Vietnam Management Channel

Vietnamese productivity falls short of regional rivals

 

According to Vietnam’s General Statistics Office (GSO) a workforce composed of low-skilled workers combined with outdated technology is widening the productivity gap between Vietnam and other countries in Southeast Asia.

The GSO report says that Vietnam’s GDP growth in 2018 increased 7.08% and worker productivity increased 6% when compared with 2017, with average worker labor productivity estimated at $4,520 USD.

While the 2018 figures represent an increase from 2017, other Southeast Asia countries are increasing their labor productivity at greater rates. Some of the factors that have elevated productivity in other countries include continuous training and upgrading of worker skills and investments by companies in technologies that are more advanced than many of the technologies solutions deployed in Vietnam.

The GSO used 2011 Purchasing Power Parity (PPP) figures to arrive at constant numbers and calculated that Vietnam’s labor productivity in 2018 was $11,142.73. This compared to other countries as follows:

Vietnam           Compared to Singapore           7.3%
            Compared to Malaysia           19.0%
            Compared to Thailand           37.0%
            Compared to Indonesia           44.8%
            Compared to the Philippines           55.9%


In Southeast Asia, Vietnam’s labor productivity is only higher than that of Cambodia which was estimated to have reached $6,963 in 2018.

 

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Labor productivity in Southeast Asia – Vietnam General Statistics Office


The GSO report noted that poor labor productivity can be blamed on three primary sources: the use of outdated technologies in companies; the lack of highly-skilled workers; and an increasingly large gap between what students are taught through career education and the actual market demands of companies.

The report states that: "Vietnam's economy will face huge challenges in the coming time to catch up with the labor productivity of neighboring countries."

Another factor that faces Vietnam’s future when it comes to human capital is the reality that Vietnam is transforming from a country with more than 50% of people under the age of 30, to a country with an increasingly older population.

The United Nations says that Vietnam will transform from a young society to an older one since the number of Vietnamese over the age of 65 will rise from 6.3 million people in 2018 to 18 million people by 2040, which will equal 18% of the country’s population.

Vietnam’s Ministry of Labor, Invalids and Social Affairs says that Vietnam passed a milestone in 2015 when it became one of the countries with the fastest aging populations in the world. As Vietnam joins an increasingly “Industry 4.0 world”, experts have warned advances in artificial intelligence and smart manufacturing will threaten a workforce that its low-skilled and doesn’t receive skill upgrade training.


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Upgrading Vietnamese work skills – Source – The World Bank


Vietnam’s Prime Minister, Nguyen Xuan Phuc, commented on the GSO’s report and other reports related to labor productivity, and stated that Vietnam cannot continue to rely on low-cost labor against regional completion.

The Prime Minister said that its imperative that businesses lead in the use of technology and provide their skilled workers attractive wages and benefits that are competitive and will lead to both businesses and workers benefiting.

 

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Vietnamese concerns about Artificial Intelligence – Source: Indochina Research


Government officials have said that the changes in Vietnam’s demographics will require Vietnam to optimize its human capital and that companies must provide improved education and skills training and technology transfer, and that companies and the government must provide inclusive social protections, including pensions and universal basic healthcare.