Unemployment is up, investment is down and the labour force is growing by 1.1m people every year. Vietnam's workers should get ready to travel

It's been a tough year for Vietnam's workers. Just six years into Vietnam's long-overdue economic boom, lay-offs at companies like the Vietnam Motor Corporation and sportswear maker Nike portend lean days to come. The solution? Vietnam's policy-makers are looking overseas to remedy the effects of economic downturn.

A recent survey from the Ministry of Labour, Invalids and Social Affairs (MOLISA) reported that nation-wide unemployment rose to seven per cent of the labour force last year, with that average rising to 23% in some rural areas. To wit, foreign investment is falling quickly; the amount of foreign direct investment pledged to Vietnam in 1998 is just 60% of the amount received in 1997. With the labour force growing by 1.1m workers every year, getting people to work-no matter where-is crucial. With contracts for foreign labourers in countries ranging from South Korea to Angola, sending Vietnam's best and brawniest to work abroad is a solution that appeals to workers and the government alike.

Visit to the past

Going to work in a foreign country is not a new concept for Vietnamese labourers. The government began sending workers abroad in the early eighties under agreements with a host of Eastern-bloc countries. The declining economic power of the Soviet Union also prompted the government to look for labour contracts in other non-aligned countries. Official figures from MOLISA indicate that between 1980 and 1990 over 250,000 people went to work in Comecom countries, Iraq and Libya.

Under the terms of these agreements, Vietnamese workers were technically employed by the Vietnamese government, which then subcontracted their services to the host countries. The agreements were very profitable. Over the course of the decade, roughly VND800bn, or $300m calculated at the 1990 ruble-to-dong rate, was earned for the state budget by the labour contracts. During an era when rice was rationed and there wasn't enough meat to go around, it was a good arrangement for everyone. "Vietnam was experiencing a serious crisis at that time," says Nguyen Trong Duc, a professor at the Hanoi Irrigation University who went to Iraq in the late eighties. "People had nothing to do and the government desperately needed to find jobs for us. They found them abroad."

Following the collapse of the Soviet Union, export emphasis has shifted to other markets, such as South Korea. The change in economic models also brought about a change in the export industry. For the first time, individual government bodies were allowed to market their workers and undertake contracts directly with private companies, usually through one of their subsidiary companies.

Under the present arrangement, these state-owned firms apply to MOLISA for quotas to export workers. The largest two labour exporting ventures are the Vietnam Construction Company (Vinaconex), under the Ministry of Construction, and the Labour Overseas Development Company (LOD), under the Ministry of Communications and Transport. Between 1990 and 1997, 54,000 labourers have been sent abroad under arrangements organised by these organisations.

Unofficial labour

Keeping tabs on actual figures for the past decade has also become much more difficult; many of the workers that went abroad in the eighties have yet to return. After the last of the inter-governmental agreements from the eighties ended, an estimated 200,000 Vietnamese guest workers remain unaccounted for, most of whom are working unofficially in their host countries. They are also generating lots of unofficial business for their home country.

A recent survey conducted by MOLISA reports that between 1991 and 1997, Vietnamese working abroad officially contributed about $1bn dollars every year to the Vietnamese economy. While no exact numbers are available for this grey industry, people involved in trade with relatives abroad say this number is plausible.

"I set up this workshop with the money my brother sent from Russia. We make garments that he orders, which we export to Russia," said Nguyen Tu Nam. Mr Nam's shop has expanded and now employs 15 tailors in Hanoi's Hai Ba Trung district. According to a source from the Vietnam Chamber of Commerce and Industry (VCCI), hundreds of these small businesses have been set up with money repatriated by overseas workers. These establishments then create more jobs.

Culture shock

The growth in small scale trade could be a blessing. As the effects of the regional crisis take hold around the region, the number of official labour contracts is beginning to taper off. The reason for the decline is simple: "In South Korea, there are so many unemployed natives right now," explains Kim Hyun-Myung, counsellor at the Embassy of the Republic of Korea in Hanoi. "No new guest labour contracts are being made."

Beginning in the early nineties, South Korean companies began employing droves of Vietnamese labourers. At the peak of the hiring in 1993, there were 50,000 Vietnamese guest workers in South Korea. But with almost 2m unemployed workers in the country, it's hard to justify bringing more foreigners in. Mr Kim says that South Korean companies aren't signing any new contracts and are ending present contracts through attrition. "Importing more foreign labourers will be difficult for the time being," he says.

Depressed economies aren't the only reason that Vietnamese workers aren't being invited back to their former countries of employment. Despite background checks conducted by their sponsor companies, some bad apples get through. "I am told that our office in Libya is planning to reduce the number of Vietnamese workers imported to Libya," says Jong Sun Lee, representative for the Dong Ah company in Vietnam. "There have been thefts of our supplies. This is a serious problem." Through a partnership with Vinaconex, Mr Lee's company has sent more than 2,000 labourers to Libya.

The problem has also become a headache for the local contracting companies. "People sometimes do not want to hire Vietnamese because they lack discipline," says Nguyen Quan, vice general director of LOD. "Some have made liquor in Muslim countries, for example." After five years of managing export labour contracts, he says that preparing Vietnamese for life abroad is challenging.

"One problem is that South Korea is an industrialised society, somewhat different from Vietnam," explains Mr Kim at the South Korean embassy. "In a rural society, you can go to the fields at eight o'clock, nine o'clock-whenever. But on a manufacturing line, if one person starts late, everyone starts late. Our societies are very different, and this may be the problem, not only culture and language."

A general lack of understanding may also contribute to another problem that has bedevilled South Korean employers of Vietnamese workers. An estimated 44% of the Vietnamese workers who have gone to South Korea have broken their original contract agreements, with most going to work for other employers. While many have returned with complaints of mistreatment at the hands of their employers there, the trend has caused problems for future contracts. "Our workers aren't so disciplined," admits Tran Van Hang, director of the labour export department at MOLISA.

The competitive edge

What everyone agrees on is that Vietnam's labour export industry needs to shape up, especially faced with rising

numbers of Philippino and Thai workers looking to make money wherever they can. "In economic terms, what matters is competitiveness," says Mr Kim. Predictably, for many economists the answer is deregulation. Theoretically, exposure to competition among labour exporters in other countries as well as within Vietnam would force companies to look harder for contracts abroad. Mr Quan at the LOD argues that improving the export companies isn't the priority right now.

"What do you look for when you buy a product? The quality of the product, or the number of shops that sell it?" he asks, pointing out that over 100 companies have received quotas to export workers. The next step is to invite foreign investment in the preliminary education and training of workers. But several companies have tried already, and found the industry difficult water to tread.

Three years ago, LOD signed a joint venture contract with the SYSTEN company, based in Japan. The project was aimed at setting up a training school for workers, who would then be farmed out to projects around the world. Yet the Japanese company eventually pulled out, telling Mr Quan that the risks did not justify the cost.

Other attempts by South Korean companies have faced similar endings. Mr Lee at the Dong Ah company was not surprised to learn two months ago that the Bum Jin Engineering and Construction company, which had been planning to invest in a technical welding school for local workers, gave up. His company tried the same thing. "It is very complicated to invest in this sector here. It's a world of paper work," says Mr Lee. One of the company's major concerns, he added, was that even if the company ever did gain the right to sponsor Vietnamese workers abroad, they would still rather subcontract through Vinaconex. "If there are problems with workers, local partners have an easier time sorting them out," he explains. "We would have a lot of problems trying to fine Vietnamese workers who break their contracts."

Despite some setbacks, the case for labour export remains strong. Mr Kim at the South Korean embassy remembers what a similar drive did for his country. "In the 1960's, many Koreans went to the West to do manual work, even if they had advanced degrees," he says. As the South Korean's technical expertise improved, so did their export jobs. In the seventies, instead of coal mining in Germany, many went to do construction in the Middle East. "Over 100,000 Korean workers went. We didn't have any natural resources like Vietnam."

The Vietnamese government has apparently taken that lesson to heart. At the beginning of last month MOLISA announced ambitious export labour goals, which will culminate with overseas contracts for 150,000 workers by 2000. Now's the time for hopeful labourers to get their bags packed. 

Average salaries abroad

Unit: US$ per month

(C) Vietnam Economic Times - 1998