Foreign investors buck restrictions on expatriate staff

At the end of last year, the Ministry of Labour, War Invalids and Social Affairs (MoLISA) issued Decree 105 limiting foreign employees working for companies operating in Vietnam to either 3 per cent or 50 people, whichever was lower.
Foreign companies complained that the employment restrictions might hinder foreign professionals from coming to Vietnam and contributing their expertise.
As a result, the ministry made a slight amendment to the decree through Circular 04 earlier this month, allowing up to 4.5 per cent foreign staff for posts that Vietnamese employees were unable to fill. However, the need for approval from people’s committees remains in force.
General director of Chinfon Group, David Lin, said he did not understand why Vietnam needed such a rule, calling it “contradictory and unnecessary”.
He said the restriction itself was a disincentive for foreign companies wishing to enter Vietnam, regardless of the percentage allowed.
“It is psychological. On one hand, your country tries to call for more foreign investment. On the other hand, you build a barrier to foreigners coming to the country to work. Investors will immediately raise questions about the goodwill of the country,” Lin said.
Deputy head of MoLISA’s department of labour and employment, Le Trung, said that increasing the limit had no significance except to deflect foreign investors’ criticism and was not really necessary.
“All our surveys show that the ratio of foreign staff to total workforce in almost all companies stands at just 2 per cent,” he said.
“The limit of 3 per cent, and 4.5 per cent in some cases, gives reasonable leeway to the companies.”
John Hickin, a solicitor at law firm Johnson Stokes & Master, said that despite the introduction of the circular, the decree would continue to provide adverse effects, including an unnecessary administrative burden on firms, send negative signals about Vietnam’s investment climate and create skill gaps in the country.
“That a company has to go to the people’s committee whenever it needs to recruit a foreign employee is troublesome, time-consuming and unnecessary,” he said.
Hickin echoed Lin’s warning, saying investors would hesitate to invest in a country once they were aware of such restrictions.
“We recognise the government’s efforts to reduce the impact of Decree 105, but we are sorry to say that we still find the amended rules disappointing. We expected something more than what we have read in the circular,” he said.
MoLISA officials refused to comment on the foreign investors’ opinions, merely reiterating that the new rules would have no impact on foreign companies’ performance in Vietnam.
A foreign investor, who chose not to be named, said one area that might be affected despite the ceiling increase would be education projects which need many foreign teachers.