It is said that Vietnam's growth in several years is due to the quantity including capital and labour rather than the quality that is based on productivity.
Vietnamese enterprises, especially private ones, are too small and not connected to the global value chain of multinational companies.
The above situation is mainly due to the inability of enterprises to invest in technology so that they can not improve their labor productivity to become more competitive in the market.
TheLEADER had an interview with Prof. Tran Van Tho from Waseda University (Japan), member of Economic Advisory Team of the Prime Minister on labor productivity in Vietnam,
What characteristics of the Vietnamese economy are having the greatest impact on labor productivity?
Prof. Tran Van Tho: In my opinion, there are three major issues.
Firstly, resources, especially labor and capital, are too much in low productivity areas such as agriculture and the individual households which account for a large share in Vietnam. When labour work in such low-lying areas, the productivity of the whole society will be lower.
Secondly, there are many small and medium sized enterprises and individual enterprises in Vietnam market.
Vietnamese government is currently encouraging the startup movement but if the startup business immediately died, there is no meaning. These enterprises need to be built up to become large ones. When they become larger, they are qualified to improve their productivity, put into production lines and buy new technologies.
Thirdly, Vietnam has not yet taken advantage of advanced technology from foreign countries, which is mainly due to the small size of enterprises.
In term of the policies and regulations, do you think there are any shortcomings affecting labor productivity?
Prof. Tran Van Tho: The fact that enterprises do not have access to capital is a matter of policy.
Institutional arrangements now still favor SOEs which are often located in important locations, use a lot of capital, land and other resources.
However, these businesses have wasted their investment, which reduces social productivity. Especially in the last ten years, SOEs have wasted too much when they lost their business or invested out of their own sector and then, no one was responsible for the losses.
This is a waste of resources which many private firms cannot access.
As for the inadequacies as stated, what are your suggestions and recommendations?
Prof. Tran Van Tho: In my opinion, there are three things to do.
Firstly, it need to industrialize more strongly to attract and shift labor from low productivity areas to higher productivity ones.
Secondly, small businesses have problems with raising capital, difficulties in accessing land to build factories and construction sites so Vietnam government needs to make loans easier with easier conditions.
Thirdly, the reform of SOEs must make the capital market, labor market and land market more complete.
Thank you so much!