Major Characteristicsof The Progress ofVietnam’s Labor Productivity
in Three Decadesof Reform and Integration, 1990-2020
Assoc. Prof. Nguyen Duc Thanh
Viet Nam Center for Economic and Strategic Studies (VESS)Ha Noi, April 28, 2021

The Viet Nam Productivity Report• Vietnamese leaders are interested
in productivity. Yet, data & situation analyses
are insufficient and policy discussion is notdeep or pragmatic enough.
• To fill this gap, VEPR and GDF cooperated todraft the VN Productivity Report. All data work
was done by VEPR while GDF advised & prepared policy
part.
• We worked with PM Office and the Party Central Economic
Commission, but not continuously. VCCI and Japanese
Embassy assisted us consistently. METI and JICA eachprovided partial financial support.
• Advice was received from Prof. Tran Van Tho (Waseda)
and Dr. Vu Minh Khuong (Singapore LKYS).
• The Report is forthcoming as a book in 2021.
2

Content
PART I CHARACTERISTICS OF LABOR PRODUCTIVITY PROGRESS
IN VIET NAM
Chapter 1: Definition and measurement of labor productivity
Chapter 2: Current situation of labor productivity in Viet Nam
Chapter 3: Sources of labor productivity growth
Chapter 4: Viet Nam’s labor productivity in the international context
Chapter 5: Productivity enhancement policy in the Doi Moi period
PART II JAPANESE PRODUCTIVITY ENHANCING MEASURES AND THE
POSIBILITY OF THEIR ADOPTION IN VIET NAM
Chapter 6: Selectively adopting Japanese productivity tools
Chapter 7: Japanese productivity methods in the Vietnamese context
3Authors
Ohno Kenichi
National Graduate Institute for Policy Studies (GRIPS)
Nguyen Duc Thanh
Viet Nam Centre for Economic and Strategic Studies (VESS)
Pham Thi Huong
Viet Nam Institute for Economic and Policy Research (VEPR)

4PART I
CHARACTERISTICS OF LABOR PRODUCTIVITY PROGRESS
IN VIET NAM, 1990-2020

5

Definition
and Measurements

6

Definition and Measurements
We focus on:• Labor productivity—it is the ratio of output of goods andservices to labor input to produce such output.
• Total factor productivity (TFP)—it is the amount of output thatis not explained by the quantity of various inputs used in
production, showing effectiveness in the utilization of inputs.
This is a comprehensive efficiency indicator, but sensitive tomodel assumption and data.

7

Measuring Labor Productivity
Labor productivity is a partial productivity indicator, reflecting the amountof goods and services generated per unit of labor input.
𝑂𝑢𝑡𝑝𝑢𝑡𝐿𝑎𝑏𝑜𝑟 𝑝𝑟𝑜𝑑𝑢𝑐𝑡𝑖𝑣𝑖𝑡𝑦 =𝐿𝑎𝑏𝑜𝑟 𝑖𝑛𝑝𝑢𝑡 Output is measured in GDP (or value added for each sector)

 Labor input is measured by the total number of employed persons

8Decomposition of Labor Productivity Growth• Growth accounting method was initiated by the neoclassicalgrowth model of Solow (1957). Labor productivity growth is divided
into TFP (true efficiency) and capital deepening (K/L).
• Shift-share analysis method decomposes labor productivity growth
into three components: (i) within effect, (ii) shift effect, and (iii)interaction effect.
𝑡 −𝑃 0
𝑃𝑚
𝑚
0
𝑃𝑚

=

𝑡
0
0
σ𝑛
𝑃
−𝑃
∗𝑆
𝑗=1
𝑗
𝑗
𝑗
0
𝑃𝑚

+

0
𝑡
0
σ𝑛
𝑃
∗
𝑆
−𝑆
𝑗=1 𝑗
𝑗
𝑗
0
𝑃𝑚

+

𝑡
0
𝑡
0
σ𝑛
𝑃
−𝑃
∗(𝑆
−𝑆
𝑗=1
𝑗
𝑗
𝑗
𝑗)
0
𝑃𝑚

 Within effect: productivity growth in each sector
 Shift effect: impact of labor mobility across sectors with different
productivity
 Interaction effect: capturing the relationship between changing labor
shares and changes in sectoral labor productivity
9

Major Trendsof Labor Productivity
in Viet Nam

10

Economy-wide Labor Productivity: Growth & Level• Average growth was 4.65% (1991-2019), which is moderate by East Asian standard.
There was no productivity breakthrough to catch up and overtake other countries(unlike China).

• Starting from a very low position, the absolute level is still low. Relative position
within ASEAN has not changed much. To move up from current lower middle income($2,590, WB 2019 data), acceleration of productivity growth is necessary, notslowdown.
The level and growth rate of Viet Nam’s labor productivity

Source: authors’ calculation based on GSO data.

11

Economy-wide Labor Productivity: Three Phases
High growth (1991-95) Average growth 5.7%
One-time catchup to normal position as the suppressed economy was liberalized
and opened up. Investment grew strongly but the quality and quantity of laborwere largely unchanged.
Slowdown (1996-2012) 4.0%
Growth was driven by large but inefficient investment. TFP and labor productivity
growth were not satisfactory. Growth was more quantitative than qualitative.
Recovery (2013-19) 5.5%
Labor productivity growth and TFP growth picked up again. The cause(s) are still
unknown (data too short), but may include (i) strong trade and FDI performance
thanks to many FTAs and trade agreements, and diversion from China; (ii)continued business effort for efficiency; and (iii) sound policy management offiscal deficit, COVID, etc. It is not clear whether these are lasting factors. The
spurt may be only temporary.
12

Economy-wide Labor Productivity: Three Phases
Decomposition of GDP growth into labor productivity and employment growth
Growth rate (%/year)
Labor
Employment
productivity

GDP

All period

1991-2019

4.65

2.26

6.91

Period of highproductivity growth

1991-1995

5.70

2.48

8.18

1996-1999
2000-2007
2008-2012

4.73
4.18
3.10

2.26
3.02
2.69

6.99
7.19
5.79

2013-2019

5.53

0.92

6.46

Period ofproductivity
stagnation
Period ofproductivity
recovery

Source: authors’ calculation based on GSO data.
13

Incremental Capital Output Ratio (ICOR) and TFP• ICOR shows how much investment is needed to push GDP by 1%. Higher
the ICOR, less efficient is investment. Viet Nam’s ICOR was high (5 to 7)
but fell to a more reasonable level in recent years.
• TFP growth was negative until 2002 but became mostly positive since then.
ICOR

TFP growth (%)

Source: authors’ calculation based on data from IMF and GSO.

14

Labor Productivity by Economic Sectors• In 2019, the average labor productivity of industry and construction was 1.1 times
higher than that of services and 3.49 times higher than that of agriculture, forestry,
and fisheries.
• This pattern of labor productivity across broad sectors is consistent with the
expected dynamism in a developing country such as Viet Nam in which industry is
the main driver of structural transformation.
Labor productivity of broad economic sectors(In VND million per worker, at constant 2010 price)

Contribution to GDP by economic sectors

100
90
80
70

The whole economy

60

Agriculture, forestry, and fisheries

50
Industry and construction

40

Services

30
20
10
0
1991

2000

2010

2019

Source: authors’ calculation based on GSO data, with adjustment for the 2010 data gap.

15

Manufacturing Labor Productivity Stagnates• In 2019, labor productivity was highest in Secondary Sector (construction & industry),
second in Tertiary Sector (services) and lowest in Primary Sector (agriculture,
forestry & fishery). However, LP of Secondary Sector stopped growing after 2000.
• Within Secondary Sector, manufacturing clearly shows stagnation in the 21st century(below). This is puzzling in a rapidly industrializing economy such as Viet Nam.
Manufacturing Labor Productivity: Level & Growth

Source: authors’ calculation based on GSO data,with adjustment for the 2010 data gap.

16

Labor Productivity by Type of Ownership
From 1991 to 2019, labor productivity of the FDI sector increased 1.19 times, thatof the non-state sector 3.34 times, and that of the state sector 4.24 times.
Growth 1991-2019: State > Non-state > FDI

LP level in 2019: State > FDI > Non-state

Labor productivity by ownership(VND million per worker, atconstant 2010 price)
Source: authors’ calculation based on GSO data,with adjustment for the 2010 data gap.
17

State Sector: Labor Productivity Continues to Rise
The increase in labor productivity may come from the following reasons.
(i) A series of state enterprise reform which streamlined and equitized manyof low performing enterprises, retaining only good performers in the state
hand and thus pushing up their average productivity.
(ii) A high capital-labor ratio, and various privileges and protection offered by
the government.
250

25
20

200
15

Labor productivity: State Sector
10

150

5
100

0
-5

50
-10

Source: authors’ calculation based on GSO data,with adjustment for the 2010 data gap.

-15

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

0

18

Non-state Sector: Rising but Level is Still Low
Labor productivity of the non-state sector increased steadily. Even so, itremains low in absolute terms in comparison with the other two sectors.

45

14

40

12
10

35

8

30

Labor Productivity: Non-state Sector

6
25
4
20
2
15

0

10
5

-4

0

-6

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

Source: authors’ calculation based on GSO data,with adjustment for the 2010 data gap.

-2

19

FDI Sector: Decline & Stagnation
Labor productivity of the FDI sector strongly rose up to 2001, then fell
greatly, and stagnated. This is strange because we normally expect FDI to
be productive and competitive.
450

30

400

20

350

10

300
0
250
-10

Labor Productivity: FDI Sector

200
-20
150
-30

100

-40

0

-50

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019

50

Source: authors’ calculation based on GSO data,with adjustment for the 2010 data gap.

20

Why LP of Manufacturing and FDI Sectors Stagnate?
• Manufacturing sector and FDI sector overlap. The main reason for theirstagnation is changing content of their activities.
• Prior to 2000, capital- and technology-intensive FDI abounded (mining,energy, motorcycle, automobile, die & mold, etc.) After that, exportoriented labor-intensive large-scale FDI dominated (garment, footwear,
electronic assembly, etc.) These activities have low domestic value-added
and low labor productivity.
• The problem is that government failed to upgrade them toward higher
productivity, quality and competitiveness—unlike Malaysia’s
Manufacturing++ strategy (1990s) or Thailand’s new FDI policy (2015).
• FDI firms also consider Viet Nam to be a place for simple works and haveno reason to revise this strategy. Policy failure and FDI’s such attitude are
two sides of the same coin.
• If wages continue to rise, FDI will not upgrade but simply leave Viet Nam—a typical “middle income trap” situation.
21

Persistence of Unskilled Labor• In the mid 1990s, Vietnamese workers were praised as young, skillful anddiligent. After a three-and-half decades of Doi Moi and a quarter century of
global integration, some of these traits are being eroded. Moreover, theseadvantages are not enough to take Viet Nam above middle income.
• Viet Nam failed to educate and train high-level human resources who
generate high value (scientists, managers, engineers). They are in acuteand chronic shortage.
• Workers are becoming shortsighted and unwilling to learn. Untrained
workers are not declining but increasing (56→66% in industry andconstruction; 31→56% in services: from 2007 to 2013).
• Viet Nam must overcome such negative mindsets if it is to advance inindustrialization.

22

Limited Participation the Global Value Chain• FDI attraction does not automatically strengthen domestic firms or activate
participation in global value chains. Host nations must prepare necessary
conditions first.
• Khoi & Chaudhary（2019）calculated Viet Nam’s participation in GVCs. Backward
participation (upstream) rose but forward participation (downstream) remains
stagnant (see table).
• Supporting industries (upstream) are dominated by FDI firms.
• Insufficient GVC participation and being trapped in simple processes (mentioned
above) are two sides of the same coin.
Viet Nam’s participation in global value chainsValuecreation

Upstream

Low-value simple
processes

Backward
participation
(%)
21.6

Participation in
global value
chains (%)
34.2

2000

19.5

27.2

46.7

2005

14.5

36.1

50.6

2010

12.5

40.5

53.0

2015

11.1

44.5

55.6

Year

Smile Curve
R&D
DesignMaterials
Components

1995

Forwardparticipation
(%)
12.6

Branding
MarketingCustomer service

Downstream

Source: Nguyen Viet Khoi and Shashi Chaudhary (2019).

Technical note
Nguyen Viet Khoi and Shashi Chaudhary (2019) define the “backward participation” as theamount of domestically produced intermediate products and services contained in anation’s total export, and “forward participation” as the amount of value-added earned
abroad in a nation’s total export.
Vietnam: Export value structure (2015)

A

B

Imported inputs

Domestic inputs

Accrues to:

Total export value = A + B + C + D
Backward participation = B / (A+B+C+D)
Forward participation = C / (A+B+C+D)

Domestic workers & suppliersincl. FDI suppliers (44.5%)

C
ProfitmarginExporters(11.1%)

D
CF&T

Charges, fees & taxes paid togovernment, domestic &foreign agents for import,
export & production

Note: this is an analysis of export value (FOB). The final retail pricemust be higher, and the difference is captured by foreign buyers &distributors, whose amount is unknown to Vietnamese exporters.

The Labor Market and Lewis’ Turning Point• Arthur Lewis argued that, in development, rural labor migrate to urban
industry and services. If this process proceeds sufficiently, the economy
will reach the “turning point” where surplus labor disappears, the labormarket tightens, and wages begin to rise.
• Vietnamese labor is migrating across sectors. Agri. (72→34%), Industry(11→30%), Services (16→35%) (labor share, 1991 to 2019）.
• Labor in HCMC & Ha Noi is already tight, but surplus labor exists in ruraland remote areas. Labor shortage is partial and local. The nation as awhole has not reached the turning point.
• In Japan, labor migration did not stop until the turning point was reached.
Why does Viet Nam’s internal labor migration not accelerate? Possible
reasons include: (i) rural labor is actually already in shortage; (ii) rurallabor is without skills for modern sectors; (iii) narrowing urban-rural income
gap; (iv) some barrier(s) in labor mobility exist.
25

The Labor Market and Lewis’ Turning Point (cont.)
Skill level of Vietnamese labor is low and not rising (actually, falling)• Between 2007 and 2013, labor who lacked skill, as defined by job duty and required
certification, rose from 7.1% to 11.1% in agriculture, from 55.5% to 65.5% in industry
and construction, and from 30.5% to 56.4% in services (Nguyen Ba Ngoc & Pham
Minh Thu, 2014).
Distribution of labor between rural and urban areas (%)
Labor is surely migrating fromvillages to cities, but speed may
not be very fast

Source: General Statistics Office.

26

Findings in the Sources ofLabor Productivity Growth27Growth Accounting Decomposition
Δ Labor productivity = Δ TFP + Δ (Capital/Labor)• In early years, heavy investment drove labor productivity. TFP (true efficiency)
tended to decline.
• In the 21C, especially in the 2010s, TFP growth rose and replaced investment asa main driver of labor productivity.
Growth accounting: decomposition of labor productivity growth (%)

Source: authors’ calculation based on GSO data, with adjustment for the 2010 data gap.

28

Decomposition of Labor Productivity Growth (%)
Same data in table format for three subperiods

All period

1991-2019

4.65

Contribution of
Capital
TFP
intensity
4.44
0.22

Period of highproductivity
growth1991-1995

5.70

10.39

-4.69

182.16-82.16

1996-1999
2000-2007
2008-2012

4.73
4.18
3.10

8.05
3.77
0.58

-3.32
0.40
2.52

170.2490.31
18.79-70.24
9.69
81.21

2013-2019

5.53

2.28

3.25

41.20

58.80

Labor
productivity
growthPeriod ofproductivity
stagnation
Period ofproductivity
recoveryContribution share
Capital
TFP
intensity
95.37
4.63

Source: authors’ calculation based on GSO data.
29

Growth Accounting Decomposition: Subsectors• Trends in agriculture, manufacturing & construction are similar to overall economy,
but services are driven mainly by TFP.
Decomposition of labor productivity growth: selected subsectors (%)
Manufacturing

Agriculture
20

20

15

15
10

10

5

5

0

0

-5

-5

-10

-10

-15
-20

-15

20

Construction

15
10
5
0
-5
-10
-15

1…
2…
2…

50
0 Capital intensity-50

Wholesale, retail, repair
15
10
5
0
-5
-10
-15
-20
-25
-30

TFP

Source: authors’ calculation basedon GSO data, with adjustment forthe 2010 data gap.

Labor productivity

30

Growth Accounting Decomposition: Subsectors (cont.)• In terms of type of enterprise ownership, capital intensity had a large influence on laborproductivity growth in all sectors in the 1990s, though this effect was slightly lessprominent and more volatile in the FDI sector.
• After 2000, the impact of capital intensity generally became small and the role of TFP
growth more prominent, especially in the non-state sector. However, TFP contribution was
unstable and weak in the FDI sector, as its labor productivity fell greatly in the early
2000s—especially in 2003—and then stagnated subsequently, a phenomenon weanalyzed in detail in the previous chapter.
Decomposition of labor productivity growth by ownership (%)
State sector
25

20

20

15

15
10

Non-state sector
40
30
20

10

10

5

5

0

0

0

-10

-5

-20

-5

-10
-15
-20

-30
-10

-40

-15

1…
2…
2…

-50
50
0 Capital intensity

-50

TFP

Source: authors’ calculation based on GSO data, with adjustment for the 2010 data gap.

Labor productivity

FDI sector

Shift-share Analysis
Δ Labor productivity = Δ Productivity increase in each sector+ Δ Labor movement across sectors + Interaction effect• Within effect dominated in early and recent years. In the middle subperiod, Shift effect
was also significant.
• At lower middle income, both effects should be dynamic and reinforce each other. In
Viet Nam, they are not very dynamic.
Shift-share analysis:
decomposition oflabor productivity
growth (%)

Source: authors’ calculation based on GSO
data, with adjustment for the 2010 data gap.

32

Shift-share Analysis: Subsectors
Five subsectors that had, generally and throughout the entire period, largest impact on overall laborproductivity are (i) manufacturing; (ii) mining; (iii) construction; (iv) financial, banking, and insurance
activities; and (v) wholesale, retail, and repair. They collectively accounted for 61% of overall laborproductivity growth in the 1990s and 2010s though their impact was reduced to 52% in the 2000s.
Annual subsector contribution toeconomy-wide labor productivity
growth (%)

Source: authors’ calculation based on GSO data, with adjustment
for the 2010 data gap.
Note: the apparent jump in 2010 may reflect our less-than-perfectadjustment for the change in the GSO’s treatment of “products
taxes less subsidies on production”.

33

Major Findings fromthe International Context

34

Labor Productivity: Level & Growth
Even through rising, Viet Nam’s labor productivity (second from bottom) is still very
low. Speed is too slow to overtake others. It is China that is overtaking others.
Labor productivity level: comparison with Asia’s middle income economies

Source: authors’ calculation based on the statistics from APO.
Note: expressed in USD thousand per worker in constant 2011 PPP dollars.

35

Labor Productivity: Level & Growth (cont.)
In 1991, the labor productivity of Viet Nam was similar to that of China. Thereafter,
China attained a high labor productivity growth of 8.98% during 1991-2017, andespecially in the first decade of this century when its growth nearly reached 10%
per annum. China raised labor productivity by 9.4 times from 1991 to 2017 while
Viet Nam’s rose only 3.7 times.

Country

1991-2000 2001-2010

2011-2017

1991-2017

Japan

0.99

0.79

0.51

0.79

South Korea

5.30

3.29

1.43

3.54

China

9.25

9.94

7.26

8.98

Singapore

3.95

1.91

1.91

2.66

Thailand

3.46

3.19

3.72

3.42

Philippines

1.26

1.95

4.47

2.34

Malaysia

3.92

2.61

2.28

3.01

Indonesia

2.47

3.29

3.51

3.04

Cambodia

3.72

4.06

4.93

4.16

Viet Nam

5.74

4.79

4.83

5.15

Viet Nam needs to accelerate laborproductivity growth significantly, notjust maintain its current pace, if it
does not want to further lag behind
other countries in the region.

Labor productivity growth in Viet Nam andselected countries (percent per annum)
Source: authors’ calculation based on statistics from APO.
36

Labor Productivity by Sectors• In 2017, the labor productivity of Viet Nam in almost all sectors wasat the lowest range in comparison with the selected Northeast andSoutheast Asian countries.
• Viet Nam’s labor productivity was the lowest, even below Cambodia,
in two sectors, namely construction; and transport, storage andcommunications.
• It was the second lowest, only above Cambodia, in agriculture,
forestry, and fishery; manufacturing; electricity, gas, and watersupply; wholesale and retail trade, repair of vehicles and household
goods, hotels and restaurants; and community, social and personal
services.
• Viet Nam had relatively high labor productivity in two sectors,
including mining and quarrying; and financial intermediation, realestate, renting and business activities.
37

10%
10%

5%
5%

0%
0%

-5%
-5%

-10%
-10%

Source: authors’ calculation based on the statistics of APO.
2003
2005

2007
2009

2011
2013

2015
2017

2003
2005
2007

2009
2011
2013
2015
2017

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

2001

Viet Nam

2001

1999

1997

1995

1993

15%

1991

China

1989

-10%

1975

15%

1987

-10%

1985

-5%

1983

-5%

1981

0%

1979

0%

1977

5%

1975

5%

1973

10%

1973

Japan

1971

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

15%

1993

10%

1971

15%

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

Labor Mobility: Comparison with Other Asian Economies
Korea and China grew mainly by Within effect, while Shift effect was supplementary.
Shift-share decomposition: Northeast Asia and Viet Nam
South Korea

38

15%

15%

10%

10%

5%

5%

0%

0%

-5%

-5%

-10%

-10%

-15%

-15%

Source: authors’ calculation based on the statistics of APO.
2017

2016

2015

2014

2013

2012

2011

2010

2009

20%

2008

Philippines

2007

20%

2006

-15%

2005

-15%

2004

-10%

2003

-10%

2002

-5%

2001

-5%

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

Malaysia

2000

0%

1999

0%

1998

5%

1997

5%

1996

10%

1995

10%

1994

15%

1993

15%

1992

20%

1992

1991

20%

1991

1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Labor Mobility: Comparison with Other Asian Economies (Cont.)
In ASEAN, Shift effect was significant first, then Within effect later rose. Annual
fluctuations were large.
Shift-share decomposition: selected ASEAN countries
ThailandIndonesia

Sectoral Contribution to Labor Productivity Growth
Since 2011, the contributions of economic sectors gradually recovered and had a positive
impact on labor productivity growth, although a remarkable leveling up of the growth process
was again not observed. So far, a manufacturing-based shift to high growth and high income
has not been observed in Viet Nam.
Sectoral contribution to overall labor productivity growth in Viet Nam

Source: authors’ calculations based on data from APO.

40

Productivity Enhancement Policyin the Doi Moi Period

41Viet Nam’s Productivity Policy: A Historical Review
1996 Join the Asian Productivity Organization (APO).
1996-2005 First Quality Decade. Vietnam Productivity Institute (VNPI)
established under MOST. Quality Awards, ISO, 5S, Kaizen introduced.
2006-15 Second Quality Decade. Emphasis on implementing learned tools.
Awareness raising, enterprise guidance, technology infrastructure.
2010 Prime Minister’s National Program (Program 712).
2011 TFP targets set at 11th Party Congress.
2015 ILO says Viet Nam’s labor productivity is very low.
2016 Productivity targets at 12th Party Congress. Action plan by
Resolution No. 27/NQ-CP (2017).

42

Key Policy Components
The Vietnam Productivity Institute (VNPI)VNPI was established in 1997 with the support of the APO. The VNPI
was expected to become a competent and effective national productivity
agency. However, with its current position in the system of manyagencies related to productivity under MOST, the VNPI has not fully
fulfilled its expected role.

National Program 712
Its full name is “Improving Productivity and Quality of Products andGoods of Vietnamese Companies to 2020.” This was the first national
program for productivity and part of the Second Decade of Quality,
approved under Decision No. 712/Qd-TTg of May 2010. It is a collectionof missions and solutions to reform the legal framework, policy
mechanisms, organizations, and human resource.
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Achievements• Even though the awareness raising process has been slow, Viet Nam has
prepared basic conditions to initiate a future national productivity movement.
• The trade-off between productivity and quality, which was the concern ofpolicymakers in the days of central economic planning, has been resolved.
• The First Decade of Quality 1996-2005 introduced a number of new
methods to Vietnamese enterprises. The Second Decade of Quality 20062015 expanded various prototyped models to improve productivity forbusinesses.
• Program 712 was implemented with the goal of raising TFP’s contribution to
GDP growth to 35% by 2020. This goal was achieved ahead of time with
better productivity performance in recent years; contribution of TFP to GDP
growth was 43.5% in 2018.
• Policy planning and enforcement mechanisms are now in place. Relevant
agencies have accumulated experience, and many workers are well trained
to promote technology transfer. These are a solid foundation for Viet Nam to44
implement new productivity policies in the future.

Limitations• Policies so far focused only on the business sector, but not government,
educational institutions, and households.
• Mindset regarding productivity is still marred by traditional top-down plan thinking
rather than the bottom-up approach driven by individual firms and organizations.
• In designing and implementing policies, communication and coordination amongsupport organizations are hampered or delayed due to scattered authority andmultiple management layers of many ministries.
• Viet Nam has received technical and financial support from many countries.
International cooperation has produced reasonable results so far, but foreignmodels must in the long run be converted to a genuine homemade model.
• The results remain ineffective due to serious weaknesses in Viet Nam’s policy
making process. They include (i) the lack of continued commitment and support
by national leaders, (ii) the lack of incentives for firms, workers, and individuals toparticipate, (iii) the lack of detail design—only broad directions are given—andproper mechanisms, staffing, and budgets, (iv) government and ministerial
bureaucracy which causes deadlocks and delays, and (v) insufficient international
support. The productivity movement of Viet Nam has so far been small, scattered,45
and only partially implemented.

Thank You!

Contact:
Assoc. Prof. NGUYEN DUC THANH
Email: thanh.nguyenduc@vess.org.vn
Viet Nam Center for Economic and Strategic Studies (VESS)
Level 7, TMC Tower, No.1 Luong Yen, Hai Ba Trung Dist., Ha Noi
Mobile: (+84) 98 2298 105
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