Vietnam: Hard Workers but Low Producers, not quite a Tiger Yet

The two charts below were published by Harvard’s Michael Porter, arguably the top mind in business and economics, in a presentation on Vietnam’s Competitiveness in December 2008:

The graph labeled Labor Force Utilization shows that Vietnam is amongst 1st world countries in labor participation.  55% of the working age population in Vietnam is apart of its labor force.  This is compared to 53% in the U.S., 45% in France , and 33% in Turkey.  Moreover, Vietnam’s labor participation rate has grown 4% between 2003-2007, one the fastest in the world.

The graph labeled Labor Productivity shows that Vietnam is amongst the poorest countries in the world with a GDP per employee of around $6,000.  That figure is growing quickly at 6% per year from 2003-2007.  However, at that rate, it would take Vietnam 12 years to get to $12,000 per employee and 36 years to be at the same level as countries like Japan, Singapore, an Australia.

What do the two graphs infer? Vietnam works hard but provides mainly low skilled labor. This inference is collaborated by the Asian Development Bank data which shows the two largest components of Vietnam’s GDP to be 1) Manufacturing 2) Agriculture (Vietnam is the world’s #2 producer of rice).  Particularly weak are the service and technology sectors, which 1st world countries are particularly strong at.

For Vietnam to become a middle income economy, there needs to be a shift in the labor the country provides.  Journalists in the past few years have been touting Vietnam as the next Asian Tiger (which includes Hong Kong, South Korea, Taiwan, and Singapore).  But if you look at the current Asian Tigers, the first few things you think about are: electronics, technology, financial services, and media.  For Vietnam to be mentioned in the same breathe as the Asian Tigers, the country needs to foster inovation and business in high-skilled labor.  With a culture that places strong emphasis on education and with a population with the average age of 25, Vietnam has strong potential to accomplish just that.