Local Economic Governance and the Development of the Business Sector in Vietnam

Abstract

Local economic governance plays an important role in the development of the business sector. To assess its impact on business sector growth in Vietnam, this empirical study is conducted at the local level with all 63 provinces nationwide in the period from 2006 to 2014. The Provincial Competitiveness Index (PCI) is used as a measurement for local economic governance. The finding reveals that overall the PCI has a positive effect on growth in the number of enterprises and output generated in the business sector. At the sub-index level, 5 indicators show positive effects with labor training having the largest impact, followed by time costs of regulatory compliance, informal charges, transparency and finally business support service. Land access and security of tenure and proactivity of the provincial leadership unexpectedly show negative effects while the other 2 indicators, including entry cost for new firms and legal institutions, have no significant impact on business sector growth.

Keywords

Local economic governance, Provincial Competitiveness Index, business sector growth

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