Ho Chi Minh City must boost business environment

(Saigon Investment) -  Ho Chi Minh City is the most dynamically vibrant economic hub of the country, with the maximum number of lucratively active enterprises, which all contribute the largest share towards the state budget. 
It often takes a long time for many real estate projects to be licensed in HCMC.
It often takes a long time for many real estate projects to be licensed in HCMC.

The City also has a highly developed infrastructure, the largest market size, and a very qualified human resource base. Despite this, for many years now, the quality of development in Ho Chi Minh City and the economic growth has seen a gradual decline.

Fall in rankings

Investors usually rely on factors such as geographical location, quality of infrastructure, market size, and quality of human resource, before considering investing in any project in the long term. Other factors that are also considered are cumbersome administrative procedures, the local people, and the running of the state apparatus in that particular area. These are factors that have weighed the quality of economic governance in the field of Provincial Competitiveness Index (PCI), measured and evaluated in recent years.

Since the establishment of the PCI in 2005, up until now, the highest ranking given to Ho Chi Minh City was in 2014, at 4th place, out of 63 cities and provinces. At this position, Ho Chi Minh City ranked behind Da Nang among the provinces and cities directly under the Central Government, far ahead of ranking of Hanoi at 26th place. Ever since 2014, although the overall score has improved, Ho Chi Minh City ranking has been gradually falling, from 6th place in 2015, to 8th place in 2016 and 2017, 10th place in 2018, and 14th place in 2019 and 2020. During all this time that Ho Chi Minh City has been fluctuating in ranking, Da Nang has remained stable at the top 5 position of best localities, Hanoi has stayed at 9th position for three consecutive years in a row, and Hai Phong has just entered among the top 10 slot for best localities since PCI 2019.

The gradual decline in PCI ranking for Ho Chi Minh City sends a clear message of the need to implement stronger reform programs in terms of governance and local economic management, if the City wishes to keep pace with the rapid development in many other provinces and cities across the country. Ho Chi Minh City is still planning reforms and several development programs and projects, but it seems these are too slow in implementation than in some of the other smaller economic hubs in the country.

Lacking expertise

The index under “Cost of Entering the Market” of Ho Chi Minh City in PCI 2020 decreased by 27 places compared to PCI 2019, ranking 59th among 63 provinces and cities. This index score of Ho Chi Minh City has been gradually falling since 2016 and the result for 2020 could be even more dismal.

While enterprises recorded an improvement in the application of information technology in business registration settlement, and more efficiency of the OSS department, they are still concerned about the disclosure of administrative and professional procedures and the attitude of working staff. Enterprises have just completed these procedures with worrying results, with only 32% of enterprises in Ho Chi Minh City stating that staff were knowledgeable and friendly. This is the lowest percentage in the country, much worse than the national median when it comes to staff expertise at 73% and friendliness at 79%. The survey results also showed that 12% of enterprises still had to wait more than one month to complete procedures before implementation of projects, which is a very high rate.

The index under ‘Transparency and Access to Information’ has decreased 22 places compared to the PCI 2019 ranking of 42nd place in 53 provinces and cities. Enterprises also face many difficulties when searching and accessing information and documents for business activities. For example, only 37% of enterprises said that the bidding information was being made public. Enterprises in the City are also in the group of enterprises facing the most obstacles when they learn how to plan documents and receive feedback from local authorities.

The index under ‘Business Support Services’ used to be the strength of Ho Chi Minh City, but in PCI 2020 it lost its lead position and dropped 16 places, to current 17th position. Business Support Services and the group of businesses that intend to continue to use these services have significantly reduced compared to PCI 2019. This trend is quite consistent in most of the service groups assessed as legal consultants, seeking for business partners, or those related to technology.

Boost business environment

Survey results of enterprises in Ho Chi Minh City show a need to continue to improve the efficiency of public administration centers and the one-stop-shop sector (OSS), such as by upgrading to more efficient administrative procedures. Civil servants operating the OSS sector should be more proactive, in all round supervision, assessment and implementation plans.

Ho Chi Minh City also needs to publicize and provide transparent information on planning, development plans, public investment projects, bidding, projects calling for investment, investment projects in public-private-partnerships, and also all other relevant processes and procedures, as well as share results of administrative procedure settlement of branches and units. The coordination process with business associations is very important, in which regular and substantive dialogue should be conducted with business establishments.

The City government and districts need to promptly solve the problems of enterprises, assign business associations to participate in monitoring and supervising the settlement process, and periodically conduct a public assessment of the results of problems faced by enterprises.

As it is the main economic hub of the country, Ho Chi Minh City is under constant pressure to show better reforms than other localities in the country, with the business community also having much higher expectations from the City as compared to any other place in the country. In order to lure investors to seek business opportunities in  Ho Chi Minh City, the government here needs to make huge drastic changes.

I think that perhaps Ho Chi Minh City needs to clear several bottlenecks so as to improve the business environment, such as congested locations, and projects that are just holding up rapid development. It is now vital to quickly build an environment upgrade program, and look at all other situations that are constant obstacles in creating favorable conditions for future investors.