Vietnam’s National Program for Increasing Labor Productivity: Key Takeaways

Last week, the Prime Minister of Vietnam approved the National Program for Increasing Labor Productivity to 2030. Here is how Vietnam intends to improve productivity in its workforce.

Labor productivity has been a challenge for Vietnam for some time. In 2021, labor productivity in the country hit just US$10.22 per hour trailing its regional peers mainland China at US$13.53, Thailand at US$15.06, and Indonesia at US$12.96, according to the International Labour Organization.

There is, however, a strong impetus to improve productivity–Vietnam’s low wages that were once a key drawcard are rising rapidly, and therefore adding value to the labor force is necessary to remain competitive.

This has not been lost on key decision-makers in Vietnam either.

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In fact, last week the Prime Minister approved the National Program on Increasing Labor Productivity to 2030 (Decision 1305/QD-TTg). This document is a road map for improving labor productivity in Vietnam, outlining key targets and strategies that the authorities intend to implement in order to see that Vietnam’s labor force can meet the productivity demands of firms operating in the country.

In this article, the Vietnam Briefing explores this plan so that foreign firms investing in Vietnam might be able to better gauge where Vietnam’s labor force is headed in order to plan accordingly.

Key targets of the National Program for Increasing Labor Productivity

The National Program for Increasing Labor Productivity outlines several key targets and performance indicators that inform the general development of the strategy. These are:

• An average labor productivity growth rate of 6.5 percent a year or more;
• Labor productivity in the processing and manufacturing to reach an average annual growth rate of 6.5 to 7.0 percent;
• The average annual growth rate of labor productivity in agriculture, forestry, and fisheries to reach between 7 and 7.5 percent a year;
• The service sector is to have an annual average growth rate in labor productivity of 7 to 7.5 percent a year;
• The average labor productivity annual growth rate in the four key economic regions and the five centrally run cities to be greater than the national average between 2023 and 2030;
• To be among the top three countries in the ASEAN region with respect to labor productivity growth;
• For enterprises engaged in research and development to increase by 15 percent a year up to 2025 and by 20 percent a year each year after to 2030;
• For 30 percent of workers to have degrees and/or certificates by 2025 and 35 to 40 percent to have degrees and/or certificates by 2030;
• For the number of workers in agriculture to be reduced to less than 20 percent by 2030; and
• To increase the contribution of science and technology to innovation and total factor productivity growth to 45 percent of GDP by 2025 and close to 50 percent by 2030

Implementation guidelines

The National Program outlines several key approaches to meeting the aforementioned targets. These are:

Macroeconomy

To research ways to improve the quality, efficiency, and competitiveness of Vietnam’s economy broadly. This includes promoting innovation and the enhanced application of science and technology in the business environment, as well as promoting the development of Vietnam’s digital economy. It also suggests:

• Improving service quality according to international standards and practices; and
• Taking advantage of new technology as well as promoting innovation and the digital transformation of the education and training sector.

Legislation and regulations

Legislation and regulation are also expected to play a key role in improving Vietnam’s labor productivity. In a practical sense, this means completing legal frameworks and developing legislation to create a supportive environment for start-ups and businesses focused on innovation and developing new technologies. This new legislation should also look to:

• Increase foreign investment in industries with a high-added value component;
• Promote integration with global production and supply chains;
• Promote the transfer of technology and management skills from foreign-invested enterprises to domestic firms;
• Promote policies aimed at commercializing the results of research and development activities; and
• Improve the efficiency and effectiveness of investments in education, training, vocational education, scientific research, career guidance, entrepreneurship, and innovation.

Promote labor productivity initiatives

The National Plan also pushes for the promotion of labor productivity initiatives including regional pilot programs of these initiatives in order to bring the whole country into the fold. Furthermore, it advocates for:

• Establishing a National Productivity Committee to summarise international experiences to find synergies with the conditions on the ground in Vietnam;
• Initiating a dialogue that includes sharing experiences on increasing labor productivity with the business community, investors, and workers, on the barriers to labor productivity, and using the outcomes to find practical solutions; and
• Increase awareness of labor productivity and labor productivity issues in all sectors of the economy: national and local, enterprise and community.

Improve the quality of education and training

A fourth component of the National Program is education and training through which Vietnam intends to develop a modern flexible labor force. This includes connecting domestic and foreign labor markets but also:

• Improving the efficiency of state management of education, training, and vocational education;
• Accelerating the digital transformation of the education sector;
• Modernizing education and training facilities and equipment and creating innovative training programs;
• Improving access to education and training and closely linking education and training with business needs and labor market objectives.
• Researching and developing new education and training models based on digital platforms and technology;
• Developing and implementing training programs for experts, high-quality human resources, and technical workers; and
• Developing a network of consultants and Vietnamese experts abroad to assist in the digital transformation of education and training in Vietnam.

Increase competitiveness

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Creating greater competitiveness is also part of the plan to increase labor productivity. In particular, the plan envisions increased regional development and greater regional linkages. This includes forming a sub-regional development space in each of Vietnam’s socio-economic regions to promote the region’s competitive advantages and increase labor productivity in those sub-regions. This also means:

• Developing institutions and policies to restructure the agricultural sector. This includes improving the productivity, and efficiency of production and business.
• Improving industrial development institutions and developing an Industrial Development Law;
• Forming regional and world-class service centers in trade, tourism, finance, and logistics; and
• Creating a system of statistical indicators to monitor and evaluate labor productivity developments associated with innovation and digital transformation.

Program funding

Though specific figures and budgets are not provided with the Decision it does suggest a number of possible funding sources including:

• State budget capital,
• Private enterprise, and
• International sponsorship.

Labor productivity moving forward

Though the National Program for Increasing Labor Productivity to 2030 lacks specific details, its development and approval does provide valuable insights into the thinking of key decision-makers in Vietnam with respect to labor productivity. An understanding of what is in the Decision may therefore be beneficial to firms conducting due diligence or performing regional location comparisons and analysis.

This is, however, only one part of the much bigger picture when it comes to the labor market in Vietnam. Firms looking for more information should contact the human resources and payroll experts at Dezan Shira and Associates.

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