Labor productivity lowest in domestic private sector

Data for 2017, the latest year for which it is available, shows the domestic private sector’s productivity was VND228.2 million ($9,800) per person per year.

It was VND330.8 million ($14,200) for the foreign sector and VND678.1 million ($29,140) for the public sector, according to the General Statistics Office (GSO).

Productivity in the domestic private sector was low because the small scale of most businesses in the sector limited their ability to acquire technology, bank credit and skilled labor, participate in leading value chains or benefit from economies of scale, the GSO explained in its report.

According to the World Bank, the biggest hurdles for the sector are its inability to access finance and low skill level of labor. Poor production management and lack of experience are also major problems plaguing small businesses.

"Small, medium and micro enterprises account for about 98 percent of the total number of enterprises in the country, but most of them have not reached the optimal scale (100 - 299 employees) to acquire the highest productivity levels," a Ministry of Planning and Investment report noted. 

Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry, said the large labor productivity gap between the public and private sectors is the result of the former receiving large investments and numerous incentives but creating few jobs, while the latter has less capital but must sustain millions of jobs.

Kim Ngoc of the Vietnam Academy of Social Sciences said despite this imbalance the private sector contributes around 43 percent of GDP while the public sector contributes only 30 percent despite accounting for 40 percent of gross capital formation.

Based on purchasing power parity (PPP) at 2011 constant prices, the GSO estimated Vietnam's overall labor productivity in 2018 was $11,142, 7.3 percent of Singapore, 19 percent of Malaysia, 37 percent of Thailand, 44.8 percent of Indonesia and 55.9 percent of the Philippines.