Vietnam's economic governance sharply declines in 2012: Analysis

Local economic governance across Vietnam in 2012 sharply declined, leading to calls for local authorities to speed up reform, according to analysis provided by the 2012 provincial competitive index (PCI).

Results of the survey jointly released on Thursday by the Vietnam Chamber of Commerce and Industry (VCCI) and the U.S. Agency for International Development (USAID) showed that the median score decreased to 56.2 in 2012 from 59.15 in the previous year.

Both domestic and foreign firms were far more negative about their prospects than in previous years, with only 33 percent of respondents saying they wished to expand business, compared to 76 percent in 2006.

According to VCCI, business performance was reported at an all- time low in 2012, with only 6.5 percent of respondents saying they had increased operations, and less than 60 percent claiming to be profitable. The relevant figures in 2007 were 27 percent and 82 percent respectively.

Alarmingly, the report said 42 percent of firms admitted to pay commission to government officials to ensure they won a contract, up 23 percent over the figure recorded in 2011.

Business confidence and performance were at their lowest levels since the survey first began eight years ago, with only 33 percent of foreign-invested firms expecting to expand business over the next two years, and 48 percent of foreign investors considered macroeconomic instability as one of the top three risks they face in Vietnam.

Surveys for the 2012 PCI was conducted by VCCI and USAID's Vietnam Competitiveness Initiative (USAID/VNCI) with over 8,000 domestic firms and 1,540 foreign-invested enterprises nationwide.

Southern Dong Thap province ranked top the list, while northern mountainous Dien Bien, Tuyen Quang and Cao Bang provinces at the bottom.