Expert Column 28/05/2024, 10:18

Vietnamese human resources, perspective from FDI businesses

Ensuring stable human resources is always an important factor for the sustainable development of the company. As Vietnam's FDI attraction strength is gradually shifting from "low labor costs" to "high quality labor," what measures should FDI enterprises take in the coming time? Let's find out the current human resources trends and some solutions through the following article.

Vietnamese human resources, perspective from FDI businesses

Vietnam – destination of FDI capital

The term “China Plus One” (C+1) started from 2008, when multinational corporations of America, Japan began looking for stable markets in term of politics, economy and society such as India and Southeast Asia countries to avoid investing to much in China.However, it was not until the Covid-19 pandemic occurred in early 2020 that caused the Chinese economy to struggle that C+1 truly became a new trend. The world's leading economic corporations began a gradual "escape" from factories in China because there were too many risks. The new strategy is investing in India and Vietnam as these are potential and stable markets with a lot of room for development.

Besides, in recent years, Vietnam is becoming more well-known to international partners thanks to participating in many free trading agreements as well as bilateral and multilateral cooperation activities. In 2022, Vietnam and South Korea officially upgrade their relationship to “Comprehensive Strategic Partnership”. In June 2023, President of South Korea visited Vietnam, reaffirming the friendly cooperation between the two countries, especially regarding economic aspect. In September, 2023, President of USA – Joe Biden officially visited Vietnam. The two countries also upgraded ties to “Comprehensive Strategic Partnership”. Then, in November, 2023, Vietnam and Japan also upgraded their relationship to “Comprehensive Strategic Partnership for peace and prosperity in Asia and the world”. These big events help facilitate international trade, and expanding foreign investment in Vietnam.

According to the General Statistics Office, in 2023, total registered FDI capital in Vietnam reached over 36.6 billion USD, an increase of 32.1% compared to the previous year. Implemented capital of foreign investment projects is estimated at about 23.18 billion USD, an increase of 3.5% compared to 2022. This is a record disbursement level ever. Among economic sectors, the manufacturing and processing industry is still the leading sector in attracting foreign investment capital. In particular, in recent years, the quality of FDI capital flows into Vietnam has increasingly improved, and the number of projects in high-tech fields is increasing.

Demand for high-quality human resources

Previously, when talking about Vietnam's strengths in attracting FDI, one of the factors frequently mentioned was low labor costs. However, it is difficult to say that Vietnam will continue to sustain this strength in the coming years. Along with government policies that prioritize attracting high-quality FDI sources, "quality of labor resources" is becoming a consideration for FDI firms when investing in Vietnam.

Vietnam's average population in 2023 was 100.3 million people, with a well-balanced male-female population ratio (men accounted for 49.9%, women for 50.1%). Vietnam is now experiencing a golden population structure, but is shifting toward increasing the proportion of elderly people while lowering that of young people. According to the General Statistics Office, Vietnam's work force aged 15 and older would total 52.4 million individuals in 2023, an increase of 666.5 thousand people over the previous year. In 2023, the skilled workforce with degrees and certificates was expected to be 14.1 million people, accounting for 27.0%. Thus, by the end of 2023, the country would still have around 38.0 million untrained workers. This figure demonstrates the significant problem of improving workers' technical skills.

The Provincial Competitiveness Index (PCI) 2022 report by the Vietnam Confederation of Commerce and Industry (VCCI) and the United States Agency for International Development (USAID) assesses the quality of Vietnamese labor resources and finds that there is still much room for improvement in labor quality. Accordingly, up to 54% of FDI businesses rated labor quality as just meeting average requirements. Approximately one-third of FDI companies believe that labor quality fulfills most of their demands. Only 9% of FDI enterprises are completely satisfied with the quality of their human resources.

In particular, positions that require specialized skills and higher labor productivity are more difficult to find. According to the PCI 2022 research, up to 42% of FDI businesses that participated in the poll reported that finding candidates for the role of CEO was "difficult" or "very difficult," while 30% had the same problem when recruiting management and supervisory positions. Technical staff roles are similarly tough to fill. Up to 54% of FDI businesses said that recruiting technical staff was "quite difficult," with 22% rating it as "difficult" or "very difficult."

Difficulty in retaining workers

Stabilizing human resources is critical for organizations to develop sustainably, especially in light of rising input prices. Employee turnover forces organizations to frequently hire new employees, incurring additional expenditures such as recruiting and personnel training. As a result, it can be considered that keeping personnel, particularly skilled individuals with the necessary skills and certifications, is vital for any organization.

Management-level personnel are high-quality personnel in the business, and a business often costs a lot of money and time to recruit and train one person.  Therefore, losing an employee like this can bring many difficulties to the business.

However, the fact that a senior employee leaves a workplace where he or she has worked for many years can be due to one of the following two reasons. The first reason is to move to another enterprise for reasons such as salary, benefits, working environment... The second reason, a case that we often see at Japanese FDI enterprises, management-level personnel after a period of training in the FDI environment, leave to establish their own companies. Since the companies they establish often operate in the same field as the old company, they will directly compete to attract human resources with the old company. There have been cases where a management-level employee took his subordinates or people in the departments he managed from the old company to the new company he established.

Businesses may face identical issues with workers. Workers are particularly vulnerable during periods of socioeconomic crisis, such as the COVID-19 epidemic. Along with the growing cost of living in major cities, many people may choose to leave their professions and return to their hometowns to pursue other employment. Some firms also told Emidas magazine that after extended vacations like the Lunar New Year or the National Reunification holiday, a portion of employees do not return to work. The common explanation is that they have obtained a job at another firm in their hometown or that they work freelance as an hourly maid, technology motorbike taxi, etc.

Another group of employees that businesses may have difficulty retaining is Gen Z employees. Characterized by being dynamic and having strong personalities, Gen Z are often interested in finding a job suits their personality with highly flexible working environments. Such characteristics make Gen Z seem not suitable for the support industry - an industry that requires high discipline, perseverance and patience. However, with their creativity and dynamism, Gen Z can still create a lot of value for businesses. The reason why this group of personnel "job-hop" often comes from incompatibility in terms of corporate culture, working environment, job content, etc.

Some suggestions for businesses

Human resource plays a vital role in a business. A high-quality human resource is not only useful in daily activities but also a valuable competitive advantage. In this article, Emidas magazine has mentioned two problems that FDI businesses often face when recruiting Vietnamese workers, and other difficulties such as personnel training and high labor cost.

Below, we would like to introduce some solutions to human resource problems that businesses may encounter. These are proposed solutions from human resources experts in the TopCV Insights program series organized by TopCV Vietnam Joint Stock Company. Some solutions are mentioned in the January 2024 issue of Emidas digital magazine.

Firstly, businesses need to reshape the portrait of a suitable employee they are recruiting. In today's volatile context, new skills are born and it gradually becomes more important to adapt to the current business environment. In addition, businesses need to focus on developing current human resources through training and retraining. Updating employees' skills and knowledge not only helps them adapt to new challenges but also enhances their positive contribution to business development.

Secondly, in a difficult economic environment, when firms struggle to maintain wages and incentives that meet employee expectations, they can focus more on other benefits. One of the strategies that can be applied is to strengthen policies on career development and training. This not only helps employees improve their personal skills but also creates advancement opportunities within the business. In addition, businesses can also improve the working environment and pay more attention to the mental health of employees. This not only positively affects work performance but also contributes to employee engagement and loyalty.

Thirdly, businesses can consider linking with training facilities such as vocational schools and universities to ensure a human resource input with relatively stable quantity and quality. A popular form of partnership is to build practical study or internship programs for students from universities. In addition, businesses can also cooperate with training schools to develop customized training programs to meet the specific needs of the business. Furthermore, cooperation with training facilities can also include training for current employees of the business.

Finally, businesses can apply technology to save expenses and increase recruiting efficiency, such as placing job advertising on social media and recruitment portals. In addition, firms may use AI Chatbot technologies like ChatGPT to generate JD or automate recruiting procedures. Online meeting software can also be useful for quickly interviewing candidates online.

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