Is Vietnam’s productivity low because Vietnamese work for foreigners?

When asked to make comments about Vietnam’s low productivity reported by International Labor Organization (ILO), Nguyen Xuan Duong, chair of Hung Yen Garment Company, said the productivity of the garment industry was low, but specific businesses had a higher level of productivity.

The productivity is calculated based on workers’ skills. At Hung Yen Garment Company, productivity in 2014 was $2.5 per working hour, which was equal to that of Thailand in 2012. However, the average productivity in the garment industry was just equal to 60 percent of other regional countries, $1.5-1.8 per working hour.

Vietnam’s garment industry only began developing in a number of years ago, and workers still don’t have high skills.

“Older companies which have been operating for 5-10 years have higher productivity, while newly set up businesses have low productivity of $1-1.2 per working hour.

Why do Vietnamese have low productivity when working for Vietnamese enterprises and have higher productivity when working for foreign invested enterprises (FIEs) then?

Duong said FIEs make specialized products for specific markets and workers there can become skilled just after one year of working. The workers at the project developed by the US Hanes-Brands in Hung Yen province, for example, specialize in making men’s underwear and T-shirts. They can become skilled just after one month.

Meanwhile, Vietnamese enterprises cannot take these jobs. Most of them ‘live from hand to mouth’, do outsourcing for foreign enterprises, i.e. they do what they are told do to. Therefore, the workers in the enterprises do not have high specialization level than workers in other enterprises in the same Vietnamese market.

“Therefore, it is not completely true to say Vietnamese productivity is low,” Duong said.

Why do businesses still refuse to raise the minimum wage as requested if they deny the fact that their productivity is low?

Answering this, Duong said most businesses pay their workers based on revenue. Hung Yen Company, for example, reserves 60 percent of revenue to pay workers.

If the social insurance premiums increase, workers net incomes will fall. The premiums which were 7-8 percent of total revenue, have increased to 9 percent.

The social insurance premium is 32.5 percent, while the trade union fee is 2 percent, which places a heavy burden on businesses.

Duong noted that productivity is not too low, but it increases by no more than 5 percent per annum, while businesses are requested to raise wages by more than 10 percent per annum.

Dat Viet (151119)