First published in Viet Nam News on Thursday, May 9, 2013.
Over the last two decades, millions of Vietnamese have escaped poverty through better employment thanks to a dynamic, growing and vibrant economy. Since the early nineties, the proportion of Vietnamese people living in extreme poverty at less than US$1.10 per day (roughly VND 23,000 in current prices), has dropped from 58 percent to less than 10 percent in 2010.
At the recent World Bank - IMF Spring Meetings, global leaders committed to a target of reducing extreme poverty globally to 3 percent by 2030. Vietnam is well on track to reach that target early and go even further. To accomplish this, Vietnam faces the challenge of accelerating poverty reduction especially in hard to reach areas that include ethnic minorities.
The fact is Vietnam needs more jobs, and higher quality jobs to help reduce poverty. The problem is growing as more young Vietnamese enter the job market every year. Almost 10 million more people joined the labor force in the decade ending in 2011. According to the latest official estimates, nearly one million Vietnamese are unemployed and over one million are underemployed. Vietnam will need to create roughly 1 million jobs per year, a challenging prospect at a time when the growth rate is slowing.
Vietnamese youth between the ages of 15 and 24 years-old, are particularly hard hit, accounting for nearly half of all unemployed. Vietnam faces the challenge of meeting the younger generation’s aspirations by delivering quality jobs in the right sectors to spur rapid, inclusive and sustainable development and to begin to reverse growing inequality.
The challenge is especially visible in rural and mountainous Vietnam where too many are working in agriculture that is inefficient and barely yields a living wage. The recent economic slowdown has pushed many others into low-income, vulnerable, informal sector employment. Earnings are low and irregular, making it increasingly difficult for families to support themselves.
Part of the challenge is the competitive external environment. Vietnam is going head-to-head with countries that export highly competitive goods and like its competitors it faces difficult structural reforms. Making state enterprises more efficient and providing support to the private sector with the right incentives to nurture small and medium enterprises is critical. The challenge is to create a highly efficient public sector by removing bureaucratic constraints, complemented by a dynamic private sector to maximize job creation. . Special attention is needed for small and medium enterprises and ensuring they have access to finance so they can create jobs. Policies to modernize and increase value added in agriculture will increase rural incomes.
In countries all over the world, financial sector reforms are being undertaken and Vietnam would also benefit from re-thinking efficiency, transparency and other measures to boost confidence in the financial markets.
To help prepare Vietnam for this future, reforms from early childhood education through higher education are important along with building a culture of life-long learning. In that context, the right skills matter. New World Bank research on skills in Vietnam shows that employers are looking not only for technical skills, but also cognitive skills like critical thinking and problem solving, and behavioral skills, like reliability and team work and communication skills.
The government has policy levers it can use to meet the challenge including increasing public funds for science, mathematics, and engineering and research and development. At the same time it needs to focus on making sure funds are better allocated; further targeting public spending for scholarships and loans, especially for the poor and ethnic minorities; and encouraging selected university-industry linkages to improve the relevance of the curriculum and support entrepreneurship.
The challenge of creating more, higher quality jobs is not only a challenge for the government, but a call for all Vietnamese people to come together around this agenda for the next generation.
Axel van Trotsenburg is the World Bank Vice President for the East Asia and Pacific region.
MPI/GSO, “Report on Labor Force Survey – Quarter 4, 2012”