Can the Vietnamese Provincial Competitiveness Index Attract Enterprises for Locals?

Abstract

The Vietnamese provincial competitiveness index (PCI) is a tool designed to assess the economic governance quality of provincial authorities in creating a favorable business environment for enterprises. This study employs descriptive statistical analysis and structural equation modeling to examine the effectiveness of PCI in attracting enterprises. We utilize two official data sources in Vietnam, namely, the PCI and proxies of enterprise attraction, including the number of enterprises, employees, and capital value of enterprises, covering the period from 2013 to 2020. Our results show a strong correlation between the PCI and its subindices and a positive impact of the PCI on all proxies of enterprise attraction. Specifically, the effect of the PCI on the number of enterprises is more potent than on the number of employees and the capital value of enterprises. In addition, our study finds that the effect of the PCI on enterprise attraction in less developed provinces is more vital than in developed provinces.