Vietnam’s economy, now driven by cheap labor, needs productivity push: official

A knowledge-based growth model requires better training to upgrade the workforce, Deputy PM Pham Binh Minh has said.

Vietnam is going to expand its skilled workforce for the country’s new economic growth model, which emphasizes on technology application and productivity, Deputy Prime Minister Pham Binh Minh said Thursday.

“Vietnam’s economic development has relied heavily on low-cost labor and capital-consuming sectors,” Minh said. “However our economy has reached a point where such elements have become insufficient.”

Vietnam needs a new growth model that focuses on quality, labor productivity and knowledge, he told members of the government and the business community at a summit hosted by the Economist Group and Vietnam’s foreign ministry in Ho Chi Minh City.

“We believe those are the key factors that drive the economy to grow both extensively and intensively,” he said.

Taking agriculture as an example of a labor-intensive sector that employs 70 percent of the local workforce, Minh said the government aims to reduce that ratio to 40 percent by applying high technology and developing the industrial and service sectors.

“The process requires us to train and re-train our labor force, reform university education and improve vocational training to create a talent pool with higher skill and expertise levels,” he said.

“We are stepping in the world’s fourth industrial revolution, where advanced technology will be applied,” Minh said, pointing out that 86 percent of the workers in the textile industry could be affected by automation.

Vietnam’s economy has been growing at a fast pace over the past decade. But as growth is still mostly driven by low-cost labor and low-value exports, a new model that can help transform the economy is believed to be critical for the next phase of development.

For now, cheap labor remains a major competitive edge to pull in investment. In a recent survey among U.S. companies, Vietnam has become the first market they are looking to expand in across ASEAN, due to many advantages like low labor costs, good personal security and a stable government and political system.

At Thursday summit, experts said Vietnam’s educational performance in primary and secondary levels is impressive. Last year, Vietnam’s schools scored higher than the average for the OECD, a grouping of industrialized nations, in the Program for International Student Assessment, better known as PISA.

“But if you look at post-secondary education, that’s where the weaknesses are in terms of the numbers of graduates and the quality and relevance of the curricular and the educational skills set up in that sector,” said  Stephen Groff, a regional vice president for the Asian Development Bank.

Sebastian Eckardt, a lead economist and program leader at the World Bank, said the country, particularly the manufacturing sector, could lose its cost advantage to other competitors such as Cambodia and Bangladesh due to low productivity.

“One of the challenges is raising wages while productivity still lags behind,” he said.

Labor productivity is growing at an annual rate of more than 4 percent and wages are outpacing it, Eckardt said.

Vietnam raises the minimmum wage every year. It will increase the basic wage level by 7.3 percent next year, following a 13 percent bump this year.

The Economist Intelligence Unit has estimated Vietnam’s economic growth at 6.8 percent in 2016 and potentially higher in 2017. That is higher than the World Bank’s projection of 6 percent.

Source: Customs-news

The Impacts of Vietnamese Workers Abroad​ (Part 2)

Negative impact

Firstly, reducing net factor income (NX) in gross national income (GNI).
Foreign workers who come to Vietnam to work have income and are transferred to the remainder of their income. It is this that reduces the net income of the national income; The result is a reduction in total national income.

Secondly, the introduction of foreign lifestyles and cultures is inconsistent with the traditions and customs of the Vietnamese people, distorting traditional ethical and cultural norms.
Foreign workers who enter Vietnam work, they bring the culture of their nation and their country. Along with civilized and modern elements; At the same time, they also bring a harmful lifestyle and culture that is inconsistent with the customs, customs and cultural identity of the Vietnamese people.

Reasonable choice for sustainable development
Thus, the international labor movement in Vietnam has both positive and negative impacts on socio-economic development. With its role, the State needs to make reasonable choices by specific policies in order to make the most of the positive impact, minimizing the unwanted impact. Therefore, policies should follow the following two basic principles:

The principle of “shocking” or the choice of two sharp points
The basic content of this principle is the labor market segment and the selection of labor groups at the two poles to bring abroad to work with different objectives. Accordingly, the labor market in Vietnam has three main sections: highly qualified labor, average qualified labor, and simple labor.
For the group of highly qualified workers, have the ability to access and collect new technologies to work in high-tech places with the aim of both earning high income for employees and implementing principles “3I”
For unskilled workers, especially agricultural workers, they must accept to work in industries that indigenous workers do not do; aiming at two objectives: to create jobs with reasonable income, to move labor away from labor-intensive production areas, to quickly bring advanced and modern production technologies to use less labor into production, creating high social labor productivity.

The principle of “traction” or motivation choice
The basic content of this principle is to select a number of professions that, if undertaken by foreign workers, it creates a boost for the economy such as the oil refining industry, information technology, etc. or some managerial positions such as general director, executive director of a number of state-owned economic groups and corporations.
International labor migration in Vietnam has a strong impact on economic growth and development in Vietnam; At the same time, it also impacts negatively on the cultural and spiritual life of society. Therefore, the issue of selecting and determining the target of international labor migration in accordance with each period is of utmost concern.

The Impacts of Vietnamese Workers Abroad​ (Part 1)

As a member of the WTO, Vietnam must open up the labor market, so foreign workers entering Vietnam are free. Foreign workers who come to Vietnam to work both have an impact on development and have a negative impact.

Promote economic development
Firstly, providing high-quality human resources to contribute to improving social labor productivity, promoting rapid economic growth.

As a developing country, Vietnam is facing the fact that there is a shortage of highly qualified human resources in some national economic sectors. Especially the group of technicians in a number of technical and economic sectors, and senior administrators at the enterprise level as well as the sector with a serious shortage.

Vietnam became an official member of WTO to create conditions for foreign workers to work in Vietnam to help offset the shortage mentioned above. On the other hand, high-quality human resources contribute to increasing social labor productivity and thus promoting a high level of economic growth.

Secondly, create human resources to meet the needs of foreign investors in Vietnam.
Foreign investors, together with bringing high capital and technology into Vietnam, have demand for labor with corresponding qualifications. As a WTO member, high-level human resources from abroad who are free to work will create favorable conditions for foreign investors in recruiting highly qualified workers. This is also creating a favorable environment to attract foreign investment to promote economic growth.

Thirdly, create a competitive environment between Vietnamese workers and foreign workers.
In the context of the newly formed labor market, foreign workers coming to Vietnam to work will create labor supply for the market. This has motivated competitive labor in the market to contribute to improving labor quality. Through competition, employees have to improve their qualifications, professional skills and foreign languages ​​themselves. The result is to improve the quality of human resources.

Fourth, contributing to on-the-job manpower training under osmosis interaction.
When foreign workers work with Vietnamese workers, through daily contact, Vietnamese workers can learn directly about foreign languages, styles, techniques, and techniques to improve themselves and raise their level.