Provincial Competitiveness Index 2024
The 2024 Provincial Competitiveness Index (“PCI”) has ranked the northern coastal province of Hai Phong as the most competitive region in Vietnam, up two places from third in 2022 and 2023. The Vietnam Chamber of Commerce and Industry (“VCCI”), which publishes the PCI, awarded Hai Phong with a total score of 78.84 points at the launch in Hanoi earlier this month.
Despite receiving a higher score than in 2023, Quang Ninh province dropped from first to second place in 2024 with 73.20 points. Long An (72.64) finished third, just ahead of Bac Giang (71.24) in fourth. Ba Ria-Vung Tau rounded out the top five, with 71.17 points out of a possible 100.
First published in 2005 and now in its 20th edition, the PCI is an annual ranking of the business environments of 63 provinces and cities nationwide. The PCI league table is based on ten metrics including the cost of starting a business, ease of access to land, transparency in the business environment, how long it takes to complete administrative procedures, the problem-solving skills of provincial leaders, and the procedures for fair and effective dispute resolution. For the first time, in 2024, the PCI also measures the environmental governance and green investment performance of provinces.
The latest PCI was based on feedback from more than 11,000 companies nationwide, including 1,500 foreign-invested enterprises, providing a detailed picture of Vietnam’s trade and investment environment. Following recent administrative reforms, which will see mergers between some provinces and cities as outlined in Resolution No. 60/NQ-TW, this will also be the last PCI in the current configuration.
Trends in the 2024 PCI
Over the last two decades, the PCI has highlighted a continuous improvement in the ease of doing business in Vietnam. The median PCI score reached 67.67 points in 2024, up by 1.6 points compared to 2023 and continuing a streak of eight uninterrupted national average scores of over 60 points.
Looking at individual metrics, more companies are confident in education (68%) and vocational training (63%) delivered in provinces. Meanwhile, over half of companies (54%) report being satisfied that the local workforce meets their needs. This represents a seven point rise compared to 2023.
Of particular interest to foreign-invested companies, the PCI highlights a considerable reduction in the time taken to enter the Vietnamese market. The first PCI recorded the average time taken for these companies to register as about one month. In 2024, this had fallen to around a week. However, fewer than half of respondents were satisfied with conditional business licensing procedures, highlighting the need for continued reform in this area.
Likewise, while transparency has increased to record levels, with access to planning (3.11) and legal documents (3.23) reaching their highest-ever scores, the flexibility of local administrations has declined. Just three-quarters of companies reported that provincial authorities were flexible within the legal framework to solve problems facing business, down from 82% in 2023. At the same time, companies report spending more time understanding and implementing legal regulations, with almost a quarter (24%) of businesses spending around 10% of their time doing so. This is a four point increase compared to 2023.
Challenges remain but optimism returns
The 2024 PCI asked enterprises for their biggest challenges when doing business in Vietnam. The most common was access to finance or credit from banks (54%), followed by sourcing customers (49%) and a general market downturn (38%). Rounding out the top-five were finding business partners (20%) and recruitment (20%).
Despite these challenges, companies remain optimistic about their future investment plans and commercial activities. One third (33%) of enterprises plan to expand their operations in the next two years, up from just over a quarter (27%) in 2023. This figure is even higher for foreign-invested companies (37%), up from 26% in 2023.
Foreign investment survey
The PCI also includes a section dedicated to foreign investment. According to data from the Ministry of Planning and Investment (“MPI”), the PCI reports that Vietnam attracted USD 38.23 billion in 2024, maintaining levels similar to those recorded in 2023.
Of this, there was a 7.6% decline in new capital contributions but a 50.4% rise in investment into existing projects. South Korea (29.9%), Japan (22.6%), and China (13.2%) made up the most popular countries of origin for foreign-invested enterprises in 2024, mirroring similar trends in previous PCIs.
Similar to domestic companies, foreign enterprises are also more optimistic about the Vietnamese business environment, with 40% planning to increase their investment in 2024, up from 30.3% in 2023. Likewise, more than a third (37%) of foreign-invested companies planned to expand their operations in 2024, up from about a quarter (26%) in 2023, with stronger sentiment among exporting (43.6%) than non-exporting (35.5%) foreign firms. However, this figure remains below the pre-pandemic period, when it averaged around 45%, and also came before US President Trump promised to impose high tariffs on countries across Southeast Asia.
There is also some interesting variation in the proportion of foreign-invested enterprises planning to expand their operations across provinces. Almost half (47.1%) of foreign companies in Bac Giang, for instance, plan to grow their footprint. Likewise, international enterprises in Da Nang (42.9), Hai Phong (42.6%), and Ho Chi Minh City (41.9%) also recorded above-average positive sentiment in this area. On the other hand, foreign companies in provinces such as Dong Nai (17.9%), Long An (17.2%), and Binh Phuoc (11.8%) are less likely to expand their operations.
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