Vietnam’s labor productivity is lagging decades behind regional countries', despite considerable improvement in recent years, the Ministry of Planning and Investment said in a report.

Labor productivity, or output per unit of labor input, is gross domestic product (GDP) divided by total employment in the economy, also known as GDP per person employed, according to the report prepared by the ministry’s General Statistics Office (GSO).

In 2014, Vietnam’s GDP per person employed was VND74.7 million (US$3,335) per laborer, up 4.9 percent from a year earlier.

Labor productivity increased at an average pace of 3.7 percent annually between 2005 and 2014.

“We did the calculations in accordance with the recommendation and common practices of the International Labor Organization [ILO] and the Organization for Economic Co-operation and Development [OECD],” Dau Ngoc Hung, deputy head of the GSO, told Tuoi Tre (Youth) newspaper on Thursday.

The 2014 figure was calculated based on a GDP of around VND3,930 trillion ($175.45 billion) and some 52.7 million employed people above 15 years of age during the period of calculation, Hung said.

The planning and investment ministry said it will take Vietnam dozens of years to catch up with other Southeast Asian countries in terms of labor productivity, supposing that the GDP per person employed of these nations continue growing at the same average pace as that in the 2007-12 period.

It is thus expected that Vietnam would only be able to keep pace with the Philippines in 2038, and with Thailand in 2069, according to the report.

The report also shows that while Vietnam’s GDP per person employed was only 1.3 times lower than that of China, the gap widened to 2.8 in 2013.

Myriad factors

The ministry attributed low labor productivity to a number of factors, among them the huge number of untrained laborers, a less competitive business environment, and complicated administrative procedures.

The current economic structure, in which primary industry dominates over service and knowledge-based sectors, is also to blame, according to the ministry.

Primary sectors include farming, fishing, and mining, whereas the service and knowledge-based ones, also known as tertiary and quaternary sectors, consist of finance, banking, and software.

The tertiary and quaternary sectors bring more value to the country, but currently make up a far smaller proportion in the economic structure, resulting in poor labor productivity.

The agro-forestry and seafood industries currently account for more than 46 percent of the country’s total labor force, but only generate 18.1 percent of GDP, according to the report.

In the meantime, only 9.6 million out of the 52.7 million laborers measured in the report, or 18.2 percent, are trained, which indicates that the economy is full of unskilled employees.

Businesses still have to complete complex paperwork to get their work done in Vietnam, whose competitiveness index only ranked 68th out of 144 economies in 2014, according to a report by the World Economic Forum.

Vietnam stood way behind such ASEAN nations as Singapore (#2), Malaysia (#20), Thailand (#31), and the Philippines (#52).

Solution for improvement

The planning and investment ministry suggested that Vietnam set up a committee, which consists of representatives from the government, businesses, industry associations, exclusively tasked with working to improve the country’s labor productivity.

There should be a national strategy with a goal to make Vietnam on a par with regional nations in terms of GDP per person employed, the ministry said in the report.

“Vietnamese businesses should also be encouraged to boost research and development as recent studies find that firms with strong R&D activities can achieve higher productivity,” Hung from the GSO said.

The government has requested that the planning and investment ministry continue to solicit feedback, suggestions and recommendations from experts and scientists to prepare another report on solutions for improving the situation, which should be submitted for consideration next month.

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