Embed Size (px)
Citation preview
Labor Productivity in Vietnam Data Analysis and Policy Recommendations
Nguyen Duc Thanh, PhD.
Vietnam Institute for Economic and Policy Research (VEPR)
UEB, Vietnam National University (VNU)
Addis Ababa, November 2017
Outline
• Vietnam Economic Performance in the last three decades
• Low Middle Income Trap: Productivity Challenge
• Implications and Recommendations
3
Basics of Viet Nam
Facts:
Capital: Ha Noi
Largest cities: Ho Chi Minh City, Ha Noi, Da Nang, Hai Phong, etc…
Area: 331,690 sq km2
Population: 92.71 millions (2016)
GDP: USD: 205.3 billion (2016)
GDP per capita: 2.214 USD (2016)
GDP per capita (PPP): 6.034 USD (2016)
4
Economic Performance: GDP and GDP per capita, 1992-2016 (bil. USD)
Source: WB (2017)
0
1000
2000
3000
4000
5000
6000
7000
0
30000
60000
90000
120000
150000
180000
210000
GDP (current mil. US$) (lhs) GDP per capita (current US$) (rhs)
GDP per capita, PPP (current international $) (rhs)
5
Economic Performance: Merchandise Exports and Imports, 1992-2016 (bil. USD)
Source: WB (2017)
0
40
80
120
160
200
Merchandise exports (current bil. US$) Merchandise imports (current bil. US$)
6
Openness and Net Export, 1990-2016 (% GDP)
Source: Author’s calculation from CEIC database, GSO
-50.00
0.00
50.00
100.00
150.00
200.00
net exports exports imports trade openness
FDI inflows, 1991-2016
7
Source: Authors’ calculation from GSO, MPI and CEIC database
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
0
10000
20000
30000
40000
50000
60000
70000
80000
Committed FDI (left) Realized FDI (mil. USD, rhs) Realized FDI /GDP (%, rhs)
Economic Structure: Contribution to GDP by Sector, 2005-2015 (%)
8
Source: General Statistics Office (2016)
0%
10%
20%
30%
40%
50%
2005 2010 2011 2012 2013 2014 2015
State Non-State Non-State: Private FDI Sector
Early Middle Income Trap: Productivity Challenges
• Economic growth rate declines
• Productivity challenges: Data analysis
• Factors: • Structural issues
• Labor supply
• Institutions and governance
10
A Closer Look at Economic Growth Rate, 1990-2015 (%)
Source: GSO (2017)
0
2
4
6
8
10
12
199319941995199619971998199920002001200220032004200520062007200820092010201120122013201420152016
GDP growth
7.3% in 1990-2000 6.5% in 2000-2010 5.7% in 2010-2015
The trend of economic growth in Vietnam, 1991-2016 (%)
The long-term trend of the economy’s growth has declined remarkably over the past years. The main
cause of this was the decreasing total factor productivity (TFP) rather than factors like capital,
investment or labor. Thus, macro policies in the future should aim at creating a healthy business
environment with equality and stability.
Source: Author’s calculations
11
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
19
91
Q1
19
91
Q4
19
92
Q3
19
93
Q2
19
94
Q1
19
94
Q4
19
95
Q3
19
96
Q2
19
97
Q1
19
97
Q4
19
98
Q3
19
99
Q2
20
00
Q1
20
00
Q4
20
01
Q3
20
02
Q2
20
03
Q1
20
03
Q4
20
04
Q3
20
05
Q2
20
06
Q1
20
06
Q4
20
07
Q3
20
08
Q2
20
09
Q1
20
09
Q4
20
10
Q3
20
11
Q2
20
12
Q1
20
12
Q4
20
13
Q3
20
14
Q2
20
15
Q1
20
15
Q4
20
16
Q3
GDP Growth De-seasonal GDP growth Trend
Vietnam’s GDP growth has followed a declining trend since 2001
12 Source: Conference Board Total Economy Dataset
Vietnam is no longer a stellar performer
Quốc gia 2012 2013 2014 2015 2016*
Average
2012-2016
China 7.7 7.8 7.3 6.9 6.6 7.3
Cambodia 7.3 7.4 7.1 7.0 7.0 7.2
Laos 7.8 7.5 6.7 6.8 6.8 7.1
India 5.1 6.6 7.2 7.6 7.4 6.8
Philippines 6.8 7.1 6.2 5.9 6.4 6.5
Bangladesh 6.5 6.0 6.1 6.6 7.1 6.5
Vietnam 5.2 5.4 6.0 6.7 6.0 5.9
Indonesia 6.0 5.6 5.0 4.8 5.0 5.3
Malaysia 5.6 4.7 6.0 5.0 4.1 5.1
Sri Lanka 6.3 3.4 4.9 4.8 5.0 4.9
Pakistan 3.8 3.7 4.1 4.0 4.7 4.1
Thailand 6.5 2.7 0.8 2.8 3.2 3.2
Singapore 3.4 4.7 3.3 2.0 1.8 3.0
Hong Kong 1.7 3.1 2.7 2.4 1.5 2.3 13 Source: ADO 2016 (Recited from Vu Minh Khuong (2016))
GDP Growth: Vietnam vs. Miracle Economies
14
5
6
7
8
9
10
11
t0 t1 t2 t3 t4 t5 t6 t7 t8 t9
t10
t11
t12
t13
t14
t15
t16
t17
t18
t19
t20
Pe
rce
nt
10-YMA GDP Growth
China
S. Korea
Taiwan
Vietnam7%
Source: Vu Minh Khuong (2016)
Growth Accounting Decomposition
• 𝑔_𝐺𝐷𝑃𝑡 = 𝑔_𝐴𝐿𝑃𝑡 + 𝑔_𝐸𝑀𝑃𝑡 (1)
• 𝑔_𝐴𝐿𝑃𝑡 = 𝑘_𝑐𝑜𝑛𝑡𝑏𝑡 + 𝑔_𝑇𝐹𝑃𝑡 (2)
15
GDP slowdown since 2005 was driven by ALP growth decline
16
0
1
2
3
4
5
6
7
81
995
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Pe
rce
nt
GDP, ALP, and EMP Growth (10-YMA)
GDP Growth
ALP Growth
EMP Growth
Source: Vu Minh Khuong (2016)
ALP growth slowdown since 2005 was due to declining capital deepening growth and poor TFP growth
17
-1
0
1
2
3
4
5
6
7
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
Pe
rce
nt
ALP Growth and Contribution of Capital Deepening and TFP (10-YMA)
ALP Growth
Capital deepening contb
TFP Growth
Source: Vu Minh Khuong (2016)
Contribution of capital deepening to ALP growth (10-YMA) Vietnam vs. Miracle Economies
18
0
1
2
3
4
5
6
7
8
t0 t1 t2 t3 t4 t5 t6 t7 t8 t9
t10
t11
t12
t13
t14
t15
t16
t17
t18
t19
t20
Pe
rce
nt
Contribution of capital deepening to ALP growth (10-YMA)
China
S. Korea
Taiwan
Vietnam
Source: Vu Minh Khuong (2016)
TFP Growth: Vietnam vs. Miracle Economies
19
-1
0
1
2
3
4
5
6
t0 t1 t2 t3 t4 t5 t6 t7 t8 t9
t10
t11
t12
t13
t14
t15
t16
t17
t18
t19
t20
Pe
rce
nt
10-YMA TFP Growth Rate
China
S. Korea
Taiwan
Vietnam
0%
Source: Vu Minh Khuong (2016)
GDP growth decomposition by sector
Sector
2000-14 2000-07 2007-2014
Vietna
m China VN-CN
Vietna
m China VN-CN
Vietna
m China VN-CN
(1) (2) (1)-(2) (3) (4) (3)-(4) (5) (6) (5)-(6)
Overall Economy
GDP growth (%) 6.7 9.4 -2.7 7.7 10.3 -2.6 5.7 8.5 -2.8
ALP Growth (%) 4.5 8.9 -4.4 5.4 9.7 -4.3 3.5 8.1 -4.6
EMP Growth (%) 2.2 0.5 1.8 2.3 0.6 1.7 2.2 0.4 1.8
Agriculture
GDP growth (%) 4.7 6.0 -1.4 4.4 5.4 -1.0 4.9 6.7 -1.8
ALP Growth (%) 4.2 9.4 -5.2 4.8 7.7 -2.8 3.5 11.2 -7.6
EMP Growth (%) 0.5 -3.4 3.9 -0.4 -2.3 1.9 1.3 -4.5 5.8
Mining
GDP growth (%) 7.8 8.9 -1.1 7.3 12.1 -4.8 8.3 5.8 2.6
ALP Growth (%) 5.4 7.8 -2.3 1.0 10.5 -9.6 9.9 5.0 4.9
EMP Growth (%) 2.4 1.1 1.2 6.3 1.5 4.8 -1.6 0.8 -2.3
Manufacturing 0.0
GDP growth (%) 4.9 8.6 -3.7 9.7 10.3 -0.6 0.1 6.8 -6.7
ALP Growth (%) -1.5 6.2 -7.6 2.3 7.4 -5.1 -5.2 5.0 -10.2
EMP Growth (%) 6.4 2.4 4.0 7.4 2.9 4.5 5.3 1.8 3.5
Utility
GDP growth (%) 7.9 7.3 0.6 8.6 11.5 -3.0 7.2 3.1 4.1
ALP Growth (%) -0.3 6.9 -7.1 -2.3 8.7 -11.1 1.8 5.0 -3.2
EMP Growth (%) 8.2 0.4 7.7 10.9 2.8 8.1 5.4 -1.9 7.4 20
GDP growth decomposition by sector
Sector
2000-14 2000-07 2007-2014
Vietnam China VN-CN Vietnam China VN-CN Vietnam China VN-CN
(1) (2) (1)-(2) (3) (4) (3)-(4) (5) (6) (5)-(6)
Contruction
GDP growth (%) 6.7 11.0 -4.4 10.9 10.7 0.2 2.4 11.4 -9.0
ALP Growth (%) -1.5 7.3 -8.8 -0.3 6.9 -7.1 -2.8 7.8 -10.6
EMP Growth (%) 8.2 3.7 4.5 11.1 3.8 7.3 5.2 3.6 1.6
Trade
GDP growth (%) 6.0 10.1 -4.1 8.7 9.6 -0.9 3.4 10.6 -7.2
ALP Growth (%) 2.8 6.2 -3.4 4.6 6.7 -2.1 0.9 5.7 -4.7
EMP Growth (%) 3.3 3.9 -0.7 4.1 2.9 1.2 2.5 5.0 -2.5
Transport, Storage, and
Telecomm
GDP growth (%) 6.2 7.9 -1.7 9.4 9.4 0.0 3.1 6.4 -3.4
ALP Growth (%) 5.2 5.7 -0.5 8.9 6.9 2.0 1.4 4.4 -3.0
EMP Growth (%) 1.1 2.2 -1.1 0.5 2.5 -1.9 1.7 2.0 -0.3
Financial, Real Estate,
Business Services
GDP growth (%) 5.0 12.1 -7.1 6.2 12.8 -6.6 3.8 11.4 -7.6
ALP Growth (%) -5.4 9.4 -14.8 -9.8 10.0 -19.8 -1.1 8.8 -9.9
EMP Growth (%) 10.4 2.7 7.7 16.0 2.8 13.2 4.8 2.6 2.3
Public, Community, Social,
and Personal Services
GDP growth (%) 6.7 11.5 -4.8 6.6 12.6 -6.0 6.8 10.3 -3.6
ALP Growth (%) 3.2 8.3 -5.1 -0.5 9.5 -10.0 6.9 7.2 -0.3
EMP Growth (%) 3.5 3.1 0.4 7.1 3.1 4.0 -0.2 3.1 -3.3
21
Source: APO Productivity Database 2016
Labor Productivity in Agriculture Vietnam vs. Asian Peers
Country 2000 2005 2010 2015
Value-added/Worker (2010 US$)
Vietnam 585 661 719 806
S. Korea 9674 13067 19213 26500
Malaysia 10426 12910 15962 19818
Indonesia 1545 1777 2124 2629
Thailand 1446 1643 1860 2106
China 774 930 1160 1465
Cambodia 575 652 767 798
Vietnam Standardized to 1.0
S. Korea 16.5 19.8 26.7 32.9
Malaysia 17.8 19.5 22.2 24.6
Indonesia 2.6 2.7 3.0 3.3
Thailand 2.5 2.5 2.6 2.6
China 1.3 1.4 1.6 1.8
Cambodia 1.0 1.0 1.1 1.0
22 Source: World Development Indicators Database 2016
Annual Real Wage, 2004-2015 (deflated by GDP deflator, 2010 as base year, million VND)
Source: VEPR (2017) 23
Average Real Wage Increases Quickly
20
30
40
50
60
70
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Labor Income I Labor Income II
Labor income I consists of wages, bonus and subsidies. Labor incomes II consists of all components of labor income I and payments
on social insurance, health insurance and unemployment insurance.
• Average real wage
doubled during the
2004-2015 period.
• Increasing payments
on social insurance,
health insurance,
and unemployment
insurance.
Source: VEPR’s Calculation from International Labor Organization (ILO) Database
24
Average Wage and Productivity Growth An International Comparison
Wage and Productivity Growth in Viet Nam and Asian Countries 2004-2015
(Average annual real wage growth deflated by the CPI, %)
Notes: Monthly earning is in 2014 for Thailand and 2015 for other countries.
• Productivity growth in Vietnam
is significant (4.4%).
• However, the average wage
growth rates (5.8%) outpaced
the productivity growth rate.
• Calculation using Vietnam
Enterprise Surveys show that
during the 2004-2009 period,
wage grew less than labor
productivity but wage growth
exceeded productivity growth
since 2009.
Country Productivity
Growth Rates
Average
Wage Growth Rates
China 9.1 8.8
Indonesia 3.6 2.6
Malaysia 2.1 2.5
Philippines 2.6 0.4
Singapore 1.8 1.2
Thailand 2.7 3.5
Viet Nam 4.4 5.8
Young population but soon ending the demographic dividend
0
20000
40000
60000
80000
100000
120000
Year
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
20
10
20
15
20
20
20
25
20
30
20
35
20
40
20
45
20
50
20
55
20
60
20
65
20
70
20
75
20
80
20
85
20
90
20
95
Tho
usa
nd
s
0-14 (thousands) 15-59 (thousands) 60 or over (thousands)
25
Source: GSO (2014)
Population Pyramid, 2014
26
o Regional Minimum Wage Growth: much higher than that of CPI and GDP per capita.
Growth Pattern of Regional Minimum Wages, CPI, and per-capita GDP, 2009-2016 (2008=100)
Notes: Before October 2011, regional minimum wage applicable to domestic enterprises.
Source: VEPR (2017) 27
Minimum Wage Growth Trend
0
100
200
300
400
500
600
2009 2010 2011 2012 2013 2014 2015 2016
MW category I MW category II MWcategory III
MW category IV GDP per capita CPI
• Rapid increase in ratio
of minimum wage to
labor productivity:
from 25% in 2007 to 50% in 2015. • Labor productivity in
this comparison is measured as GDP/total number of workers.
Notes: a Minimum wage before 2005 applicable to Beijing. b Monthly minimum wage computed from hourly minimum wage (8 hours x 23 days); c Minimum wage rate applicable to Non-Agricultural;
d Minimum wage rate in Bangkok; e Minimum wage rate of category I, for domestic firms. Productivity is calculated as GDP/Labor force.
28
0%
10%
20%
30%
40%
50%
60%
2007 2008 2009 2010 2011 2012 2013 2014 2015
China Indonesia Philippines Thailand Viet Nam
Source: VEPR’ Calculation using Data from WDI and CEIC Database
Ratio of Minimum Wage to Labor Productivity, 2007-2015
Minimum Wage and Productivity Growth An International Comparison
Business Climate Indices
29
INDICES 2017 2016 2015 2014 2013
TI Corruption Perceptions 113 119 119 116
Heritage Foundation Index of
Economic Freedom (points)
147 (52,4)
131 (54)
148 (51,7)
148
(51,7)
140
(51,0)
WB Doing Business 82 90 78 99 99
WEF Global Competitiveness
(points)
55
(4,36)
60
(4,31)
56
(4,3)
68 70
(4,18)
Source: Transparency International, Heritage Foundation,
World Bank, World Economic Forum
World Bank’s Doing Business Index
30
Rank 2018 (China) 2017 (China) 2016 (China) 2015 (China) 2014 (China)
Overall rank 68 (78) 82 (78) 90 (84) 78 (90) 99(96)
Starting a business 123 (93) 121 (127) 119 (136) 125 (128) 109 (158)
Construction permits 20 (172) 24 (177) 12 (176) 22 (179) 29 (185)
Registering property 63 (41) 59 (42) 58 (43) 33 (37) 51 (48)
Getting electricity 64 (98) 96 (97) 108 (92) 135 (124) 156 (119)
Getting credit 29 (68) 32 (62) 28 (79) 36 (71) 42 (73)
Protecting investors 81 (119) 87 (123) 122 (134) 117 (132) 157 (98)
Paying taxes 86 (130) 167 (131) 168 (132) 173 (120) 149 (120)
Trading across borders 94 (97) 93 (96) 99 (96) 75 (98) 65 (74)
Enforcing contracts 66 (5) 69 (5) 74 (7) 47 (35) 46 (19)
Resolving insolvency 129 (56) 125 (53) 123 (55) 104 (53) 149 (78)
Source: World Bank (2017)
Policy Discussion
• Weak TFP growth was the main culprit of Vietnam’s GDP growth slowdown.
• Weak TFP growth is due to several factors: • lack of vigorous efforts in knowledge acquisition and
innovation; • Ineffective control of corruption, which causes inefficiency in
resources allocation and management • Ineffective coordination in promoting structural change,
shifting resources from lower to higher value activity.
• The private sector to take a lead in productivity movement.
• Opportunities from the ICT revolution and the strong presence of FDI in the country’s productivity drive.
31
Way Ahead
• Set forth the productivity targets. • The minimum labor productivity level of OECD countries can be used the
benchmark, for the overall economy as well as for individual sectors.
• Establish a Vietnam National Productivity Council (VNPC), comprising representatives from government, business, industrial associations, unions, and academia.
• Create a productivity fund to promote productivity improvement, technology acquisition, and R&D activities.
• Launch Vietnam’s Productivity Movement.
• Monitor the nation’s progress in narrowing productivity gaps with the strategic benchmarks, making this information public and accessible to all people through the internet and mobile technologies.
• Vigorously disseminate international best practices on productivity.
32
Japanese and International Experiences-Based Policy Measures
• VDF/GRIPS – JICA – MPAC to promote the policy ideas and develop contents.
• Introduction and classification of policy measures; identifying key factors for success extracted from international experiences and cautious applications to Vietnam.
• Introducing: Five S, Keizen, Shindan and handholding, Kosetsushi,
• TVET-industry linkage, FDI-local firm linkage, Benchmarking, Twinning,
• Ginno Jisshusei (technical internship abroad),
• Productivity institute (or center),
• Funds, subsidies and support for productivity enhancement,
• Mindset change,
• National productivity movement
33
Thank you! Q&A
Contact: Nguyen Duc Thanh, PhD. Email: [email protected] Vietnam Institute for Economic and Policy Research (VEPR), University of Economics and Business -Vietnam National University, Hanoi. R.707, Building E4, 144, Xuân Thủy Street, Cầu Giấy District, Hanoi. Email: [email protected] Tel: 04.37547506 ext 714/ 0975608677 Fax: 04.37549921
34
