Vietnam lags behind Philippines, Indonesia in labor productivity

By Duc Minh February 16, 2024 | 02:30 am PT

Vietnam’s per-hour labor productivity is among the lowest in Asia despite recording strong growth over 10 years, a report has found.

An average worker in Vietnam made products worth $6.40 per hour in 2020, compared to a $9.70 in the Philippines and $12 in Indonesia, according to a recent report by the Asian Productivity Organization.

Vietnam, however, saw per-hour productivity growth reaching 64% in the 2010-2020 period, the highest among countries in the region.

The total factory productivity of businesses grew only by 2% during 2014-2018. Total factory productivity only contributed 1.5 percentage points to Vietnam’s GDP growth during 2015-2019.

Although Vietnam is among the world’s fastest-growing economies in the last 30 years with an average growth of 5.3% annually between 1990 and 2021, higher than any countries in Asia except China, it needs to increase productivity growth to maintain this record, the World Bank said in a recent report.

GDP growth has been largely driven by foreign direct investment and domestic companies had little impact on economic expansion, it said.

Although the number of domestic private enterprises has increased sharply over the past decade, domestic enterprises are often smaller, less efficient and less innovative than foreign-invested enterprises and are not well integrated into the global value chain.

Most domestic private enterprises are micro, small businesses operating in sectors with relatively low productivity such as retail, and small restaurants; they have simple production activities aimed at the domestic market instead of exporting.

In terms of added value per employee, foreign-invested enterprises are nearly five times more productive and have much higher returns on assets and profits than domestic enterprises.

The World Bank suggested Vietnam improve productivity through startups and innovation to create high-quality jobs.