Vietnam workers have substantially improved their productivity levels in the last 15 years, according to ICAEW’s latest Economic Insight: South East Asia report.‘Pure productivity’ grew 2.3% and sectoral shifts accounted for 1.7% of productivity growth.
ASEAN workers overall have had an impressive track record, with productivity growing 3% per year between 2000 and 2015. This surpasses the per year growth rate of Latin America by 2% and Africa by 1.44%. Sectoral shifts (workers moving from agriculture to manufacturing and services), urbanisation and an increase of workers in the ‘prime age’ (25 – 54), have been the main drivers of productivity growth throughout the region, with the exception of Singapore.
.jpg)
Priyanka Kishore, ICAEW Economic Advisor & Oxford Economics Lead Economist, said: “Vietnam’s productivity grew at an impressive 4% per year in the last 15 years and should accelerate to 5% in the next five years, outpacing its neighbours. This will be powered by sectoral shifts, urbanisation and a growing number of workers in the prime working age. Pure productivity growth, however, ranks below its ASEAN-6 neighbours except Singapore. This highlights an opportunity for Vietnam to invest in productivity measures to improve output per worker.”
High household savings are also likely to have contributed to productivity improvements as sectoral shifts would not be possible without a stable supply of finance to invest in both physical and human capital. Though Foreign Direct Investments (FDI) have an important role in growing ASEAN’s economies, the bulk of financing for business investment – particularly among the job-rich small and medium-sized enterprises – comes from domestic savings and lending. This partly explains why ASEAN’s productivity has risen faster than other ‘middle income’ regions.
Rising domestic demand and booming Foreign Direct Investment (FDI) are driving economic growth of 6.5% despite the challenging regional and global environment. Continued diversification of export industries from oil and coffee to textile, electronics and other manufactures have also helped shield the economy from low commodity prices.
Mark Billington, Regional Director, ICAEW South East Asia, said: “Training, development and skills upgrading must play an essential role if Vietnam wants to maintain its growth path and improve the productivity and output of its workforce. As its economy continues to diversify, it will need a highly skilled workforce; one which has moved closer to a global standard of technical knowledge, business skills and innovation.”
Other findings in the report include: Indonesia’s financial conditions have improved; Reforms needed to reignite growth in Malaysia; and GDP growth to accelerate in the Philippines.
Economic Insight: South East Asia is produced by Oxford Economics, ICAEW’s partner and economic forecaster. Commissioned by ICAEW, the report provides its 145,000 members with a current snapshot of the region’s economic performance. It undertakes a quarterly review of South East Asian economies, with a focus on Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
The full Economic Insight: South East Asiareport is available at
Vietnamese
