Significance of PCI for better business environment in Vietnam period of 2016-2018: Issues and policy implication

In order to improve business environment, not only the determination of government is needed but also the voice of businesses and enterprises from all level should be acknowledged to con

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

NGUYEN HOANG LONG

SIGNIFICANCE OF PCI FOR BETTER BUSINESS ENVIRONMENT IN VIETNAM PERIOD OF 2016-2018: ISSUES AND

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Contents

LIST OF TABLE iii

ACKNOWLEDGEMENT iv

ABSTRACT v

CHAPTER 2 INTRODUCTION 1

2.1 Research background 1

2.2 Research statement 1

2.3 Research questions 2

2.4 Scope of the study 2

2.5 Significance of the study 3

2.6 Structure of the study 3

CHAPTER 3 LITERATURE REVIEW AND FRAMEWORK 5

3.1 Business environment 5

3.1.1 Definition and components 5

3.1.2 Impact on economics 7

3.1.3 Influences of policies on business environment 8

3.2 Facilitating government 9

3.2.1 Definition of facilitating government 9

3.2.2 Characteristics of facilitating government 11

3.2.3 Factors affecting the construction of facilitating government 12

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3.3 Provincial competitiveness index (PCI) 13

3.3.1 Research methodology of PCI 13

3.3.2 Result and impact 15

CHAPTER 4 RESEARCH METHODOLOGY 17

4.1 Research design 17

4.2 Research approach 17

4.3 Research strategy 17

4.4 Research method 18

4.5 Data collection 19

4.6 Data analysis technique 20

CHAPTER 5 FINDING AND IMPLICATION 22

5.1 The impacts of Vietnam business environment on the economy 22

5.2 PCI as a business environmental measurement 26

5.2.1 Evaluation of business environment on economic development 27

5.2.2 Correlation between PCI and DBS Index 30

5.3 Hindrances of PCI 34

5.4 Policy implication 44

CHAPTER 6 CONCLUSION 49

REFERENCE 51

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LIST OF TABLE

Table 2.1: Sub-indices of PCI 14

Table 4.1: Vietnam‟s GDP growth, GDP per capita growth, and inflation 22

Table 4.2: The contribution of sectors into GDP 23

Table 4.3: Vietnam‟s GDP growth and GDP per capita growth 24

Table 4.4: Business operations of enterprises in Vietnam 25

Table 4.5: Investment in Vietnam 26

Table 4.6: Correlation between PCI score and some economic indicators 27

Table 4.7: Correlation between PCI‟s components and some economic indicators 28 Table 4.8: Variable coding 31

Table 4.9: Pearson correlation result 33

Table 4.10: The provinces with decreasing PCI score 34

Table 4.11: Top and Bottom Ranks 35

Table 4.12: Some socio-economic development of selected provinces 40

Table 4.13: SIPAS 2018 42

Table 4.14: PAR 2018 43

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ACKNOWLEDGEMENT

First and foremost, I would like to express my sincere gratitude to my research supervisors Prof Yutaka Tsujinaka and Assoc Prof Tran Thi Thu Thuy for their support on my Master thesis research Thanks to their patience, motivation and knowledge, I could carry out this research successfully

Beside my supervisors, I would like to thank to Dr Mai Chi Thuy Anh and Dr Vu Hoang Linh for giving advises to me during the interim thesis defense and support

me with the thesis related documents process

My sincere thanks also goes to my thesis committee: Prof Naohisa Okamoto, Assoc Prof Dao Thanh Truong, Dr Ho Hong Hai, and Dr Nguyen Cam Nhung for their insightful question and precious comments which help me to develop and finalize my thesis

Last but not least, I would like to say thanks to my families, my friends and all VJU staff for their encouragement and support during my research

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ABSTRACT

Since 2016, the new administration of Prime Minister, Nguyen Xuan Phuc, has launched the campaign of “Facilitating government”, in which the government might promulgate frameworks and policies along with building appropriate manpower and management mechanisms to create favorable environment and conditions for people of all economic components can fully develop and achieve their potential

One of the key indicators mentioned in “facilitating government” is business environment In order to improve business environment, not only the determination

of government is needed but also the voice of businesses and enterprises from all level should be acknowledged to construct a better business environment

Provincial Competitiveness Index, as an objectively indicator, including the voice

of thousands business and enterprise from variety scale, is an important measurement for government to understand the real situation as well as aspirations

of businesses across the country

From that point of view, doing research about the significance of PCI for better business environment in Vietnam is essential

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CHAPTER 1 INTRODUCTION 1.1 Research background

Vietnam is an emerging country in Southeast Asia which achieving significant changes and growth since the Renovation (or “Doi Moi” in Vietnamese) campaign introduced to public Its gross domestic product (GDP) per capita had grown rapidly since 1990, from only 6.4 billion in 1990 to 205.27 billion in 2016 Along with the thriving of economics, Vietnamese government also have to keep the sustainable of development using policy instrument

In 2016, after Mr Nguyen Xuan Phuc took over as Prime Minister, his new administrations had introduced the term of “facilitating government” (or

“developmental government”) in which the government might promulgate frameworks and policies along with building appropriate manpower and management mechanisms to create favorable environment and conditions for people

of all economic components can fully develop and achieve their potential

During the question and answer session before National Assembly on November

18, 2017, Mr Prime Minister stated four main indicators of facilitating government, emphasized that government have to create a favorable business environment, not only in the top among ASEAN countries, but also to strive and become one of those Organization for Economic Co-operation and Development (OECD) developed countries

1.2 Research statement

In the view of improving business environment, we have to assess the current situation of the business environment, find out the weaknesses need to be addressed, then from these points, issue appropriate policies to improve the situation

Since 2005, under the research collaboration between the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International

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Development (USAID), Provincial Competitiveness Index (PCI) had been introduced to public This set of index was designed to measure and evaluate the ease of doing business, economic governance and administrative reform efforts by local governments, through which to promote the development of the private sector

in 63 provinces and cities in Vietnam

During more than 10 years of operation, through PCI, the voice of enterprises has been heard, government has introduced many policies to satisfy the need of people

In order to further develop business environment as the facilitating government campaign, PCI is a very important instrument in the process of collecting feedbacks and ideas for policy formulation and evaluation process

This research will analyze the situation of business environment in the period of 2016-2018, the beginning of Prime Minister Nguyen Xuan Phuc‟s administration as well as the start of facilitating government campaign, along with analyzing the PCI

in order to find the correlation between the progress in the business environment and the evaluation function of the mentioned indicators

1.3 Research questions

This research will seek for the answer of following questions:

Main research question:

- Can the PCI contribute to better business environment in Vietnam?

Sub research questions:

- Can PCI reflect real situation of business environment in Vietnam?

- Does Vietnamese government acknowledge and formulate policy regarding

to better business environment based on PCI research?

- What is the hindrance of PCI research?

1.4 Scope of the study

This study is developed with specific scope of work The scope of a research consists of the study‟s location, time when the study is developed, and the object of

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the study It is denoted that the study is about business environment in Vietnam which is measured throughout comprehensive index, namely provincial competitiveness index (PCI) Location of the study is in Vietnam and the assessment will cover 63 cities and provinces of the country Time of developing this study is during May 2019

1.5 Significance of the study

By developing this study, the researcher believes that provincial authorities in Vietnam will understand the importance of using provincial competitiveness index (PCI) in reviewing current policy schemes and the issues which are being faced by the companies located the provinces Moreover, this study evaluates the change in PCI by provinces so that it helps the governmental officers and managers to determine the provinces with lower PCI compared to others

1.6 Structure of the study

This study is developed with five chapters

Chapter 1: Introduction

In this chapter, the researcher provides research background and research problems The establishment of these two contexts enables the researcher to propose right research objectives and research questions

Chapter 2: Literature Review and Framework

In this chapter, the researcher will explore the concept of business environment and facilitating government Moreover, this chapter goes to PCI and how this index is generated i.e methodology and results

Chapter 3: Research Methodology

In this chapter, the researcher proposes the choices of research methodology components, including research design, research strategy, research approach, and

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research method Data collection is presented along with how to process the data in order to generate findings

Chapter 4: Finding and Implication

In this chapter, the researcher firstly explores Vietnamese business environment during the period of 2016-2018 Then, it evaluates the correlation between PCI and effectiveness of governmental policies Key hindrances of PCI application are identified in this chapter After that, a set of policy recommendation is developed to increase the effectiveness of using PCI as macro-management tools in provinces Chapter 5: Conclusion

In this chapter, the researcher summarizes key findings from previous chapters It generates the conclusions of the study as how research objectives and research questions are fulfilled Limitations of the researcher and future research recommendations are presented in this chapter

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CHAPTER 2 LITERATURE REVIEW AND

FRAMEWORK 2.1 Business environment

2.1.1 Definition and components

Business environment is defined as the entities which are beyond the control of the business (i.e suppliers, customers, existing and future competitors, government, legal framework, technologies, society, etc.), affect the business functions and performances (National Open School, 2018) Similar definition was also found by Richman & Copen (1972) Another definition of business environment was provided by Pal (2018) in which it consisted of internal and external factors that brought both opportunities and threats to the business Glueck & Jauch (1984) viewed business environment as strategic management process in which the strategic managers of the business provided their assessments and monitors towards governmental, suppliers, market, economic, geographic, social, and technological forces to identify the opportunities and threats to their business

Business environment has its natures On the other hand, the characteristics of business environment has been explored by previous researchers According to Salwan & Gupta (2018), business environment has 8 characteristics, namely aggregative, inter-related, dynamic, general and specific forces, relative, inter-temporal, uncertain, and contextual Kattookaran (2015), however, proposed that business environment has 5 characteristics, namely complex, dynamic, interrelatedness, relativity, and uncertain Hans (2018) proposed 4 characteristics of business environment and they are totality of factors with some specific, general and co-related, dynamic, unpredictable, and differences Hence, common characteristics of business environment had been shared between previous researchers At first, business environment includes bot general and specific forces General forces refer to political, economic, social, technological, and legal environment where the businesses are operating within while specific forces

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emphasize the industry-related factors such as suppliers, customers, competitors affecting the business of individual or group of businesses (Hans, 2018; Salwan & Gupta, 2018) Second, business environment is uncertainty or it is unpredictable or volatile due to dramatically changes in market structures, applied technologies, and competitiveness position between involved players (Hans, 2018; Salwan & Gupta, 2018; Kattookaran, 2015) Third, business environment reflects the inter-relation between factors (Kattookaran, 2015) For instance, when the consumers increase their friendly attitudes, it enforces the businesses to conduct anti-pollution measurements and actions Other example refers to the case when the government implements new import-export policies and they impact on the demand and the motivation of import and export activities of the business Business environment is relativity or its concept is different across the countries i.e capitalist environment in U.S is different to communist environment in China or Vietnam (Salwan & Gupta, 2018) This characteristic of business environment is considered as „differences‟ characteristics which was provided by Hans (2018) Previous researchers agreed that business environment is dynamic or it is changed over the times and this characteristic is associated with the uncertain characteristic (Hans, 2018; Salwan & Gupta, 2018; Kattookaran, 2015) Moreover, Salwan & Gupta (2018) provided additional characteristics of business environment, namely aggregative and contextual Aggregative characteristic emphasizes that business environment comprises different business environment factors as totality while contextual dictates that business environment is macro framework in which the businesses operate and do their businesses

In this dissertation, business environment is defined as the overall situation related

to socio-economic development of Vietnam It refers to the country‟s economic growth, key industries‟ development, the import and export performance, and quality of investment The clarification of the concept for business environment encompasses the way of analyzing in the fourth chapter

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2.1.2 Impact on economics

After the definitions and the characteristics of business environment are provided and explored, this section is developed with the objective of identifying possible impacts of business environment on economics According to Pondicherry University (2018), the companies obtain inputs from economic environment and in turn, economic environment receives the outputs which are generated by the companies Such relationship is simply described as a business framework in which the first stage is to collect and to purchase inputs before it goes to the second stage where the inputs are transformed to the outputs while the last stage is designed to supply the outputs to target customers (Wetherly & Otter, 2011) This process is heavily depended on economic factors According to Hans (2018), economic factors are divided into macro-economic factors (i.e unemployment rates, foreign currency exchange rates, consumer confidence, interest rates from central banks) and micro-economic factors (i.e market size and demand, supplier relationship, distribution channels, market competition)

The effect of economic environment is visualized in different circumstances For instance, when disposal income of people increases, the demands for products and services are increased, leading to the more production from the companies (Agarwal

& Saksena, 2005) There are numerous empirical evidences which were developed

by previous researchers in the objective of exploring the effect of business environment on economic performance and growth Ncube (2017) explored economic growth, entrepreneurship and business environment in Africa and this researcher identified that institutional factors (i.e corporate governance standards, corruption reduction, government effectiveness, consistent government‟s policies) reformed business environment in African countries that promoted economic performance measures (i.e GDP growth rate, unemployment rate, and poverty rates) Everett et al (2010) identified that the focus on environmental policies tacked the future risks to economic growth Xu (2010) concluded that business environment was strongly associated with stronger economic performance

2.1.3 Influences of policies on business environment

As briefly mentioned in previous section, the changes in government policies can impact on business environment In fact, nation‟s government plays significant roles

in setting business environment and it is considered as one of components that formulate a country‟s competitiveness (van den Bosch & de Man, 1994) According

to Bryan (2013), government policies had a significant effect on the economic growth and its impact on new business formation Before that, Christensen & Goedhuys (2004) confirmed the significant impact of national policy environments

on the formulation and the performance small and medium enterprises

In addition, empirical evidences were found in the boundary of governments‟ policies influencing on business environment Johannsen (2014) found that the uncertainty in both short-term and long-term fiscal policies caused large falls in production outputs, more economic depression, lower consumptions and investments Agarwal & Saksena (2005) affirmed that Indian government took some policies such as controlling key industries, reduction of import activities from private sectors, and conducting central planning and it led to steady changes in

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business environment of the country The role of government on business environment is vital in case of the country follows a socialist market economic system whether political consultation and multi-party cooperation are under the control of the communist party such as China (Fogel, 2010) A qualitative research was developed by Ogunro (2014) and it identified that poor business environment in Nigeria was explained by low synergies between different governmental agencies and insignificant empowerment for responsibilities in business investment In addition, Eniola & Entebang (2015) proposed a research model in which government policy was put into a direct relation with the performance of small and medium enterprises in Nigeria Pal (2018) dictated that government policies must be formulated in the way of fostering vocational training and education so that the workers are able to receive the right skills in the dynamic business environment Aisen & Veiga (2011) provided a quantitative research and they confirmed that the increases in political instability resulted lower economic growth Haidar (2012) investigated the association between economic growth and governmental regulatory reforms in 172 countries during the period of 2006-2010 and they acclaimed that positive linkage between these factors Dechezlepretre & Sato (2017) measured the impacts of environmental regulations of the government on competiveness of the companies They concluded that plant location, trade, productivity, and employment level of firms were affected negatively by environmental regulations in short-term and they found that environmental regulations had induce effect on the companies with clean technologies to be applied Gale & Samwick (2014) highlighted the importance of government policies on tax system as key influencers of economic growth

2.2 Facilitating government

2.2.1 Definition of facilitating government

In Vietnam, Facilitating government is a macro-management concept which has been provided by the Prime Minister, Nguyen Xuan Phuc since 2016 and its meaning refers to the commitment of Vietnamese government in renovating

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business environment of the country in the global integration context (The Saigon Times, 2017; Dan Tri, 2016) However, such definition is abstract and therefore, the researcher requests exploring the concept of facilitating government in the studies

of other researchers According to Zaban (2012), facilitating government or enabling government is a term to attain the roles of the government or the state of establishing social rights for people and ensuring the social welfares are existed and maintained throughout the creation of policies to maintain and to improve conditions, opportunities, and resources European Union (2015) provided a definition for facilitating government as the establishment of supportive legal and policies, the clear definition of institutional roles and their coordination, the strengthening of capacity, and the introduction of social dialogue in which the stakeholders are participated into the discussion with governmental authorities In fact, facilitating government was early introduced by Gilbert & Gilbert (1989) and this term was related to the welfare policies that had been developed and implemented by the governments in U.S and Great Britain

The definition of facilitating government was explored further by other researchers Grotenbreg & van Buuren (2017) considered facilitating government as a governance strategy This statement was also confirmed by Kisby (2010) and Vigoda (2002) and facilitating government was translated to the situation of the government considered facilitation as government strategy and it involved non-governmental actors to participate into the public service delivery The involvement

of non-governmental actors was determined as a modern states operation and development (Francesch-Huidobro, 2015; Roodbol-Mekkes & van den Brink, 2015) Grotenbreg & van Buuren (2016) referred facilitating government to the pubic-private partnerships (PPP) whether the governments encouraged private parties to join effort in applying innovative infrastructures Torfing & Triantafillou (2011) dictated that facilitating government was established with less dependency

on command and control as traditional statist governance tools but took into account interactive governance actions

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Adequate understanding of facilitating government is also achieved throughout its differences to other forms of governments, including open government, adaptive government, and responsive government Open government is formulated upon on the idea of individual has rights to access to governmental documents and policy making (Zaban, 2012) According to Lathrop & Ruma (2010), open government is sourced from the open source software theory and it attains the idea of individual is able to access information and documents related to the governments‟ orientation and operations and individual is able to play significant role in the government Adaptive government is often used in case of there are ecological problems or conflicts about natural resources (Brunner et al., 2005) In this context, adaptive government is established along with scientific knowledge in order to balance the interests of involved parties (Scholz & Stiftel, 2005) Responsive government refers

to the governmental reactions and responds towards the public opinions and issues (Binzer & Klemmemsen, 2005)

2.2.2 Characteristics of facilitating government

The characteristics of facilitating government has been explored by different researchers over the time According to Zaban (2012), facilitating government was achieved through the creation and the maintenance of four characteristics, including employment, privatization, social cohesion, and the reduction of public expenses Employment is considered as the governmental efforts to increase social participation of an individual, especially in labor market and it helps an individual

to increase income while maintaining unemployment rate at stable level (Carone & Salomaki, 2001) Privatization refers to a material transaction to reduce the ownership of the state in particular enterprises (Estrin & Pelletier, 2015) Social cohesion is defined as the connections between social groups and its establishment

is to share the values, issues, and to bring equality among social groups Schmitt, 2000) Decreasing public expenses is last core characteristics and desired outcome of facilitating government and it is obtainable throughout various actions such as privatization, social rights dependent on commitments, etc (Zaban, 2012)

(Berger-12

Grotenbreg & van Buuren (2017), however, recognized key characteristics of facilitating government throughout its frames In more detail, facilitating government frame consists of diagnostic, prognostic, and motivational Each frame has unique characteristics to formulate a successful facilitating government Diagnostic frame has two characteristics of identification the benefits from change and the identification of problems when external actors when they involve into facilitating government scheme Prognostic frame focuses on the development of actions which will be carried out external actors and the determination of facilitate roles of governmental actors Motivational frame attains the core benefits that external actors can take from facilitating government scheme This frame also consists the collaboration between governmental and non-governmental actors and what the facilitation that non-governmental actors should receive from the government

2.2.3 Factors affecting the construction of facilitating

government

In this section, key factors affecting the construction of facilitating government are explored Latham (2001) identified that facilitating government was obtained only when its key factors were maintained or developed well These factors were community-led solutions and delegating authority, social work and workplace initiatives, solutions to poor people groups, hierarchy in public government, the cooperation between government and communities, and the responsibility In more detail, Latham (2001) recommended that facilitating government was achieved only after the governments delivered community-led solutions to build social capital and social competences, continuous learning from social networks, the supportive policies to poor people to access creativity and achievement, flattening hierarchy in public government with a semi-autonomous networking model, the strengthening of cooperation between governmental authorities and communities, and the high responsibilities of governments

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2.3 Provincial competitiveness index (PCI)

2.3.1 Research methodology of PCI

Provincial competitiveness index (PCI) was firstly introduced in 2005 The objective of PCI is to provide a comprehensive indicator to measure the economic governance quality in establishing and maintaining good business environment for private business sector at provincial level (PCI Vietnam, 2017a) It is denoted that PCI was developed by the joint effort between the Vietnam Chamber of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID) VCCI is operating under the key mission of protecting and assisting Vietnamese companies in doing businesses throughout its presence in domestic and international relations events, fostering the cooperation between the companies, providing technological and technical assistance to the companies, and offering trade and investment supports (VCCI, 2019) USAID is determined as an independent federal agency that provide the assistance on economic and humanitarian development in the global context In Vietnam, USAID played prominent role in the successful entry to World Trade Organization (WTO) as well

as strengthening the government policies to improve economic governance and positive integration into global economy of the country (USAID, 2019)

Regarding the methodology, PCI is generated through three subsequent steps The first step is to collect the data from the survey with relevant enterprises in Vietnam The second step requires the calculation of 10 sub-indices throughout the 10 points

of scale These sub-indicates consist of the entry-cost for startup enterprises, the easiness to use land and security in the premises of enterprises, the transparency level of business environment where the enterprises are located, informal charges in the business environment, required times for bureaucratic process and inspections, policy biased towards the government, proactive and creative provincial leadership, business supports from the government authorities, labor trainings, and legal framework and dispute resolutions

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Proactive and

creative provincial

leadership

To measure the effectiveness of provincial leadership

in clearance the concern of the enterprises towards unclear national regulatory

9 Labor trainings

To measure the effort of provincial government in establishing vocational training and development of skills to match the demands of enterprises

The last step generates a weighted PCI score based on the mean of sub-indices and this score is ranged from 0 to 100 In order to generate PCI, there is a requirement

of sampling Currently, the sampling method is random in order to select the enterprises that will be participated into the survey In order to ensure the samples can reflect the population, stratification is used to mirror the population‟s characteristics throughout legal type, age of enterprises, and sectors

2.3.2 Result and impact

PCI is a set of indicators that are widely used in Vietnam to assess the advantages of administrative procedures at provincial governments such as: business registration procedures, land use, business licenses, and the level of government support for private enterprises operating in the provinces Due to being evaluated in an objective and fair way, PCI has been highly appreciated by local enterprises PCI assessment helps provincial governments to self-assess and create plans to promote the improvement of the investment environment and help businesses develop stably and sustainably PCI is a reflection of the government's governance capacity and is

an important driving force for reforming the provincial business environment PCI

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is also determined as a reflection of private businesses on the local business environment, a reliable reference channel, as one of the important bases when deciding to invest in particular province

It is perceived that PCI has been calculated and generated for 64 provinces of Vietnam since 2005 The recent update of PCI score was made in 2018 in which Quang Ninh and Dong Thap were two provinces with highest PCI scores at 70.36 and 70.19 and they were ranked as very good PCI tiers In addition, there were 7 provinces which were ranked as good PCI tiers, namely Long An (68.09), Ben Tre (67.67), Da Nang (67.65), Binh Duong (66.09), Quang Nam (65.85), Vinh Long (65.53), and Hanoi (65.40) PCI 2018 score data showed that there were 32 provinces with above average PCI tiers and 20 provinces were ranked at average PCI tiers Finally, there were two provinces with relative low PCI tiers, namely Lai Chau (58.33) and Dak Nong (58.16) Also, the PCI 2018 report confirmed the prominent role of training to the development of enterprises as Vietnamese enterprises must take into account the training activities to effectively manage their business operations as well as better managing their talent groups The report also recommended that the managers in Vietnamese enterprises are still being relied on government corruption as business tactics but its behavior will be soon over since deeper international integration

no room for alternatives In addition, the researcher would like to explore the correlation between PCI and other indicators which reflect the effectiveness and the efficiency of government‟s policies in Vietnam It is denoted the correlation between variables demands for quantification or quantitative data analysis and it is part of conclusive research design

3.2 Research approach

The researcher decides developing the dissertation with the application of deductive approach, applies existing theories related to business environment and facilitating governments and uses PCI data to understand how the usefulness of this indicator to improve business environment in Vietnam It is recapped that PCI is developed by the joint effort between VCCI and USAID since 2005 or the researchers do not create anything news in term of evaluating provincial competitiveness level The researcher simply utilizes the data from PCI website and performs respective data analysis to confirm or to disconfirm the role of PCI

3.3 Research strategy

In this study, archival research is utilized as research strategy This research strategy

is defined as the action of collecting historical documents to develop adequate understandings towards social phenomenon (Saunders et al., 2016

Beside, case study refers to the action of developing studies within a business case and it demands clear research context The researcher will focus on particular case study of provinces which obtained good and bad PCI score in 2018 Case studies are

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Quang Ninh, Dong Thap, Long An, Da Nang, and Ben Tre which are considered as provinces with high PCI score Case studies also include Lai Chau and Dak Nong which are determined as provinces with low PCI score In each province, the research utilizes the Satisfaction Index of Public Administrative Services (SIPAS) and Public Administration Performance Index (PAR) which were calculated and published by Vietnam Ministry of Home Affairs in order to verify the result of PCI score

3.4 Research method

Quantitative and qualitative are two research methods which are being used intensively in academic studies Quantitative method refers to the collection of appropriate data and it is associated with deductive approach under objectivist viewpoint (Bryman & Bell, 2015) The data which is used for quantitative method is structured and it is often collected from close-ended questionnaire (Saunders et al., 2016) Qualitative method, however, is applied when the researchers target collecting unstructured data to explore underlying information inside social phenomenon (Denzin & Lincoln, 2018) Key difference between quantitative and qualitative method is highlighted in the context of quantitative method generates findings from statistics or mathematical quantification while qualitative method focuses on the knowledge development through personal judgment or self-evaluation towards social phenomenon (Biggam, 2008; Bogdan & Biklen, 1992)

In this dissertation, quantitative method is utilized in order to analyze PCI‟s annual data This research method helps the researcher to identify the effectiveness of PCI through the change in the result of each province, including both improvement and degradation

In addition, quantitative method is also adopted to check how the correlation between PCI, some key economic development indicators of the country and Doing Business Score (DBS) It is denoted that DBI is an index which is developed by the World Bank in term of evaluating how easy to do business in every country At

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first, the methodology of DBS index will be explored This index is perceived as the combined of indices to measure how ease of doing business in particular country Herein, each country receives a score value to reflect overall ease of doing business and the country‟s index will be recalculated every year In term of structure, DBS index consists of 10 sub-indices, including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency Similar to the methodology used in PCI, DBS index is generated from the data that is collected from administering questionnaires

to more than 13,000 local experts in 26 economies Moreover, the World Bank also sends its team to visit each economy to verify the data and respondents It is highlighted that DBS index generates a score with value ranged from 0 to 100 Given to this methodology used in DBS index, it is recognized that this index is only generated from Vietnam and there is no score calculated for each provinces and cities of the country According to World Bank (2019), there are two key limitations related to the use of DBS index The first limitation refers to the data is only collected in largest business cities of a country and therefore the result may not represent for overall economic structures and business environment of a country Second limitation is highlighted as the choice of company type as the sample selection is limited for only limited liability enterprises World Bank (2019) also highlighted some other limitations of DBS index such as the results may not cover all business aspects, the data quality is heavily depended on the quality of the respondents or the respondents‟ perception towards the questionnaire‟s items, and the assumption of a business has full information on what is required and does not waste time when completing procedures

3.5 Data collection

There are two data which are often used and collected in academic studies, namely primary data and secondary data Primary data is defined as information collected from questionnaires or interviews with appropriate respondents who are associated

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with studied social phenomenon (Ajayi, 2017; Srivastava & Rego, 2016) Secondary data refers to existing information which is collected from books, journals, and online database (Perez-Sindin Lopez, 2017)

Since archival research strategy is selected, the researcher aims collecting secondary data Primary data is not collected in the dissertation because of there are no survey

or interview to be made The collection of secondary data brings numerous benefits The first benefit of collecting secondary data is that it does not take time to collect and the cost of acquiring secondary data is free Primary data, however, demands much time to develop the questionnaires and to collect this data from appropriate respondents In the dissertation, the researcher collects PCI as secondary data from the website pcivietnam.org It is denoted that PCI data is collected from 2005 to

2018 Secondary data is also collected from annual reports of World Bank with high attention to Doing Business Index (DBS)

3.6 Data analysis technique

Correlation analysis is utilized as quantitative data analysis technique and it helps the researcher to measure the correlation between selected variables According to Gogtay & Deshpande (2017), correlation analysis receives the value from -1 to 1 and absolute value closed to 1 indicates for strong relationship between variables In more detail, Siverland (2014) provided the benchmark for Pearson correlation and if the absolute correlation value is higher than 0.5, the relationship between variables

is strong; if the absolute correlation value is between 0.4 and 0.5, the relationship between variable is moderate; and if the absolute correlation value is between 0.3 and 0.4, the relationship between variable is low

Other data analysis technique which is applied in this study is descriptive statistics According to Urdan (2017), descriptive statistics helps the researcher to explain the data pattern of a variable throughout the mean value On the other hand, mean value

is determined as the central tendency of the variables Moreover, the researcher also explores the trend of the variable throughout the time By applying descriptive

21 statistics, the researcher will capture how the movement of PCI score of each province throughout the year and between two periods of before and after 2016

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CHAPTER 4 FINDING AND IMPLICATION

4.1 The impacts of Vietnam business environment

on the economy

As mentioned in the second chapter, the concept of facilitating government was highlighted by Vietnam‟s Prime Minister, Nguyen Xuan Phuc as the government‟s efforts in renovating the policies to improve business environment of Vietnam in the way of supporting the enterprises and social welfare The researcher attempts collecting data from international indicators on Vietnam Business environment in two periods as before 2016 and after 2016 By comparing the progress of business environment in two periods, it can help the researcher to identify how the effectiveness of policy in line with facilitating government campaign

The data source which is used in this section is collected from World Bank (2019) and CEIC (2019) It is denoted that World Bank (2019) has coordinated with General Statistics Office of Vietnam – GSO (2019) and other governmental bodies

to collect the data of Vietnam‟s socio-economic development throughout the years First, Vietnam business environment is explored through gross domestic product (GDP) growth, GDP per capita growth, and inflation rate

Table 4.1: Vietnam‟s GDP growth, GDP per capita growth, and inflation

Source: World Bank (2019), GSO (2019)

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Table above demonstrated a clear difference between two periods as before 2016 and after 2016 In the period of 2006-2015, average GDP growth rate was 5.02% while average GDP per capita was US$1,453 and average GDP per capita growth rate was 6.12% In the period of 2016-2018, average GDP growth rate was 5.41% while average GDP per capita was US$2,367 and average GDP per capita growth rate was 6.70% Besides, inflation rate was sharply decreased during the period of 2016-2018 and it was averaged at 3.43% compared to averaged value of 9.47% in the period of 2006-2015

Second, GDP is generated mainly from the sector of agriculture, forestry, and fishery, the sector of industry and construction, and the service sector

Table 4.2: The contribution of sectors into GDP

Agriculture, forestry, and fishery, % 18.68% 15.41%

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Industrial Production (IIP) GSO (2019) confirmed that average IIP of Vietnam was decreased from 112.5 in 2012-2015 was stood at 112.5 to 109.33 in 2016-2018 Third, the researcher explores how the import and export performance of Vietnam throughout these two periods The researcher proposes using imports/exports of goods and services as % of GDP and imports/exports of goods and services as annual growth rate

Table 4.3: Vietnam‟s GDP growth and GDP per capita growth

Imports of goods & services (% of GDP) 80.46 96.25

Imports of goods & services (annual % growth) 11.68 14.76

Exports of goods & services (% of GDP) 76.24 99.04

Exports of goods & services (annual % growth) 10.88 14.80

Source: World Bank (2019), GSO (2019) Table above indicated that the shares of imports of goods and services to GDP was increased from 80.46% in 2006-2015 to 96.25% in 2016-2018 The researcher also captures an increases in annual growth rate in imports of goods and services, from 11.68% to 14.76% Similar trend was captured for exports of goods and services whether % of GDP of exports of goods and services was increased from 76.24% to 99.04% while annual growth rate in exports of goods and services was jumped from 10.88% to 14.80% It is identified that import activities have higher annual growth rate compared to export activities

Fourth, business operation is put into the evaluation The researcher collects the data related to number of new registered enterprises, number of re-operated enterprises, number of temporarily ceased enterprises, successful dissolution rate,

Number of new registered enterprises 82,184 122,745

Number of temporarily ceased enterprises 66,650 70,624

Total new registered capital, VND trillion 477 1,222

Average registered capital, VND billion 5.8 9.9

Source: GSO (2019) Table above showed that the number of new registered enterprises was increased in the period of 2016-2018 compared to the period of 2013-2015 and it is translated to the average of 82,184 new registered enterprises in the first period and 122,745 new registered enterprises in the second period Similarly, the number of re-operated enterprises was increased from 17,083 in 2103-2015 to 29,049 in 2016-2018 Total new registered capital and average registered capital were both increased significantly during the period of 2016-2018 in comparison with the period of 2013-

2015 However, it was captured that the number of temporarily ceased enterprises was increased dramatically, from 66,650 to 70,624 between the two periods Table above dictated that successful dissolution rate for issued enterprises was increased between two periods, from 14.48% to 19.13%

Fifth, investment is analyzed through overall investment as percentage of GDP, incremental capital output ratio (ICOR), and foreign direct investment (FDI) inflow

to the country

Registered capital of FDI projects, US$m 24,841 27,388

Implemented capital of FDI projects, US$m 10,418 17,467

Source: GSO (2019) Table above illustrated that the share of investment to GDP was decreased from 35.32% in the period of 2006-2015 to 33.27% in the period of 2016-2018 ICOR is the economic indicator that refers to the reciprocal of the marginal product of capital The higher the ICOR, the lower the productivity of capital or the marginal efficiency of capital In Vietnam, ICOR was maintained between the two periods at 6.165 in 2006-2015 and 6.167 in 2016-2018 It means that there is no dramatically drop in the productivity of capital of the country In addition, number of project was increased nearly double to 2,800 FDI projects in the period of 2016-2018 Registered capital of FDI projects in the period of 2016-2015 and 2016-2018 was US$ 24,841 million and US$ 27,388 million, respectively The efficiency of FDI project was also improved since the percentage of implemented FDI capital over registered FDI capital increased from 42% in the first period to 64% in the second period

4.2 PCI as a business environmental measurement

In this section, the researcher conducts the correlation analysis with two main objectives The first one is to evaluate the significant of PCI index in reflecting the real situation of business environment in Vietnam by using with some key economic development indicators of the country as basement The second objective