The development of private enterprise will improve their labor productivity

	Part 4: From the success of private enterprises, look at State-owned enterprises
	“Giving wings” to private enterprises
	Development of private business: It takes a lot of strong “medicine”

In order to solve the bottleneck of labor productivity in enterprises, Vietnam needs to change its mind to consider cheap labor as an advantage. Photo: Xuan Thao.

High and low labor productivity

Director of the Vietnam Institute for Economic and Policy Research, University of Economics, and Business, Vietnam National University, Hanoi Nguyen Duc Thanh said that the average annual productivity of Vietnam increased from 18.886 million VND/labor (1991) to 54.427 million VND/labor (2015). Thus, after 25 years, the average labor productivity of Vietnam increased less than 3 times (2.88), much lower than the speed of other countries, leading a risk of falling behind.

Mr. Thanh said, the labor productivity of the industry and construction sectors was the highest, followed by the service sector, and the lowest was of the agriculture, forestry and fishery sectors. In terms of the contribution of these three sectors to GDP, the agriculture, forestry and fishery groups had the lowest labor productivity and their contribution rate also decreased gradually (around 2%). The labor productivity of service group was smaller than industry and construction group, but the contribution rate of these sectors was nearly equal (around 40%).

According to the Director of the Vietnam Institute for Economic and Policy Research, from 2002 onwards, the labor productivity of the FDI sector has fallen sharply, while the labor productivity of the state sector continued to grow, even surpassing the FDI sector in 2015. The labor productivity of the private sector was still very low. In 2015, the share of GDP contributed by the state, non-state and FDI sectors was 35.8%, 49.5% and 14.7%, respectively. The fact is that this will cause harm, prevent growth and national competitiveness. Meanwhile, Vietnam's unskilled cheap labor force, which is stuck in rural areas and unable to move to a more productive sector, is still very large. This is a very serious problem of the Vietnamese economy. Notably, the labor productivity of the industrial and construction sectors - which is the most important area, has long since stalled, causing a disadvantage as well as inhibiting the economic growth.

“The labor productivity of the state-owned enterprise sector is higher and further than the productivity of the private enterprise sector. But the high productivity of the state-owned enterprise sector is not due to the efficiency or superiority, but thanks to the preferential mechanisms of capital, technology, market monopoly, so the output of state-owned enterprises is better. In contrast, the private enterprise sector is using the largest labor force in the economy, but its labor productivity is the lowest,” Dr. Nguyen Duc Thanh analyzed.

Create a competitive environment to increase labor productivity

Many people said that enterprises still did not properly understand and focus on investing and purchasing activities, changing technology in the modern direction to support workers, creating a favorable and progressive working environment for employees to take advantage of and maximizing their capacity and thereby improving the labor productivity... This stemmed from working conditions, working environment, low technology and capital-used density of Vietnam and low skills of workers. And that explains why our income now is in the lowest category of the lowest group in ASEAN region in particular and in Asia in general.

Mr. Nguyen Anh Tuan, Director of Vietnam National Productivity Institute (VNPI) said that labor productivity was important for all three objects: enterprises, workers and the State. With high productivity, businesses could attract investment and develop, improve their competitiveness; improve living standard for the employees; At the same time, high productivity enhanced the national competitiveness and directly impacted on the GDP. Increasing labor productivity should come from the thinking of business leaders, the thinking of leaders at all levels and the employees themselves. Therefore, changing the environment and institutions was important to create a competitive environment, thereby increasing labor productivity.

Further analyzing of this issue, according to Mr. Tuan, to address the bottleneck of labor productivity in enterprises, Vietnam needs to change its mind to consider cheap labor as an advantage. Because of cheap labor, the income of workers is also low. And Vietnam should gradually change its thinking, cheap labor should not be considered as an advantage, but should go into higher value fields instead of processing products for the countries as we have been doing. At the same time, it was necessary to reform institutions and create a favorable environment for business to develop.

According to economist Pham Chi Lan, private enterprises are increasingly fiercely competitive with FDI enterprises, and find it difficult to access resources on capital, land and resources... Therefore, the private enterprise sector is getting smaller and smaller in size; they do not dare to make a large investmejt to increase their productivity, while it should be a region with higher labor productivity.

Private enterprise development: motivating, creating, sustainable

Agreeing with the views of Ms. Pham Chi Lan, Associate Prof. Dr. Nguyen Duc Thanh also said that the private enterprises were the object for absorbing a lot of labor but it was not expanding; without a market, we could not expand production in those industries. Therefore, developing the market was the most important for businesses to absorb the available and redundant workers today.