Đậu Anh Tuấn, vice secretary general and head of the Legal Department at VCCI. Photo courtesy of VCCI

The 2025 Provincial Competitiveness Index (PCI) marks a significant shift in how Việt Nam assesses the quality of local economic governance.

Đậu Anh Tuấn, vice secretary general and head of the Legal Department at the Vietnam Chamber of Commerce and Industry (VCCI), spoke to Việt Nam News about a new version of the annual PCI report and the priorities for improving the business environment in the years ahead.

What distinguishes the 2025 Provincial Competitiveness Index (PCI) Report from previous editions?

The most notable – and perhaps the biggest – change in this year’s PCI Report is that it will no longer publish a ranking of all 34 newly established provinces and centrally governed cities from first to thirty-fourth, as it did in previous years.

Instead, the 2025 PCI Report will group localities according to their governance performance. There are several key reasons behind this change.

First, following the recent administrative restructuring, development conditions have changed significantly across localities. Some new provinces were created through the merger of three former provinces, others through the merger of two, while some remained unchanged. As a result, the workload and governance challenges facing each locality over the past year have varied considerably.

Second, based on our assessment of the 34 provinces and cities, we have observed that the gap in governance quality among localities has been narrowing. In many cases, groups of four or five localities achieved very similar results. Yet under a traditional ranking system, even marginal differences in scores could translate into substantial differences in rankings. This may create the impression that there are wide disparities in governance quality when, in reality, the differences are relatively small.

For this reason, the PCI research team wants localities to focus more on the data and indicators provided by the PCI rather than on their ranking. The PCI offers a comprehensive source of information that local governments can use to support reforms, innovation and improvements in governance quality.

What matters most is making effective use of the survey findings and empirical evidence to drive reforms and improve the local business environment.

A third reason is that we have also looked at international practices. In recent years, many assessment frameworks developed by the World Bank and the OECD have shifted from detailed rankings to grouping economies according to performance.

This year's PCI will identify leading groups of localities instead of publishing a numerical ranking from one to thirty-four.

We recognise that every locality is making significant efforts to promote economic development and attract investment. The role of the PCI and the PCI research team is therefore to work alongside local governments by providing data, information and practical feedback to support their reform efforts.

Ultimately, our objective is to contribute to the development of all localities. That is one of the most significant changes introduced in this year's PCI.

How do you assess the PCI performance of localities, particularly those in the leading group of the 2025 PCI?

Perhaps the most notable finding of this year's PCI is the increasingly proactive role of local governments.

As Việt Nam continues to deepen decentralisation and delegate greater authority to local governments, many responsibilities that were previously held by central ministries and agencies have now been transferred to provincial authorities. At the same time, local governments have been assigned increasingly specific economic growth and development targets. As a result, their proactive role has become much more pronounced.

In this year's PCI Report, we emphasise that a favourable business environment is not determined solely by streamlined administrative procedures or regulatory reform, but also depends on the proactive and enabling role of local authorities.

Equally important is the extent to which the business environment is fair, allows enterprises to access resources more easily and ensures that support policies are implemented effectively and meaningfully.

These are increasingly becoming the factors that differentiate one locality from another, and this year's PCI results clearly reflect that trend.

The PCI survey also shows that disparities among localities in areas such as reducing the time required for market entry have narrowed significantly. Today, many provinces have proactively shortened business registration and licensing procedures while continuing to streamline administrative processes.

As a result, differences among provinces are likely to become less about licensing times or administrative simplification, as these have increasingly become common practice nationwide.

Instead, the distinguishing factor will be the degree to which local governments proactively support businesses and implement policies that foster a more enabling business environment. In my view, this will become the defining difference among localities in the years ahead.

The leading group in the 2025 PCI – Bắc Ninh, Đà Nẵng, Hải Phòng, Phú Thọ and Quảng Ninh (listed alphabetically) – also share a particularly impressive characteristic, namely consistently strong performance across a broad range of indicators.

Among the PCI's nine sub-indices, each of these localities ranks in the national top 10 in at least five indicators. This demonstrates that their governance quality has improved in a balanced and comprehensive manner.

Another notable point is that these leading localities also recorded exceptionally strong GRDP growth last year, including Hải Phòng, Quảng Ninh and Phú Thọ. This suggests a close relationship between governance quality, actual economic growth and private sector development.

Hải Phòng, in particular, stands out for its well-rounded performance across multiple dimensions. The city has consistently maintained a high PCI ranking over recent years while achieving impressive GRDP growth.

It has also been highly successful in attracting foreign direct investment (FDI), especially alongside substantial investment in infrastructure development.

We believe that, with such a systematic, consistent and long-term approach, Hải Phòng will continue to emerge as one of Việt Nam's leading investment destinations in the years ahead.

Production at AUTOMECH Mechanical Equipment and Solutions JSC in Bắc Ninh Province. VCCI has introduced the Business Performance Index (BPI) to place greater emphasis on measuring the development of the private sector. — VNA/VNS Photo

This year marks the first time that VCCI has introduced the Business Performance Index (BPI). How can this new index help local governments better support the business community and improve governance quality?

Going forward, local authorities should place greater emphasis on the development performance of the private sector. That is precisely why we introduced the Business Performance Index (BPI) in this year's PCI Report.

The index comprises 23 component indicators that measure various aspects of private-sector performance in each locality. These include, for example, whether businesses are profitable and whether they are optimistic about their future business prospects.

We also place particular emphasis on innovation. The index examines whether businesses engage in innovation activities and adopt new technologies. This is fully aligned with the strategic direction set out in Resolution 68 (on private-sector development, issued by the Communist Party of Việt Nam in May 2025), which identifies innovation as a key driver of private-sector development.

In other words, whether private enterprises are provided with a supportive environment and sufficient incentives to innovate is an extremely important indicator.

This year, therefore, we have adopted a broader approach to assessing the business environment. Rather than focusing solely on the quality of government governance, we are placing greater emphasis on whether businesses are operating efficiently, growing sustainably and creating value. This also reflects the spirit of Resolution 68 on private sector development.

This year, VCCI also praised several localities for their significant improvements in PCI performance. How do you assess these localities?

We selected three localities for special recognition in acknowledgement of the positive progress they have made over recent years: Đồng Tháp, Huế and Tây Ninh.

These are not provinces that rank among the country's leading destinations for investment or enjoy exceptional advantages in infrastructure development. What distinguishes them, however, is their success in building effective models of collaboration between local authorities and the private sector for many years.

Đồng Tháp is particularly impressive. It has remained among the top-performing provinces in the PCI for nearly two decades – an achievement that deserves considerable recognition.

The province has established an effective dialogue between government and businesses, enabling many of the difficulties and concerns faced by investors to be addressed in a timely manner.

Huế has also stood out. Based on both our survey findings and direct engagement with the locality, we have been particularly impressed by the quality of support provided to small and medium-sized enterprises (SMEs).

Although Huế does not possess the same level of resources as some of Việt Nam's larger economic centres, its SME support system has been operating effectively and has produced highly encouraging results.

In our view, these are the kinds of governance models and policy approaches that deserve to be replicated widely. While factors such as infrastructure, geographic location and other structural conditions may prevent these localities from becoming the country's leading destinations for domestic and foreign investment, they have demonstrated that practical, targeted and effective governance can significantly strengthen the private sector and enhance investment attractiveness within their own circumstances.

Having monitored the PCI over many years, we have observed this trend becoming increasingly evident.

For many years, Hà Nội and HCM City have not ranked among the top performers in the PCI, and this year is no exception. How do you assess the quality of governance and the business environment in Việt Nam's two largest economic hubs?

Major economic centres such as Hà Nội and HCM City play a particularly important role in the country's economic growth, as they are home to the largest concentration of businesses in Việt Nam.

Our enterprise survey also recorded many positive signals from both cities. For example, according to the BPI, Hà Nội and HCM City rank among the country's top-performing localities, indicating that their private sectors are both dynamic and highly productive.

As a result, the private business communities in these two cities also rank among the national leaders in terms of innovation capacity and management capability.

Going forward, efforts to further improve the business environment in Hà Nội and HCM City should not focus solely on attracting large corporations and foreign direct investment (FDI). They should also aim to create a more supportive business environment for small and medium-sized enterprises (SMEs).

We hope that both cities will continue to implement more effective and practical support programmes for SMEs in the years ahead.

Following the recent administrative restructuring, what should local governments focus on to further improve their PCI performance?

One of the greatest advantages for newly merged provinces is the expansion of their development space. For businesses, the scale of the economic space is an important factor. A larger development area naturally creates greater opportunities.

At the same time, however, it also presents a new challenge: how to maintain effective, meaningful and regular engagement with the business community, particularly small and medium-sized enterprises.

Larger provinces typically have significantly more businesses, while the resources and institutional mechanisms available to support them remain limited. As a result, ensuring effective interaction between local governments and businesses is by no means a simple task.

One priority, in my opinion, should be to accelerate the adoption of digital technologies by moving interactions between authorities, citizens and businesses onto digital platforms. This will help maintain effective communication and engagement as administrative jurisdictions become larger.

A second priority is to develop business associations. In practice, it is difficult for any level of government to engage directly with the entire business community, especially SMEs. Well-functioning business associations therefore play an essential role as intermediary institutions that can effectively support smaller enterprises.

Third, I believe it is crucial to enhance the effectiveness of governance at the ward and commune levels. These are the levels of authorities closest to SMEs, and they have also been granted significantly greater autonomy under the current decentralisation framework.

If every locality can ensure that each of its wards and communes develops a culture of partnership and support for businesses – particularly SMEs – it will make a substantial contribution to creating a more favourable business environment.

Ultimately, businesses and household enterprises rarely interact directly with the heads of provincial People's Committees. Their day-to-day dealings are primarily with grassroots authorities. That is why the administrative culture, service mindset and business-friendly approach of local frontline authorities are critically important.

These factors have a direct impact on the quality of policy implementation. We hope that local authorities will continue to strengthen the effectiveness of this level of administration in a more practical and results-oriented manner. — VNS