Promoting improvement of business investment environment

Now in its 20th year, the PCI has increasingly affirmed its role as a “compass” helping provinces and cities enhance the quality of economic governance and providing a driving force for policy, legal, and business environment reform across Viet Nam.

Nonetheless, issues such as high costs, lengthy administrative procedures, and challenges in accessing business opportunities remain prevalent and must be tackled more thoroughly by local authorities to foster a more transparent and favourable business climate.

Bright spots

The 2024 PCI report spotlighted Hai Phong City’s impressive breakthrough as it topped the rankings for the first time with a score of 74.84, surpassing Quang Ninh Province, which had held the top spot for seven consecutive years. This result reflects Hai Phong’s persistent efforts in administrative reform, streamlining procedures, and boosting investment. The city scored highly in seven out of ten sub-indices, including market entry, land access, transparency, informal charges, fair competition, proactivity of local government, and legal institutions.

Hai Phong’s rise to the top of the 2024 PCI rankings is the outcome of continuous reform efforts centred on serving citizens and enterprises. Following Hai Phong in the rankings are Quang Ninh with 73.20 points, Long An with 72.64, and Bac Giang with 71.24, maintaining its position in the leading group. Performers include Ba Ria – Vung Tau, Thua Thien – Hue, Hau Giang, Phu Tho, Dong Thap, and Hung Yen.

The report also noted several key trends in provincial governance. The median score rose to 67.67 points, up one point from the previous year, marking the eighth consecutive year above the 60-point threshold, commonly interpreted as a favourable business environment. The core PCI sub-index, which reflects the quality of essential economic governance, reached 68.18 points, continuing its upward trend since 2016. This reflects sustained reform efforts across localities, supported by active monitoring from the business community.

Notably, the business community continues to express high satisfaction with enterprise registration procedures, with 93% of surveyed firms finding the procedures transparent, 91% receiving clear guidance, and 86% satisfied with the professionalism and attitude of officials. Inspections have also improved, with only 5% of firms reporting more than three inspections per year—the lowest rate to date.

Online administrative procedures have proven effective, with 79% of businesses reporting no difficulties in implementation and the same percentage acknowledging time and cost savings. Only 2.3% of firms reported unofficial costs exceeding 10% of revenue, continuing a steady decline since 2010 and a sharp drop from nearly 13% in 2006 (the first year of PCI surveys).

VCCI Chairman Pham Tan Cong noted that the 2024 PCI presents an optimistic picture of provincial economic governance. More than just an assessment tool, the PCI has become a catalyst for healthy competition among localities, encouraging mutual learning in the drive to improve the business environment. Component indicators also saw clear improvements: the market entry index rose from 7.31 in 2023 to 7.72 in 2024 due to streamlined licensing and digital registration processes; transparency rose to 6.51 (up 0.41); informal costs decreased from 7.08 to 6.77; and 68% of businesses expressed satisfaction with local labour skills, up from 63% in 2023.

Efforts to remove barriers for business

According to Dau Anh Tuan, Deputy Secretary General of VCCI and Director of the PCI Project, while the quality of provincial governance has improved significantly over the past two decades, several persistent barriers continue to hinder business growth. Around 24% of enterprises reported spending over 10% of their time understanding and complying with legal regulations, an increase of 4% from 2022–2023. Meanwhile, 22% of businesses cited overlapping inspection content, up 8.5% from the previous year. Access to credit, finding customers, and navigating market volatility remain longstanding business challenges.

Economists note that the biggest hurdle in institutional reform and business environment improvement lies in changing the mindset and approach of local officials and civil servants. Indeed, the 2024 PCI revealed a decline in the proactivity of some local governments, with the average score for this sub-index falling to 6.29, compared to 6.68 in 2023. Only 77% of businesses believed that local governments flexibly applied legal frameworks to facilitate business operations, a 9% drop from the 2021–2022 period. These figures indicate a need for local governments to take more decisive action to fulfil the directives of General Secretary To Lam in driving the country’s economic development.

Creating real momentum for improving the investment climate and laying a foundation for economic growth requires visionary thinking, strong commitment, dynamism, and a willingness to listen on the part of local leaders. According to Hai Phong Party Secretary Le Tien Chau, the city’s top ranking in the 2024 PCI is the result of unity between the government and the business community. Hai Phong has focused on building a digital government, reforming administrative procedures, and establishing a transparent investment environment to become a modern international port city.

The city has also assigned specific responsibilities to individual officials and Party members based on “clear personnel, clear tasks, clear timelines, clear accountability, clear outcomes, clear authority.” In parallel, Hai Phong’s leaders maintain regular dialogues with the business community to identify bottlenecks, address challenges, and actively support production and business activities. The city remains committed to sustaining and improving governance quality, ensuring enterprises and citizens are not disrupted by the ongoing restructuring of local administrative units.

Thanks to sustained PCI improvement efforts across the country, Viet Nam is edging closer to its goal of building a transparent, favourable, and competitive business environment. However, VCCI Chairman Pham Tan Cong stressed that to sustain growth momentum and meet business community expectations, localities must further accelerate administrative reform, reduce unnecessary costs, and ensure equal conditions for all types of businesses, aligning with directives from the Prime Minister.

Moreover, local governments must embrace a spirit of dynamism and initiative, strengthen digitalisation of procedures, and enhance the capacity of implementation staff—these are the keys to shortening administrative timelines and establishing a secure business environment. Only then can Viet Nam achieve a strategic breakthrough in the business environment in 2025 and beyond, fostering a culture of equality and shared progress, harmonised interests and risks, and driving the country towards fast and sustainable economic development.

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