mask
Don’t fear the competition
Antonio Berenguer, trade counselor to the European Commission Delegation, says that allowing in more skilled foreign workers would help increase the skill levels of local workers

Antonio Berenguer, trade counselor to the European Commission Delegation, says that allowing in more skilled foreign workers would help increase the skill levels of local workers

How do you assess the current situation of Vietnam’s human resources?

Vietnam can be proud of its youthful labor force, as it has been at the heart of its rapid economic development in recent years. Many investors prefer Vietnam to China and other neighboring countries because of its disciplined, fast-learning, young labor force. Indeed, out of 45.6 million people at the working age, up to 46.4% are 15 - 34 years old. Yet, it is estimated that as much as 80% of the Vietnamese youth aged 20 - 24 participating in the labor market remain untrained. This poses a challenge to the economy and society in terms of vocational training, higher education and job generation. Annually, around 1.4 million Vietnamese enter the labor market every year. The government faces a titanic task in not only ensuring that all the policies to foster job generation are in place but also that the labor force can be properly trained - i.e., in tune with market needs. In short, while Vietnam is currently not suffering from manpower shortage (in fact, Vietnam continues to export workers abroad), it faces an important challenge in adjusting that labor force to the rapidly changing needs of a fast growing economy.

In your opinion, what are challenges to Vietnam’s human resources in the post-WTO era?

Vietnam has not made major commitment, in joining the WTO, regarding free movement of workers. In practice, no one should expect any massive inflow of workers from other WTO members flocking into Vietnam. The impact of WTO will be indirect, linked to the development model of Vietnam.

As you know, Vietnam’s growth has been, so far, largely based on labor intensive industries such as textiles and garment, footwear and furniture. For example, the combined export turnover of these three industries represented 28.5% in value of all Vietnam’s exports and 18.5% of the country’s GDP in 2006. While this model has contributed in generating employment to large chunks of the population, many believe, like myself, that it is not sustainable in the long rung.

Firstly, because those industries leave little revenue in the country. Let me give you an example. Last year, out of USD 3.59 billion worth of export turnover, Vietnamese shoe makers obtained an estimated profit of well-below 15%. The same is true for other labor-intensive industries such as garment and textile and furniture (export turnover of USD 5.8 billion and USD 1.9 billion respectively) which rely too much on importation of raw materials (average 80%) from Vietnam’s main competitors (like China and other ASEAN countries). Vietnamese footwear firms on average earn only 2 euro from a pair of shoes exported to overseas market. It should be noted that these 2 euro has not yet included the deduction of production costs.

Secondly, WTO will cause Vietnam to disarm some of the trade measures (e.g., subsidies, etc) which encouraged quick growth on those sectors in the past. As those sectors of Vietnam’s economy remain internationally competitive solely on the basis of the labor force (as raw materials as well as machinery are currently imported) they also become more vulnerable to business de-location. Indeed, as Vietnam’s standards of living (and thus salaries) raise, labor cost will also increase and inevitably cause investors to move their factories elsewhere, potentially leaving behind numerous jobless workers.

As many countries in Europe and elsewhere have done, Vietnamwill have to change its growth paradigm and gradually migrate to more sophisticated, research-intensive and technology oriented industry. In so doing, Vietnam is facing a paradox as concerns its work force: employers are confronted with many difficulties finding qualified Vietnamese workers and, at the same time, they cannot hire as many overseas workers they wish. This is the result of Vietnam’s legal cap on work permits (applied until recently but soon to be phased out) for foreigners applied by the authorities in order to alleviate the problem of many university graduates who fail to find a job.

What may be solutions to improving Vietnam’s human resources in order to meet the development requirements?

I believe that Vietnam should welcome foreign skilled workers. Their presence, like the presence of foreign companies did vis-à-vis local ones, will stimulate competition and will ring about a learning, on-the-job training, experience. At the same time, Vietnam should quickly open up the educational and training services sector to foreign investors ahead of its WTO commitments (100% foreign invested entities in education are only permitted from 1 January 2009). This is for the benefits of Vietnam, as it will improve the quality of university and post-university graduates, and will also help increase the attractiveness of the country’s business climate.

How can the EU assist Vietnam in developing human resources?

We are quite proactive in working with Vietnam to tackle the issue. The EU is contributing via a variety of development projects to strengthening Vietnam’s higher education system and hence to improve the quality of its work force. Firstly, our Labor Market project, implemented by the ILO (International Labor Organization), will devote some 5.6 million euro to support the design, development and dissemination of a labor market observatory information system in key provinces. This is complemented by our Erasmus Mundus program, that will send, this year, some 35 Vietnamese students to European educational institutions and by our project on human resources in the tourism sector that, with a contribution of 10.8 million euro, seeks to upgrade the standard and quality of human resources in the tourism industry in Vietnam. We are also contributing, via a number of projects, to strengthening elementary education.-

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