Economic Sector

Last updated: Tuesday, February 19, 2019


Unstable Labour in FDI Enterprises

Posted: Tuesday, July 03, 2018

The 4.0 revolution is taking place strongly. The competition to attract foreign direct investment (FDI) is becoming fiercer and fiercer. Vietnam is increasingly relying on high quality manpower resources to attract environmentally-friendly high-tech projects. In this context, a comprehensive assessment of the actual status of labour in the FDI sector is essential.

Actual status
In terms of direct impact, FDI capital helps shift the domestic labour structure from sectors of low labour productivity to sectors of the higher labour productivity. In the recent years, Vietnam's labour productivity growth has gradually improved and a rather high growth rate has been achieved, especially the period 2014 - 2016 reaching an average growth of 5.5 per cent per year. Among economic sectors, the FDI sector always has the highest absolute labour productivity compared to the state sector, particularly compared to the non-state sector. Analysis of this situation, as mentioned by Dr Le Van Hung from Institute of Economics of Vietnam, the main reason for this difference is that FDI sector focuses mainly on processing industry, while domestic one still concentrates mainly in agriculture and informal sector with low absolute labour productivity. However, FDI sector has not created a close link with Vietnamese enterprises to join the value chain, not pushing the development of supporting industries of Vietnam. The transfer of technology and management experience has not been as expected. State budget contribution has not been symmetrical, even some FDI enterprises have committed price transition, tax evasion or environmental treatment regulation violation.

Mr Ngo Duy Hieu, Director of the Labour Relations Commission of the General Confederation of Labour, a widespread situation is that FDI enterprises sack workers of over 35 years old because those workers are not suitable with some branches any longer. Those enterprises are afraid of paying high wage and covering higher social insurance for senior workers. Furthermore, some workers aged above 35 cannot meet their job requirements in the context of plentiful young labour force. Increase in workers working for FDI enterprises in some localities keeps placing numerous social issues such as housing for workers, health care, education, urban infrastructure, transport. This is also consequence after a long period competing for FDI capital attraction with the advantage of cheap labour.

According to Mr Vu Dai Thang, Deputy Minister of Planning and Investment, making a comprehensive assessment of the current labour in FDI enterprises to have appropriate and breakthrough solution to improve quality and productivity of labour in the region is also a solution to maximise FDI capital flow. In order to improve labour productivity from FDI sector, as suggested by Dr Le Van Hung, Vietnam should pay attention to the quality of FDI capital flow instead of its amount only. FDI attraction should be closely linked to the national development strategy. Priority should be given to attracting some sectors with comparative advantages by each region, especially to deep-processing enterprises, high technologies and new energies aimed to create pervasive effects on the economy for long term.

Adjusting the attracted FDI capital flow structure is also a solution recommended by numerous experts. Accordingly, priority should be given to attracting FDI in high-tech industrial services and supporting industry projects. It is necessary to construct a few pilot eco-industrial parks only to attract FDI enterprises and domestic ones of the same sectors and mutual linking and assistance for development, such as construction of separate industrial zones for coffee and rubber processing and production enterprises in the Central Highlands; construction of industrial zones for the processing of products/finished products related to seafood, fruit or rice-related products in the Mekong Delta. This will simultaneously solve the outstanding instability for labour in FDI enterprises.

Bao Chau

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