Solutions for vietnamese labor market in condition of forming asean economic community

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Solutions for vietnamese labor market in condition of forming asean economic community

Luu Cong Thuong, MA

Abstract

At the end of 2015 Vietnam joined ASEAN Economic Community, which is a very important event creating a momentous turning-point to the Labor Market of Vietnam. The Economic Community will establish a very huge market, give potential opportunities to Vietnamese workers, impulse the development of technology and contribute to the productivity. However, when AEC shapes, Vietnam will have to face relatively big challenges. Therefore, particular solutions are necessary for Vietnamese laborers to adapt and compete with the workers of other countries in ASEAN.

Keywords: ASEAN Economic Community, Labor resource, Opportunity, Challenge solution, Labor productivity, Labor maket.

vietnamese labor market

1. Advantades of Viet Nam of participating in ASEAN economic community

ASEAN economic community (a.k.a ACE) is an economic area consisting of 10 membership nations including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. AEC is one of three important pillars in the ASEAN Charter planned since 2003 and with the vision to 2020. By the end of 2015, ASEAN Economic Community was established under the consent of all leaders of the Southeast Asian countries. The AEC was born to become a single market for the membership nations in Southeast Asia with the population of 620 million people and annual GDP is about USD 2.000 billion. The biggest goal of the ASEAN Economic Community is to establish an economic area with high competitiveness, which can firmly integrate on global economy and is expected to be a dynamic community having influence on large world's economy. Moreover, that the AEC was born will help enterprises expand trade, investments services freely flow, develop economy equally, reduce wealth discrimination, and improve people's psychological life.

According to the International Labor Organization (ILO), Vietnamese labor market, upon becoming a member of AEC, will be more dynamic and capable of creating more jobs and reducing unemployment. The employment of Vietnam will increase to 14.5% in 2025 simultaneously. Under the effect of AEC, Vietnam is likely to witness strong increase of the market and growth labor. With the increase of investment and trade flows, Vietnam's economy will accelerate. This allows Vietnam to compete on the global market on the basis of reforming and increasing labor productivity. But the real question arising is how integration and connection in the AEC will impact the lives of Vietnamese, whether Vietnamese workers could find a good job with high income and enhance working conditions.

In 2015, there are 8 careers that workers in the ASEAN countries are freely moved through the equivalent recognized skill agreement, namely: accounting, architect, dentist, doctor, engineer, nurses, logistics and tourism. In addition, high-quality human resources from tertiary level or above, foreign languages proficiency, especially English are moving more freely.

Vietnam is considered as a country with «demographic bonus», with a population of about 91.4 million people and the estimated population of working age of 54.644 million. So what are the opportunities and challenges for Vietnam labor market conditions in forming the ASEAN economic community?

Table 1 shows that the number of working-age people of Vietnam in the period from 2012 to 2015 increased from 53698.9 thousands to 54 644 thousands (an increase of 945.1 thousand people), the average increasing of 1.1 million people/year. This can be seen as a period of «golden population» of Vietnam. Golden population structure is enormous strength contributing to promoting economy-society development. This opportunity appears only once during the history of the development of a country and lasts a maximum of 40 years. According to calculations by population experts, Vietnam finished «young population structure» period in 2015, entered the «golden population structure» period and will reach peak around 2025.

Table 1. Vietnamese population in the period of 2012-2015

Unit: 1000 people

(Sources: General Statistics Office Vietnam)

Taking advantage golden population structure will contribute to create the volume of enormous social wealth, create great value for the future accumulation of the country. In other words, if taking advantage of this opportunity, it will create tremendous growth of social economy, promote the comprehensive development for Vietnam. This can be seen in the phenomenal growth period of Japan, Korea, Singapore and fast development period of the new industrial countries associated with the period of «golden population structure».

Table 2 shows the structure of economically active population by age group is most concentrated in the 15 to 34 age group, during the period since 2012 to 2015 were more than 40% of the total population of the country. This is a young labor force has strengths such as good health, energetic, receptive to new things, grasp the technology quickly, moving easily. If you are trained in a basically, equipped with the knowledge and skills necessary, they will promote and encourage the ability of the process of international economic integration. This is a very favorable factor for economic development -- society and contributive to labor productivity growth of Vietnam.

Taking advantage golden population structure will contribute to create the volume of enormous social wealth, create great value for the future accumulation of the country. In other words, if taking advantage of this opportunity, it will create tremendous growth of social economy, promote the comprehensive development for Vietnam. This can be seen in the phenomenal growth period of Japan, Korea, Singapore and fast development period of the new industrial countries associated with the period of «golden population structure».

Table 2 shows the population structure divided by age is most concentrated in the 15-34 years group, during the period since 2012 to 2015 were more than 40% of the total population of the country. This is young labor source having advantages such as good health, activeness, reception to new things, grasp the technology quickly, easily moving. If you are methodically trained, equipped with the necessary knowledge and skills, they will promote and encourage the ability of the process of international economic integration. This is a very favorable factor for economy-society development and contributes to increase labor productivity of Vietnam.

Table 2. Labor structure divided by age of Viet Nam from 2012-2015

Unit: 1000 people

(Sources: General Statistics Office Vietnam)

Labor structure has shifted positively and quality of labor has also been raised. According to the data in Table 3, the percentage of workers in field of agriculture, forestry in 2015 at 41.68%, decreased 5.36% compared with 2014, while the rate of workers in the industry, construction and services has increased. This is the general trend of Vietnam in the period of industrialization and modernization, diminishes agricultural labor to non-agricultural labor, which means moving from fields of lower labor productivity to the field of higher labor productivity, such as industry and services. It can be said that the labor movement increased welfare in all aspects, such as income, quality of life On the other hand, according to the author, proportion of trained workers increased from 30% to 38% within 10 years. Trained workforce contributes to meet the requirements of business and labor market in Vietnam. They master science and technology, undertake most complicated job in the business, which were previously rented foreigners.

Table 3. Labor structure by fields

Unit: %

(Sources: General Statistics Office Vietnam)

According to the ILO, Vietnam will increase employment opportunities in the sector like rice production, construction, transport, textiles and food procession. In the period 2015-2025, the demand of careers needing medium skilled labor will generally increase the fastest, at 28%, and low-skilled workers are 23% and high-skilled workers will increase 13% and will have more opportunities to improve the lives of millions of people.

The deeper integration will form a common labor market, Vietnamese workers not only have many career opportunities in the country but also can expand into regional markets. Moreover, employees also have the opportunity to interact and enhance the experience, specialized skills in advanced countries in the region, will be scrubbed when working in many countries, increase flexibility, increase competitiveness, increase adaptability to the working multicultural environment, which is inherently shortcoming of Vietnam.

Employment Law №38/2013/QH13 adopted by Vietnam National Assembly being effective from the date 01/01/2015 allows more powers for enterprises both domestic and abroad on the application of the mechanism of salary, bonuses, as well as other welfare policies to attract high-quality workforce, not just Vietnamese workers, but also foreign workers. Unlike the previous regulations that businesses must register with the salary scale state agencies, businesses are now self-build salary scale according to their affordability in the framework of the law allows. This has created more flexibility for enterprises in attracting labor resources, promoting the development of labor skills and improving the lives of workers.

The birth of AEC will create pressure for membership nations perfecting and adjusting policies to adapt to labor regulations in ASEAN. Especially the requirements of high-quality human resources in ASEAN. This forced Vietnam to consider adjustments to the criteria in the training of human resources, as well as the development of labor policies.

2. Vietnam's shortcomings upon participating AEC

Besides the advantages of Vietnamese labors as analyzed above, the challenges of Vietnam upon joining in AEC can be generalized as follow:

Firstly, Vietnam's labors mostly come from rural areas and work for agriculture. Characteristics of agricultural culture make workers inflexible, low sense of discipline, discretionary on working time. As shown in Table 4, the majority is the labor force in rural areas, accounting for over 60% of the population of working age. The workforce in this area have not been equipped with the knowledge and skills of teamwork, inability to cooperate and bear the risk, fear of promoting initiatives and sharing experiences work so labor productivity is not high. These are huge barriers for Vietnam in implementing industrialization and modernization of the country.

Table 4: Labor structure by areas

Unit: 1000 people

(Sources: General Statistics Office Vietnam)

Secondly, it is the restriction on labor quality. Low-qualitative human resources in Vietnam is one of the obstacles hindering the development of the country. The quality of labor in Vietnam is still far behind other countries in the region and around the world. If based on the Human Development Index (HDI), the Vietnamese HDI is quite low compared to other ASEAN countries, ranking the 7th after Singapore, Brunei, Malaysia, Thailand, Philippines, Indonesia and not significantly higher with Cambodia, Laos and Myanmar. Vietnam's HDI is 0.638, 0.569 and Laos are of Cambodia was 0.584, Myanmar is 0.524 while Singapore is 0.901. If calculated according to a scale of 10, the quality of the Vietnamese workforce is only 3.79 points, ranked 11/12 Asian countries, while South Korea is 6.91; India is 5.76; Malaysia is 5.59; Thailand is 4.94. It can be said that the labor productivity of Vietnam in the bottom third in the Asia Pacific.

Thirdly, due to the low quality and level of labor Vietnam, it results in that labor productivity in Vietnam is still low compared to the region and the world. According to the ILO, the labor productivity of Vietnam is 15 times as low as Singapore, 1/5 labor productivity of Thailand and Malaysia. That is not to compare labor productivity with countries such as Japan, South Korea, Australia, India and New Zealand. These are the countries having signed important agreements with ASEAN and the labor market with more and more areas being expanded. This suggests, this is a factor in reducing Vietnam's labor intriguing possibility to the foreign employers, even a factor for employers increase the stringency of selection criteria for labor Vietnam.

According to data from Table 4, in 2014, Vietnam has 54 426 thousands people in the labor force but has 44188.4 thousands employees without professional qualifications, accounting for 81.19%. In particular, the number of employees trained is 10237.6 thousands workers accounted for only 18.81%. This figure reflects that labor supply is not meeting the actual requirements and the number of labor opportunities are very rare when Vietnam participate in AEC.

Fourthly, AEC launched will perform free rotation of five basic elements: capital, goods, services, investment and skilled labor. This free moving is both an opportunity and a big challenge for Vietnam's labor market. When joining in AEC a large number of workers from other countries in this group will overflow into Vietnam and create fierce competition with domestic labor. In addition, joining AEC, workers need not only excellent professional skills, but also need the ability of languages and other soft skills to have chance to participate in the national work of the AEC.

Fifthly, the information system of the labor market is still weak and limited. In particular, the system is divided among the regions; ability sweeping, collecting and providing information are unsatisfactory with the needs of the partners on the labor market, especially employers and workers. Indicator System for the labor market, in spite of being issued, has been incomplete and far from international norms on labor.

3. Solutions for Vietnamese labor market in condition of forming ASEAN economic community

To improve the qualifications of employees, Vietnam needs to reform education and training. This is an important task, as key measures to develop human resources in Vietnam in the period from now to 2020 and subsequent periods. Vietnam needs drastic measures to reform the basic, comprehensive education system and training to meet the requirements of industrialization and modernization of the country in the international integration. Renewal of education and training systems in terms of:

1) Reorganize education and training network, rearrange the national education system both in the scale of training, career structure, training facilities and plan the network of vocational education, university education associated with the planning of economic development -- regional society, local and national.

2) Conduct training follow the need of society, increase practice time, focus on content, skills learners, businesses and society need. Diversify training methods. The training institutions should collaborate with businesses, link theory with practice, encourage employers to participate in formulating, adjust and implement training programs and competency assessment learners.

3) Equip with the necessary soft skills for workers, such as communication skills, teamwork skills, negotiation skills, critical thinking skills and problem solving … Enhance teaching and knowledge foreign languages (especially English), world culture, to increase the adaptability of Vietnamese labor in the international environment.

4) State conjuncts with businesses to promote information dissemination and communication about the AEC to workers, particularly for high-skilled workers, the specific criteria to be a member of ASEAN countries announced and apply; simultaneously, regularly research and review of experience in ASEAN countries in order to draw lessons for Vietnam. In addition, information on the labor situation of the country should also be public for enterprises, people to update. Accordingly, Vietnam's agreement, commitments need to be informed specifically to each enterprises and people, especially to students of universities, colleges, high schools and centers vocational training in the country.

5) Develop specific measures aimed at economic restructuring in Vietnam in the direction of industrialization and modernization, such as increasing the percentage of the GDP value of the industry, constructing and trade -- service breast; declining relative rate of value in GDP of agriculture, forestry and fisheries; and deleting the distance in urban and rural areas, the plains and the mountains, in order to improve the living standards of the rural population.

6) Enhance labor productivity, Vietnam should focus on scientific and technological innovation, especially invest, develop auxiliary industries. Increasing investment for scientific research, manufacturing, improving machinery and equipment to enhance labor productivity, reducing manual labor, promote international cooperation, technology transfer and the developed country; Catch up with the technological level of the countries in the region and around the world, requiring speed technology innovation for our country right now at about 20%/year.

7) It can be said that that, AEC contribute to open good opportunities for Vietnam to quickly catch up with the trend and level of economic-social development of the region and the world, contribute to create jobs for workers, reduce unemployment, increase labor productivity, boost economic growth. However, Vietnam, in the fact, needs a great political determination to implement successful development strategies labor market in the future.

References

1. Bui Thi Minh Tiep (2013). Population and economic activity group: The impact on economic growth in Vietnam // Journal of Economics and Development, No. 195, January 10/2013, tr.63- 70.

2. Bui Thi Minh Tiep (2015). Human Resources of the ASEAN countries and the reference to Vietnam towards WTO AEC // Journal of Economics and Development, No. 212, May 2/2015, tr.25- 34.

3. Ha Van Hoi (2013). Join the ASEAN Economic Community and the impact on international trade of Vietnam//Journal Vietnam National University, Economics and Business, Vol 29 No 43, tr.44-53.

4. Nguyen Duc Thanh (2014), Vietnam and the AEC in 2015, the Saigon Economic Times, URL: http://www.thesaigontimes.vn/119601/Viet-Nam-va-AEC-2015.html

5. The General Statistics Office of Vietnam, population statistics and labor. URL: http://gso.gov.vn/default.aspx?tabid=427&idmid=3

6. ILO - International Labour Organization (2014). ASEAN Community 2015: Managing integration for better jobs and shared Prosperity. URL: http://www.ilo.org/asia/whatwedo/publications/WCMS_300672/lang--vi/index.htm

7. ILO - International Labour Organization, 2014. Survey of Employers on skills and Competitiveness ASEAN. URL: http://www.ilo.org/wcmsp5/groups/ public /--asia/--ro-bangkok/--sro-bangkok/documents/publication/wcms_249982.pdf

8. UNDP - United Nations Development Programme, (2014). Summary Human Development Report 2014. URL: http://hdr.undp.org/en/content/human-development-report-2014-summary

9. Ministry of Labour - Invalids and Social Affairs of Vietnam. URL: http://molisa.gov.vn/vi/Pages/chitiettin.aspx? IDNews=23363

10. Фунг Тхе Донг. Органичения в установлении пенсионного возраста и определении уровня пенсионных выплат во Вьетнаме / Фунг Тхе Донг, Чан Мань Хунг // Интернет-журнал «Науковедение». 2013 №6 (19) [Электронный ресурс]. - М. 2013. - Режим доступа: http://naukovedenie.ru/PDF/115EVN613.pdf

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