Vietnam provincial competitiveness index: how to read it

The Vietnam provincial competitiveness index, or PCI, is a yearly score of how well each province runs its economy for private business. It is run by the Vietnam Chamber of Commerce and Industry (VCCI) with support from USAID. Investors can use it to compare provinces on cost, speed and fairness before they pick a site.

What the index is

The PCI began as a pilot in 2005 and covered 42 provinces and cities. From 2006 on, all provinces and cities were ranked. The VCCI and a USAID-funded project built it, with help from The Asia Foundation.

It does not measure size or wealth. It asks a narrower question: how easy and fair is it to do business under this provincial government? Each of the 10 parts is scored on a 100-point scale, and a province's overall score combines them with set weights.

Sources: Vietnamese Wikipedia, "Chi so nang luc canh tranh cap tinh", for the 2005 pilot, the 2006 start of full ranking and the 100-point scale. English Wikipedia, "Provincial Competitiveness Index", for the VCCI, the USAID-funded project and The Asia Foundation role.

The 10 sub-indices

Each part looks at one area of local government. Here they are in plain words.

• Market entry: how long and how costly it is to register and start a business.
• Land access and tenure stability: how easy it is to get land, and how safe your right to use it feels.
• Transparency: whether firms can get plans and documents, and whether rules are clear.
• Time costs: how much time firms lose to inspections, permits and paperwork.
• Informal charges: how often firms must pay extra, unofficial amounts.
• Proactive provincial leadership: whether leaders solve problems and apply national rules in a helpful way.
• Equitable competition: whether firms get equal treatment, or some get favours.
• Business support services: the quality of information, matchmaking and other help for firms.
• Labor training: how good local worker training and job services are.
• Legal institutions: whether firms trust local courts and other ways to settle disputes.

Sources: Vietnamese Wikipedia, "Chi so nang luc canh tranh cap tinh", for the list of ten sub-indices.

How to compare provinces

Start with the total score, but do not stop there. Two provinces can have the same total and very different strengths. A high total can hide one weak part that matters for your plan.

Look at the 10 parts side by side. Write down the three that matter most to your business. Then check how each short-listed province does on those three.

Think of it as a report card written by the people who pay the costs. Provincial leaders use it too. A weak score on one part shows them where firms feel pain, and a rising score shows reform is working. For an investor, that makes the trend as useful as the level. A province that is climbing on time costs and informal charges may be a better bet than one that is high but flat.

Read the index next to other facts. Look at roads, ports, power supply, wages and the size of the local market. The PCI tells you about the government side of the decision. It does not replace a site visit or a financial plan.

Match the parts to your business

A factory needs land and workers. Focus on land access, tenure stability and labor training. A service firm may care more about market entry, time costs and informal charges.

A firm that deals often with officials should watch transparency, proactive leadership and equitable competition. A firm that expects contract disputes should read the legal institutions score closely.

If your firm is small, pay extra attention to informal charges and time costs. Small firms feel these costs most, because they have fewer staff to spend on paperwork.

Limits to keep in mind

The PCI reflects how local firms rate their own province. It is a guide, not a guarantee. Scores can change from one year to the next, and the picture can differ between districts inside one province.

Use it to build a short list. Then visit, talk to firms already there and ask the provincial investment office for current facts. Check that the sub-index names and scoring in the latest report match what you read here, because methods are updated over time.

Quick checklist

• Pick three sub-indices that matter most to your business.
• Compare at least three provinces on those parts, not only the total.
• Note any province with a weak score on a part you cannot work around.
• Confirm the facts on site before you commit money.

Sources: Vietnamese Wikipedia, "Chi so nang luc canh tranh cap tinh". English Wikipedia, "Provincial Competitiveness Index".