Vietnam to halve corporate coverage of unemployment insurance to boost competitiveness

By Ho Binh Minh   April 8, 2017 | 11:19 am GMT+7

The unemployment insurance fund has a huge surplus, estimated at nearly $2.5 billion at the end of last year.

The Vietnamese government said it has agreed to cut half the coverage of unemployment insurance by employers to 0.5 percent of their salary fund to free up more funds for expansion and raising competitiveness.

The government will also stop its contribution to the unemployment insurance fund thanks to its current huge surplus, leaving employers and employees the only contributors, it said in a statement Saturday.

Under current regulations, employers, employees and the government each contribute 1 percent to the unemployment insurance fund, used to assist employees when they become unemployed, to facilitate vocational training or introduction and consultation of jobs. The fund is also used to cover health insurance for those who lose a job.

The labor ministry will draft an amendment on the change and seek National Assembly approval for the reduction, Prime Minister Nguyen Xuan Phuc said in a government resolution signed late Friday. 

The agreement is in place thanks to "a huge surplus of the unemployment insurance fund in 2015, 2016 and [expected] in several subsequent years", the government statement said.

It estimated the surplus at nearly VND56.5 trillion ($2.5 billion) at the end of last year, adding that by 2020 the fund will still be safe.

"Along with the relatively high surplus of the unemployment insurance fund, it is necessary to amend the contribution to the fund to provide conditions for raising competitiveness and developing businesses," the government statement said.

It was not immediately clear if the labor ministry could complete its draft for submission to the National Assembly's next session, which is scheduled to last a month starting May 22.

Vietnam's economy this year has shown its first slowdown since 2014, with annual expansion slowing to 5.1 percent in the first quarter, based on government data. Hanoi has targeted to accelerate economic growth this year to 6.7 percent, from 6.2 percent in 2016.

In order to better facilitate expansion, Premier Phuc has asked government officials to look at ways to raise the total investment for development to 35 percent of the gross domestic product, from 32 percent in the first quarter. Nearly 40 percent of the total investment comes from the fast expanding non-state sector.

Last year the number of new businesses in Vietnam hit a record high of 110,000. Besides, some 600,000 small and medium-sized companies employ 52 percent of the workforce, based on Vietnam Chamber of Commerce and Industry data.

Even though Vietnam further reported a rising number of new businesses in the January-March period, most of them are small, officials have said.

The unemployment rate among Vietnamese people in the working age stood at 2.3 percent in the first quarter of 2017, unchanged from the end of 2016 but up from 2.25 percent recorded in the first quarter of 2016, based on government data.

 
 
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