Increase labor productivity to enhance competitiveness

Improving labor productivity and TFP (or increasing quality) is a driving force for growth, one of the sustainable development goals set by the Government.

Efforts to improve labor productivity

The roadmap for implementing Vietnam's sustainable development goals by 2030 stipulated in Decision 841/QD-TTg dated July 14, 2023 sets the goal of: Increasing labor productivity through promoting economic restructuring, transforming the growth model, upgrading and innovating technology, focusing on high-value-added and labor-intensive industries. Specifically, the average labor productivity growth rate will reach over 6.5% per year in the 2021-2030 period. The contribution of total factor productivity (TFP) to GDP growth will reach over 50%. In recent years, Vietnam's labor productivity has narrowed the relative gap with countries in the ASEAN region with higher levels of development. However, in absolute terms of purchasing power parity in 2017, Vietnam's labor productivity in 2022 reached 20.4 thousand USD, only 11.4% of Singapore's labor productivity; 35.4% of Malaysia's; 64.8% of Thailand's.

Compared to large-scale developed economies, Vietnam's labor productivity is equal to 15.4% of the US; 19.1% of France; 21.6% of the UK; 24.7% of South Korea; 26.3% of Japan and 59% of China. Comparing Vietnam's labor productivity with other countries shows that we are facing a huge challenge to catch up with the labor productivity of countries in the region and the world. According to the assessment of the Ministry of Planning and Investment, the economic structure and growth model have not changed significantly. The level of improvement in productivity and quality has not met expectations, and the resilience of the economy is still limited. The average labor productivity growth rate in 2021-2022 is 4.7%, lower than the set target of 5.5%. The proportion of manufacturing and processing industry in GDP increased slowly, in 2021 it was 24.3, in 2022 it was 24.7%. Dr. Nguyen Bich Lam, former General Director of the General Statistics Office, said: Our country's low labor productivity is due to: The labor structure by economic sector is not reasonable; The leading role of labor productivity within the sector has not been promoted; Labor productivity of the enterprise sector is low; The application of technology and techniques in production and business is still limited, machinery, equipment and technological processes are still outdated; Human resources still have many shortcomings, not meeting the requirements of improving labor productivity, promoting socio-economic development. There is still much room to improve labor productivity . Statistics show that although 2022 achieved a high growth rate of 8.02%, the labor productivity of the economy only increased by 4.7% compared to the previous year. On average, in 2021-2022, labor productivity increased by 4.65% per year, which is quite low compared to the target of 6.5% in the socio-economic development plan for the 2021-2025 period and the 10-year socio-economic development strategy for 2021-2030. That is, to achieve the target of the 2021-2025 plan, on average in the 3 years of 2023-2025, labor productivity needs to increase by about 7.8% per year. "Thus, although there has been an improvement, labor productivity in recent years has increased relatively slowly and has not had the expected breakthrough. This is a big challenge for the Vietnamese economy. The development process shows that accelerating the growth rate of labor productivity is decisive for the competitiveness of the economy," Mr. Nguyen Bich Lam assessed. To improve labor productivity, Mr. Lam said that the Government needs to urgently develop and implement the National Strategy on improving Vietnam's labor productivity. Periodically evaluate, supplement and update this strategy in accordance with rapid changes in the world economy. Proactively forecast events and changing trends of the world economy; identify and assess the impact of opportunities and challenges from these changes on our country's economy. No one else but the Government must identify exogenous factors that create innovation, thereby proactively proposing solutions to take advantage of opportunities, overcome challenges to maintain macroeconomic stability, improve labor productivity, and promote rapid and sustainable growth. Considering that improving labor productivity and TFP (or increasing quality) is a driving force for growth, economic expert Can Van Luc emphasized: This is both a driving force and a solution for Vietnam's economy to improve efficiency and quality in the coming years. In fact, Vietnam's TFP in 2022 only contributed 43.8% to GDP growth, lower than the average of 45.7% in the 2016-2020 period. According to Mr. Can Van Luc, it is clear that Vietnam still has a lot of room to improve labor productivity and TFP because the results in recent years are still far from the target. The BIDV Training and Research Institute Research Group forecasts that with this momentum and good promotion of growth drivers, Vietnam's labor productivity is forecast to increase by 4.5-5% in the 2021-2025 period (target is 6.5%) and increase by 6-6.5% in the 2026-2030 period (target is 6.8-7%). The contribution of TFP to GDP growth is forecast to reach about 40-45% in the 2021-2025 period and 50-55% in the 2026-2030 period.

Luong Bang

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