Vietnam’s automation future at work

Are robots coming to take Vietnamese jobs? Are iPads invading Vietnamese workplaces? 

Throughout the economic reform era, a key policy challenge for Vietnamese leaders has been to continually provide new employment opportunities for the country’s workforce

1492p10 vietnams automation future at work
Edmund Malesky Professor, Duke University and Lead researcher of the Vietnam Provincial Competitiveness Index

Rising labour costs and tightening labour markets, combined with pressure from international competitors and demands from international buyers, has led many companies to contemplate enhancing productivity by investing in labour-saving automation. Social distancing within the workplace as a response to COVID-19 may exacerbate interest in these technologies, as companies seek to maximise the productivity of their employees with limited space. Not all forecasts are so gloomy, however; others argue that automation can enhance employment by diversifying businesses’ activities.

This year, the Provincial Competitiveness Index (PCI) research team attempted to shed light on this debate within Vietnam by asking businesses about their current use and plans for automation in their manufacturing and service sector operations. We defined automation broadly as three sets of activities.

First, using industrial robots in product assembly, distribution, and/or delivery; digitalisation of production or services, such as the use of iPads or tablets for taking customer orders or for back-office activities to reduce error from human input; and adoption of AI, such as autonomous delivery vehicles.

We can use that data to answer three questions: What is the extent of current automation in Vietnam? What factors are driving the adoption of these new technologies? And what is the potential impact on the scale and composition of employment in foreign and domestic businesses?

Starting with the first question, the extent of current and planned automation in Vietnam is higher than expected. Within the past three years, 67 per cent of both foreign and domestic investors have automated some operations, while 75 per cent plan to automate new tasks during the next three years over the next three years. Domestic ones claim to have already automated about 10 per cent of their operational tasks over the past three years and plan to automate over 25 per cent of their work in the near future. Automation among foreign firms is only slightly more advanced (10.6 and 28 per cent of current and planned tasks, respectively).

We can see the motivations behind businesses’ automation decisions. They are investing in automation for two reasons. They seek to reduce the costs of labour recruitment and training, and they believe these efforts will assist them with global integration, connecting them to overseas buyers and customers. For domestic businesses, the highest levels of current automation are found among those whose primary customers are foreign-invested enterprises (FIEs) based in Vietnam.

However, those selling to third-party buyers have the greatest plans for automating technologies. Foreign businesses that are part of multinational corporations or sell to third-party buyers have been the most ambitious automators. In further econometrics analysis of foreign businesses in the PCI report, we also identified an important third correlate of investment in automation - labour unrest. Businesses that have observed labour strikes among competitors in similarly situated provinces and industries are significantly more likely to adopt automation than those where strikes have been less prominent.

Automation is affecting businesses’ employment decisions in surprising ways. The impact of increased automation on current employment and future hiring plans is diverse and dual-edged. Some 12.6 per cent of domestic businesses have increased employment as a result of automation, compared to 35 per cent who plan to maintain employment at current levels and 27 per cent of domestic businesses who intend to reduce employment. Of this latter group, over half (15 per cent) plan to do the same activities but with a smaller number of people.

1492p10 vietnams automation future at work
Frequency and depth of automation among Vietnamese businesses
1492p10 vietnams automation future at work
Drivers of automation
1492p10 vietnams automation future at work
Impact of automation on employment decisions

By sharp contrast, 17.8 per cent of FIEs expressed their intention to increase employment. This is positive news. Although 33 per cent do still plan to reduce employment, in contrast to domestic investors, a significant share (8.5 per cent) intend to increase the sophistication of their smaller labour forces. Automation is quite diverse across sectors, revealing the dual-edged nature of automated technologies. In some cases, they will lead to redundancies and decreased employment. In other cases, they will lead to enhanced training and greater opportunities for the next generation’s workers.

 

- We continue to employ the same number of workers, performing the same tasks.

- We employ the same number of workers, but they perform different tasks.

- We have both expanded employment and automated production.

- We employ fewer workers to perform the same number and type of tasks.

- We employ fewer workers, and they perform less sophisticated tasks.

- We employ fewer workers, but they perform more sophisticated tasks.

The impact of automation on the average skill level of companies’ labour forces will be diverse. For domestic businesses, the most frequent answer was that automation would have no impact on the average skill level of employees (just under 24 per cent). The second most common answer for domestic businesses was that they would seek more high-skilled labour (19 per cent), illustrating that some businesses are interested in upgrading their workforces. For foreign businesses, these answers are reversed.

More than 23 per cent of FIEs plan to hire workers with greater skills and just over 20 per cent do not expect to change. This is illustrative of the dual-edged nature of automated technologies. In some cases, they will lead to redundancies and decreased employment. In other cases, they will lead to enhanced training and greater opportunities for the next generation’s workers.

Given that automation is an unstoppable force that is likely to be undeterred by regulatory changes, what can Vietnamese policymakers do to mitigate the harmful effects of new business technologies while simultaneously aiming to take advantage of the opportunities that automation provides? The first recommendation is simple – Vietnamese authorities should double-down on their current legislative achievements in education and labour relations. Make sure these laws are implemented quickly and aggressively, and that, in so doing, bureaucrats adhere to the spirit envisioned by the laws’ architects. The Law on Education and accompanying national curriculum reforms were aimed at enhancing the quality of general and vocational education with the specific goal of improving the skill sets for Vietnamese workers to succeed in an advanced economy.

The Labour Code broke new ground for working conditions and employee-labour relations. Both the Law on Education and the Labour Code were legislative achievements, but the corresponding implementing regulations and decrees at both national and local levels have yet to be written. By augmenting the skillsets of Vietnamese employees and reducing misunderstanding between workers and employers, successful execution of both laws will help mitigate any hurt stemming from firm-level automation decisions.

According to the PCI data, only 29 per cent of foreign employers and 27 per cent of domestic employers assess the workforce near where they do business in Vietnam as fully sufficient to meet their needs. The cost of retraining employees in-house is the largest contributor to their automating decisions, as businesses have justifiable concerns about investing in training when those workers can so easily move on to competitors.

To date, robots have proved more loyal. Better matching general and vocational educational training to business needs will reduce some of the current demands for automation and will prepare Vietnamese workers for better and higher paying jobs both now and after automation occurs. Because it will be extremely difficult for Vietnamese leaders to anticipate what new jobs will be created due to automation, it is important to focus education on providing sets of fungible skills that allows workers to adapt quickly, learn new skills easily, and take advantage of technological change.

At the same time, allowing for more constructive conduits between workers and businesses will provide opportunities for collective decision making about how best to prepare local workforces for automation. VIR

Edmund Malesky (Professor, Duke University and Lead researcher of the Vietnam Provincial Competitiveness Index)

 
 

Other News

.
From small teen to “natural born killer”: A Vietnamese boxer’s journey to Tokyo Olympics
From small teen to “natural born killer”: A Vietnamese boxer’s journey to Tokyo Olympics
FEATUREicon  23/05/2020 

Boxer Nguyen Van Duong is proud to be heading to Tokyo next year after defeating the renowned Chatchai-decha Butdee from Thailand in the Olympics qualifiers in Jordan in March, 

The world in the post-Covid-19 era (Part 5)
The world in the post-Covid-19 era (Part 5)
FEATUREicon  23/05/2020 

Science and technology help people cope with pandemics like Covid-19 and help society adapt to pandemics.

Cuban photographer yearns to return to Hanoi
Cuban photographer yearns to return to Hanoi
FEATUREicon  23/05/2020 

Neither the great distance nor the spread of the novel coronavirus stopped Cuban photographer Eloy Rodriguez’s from visiting Vietnam for a few weeks in early March.

The world in the post-Covid-19 era (Part 4)
The world in the post-Covid-19 era (Part 4)
FEATUREicon  22/05/2020 

American scholar Stephen Walt, a realist and an ardent supporter of nationalism, said the post-epidemic world is a world that is less open, less prosperous and less free.

The world in the post-Covid-19 era (Part 3)
The world in the post-Covid-19 era (Part 3)
FEATUREicon  21/05/2020 

Originally regarded as a "savior", the Covid-19 pandemic has created new skepticism, considering globalization as a "criminal" that spread the coronavirus epidemic across the globe and caused the current disaster.

Cooperation - key in Vietnam’s fight against COVID-19
Cooperation - key in Vietnam’s fight against COVID-19
FEATUREicon  19/05/2020 

The international community has attributed Vietnam’s remarkable achievements in taking on COVID-19 to the close cooperation between the country’s Government and its people.

The world in the post-Covid-19 era (Part 2)
The world in the post-Covid-19 era (Part 2)
FEATUREicon  20/05/2020 

Some questions must be answered clearly: Where and in what context did Covid-19 appear? Were the World Health Organization's (WHO) detection and warnings timely enough in preventing the pandemic outbreak?

President Ho Chi Minh lives on through the lives he touched
President Ho Chi Minh lives on through the lives he touched
FEATUREicon  19/05/2020 

It's been more than 50 years since President Ho Chi Minh passed away and school children still learn his poems, his biography and about his minimalist lifestyle. 

Vietnam stands firm amid Covid-19 outbreak
Vietnam stands firm amid Covid-19 outbreak
FEATUREicon  20/05/2020 

Vietnam has recorded no new cases of COVID-19 infections in the community for more than 30 days. Quarantine has been lifted in high-risk areas and social distancing measures relaxed. 

The world in the post-Covid-19 era
The world in the post-Covid-19 era
FEATUREicon  19/05/2020 

The coronavirus pandemic has not passed, but it has been and will leave severe consequences in all aspects of human life, as well as international relations.

When Apple comes to Vietnam and FDI flow starts moving
When Apple comes to Vietnam and FDI flow starts moving
FEATUREicon  18/05/2020 

Apple is making clearer signals in the production of components and products in Vietnam, opening up opportunities for Vietnam to participate more deeply in the global value chain.

Barber truck offers free haircuts to people in need
Barber truck offers free haircuts to people in need
FEATUREicon  16/05/2020 

There is nothing unusual about barbershops, but in HCM City there is a barbershop that moves.

Keys to nation’s investment optimism
Keys to nation’s investment optimism
FEATUREicon  15/05/2020 

Recent analyses by the World Bank indicate that Vietnam will be one the few countries in the entire world to experience positive economic growth in 2020.

Fishing villages co-exist with development
Fishing villages co-exist with development
FEATUREicon  12/05/2020 

Stretching 90km along the coast over the Hai Van Pass to Hoi An, fishing villages and crowded fishery communities have been around for centuries.

Daughter’s joy after her father was rescued at sea by Vietnamese fishermen
Daughter’s joy after her father was rescued at sea by Vietnamese fishermen
FEATUREicon  10/05/2020 

The daughter of a Filipino fisherman who has been rescued after 17 days adrift has thanked the Vietnamese authorities for helping to save her father.

Low business performance may prompt Vietnam c.bank to further cut policy rates
Low business performance may prompt Vietnam c.bank to further cut policy rates
FEATUREicon  08/05/2020 

The central bank of Vietnam had previously cut the benchmark interest rates by 0.5 – 1 percentage point in March.

Slowdown hampering sluggish divestments
Slowdown hampering sluggish divestments
FEATUREicon  07/05/2020 

A wave of challenges stemming from the pandemic and volatile market could throw a monkey wrench in the works for state divestment, but may well open the door wider for foreign investors in Vietnam.

Foreign groups step up plans to enter or expand in Vietnam
Foreign groups step up plans to enter or expand in Vietnam
FEATUREicon  06/05/2020 

While China is struggling with the pandemic and is losing the confidence of foreign investors, proven resilience is pushing Vietnam to the fore as an ideal investment and manufacturing hub for Southeast Asia.

Young “Robinhoods” shooting for the stars at Tokyo Olympics
Young “Robinhoods” shooting for the stars at Tokyo Olympics
FEATUREicon  05/05/2020 

Securing a berth at the Tokyo 2020 Olympic Games has been a turning point in the sporting careers of Do Thi Anh Nguyet and Nguyen Hoang Phi Vu - the first Vietnamese archers to qualify for the world’s largest sporting event. ​

Vietnam fulfills promise to remain a safe destination
Vietnam fulfills promise to remain a safe destination
FEATUREicon  05/05/2020 

Vietnam puts safety of its citizens and visitors the first and foremost, even at the cost of economic interest.

 
 
 
Leave your comment on an article

OR QUICK LOGIN