindrances of PCI .34 5.4 Policy implication 44 CHAPTER CONCLUSION 49 REFERENCE 51 ii LIST OF TABLE Table 2.1: Sub-indices of PCI 14 Table 4.1: Vietnam‟s GDP growth, GDP per capita growth, and inflation 22 Table 4.2: The contribution of sectors into GDP 23 Table 4.3: Vietnam‟s GDP growth and GDP per capita growth .24 Table 4.4: Business operations of enterprises in Vietnam 25 Table 4.5: Investment in Vietnam .26 Table 4.6: Correlation between PCI score and some economic indicators .27 Table 4.7: Correlation between PCI‟s components and some economic indicators 28 Table 4.8: Variable coding 31 Table 4.9: Pearson correlation result 33 Table 4.10: The provinces with decreasing PCI score 34 Table 4.11: Top and Bottom Ranks 35 Table 4.12: Some socio-economic development of selected provinces 40 Table 4.13: SIPAS 2018 42 Table 4.14: PAR 2018 .43 iii ACKNOWLEDGEMENT First and foremost, I would like to express my sincere gratitude to my research supervisors Prof Yutaka Tsujinaka and Assoc Prof Tran Thi Thu Thuy for their support on my Master thesis research Thanks to their patience, motivation and knowledge, I could carry out this research successfully Beside my supervisors, I would like to thank to Dr Mai Chi Thuy Anh and Dr Vu Hoang Linh for giving advises to me during the interim thesis defense and support me with the thesis related documents process My sincere thanks also goes to my thesis committee: Prof Naohisa Okamoto, Assoc Prof Dao Thanh Truong, Dr Ho Hong Hai, and Dr Nguyen Cam Nhung for their insightful question and precious comments which help me to develop and finalize my thesis Last but not least, I would like to say thanks to my families, my friends and all VJU staff for their encouragement and support during my research iv ABSTRACT Since 2016, the new administration of Prime Minister, Nguyen Xuan Phuc, has launched the campaign of “Facilitating government”, in which the government might promulgate frameworks and policies along with building appropriate manpower and management mechanisms to create favorable environment and conditions for people of all economic components can fully develop and achieve their potential One of the key indicators mentioned in “facilitating government” is business environment In order to improve business environment, not only the determination of government is needed but also the voice of businesses and enterprises from all level should be acknowledged to construct a better business environment Provincial Competitiveness Index, as an objectively indicator, including the voice of thousands business and enterprise from variety scale, is an important measurement for government to understand the real situation as well as aspirations of businesses across the country From that point of view, doing research about the significance of PCI for better business environment in Vietnam is essential v CHAPTER INTRODUCTION 1.1 Research background Vietnam is an emerging country in Southeast Asia which achieving significant changes and growth since the Renovation (or “Doi Moi” in Vietnamese) campaign introduced to public Its gross domestic product (GDP) per capita had grown rapidly since 1990, from only 6.4 billion in 1990 to 205.27 billion in 2016 Along with the thriving of economics, Vietnamese government also have to keep the sustainable of development using policy instrument In 2016, after Mr Nguyen Xuan Phuc took over as Prime Minister, his new administrations had introduced the term of “facilitating government” (or “developmental government”) in which the government might promulgate frameworks and policies along with building appropriate manpower and management mechanisms to create favorable environment and conditions for people of all economic components can fully develop and achieve their potential During the question and answer session before National Assembly on November 18, 2017, Mr Prime Minister stated four main indicators of facilitating government, emphasized that government have to create a favorable business environment, not only in the top among ASEAN countries, but also to strive and become one of those Organization for Economic Co-operation and Development (OECD) developed countries 1.2 Research statement In the view of improving business environment, we have to assess the current situation of the business environment, find out the weaknesses need to be addressed, then from these points, issue appropriate policies to improve the situation Since 2005, under the research collaboration between the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID), Provincial Competitiveness Index (PCI) had been introduced to public This set of index was designed to measure and evaluate the ease of doing business, economic governance and administrative reform efforts by local governments, through which to promote the development of the private sector in 63 provinces and cities in Vietnam During more than 10 years of operation, through PCI, the voice of enterprises has been heard, government has introduced many policies to satisfy the need of people In order to further develop business environment as the facilitating government campaign, PCI is a very important instrument in the process of collecting feedbacks and ideas for policy formulation and evaluation process This research will analyze the situation of business environment in the period of 2016-2018, the beginning of Prime Minister Nguyen Xuan Phuc‟s administration as well as the start of facilitating government campaign, along with analyzing the PCI in order to find the correlation between the progress in the business environment and the evaluation function of the mentioned indicators 1.3 Research questions This research will seek for the answer of following questions: Main research question: - Can the PCI contribute to better business environment in Vietnam? Sub research questions: - Can PCI reflect real situation of business environment in Vietnam? - Does Vietnamese government acknowledge and formulate policy regarding to better business environment based on PCI research? - What is the hindrance of PCI research? 1.4 Scope of the study This study is developed with specific scope of work The scope of a research consists of the study‟s location, time when the study is developed, and the object of the study It is denoted that the study is about business environment in Vietnam which is measured throughout comprehensive index, namely provincial competitiveness index (PCI) Location of the study is in Vietnam and the assessment will cover 63 cities and provinces of the country Time of developing this study is during May 2019 1.5 Significance of the study By developing this study, the researcher believes that provincial authorities in Vietnam will understand the importance of using provincial competitiveness index (PCI) in reviewing current policy schemes and the issues which are being faced by the companies located the provinces Moreover, this study evaluates the change in PCI by provinces so that it helps the governmental officers and managers to determine the provinces with lower PCI compared to others 1.6 Structure of the study This study is developed with five chapters Chapter 1: Introduction In this chapter, the researcher provides research background and research problems The establishment of these two contexts enables the researcher to propose right research objectives and research questions Chapter 2: Literature Review and Framework In this chapter, the researcher will explore the concept of business environment and facilitating government Moreover, this chapter goes to PCI and how this index is generated i.e methodology and results Chapter 3: Research Methodology In this chapter, the researcher proposes the choices of research methodology components, including research design, research strategy, research approach, and research method Data collection is presented along with how to process the data in order to generate findings Chapter 4: Finding and Implication In this chapter, the researcher firstly explores Vietnamese business environment during the period of 2016-2018 Then, it evaluates the correlation between PCI and effectiveness of governmental policies Key hindrances of PCI application are identified in this chapter After that, a set of policy recommendation is developed to increase the effectiveness of using PCI as macro-management tools in provinces Chapter 5: Conclusion In this chapter, the researcher summarizes key findings from previous chapters It generates the conclusions of the study as how research objectives and research questions are fulfilled Limitations of the researcher and future research recommendations are presented in this chapter ... establishing and maintaining good business environment for private business sector at provincial level (PCI Vietnam, 2017a) It is denoted that PCI was developed by the joint effort between the Vietnam. .. questions: - Can PCI reflect real situation of business environment in Vietnam? - Does Vietnamese government acknowledge and formulate policy regarding to better business environment based on PCI research?... CHAPTER FINDING AND IMPLICATION 22 5.1 The impacts of Vietnam business environment on the economy 22 5.2 PCI as a business environmental measurement 26 5.2.1 Evaluation of business environment