What are the new drivers of productivity for Vietnam?

This forum aimed to look at ways to tackle challenges in boosting productivity and to call upon stakeholders to join forces in unlocking new potential through collaborative solutions.

Gulmira Asanbaeva, programme manager for Productivity Ecosystems for Decent Work Programme in Vietnam, International Labour Organization

Looking back at the last two decades, Vietnam has had remarkable economic progress. Vietnam has become one of the fastest growing industrial hubs in Southeast Asia thanks to an export-driven development strategy. In this regard, it represents a textbook case study of structural economic restructuring and productivity development. 20 years ago, agriculture employed 65 per cent of the Vietnamese population; while today, this figure has dropped to only one-third of the population.

Many people have shifted to occupations in industry and services, which currently employ 31 and 26 per cent of the workforce, respectively. Manufacturing and services are far more productive than agriculture. Therefore, this change has resulted in a significant increase in overall production.

As a result of this successful early phase of industrialisation, GDP per capita has expanded fivefold in the last two decades. This transformation has propelled Vietnam to lower-middle-income status, lifting millions out of poverty.

Nevertheless, the productivity drivers that used to work for Vietnam are running out of steam. The transformation of the country’s production structure from low value-added to high value-added activities has slowed. Furthermore, the Vietnamese economy grows at different rates, with substantial productivity disparities between foreign investments, state-owned enterprises, the domestic private sector, and the informal sector.

Many products in Vietnam continue to have a low proportion of their value added generated domestically. While informal employment has decreased, informality rates remain persistently high, especially when compared to other countries at this income level.

As a result, Vietnam must create new productivity drivers through innovation, more qualified labour, improved technology and production methods, and manufacturing of products with higher value addition.

Human resources are the most significant factor in a successful economic transformation to new drivers of growth and, more broadly, in labour productivity. Other critical components, such as capital and technology, can be imported or produced domestically, and economic, industrial, and other policies may be applied to create a favourable economic climate and drive enterprise development in the desired direction.

It takes time to develop human resources. It necessitates long-term investments, and there are significant time lags before these efforts bear fruit in the shape of a better qualified and productive workforce.

The demands of the Fourth Industrial Revolution and the planned rapid transformation of the economy will require a highly skilled labour force that masters digital skills. Relying solely on incremental growth of the labour force with well and newly educated young workers will not be sufficient to meet these demands. More people that are now in employment, will need to retrain, upgrade their abilities, and pursue lifelong learning more intensively to keep up and this also includes those in older age groups.

The challenge lies in aligning the skills of the current workforce with the evolving demands of the economy and Industry 4.0. Structural transformations may result in job losses, necessitating a proactive approach to retraining and upskilling to meet the requirements of emerging industries.

It is imperative that all stakeholders involved comprehend the absolute linkages between development goals, human resource development, and economic policies. There is no economic transformation without employment transformation.

The good news is that businesses, associations, and the government all place a high premium on productivity. With the adoption of a new National Programme for Improvement of Labour Productivity in November and the implementation of targeted programmes on science and technology, the climate in which productivity growth is sought in Vietnam is highly favourable.

Significantly more, the Vietnamese government is dedicated to realising environmental and social policy objectives in addition to the economic development outlined in the objective of high incomes and net-zero growth.

The International Labour Organization (ILO) has been working very closely with the government on this, for instance, in the adoption of a new Labour Code in 2019, and in many other areas, including employment promotion, social protection, tripartite dialogue, industrial relations, labour migration, as well as the adoption and implementation of fundamental labour conventions, and we can build on this previous work, using the Productivity Ecosystems for Decent Work approach.

The Productivity Ecosystems for Decent Work, supported by the ILO, adopts an ecosystems approach to increase productivity and working conditions. This approach addresses productivity at the enterprise, sector, and national levels, acknowledging the interconnected dynamics. It aims to tackle the root causes of low productivity, involving multiple stakeholders in collaborative interventions.

The flexibility of this approach allows tailored interventions based on in-depth analyses and consultations, ensuring a holistic strategy for sustained productivity growth and improved working conditions.

The ILO in Vietnam remains committed to supporting local partners and enterprises in enhancing specific segments of the productivity ecosystems for decent work. This commitment involves the improvement of effective implementation of employment policies and the application of innovative technical and management tools. These tools aim to empower enterprises in areas such as human resource development, working condition, social dialogue, process optimisation, digitalisation, and green productivity.

ILO praises Vietnam's efforts in promoting decent work in supply chains The International Labour Organisation (ILO) applauded Vietnam's efforts in collaborating with the agency in the field of labour statistics and implementing the Decent Work Country Programme at an international seminar in Geneva on October 16.