Labour market and Employment conditions in Vietnam

By Dr. Dao Quang Vinh Institute of Labour Sciences and Social Affairs, Viet Nam

I. Introduction: Vietnam has embarked on reform process since 1986 with the emphasized efforts to shift the centralized planning economy to market oriented economy. Since then, Vietnam has achieved the development and advancement with more openness and further integration into the world economy. With the sound guideline on reform and policies on openness, Vietnam has been more and more initiative and dynamic in integrating to the global economy. The dynamic exchanges of goods, services, capital, technologies and labour, globalization has increasingly and strongly impacted to all dimensions of socioeconomic life of Vietnam. After more than 11 years of negotiation, Vietnam has officially become the 150th member of the WTO in November 7th, 2006. The integration of Vietnam into WTO has created more new opportunities which may result to promotion of the growth of export industries and intensive absorption of foreign direct investment (FDI). However, this event brings Vietnam to the exposure of global severe competition. With the further integration into the world economy, Vietnam has more chances to strongly involve in the international labor division process. The sectors with more competitive advantages shall have more opportunities for development as the result of the expanded market, thus, more job opportunities are created. There are more opportunities to turn the competitive advantages of Vietnamese labour such as high proportion of literacy and cheap labour cost into better economic effectiveness. Foreign investment in Vietnam is expected to increase, and in parallel, Vietnamese enterprises have chances to access to advanced technologies and modern management techniques which are resulted to more new jobs generated and increased labour productivity and higher wages. In addition to opportunities, there are also many challenges exposed for Vietnamese enterprises. With expanded trading linkage with foreign partners, Vietnamese enterprises are facing with the pressure posed by strictly compliance of labour standards, code of conducts, regulation on moral practices, and performance of social corporate responsibilities, and other environment related qualities and standards as well. With regard to labour force, the most challenge for Vietnam is low skill qualification of labour, in the mean while, there are still many problems and constraints in term of education and training, delivery of high quality training services is not capable and sufficient to respond the demands of employers. It is expected that the competitiveness in employment and labour cost shall be more severe in a more open and broader labour market. In the meantime, the legislation for operation of labour market has not yet well- refined in Vietnam that causes to higher labour cost, higher transaction cost and employment fees. In responding the new requirements in the new context, it is the need to strongly and consistently change the legal system and management mechanism with the aim to rapidly and consistently formulate relevant factors of market economy, creating legal basis for

performance of market economy principles, eliminating all discrimination, creating equal playing field and building a healthy competitive environment. With regard to labour and employment, it is necessary to accelerate the changes in labour and employment policies, labour market regulations and employment conditions

II. Globalization and its impacts on labour market. 2.1. Globalization and integration of Vietnam 2.1.1. Opportunities and challenges in international economic integration. One of the critical characteristics in economic reform process embarked by Vietnam during the last years is more and further integration into the world economy with the most tangible mark is the inclusion of Vietnam as the official member of WTO at the end of 2006. Import export activities have been more dynamic with relative high growth rate. There have been more positive signs in term of foreign direct investment. Vietnamese workers have more opportunities to find jobs in many other countries. a) Opportunities Globalization has brought unheard of opportunities for many countries in the world, including Vietnam. With the advancement of information and telecommunication technology, transaction cost has more and more decreased, partial and temporal distances between the nations have been narrowed down; the conditions for knowledge accessibility are improved and increased. Globalization has increased and promoted the ownership of actors involved in this process as it increases the options for choices for them1. Globalization brought advantages for promotion of economic factors such as capital, techniques, knowledge, adequate allocation of resources, expanding trading activities, improving economic effectiveness, intensifying the economic and technical linkages between the nations and regions. World market becomes an extremely huge capital and technology resources that all countries could be able to find opportunities to exploit. Human being knowledge and global information are widely disseminated that all people can have opportunities for access For Vietnam, globalization create an greate opportunity to absorb direct foreign investment and receive new technology to promote economic development. For the period of 2001 - 2005, flow of direct foreign investment has increased by 35% with total volum of US $ 3.3 billions by 2005. Foreign investment constitutes to 16.% of total national investment in 2005, FDI sector contributes a share of 37% of total industrial production value, and accounting for nearly 56% of export turnover, contributes to 15.9% of Vietnams GDP in 2005 (table 1)

Stiglitz J. E. v Yusuf S. (2002), The World Bank, Publishing House, Ha Noi.

Rethink about East Asian Mirecles, Political

Table 1. Direct foreign investment in Viet nam 2001-2005 2001 Total (Mill. USD) Share of total investment (%) national 2,450 17.6 2002 2,591 17.5 2003 2,650 16.3 2004 2,853 15.5 2005 3,309 16.3

Source: Statistical year book 2005, Statistics publishing house, Hanoi 2006, p. 93

Foreign investment has been strongly absorbed by industries, of which processing industry alone attracted 50% of the total FDI2. Thank to a strong flow of FDI, Vietnam has created conditions to increase capital, receiving advanced production technology and modern management techniques, promoting economic restructuring, creating more jobs and transferring labour structure towards industrialization and modernization, ensuring the high growth rate and narrowing down the gap in development with other countries. GDP growth rate for period of 2001-2005 gains 7.5% at average. In this period, proportion of agriculture production in GDP reduces from 23.24% to 20.9%3. FDI sector with superior advantages on capital absorption and equipment of technology, has obtained a twice higher productivity compared to domestic enterprises. Although during the period of 2001-2004, there was a boost of private enterprises with double increase of productivity, the disparity in term of productivity remains high in compare with FDI enterprises. State owned enterprises have not gained any increase of productivity, thus, by 2004, these enterprises were lagging behind private sector (Figure 1)
Figure 1. Labour productivity by enterprises ownership for period of 2000-2004 (millions VND/employee/year)
450.000 400.000 350.000 300.000 250.000 200.000 150.000 100.000 50.000 0.000 2000 2001 2002 2003 2004

FDI

Private

SOE

Source: computation on the basic of enterprises survey undertaken by GSO in 2000, 2001, 2002, 2003 and 2004.

Globalization has promoted trade development and created more enabling environment for Vietnam to more widely and deeply integrate into the international labour division to better use of the national comparative advantages. Import- export activities
2 3

The 2005 statistical yearbook, statistic publishing house, Hanoi, 2006 The 2005 statistical yearbook, statistic publishing house, Hanoi, 2006

strongly developed with growth rate of about 20% during the period of 2001 2005 (see table 2)
Table 2. Import export activities value and growth rate by period 2001-2005 2001 Export (Mill. USD) Growth rate (%) Import (Mill. USD) Growth rate (%) 15,029 3.8 16,218 3.7 2002 16,706 11.2 19,746 21.8 2003 20,149 20.6 25,256 27.9 2004 26,485 31.4 31,969 26.6 2005 32,442 22.4 36,978 15.7

Source : The 2005 statistical yearbook, statistic publishing house, Hanoi, 2006, page. 423

International trade has become an important factor to safeguard the economic growth. By 2006, export turnover constitutes a share of 60% of total GDP4. Thank to the boost in FDI sector and increase of export, the economy has created much more new jobs. It is stated that integration and globalization have made considerable contribution to economic growth, jobs generation, poverty reduction and opening the way for long term and sustainable development, enabling Vietnam to advance toward with the same speed of other countries5 b) Difficulties and Challenges It is the must to emphasize that, opportunity, in the practical meaning, conceives to be potential. Opportunities themselves do not conceive practical specific value. Opportunities can only be turned into reality only when there are enough conditions to uptake them. Involvement in globalization process means Vietnam has to commit for compliance a series of requirements for integrations such as the regulation on copyright or banking standardsIn the meanwhile, there are many international standards, regulations which have been formulated in the context where developed countries take the driving force role. Thus, the countries with low level of development such as Vietnam are prone to be more vulnerable to the risks. Economic globalization shall bring more opportunities in business making, more jobs generated but these opportunities are accompanied with challenges of more rapid change of technology, shorter revolving circle of production, more flexible circulation capital, more severe human comparativeness and more risks in employment. The most severe challenges for Vietnam in current time and in future are how to overcome the weakness of the economy and to cope with the lagging behind of the human resource The competitiveness of the whole economy in general and each commodity, service in particular is much lower in compare to other countries in the region and the world in

4 5

According to the report of GSO Vietnam Human development 2001, National political publishing house, 2002 c

term of quality, price, and model. In 2006, Vietnam stands as the position of 98 in the rank of 175 countries on national competitiveness. Infrastructure (road, ports, transportation, telecommunication, power, water supply) is less developed and can not respond the requirements of economic development. Technology level of the economy is very out-dated (about 3 -5 generations lagging behind the countries in region). The application of informatics technology in management and trading is still limited. Human resource reveals many inadequacies in term of qualifications. There are worrying signals in term of skills, sense of professional moral, sense of labour discipline obey, technology rules compliance, heath and ability of foreign languages. By 2005, there was 74.7% of labour force who remained unskilled, for women labour, the rate was 79.2%.6 Physical infrastructure for training and vocational training system in Vietnam is too out-dated compare to the general level of many other countries in the regions and the world. The investment capacity on education and vocational training stands at very low level7 2.1.2. The impacts of integration on labour policies in Vietnam. a) Impacts of international economic integration to employment In general, international economic integration has positively impacted to employment of Vietnam during the last years in term of number of jobs created, quality of jobs and income generation. - Employment in FDI enterprises. So far, foreign direct investment mainly concentrated on the processing industries and some services, where enterprises could take usage of cheap labour cost. Thus, besides the petroleum exploitation sector, the sectors with high share of foreign investment are the labour intensive industries such as garment, textile, leather, seafood processing, electronically goods and others There is a trend of increase of number of workers working in FDI sector. It rises from 0.6% of total workforce in 2000 to 1.6% in 2005, or increased by 0.7 millions of workers from 15 years of age and above8 . - Employment under the impacts of international trade. In the processing industries of Vietnam, there is contrast differentiation into 2 extremes. One side is the export led industries with labour intensive consuming such as garment, textile, leather, woodwork, seafood process, and the other side is high protective industries with less labour intensive and less employment generation such as cements, steel producing, and chemical industries.
6

Statistics on labour and employment, 2005, Labour-social publishing house, Hanoi, 2006. p.16. 7 Report by General Department of Vocational training in the 2006 Annual review meeting of MOLISA, 1/2007 8 Status of Vietnam enterprises GSO website

However, the economic integration of Vietnam has undergone mainly in expanding export market. The highly export led industries have brought more jobs for labour. In 2004, out of the total workforce of the processing industries9, the labour of leather industry constitutes to 18%; it was 17% from garment and textile industries, 16.4% from seafood processing, and 6.5% from wood processing industries. In principle, industries which have been strongly protected by tax and non tax barriers shall be negatively affected by the integration process, thus, the number of jobs in these sectors is also expected to be reduced. In the past, as the Vietnam economy has not fully integrated into the world economy, the negative effects of integration to the economic development as well as the protected industries are not tangibly obvious. However, since Vietnam became the full member of WTO in 11th January, 2007 and in this context, negative impacts from integration process to the employment will become more inevitable, if Viet Nam doesnt carry out a prompt modification and adaptation for the economy. According to the assessment of The World Bank, with the available resources (human resource, labour force in compare to land), Vietnam has enough preconditions to learn and repeat the successes of Asian countries in export led production and job generation10. Applying the results from research undertaken in 115 countries of Wood and Mayer in Vietnam context, Belser 11 has estimated the labour coefficients in export and import replaced industries in Vietnam as follows:

Manufacturing sectors Export industries (SOEs) Export industries (FDI) Export industries (Trung binhf ) Import replaced industries

Number of workers per 1.000 USD of output value 0,259 0,232 0,245 0,108

According to the result of this estimate, it is stated that export industries has double higher level of labour usage compare to the import substituted industries. This means, expanding export industries based on the labour comparative advantages shall generate more jobs than development of import replaced industries. After the computation of gains and losses, Belser (2000) indicated that if Vietnam increases the ratio of export processing industries to 63% instead of 37% at current time, it could create more 1.2 to 1.3 millions jobs. It is tangibly that Vietnam has great comparative advantages that have not been fully exploited in export industries, especially for light industries (labour intensively consuming industries) Unlikely to other Asian countries, for Vietnam, figure on export has been continuously positively changed, is because, electronically products are not the essential

Status of Vietnam enterprises, GSO Website Attracting poverty, world bank, Hanoi, 2000 11 The World Bank, 2000, Viet Nam attacking the poor, Hanoi
10

products of Vietnam, instead, the key products are agriculture-based products, seafood, garments and leather goods. According to the assessment of the World Bank12, the Vietnam US trade agreement, when comes into performance, shall bring one more 1% of economic growth for Vietnam. With the employment elasticity coefficient is estimated to 0.33% according to GDP, the Vietnam US trade agreement shall create 130,000 to 150,000 of new jobs. - International labour migration Vietnam began to export labour in early 1980s. The destinations for the first flow of labour export were former Soviet Union and East of European countries. But the number of export labour was rapidly reduced as the consequence of the political chaos in this part of the world. In early of 1990s, Vietnam labour export entered into a new process which targeted to non- traditional market as (Libyan, Arab countries) and newly developed Asia countries such as Japan, South Korea, Taipei, Malaysia and Singapore. In late of 90s, the number of Vietnamese laborers working in Asia countries rapidly increased due to the shortage of labour in these countries and their policies on importing unskilled and semiskilled labour. By considering the activity of sending labour to work abroad in definite term to be an important solutions for job placement, the policies on employment haven been resulted to accelerate the scale and diversify the market for Vietnam labour. In 2001, South Korea and Japan markets constituted the largest proportion of export labour, but in 2005, such markets are replaced by Taiwan and Malaysia. So far, 4 mentioned above nations are the main market for Vietnamese labour, accounting for 82% of total Vietnamese workers working abroad in labour contract with definite term. (Table 3)
Table 3. Number of Vietnamese workers working abroad in labour contracts with definite term Unit: Person 2001 Total Of which : South Korea Japan Malaysia Taipei Others 3.910 3.249 23 7.782 21.204 1.190 2.202 19.965 13.191 9.574 4.226 2.264 39.624 27.981 1.605 4.779 2.752 14.567 37.144 8.205 3.850 2.500 19.500 20.750 10.900 36.168 2002 46.122 2003 75.700 2004 67.447 2005 70.590

Source: Ministry of Labour Invalids and Social affairs (MOLISA).

There are also positive changes in term of career modality of export labour. In early 1980s, almost of export labour worked as manual workers in factories, but at current time,
12

The World Bank, 2000, Viet Nam attacking the poor, Hanoi

the percentage of semi- skilled and skilled labour has increased to about 55% in 200513. However, the ratio of highly skilled workers and professional specialists remains low. It is estimated that during the next years, labour export will be more increasing, and the share of semi skilled and skilled labour will also be raised when Vietnam further integrates more deeply into the regional and world economy. b) Impacts of international economic integration to employment policies During the last 20 years, all guidline and orientation of the State on reform has been institutionlized into legal documents, shaping a relative complete legislation framework for the formulation and development of labour market. These legal documents include Labour Code, Decrees of the Government, Circulars issued by Ministry of Labour and Social Affairs and other joint circulars, policies formulated by localities. The Labour code was ratified by the National Assembly in 1994 and took effect in 1/1/1995 and was amended and supplemented twice in 2001 and 2004. The promulgation of labour code has put the ground for the formulation and development of labour market. By promulgating the labour code, perception, concept on employment and the guideline for job placement have been basically changed. In the past, only job in the state sector and collective sector were considered as a job, but with the promulgation of the labour code, the view point of the employment was changed dramatically. The Article 13 of the Labour Code stated that all labour activities generating a sources of income and not prohibited by law shall be deemed to be employment This change creates a new concept on employment and gradually replaced the former perception of people on job, promoting the ownership and initiativeness of employers and employees. Workers are placed in the central position, and are initiative to find a job instead of waiting and being independent to the job placement by the state. Employers are stimulated to invest on development of production, business and services for job generation. The labour code provides an official protection of the rights to freely exchange, purchase and sell labour services. Worker owns his or her labour and has full right to determine the usage of labour. Employers shall have all rights to recruite workers, increase or reduce the number of employees according to their production or business requirements. The legislative protection is stipulated in the Article 16 as An employee shall have the rights to be employed by any employer in any location not prohibited by law; and An employer shall have the rights to recruit employees directly or through Job introducing angencies, and to increase or reduce the number of employees to suit production and business requirements and in compliance wit the provision of the law. The labour code stipulates other provisions regulating the relations of labour market such as, relation on vocational training, labour contract, wage, labour disciplines, labour safety and health, social insurance, trade union and state management on labour issues. In order to provide guidance for implementation of labour code, the Government has issued a number of Decree on labour contract, employment, wage, social insurance, time of work and time of rest, labour safety and health, collective labour agreement. The Prime Minister has issued Decision N. 48/QD-TTg ratifying the planning and projection of vocational training network, incorporating the component of vational training into the national targeted program for poverty reduction and employment for period of 2001-2005 which contains a number of support policies and projects for the poor, laborers in

13

Study on sustainable development of labour and social issues, Molisa, 2005

improving their knowledge, skills, loans for job generation, development of new trades, labour restructuring. In addition to the labour code, other laws such as the Law on enterprises, the law on investment, including promotion of foreign investment, civil law, land law.. and other policies of the State have created a fundamental legislation framework, making a great contribution to liberalization of production forces, realization of labour potentials, and these both directly or indirectly impact to the development of labour market. However, it is necessary to state that the regulating coverage of labour code is still limited, the outreach of labour code is still limited in formal sector, and even in formal sector, there are still many constraints in fully implementing the provisions of labour code. - Macro policies on job creation This group consists of policies on job creation and employment adjustment in a macro aspect (nationwide). The objectives of these policies are to create more jobs for the employees and enhance the employment structure transformation in a modern and advanced way in order to increase labor productivity and improve the workers living standard. These policies express the great and fundamental guidelines of the State; there are great approaches of the period of mid-term and long-term plans to develop the socioeconomy and labor-employment of the country (5 year Plan, Development strategy and plan for the coming 10-15 years, Long-term vision, etc.). The key macro policies on employment include: . The policy on diversifying the employment and capital source and subjects for job creation: These are incentive and supporting policies for investment and job creation influencing all the subjects in the society who create jobs for the employees. . The investment policy on encouraging and supporting the job creation: The State plays an active role in job creation in all national economic industries and gives the priority to industries which have the incentive and spreading effects on other economic parts. The content of the policy is not only to set up a comfortable legal corridor but also a financial support (preferential credit, infrastructure building, educations, information supply, and so on). . Policy on employment structure: Through investment policy, the State directly invests and gives measures to encourage or limit the investment in some industries, fields, regions, etc. to create jobs. It has a decisive meaning and interdisciplinary and interregional impacts on creating an advanced employment transformation with 3 main forms of structure as employment structure according to industry (transferred from agricultural jobs to non-agricultural jobs), employment structure according to technical qualification (transferred from low-skilled handicraft labor to mechanized labor and heading to automated labor) and employment structure according to regions (mainly transferred from rural labor to urban labor with industrial working behavior, requirement for professional education and skills for higher productivity, quality and efficiency). . Specific policies on employment These are specific policies and solutions on directly creating jobs and supporting on job creation. They are involved in particular action programs, plans, projects edited and implemented in each certain period of time. For example, Decision No. 120/Q-TTg of the Prime Minister about National program on employment settlement for the period of 19962000, National target program on employment and HEPR for 2001-2005, labor policies in the process of equitization State-owned enterprises, etc. Besides, there are also other important policies relating to that of the process of job generation, the adjustment of

industrial relations as minimum wage policy and wage management policy, social insurance policy, regulation on labor protection, labor safety and hygiene, etc. 2) Labour market reform and its impacts on employment conditions in Vietnam It is said that the labor market in Vietnam is nowadays in the process of establishment, hence there are many shortcomings (e.g. undeveloped, partitioned by regions and territories, lack of legal framework, etc.). The number of people directly participated in the labor market (wage workers) by 1 July 2005 was 11.10 millions, occupied 25.6 per cent out of the total employed labor. This number was 3.1 times bigger than that of 2000 (on 1 July 2000, the number of wage workers was 3.63 millions), i.e. annually the number of wage workers increased by 726.1 thousands of people on average, or the average growth rate is 8.24 percent per year. The employment policy evokes the extension of the number of wage workers in nonagricultural sector (industry-construction and services) but in the agricultural-forestryfishery sector, the impacts remains limited. While the model of small-scale household economy still rules in rural areas, the situation of self-employment in agricultural-forestryfishery is very popular. In the total number of employed labor in rural area, the rate of wage workers in agriculture-forestry-fishery only accounts for approximately 6 percent, that of non-agriculture is 22 percent, the last 72 percent is the self-employed, of which the self-employed in agriculture-forestry-fishery hold 53 percent. The development level of the labor market, broken down by the rate of wage workers, is different among regions and localities. In 2005, the rate of wage workers in urban area was 49.4 percent while that in rural area was only 18.2 percent (table 4).
Table 4. Percentage of wage workers 15 years old and above in 2005 (%) Of which Region Nationwide Of which: 1. Northeast 2. Northwest 3. Red river Delta 4. Northern Central 5. Coastlines of Southern Central 6. Highlands 7. Southeast 8. Mekong Delta 14.67 9.75 26.18 15.01 27.53 16.36 44.23 28.07 49.68 53.34 58.12 43.96 46.90 35.99 52.84 40.91 7.74 3.80 18.74 10.93 20.41 9.46 34.62 25.15 Total 25.6 Urban 49.37 Rural 18.21

Source: Labor Employment Survey con ducted by MOLISA in 2005

Red river Delta, Coastline of Southern Central, Southeast and Mekong Delta have the rate of labor market participation higher than the medium rate of other regions and in the nationwide. In general, there is no big gap among the regions in terms of the rate of labor market participation in urban areas while there is one in rural areas. In order to speed up the development of the labor market, the Government has recently carried out a great deal of measures to enhance the institutions, promulgate tools and strengthen the activities of the labor market: - Employment services: By 2005, there were 177 public employment introduction centers, including 64 centers under the provincial Departments of Labor, Invalids and Social affairs, and other 117 centers under the mass organizations and ministries and industries. In the nationwide, over 3000 enterprises performing in the field of employment consultancy and introduction. The number and types of such services run by Centers and enterprises are diversified. However, the quality of employment services is still low and inefficient due to the lack of information on labor market, and lack of tight combination with enterprises and training units. - Job fairs Together with the activities of Employment introduction centers and enterprises of employment services, a kind of tool of the labor market, which is effectively organized and run, is Job fairs. Since 2000, there have been over 100 Job fairs organized in many localities in the nationwide. Beside the general Job fairs, a number of professional Job fairs and the ones for particular groups of people have also been organized. In such affairs, ten thousands of people have been offered advice and jobs. Beside the enterprises, the workers, and labor administration agencies, the participants of such job fairs are also training/educational organizations, centers, employment introduction enterprises. - Establishing employment information center The employment information centers, websites for worker and work seeking, vacancy articles are now more and more making a great contribution to the development of the labor market. A typical example is that within the project of enhancing the development of the labor market, the design of dataset and information on employment has been carried out as a pilot and run effectively at several localities. Among that, the noticeable outcome is in Dong Nai province. The Department of Labor, Invalids and Social Affairs quarterly releases the information on the recruitment demand of enterprises operating in the province, hence the workers are able to find jobs14. Nevertheless, it is only possible to collect and release the information on labor demand (employment) but not the information in labor supply. Moreover, the input information is still restricted. In the years to come, the number of wage workers will keep raising and the labor market will be more and more diversified. Therefore, it is essential to have specific regulations to instruct and manage the activities of the labor market to upgrade the efficiency of the labor supply-demand as well as to protect the benefits and determine the responsibility of the participants of the labor market. Properly managing the labor market plays an important role in arranging the employment, reducing the unemployment and enhancing the flexibility of the labor force as well as preventing and mitigating many other socio-economic consequences.

14

MOLISA

2.2.2. Employment conditions of workers in circumstances of integration, competition and development. In the context of economic openness to the world integration and for development, enterprises have to compete not only in term of products quality and price, but also raise their competitions in terms of commitment to take care of life and working conditions for their workers. This means, enterprises have to commit to perform the Social Corporate Responsibilities (CSR), which is a quite new issue for Vietnamese enterprises but it become an actual requirement for international economic integration. Currently, enterprises have been more and more concerned not only on advancement of technology, reform of production management, expansion of market, but also on compliance of labour legislation and labour standards, paying more attentions on their workers and environment protection. The current surveys conducted by Institute of Labour Science and Social Affairs indicated that leaders and managers of enterprises in export manufacturing and processing industries are aware that their clients will not accept the products if enterprises violates labour legislation, using child labour, or enterprises do not comply to safeguard necessary working condition and labour safety, or commit to any bad behavior of disrespecting labour

Box 1
In engaging in the business with us, such companies as Nike, Reebok, and Adidas. Have sent their representatives to our company to check and propose their specific requirements in relation of social corporate responsibilities. They will not accept our products if we commit in any violation of labour code, using child labour, forced labour, or not arrange safety labour conditions for workers, or applying too strict disciplines to workers, Mr. Nguyen Thien Thuat, General Director of Coast Phong Phu, Hochiminh city.

Those enterprises that well perform CSR have gained remarkable benefits including cost reduction, revenue increase, better trade - mark prestige, worker dismissal reduction, labour productivity increase and more opportunities in accessing to new markets. According to the survey undertaken by the Institute of Labour Science and Social affairs ( ILSSA) recently in 24 enterprises in garments and textile, leather industries15, thank to the implementation of CSR, those enterprises have gained 25% of revenue, labour productivity increased from 34.2 millions VND per year to 45.8 millions VND/year, proportion of export products increases from 94% to 97%. Besides the economic profits, enterprises also gained benefits from better trade prestige, the commitment and satisfaction of workers and being able to employ high qualified skilled workers. These enterprises have adopted the adequate and fair salary mechanism, creating training opportunities for workers, fully implemented commitment on health insurance for workers, keeping safe and clean working environment, these all help enterprises in keeping good workers to stay to work for enterprise.

15

Dao Quang Vinh, report on CSR in enterprises of leather & footwear and textile and garment sectors, ILSSA, 2003.

However, its important to state that not many enterprises in Vietnam engaged in practice of CSR, it is because enterprises are not aware about the benefits gained, and in the meanwhile, there is no requirement from their clients. In the national policy framework, bedises the policies on economic development, social and environment protection goals have aslo been mainstreamed into the Governments legislations. Vietnam Government stimulates and creates enabling environment for enterpirses to engage themselves to perform Social Corporate Responsibility in the enterpirses operations. Ministry of labour, invalids and social affairs (MOLISA) in collaboration with Ministry of Industries (MoI) offers annual rewards for those enterprises that have best practice of social corporate responsibility. Such enterprises have been honoured widely in mass media. In order to promote CSR, honour and praise the enterprises which have been implementing well CSR, for 2 years of 2005 and 2006, Vietnam Chamber of Commercial and Industries (VCCI) in collaboration with concerning agencies as Ministry of Industries, Ministry of Labour and social affairs (MOLISA), Vietnam General Federation of labour (VGFL), Vietnam Association of leathers production, Vietnam Association of Garment and Textile, Vietnam Action Aid... have organized honour recemony to offer rewards for garment and textile enterprises which have well implemented CSR. The honour rewards have made contribution to improve the pretige and image of Vietnamese enterprises in integration process in one hand, and in other hand, this enables Vietnamese enterprises to cooperate with regional firms and forums in implementing CSR for sustainable integration. For the period of 1994 to 2006, the Labour code had undergone two round of revision and supplement with the aim to promptly modify the policies and regulations pertainning labour and labour relations emerged in the market economy, to adapt them to be more compatible with international practices. This improvement created enabling conditions for enterprises to well perform CSR and Code of Conducts (CoC) required by client partners. The main contents include: - Regulation on child labour: According to the Vietnam legislation, there are 2 minimum age thresholts for labour as: mimumum age for a person to engaged in normal work in normal working conditions is fully 15 years old; mimumum age for a person to engaged in hazadous and hard work is 18 years old. - Regulation on forced labour: The Labour code has stipulation that any ill treatment with labour or forced labour in any forms are forbidden. - Regulations on discrimination, harassment and abuse: Labour Code states that disrimination in all cases is forbidden. It is regulated in the Article 5, point 1 of the Labour Code states that all people have the right to work, the right to freely chose career and job, to vocational training and improving career qualification without disrimination of sex, ethnicity, social classes, and religious practices. - Regulation on wage, salary: The Labour Code stipulates that the State shall decide and promulgate for each period and revise the minimum wage according to the changes of costs of living to ensure the living standard for workers and their household. In addition, Labour code also promulgates the regulation of payment for overtime works in case of performing normal overtime hours, overtime in night work and in public holiday time with the different rates of 150%, 200% and 300% of basic salary correspondingly. - Regulations on time of work and time of rest: normal working hours for workers shall not exceed 8 hours per day and workers are entitled to have at least one day off of a week. Enterprises shall determine the working hours on week with 48 hours for 6 days or 40 hours for 5 days or 44 hours for 5.5 days. For adolescent workers, the

working hours shall not exceed 7 hours per day or 42 hours per week. Employers and employees may agree on overtime working hours but the number of additional hours shall not exceed four hours a day, or 200 hours a year, with the exception of some special cases, the number of overtime working hours shall not exceed 300 hours per year (for export production and proceesing enterprises in garments, textile, leathers, sea food processing industries). - Regulation on freedom of association and collective labour agreement: The labour code promulgates that all acts to impede the estbalishment and the activities of trade union in enterprises are strictly prohibited. Employers shall not discrimiate against employees on the ground of their forming or joining trade unions, or participating in trade union activities, and shall not by economic measures or other manoeuvres, seek to interfere in the organization and activities of trade unions. With the possitive changes with implementing CSR, the role of workers and trade union are better appreciated in enterprises. The results from current garment and textile enterprises survey reveals that many enterprises have undertaken a series of reforms in the opration of internal supervision and management system, developing clearer functions and tasks in the management system, improvement of equipment and human resource and developing specific operatinal plan for each management section16. Such enterprises have also setup a system of labour regulations and other internal rules with specific stipulations on clarification of responsibilities and obligations of each parties, rights and benefits of workers. These regulations are disseminated to all employees by various chanels such as widely posting or meeting at workplace. All reform activities have been warmly welcome and actively involved by empployer, employees and representatives of trade union. Especially, the role of trade union has been more and more increased in the internal supervision system. In all enterprises which are implementing CSR have setup a section or assigned personnel to oversee the implementation of CoC, or setup labour protection council, or supervision team at production unit and workshop17 The important reforms in monitoring and manangement system include: (i) improvement of transparency on and implementation of policies of enterprises towards employees and (ii) promoting the participation of emplloyees and trade unions. Policies and benefits for employees are widely posted at workplace or at the public places of enterprises areas. Reporting system have been improved with intensified frequacy with the aim to have better and prompt understandings on business and production operation, the performace of enterprises policy and status of labour relation. Quality of report has also been improved, especially the bookeeping and record system relating to personnel, labour protection, fire prevention, health care for employees, record of time of working and time of rest, wages and other benefits for employees.. The important reform relating to working conditions is the establishment of mechanism for negotiation and settlement of labour dispute at enterprise. The labour code promulgates specific regulations on engagement of labour contract between anemployer and an employee. The main contents of the labour contract should be the task shall be performed, time of work, time of rest, wage, workplace, term of contract, labour safety conditions, social insurance for employees. Enterprise and employees are free to enter into negotiation on working conditions, wages and salary basing on the prevalent wage level in the market. Labour market information has been more and more important for workers and employers to negotiate wages, time of work and working condition.. Trade union and
16 17

The 2006s enterprises survey of ILSSA Dao Quang Vinh

employees have been more and more interested and actively participated into the negotiation process and settling the labour dispute, protecting the benefits of employees and building a harmonized labour relation in enterpises. However, in the implementation of the mechanism for negotiation, and mechanism for settlement of labour disputes, some of constraints appear as follows: - Firstly, trade union hase not been formulated in many enterprises. According to report of Vietnam General Confederation of labour union, 100% of state owned enterprises have trade union, while only 50% of FDI and 20% of private enterprises have trade union18 - Secondly, even in many enterprises where trade union has been established, operation of trade union is not effective due to the limited capacity of trade union staff, or the dependance of trade union staff to employer (work assignment, wages) or due to the impedance of employer19 - Thirdly, workers, especially migrant workers, young workers are lack of understandings on labour legislation, and lack of awareness on the way to protect their legitimate rights and benefits, they are not concerned on trade union activities20. 2.2.3. Benefit of workers in labour market reform One of important contents of labour market reform is to formulate policies and solution to protect workers against market risks and changes. The main policies pertaining protection of workers include: regulations on social insurance, health insurance, compensation for labour contract termination, work severance allowance and other allowances. a) With regard to social insurance (including health insurance) Coverage of social insurance has been remarkably expanded during the last years. Since January of 200321, coverage of social insurance has been expanded to all workers employed by enterprises, bodies and organizations under the labour contract with definite term of over 3 months and labour contract with indefinite term without discrimination of labour scale or ownership of employers, including all types of bodies and enterprises, cooperatives, semi-state entities and private entities. This regulation has created an equal access to social insurance between workers of different economic sectors. The number of people covered by social insurance sytem has increased from 3.2 millions from 1996 to 5.8 millions in 2004 and 5.93 millions by June of 200522 The Law on social insurance stipulates the contribution obligation of employers and employees to the social insurance fund. The employers shall contribute 15% of total wages fund of the enterpirses to the social insurance fund and 2% of total wage fund to the health insurance fund; the employees shall contribute 5 % of their actual wage to social insurance fund and 1% of wage to health insurance fund. Social insurance schemes have been promptly promulgated and revised in accordance with the Labour code and the law on social insurance.
The 2005s annual review report, Vietnam general confederation of labour unions Enterprises survey in 5 provinces of Hatay, Hungyen, Khanh Hoa, HochiMinh city and Dong nai, 9/2006 20 Enterprises survey in 5 provinces of Hatay, Hungyen, Khanh Hoa, HochiMinh city and Dong nai, 9/2006 21 According to a new regulation of the Government on social insurance. 22 Report of Vietnam Social Insurance, 2005
19 18

With the formulation of social insurance fund, seperately from the state budget and operating independently, the fund has performed initiate income generating activities for growth. Social insurance fund has ensured to timely pay benefits to insured people. Social insurance has made possitive contribution to stabilization of workers life in working process and in retirement age. In this line, responsibilities, obligations, rights and benefits of all partners in engaging social insurance and relation between the contribiution and compensation are clarified. Thus, the egad and subside practice have been gradually eliminated but the sociality in distribution of benefits in the community has been safeguarded. However, the factual implementation of regulations on social insurance reveals a number of contraints as follows: - The share of employees who are actually covered by social insurance still remains small, especially for workers of private sector, where only 20% of employees engaged in social insurance. Many private enterprises, especially those working in health care and education sectors, traditional handicraft trades, private trading households have not participated in social insurance system23. - The social insurance schemes have not been fully operated. According to the Labour code and the Law on social insurance, there are 3 categories of social insurances as compulsory Social insurance, voluntary social insurance and unemployment insurance. However, only compulsory social insurance system have been working currently, voluntary social insurance is on process of pilot implementation, and unemployment insurance is not put on place until 2009 - Currently, the un-used part of social insurance fund is lent to the State budget, thus growth of fund via investment activities is very low. According to statistics of Vietnam social insurance, with the pay- as -you - go system, in 1996 the ratio of contributors to pension earner is 217/1, that means 217 insured persons contributed social insurance for 1 pensioner, but in 2000, this ratio is 31/1, it reduces to 23/1 in 2002 and dropped at 19/1 in 200424 - There is a large number of enterprises which committed evasion or delay of social insurance contribution. Due to the lack of understandings or misunderstanding, a large part of laborers, mainly migrant workers, workers who engaged in temporary works, has colluded with employers to evade social insurance contribution as stipulated by law. In 2005, of the small and medium enterprises which contribute social insurance for their workers, only 65% of workers of such enterprises are covered by social insurance, while the rest are not25. b) Other fringe benefits In the Labour code (amended and supplemented in 2004) it is promulgated in article 17 that an employee who has been regularly employed in the business for fore than 12 months becomes unemployed, the employer shall have responsibility to re-trained him for continued employment in new jobs, or to pay an allowance for loss of work equivalent to the aggregate amount of one months salary for each year of employment. The Article 23 of Labour code regulates An enterprise is responsible for carrying out programs to improve the occupational skills for its employees and for re-training employees before transferring them to other jobs
23 24

Report of Vietnam Social Insurance, 2005 Report of Vietnam Social Insurance, 25 ILSSA, survey on employment, wages and social insurance in SMEs 2006

The Government shall readjust the minimum wage relates accordingly to safeguard the workers real wage (Article 56, labour code) In the fact, the offer of fringe benefit for employee depends to the ability and conditions of each enterprise. The most common fringe benefit is annual bonus (a number of enterprises offers monthly or quarterly bonus); offering free of charge transportation for employees to workplace; providing cheap shelter, organizing tourist activities, holiday and bonus on Tet occasionIn FDI enterprises, wage constitutes 83.09% of total income of an employee at average, bonus shares 8.19%, allowance is 6.8% and from other sources is 1.92%26. In state owned enterprises and private enterprises, the corresponding rates are 64.7% and 69.6%27. These figures indicate that fringe benefits a bonus schemes are more prevalently applied in SOEs and private enterprises compare to FDI. For SOEs, the main reason for prevalence of bonus and fringe benefit is because the State controls the wage mechanism by imposing a formal wage frame stipulated by the State. 2.2.4. Points of view from parties (workers and employers) on labour market reforms In general, the labour market reforms undergone recently have contributed to make labour market to work more flexibly, dynamically and more effectively. These reforms brought practical benefits to both employers and employees. However, there are new questions and new requirements emerged as the result of reforms. a) With regard to employees Regulations on residence managements have been loosened and gradually eliminated, as the results, the locations for job seeking have been expanded. The Article 16 of the labour code stipulates that An employee shall have the right to be employed by any employer in any location not prohibited by law. The migration flows from rural areas to urban and industrial, processing areas for permanent or seasonal jobs have been increasingly year to year, these help to reduce the employment pressure in rural areas, to increase income and considerably improving a part of rural population. Labour legislation has been more and more refined and become important legislative tools to protect employees in labour relation, in engaging labour contract, wage negotiation and settlement of labour disputes. Trade union has better and firm legislative tools to protect benefits for workers. The massive implementation of a series of labour market programs such as providing allowance for losing job, providing credit for job generation, employment consultation and job matching services, labour market information, job fair, vocational training and others have outreached to tens of thousands of workers and helped them to get new jobs with better income. The implementation of CSR in enterprises has brought practical benefits to employees. Employees are better paid, and working in better and safety conditions, are more respected, and have more opportunities in training and social welfare. For the most of young employees, the working and life experiences gained from the enterprises environment have helped them on how to claim for their benefits and how to get support from their social network. In many industrial zones, employees have better capacity and can be able to cooperate with their trade union at higher level to carry out

26 27

ILSSA, FDI enterprises survey, 2005 ILSSA, FDI enterprises survey, 2005

their collective activities28. Employees have more choices in protecting their legitimate benefits. They can struggle with their employer to claim their benefits such as pay increase, reduction of working hours, improving working condition, or making choice of quit job and seeking for better job with better conditions. The labour scarcity in some locations and some sectors has helped workers to have better position for negotiation. However, employment competition get more severe and this presents as one of the most challenge and constraint for a large part of workers, especially middle aged workers, who have experienced the former mechanism of centralized planning who are not dynamic and dependant to the placement of state. In the new context, there are more opportunities accompanied with higher risks of losing job. Social equality in employment and wages present also as concerns of many employees. There have been new standards set up relating to labour assessment and pay; the rules of equal pay for equal work have been implemented. The prevailing wage rates on the market are used as the basis for wage negotiation. However, the vulnerable groups of worker are suffering the disadvantages due to lack of supportive policies. b) With regards to employer The labour market reforms undergone recently have greatly impacted to the employers in formulating their business policies and orientation, especially to the policies towards employees. Labour market operation have been more dynamic, enterprises have more choices to select better workers, but they also face with constraints relating to labour changes and competition. Many garments, textile and leather enterprises in Hochiminh City and Dong nai province have experienced high labour turnover. In some cases, a number of enterprises have recorded the labour changes of 20% per year. Other cases are reported as the scarcity of labour leads to the scramble of workers between enterprises29 Many enterprises face with difficulties in employing technical workers. Although education and vocational training system has been invested and developed rapidly during the recent years, the rate of skilled workers remains low, at 26% of total working people in 2005 30 . Especially, training quality is assessed as not good enough to respond the requirements of employers. Working skills, techniques, labour committement and industrial working style are also the concerns that frequently raised by employers, most complaints are on workers who come from rural areas. Box 2 It is difficult to employ skilled workers. Local applicants are mainly manual workers. The company has to train for 100% of newly employed workers. In 2005, 100 workers of total estimated 260 workers quitted the job. There are 2 main reasons for the jobs quit are: firstly, they could not respond the requirement of work; and secondly, their sense of labour discipline compliance is poor and they not very cooperative with the company. Fit Active company (Taiwan), Vinh Phuc Province.

Change Hee Lee, Labour relation and settlement of labour disputes in Vietnam, ILO Hanoi, 2006 Change hee lee, Industrial relation and settlement of labour disputes in Vietnam, ILO Hanoi, 2006 30 The 2005s statistics book on employment labour, Labour employment publishing house, Hanoi, 2006
29

28

In addition, with current status of economic development and labour market operation, there have been more labour strikes. For the period of 1995 to 2005, there have been 1,056 labour strikes in Vietnam, for only January and February of 2006, there were 150 spontaneous labour strikes. In analyzing the reasons for that, specialists have pointed out one reason as labour market has been more dynamic and favoring employees, these dynamics enable them to be easier to carry out collective activities31. In the relation with employees, a number of enterprises, by recognizing that trade union is not the effective communication channel with workers, have paid efforts to setup direct communication routines with employees to timely settle conflict and disputes. Direct dialogue between employer and workers, collective activities, promoting transparency of information on working condition, wages and other fringe benefits to all workers have been undertaken and help to improve labour relation between employer and employees, developing harmonized labour relation in the enterprises. Many enterprises recognize that human resource is the decisive factor determining productivity and quality of products, determining the competitiveness of the enterprise; therefore employers have embarked in a sound policy to absorb and keep high skilled and qualified employees. Enterprises which apply an equal and adequate wage mechanism, providing training opportunities for employees, offering social insurance and health insurance for them, keeping a safe and healthy working environment are capable to absorb and keep good employees. The compliance of labour legislation, commitment to observe labor standards and performing to apply sound policies for workers such as wage increase, working environment improvement are also the requirements from clients and labour management agencies.

Box 3
Viettien Company has been applying SA 8000, WRAP and CoC of big clients such as Nike, Adidas, Columbia Sport, and JC Penny This year, we set 2 big targets for our workers, the first is to install cooling system for all workshops and secondly is applying the minimum wage rate of 550,000 dong per month for worker (while the minimum wage rate stipulated by the State is 350,000 dong / month) In order to achieve the goal of US $ 20 million of net revenue from contracted garment production this year. Leaders of company stand in front of many concerns as not only preparing inputs, market arrangement, equipmentbut also improving working condition and living standards for workers, so that they can consider company to be their large family and have better commitment for development of company. Mr. Le Viet Toa, Deputy general director, Viettien Export garment company

31

Labour strike from the perspectives of National Assembly representative, http://www.vov.org.vn/?page=109&nid=15174

III. Evaluation of employment conditions in Vietnam 3.1. Employment status By 2005, population of working age is 51.8 millions, an increase of 5.7 millions compared to 2001, average annual increase is 1.43 millions. For the same period, employed labour increased to 4.9 millions, from 3.85 millions in 2001 to 4.34 millions in 2005, average annual increase of new jobs was 1.2 millions (Figure 2)
Figure 2. Trend of population changes by working age, figures of employed people and unemployment rate 2001-2005.

60000 50000 40000 30000 20000 10000 0 2001 2002 Number of employees 2003 2004 2005

6.4 6.2 6 5.8 5.6 5.4 5.2 5 4.8

(1000 people)
(%)

Population in working age (1000 people) Urban unemployment rate

Source: the 2001-2005 statistics on labour and employment, MOLISA.

During the last years, thank to the rapid and stable economic growth rate, number of newly created jobs rapidly increases every year. Since 2001, employment growth rate keeps higher than the labour force growth rate; number of new jobs generated annually has exceeded the increase of labour force32. That is the main factor for reduction of urban unemployment rate. Unemployment rate continuously reduced from 6.3% in 2001 to 5.3% in 2005 (figure 3). The annual statistics on labour and employment also indicates that, during this period the status of underemployment and labour time using in rural areas have been remarkably improved. It is notably that during period of 2001 2005, at times, number of people working in agriculture forestry fishery sectors absolutarily reduced (not only reduction in relative term). Newly generated jobs mainly were in service sector, and this circumtance is quite prevalent for developing contries which are on begining process of industrialization. Although a more rapid speed of labour restructuring has been observed compared to the
During this period, non - active economically population increases, mainly due to the high growth of schooling people and housewife
32

previous years, agriculture sector remains the main sector of job generation with 57% of total employed people. The share of working people in industries sector slowly increased, from 14.4% in 2001 to 17.88% in 2005. Thus, it can be seen that labour still is being repressed in agriculture sector (Figure 3)
Figure 3. Employment structure in the period 2001-2005 (%)

110 100 90 80 70 60 50 40 30 20 10 0 2001 Agri. 2002 2003 2004 2005 Forestry, fishery 62.76 61.14 58.35 57.91 22.82 14.42 23.81 15.05 24.69 16.96 24.74 17.35 25.34 17.88

56.78

Trade and services

Construction, industries
Source : the 2001-2005 labour and employment statistics , MOLISA.

In general, in non farm sectors, about 90% of laborers work in small and medium size enterprises and individual business and trading households. The annual firms survey carried out by General Statistics ffice (GSO) indicates that, number of workers employed by registered enterprises (excluding agriculture and forestry cooperatives and trading individual households) has increased from 3.5 millions in late of 2000 to 5.18 million people by late of 2004. On average, annual increase are 410,000 people. Of which, 143,000 people (35%) work in small and medium size enterprises. The increase of labour in non-farm activities is resulted mainly from the rapid rise of newly registered SMEs in accordance to the Law on enterprises. Specifically, the increased employment was in handicraft industries, business households, traditional handicraft and traditional trade villages. For the service sector, the increase of employment is mainly by self-employed workers and the laborers who are engaged in irregular jobs as they move out from agriculture sector but can not find a job in formal sector. Number of new jobs in formal sector is not considerable. With regard to the status of compliance of labour code, according to the report of Ministry of Labour, Invalids and social affairs, for 2006, about 87% of workers of enterprises all over the country has engaged in labour contract. By ownership of enterprises, SOEs with 96%, private firms with 80% and FDI with 88%33. A number of case studies at enterprises provides other dimensions of the whole picture on the status of labour contract engagement.
33

The 2006 review report of MOLISA

Studies conducted by MPDF (Webster 1999, Wbbster and Raugssig 1999) show that 6% of the larger private firms generally signed no contracts at all with their workers, while another 23% sign only daily or monthly contracts. Further more, in the whole private manufacturing sector, seasonal and part-time workers represent about 30% of the total labour force. Another study conducted by Stoyan Tenev and others34 shows that SOEs have higher percentages of workers with formal contracts than do private enterprises. The share of workers with formal contracts increases with firm size. A bout 4 % of private firms report having no formal contracts with their workers. For SOEs in their sample, part-time and seasonal workers represent 34% of the total labour force; for private firms, part-time and seasonal workers represent 41% of the total labour force. These findings are quite consistent with the information on limited quantity and low coverage of social insurance because part time and seasonal workers are not targeted to participate compulsory social insurance. The study of Stoyan Tenev, Amanda Carlier, Omar Chaudry, and Quynh Trang Nguyen (2003) indicates that scale of firm has direct proportion with the share of employees engaged in labour contract. The findings of this study also confirm that private firms have less proportion of workers engaged in labour contract compared with SOEs, with 11 percent points lower than SOEs. Another one important characteristic of employment in Vietnam is a high proportion of labour work in the informal economic sector. In 2001, it was estimated that about 32 million laborers (including those work in agriculture production households), or 79% of labour force work in the informal economic sector35. The formalization process took place in very slow progress and the proportion of workers in informal sector still remains high. 3.2. Wage/income. Currently, Vietnam Government stipulates 2 minimum wage rates applicable for different types of enterprises - Minimum wage rate of 350,000 VND /month36 applicable for domestic enterprises and - Minimum wage rate applicable for enterprises with foreign direct investment (FDI) which includes 3 different rates for 3 geographical region as: 656,000 VND / month for region 1; 556,000dong / month for region 2 and 487.000 dong / month for region 3. In special cases, when enterprises face with extreme business difficulties, they are allowed to apply the minimum rate ranged from 417,000 dong per month to 487,000 dong per month for a certain period of time. One of the important labour market reforms is to gradually reduce the intervention of state to the wage payment mechanism of enterprises. Labour market become more flexible, more dynamic and wage rates are gradually determined by supply demand relation. The common trend in current years appears that nominal wage rapidly increases and the disparity of wages between SoEs and FDI enterprises is narrowed down. J. Gallup (2004)37 estimated that the average actual wage increases by 10.5% for the
Stoyan Tenev, Amanda Carlier, Omar Chaudry, and Quynh Trang Nguyen, Informality and the playing field in Viet Nams Business sector, The WB 2003. p. 23 35 Dao Quang Vinh, Nguyen Huu Dzung, Social Protection in Viet Nam, Social protection in Southeast and East Asia, Frriedrich Ebert Stiftung, 2002 36 1 USD = 16.000 VND as of December 2006
34

period between the 2 living standard surveys carried out in 1993 and 1998. Current statistics shows that 100% of FDI enterprises has the highest hour wage rate and the lowest rate is observed in collective economic sector. Wage level paid in Partys organizations, mass organization, public management sector, security, military sectors was at mean points of 2 above mentioned rates38. By sectors, in 2003, the agriculture forestry and fishery sectors have the lowest average monthly wage rate, at 940,000 VND, equivalent to 63% of average monthly wage in industrial sector and 60% of wages in service enterprises39. Accroding to the results of labour, employment and wage surveys undertaken by ILSSA and Minisrtry of labour , invalids and social affairs in 2005 and 2006, the average growth rate of wages in SOEs is very high, with 23.5% in 2003; 10% in 2004 and 12% in 2005 and as the result, the gap of wages between SoE and FDI enterpirses has remarkably reduced (to only 6% in 2005). Domestic private firms remain to be the worst pay sector with average wage rate equivalent to 63% of wage that paid in SOEs and to 60% of average wage that paid in FDI firms40
Table 5. Average monthly wage and wage growth rate for period of 2003-2005
2003 Average Per cent of Wage increase (000VND) 1,617 23.5 1,046 14.2 1,774 - 6.5 2004 Per cent Average of Wage increase (000VND) 1,780 10,1 1,150 9.9 1,935 9.1 2005 Per cent of Average increase Wage (000VND) 1,995 12.0 1,265 11 2,110 9,0

SOEs Private firms FDI firms

Source: Surveys on Employment and wage in enterprises in 2005 and 2006 by ILSSA and MOLISA.

One of interesting point relating to wage issue in Vietnam is the existence of two contrast trends. The first trend observed is the drop of Gini coefficient by wage from 0.403 from mid of 1993 to 0.377 in 1998. The second trend, at the same time, is the increase of inequality of wage in the large scale cities (such as Hanoi or Hochiminh city) and medium scale cities (Gallup, 2004)41. In addition, specialists also found out that wage inequality increases between the educational level groups. According to Le xuan Ba and collaborates (2001)42 , the disparity between college graduates and primary school drop-outs almost doubled between 1993 and 1998. The first group has 1.3 folds higher wage compared the latter group in 1993 and the disparity increased to 2.3 folds in 1998. One of explaination for the reduced inequality of wage on nation wide is the narrowed disparity of wage between male and female workers. According to Le xuan Ba and his associates (2001)43,
Gallup JL. 2004 waged jobs market and inequality in Vietnam in growth, poverty reduction and households welfare in Vietnam by Glewwe, Agrawal, Dollar, WB 38 However, this exclude the factors that, in addition to wage, government official could gain much higher income and fringe benefits compared to wage. This explains why many Vietnamese prefer to work in Government sector. 39 Date given by MOLILSA 40 Survey on Employment and wage in all types of enterprises in 2005 and 2006 by ILSSA and MOLISA 41 Gallup (2204) estimated that Gini coefficient for waged workers in Hanoi for 1993-1998 has increased from 0.332 to 0.355. similarly correspondingly coefficients are 0.312 and 0.378 in Hochiminh city 42 Le Xuan Ba, Cu chi loi, Nguyen Thi Kim Dung, Nguyen Van Tien (2001) Vietnam labour market: growth, poverty reduction and adaptation after crisis in labour markets in transition economies in Southeast Asia and Thai Lan Development research network, Phnom Penh
43
37

L Xun B, C Ch Li, Nguyn Th Kim Dung, Nguyn Vn Tin (2001)

male workers has 24% higher wage compared to that of female workers in 1993 and 15% in 1998. The increased inequality of wages in large cities and between education groups may be resulted by the increased job opportunities in those areas. With more job opportunites in the labour market, income of workers is more competative and more adaquately reflect the skill levels of worker. The rate of returns to higher eduction seem to increase more rapidly. For instance, by using quantile regression decomposition, Nguyen and his associates (2003)44 explained that inequality in well - off groups is resulted from the rate of returns to market capital, while inequality in poor groups is caused by factors of individual characteristics. According to report of MOLISA, in 2006, private enterprises pay their members of management board with rate of 2.5 millions dong to 3.5 millions dong per month; head of functional sections get pay of 1.5 millions dong to 1.8 million dong per month; technical, professional staff are paid at 0.8 to 1.2 millions dong per month; direct workers get pay of 0.35 millions to 0.7 millions dong per month. In FDI enterprises, the average wage (by USD) is 80 to 100 USD per month. Directors and the same level positions are paid with 500 USD to 2500 USD per month; head of section and similar positions: 250 to 400 USD per month; professional and technical staff: 100 USD to 200 USD per month. Workers involved in direct production, business are paid at rate of 45 to 70 USD per month45. Wage trends reflect the more dynamic operation of labor market and the State interventions in determining wage rates on the market. However, the trend of rapid increase of wage may reduce the competitiveness of Vietnamese labour and discourage the flow of foreign direct investment into the labour intensive industries in medium term, on which Vietnam has comparative advantages currently. 3.3. Migration Migration has become a very prevailing currently and number of migrants is increasing. Dang Nguyen Anh and associates (2003) estimated that about 4.5 millions people has ever changed their living place during the period of 1994 to 1999. These people constitute to 6.5% of the population of 5 years old and upwards. Of the total migrants, 55% migrated within their original provinces, and 45% move between provinces. According to the results of migartion survey undertaken by GSO in 2005, 69% of migrants moving arround for economic reasons, 14% is for family related reasons, and the rest is for others 46 . In rural areas, laborers have continuosly to share jobs due to the pressure of employment and low income, therefore the flow of migration from rural areas to urban areas is continuously increased and become the largest domestic migration flow. Most of migrants are aged from 20 to 34, and that constitutes 67% of total migrants (Figure 5)

Nguyen Thanh Binh, J. Albrecht, S. Vroman v M. D. Westbrook (2003), A Quintile Regression Decomposition of Urban-Rural Inequality in Vietnam, research N 03-31, Faculty of Economics, University, UGeorgetown 45 Date from MOLISA report 46 Migration survey of GSO 2005

44

Fifure 5. Migrants and non migrants by age groups

35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59

Migrants

Non-migrants

Source : Migration survey of GSO 2005

These migration flows relates to the distribution of economic opportunities, higher income levels and development dynamics. Most prevailing destinations for migrants are Hanoi, Hochiminh city and SouthEast provinces. The regions which suffer from high pressure of pupulation to resources and low incomes have the highest rates of net out migration. These regions include Red river delta region, central provinces and almost all of East Northen provinces (Dang nguyen Anh and associates, 2003). Other studies indicates that rural to urban migration in Vietnam is mainly associated with the increase of underemployment and unemployment in rural areas, where 1/5 of population is surplus labour (Dang nguyen Anh and associates , 2003)47. The second large migration flow is the migration from Northen provinces to the Southern provinces where business environment is more open with more dynamic economic development and more abundant resources Migration actually has brought great economic changes for workers. According to the results of migration survey undertaken by GSO in 2005, 80% of informants reports their better income compared to that of before migration. Especially, 10% of interviewees indicates that their income get much higher than that when they were in original areas. (Figure 6)

47

Dang Nguyen anh, 2003 policies on internal migration in ESCAP review on population, Asia Specific, September

Fifure 6. Comparison of income prior and after migration

80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 Much higher Higher No change Lower Much lower Don't know

Source : Migration survey of GSO 2005

Migration has made contribution to balance labour supply and demand relations nationwide. In the past with centralized planed economy, migration flow was under the organization and coordination of the State, but nowadays, migration is mainly in spontaneous manner. Labour market reforms, in combination with loosen management of residence, prevalence of labour market information, the dynamics of labour force are the main factors promoting the mobility. 3.4. Work-family balance and gender equality. Labour division in household is related to the participation of women and men in economic activities. Normally, men have responsibility to earn living for their families, and therefore, they involve in more economic activities. In the household work, women, at average spend 3 hours per day for housework while men only 12 minutes for it48. Women workers in the informal sector spend 10 hours per week for housework. A study of Vietnam Women union said that, working time of women is 11 to 12 hours per day, while it is only 7-8 hours per day for men. Women have longer working hours than men because they have to spend lots of time for taking care of family and children49 Francois Houtart and Genevieve Lemercinier (2001)50 indicated that rural Vietnamese has no notion of free time, they do not distingush the occupational working time and free time. For many Vietnameses, even during free time they also conduct many reproductive activities. Studies on using free time in households usually apply the approach of analyzing reproductive activities, including how use of free time. The specific questions are how the husband and the wife in household use their time for housework and their free time.
UNDP 1996, Gender analysis from VLSS 1992-193 Gender equality in socio economic development policies, workshop handouts, Hanoi, 7/2000 50 Francois Houtart and Genevieve Lemercinier, 2001. Sociology in a commune in Vietnam, social participation, cultural, family, religious model in Hai van commune, Institute of Sociology, Sociology publishing house, Hanoi, 2001.
49 48

Do Thi Binh and associates (2002) 51 and the Committee of Population, Family and Children (2004) 52 have indicated that women are put under higher time pressure compared to men to accomplish their role in family.
Table 6: Activities in free time by women and men (share of total informants) General Male Reading books, newspapers Sport Enjoying time by drinking with friends Going to pagodas Going to cinemas 72 35.1 79 Female 62.9 24.5 47.3 Male 61.4 29.4 37.9 Rural Female 49 17 76.6 Male 88.5 44.1 83 Urban Female 85 36.6 62.4

38.1 -

42.7 32.8 36.7 41.4 39.2

Source: Ha Thi Khuong, using free time of men and women. Gender and family studies review, Vol. 1/2007, page 20-34

The table 6 indicates that, except the activity of going to pagodas, percentages of men participating in other recreation activities such as reading books, sport, and enjoyment with friends is much higher than that of women. Gender differentiation in recreation activities is much larger between rural and urban areas. In general, women have recreation and enjoyment time mainly at home, or in the close living community, which requires no expenses, while men have more recreation activities outside the households. 3.5. Health and safety. Working conditions and environment are among the most important contents of the employment and labor policy. In fact, working environment and conditions has been expressed in policy documents and regulations of the State about safety, labor protection and labor hygiene. However, according to the report of MOLISA, number of labour accidents and injured persons due to labour accidents has increasingly occurred during the last years. Compare with 1996, by 2004 number of labour accidents increased by 2.25 folds, number of death and injured people increase by twice and 4 folds correspondingly (see table 7)

51

Do thi Binh and Associates, 2002 Vietnamese Family and women in period of industrialization and modernization, Sociological Science publishing houses, Hanoi, P.238 52 Committee on Population, Family and Children, 2004. Current status and issues raised for Vietnamese family. Internal review, Hanoi, P.288

Table 7. Number of labour accidents and injured people Labor accidents Year N. of cases with death 1996 1997 1998 1999 2000 2002 2002 2003 2004 249 320 312 335 368 362 449 469 561 N. of dead victims 285 402 362 399 403 395 514 513 575 N. of seriously injured people 1.530 1.870 2.552 2.611 1.020 3.748 4.521 4.089 6.186

Source: the 2005s report, MOLISA

Nevertheless, the concern and investment to improve the working environment and conditions are now irrelevant to the requirements and cannot catch up with the advances of production science and technology and of labor hygiene and safety. The system of organization and human resources in the field of labor hygiene and safety remains weak and insufficient. The amount of labor accidents and injuries getting larger and larger is the manifest evidence of the insufficient and irregular interest in the working environment and condition issue. The main reasons are: - Subjected to the urgency and essentiality of job generation for the employees, which focuses in job creation for a number of people but not in working conditions. That means that it is only concerned about the quantity but not the quality of the jobs (to the extent of working environment, safety and health). - Lack of investment: due to the limitation of investment sources, the projects of investment on building of production units often concentrate on assembly lines but not sufficiently invest or invest at a minimum level in the solutions for working environment, safety and health. The working environment and condition issues was even not mentioned reasonably at the beginning of the technological designing process or it was but truncated in the process of implementing. - The legal framework is inadequate and loose. There has been no specific and completed regulations on making the working environment and conditions safe in investment projects as well as in operating production and service units. The regulations on bonus and penalties are not strong enough. The staff working in the field of labor hygiene and safety is insufficient and unable to catch up with the reality. The work of supervising and monitoring is weak and not conducted regularly. Labour safety regulations and norms are not complete, out dated and many standards norms are not compatible and therefore should not be capably applicable for new technology, new material, especially for machins, equipment which required strict compliance of labour safety regulations.

- The procedure for benefit shemes for compenstation of labour injuries and occupational disseases are too complicated, there has not been a mechanism on place for consistently proceeding a labour accident53 (there has no Fund for labour accident compensation exist). The formulation of Fund for compensation of labour accidents shall address this problem and shall also help to share economic burdens with employers in cases of labour accidents, having compensation on reinvestment on production conditions and facilities for safe work. - The functionining of state management over labour safety and heath are ovelapping between state agencies at localities, that create more burdensomes for enterprises. IV. Emerging Social issues and ways to solve and revise policies 4.1. Unemployment, underemployment and support programs The annual unemployment rate of Vietnam as a whole is low, about 2-3 percent of the labor force. However, the unemployment situation in urban and rural areas is very different: in urban areas, it is significant at 5-6 percent and in rural areas it is very low at 1-2 percent54. A more serious problem in rural areas is underemployment, meaning that working time is not completely exploited (a form of hidden unemployment). Productivity and labor income in rural areas are also very low. All these problems in rural areas are related to the fact that workers in agriculture are mainly self-employed and Unskilled. The share of rural labor-force working as wage workers is very small, in line with the underdevelopment of the rural labor market. Given this situation, unemployment in Vietnam typically means urban unemployment. Statistical data show that the urban unemployment rate has fallen in recent years from 6.42% in 2000 to 5.31% in 2005. However, it is still at a high level compared with that of other countries in the region. For example, the unemployment rate in Thailand was 4.5 percent in 1998 and 3.4 percent in 2000; in South Korea, it was 3.7 percent in 2001 (ILO, 2005. Bulletin of Labour Statistics 2002-4, Geneva). Unemployment rates are highest among young workers, especially in the age group from 15 to 24 years, as they have just joined the labor market. In 2005, the unemployment rate of 15-24 age population group reached to 13.4%. The unemployment rate is slightly higher for females than males. However, in recent years, the unemployment rate of females has an upward trend (from 5.1% in 1996 to 6.9% in 2003). While the unemployment becomes an imperative problem in urban areas, for rural areas, underemployment is the most urgent question. This is characteristics of an economy at low level of development and labour surplus. In urban areas, underemployment may be characterized by employment with low productivity and low income. In rural areas, underemployment is more prevailing and serious. The 2005s labour and employment survey indicates that there are 3.1 millions of people of 15 year old age reported their underemployment in rural areas, which constitutes of 6.8% of total population of full 15
53

Employer contribute to the social insurance fund and Social insurance agency shall pay benefit for injured person in case of accidents or occupational diseases occurs (according to the Regulations of social insurance which are stipulated on the Decree 12/CP dated 26/11995 of the Government), but at the same time, employers shall have to pay compensation and allowance directly for injured employee (according to Article 107 of Labour Code, Decree N. 110/2002/ Decree CP dated 27/12/2002 of the Government on amendment and supplement of a number of articles of labour code on Labour health and safety. 54 Annual Survey on Labour and Employment conducted by MOLISA

year old and above or 9.2% of total rural workforce. Of the underemployed people, age group of 15-24 constitutes the largest share at 30.4%. By educational levels, the largest share is 34.4% with primary level, 91.7% of underemployed people are un-skilled. Thus, unemployment and underemployment are closely linked with limited quality of human resources. Formal and informal support programs for the unemployed (a) Formal support programs The current Labour Code that was amended and supplemented in 2002 and 2004 stated in Article 140 that policies on social security also include the policy on unemployment insurance. It stated that the government shall promulgate specific regulations on retraining for unemployed workers, on rates of contribution to unemployment insurance, on qualifying conditions and payable unemployment benefits, and on the establishment, administration and operation of the unemployment fund. Since the draft law on social insurance, including a chapter on unemployment insurance is still under discussion at the National Assembly, other policies and programs support the unemployed and these have been implemented for a number of years, such as the following: Allowance for those who lost their job This policy has been in force since the end of the 1980s, in order to provide a lump sum for people who lost their job. Decision No. 227/HDBT dated December 29, 1987 on reorganizing and restructuring State-owned enterprises and streamlining regular staff in State administrative agencies was promulgated by the President of the Council of Ministers (now the Prime Minister). This decision stipulated that if State workers or civil servants voluntarily leave their job, they will receive a lump sum, calculated and paid according to their duration of service. For each year of service, one months salary, including allowances (if any), will be paid from the State budget. Those about to be made involuntarily redundant are allowed time off from work in order to look for a new job. The maximum time for being off work is 12 months, during which time these officials will receive 75 percent of their salary, and other allowances. After 12 months, if these officials have still not found a new job, they will be dismissed and receive the same subsidies accorded to all laid-off workers. On October 9, 1989 the President of the Council of Ministers (Prime Minister) promulgated Decision No. 176/HDBT to restructure and streamline the labor force in State-owned enterprises. This Decision stipulated that, for each uninterrupted year of service, enterprises must pay employees made redundant one months basic salary plus subsidies (if any). The minimum to be paid by enterprises is three months salary. The Government may give some support to enterprises in a difficult situation, but not exceeding half the enterprises obligations under the program, and this support must be defined/specified in particular cases. Under this program, the State budget has paid VND Allowance for those who lost their jobs Free employment services: job consultancy and employment information Training and re-training for those who lost their jobs Loans to enterprises for employment creation

300 billion to support about 800,000 redundant employees. The total paid, including the funds paid by local budgets and enterprises themselves to implement Decision No. 176/HDBT is about VND 600 billion. The Labour Code promulgated in 1994 (amended in 2002) and other legal documents provide regulations on financial support for employees who lose or quit their job, as follows:

- To deal with unemployment problems, Article 41 of the Labour Code states: When
unilaterally terminating a labor contract in infringement of the Law, the employer must re-employ the employee to the work as agreed upon in the contract, and pay compensation equal to the amount of the wages and additional payments, if any, corresponding to the period the worker was not allowed to work, and the addition of at least two months wages plus allowances, if any. - Article 42 of the Labour Code states: "When terminating the labor contract of an employee who has been regularly employed in an enterprise, office or organization for a full year or more than 12 months, the employer must pay such employee a severance allowance at the rate of half a months salary plus a salary allowance, if any, for each year of service. In order to implement support policies for those who lost their job due to the restructuring of State-owned enterprises, the Government promulgated Decree No. 41/2002/ND-CP dated April 11, 2002. According to this Decree, a fund for redundant employees, in the amount of about VND 6 trillion (US$ 400 million), has been set up by the Government. Under this program, all redundant employees are paid subsidies based on the duration of their working time and their monthly salary. Moreover, their social insurance fees are also paid out of the fund. By May 2004, 789 enterprises had received support from this program. The number of workers that received subsidies was 35,282, of whom 3,662 were retired early and 31,449 received allowances for losing their jobs. A total of VND 1.019 trillion has been paid from the fund for supporting redundant workers.55 Vocational training and retraining for people who lost their job The Labour Code stipulates that all enterprises need to take responsibility for providing vocational training and retraining for people who lost their job in order to help them to find a new job. Decree No. 41/2002/ND-CP dated April 11, 2002 also stipulates that, in addition to the above-mentioned subsidies for people who were laid off or retired before the compulsory retirement age, these people also have the right to participate in training programs free of charge for a maximum duration of six months at vocational training centers under MOLISA.56

55 56

Department of Labour Employment, MOLISA. Source: Circular No. 19/2004/TT- BLDTBXH dated November 22, 2004 on Guideline of implementation of some Articles of Decree No. 41/2002/ND-CP on the policy for redundancy from reconstruction of State-owned enterprises; these were amended by Decree No. 155/2004/ND- CP dated August 10, 2004 by the Government.

Providing soft loans for employment creation A national fund for employment promotion has been set up according to Decision No. 120/HDBT of the Council of Ministers (now the Government). The objective of this fund is to provide loans with a low interest rate and to support vocational training for workers, in order to create opportunities for their employment. Every year, this fund lends about VND 900 billion (approximately US$600 million), which helps create about 25,000 to 30,000 jobs, including jobs for unemployed and laid-off workers. The Government is also trying to mitigate the unemployment problem by encouraging those with rural roots to go back to them. Leaving farming without leaving the village has become the motto to develop rural industry, provide local services, and promote traditional craft villages. The institution of land-use rights provides incentives for farmers to invest in their land. Reforestation is put in the hands of farmers to promote sustainable development by providing them with income. (b) Other informal supporting programs Unemployed persons can receive assistance from credit programs for employment promotion provided by the Government, NGOs or other socio-political organizations. Employment opportunities can be also found in some public employment-creation programs or in the informal sector. However, the results of these programs are still limited in terms of both the number of beneficiaries and the wages earned. The following is a summary: - Despite the lack of unemployment insurance, some policies on unemployment have been implemented and laid-off and unemployed people are supported by some formal and informal programs. However, recent support programs are mostly ad hoc, the number of beneficiaries is limited, and these mostly consist of unemployed workers (laid-off workers) from the State sector. The State budget has been put under pressure owing to implementation of these support policies. - According to the Labour Code, enterprises are responsible for paying subsidies to those who have lost their job; State support will be given only in some specific cases. Since many enterprises are facing financial problems, some workers may be unable to receive the subsidies to which they are entitled. Currently, support for those who have lost their job is implemented mainly in State-sector and foreignowned enterprises. - A number of organizations have been set up for supporting unemployed people, including centers for employment services, funds for employment promotion, and the national employment target program. However, close links do not exist between these organizations, and their impact has been very limited. 4.2. Social security and housing issues for migrants workers As analyzed in the above sessions, number of migrants is in trend of increase in recent years. However, migration for works have two dimensions, in one hand, it supplement labour resource for industrial and processing zones, developed locations, but in other hand, the massive migration flow from rural areas to cities and industrial zones have brought more severe social pressure for the destinations. The rise of population shall lead to the overuse of infrastructure in near future and social services supplying system seem to be incapable to deliver health, education, shelter services for migrants.

Migrant workers suffer from labour pressures and vulnerabilities in term of labour contract engagement, wage negotiation, social insurance, and other social services. A research carried out by Action Aid in a number of localities indicates that, many enterprises engage in labour contract with migrant workers only after the probationary working period or after 12 months of work and labour contracts with term of only 3- 6 months 57 . This practice has negatively effected to engagement in social insurance and health insurance of employees. In fact, most of migrant employees are not covered by social insurance and health insurance system. This explains why the percentage of employees covered by social insurance in private sector is very low. There are two reasons for this problem, firstly employees do not intend to work for firm for long time and they do not want to contribute social insurance as they thought that the contribution shall reduce their net income, while the average income of migrant workers is equal to 79% of income of local workers58 The survey carried out by Action Aid Vietnam in Danang City in 2005 reports that migrant employees face with many constraints and suffer lots of hardship. Especially, their spiritual and culture activities are very limited. They have very limited access to information and have very few opportunities for social events. Especially many women workers are very society blind and lagging very far behind to the dynamic social changes. In the context of poor access to cultural and social events, enterprises, in many cases, have increased working time with more overtime work, this prevent employees to access recreation activities. The study undertaken in Haphong city indicated a number of social problems which are faced by women labour, including: a) Social value and preconception: Community at the destination has bias against working migrants. Local community perceives that working migrants have no awareness of environment protection, often cause public troubles. In the meanwhile, a number of local people rely on migrant workers for living earning such as lending house or supplying goods, services for migrants. b) Family relations: Migrants have to live far away from their family, husband and children. They are not supported by family, and moreover, living costs increase as the result of living separately from family. c) Value, attitudes, culture, informal institutions, participation Migrants are very hard to build confidence at the immigrated community due to the bias. In the result, migrants always feel a complex about their situation and not confident. The informal institutions such as associations of fellow-countrymen/women, friend relations are very weak to present as the spiritual reliance for migrants, especially when they face with hardship such as sickness, deprivation. Most of working migrants come from rural areas with low educational attainment, limited understandings and limited access to information on legislation and this hinders their participation and social ability.

57 58

Labour union of Danang, Haiphong and Action Aid Vietnam, 2005 Migration survey of GSO, 2004

d) Legislation, institutional and policy framework The operation of formal institutions such as banks, justice bodies, and security bodies is not pro-migrants. There have been legislative regulations on protection of employees benefits, but the implementation of such regulations depends to the attitudes of enterprises. The monitoring and supervising system of legal compliance of enterprises is still weak also. In process of projection and planning industrial zones, no adequate concerns has been paid on development of social infrastructure such as shelter, hospital, school, culture houses. As a result, there are not enough necessary social and living physical facilities for migrant workers. Box 4 Besides working in offices, factories or workshops in industrial, processing zone, other living conditions, traveling and others of workers are totally arranged by individual workers according their status. Employers do not know and employers are not responsible for any thing at all for their workers outside the fence of factory. Mr. Tran Van Dong, deputy of executive standing committee management board of industrial processing zone, Danang.

It is very often that migrant workers rent house and live together with local population, and this makes more hardship for workers as the minimum living conditions are not responded to safeguard physical and spiritual life59. Women workers constitute very high percentages in those areas. For instance, in industrial and processing zones in Danang, 90% of labour force is women. No adequate concerns have been paid on social management, responding living conditions, security for women workers. However, building shelters for workers is very hard work because of limited land availability, lack of investment and there is no mechanism on mobilization of investment and management of shelter for workers put on place 4.3. Working life of people in urbanized and industrialized areas. Rapid industrialization and urbanization progress undergone during the current years and in the incoming times has led to downscale of cropping land, and as the result, a part of farmers no longer holding land for production. For period of 2000 2003, specialized use land area has increased to 104.442 ha, of which mainly used for establishment of industrial, processing zones, small and medium industrial clusters, new urban areas, new road routines, sea ports. As the result, a large areas of agriculture land has been recovered for other purpose uses, and hundreds thousands of farmers has no land for cropping, and they need to be trained to transfer to a new job. However, most of them found it very hard in seeking for a new job due to low education attainment, high age and no skill (50% of them is older than 35 years old difficult to be retrained).

59

Labour union of Danang, Haiphong and Action Aid Vietnam, 2005

During the last years, the Government (including central and local government) has issued a number of policies for segment of workers whose agriculture land have been converted to other purpose use. The Decree 22/1998/ND-CP dated 24/4/1998 of the Government has stipulated workers whose land are recovered shall be provided a supportive fund for training for a new occupation and the agencies, bodies which use the recovered land if have demands on employment, shall give priority to recruit the owners of recovered land plot. The Decree N. 179/2004/ND-CP dated 3/12/2004 of the Government on compensation, support and resettlement for the land owners whose land plot are recovered has promulgated specific provisions on supporting land lost people to transfer occupation, job generation and vocational training. Localities have provided specific supports. For instance, Danang citys authority gives allowance of 4 millions VND for those whose land has been recovered. In Hanoi, if a household whose land plot has been recovered with 30% to 50% of areas of plot, a member of household shall be supported for career transfer; if the lost land area is from 50% to 70%, 2 members of household shall be supported and all member of workers in the household shall be supported in case more 70% of their land is recovered. Each worker receives support which is equivalent to 3.8 millions dong. In Haiduong, all workers of households whose land is recovered are given free of charge vocational training. However, there are still many constraints and obstacles in implementing those policies as training plans are not specific, there are not comprehensive and adequate solutions put on place to address the questions of employment for labour in the areas where agriculture land had been converted in urbanization areas. And there have been no solutions to settle the social problems emerged in industrialization and urbanization areas. 4.4. Management issues in implementing Labour Law and policies relative to workers in enterprises. The emerged problems in export led processing industries are that workers have to work on longer working hours than that of stipulated by law. Working hours in enterprises often prolong from 8 to 10 hours per day60. The average overtime working hours of an employee ranges from 350 to 400 hours per year, a 50 to 100 hours exceed according to the labour legislation. Another survey reported that 77% to 87% of workers in garment textile and leathers production have to work at least 4 overtime hours per day61. The reasons explained by employers include higher pressure on product delivery and more severe competition to get orders for production or reduction of production cost. To tighten management over labour, a number of firms (mainly FDI) even put the strict regulations on working time and frequency of toilet using by workers62. By setting up too high labour norms, working environment is slowly improved, delay of wage payment and wage increase, evasion of contribute social insurance. These are the reasons leading to labour conflicts and strikes in recent years. Vietnam Government has been deploying great efforts to refine the legal system and promote propaganda activities, providing guidance and supervision with the aim to facilitate the process of implementation of legal regulations pertaining employees in enterprises. Since 1995, when the Labour code was promulgated, it has been amended and supplemented twice in 2002 and 2004, in which there are provisions settlement of labour
60 61

Survey in Hai phong, Danang in 2005 Survey in 5 provinces conducted by ILSSA in 2006 62 Survey in Haiphong, Danang in 2005

disputes and labour strikes. The law on enterprises which was issued in 2000 has created an enabling business and open environment for development of private sector. In 2004, the National Assembly adopted the Ordinance on labour strike. This reflects the rapidly improved awareness on labour relations by concerning parties and the grown up labour relation system. In addition, the wave of practice of CRS by enterprises has positively impacted to labour management in enterprises and building up harmonized labour relation. However, the weakness reveal recently in the organization and role functioning of trade union in bilateral relationship at enterprise level. The question raised is to the need to improve the position of trade union and make this organization to be strong enough to get confidence from workers. V. Conclusions. 5.1. Key findings The recent forecasts on economic development prospects and job generation when Vietnam become a member of WTO are quite promising. There has been a new wave of foreign investment in Vietnam, in 2006; Vietnam has attracted USD 9.9 billions of FDI, an increase of 71% compared to 2005. Total export revenue reached 39.6 billions dong in 2006, an increase of 21% compared to 200563. GDP growth rate of 2006 achieves 8.17%, it is estimated that economic growth could get to 8.5% per year in the next few years and about 1.6 millions new jobs shall be generated every year64. As Vietnam is advancing at low development level, labour cost is cheap as the result of low income of population; Vietnam has comparative advantages as according to international commercial theory. In recent years, FDI sector has generated about 300 thousands of new jobs annually, and about 30 thousands of workers and specialists have been sent abroad for work. The export led industries includes garment, textile, leather, food processing, sea food processing. Have provided jobs for millions of people. In the context of openness and integration, other service sectors such as tourism, hotel, restaurant, telecommunication, transportation have rapidly developed and generated more jobs. In many sectors and fields, labour productivity has increased; working condition, wage and income of employees have been considerably improved. However, the supply demand relations shall evolve to an equilibrium point where Vietnam has no longer comparable advantage of cheap labour. Even many investors stated that cheap labour is no longer as advantage to attract investment, instead good quality of labour. Many studies indicate that, even cheap labour, but Vietnam is seriously lack of well skilled labour. The weakness of Vietnamese labour is low productivity and poor sense of labour disciplines. Vietnam is seriously lack of managerial staff and high skilled labour. Labour market in Vietnam reveals the lack of high-skilled workers and qualified engineers who are proficient in foreign language (English). It is found that every 100 Japanese companies, there are 14 companies which report their difficulty to recruit skilled workers65 In order to respond the demands of rapidly changed technology, development of spearhead economic sector, effective economic restructuring, improving competitiveness
63

Hong Ha, Vietnam - 2006 economic review, Asia Pacific economic review, Vol. 1, Jan 2007 page 2 The 2006 review report and tasks for 2007 MOLISA 65 Nguen Hao, no long advantages of cheap labour, Asia Pacific economic review, Vol. 47, 11/ 2006 p.11
64

of economy, as well as to address labour export requirements, our human resource has continuously developed, number of trained labour has increased at all professional and skill levels. Training activities have been boost with expanded scale and more diversified forms, and therefore training quality has been improved. Legislation system, including labour legislation has continuously revised, amended and refined to be more compatible to the international legislation and practices, creating more dynamic and flexible adaptation to market and integration mechanism. Labour market has been continuously matured and developed and social security schemes are safeguarded. Besides the positive impacts, there are also inverse effects caused by globalization as the bankruptcy, jobs losing, massive labour changes due to instable status of employment, more severe labour competition, larger differentiation of the rich and the poor, migration and other social problems In near future, globalization shall bring more massive, complicated and unpredictable impacts to labour, employment and development of human resources. These impacts shall be resulted from realizing multilateral and bilateral commitment and application of international legislation and standards during the integration process. Thus, there will be more and great challenges for labour, employment and employment generation. 5.2. Recommendations Integration is a quite sophisticated process, requiring a sound responsiveness by combining internal factors (such as institutional, development strategies, resources) and other outside factors (such as rules of game, capital, technology). Globalization could bring positive impacts to a certain sectors but may negatively effects to others. Even within a sector, the marketing approaches to different markets (Europe, Japan, US, China) require different policies for each specific market, using different standards. For these reasons, it is the must to carry out in-depth study on impacts of economic globalization toward labour, employment and human resource development for each sector, even for each type of commitment and agreement. The solutions for up taking opportunities and coping with challenges include: a) Refining legislation for labour market (legal framework, institution, policies) Due to the low competitiveness of labour market as the result of imbalance supply demand relations (between employers and employees), imperfect mobility of labour, deficiency of information or discrimination, the Government has to give interventions to address the market failures in order to protect employees by giving them rights and voice in labour relation66. The interventions of the Government can be functioned by a refined legislation system including law, regulations, policies and mechanism. It is necessary to design relevant intervention programs so that to harmonize the targets of equality and effectiveness in state competency. Experiences indicate that this task is very challenging. A sound institutional arrangement for a well functioning labour market shall have to ensure the steady growth but also go in hand with generating more jobs. The question is to harmonize between protection and flexibility of the labour market.

66

The World Bank, World Development report 2006, p. 282 (Vietnamese version)

b) Improving labour quality The rapid changes of techonology put more requirements from labour in term of their readiness and good adaptibility. In the past, human resource development programs were implemented with traditional training methodology, in which focus was given to aquiring and performance capability of a specific occupation. In the context of globalization with more and intensive advanced technologies, employees are expected to acquire recreative sense, analytical skills and must be continuously trained to have better adaptability to a new technology and new accupation. In other words, education and vocational training should concentrate on skills and competency, shifting from occupational training to skills and multi skills training, widening subjects of training to attain high compatability. It is the need to establish training system for practical technical skill workers with different levels (semi- skilled, skilled and high skilled level ) and training must be demand driven. There is also the need for planning and projection of network of practical technical training institutions, investing in a number of technical and high tech schools in some critical economic locations. c) Development and improving operational quality of job services centers This target requires a sound planning and projection of job services centers network all over the country, especially in urban areas and gateway to big cities. One of other important work is establishing a labour market information system which is interconected nationally, firstly in a number of critical economic zones and large urban areas. d) Refining policies and social security system It is imperative to expand the coverage of social insurance (including unemployment insurance) and other insurance schemes; strictly comply all regulations on safety and health labour conditions; providing social protection for vulnerable social groups who are prone to loss in market economy; formulation of safety net to cope with cases of sudden changes resulted from natural disasters, institutional reforms or economic crisis e) Improving the role of trade union In order to improve the role of trade union, it is necessary to develop mechanism to better protect trade unions leaders against the unfair treatment imposed by employers. It requires also a legal framework and mechanism to facilitate the cooperation and support from trade union officials from the higher levels to trade union official of enterprise level in negotiation and management participation skills. Trade union of enterprises should be more independent in term of financial and have more ownership on financial manaegement. Efforts are required also to develop trade union network, especially in the private sector to provide better protection of workers benefit

References

Action Aid Viet Nam, 2005, Survey on enterprises in Hai phong and Danang. Committee on Population, Family and Children, 2004. Status and issues rose for Vietnamese family. Internal review, Hanoi, P.288 Change Hee Lee, Labour relation and settlement of labour disputes in Vietnam, ILO Hanoi, 2006 Circular No. 19/2004/TT- BLDTBXH dated November 22, 2004 on Guideline of implementation of some Articles of Decree No. 41/2002/ND-CP on the policy for redundancy from reconstruction of State-owned enterprises; these were amended by Decree No. 155/2004/ND- CP dated August 10, 2004 by the Government. Dao Quang Vinh, report on CSR in enterprises of leather & footwear and textile and garment sectors, ILSSA, 2003. Dao Quang Vinh, Nguyen Huu Dzung, Social Protection in Viet Nam, Social protection in Southeast and East Asia, Frriedrich Ebert Stiftung, 2002 Dang Nguyen Anh, 2003 policies on internal migration in ESCAP review on population, Asia Specific, September Do thi Binh and Associates, 2002 Vietnamese Family and women in period of industrialization and modernization, Sociological Science publishing houses, Hanoi, P.238 Francois Houtart and Genevieve Lemercinier, 2001. Sociology in a commune in Vietnam, social participation, cultural, family, religious model in Hai van commune, Institute of Sociology, Sociology publishing house, Hanoi, 2001. Gallup JL. 2004 waged jobs market and inequality in Vietnam in growth, poverty reduction and households welfare in Vietnam by Glewwe, Agrawal, Dollar, WB ILSSA, 2006, enterprises survey, unpublished ILSSA, 2006, Enterprises survey in 5 provinces of Hatay, Hungyen, Khanh Hoa, HochiMinh city and Dong nai, unpublished ILSSA, 2006, survey on employment, wages and social insurance in SMEs 2006 ILSSA, 2005, FDI enterprises survey Labour strike from the perspectives of National Assembly representative, http://www.vov.org.vn/?page=109&nid=15174 MOLISA, 2006, the 2005s statistics book on employment labour, Labour employment publishing house, Hanoi MOLISA, 2006, the 2001-2005 statistics on labour and employment. MOLISA, 2006, Annual Review report of MOLISA MOLISA, 2006, Statistics on labour and employment, 2005, Labour-social publishing house, Hanoi, p.16.

MOLISA, 2007, Report by General Department of Vocational training in the 2006 Annual review meeting of MOLISA, 1/2007 World Bank, 2000, Attracting poverty, Hanoi. MOLISA, 2005, Study on sustainable development of labour and social issues. MOLISA, Labor Employment Survey in 2005 GSO, Status of Vietnam enterprises GSO website GSO, Enterprises surveys in 2000, 2001, 2002, 2003 and 2004. GSO, Statistical yearbook 2005, statistic-publishing house, Hanoi, 2006 GSO, 2005, Migration survey Gender equality in socio economic development policies, workshop handouts, Hanoi, 7/2000 Ha Thi Khuong, using free time of men and women. Gender and family studies review, Vol. 1/2007, page 20-34 Hong Ha, Vietnam - 2006 economic review, Asia Pacific economic review, Vol. 1, Jan 2007 page 2 Le Xuan Ba, Cu chi loi, Nguyen Thi Kim Dung, Nguyen Van Tien (2001) Vietnam labour market: growth, poverty reduction and adaptation after crisis in labour markets in transition economies in Southeast Asia and Thai Lan Development research network, Phnom Penh Nguyen Hao, no long advantages of cheap labour, Asia Pacific economic review, Vol. 47, 11/ 2006 p.11 Nguyen Thanh Binh, J. Albrecht, S. Vroman v M. D. Westbrook (2003), A Quintile Regression Decomposition of Urban-Rural Inequality in Vietnam, research N 0331, Faculty of Economics, University, UGeorgetown Stiglitz J. E. v Yusuf S. (2002), The World Bank, Rethink about East Asian Miracles, Political Publishing House, Ha Noi. Stoyan Tenev, Amanda Carlier, Omar Chaudry, and Quynh Trang Nguyen, Informality and the playing field in Viet Nams Business sector, The WB 2003. p. 23 The World Bank, World Development report 2006, p. 282 (Vietnamese version) UNDP 1996, Gender analysis from VLSS 1992-193 Viet Nam Social Institute (2002), Vietnam Human development 2001, National political publishing house. Vietnam general confederation of labour unions (VGFL), 2005, Annual review report. Viet Nam Social Insurance (VSI), 2005, Report of Vietnam Social Insurance.