Sub-National PPD in Laos and Vietnam: Enterprise Surveys and Provincial Competitiveness Indices as Catalysts for Dialogue Le Duy Binh & Daniel Taras, GTZ DCED Workshop, Phnom Penh, 11 March 2008

Vietnam

What is Provincial Competitiveness Index? A survey on enterprise perception of local government – first time ever governments are ranked. First idea and effort by TAF, then implemented successfully under USAID funded VNCI. Ranking all 63 provinces in terms of: Entry cost Land access and security of land tenure Transparency and access to information Time costs and regulatory compliance Informal charges SOE bias and competition environment Proactivity of provincial leadership Private sector development services Labor and training Legal institutions

Why GTZ chose PCI? GTZ operate in 4 province in 4 regions of VN PCI is such a successful tool in Vietnam. Everybody know about it. Awareness is done. Only support to implementation is lacking. Neutrality is considered an advantage of PCI Decentralization process is on-going. Local government is under pressure to show progress but have little clue on how. And of course, as part of donor cooperation effort under SME Partnership Group.

What we did? USAID often launches PCI nationwide often at year end with unprecedented information campaign. GTZ then consult with local government on PCI, gauging their interest to take actions (only in selected provinces). Despite the overall warm welcome, some are sceptical.

What we did? (cont’d) A PPD was used as an instrument: Indepth analysis of province data – going into the details Interactive dialogue events organized – difficult at the beginning Selection of sub-index to be improved – quick results was key The whole process was not systemic at the beginning Useful to build concensus, ownership, adaption to local context Useful more monitoring

What we did? (cont’d) Sub-indices with quick gain potential: market entry, business information transparency, proactivity of leaders and time cost. Talk (PPD) must be accompanied with actions. So our supports are on concrete actions: Development of e-gov product: BusinessPortal OSS for time costs with administrative procedures

What we did? (cont’d) Implementation by provincial governments, private enterprise, consultant, business association and GTZ Facilitation of the PPD process by GTZ but more by local business association recently. Monitoring, sharing of experience and then PR for the provinces which had improvement in some sub-indices were important part of the work.

What we achieved? PCI improved in most of the provinces between 2005 and 2008, except for one. Sub-indices in business entry, market information transparency and time costs are improved. Local capacity on PPD significantly improved. Private sector participation was satisfactory

What we achieved? (cont’d) However: Touchy or complicated issues e.g. informal charges, accessiblity to land was not addressed. Achievement is not consistent across the 4 provinces Replication of some success story remains a challenge The link between provincial and national PPD is still missing. Top reformer provinces in PCI are interestingly those without any donor project support.

PCI Ranking in GTZ-covered Provinces Provincial Competitiveness Index PCI (Ranking 2008/2005): An Giang (Rank 9./34.), Quang Nam (14/16). Dak Lak (33/35). Hung Yen has degraded between 2005 and 2008 (20/15).

Sub-Indices Entry Costs Trans-parency Time Costs Proactivity 2005 2008   Entry Costs Trans-parency Time Costs Proactivity 2005 2008 An Giang 6.36 8.99 4.1 6.75 4.64 5.51 5.61 7.14 Hung Yen 7.73 7.47 5.34 6.68 6.28 5.98 6.01 6.61 Quang Nam 6.23 4.65 5.23 7.01 Dak Lak* 6.48 7.58 4.99 6.34 4.83 4.63 5.87

Laos

PPPD – Key Facts Currently in 4 pilot provinces Key stakeholders: Lao National Chamber of Commerce & Industry (LNCCI), provincial chambers, BAs Ministry of Planning and Investment (MPI) & DPIs Governor’s Office, line departments Supported by advisors at MPI and SMEPDO, integrated experts at LNCCI, DPI; local experts deployed to provinces Cooperation with SNV in two provinces

PPPD – A Brief History “Introduction Phase” (2005 – 2007) Started in 2005, strong support by Permanent Secretary & Vice Minister, MPI Issues-raising process supported Assistance with action plans PPPD sessions held BUT, not much change Over-optimism regarding capacity of private sector (degree of self-organisation, problem solving, voice) and support by public sector? Lack of ownership, capacity?

PPPD – A Brief History (cont’d) “Institutionalisation Phase” (2007 – 2009?) Central PPPD Taskforce LNCCI MPI (, SMEPDO, MoE) GTZ Build-up of support structure within LNCCI for PPPD Step-by-step PPPD Training Development of PPPD Guideline (& public relations) Structure (see next page) PPPD “Roadshow” Governor’s Decree Differences across provinces (capacity, reform-mindedness)

Next steps Via the new structure Monitor, evaluate identify, raise issues jointly develop action plans solve issues forward issues to LBF Monitor, evaluate build stronger capacity in secretariat (centre & province) Strengthen link with LBF Joint-secretariat at central level? MPI support?

“I don’t know what I don’t know” Unawareness of what makes up a good business enabling environment widespread External stimulus / analytical input important for dialogue No PCI or similar; data availability generally poor, especially at provincial level Attempts at marketing comprehensive competitiveness indices unsuccessful to date (but demand from individual provinces)

HRDME Enterprise Surveys Enterprise Baseline Survey (EBS2005), subsequent Enterprise Surveys (every 2 years) Internal & external constraints of enterprises in GTZ-HRDME pilot provinces (sample) By province, industry, enterprise size, ownership type…

HRDME Enterprise Surveys (cont’d) Multiple purposes: monitor progress of GTZ-HRDME programme goals and objectives against 2005 baseline, and of the business environment in general valuable primary data on economic landscape in Laos in absence of alternative information (e.g. on SMEs, enterprise performance etc.) analytical basis for policy-making (provincial/national)

Catalyst for Dialogue? In absence of PCI-type provincial indices GTZ-HRDME selectively released comparative data on the occasion of PPPD training events or high-level presentations in selected provinces enterprise numbers: tax register vs. enterprise register juxtaposed provincial performance in terms of duration of registration, “tax paid according to accounting rules” vs. “lump sum” etc. publications on relationship between GDP growth, investments undertaken, one-stop shop implementation

Arbitrary Taxation Entrepreneurs are willing to pay taxes, but need certainty according to accounting rules

Lessons Learned

Lessons Learned Similar political structure, similar transformation process, but (sub-national) PPD still requires different approach Creating demand for reform does have positive impact and is very useful catalyst for reform, also within sub-national PPD, but level of demands for reform differ, requiring different actions Capacity to comprehend policy implications, role of PPD PPD provides good opportunity for donor cooperation Economic Governance Index for Laos?! How?