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Monday, September 26, 2022

Incentives and salaries in Vietnam’s public

Updated: 09:40’ - 21/02/2012

JAIRO ACUÑA-ALFARO[1]
Policy Advisor, Public Administration
Reform and Anti-Corruption
UNDP Vietnam

As it emerges as a middle-income country, Vietnam is entering a critical phase of development. In terms of improving the quality, of its public administration system the Government is at a crossroads. Higher levels of development mean higher expectations from citizens of the services and products provided by the public sector. Better-off citizens demand better quality public services, and quality public administrative services require quality human resources. What makes a public administration system efficient are the people who manage it, including the politicians and the bureaucrats. In other words, any public administration system can only be as effective as the people who run and operate it.

In this regard, the public sector in Vietnam needs to become more professional, transparent and accountable. This means that reform efforts to strengthen the remuneration and incentives system in the public sector need to continue. This includes not only reforming salary and payments, but also paying attention to the transition from undesirable behavior (such as nepotism and patronage that are pervasive in the civil service) to new elements of performance management based on the abilities of civil servants, a performance culture, competent and meritocratic human resources and transparency in human resource matters.

At the end of the day, Vietnamese citizens have higher expectations from the public administration system, the performance of the economy and the effects on personal levels. The Governance and Public Administration Performance[2] has found that nine out of ten Vietnamese citizens (90%) perceive their economic situation today as either the same or better than five years ago, and 68% perceive their economic conditions as better. More importantly, these positive changes also have brought a good deal of optimism that the future looks promising in economic terms. One in five Vietnamese citizens perceives the next five years to remain the same, but a large majority of citizens (64%) believe that their personal economic conditions will be better in the next five years.

This paper has two objectives - to provide a snapshot of some of the challenges ahead regarding incentives and salaries in the public sector and to offer some policy options. The discussion is timely, given the recent approval of Resolution 30c/2011/NQ-CP of November 2011 promulgating the Master Program on State Administration Reform in 2011-2020, and its emphasis on human resource policies, as well as the ongoing policy discussions with the Government’s Task Force on Salary Reform led by the Ministry of Home Affairs.

The paper has three parts. The first deals with the implications of Resolution 30c and some of the remaining structural challenges regarding remuneration and incentives. The second part presents the results of an online poll on perceptions of salary levels in the public sector and typical behaviors by civil servants. The third part concludes with some policy options. The guiding thread that unites the three parts is an attempt to provide suggestions for improving the efficiency of the public administration system by rationalizing incentives, thereby reducing the widespread perception of systemic corruption and nepotism in the public sector.

Structural challenges and implications for implementation

Resolution 30c implies a commitment and continuation of public sector reform efforts. It aligns with decisions from the XIth National Party Congress, including the adoption of the 2011-2020 Socio-Economic Development Strategy, with calls to develop strong human resources in the private and public sectors. Undoubtedly, appropriate incentives and remuneration are a necessary condition to achieve these objectives and these need to be put in place in a transparent, fair and accountable manner.

Resolution 30c signals important shifts in three key areas. Firstly, it attempts to spell out clearer objectives and assign more concrete roles and responsibilities to line ministries and implementing agencies. This means opportunities for greater institutional accountability. Secondly, it emphasizes the development of human resources. This is in line with ongoing civil service reform efforts and measures to address issues of incentives and dispersed salary structures. And thirdly, it aims to enhance public service delivery, a shift in line with the middle-income country status, in addition to looking at organizations’ and individuals’ satisfaction with outputs, rather than relying on processes and procedures.

The second and third shifts are important since a better quality of service delivery requires better quality human resources. And for both a proper, transparent and fair system of incentives and remuneration is necessary.

This discussion reinforces the importance to link intention with implementation. The intention to reform the public administration system has intensified in the last ten years. Yet, while progress has been achieved in some areas, the transition from intention to implementation is not short of challenges and limitations. Additionally, when discussing incentives and salaries in the public sector the discussion revolves around mutually reinforcing elements of the civil service system that need to be considered during the implementation of Resolution 30c.

For example, the second and third shifts are also among the key challenges and limitations to ensure greater and more sustained reforms, because they explicitly refer to the system of remuneration and incentives.[3] The spirit of the 1999 Party Central Committee Resolution No. 7 (VIIIth Congress) requires that “wages must be closely attached to the country’s economic development”. In that spirit, public sector remuneration is considered an investment for development, a motivation for individual economic development and an indispensable element to the improvement of the public service quality.[4]

Currently, the civil service is characterized by a career-based approach to human resource management. Minimum salaries are set for new entries into state agencies and the more senior the civil servants are, the higher salary they get. The Government issues decrees to regulate the minimum salary for different categories of public officials, civil servants and other public employees. The universal approach to salary regimes for the civil service system is due to the unclear scope of regulations of previous legal documents on the civil service, and can be traced back to the pre- Đổi mới Decree No. 235/HDBT of the Council of Ministers in September 1985, which provided for minimum salary and allowances for public employees of all sorts.

The minimum salary is reviewed on a yearly basis and made official through government decrees. Pay rise for civil servants is considered every three years, with formalistic performance evaluation results and seniority being taken into account. However, the official minimum salary is still regarded as very low and fails to satisfy basic living needs. This means public officials must rely on other informal sources of income which are not necessarily illegal but means they deviate from their original public service duties and obligations and therefore reduce their efficiency.

In practice, the current remuneration regime is said to be one of the main reasons for civil servants to quit their state agency jobs. As widely discussed in Vietnamese media,[5] a large number of talented civil servants and public employees have moved out of the public sector in recent years.

However, the official salary is only a fraction of the income composition for public officials and civil servants. Income also extends to include allowances, bonuses, envelopes and other supplementary income. A study has suggested that the official salary is only about one third of the total income.[6] This seems to confirm the generalization of the “tendency in Vietnam to view public office as a vehicle for personal enrichment ... this happens in a variety of ways whether it is officials charging for their services, running businesses, or exploiting their position for private gain in other ways”.[7] While this is still an area of heated debate and contestation, there seems to be a consensus that little progress has been made in terms of remuneration and incentives structures.

As a result, Resolution 30c positions salary reform as one of the key objectives for the 2011-2020 period. Article 2.5 of Resolution 30c confirms the above structural challenges as it states that “in the coming decade, administrative reform will focus on… building and raising the quality of the contingent of cadres, civil servants and public employees, attaching importance to reforming salaries policies as true momentum…” Article 3.4.h focuses on the need to “concentrate and prioritize resources for reforming salary policies and regimes… to amend and supplement regulations on non-salary allowances… and revise laws on rewarding and commendation of cadres…”

Online readers’ perceptions of public sector salaries

In the spirit of Resolution 30c Article 7.14 on implementation responsibilities for press agencies, UNDP, in collaboration with VietnamNet, has created an online policy forum that has allowed policymakers, experts, scholars, businesses and citizens to present their views. The first policy issue discussed has been salary reform, contributing substantive comments to the Salary Reform Task Force that has been mandated to submit a salary reform proposal to the Government by April 2012. The aim is to contribute to the reform by providing demand-side feedback and data for further analysis.[8]

The policy forum (I want to live with my salary)[9] has attracted thousands of readers. The preliminary results from the polls conducted reveal interesting public perceptions that confirm the strategic importance of reviewing the incentives system in the public sector. The results also confirm the need to fundamentally reform the salary mechanism to ensure greater efficiency and professionalization in the public administration system. The results are worth highlighting as they confirm the structural challenges and implications for implementation of Resolution 30c discussed in the previous section.

What follows is a summary of what online readers (i.e. citizens) think about public sector salaries and typically perceived behaviors that civil servants engage in to improve their incomes.

* The first question (see graph 1) attracted 14,108 respondents. Of these, 77% believe that civil servants’ salaries are not sufficient to cover living expenses. This contrasts with the 3% who consider they can make savings from their salary.

* The second question (see graph 2) had 15,106 respondents, of whom 35% suggested civil servants use their working time to do extra work for additional income, 31% that they take their positions to receive informal payments and 25% that they do extra work using their positions and networks.

* The third question (see graph 3) attracted 10,973 respondents and suggested that the vast majority of civil servants join the civil service because of its perceived stability. In particular, 30% will choose to enter the civil service as it gives a stable job until retirement, 26% will do the same because they do not know where else they can work and 18% will opt for employment in the public sector because of the expectation of opportunities to be promoted to higher positions. 12% of respondents suggested they will join as they want to contribute to the development of the state sector and 7% to have opportunities to study and improve their capacities.

* The fourth question (see graph 4) was technical and fewer respondents were expected to answer it. Nevertheless, 4,800 respondents gave their opinion about options included in the draft salary reform. A clear majority (53%) prefer the second option in which the minimum wage is set at the mean level of minimum wages offered by the private sector, with an additional amount estimated from coefficients.

* The fifth question (see graph 5) received 10,745 respondents, of whom 37% suggested that civil servants remain in their jobs because they have numerous opportunities to seek extra incomes, and only 3% suggested that public sector agencies provide inspiring working environments.

Conclusions and some policy options

A few questions emerge as a result of the public poll findings. To facilitate reforms towards a modernized and more professional public administration system, what needs to be done? Is it a clearer distinction between salaries, incentives, remuneration and incomes? Is it a more competitive remuneration package to motivate civil servants and avoid the brain-drain to the private sector? Is it a better working environment that encourages impartiality and a nepotism-free, personnel bias-free working environment for civil servants to feel equally treated? Or is it a stronger merit-based approach to personnel management to reward talent and encourage talented staff to take posts in the civil service system? All of these need further thoughts as well as research that take into account clearer power divisions, stronger institutional reform, more available resources in both personnel and financial terms, and robust agents for change in the civil service sector. 

Nevertheless, some policy options to consider as part of the ongoing salary reform proposal under discussion include:

* To make “official” and transparent additional sources of salary/income - It seems that the current salary is too low to cover living expenses. Yet, overall incomes are higher than official salaries. This suggests a great deal of dispersion and lack of prioritization in the public sector that puts public officials in the mood to search for additional income sources. Most of these sources are legalized and formalized, but the Government could afford to pay greater attention to rationalizing and monitoring more strictly these additional sources, including stricter enforcement and verification of assets declarations.

* Exclusive dedication regimes - An option to create a more professional civil service is to ensure that civil servants devote their working time to perform the tasks and responsibilities they are entrusted to. This means mitigating and reducing the so-called moonlighting activities that create conflicts of interests and reduce efficiency in the public sector. An ‘exclusive dedication’ regime would mean that public officials and civil servants receive a higher but more transparent remuneration, and that they are banned from engaging in private or additional income generating activities.

* National Council of Salaries - Without creating new or separate agencies transform the Task Force on Salary Reform into a National Council of Salaries. Such a Council would have a tripartite representation (state, business sector and trade unions) and be mandated with defining the rules of the game in terms of salary increases. It could meet twice a year to negotiate minimum salary increases for both the public and private sector.

* Annual salary surveys - The consistent application and public disclosure of a regular salary survey in the public and private sectors could be considered. These types of surveys are very useful in many countries. In doing so, the Government can make a plan to adjust the salary levels of civil servants. A regular salary survey could provide a first step for further development of a remuneration policy in Vietnam and serve as key policy input for the above suggested National Council of Salaries.

* Pilot salary reform (i.e. exclusive dedication) in higher level positions - While the most successful reform efforts in Vietnam have been piloted at the grassroots and lower administrative levels, the nature and complexity of the salary structure requires stronger political leadership and guidance. Setting position-based approaches at the director general level could be an option to be explored, considering the smaller number of individuals, their responsibilities to improve the efficiency in the public sector and the role model these positions represent in the public sector.

In conclusion, with higher development levels, people’s expectations of the public administration system and the services it provides also shift. The next transition in public administration reform is related to modernization of the public sector and this includes rationalizing incentives and remuneration mechanisms. This requires quality human resources with efficient, fair and transparent incentives. The current incentives system seems to be a key obstacle to attract and retain talent to the civil service and also to successfully implement Resolution 30c.

Therefore, in order to implement and achieve the goal of Resolution 30c Article 4.2.e that calls for “the salary regime for cadres, civil servants and public employees will be fundamentally reformed; to implement new salary scales and tables and allowances…” Vietnam is at a crossroads.-

 

Graph 1. How do you rate your monthly salary considering that you are a civil servant that has worked in the civil service system for 10 years and your family has four members? (n=14,108)

 

Graph 2. Given the civil servants’ monthly salary that is viewed as insufficient for your livelihoods, what would you do to top up your limited income? (n=15,016)

Graph 3. What makes you choose to enter the civil servant force given the low civil service pay? (n=10,973)

 

Graph 4. The Draft Proposal on Salary Reform for the Public Officials, Civil Servants and Public Employees for the Period from 2012 - 2020 have introduced three options for salary reform. In your opinion, which of the three options is optimal? (n=4,800)

 

 

 

 

Graph 5. If you are a civil servant, which of the following is the key reason for you to remain with the state apparatus? (n=10,745)

 



[1] jairo.acuna@undp.org.  I would like to thank Ms. Do Thanh Huyen, UNDP Policy Officer, for valuable comments and assistance. The views expressed do not necessarily reflect the official views or positions of UNDP.

[2] See UNDP, CECODES and VFF (2011) The Viet Nam Provincial Governance and Public Administration Performance Index (PAPI): Measuring Citizens’ Expectations. Hanoi, Viet Nam. Also available at www.papi.vn. 

[3] The following paragraphs build from Acuña-Alfaro, Jairo and Do Thanh Huyen (2010) Reforming the Civil Service in Vietnam: Differentiation, merit, incentives and challenges. In Kim, Pan Suk (editor). Civil Service Systems and Civil Service Reforms in ASEAN member countries and Korea. Yongsei University. Seoul.

[4] See Do Phuong Dong (2009) Wage Policy for Cadres and Civil Servants in Vietnam. In Institute for Personnel Organizational Sciences & Fafo (editors) Civil Servants Policies Norwegian and Vietnamese Experiences: Workshop Proceedings. Hanoi.

[5] See VietnamNet forum “Tôi muốn sống bằng lương” [I want to live with my salary].

[6] NAPA and CIEM (2006) The current salary system in Vietnam’s public administration. Report for GTZ, Hanoi.

[7] See Gainsborough, Martin, Dang Ngoc Ding and Tran Thanh Phuong (2009) Corruption, Public Administration Reform and Development: Challenges and Opportunities as Viet Nam moves towards Middle-Income Status. In Acuña-Alfaro, Jairo (ed) (2009). Reforming Public Administration in Vietnam: Current Situation and Recommendations. National Politics Publishing House, pp. 377-427.

[8] These results have to be interpreted with caution given its “online” character and are by no means definitive. But nevertheless, considering the vast amount of responses (no control over IP was applied) they seem to confirm a generalized perception of the issues under discussion. Number of respondents varies since questions were posted online at different periods and readers responded individually.

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