date: 04-07-2016 10:44:42
Intergrating into Asean economy community: The impacts to vietnamese labour market
In this situation Vietnam has integrated more deeply into the regional economy, as well as the global economy by entering into the Agreement on Trans-Pacific Partnership (“TPP”) and officially joining the ASEAN Economic Community ("AEC") since the end of 2015. This creates the special expectation for Vietnam to take advantage of the provided opportunities from integration, especially the AEC, to positively transform the labour structure within Vietnam.
AEC is the common economic region including 10 ASEAN member countries. One of the main goals of AEC is to establish a common market for the member countries, focusing on the implementation of the rights of freedom on moving goods, providing services, moving capital and especially the freedom of movement for skilled labour among member countries.
There are a lot of concerns on the freedom of labour movement for deverloping countries such as Vietnam
Over the past few years, most labour movements between ASEAN coutries has been limited to unskilled employees intending to migrate from developing countries to those more developed in the region. Within this context, AEC has requested its member countries to promote the labour movements of skilled employees in order to create more opportunities for the member countries to approach those workforces with high qualifications.
Accordingly, the member countries of AEC have entered into 08 Mutual Recognition Agreements (“MRAs”) on business lines such as service on auditing, architecture, engineering, measuring, medicine, nursing, dentistry and tourism. These MRAs provide that the labour certificates of a skilled employees issued by the labour management authority in each country shall be recognized by the other member countries in the region.
Vietnamese commitments on labour upon joining AEC
Beside these MRAs mentioned above, another important commitment of Vietnam relating to labour is the Agreement on the Movement of Natural Persons (“MNP”), which was agreed to upon joining the AEC and executed in November 2012. MNP created advantageous conditions for natural persons of member countries to join commerce and investment activities of those member countries. For example, Article 13 MNP provides that, in considering a natural person of a member country (member A), where they moves into another member country (member B) or a non-member country of AEC ( member C), if member A treats favourably the natural person of member B or member C, member A must treat similarly the natural persons of the remaining member countries by the recognition for the movement of such natural persons into country A. This is conditional upon the capacity of the natural person to demonstrate that their education, experience, licenses or certificates meet the requirements of member A.
For Vietnam, the labour commitments of Vietnam provided in MNP also recorded a number of significant new contents. For foreign employees ("FE") that move internally within an enterprise from a country sharing member with Vietnam, these employees are allowed to enter into and stay for the period of the first 3 years. This limit can be extended subject to the duration of their commercial presence in Vietnam. In addition, each foreign enterprise is allowed to have at least 03 managers, executives and experts not being Vietnamese citizens. For other employees (management executives and experts), they will be allowed to stay under the term of the labour contract or stay under the period of first 03 years, and then it will be renewed. Schedule of Specific Commitments of Vietnam was accompanied by the Resolution No. 76 / NQ-CP dated 11/15/2012 of the Government on the approval and signing of this Agreement the content on the Movement's ASEAN.
AEC affects on the domestic labour market
Besides the advantages AEC provides, Vietnam has faced siginificant challenges in participating in this common playing field. A good integration policy can help to increase the domestic labour productivity by moving a skilled workforce. Thus, the labour market of Vietnam has more options as well as more intense competition. Once approving on MRAs and MNP, the highly skilled employees from other member countries to Vietnam may cause loss in job availability for the Vietnamese workforce.
Statistics show that by the end of 2015, 70% of the population of Vietnam are of working age (i.e. more than 60 million people). Nevertheless, the unemployment rate over recent years has experienced a steady increase (2.31% in 2015 in comparison with 2.18% in 2014).
As mentioned above, the amount of FDI investment has increased similar to the increase in the number of foreign employees participating in the management and administration of enterprises established in Vietnam. As of 2015, a total investment capital of 8 ASEAN countries into Vietnam reached $53 billion for 2,507 projects, accounting for 14% of projects and 20% of the total investment capital of the whole country. This figure also represents somewhat the labour pressures that Vietnam faces in competition in the coming years.
Additionally, the management of foreign labour is also a difficult problem. As it is currently, a number of localities withinin Vietnam are failing due to the the requirements of investment in the case of an uncontrolling number of foreign employees not allowed into Vietnam. Specifically, there are nearly 1,500 Chinese citizens are freely travelling in Ninh Binh, of which a number are "unallowed" employees, but this population is not controlled. The status of unallowed foreign employees leads to more complexity in the operation of local policing. Currently, although the Decree 95/2013 / ND-CP of the Government allows the expulsion of unallowed foreign employees and a fine to their employers of up to VND 75,000,000 for use of 21 or more unallowed employees. According to evaluation though, the implementation of this provision is not feasible due to relatively low fines as well as the weakness in the current labour inspection authorities, who do not possess the capacity to manage the entire local labour market.
On the other hand, there is concern that Vietnam appears to not have any effective policy response to this trend of "brain drain", where the great quantity of skilled employees leave their country to seek jobs with higher incomes, better working environment within the other member countries.
Along with the TPP, the provisions on freedom movement of labour resources in AEC will also motivate the process of changing the labour legislation of Vietnam to ensure compatibility with the international commitments on labour. In particular, the adjustment of benefits to employees in the direction of stricter regulation with better enforcement, would increase the burden of cost on social insurance, health care and pension benefits, leading to the unexpected increase on the operating costs of the enterprise. From 01 January 2016, the 2014 Social Insurance Law took into effect, providing changes on calculating salary. Monthly salary is now the basis for paying social insurance, and this includes both the salary and allowances rate. To enforce this regulation, the enterprises must pay social insurance for employees at the amount of 18% of the salary fund, calculated on the total salary and allowances that employees are entitled, in comparison to the payment subject to seperately social insurance funds in the past years.
What preparations can Vietnam take in joining the AEC
To avoid unfamiliarity, and integrate comprehensively and insightfully in becoming a member of the AEC, Vietnam should focus on the policy of improving its workforces. It is necessary to invest budget on skills training and prevent any "brain drain" in the continual long-term. In addition, Vietnam has enough effective technical barriers to select unskilled workforces in the situation that there is the workforce from a non-memeber country of the AEC, such as China. Simultaneously, Vietnam should tighten the supervision on the unallowed employees to minimize "unfair competition" in the domestic workforce.
In addition, the adjustment of income tax policy is more reasonable according to the schedule until 2020 provided in Decision No. 732 / QD-TTg of the Prime Minister, which is also necessary to improve the competitiveness of the labour market of Vietnam in comparison with other countries in the region. Upon participatinng in ASEAN Economic Community in 2015, Vietnam will be supported to motivate both GDP and employment growth. But this can only be achieved if there is an effective coordination between the government, the enterprises and the workforces of Vietnam. Futhermore, when AEC is enforced comprehensively, if Vietnam lacks a schedule, it will easily to fall into a situation similar to that of joining WTO. Then Vietnam met commitments on openning the markets gradually by lifting restrictions over an extended timeline, the competitive ability of enterprises and employees has not been significantly improved and the risk of "ball loss" in the home yard is a cause for concern.
To read the article, please click on the DOWNLOAD below,
"...this firm is warmly recommended by sources for the extent of its corporate, tax and accounting expertise. The banking and finance practice draws plaudits for its strong representation of real estate sector clients in their financings with local banks. Founding partner Phuoc Huu Nguyen is a standout name within this team." www.chambersandpartners.com
Phuoc & Partners ‘responds on time, provides appropriate advice, has deep knowledge of local laws, and good communication skills...'
...Managing partner Nguyen Huu Phuoc is ‘particularly good, being knowledgeable about local laws, a good communicator, and quick to respond’.
"...these firms have best been able to turn clients’ changes in attitude to their advantages..."
"...In an enviroment where the routine work is no longer up for grabs and only the most complex or specialist work will be outsourced, it is those law firms who pitch their tax skills in these areas that will succeed..." www.asia.legalbusinessonline.com