In 1986, with its Doi Moi reforms, Vietnam set out to transform from the impoverished Communist country of the immediate post-Vietnam War era into the fast-growing, middle-income market economy we see today. The lifting of the trade embargo in 1994, the bilateral trade agreement with the United States in 2001, and accession to the World Trade Organisation in 2007 all stand as milestones along the way to an economy fuelled by trade, underpinned by investment, and enabled by growth to create the 1.6 million jobs per year needed to reduce poverty among Vietnam's 89 million people.
How did this happen? That's a long and involved story, but a significant part of it involves a radical turnaround in the attitudes of the bureaucrats who once occupied the commanding heights of Vietnam's command and control economy. Changing the attitudes and behaviour of civil servants to private enterprise is notoriously difficult in countries transitioning from an inward-oriented, planned economy to a market economy committed to engaging with the global economy. One of the 'behaviour change communications' strategies employed to bring about that transformation was an innovation called the Provincial Competitiveness Index (PCI).
Business indices are nothing new. Products such as the World Bank's Doing Business and the World Economic Forum's Global Competitiveness Report are well known, well regarded instruments for tracking economic indicators, everything from the ease of registering a business to the degree of corruption in a given country. But these tools provide metrics of economic governance and competitiveness at the national level; the beauty of the PCI is it measures performance and develops rankings at the provincial level – and therein lies its power as a tool for inspiring competition and change within the country. Supported by the U.S. Agency for International Development (USAid) from 2003 to 2013, in partnership with the Vietnam Chamber of Commerce and Industry (VCCI), the PCI assesses the ease of doing business, the quality of economic governance, and the progress of administrative reforms by local governments in Vietnam's 63 provinces and cities.
Each year from 2006 to 2013, the PCI has surveyed between 8,000 and 10,000 domestic enterprises by means of mail-out questionnaires. Based on these responses – combined with hard data from government sources – it ranks all 63 provinces and cities. (A separate survey of up to 2,000 foreign-invested enterprises was added in 2010 to incorporate feedback from overseas investors.) Highly publicised, these rankings have become a powerful incentive for political leaders, regulators, business leaders, media, and society to revisit their attitudes to economic governance. In short order, the PCI has become a medium for the private sector to voice feedback to government on issues such as informal charges (corruption), market entry costs, and land tenure and security.
Here are a few of the things that make the PCI not just an index of change, but an index for change.
The Report
The annually updated rankings spurred great anticipation and competition among provinces to improve their positions. Importantly, we published the rankings as part of a broader report that goes beyond the rankings to explain the PCI's methodology, point to priorities for reform, and spotlight the performance of notable provinces. Carefully written to its target audiences, each report highlights progress made, areas for improvement, and the importance not just of improving the rankings but also of helping the lower-ranking provinces fare better. We made all the supporting data publicly available on pcivietnam.org and engaged with academics and business leaders so the PCI would be widely understood and accepted.
The Survey
Mailed to some 40,000 firms, the survey itself is a communication campaign, including a letter signed by the VCCI chair, the head of the USAid programme, and heads of the Vietnamese and American Chambers of Commerce. The average response rate of 24% is high for mail-out surveys.
Local Leadership
While DAI managed the project on USAid's behalf, the key to the PCI's success was its partnership with VCCI, a partnership that kindled right from the beginning with the conception and design of the index in consultation with leading academics. VCCI, which represents the larger interests of the Vietnamese business community as a federation of all business associations and large enterprises, took ownership of the PCI and became a more credible federation by virtue of its engagement with the private sector through the PCI surveys and advocacy programmes.
Media
For the index to have traction, it must have visibility. The PCI team focused intently on media coverage, organising a range of media events during the year. In 2013, for example, Vietnam Television 1, the most popular channel in Vietnam, covered the PCI launch day live in prime time (7 p.m. to 8 p.m.), in a programme watched by 10 million Vietnamese. This year, VCCI has developed a PCI app so that the PCI is accessible to an increasingly connected population. The signature event for media coverage was the annual launch ceremony, attended by 500 government, business, media, international donor, and civil society leaders. Featuring high-profile speakers and awards to the outstanding provinces, the event attracted corporate and media sponsorship, which in turn became an important way to finance and broaden the coalition of partners. Principal media partner the Saigon Times gained advance access to the PCI report so it could publish a front-page article about the results on launch day. Typically, the event would generate more than 100 articles, radio spots, and television clips.
Diagnostic workshops
As the PCI gained prominence, provincial leaders would increasingly ask the PCI team how they could improve their economic governance and hence their index ranking. We participated in dozens of public-private workshops – typically chaired by the head of the People's Committee or the Communist Party Chief, and attended by up to 300 people – to analyse the province's performance and engage local civil servants and businesspeople in how to improve it. Many provinces now issue master plans and official letters on how to boost PCI rankings.
Study tours
Poorer performing provinces travel to higher-ranked counterparts to learn about their reform efforts. These visits give provincial leaders practical insights into how even the smaller, less endowed provinces – like Lao Cai – can lift their ranking.
Data and dialogue
U.S. Ambassadors, other diplomats, donor agencies, academics, and foreign investors all use the PCI as an entry point for discussions with local officials on economic governance, and to assess investment opportunities. Several U.S. Ambassadors have requested PCI findings as a data source in an otherwise data-poor environment to inform their dialogue with Vietnamese business and government leaders.
Official endorsement
The PCI has been officially accepted by the central government. In March of this year, the Prime Minister signed Resolution Number 19 on key solutions for improving national competitiveness, in which improving PCI rankings features prominently: "People's committees of provinces and cities under central authority shall review their own regulations and implementation thereof, and set a target and a roadmap from now up to 2015 to achieve the level of high-ranking provinces and cities under the 2013 PCI."
Measuring behaviour change
The bottom line for the PCI team is whether Vietnam's provincial governments are changing their behaviours when it comes to economic governance. The answer is yes. In 2013, the median province scored 47 on a consistent measure of PCI performance adjusted for changes in index methodology over time – the highest score recorded since VCCI and USAid started keeping data. Fifty-one out of 63 provinces (81%) have shown improvement since 2006. Provinces have moved up or down the rankings, but there has been a general march toward better economic performance.
The news is not always good. For example, while PCI 2012 data show that low-ranked provinces were adopting the best practices of their top-ranked peers and improving their business environments, the same data show that high-ranked provinces were struggling to advance, and had actually regressed in some measures of reform. In fact, the overall median score dropped from 59.15 to 56.2 points, and not one province scored 65 points—the threshold indicating "excellence" in economic governance—the first time this had ever happened. This result may have been related to currently gloomy prospects in Vietnam's otherwise high-growth economy.
To put these numbers in concrete terms, survey respondents in the median province experienced lower waiting periods for business registration and licensing, less time spent on bureaucratic procedures, and reduced payment of informal charges. But at the same time, they indicated more dissatisfaction with expropriation risk and land compensation prices, less confidence in and usage of provincial legal institutions, and declines in the supply and quality of business support services.
The point is less that the index reveals a mixed picture than that we have this picture at all. Over the past 10 years, the PCI has established itself as a trusted barometer for Vietnamese regulators and businesspeople – and a vehicle for behavior change that is playing a vibrant role in the business environment it monitors.
Dau Anh Tuan directs VCCI's legal department. Jim Winkler is a vice president at DAI.
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