Firms to ride high on low wages

A surge in foreign workers is not expected

“Labour costs in Vietnam will remain significantly cheaper than those of other regional countries for the foreseeable future,” said Doan Mau Diep, head of the Institute for Labour and Social Science, at the Ministry of Labour, Invalids and Social Affairs (Molisa).

Diep predicted that more foreigners would come to work in Vietnam after the government’s removal of the 3 per cent cap on the ratio of foreigners to the total number of employees in an enterprise.
“However, I think most foreigners will work in senior management posts or in other high positions,” he stressed.
Many foreign employees have been heading to the education, banking and finance, stock, hi-tech, law, real estate and construction sectors.

According to Molisa’s initial calculations, about 40,000 expatriates were working in Vietnam. The number of foreigners with work permits in Ho Chi Minh City, the country’s economic hub, reached 1,800 last year, up 34.6 per cent against the previous year, with most working in the garment and textile, education and hi-tech industries.

However, Diep predicted that there would be no significant surge in the number of expatriates in Vietnam, because of their high cost. “Enterprises may decide to hire foreign experts for a period of time. They will then replace those expatriates with locals who have received enough training to take the posts. This would reduce salary costs,” he explained.

A Molisa source revealed that Ernst & Young had hired a local manager with a salary of $200,000 per year, replacing a former expatriate who had received $500,000 per year.
The manager of Navigos Group’s Recruitment Section, Nguyen Thi Van Anh, said that enterprises still preferred locals to foreigners because of their lower payment requirements and their better knowledge of the country’s socio-economic situation.

“A Vietnamese person with good knowledge about local customs and the business environment, who gets familiar with international working condition and skills after being trained, is the ideal employee,” Anh said.
“Vietnam still has the best workforce in Southeast Asia,” said Chen Chi Young, head of the Ho Chi Minh City-based Economic and Cultural Office of Taiwan.

Vice chairman of the American Chamber of Commerce in Vietnam, Walter Blocker, also stressed that Vietnam should promote training for its workforce, particularly in middle, upper middle and senior manager posts, in order to compete with other markets such as China and India. “In order for Vietnam to improve its competitiveness and compete globally for higher-quality investments, resulting in higher pay and higher-quality jobs, it must build a group of trainers,” Blocker said.