Economic Sector

Last updated: Thursday, April 18, 2019


Alarm about Low Labor Productivity

Posted: Tuesday, April 02, 2019

“Vietnam’s labor productivity stood third from bottom in ASEAN,” said Mr. Kumio Umeda, Japanese Ambassador to Vietnam.

Lower than Laos and Cambodia

According to a report by the Vietnam Institute for Economic and Policy Research (VEPR), Vietnam’s labor productivity is still low relative to many countries in the region and the world, especially to ASEAN countries. Its labor productivity is equivalent to only 7.2% that of Singapore.

Japanese Ambassador to Vietnam said that Vietnam needs to focus on improving its labor productivity so as to attract more foreign investment flows.

Dr. Nguyen Duc Thanh, Director of the Vietnam Institute for Economic and Policy Research, Hanoi University of Economics and Business under the Vietnam National University of Hanoi, analyzed that in the last 25 years, Vietnam’s labor productivity increased less than three times, much lower than that of other countries, causing the country to face the risk of falling behind. In particular, in industrial manufacturing and construction, labor productivity has slowed down in recent years.

He warned that low labor productivity causes a disadvantage, slows economic growth and affects national competitiveness.

Dr. Vu Tien Loc, President of the Vietnam Chamber of Commerce and Industry (VCCI), said, in Vietnam, most laborers are still working in agriculture, forestry and fisheries, which have lowest labor productivity.

Mr. Thanh added that Vietnam's cheap, unskilled labor force still occupies a big share, gets stuck in rural areas and fails to shift to more productive industries.

Small and medium-sized enterprises (SMEs) lack consistent focus on modern technology investment to support workers. Positively, labor productivity in State-owned enterprises (SOE) is much higher than that of the private enterprise sector.

Productivity improvement solution

Experts pointed out that wages increasing faster than labor productivity is one reason why many foreign companies do not want to pour capital into Vietnam. The report showed that the average annual wage growth was 6.7%, while labor productivity growth was 5% in 2004 - 2015.

To lift labor productivity, Vietnam needs to speed up the workforce shift from agriculture to industry and service; to apply solutions to upgrade technology, increase investment, embrace Industry 4.0 and Society 5.0 for higher labor productivity, Dr. Loc said. Besides, the country needs strong institutional reforms and open integration.

He pointed out two reasons that hinder the labor shift from agriculture to industry and service: Market issues and institutional policies for enterprise development. Vietnam targets to have one million businesses by 2020. For the time being, many barriers to business establishment and development are standing in the way, such as administrative procedures, business conditions, specialized inspection procedures and inspection. Without doubt, administrative procedures are still a major concern for the business community and a barrier to business development.

“We are living in the space of Industry 4.0 and Society 5.0, which requires businesses to reach international standards and apply modern technology to improve competitiveness. Empowering small, medium and even micro enterprises to meet international standards will help improve their productivity,” said Dr. Loc.

Dr. Kenichi Ohno from the Japan Policy Research Institute said individual dynamism and creativity must be translated into action. Focus should not be placed on short-term targets such as apparel and footwear export, but on long-term targets to create added value in the future.

Huong Ly

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