Low Investment Attraction Results Not Commensurate With Potential

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Enterprises in the provinces of the Northern Midlands and Mountains all complain about the poor sense of discipline of workers, who often violate company regulations, freely take time off work, especially on occasions such as family anniversaries, weddings, engagements, and after receiving their salary, workers can take a few days off, even without asking for permission. In some cases, while working, they invite each other to drink alcohol, then get drunk and quit their jobs. There are workers who quit their jobs after receiving their salaries, and when they run out of money, they come back to ask to go back to work. In addition, the awareness of complying with labor regulations during working hours is not high, and they often talk privately during working hours, leading to a high rate of workers having work accidents.

3.3.2.1.4. Low quality of public service, cumbersome administrative procedures

In 2010, the provinces held a review of 10 years of implementing the overall program of state administrative reform in the period 2001-2010, through which many achievements were evaluated. However, there were still limitations such as administrative procedures in some areas being cumbersome, overlapping, and difficult to implement. The one-stop shop and inter-connected one-stop shop mechanisms have been implemented in most agencies, but they are still heavily formalistic, leading to inefficiency and not promoting the nature of the one-stop shop mechanism. In 2010, implementing Project 30 of the Prime Minister on simplifying administrative procedures, provinces and cities across the country reviewed and published a set of administrative procedures at all levels, however, the number of administrative procedures was not consistent among provinces. Table 3.19 shows that Bac Giang province counted 1,684 procedures, while Son La province only had 818 procedures.

Table 3.19. Number of administrative procedures of provinces in 2010

STT

Province name	Number of administrative procedures
1	Peace	1.125
2	Lao Cai	1,031
3	Son La	818
4	Bac Giang	1,684

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Source: Provincial People's Committees - 2010

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State management capacity has revealed weaknesses, the first reason being limited training level. The average university training level of civil servants in the provinces of the Central Highlands is only 60-70%, so the proportion of civil servants without university degrees is about 30%. In particular, the proportion of commune-level civil servants with university degrees is very low and over 50% of commune-level cadres have not been trained. According to 2010 data, only 9.5% of commune-level civil servants in Hoa Binh province have university degrees, this rate in Lao Cai province is 5.8% and 4.56% in Son La province according to data in Table 3.20 and Table 3.21.

Table 3.20. Training level of civil servants in 2010

Province name

CC level
Number of CCs	University degree	Ratio%
Peace	2,318	1,686	72.73
Lao Cai	2,421	1,461	60.34
Son La	2,245	1,618	72.07
Bac Giang	2.121	1,548	73
Binh Duong	2,331	2,144	92
Vinh Phuc	2.241	1,994	89

Source: Provincial Department of Home Affairs - 2010

Table 3.21. Qualifications of commune-level civil servants in provinces in 2010

Province name

University degree
Quantity	Quantity	Ratio%
Peace	4,067	367	9.5
Lao Cai	4.231	155	5.8
Son La	4,099	187	4.56
Bac Giang	3,989	619	11.7
Binh Duong	3,898	1,286	33
Vinh Phuc	3,967	1,031	26

Source: Provincial Department of Home Affairs - 2010

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The foreign language proficiency and legal knowledge of civil servants are still limited and do not meet the requirements of the job. In addition, corruption, bureaucratic working style, lack of responsibility, disregard for professional ethics, and indifferent attitudes of a number of civil servants in many public agencies still exist. This has greatly affected the investment environment in the provinces of the Northern Midlands and Mountains.

The implementation of the coordination mechanism in handling work is ineffective. When there is work that requires coordination through written consultation, however, many departments and branches do not participate in responding to documents, or do not voluntarily respond to documents, but often the presiding agency or the project investor has to urge, even have to meet directly with the leaders and staff assigned to handle. Therefore, it has wasted a lot of time of the enterprise, increased the cost of project implementation, leading to the increase of so-called unofficial costs. This is also the cause of corruption among some cadres and civil servants.

3.3.2.1.5. Poor infrastructure

Compared to other regions in the country, the Northern midland and mountainous region has the slowest development of transport infrastructure. The system of routes from Hanoi to Lao Cai, route 6 to Hoa Binh, especially the routes connecting Son La, Dien Bien, Lai Chau are currently being upgraded, crossing many rivers and streams, making travel difficult. The system of intra-provincial routes is very narrow and mainly low-grade roads, with few concrete roads. Small rural routes are mainly 3-4 meters wide, with poor road quality.

The power grid system has degraded, investment is not synchronized, there is no separate power line for production but often shared power lines for daily life, so it cannot prioritize power supply for production, when power is cut for consumption, it will lead to power cut for production and business of enterprises. Frequent power outages without warning have also greatly affected the process.

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production and business of enterprises, some products due to power outage during production have damaged the whole batch of products, so the cost of products increased a lot due to power outage. Besides, power outage is not announced in advance so it is not possible to proactively notify workers to take time off, enterprises still have to pay workers during the power outage days. This greatly affects the investment environment, especially the continuous power outage that occurred in 2010 greatly affected the investment environment.

Water supply and drainage infrastructure is very limited, almost only the water supply system in central urban areas is guaranteed, in industrial zones there is still no tap water supply system for enterprises, but mainly using water from drilled wells, so the supply is unstable and insufficient.

The telecommunications and internet systems are unstable, and many places cannot connect to telephone lines. Mobile phone signals are weak, unstable, and often congested, thus greatly affecting the quality of phone calls.

The system of medical examination and treatment facilities is still backward, old equipment is not qualified to examine and treat serious diseases, and low service quality makes businesses not confident to invest.

Investment in infrastructure of industrial parks is slow, unsynchronized, and the scale of industrial parks is small, so there is not much clean land to attract investors.

Planning work lacks uniformity and regional connectivity. Planning work for industrial zones and clusters to create clean land funds to attract investment is slow to be implemented in the provinces. Most provinces do not have clean land funds to attract investment, or if they do, it is very little. The quality of planning work is still low, updating and adjusting planning is not timely, feasibility is not high, causing difficulties in management and operation and research to find investment locations for investors... In planning work, there is a lack of coordination and connectivity between

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regions and provinces leading to many projects lacking raw materials, factories not having enough capacity, low investment efficiency. Due to the lack of connection, every province has tea production and processing factories, cement production, many brick factories, every province wants to have a hydroelectric plant. For example, investing in 3 hydroelectric plants Hoa Binh, Son La, Lai Chau on the same Da River is ineffective, because since Son La hydroelectric plant came into operation, the generating capacity of Hoa Binh hydroelectric plant has decreased a lot and is always in a state of not running at full capacity.

From the perspective of business opinions through survey forms, infrastructure is the criterion that makes investors least satisfied in the surveyed provinces, with 56% of investors being dissatisfied with the quality of infrastructure. Especially in terms of transport infrastructure, especially electricity, it is not favorable for production and business.

3.3.2.1.6. Investment attraction policy is not attractive

The provinces of the Central Highlands do not have really attractive policies to attract investors, especially for large investment projects. Currently, the provinces mainly apply the policy framework issued by the Central Government, so it is not attractive to investors, because the provinces of the Central Highlands have very poor technical infrastructure, inconvenient transportation, low quality human resources, so if only applying the policy framework issued by the Central Government, it is difficult to attract investment. Meanwhile, when choosing an investment location, the most important issue for investors is to consider the investment cost and investment efficiency. The issuance of legal documents related to investment, construction, and land is still lacking and not synchronous, so the implementation of investment procedures is still difficult; there are no state regulations to check and monitor the financial capacity of investors.

3.3.2.1.7. Investment project care is not regular

The new TDMNPB provinces are mainly interested in investment promotion.

but have not really paid attention to taking care of projects after being granted investment certificates such as procedures on fire prevention, environmental registration, construction permits, etc. Therefore, many projects have to spend a lot of time to carry out these procedures, leading to very slow implementation progress. Most projects encounter difficulties and obstacles in compensation and site clearance. Land policies are still inadequate, there is no plan to thoroughly solve employment for workers. The construction of infrastructure in resettlement areas is slow, people demand higher land compensation prices than the approved compensation plan and the unit prices are still unreasonable between neighboring areas, there is a lack of transparency and democracy in the process of developing compensation plans. Mass mobilization work is still limited, not making people informed, people understand, people demand too much or demand unjust compensation due to lack of understanding, leading to prolonged complaints. Limited funding, difficulties in resolving investment incentives for businesses, supporting investment projects, supporting investment in infrastructure, electricity and water systems, and telecommunications. These difficulties have affected the progress of project implementation and the investment environment. Inspection and examination work lacks coordination between agencies, leading to many and overlapping inspections during the year. Inspections are less instructive and mainly apply fines. Information gathering from businesses is not regular, and measures to remove difficulties for businesses are not timely.

Low provincial competitiveness. The Provincial Competitiveness Index (PCI) is an index that evaluates and ranks the governments of Vietnam's provinces and cities in building a favorable business environment for the development of private enterprises. PCI rankings of provinces in the Northern Midlands and Mountains region according to the table

3.22 below:

Table 3.22. Provincial competitiveness index

Source: Vietnam Chamber of Commerce and Industry - 2010

Based on the results of the table above, we can see that, except for Lao Cai, the business environment for enterprises in the provinces of the Northern Midlands and Mountains is very low. The above figures have many different meanings. On the one hand, the business environment has many correlations with the investment environment, so the indicators of the business environment are also correlated with the indicators of the investment environment. The low indicators of the provinces are a sign that the views of enterprises on the business environment in the above provinces are quite similar to the survey results of this topic. On the other hand, because PCI is a research project with great influence, the fact that the provinces of the Northern Midlands and Mountains have low published PCI indexes is also a limitation of the investment environment of this region, because it reduces the prestige of the region in the eyes of investors. However, the case of Lao Cai, which has a geographical location and strengths quite similar to Lang Son or Lai Chau provinces in the region, with a high PCI index, shows that the soft environment plays a very important role in business operations, and improving the soft environment will bring high efficiency in attracting investment.

3.3.2.2. Low investment attraction results are not commensurate with potential

Activities to improve the investment environment in the provinces of the Northern Midlands and Mountains have achieved some results in recent years, however, the current investment environment still has many limitations, not commensurate with the potential of the province, specifically in the following points:

Firstly, the number of FDI projects is small, the scale of the projects is small. According to Table 3.23 below, the number of FDI projects in the provinces of the Northern Midlands and Mountains is very small, the scale of the projects is small. In Hoa Binh province, there are only 21 FDI projects with a registered capital of 95 million USD, each project has an average of only 4.5 million USD. This value is similar to that in Lao Cai and Bac Giang provinces, except for Son La province where the average scale of each FDI project is 16.57 USD due to the nickel mining project with an investment capital of 70 million USD from a New Zealand investor, however, this project is currently suspended. In Hoa Binh province, the largest scale of the Phuong Hoang golf course project is only 30 million USD. Meanwhile, Binh Duong and Vinh Phuc both have a large number of projects and very large project scales. Vinh Phuc has 105 projects, with an average scale of 19.04 million USD per project, and Binh Duong has 1,800 FDI projects with an average scale of 7.2 million USD per project.

Table 3.23. Number and scale of FDI projects in provinces in 2010

SKIN TYPE

Conscious

Total FDI and DDI projects		FDI project
DA Number	Registered Capital (Billion VND)	DA Number	Registered capital (Million USD)
Peace	269	19,637	21	95
Son La	148	26,162	7	116
Lao Cai	330	46,592	31	329
Bac Giang	544	35,939	91	556

Source: Department of Planning and Investment of provinces-2010

The results of attracting foreign investment are still very limited, so the value of products of foreign-invested enterprises in the total social product accounts for a very small proportion, less than 1%, except for Bac Giang province which accounts for 7%. Meanwhile, this proportion in Binh Duong and Vinh Phuc provinces accounts for 60-70%. Therefore, the trade balance in these provinces is very strong, the ability to balance and control foreign currency is very high. The data in Figure 3.4 illustrates that the economic role of the foreign-invested enterprise sector is very limited in the provinces of the Northern Midlands and Mountains.

Province name