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Workplace productivity drives development

Released at: 10:46, 16/05/2018

Workplace productivity drives development

Photo: Quang Phuc

Further strides forward are needed in workplace productivity to ensure economic development and foreign investment.

by Nghi Do & Ngoc Lan

Sixty-five per cent of respondents in a Vietnam Economic Times survey released at its “Workplace Productivity - A Key Indicator of Economic Development” CEO Forum held in April  in Hanoi believe that annual growth in workplace productivity in Vietnam will be 6-10 per cent over the next five years. The anticipated increase is quite modest, according to local experts and enterprises at the Forum, but with the creation of new institutions and improvements to enterprises’ capacity it should exceed 10 per cent. 

Picture of workplace productivity

Respondents, which included nearly 500 local and foreign experts and enterprises, expressed caution and even skepticism about workplace productivity in Vietnam in the future, according to Dr. Vo Tri Thanh, former Vice President of the Central Institute for Economic Management (CIEM). 

Indeed, Vietnam’s workplace productivity is lower than regional countries such as Singapore, Malaysia, and Thailand, according to Mr. Nguyen Bich Lam, Director General of the General Statistics Office (GSO). “Productivity in Vietnam is equivalent to 7 per cent of Singapore’s due to the economy’s low starting point and outdated economic structure,” he said. “However, with the same production conditions as Singapore, we would see higher workplace productivity.” 

The country’s workplace productivity has improved significantly for many years, Mr. Lam said. Interestingly, Vietnam recorded the highest growth in workplace productivity in the ASEAN region from 2007 to 2016, of 4.2 per cent annually on average, which was higher than the average in Singapore, Malaysia, Thailand, Indonesia and the Philippines. “Vietnamese people are smart and quick learners, so we can see better productivity than elsewhere,” Mr. Lam believes. 

Comparing workplace productivity between Vietnam and South Korea, Mr. Bang Huyn Woo, Deputy CEO of Samsung Vietnam, confirmed that productivity in Vietnam is equal to 99 per cent of that in its factories in other countries. There are two main types of employees, however: workers and engineers. The total number of workers at Samsung in Vietnam is 170,000, while South Korean managers number 240. “The productivity of these Vietnamese workers is similar to other countries,” Mr. Woo said. 

High-quality staff like engineers may differ between Vietnam and elsewhere due to training mechanisms, he added, but after one or two years of training the gap is bridged to a large extent. “I see that the potential of Vietnamese people is very high,” he said. “I don’t think productivity is low, mainly due to the process of training and managing workers and especially the role of managers at the company. If Vietnamese workers have a good boss, productivity increases.” 

Workplace productivity, 2011-2017, at current prices

Source: GSO 2017

Driving force

Mr. Nguyen Ngoc Thuy, CEO of Egroup, said the strength of Vietnam is its young population, which is a prerequisite for economic development. “Young people can change and adapt quickly and this is important,” he said. “If an enterprise considers its human resources to be its most important asset, it must consider investing in training and capacity building. It is also necessary to invest in technology and, in particular, master technology to drive development.” 

Moreover, employers are responsible for workplace productivity. “It’s management’s job,” Mr. Thuy said. “Most importantly, company leaders must create a healthy competitive environment and attract talent and at the same time invest in preparing strategies to improve productivity.” People and technology are the two key factors in improving workplace productivity in Vietnam, he believes. 

A report entitled “ASEAN in Transformation” released in 2016 by the International Labor Organization showed that 86 per cent of workers in Vietnam’s textile and footwear sectors are at risk of future unemployment because of automation brought about by Industry 4.0. Conversely, the demand for employees in sectors such as electricity, information technology (IT), electronics, and equipment is growing. 

Most in attendance at the CEO Forum agreed with the view that higher salaries should result in higher workplace productivity. “People are Vietnam’s largest resource and will impact on economic growth, especially when the country is calling for foreign investment,” Mr. Thuy said. “With a low labor productivity index, we will lose out when negotiating with foreign enterprises, so it is imperative to increase productivity by investing in human resources.” 

Ms. Thanh also believes that human resources are the key factor in bolstering workplace productivity and that training should be considered an investment rather than a cost. “I conducted a survey on businesses to ask these questions: What are you investing for yourself? What are your biggest projects for? Many projects are listed without human resources training,” she said. 
It takes time for changes in mechanisms to be forthcoming, according to Ms. Nguyen Thi Thanh Huyen, General Director of the Garment 10 Corporation. Enterprises need to have their own training programs, especially in foreign languages and technology. To meet international standards in exports, the textile and garment sector worldwide has become one of the leaders in workplace productivity. 

Workplace productivity differential between Vietnam and elsewhere with purchasing power parity, 2006 & 2016

Sources: GSO, World Bank 2017

Improving productivity

Figures show that wage growth isn’t reflected in workplace productivity growth, according to Mr. Lam. At current prices, the average wage for employees rose 16.9 per cent per annum during the 2007-2013 period. Meanwhile, average workplace productivity increased just 12.9 per cent per annum. Many enterprises choose to adopt wage strategies based on workplace productivity. 

Mr. Nguyen Xuan Phu, Chairman of the Sunhouse Group, pointed out two basic philosophies in creating a company’s wage structure. The first is determining the level of inflation. For example, he explained, if inflation is 5 per cent, Sunhouse increases wages by 5 per cent, to which is added any higher workplace productivity. In the past year, he went on, inflation was 4 per cent and productivity increased 9 per cent, so wages did not increase by more than 13 per cent. The second is that people who participate in policy development are paid a wage under the profit mechanism, and those who do not participate in this have their wages based on salary funds. This helps him manage wages and requires employees think about their jobs and try to increase productivity.

Photo: Viet Tuan

The government should quickly set up a National Productivity Board, Mr. Lam said, chaired by a Deputy Prime Minister, as a permanent body specializing in workplace productivity and tasked with coordinating national productivity growth drivers and studying the experience of Singapore and South Korea. Mr. Phu added that the State should focus on building a mechanism that benefits both public officials and CEOs and helps enterprises develop better. 

Meanwhile, Mr. Ngo Van Tuan, Deputy Head of the Party Central Committee’s Economic Commission, proposed that a country in the early stages of industrialization like Vietnam needs to identify and adopt new strategies and directions in attracting foreign direct investment (FDI), as the sector plays a more important role in transferring and capturing technology and increasing workplace productivity. “Vietnam needs to patiently pursue the new growth model based on productivity and innovation,” he said. “Increasing productivity is an important factor in economic development and only by increasing productivity can Vietnam achieve rapid and sustainable growth.”

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