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Cablegate: Vietnam's Pool of Skilled Labor Drying Up

VZCZCXRO3386
RR RUEHCHI RUEHDT RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHNH RUEHPB
DE RUEHHI #0056/01 0161001
ZNR UUUUU ZZH
R 161001Z JAN 08
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC 7009
INFO RUEHHM/AMCONSUL HO CHI MINH 4156
RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION

UNCLAS SECTION 01 OF 02 HANOI 000056

SIPDIS

SIPDIS

STATE FOR EAP/MLS AND DRL/IL
STATE PASS USDOL DUS PONTICELLI, ZHAO
STATE PASS USTR FOR BISBEE
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO

E.O. 12958: N/A
TAGS: ELAB EAID ILO ECON ETRD VM
SUBJECT: VIETNAM'S POOL OF SKILLED LABOR DRYING UP

HANOI 00000056 001.2 OF 002


1. Summary: Vietnam has earned a reputation for its industrious,
low-cost, and young labor force. Unprecedented economic growth,
however, is imposing severe demands on Vietnam's labor market. With
local and foreign investors draining the talent pool, Vietnam's
labor force no longer confers the advantages that it once did. A
shortage of qualified labor could hinder the country's economic
development and experts agree that Vietnam must raise the overall
quality of its labor force to sustain future economic growth. While
the Government of Vietnam (GVN) acknowledges the situation and is
making efforts to reform the country's system of higher education
and vocational training, the immediate demand for skilled labor may
overtake Vietnam's capacity to supply it. End Summary.

ADVANTAGES AND CHALLENGES CANCEL ONE ANOTHER
--------------------------------------------

2. The quality of Vietnam's human resources has improved markedly in
the twenty years since the government launched its "doi moi" reform
program. Today's labor force is relatively well educated (Vietnam
has a 94 percent literacy rate including 97 percent literacy in the
workforce) and industrious and Vietnamese cultural traditions
emphasize learning and respect for authority. In addition, Vietnam
has one of the youngest labor forces in Southeast Asia. According
to statistics cited by Madam Nguyen Thi Kim Ngan, Vietnam's Minister
of Labour, Invalids and Social Affairs (MOLISA), 50 percent of
Vietnam's 45.6 million strong workforce is under the age of 35.

3. Yet, Vietnam's inability to meet the labor demands of its
fast-growing economy concerns both employers and the Vietnamese
government, especially as foreign direct investment continues to
rise in the wake of WTO accession. Although Vietnam created upwards
of 1.6 million jobs annually from 2001-2006, the majority were
low-skill, low-wage jobs. According to MOLISA, just one-third of
Vietnam's total work force has undergone any sort of formal
preparation, including vocational training and higher education.
Vietnam's skilled workforce - which includes professional and
skilled labor - comprises just 30 percent of the country's labor
pool and there are fears that the situation could derail the
country's continuing economic growth if not remedied in the near
future.

4. As in much of Southeast Asia, Vietnam's number one challenge is
finding sufficient professional staff to work in Vietnam's fast
growing services sector, particularly in the areas of finance,
accounting, and information technology. Vietnam is also
experiencing a serious shortage of skilled and semi-skilled labor to
fill construction, textile and tech-assembly jobs. Members of the
Vietnam Chamber of Commerce and Industry (VCCI) and the Vietnam
Cooperative Alliance say that even high paying and high profile
firms like Intel struggle to find sufficient staff for their
assembly plants. The shortage of qualified labor has led to
job-hopping and employee poaching, especially among the more highly
skilled workers. As Vietnam's labor pool has tightened, strikes
have increased dramatically, with workers walking off the job in
record numbers, demanding higher wages, benefits, and bonuses to
keep pace with Vietnam's increased cost of living.

5. The shortage of skilled workers is also disrupting the social
fabric in many parts of the country. Just a small share of the
indigenous work force in Dong Nai Province - one of the regions
attracting a large share of Vietnam's Foreign Direct Investment - is
qualified to work in Dong Nai's industrial and export processing
zones. Seventy percent of Dong Nai's labor force comes from other
areas of Vietnam and the thousands of additional workers pouring
into the province have imposed strains on the local infrastructure,
including a shortage of housing and schools.

AN EDUCATIONAL SYSTEM THAT FAILED TO KEEP UP
--------------------------------------------

6. While there is a large pool of disenfranchised agricultural
workers in rural areas where cultivable land is rapidly giving way
to industrial development, relatively few of these people have the
qualifications that employers need. With its low level of skilled
labor and large rural population, Vietnam's labor market is ill
structured to accommodate the rapid pace of urbanization and
industrialization taking place in Vietnam. The country's reliance
on agriculture is the source of many of the country's labor market
woes. Over half of Vietnam's labor force toils in unskilled
agricultural tasks and 72 percent of the country's population works
and resides in the countryside. Workers who shift from agriculture
to other sectors require intensive training, which is posing serious
challenges to Vietnam's inadequate vocational training centers and
obsolete system of higher education.

7. Tertiary education has many shortcomings. Vietnam's schools and

HANOI 00000056 002.2 OF 002


universities employ an antiquated teaching methodology (a
theory-intensive instructional style), lack qualified instructors,
and have poor facilities. All of this exacerbates the widespread
incongruity between skills and requirements in the country's job
market. Vietnam's obsolete educational system is hindering the
development of suitable managerial staff, and a director of VP Bank,
a joint-stock commercial bank, said just 30 percent of students with
finance degrees from Vietnamese universities are qualified to work
for his bank. As well, a representative at Siemens Vietnam says 100
percent of the information technology graduates hired by the company
require intensive training before starting work.

8. The GVN recognizes the structural weaknesses in Vietnam's labor
market and educational system and hopes to increase the share of
skilled workers in the labor force from 30 to 40 percent by 2010.
With a new, energetic education minister, who also serves as one of
Vietnam's five deputy prime ministers, Dr. Nguyen Thien Nhan is
scrutinizing Vietnam's teaching and examination methods with an eye
to reform. His ministry, the Ministry of Education and Training
(MOET), seeks to transform Vietnam's rigid system of higher
education into a flexible, market driven system, including
attracting foreign expertise. A shift is underway, with MOET
placing more focus on the rapidly developing service sector.

9. The GVN recently implemented a higher-education credit program to
grant low interest loans to students. It will also provide
scholarships to government officials and academics to help them
pursue overseas study. In addition, the GVN aims to enhance
bilateral cooperation with the United States, the UK and Australia
to attract Fulbright, Chevening, and Australian Development
Scholarships for Vietnamese students. Finally, MOLISA, the ministry
that oversees vocational training, seeks to expand Vietnam's network
of job training centers to address looming labor shortages in the
steelwork, maritime, construction, and information technology
sectors.

MICHALAK

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