How long can Vietnam's IT industry thrive on low-cost labor?

By Bui Hong Nhung   October 27, 2016 | 11:00 am PT
How long can Vietnam's IT industry thrive on low-cost labor?
Vietnam will face serious labor shortages in IT areas by 2020. Photo from the Information Ministry.
Vietnamese engineers are now earning much less than their peers with similar skill sets in the region.

Vietnam's information technology (IT) sector may soon lose its competitive edge as salaries are likely to go up due to a shortage of skilled labor, experts have warned.

Though holding equal qualifications, employees in the sectors are taking lower pays than their peers from other Asian countries, said Nguyen Thu Giang, general secretary of Vietnam Software and IT Service Association (Vinasa).

Giang said that a highly experienced IT engineer in Vietnam earns around $2,000 per month, just half the amount he or she could in Malaysia or Thailand.

Fresh graduates in Vietnam earn $280 a month on average, only a fifth of what their peers get in Japan and South Korea, according to data from the Asian-Oceania Computing Industry Organization (ASOCIO).

Competitive labor cost has always been one of the main drivers of growth for the sector, drawing many foreign investors into Vietnam.

The 2016 version of AT Kearney’s Global Location Services Index, a biennial study of global offshore services locations, has ranked Vietnam among the world’s most financially competitive services markets, just after India, Indonesia, Sri Lanka and Egypt.

But Giang from the IT association said in the future, Vietnam is likely to lose this cost advantage as workforce shortages will result in salary increases, said Giang.

Vietnam's IT sector is employing around 190,000. By 2020, it will need an additional 400,000 employees. Each year, only 32,000 students in IT and related fields graduate and not all can meet the requirements of recruiters.

“FPT has resorted to the Philippines and Myanmar for IT engineers. It’s unbelievable,” said Truong Gia Binh, chairman of FPT, a local tech giant.

Speaking at Japan ICT Day 2016, a forum of IT companies from Japan and Vietnam, many experts said that rising labor cost is a challenge Vietnam must overcome to retain foreign investment before they move their businesses to other countries.

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