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Unemployment rears its ugly head
Unemployment is emerging as a serious problem in Vietnam as exporters and manufacturers cut jobs or slow production due to the fallout from the global economic recession.
Last December, Japan-based Canon, a global leader in photographic and digital imaging solutions, announced it would slash 3,000 jobs from its Hanoi-based Thang Long Industrial Park factories to cope with the economic downturn.
In Ho Chi Minh City, Pou Yuen, one of the world’s largest footwear producer, recently announced it planned to cut about 15,000 jobs this year. The company said that its orders had fallen sharply this year due to the global economic downturn.
Nike, the world’s largest athletic shoemaker, two weeks ago also announced it would halt orders at a factory in southern Vietnam, which is employing 6,500 workers, in the next six months due to falling demand. Rising unemployment is growing as the global economic recession is worsening and narrowing export markets.
According to figures of the Ministry of Labour-Invalids and Social Affairs (MoLISA), which have been collected from 40 per 60 provinces and cities, about 74,500 jobs were lost up till the end of February, about 37,700 people are now underemployed and about 14,900 people have been temporarily laid off. Furthermore, 3,000 Vietnamese working aboard returned to the country before their contracts ended as overseas employers tightened their belts.
Unemployment increases as production slows
The MoLISA estimated that Vietnam’s unemployment rate was 4.65 per cent till the end of last year, and forecast that an additional 400,000 people would lose their jobs this year. However, Vietnam Economic Institute acting director Tran Dinh Thien, said the MoLISA estimates were overly optimistic and the actual figures could be much higher.
“I don’t believe that another 400,000 will go this year, while many enterprises have to close their production facilities or cut jobs altogether,” Thien said. Nguyen Minh Phong, Head of Hanoi Institute of Economic and Social Development and Research’s Economic Research Department, also said MoLISA’s prediction is misinformed.
“I think that the number of enterprises announcing job cuts will increase till the end of this year as export markets narrow,” said Phong.
Statistics from the Ministry of Planning and Investment (MPI) last month, showed a sharp decline in production at industrial areas in the paper, textile, machinery, vegetable oil and ceramics sectors in particular. According to an MPI report, a number of companies are slowing production due to a surplus in inventory.
Luu Duy Tan, Vice Chairman of Vietnam Craft Villages Association, recently predicted about five million workers at craft villages, accounting for one-ninth of total country’s labour force, could find themselves out of work by years’ end. At present, Vietnam has about 3,000 craft villages, accounting for about 11 million workers nation-wide. Tan said craft villages were finding it hard to find export markets and had to dismiss about 50 per cent of workers.
Although Vietnam has recorded a trade surplus in the first quarter of this year, the Ministry of Industry and Trade reported a decline of export turnover of wood and wood products, rattan and bamboo products, pottery, footwear and electronics, with declines of 22.9 per cent, 21.3 per cent, 19.9 per cent, 10.8 per cent and 12.8 per cent respectively.
According to the MoLISA, about 938 enterprises closed manufacturing facilities and 976 enterprises slowed production at the end of last February. “Over the past years, Vietnam has become an export dependent economy and a large amount of our workers reflect this. Now, when export markets narrow, a job cut of exporters and manufacturers becomes a certainty,” said Phong.
Phong added that an additional one million workers entering the market this year would prove to be a headache for policymakers.
To create more jobs in the country, the government, over the past few months, introduced measures to boost production at firms, such as interest rate subsidies, pumping capital into investment projects and reducing corporate income tax.
But Nguyen Mai, an Independent Economist, said companies would not push production to create jobs as the demand has not moved forward.
“Most government measures focus on supporting production but not on pushing domestic demand so that unemployment problems will not be settled,” Mai said. The MoLISA expects to create about 1.7 million jobs in the country this year, but the MPI predicts just 1.5 million job will be invented. Furthermore, about 10,000 Vietnamese working aboard will return to the country before their contracts are up, according to the MPI report.
Rising unemployment pressures purchasing power
According to General Statistics Office (GSO), total retail turnover increased by only 6.5 per cent during the first quarter of this year. Nguyen Ngoc Van, Vice Head of GSO’s Integrated Statistics Department, said this was the lowest increase of retail turnover in recent years.
Thien said the slowdown of purchasing power was partly driven by unemployment as job uncertainty lowered consumer spending.
A recent survey by The Nielsen said consumers had claimed they had less cash in their pockets over the past months, and job security is one of consumer’s biggest concerns at present.
“Vietnamese consumers say over the next six months they will reduce their spending across all non-food categories including household items, electronics, facial care and clothes and general shopping as well as entertainment,” The Nielsen said in a statement. The government last month announced it would provide 12-month loan without interest rate to enterprises, which have to cut 30 per cent or more of their labour force, to pay for redundant workers.
MoLISA Vice Minister Nguyen Thanh Hoa said this measure would help to prevent further unemployment in the country.
However, a Vietnam Development Bank source said no businesses came to the bank to ask about the subsidy and called the administrative procedures too complicated.
Vu Dinh Anh, Vice Head of Institute for Market and Price under the Ministry of Finance, said the government should have greater direct support for consumers in order to expand the domestic market. “While export markets are being narrowed, supporting consumers is a very important thing to ensure a stable production of enterprises that help create jobs in the country,” Anh said.
vietnamnet, vir
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