Given Hanoi’s position as Vietnam’s economic hub with the second highest number of enterprises nationwide, the capital city’s ninth ranking in Vietnam’s 2019 provincial competitiveness index (PCI) report with score of 68.8, an increase of 3.40 points from the previous year, is significant.

Top 10 business-friendly localities. Source: PCI 2019.

The report, jointly launched by the Vietnam Chamber of Commerce and Industry (VCCI) and the US Agency for International Development (USAID), has been produced annually since 2005 to assess the ease of doing business, economic governance, and administrative reform efforts by the provincial and city governments in Vietnam in order to promote the development of the private sector. 

Hanoi's weighted PCI over the last 5 years. Source: PCI 2019.

According to the VCCI, as all provinces/cities are pushing hard to stay competitive in the eyes of the business community, the average PCI score in 2019 of 65.13 was the highest since 2005.

While Ho Chi Minh City, despite achieving a higher score than in 2018, has been upstaged by Hai Phong which positioned itself in the 10th place, Hanoi with over 285,000 enterprises has put in strong efforts to keep its place in the top 10.

Hanoi's 10 PCI subindices. Source: PCI 2019.

Among the 10 PCI sub-indices, Hanoi has the highest score in Entry Costs, which evaluates entry costs for business startups, at 7.98 points out of 10, followed by labor quality to meet firm needs and low time requirements for bureaucratic procedures and inspections.

In 2019, Hanoi had focused on reducing informal charges, creating a fair business environment and improving provincial leadership in solving problems for enterprises.

Amid the Covid-19 crisis, Hanoi considered improvements in the business environment a key solution to boost socio-economic growth. In early April, the municipal People’s Committee issued the action plan No.83 detailing measures to improve the  competitiveness and create favorable environment for the business community.

Following the plan, Hanoi’s leaders requested units and departments to continue simplifying administrative procedures and maintain frequent contact with enterprises for timely support.

The result is reflected in the rate of online business registration which stands at 100%; over 98% of enterprises declaring and paying taxes online; and 100% of tax refund claims processed on time.

Hanoi also targets 100% of administrative procedures in the city to be provided online at advanced stages of 3 and 4, of which at least 30% of the procedures to be handled at stages 3 and 4.

In the first four months of 2020, Hanoi recorded 7,468 newly established enterprises with a combined registered capital of VND118 trillion (US$5.03 billion), up 46.5% in capital year-on-year.

VCCI Chairman Vu Tien Loc said such figure remained in stark contrast with a reduction of 17.9% in the average registered capital nationwide, showcasing huge potential for business startups in Hanoi and its strong attraction to investors.

Loc expected Hanoi to build on this momentum, which is one of the key priorities to boost economic growth during the pandemic.

Needless to say, a huge amount of work remains to be done for Hanoi to meet the actual needs of enterprises, while it is necessary for the city to accelerate its reform pace to gain a higher ranking in the PCI list.