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Growing waves of FDI investment set to pose challenges for unskilled workers

Foreign enterprises are beginning to shift their investments into industries that require medium-level workers or higher-skilled workers as opposed to putting money into labour-intensive industries as in the past,

according to the Ministry of Labour, Invalids and Social Affairs.

growing waves of fdi investment set to pose challenges for unskilled workers hinh 0

Recent statistics released by the State Audit indicate that since the Foreign Investment Law was promulgated in 1987, the country has been able to attract more than 30,000 billion projects from 130 countries and territories globally with a total registered capital of US$362 billion, of which US$211 billion of the total was disbursed.

Therefore, FDI projects have historically represented important capital sources for economic development investment nationwide, with this flow of foreign investment also having a significant impact on market development, labour productivity, and worker income.

Minister of Labour, Invalids and Social Affairs Dao Ngoc Dung said that the creation of direct and indirect jobs has increased significantly, with the number of employees working in foreign-invested enterprises growing from 330,000 in 1995 to roughly 6.1 million in 2019. This represents an average growth rate of 7.72% during the 2005 to 2017 period, far higher than the labour growth rate seen in other economic sectors.

Labour productivity has been able to undergo positive changes thanks to capital being poured into the foreign invested sector. According to current prices, labour productivity of foreign direct investment (FDI) enterprises in 2017 reached a total of VND330.8 million per worker, 3.5 times higher than the national average for labour productivity, and higher than the entire business sector in general, especially in terms of non-state enterprises.

The shift in labour structure from low-skilled labour-intensive industries to highly-skilled labour-intensive industries has been growing together with attracting additional sums of foreign investment, with workers previously being concentrated in a number of labour-intensive manufacturing industries such as garments and textiles and footwear. However, the proportion of labour in a number of manufacturing industries applying high technology has been increasing rapidly, with the number of workers involved in electronics and electronic products increasing from 8.03% in 2012 to 15.7% in 2017.

Recruitment changes required

Minister Dung believes that foreign financiers are now seeking greater levels of investment efficiency, especially when putting their money into East Asia and Southeast Asia. Instead of searching for new and major markets that could be directly exploited as had previously been done in the past, multinational groups now prioritising investment in places that feature modern infrastructure facilities. Other factors that appeal to investors include an abundant supply of high-quality human resources, appropriate policy mechanisms, along with a stable political situation in order to improve production efficiency and boost competitiveness in available markets.

There will be an array of fundamental changes in terms of labour demand and human resources structures once the flow of foreign investment reaches sectors that require both medium-level labourers and highly-skilled workers. This is likely to be the case in sectors such as components, machinery accessories, electronics, scientific products, medical products, chemistry, along with rubber and plastic, although there will be little changes to low-skilled labor-intensive industries such as textiles and apparel or footwear, the minister noted.

“With this trend, Vietnam has many great opportunities as most countries, leading groups, and major businesses consider the country to be a safe, potential destination, an optimal investment and production centre in the short and medium term. In the context that the economy will experience drastic changes against the above-mentioned macro trends, Vietnam's labour market will certainly have fundamental changes in structure and organisation," said Minister Dung.

The Minister added that in the near future labour structures will continue to shift from the agricultural sector to both industrial and service sectors. This will follow the trend of employment structures altering from labour-intensive fields to technology-applied industries. Consequently, jobs in sectors that employ unskilled and low-skilled workers will gradually decrease as the demand for jobs that require more qualified and highly-skilled workers increases.

Due to these changes, it is likely that workers, especially those who are old, untrained, and unskilled, will certainly face an array of challenges to retrain in order to adapt themselves to become employable in new industries. Without thorough preparations, a large proportion of Vietnamese workers could be at high risk of losing their jobs amid the current shifting trend.

As a means of adapting to the latest trends of foreign investment and in order to benefit Vietnamese workers in a sustainable economy, Minister Dung underlined the need to be proactive in developing a number of comprehensive action strategies aimed at creating a completely connected market that features a diverse ecosystem which is closely linked to the international market.

Moreover, the Government should work closely with ministries and agencies to direct them to continue their great efforts to improve the nation’s business environment, take part in exchanges with major international groups, and proactively negotiate bilateral free trade agreements. “It is therefore essential to revamp bilateral and multilateral mechanisms with regard to investment attraction, intellectual property, banking, and finance so that foreign countries are able to provide the optimal conditions for their businesses to enter the country through their financial support mechanisms”, Minister Dung added. VOV

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