Vietnam Market Watch: Unemployed Graduates, Franchising, and Strong Growth Manufacturing Sector

January 26, 2017 Posted by Vietnam Briefing Reading Time: 4 minutes

Unemployment rate steady but graduates maintain difficulties

Vietnam’s unemployment rate reached 2.3 percent in 2016; however, numbers for people holding bachelor’s or master’s degrees are less positive. The Ministry of Labor, Invalids and Social Affairs said in a report that it was looking to develop the labor market. Approximately 1.6 million Vietnamese were hired in 2016, a year-on-year increase of one percent. Of those, 126,000 went abroad as guest workers, up 9.6 percent compared to 2015. The unemployment rate in urban areas stood higher than the one in rural areas, as 3.18 percent of urban citizens were without a job, compared to 1.86 percent of rural citizens.

There is a shortage in the creation of jobs. In the third quarter of 2016, there were 202,000 college or higher graduates that were unemployed. The government also indicated that it wants to develop stricter laws for Vietnamese employees working overseas.

Franchising still in early development stages

The franchising sector in Vietnam is still in the early stages of development, according to analysts. A consultancy firm stated that only 144 foreign brands have been franchised in the country as of June 2016. Analysts further stated that Vietnamese firms were still new to franchising, and as such were just beginning trials. Presently two brands – Starbucks and Darden – own 50 percent of the branches. In 2008, Burger King owned 12 percent of its branches but that fell 0.4 percent in 2013, while Subway does not own any shops in the country. For coffee shops, initial investment is around US$250,000 for a single shop; the break-even point is usually reached after at least two operating years.

Consultancy firms state that, in general, most franchised brands are in the food, education and healthcare sectors. Vietnamese firms, however, are mostly looking to franchise food brands. Looking forward, analysts believe that the franchise market will lift-off after about five years.

Manufacturing continues strong growth in December

Manufacturing in Vietnam ended on a strong note at the end of 2016, recording a 52.4 score on the Manufacturing Purchasing Managers’ Index (PMI) – second to only the Philippines. The result was down from November’s 54 but still strong, indicating an expansion in the manufacturing sector compared to the previous month. Robust growth was recorded due to rising orders, output and employment. The strong growth was achieved despite sharply increased input costs, as companies increased charges at rates barely met in the past five years.

According to IHS Markit, local firms will continue to be able to secure work. Consequently, a rise in the export business will help to achieve the sector’s forecasted GDP growth of 6.3 percent. The manufacturing sector is gauged on eight categories, namely basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper, and transport. Despite Vietnam’s positive performance, the ASEAN manufacturing sector as a whole declined in December 2016.

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