VZCZCXRO3690
PP RUEHDT RUEHPB
DE RUEHHM #0204/01 0781056
ZNR UUUUU ZZH
P 191056Z MAR 09
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC PRIORITY 5518
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3652
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUCPDOC/USDOC WASHDC PRIORITY 0120
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHHM/AMCONSUL HO CHI MINH CITY 5754

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000204 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EINV ELAB ETRD VM
SUBJECT: VIETNAM'S PRIVATE SECTOR LABOR MARKET: TIME TO CLEAN UP 
 
HO CHI MIN 00000204  001.2 OF 002 
 
 
¶1. (SBU) Summary:  The Ho Chi Minh City branch of Navigos, one 
of Vietnam's largest human resources (HR) services companies, 
reports that its corporate clients are holding employment levels 
steady in the expectation that wage inflation for 2009 will fall 
to near zero after years of double digit growth.   These 
companies have adopted a wait-and-see strategy, and have held 
off making long-term human resource plans until they receive 
strong signals that external markets are recovering.  Other 
Navigos clients with more foresight (and perhaps deeper pockets) 
have decided that the slowdown is an opportunity to get their 
houses in order by hiring Navigos to help them with rightsizing, 
streamlining and developing corporate culture.  End summary. 
 
¶2. (SBU) On February 20, ConGenOff met with Winnie Lam and 
Nguyen Thi Minh Tam of Navigos Group, one of Vietnam's premier 
HR consulting firms, to discuss the state of Vietnamese business 
during the worldwide economic downturn. 
 
THE LABOR MARKET: CASH IS KING 
------------------------------ 
¶3. (SBU) Our Navigos contacts said that, notwithstanding the 
beating that Vietnamese exports have taken recently, strong 
internal consumption has helped Navigos clients offset losses 
abroad.  According to Winnie Lam, internal growth remains strong 
because the country continues to be a cash-based economy.  As 
such, it is less affected by the external financial maelstrom 
and has no exposure to derivatives markets.  Indeed, because of 
the internal market, Navigos' more optimistic clients are 
expecting across the board growth in the low single digits for 
¶2009. 
 
¶4. (SBU) Such optimistic assessments have made many firms 
reluctant to conduct layoffs, with only the manufacturing and 
marketing sectors substantially affected.  Of these, 
manufacturing has been hit hardest, though Lam noted that most 
cuts have occurred in rural provinces rather than in urban 
areas.  Navigos clients in sectors such as pharmaceuticals, 
healthcare, and even retail banking continue to grow, though 
employers in these sectors do not plan to add substantially to 
current staffing levels during 2009.  Lam told ConGenOff that 
one retail banking client plans to open 100 new branches in 
2009, but expects to staff these new branches entirely by 
repositioning existing staff.  Looking forward, Lam believes 
that the professional services and World Trade Organization 
(WTO) compliance fields (e.g., legal services), in addition to 
pharmaceutical and healthcare industries, are poised for rapid 
job growth in the near future. 
 
SALARIES TAKE A HIT 
------------------- 
¶5. (SBU) After nearly a decade of enormous year-on-year salary 
increases (2008 saw an average salary increase of 19.68 
percent), the labor market in Vietnam has come back down to 
earth in 2009, Lam continued.  Navigos reports that 
approximately half of their client base of more than 8,000 
companies throughout Vietnam will freeze salaries for 2009, 
while the other half plan increases of less than 5 percent. 
(Note:  With inflation currently running just over 16 percent 
year-on-year as of February, real salaries are shrinking.)  This 
fact, coupled with a worsening labor market and frequent 
newspaper stories reporting on unemployment, has given employers 
more leverage in contract negotiations with employees.  Though 
Navigos' clients continue to experience poaching of top 
performers in highly skilled industries, they report that young, 
rank-and-file employees have been more cautious about seeking 
opportunities outside the firm or making exorbitant salary 
demands inside it. 
 
TRENDS: REWRITING THE PAST 
-------------------------- 
¶6. (SBU) Lam believes the Vietnamese business community is not 
taking a proactive stance in these difficult economic times. 
Most companies have become more defensive, and have taken to 
quarterly or month-to-month budgeting.  According to Lam, 
businesses are waiting for some sign that external markets are 
recovering before making any substantial, long-term employment 
moves.  Most expect flat budgets for the foreseeable future, and 
have delayed or abandoned projects that require major capital 
outlays. 
 
¶7. (SBU) Instead, Lam believes, companies are using the general 
downturn as an excuse to 'clean up the mistakes of the past few 
years,' which saw large-scale salary increases with no growth in 
per-employee productivity rates.  Until now, companies have 
never done the back-end research necessary to determine how 
escalating salaries have impacted profitability.  Though firms 
have finally begun to internalize the idea of retention, Lam 
asserted, they have gone about it the wrong way (solely through 
 
HO CHI MIN 00000204  002.2 OF 002 
 
 
salary hikes) for the past few years.  Having observed a recent 
increase in the number of firms interested in non-monetary 
retention policies, Lam believes Vietnamese companies may 
finally be ready to grapple with more complex HR concepts like 
employee-based return on investment (ROI).  For example, one 
client recently began to measure individual performance of sales 
force and craft individual incentives, leading to a 25 percent 
increase in sales in the first few months of the project.  Once 
these concepts have been incorporated, Lam hopes that Vietnamese 
firms will begin focusing on improving process structure, so as 
to better manage both retention and salaries. 
 
COMMENT: 
-------- 
¶8. (SBU) It's encouraging that the economic downturn has exposed 
weaknesses that are already creating demand for top-flight HR 
management firms able to effectively develop corporate culture, 
improve business processes, rationalize workforces and 
streamline organizations in Ho Chi Minh City. 
 
¶9. (U) This cable was coordinated with Embassy Hanoi. 
FAIRFAX