DR. VU TIEN LOC - CHAIRMAN OF VCCI: “INCREASING LABOR PRODUCTIVITY SHOULD START FROM WITHIN INDUSTRIES AND BUSINESSES”

 

 

At the threshold of the National Labor Productivity Improvement Conference withheldon themorning of August 7 and chaired by Prime Minister Nguyen Xuan Phuc, Deputy Prime Minister Vu Duc Dam; Dr. Vu Tien Loc - Chairman of the Chamber of Commerceand Vietnam Industry, Vice Chairman of National Council for Sustainable Development and Competitiveness Enhancement, Chairman of the Public-Private Partnership Committee had a presentation on this topic.

“According to Paul Krugman, the Nobel laureate in economics,” Productivity is not all, but in the long run it is almost all. “This shows the importance of productivity and of increasing productivity. Which is the only way to achieve the goal of sustainable growth to get per capita income from 15,000 to 18,000 USD / person in 2035 as set out in Vietnam Report 2035.

According to the General Statistics Office, labor productivity (LP) of Vietnam has improved significantly over the years, a country with a high rate of labor productivity growth in the ASEAN region. Labor productivity (at current prices) is estimated at VND 102 million / employee in 2018, the average growth rate of labor productivity in the period 2016-2018 is 5.77% / year.

Generally for the 10-year period from 2008 to 2017, Vietnam’s labor productivity with purchasing power equivalent to 2011 (PPP 2011) increased by an average of 4% / year, higher than the average increase of Singapore (0.9% / year). ); Malaysia (1.1%/ year); Thailand (2.6% / year); Philippines (3.3% / year); Indonesia (3.4% / year).

However, the current level of labor productivity in Vietnam is still very low as compared to other countries in the region: According to Price Purchasing Power (PPP) 2011, Vietnam’s labor productivity in 2017 was 10,232 USD, equal to only 7.2% of Singapore’s labor productivity; 18.4% of Malaysia; 36.2% of Thailand; 43% of Indonesia and 55% of the Philippines. Notably, the gap in labor productivity between Vietnam and   other   countries    continues to increase. This shows  that  the gap and challenges of Vietnam’s economy face in catching up with the labor productivity level of the other countries.

The process of increasing productivity over in the past period was mainly due to the  shift of labor from the agricultural sector (low productivity area) to the industrial and service sectors (high productivity areas). However, in the current period, the  space for productivity growth based on labor mobility will not be much. Therefore, in order to continue to boost productivity, it is necessary to improve the internal productivity of industries and businesses, especially private sector enterprises.

According to Vietnam Report 2035, labor productivity is declining in the sectors like mining, public utilities, construction, and finance sectors (sectors in which the enterprise plays a leading role, and receives many incentives) . While the operation of private Vietnamese enterprises is more worrisome, although the number of private enterprises increases, productivity decreases. This is because most private enterprises are small and operate in the informal sector,  so it is difficult  to increase productivity based on scale and technology.

Over the years, Vietnam has been competing primarily based on cheap labor and low raw material costs (basic factor) - which are the least important drivers of competitiveness, while Thailand and Malaysia create competitive advantage by continuously improving products and services, and Singapore has long been competing through specific products and services with very high technical level. The reliance on the advantages of cheap labor and low cost for a long time has made businesses neglect to improve theirability to planstrategies, governance,  and  promote  the   application   of science and technology in production, business, to improve work skills and to increas capital efficiency, resulting in productivity of Vietnamese workers being lower than other countries in the region.

In the context that our  country  has  become a low-middle income country, the above mentioned competitive advantages are gradually disappearing, the low productivity problem will be a big obstacle to attracting investment and international integration and will make us fall into the middle income trap. Therefore, productivity must become the main driving force for Vietnam’s competitiveness and economic development.

According to the report “Productivity and competitiveness of Vietnamese enterprises”, there is still a big gap of labor productivity between Vietnamese and middle-income manufacturing  enterprises  in  the   region such as China, Indonesia and Malaysia and that gap is very large compared to industrial countries like Japan and Korea. While the Fourth Industrial Revolution (CMCN4.0) accelerates and risks jobs with simple and repetitive skills lost due to automation in the processing and manufacturing industries. However, the majority of Vietnam’s manufacturing and processing enterprises have a low level of readiness for the to be 4.0 Revolution.

As a national organization representing the business community, Vietnam Chamber of Commerceand Industryalwayshas many activities to propagate and supporttoimprovetheproductivity in particular and competitiveness the economy. VCCI is being assigned to implement the Project on improving productivity of Vietnamese enterprises in the period of 2016-2020, with a vision to 2020 - 2030. In particular, the Chairman of the VCCI has been assigned by the Central Theory Council to host a State level Project on the theme “Competitiveness  of our economy: the current status, issues and solutions”, under the national key science and technology program in the period of 2016-2020 “Scientific research in theory for period 2016- 2020 ”. In the view of Professor Michael Porter - who has studied the framework of competitiveness analysis in the past three decades, the core central element of Competitiveness is the concept of Productivity and Productivity as motivational core factors, leading to the sustainable

Therefore, VCCI has collaborated with  many  national and international research institutes such as the Asian Competition Institute - Lee Kuan Yew Public Policy School - National University of Singapore, Chung-Hua Economic Research Institute, Taiwan, Japan National Policy Research Institute. VCCI has also collaborated with the Japanese Embassy in Vietnam to organize two seminars on the theme  of  national  productivity, the core factor determining the competitiveness of the economy. Research results  of  the  thesis have showed solutions that are fundamental to improve Vietnam’s productivity, thereby improving the competitiveness of the economy. Research results from the report show that one of the important solutions to improve productivity is the implementation of the National Productivity Movement. From the research results and opinions in the above workshops, VCCI has sent a proposal to the Prime Minister to launch the national productivity movement in Vietnam.

The national productivity movement will focus on increasing efficiency and productivity for businesses and organizations through a comprehensive approach, combining people, equipment and management systems. Therefore, Vietnam needs to develop a long-term national productivity improvement program with the commitment of top management - an important factor for the success of large, inclusive policies, and having impact on every industry, every field.

VCCI and the business community are happy to know that the Prime Minister will officially launch the National Labor Productivity Award at this conference.Astowardsthebusiness community, VCCI will continue to build programs to strongly promote awareness of productivity movement in the Vietnamese business community, encourage and support businesses to actively apply productivity improvement methods at enterprises, upgrading governance and technology level, especially implementing the digital transformation process, thereby improving productivity, contributing to improving competitivenessn.