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