Economic integration

AEC offers major employment and productivity benefits, if decisively managed

The introduction of the ASEAN Economic Community next year could spur growth in Viet Nam’s GDP by 14.5 per cent and growth in jobs by an additional 10.5 per cent by 2025, but only if decisive action is taken to manage it effectively.

Press release | Hanoi, Viet Nam | 04 September 2014
HANOI (ILO News) - The introduction of the ASEAN Economic Community (AEC) at the end of next year could spur growth in Viet Nam’s GDP by 14.5 per cent and growth in jobs by an additional 10.5 per cent by 2025, according to a new report prepared by the International Labour Organization (ILO) and the Asian Development Bank (ADB).

On a broader scale, the economic integration could generate 14 million additional jobs in ASEAN and improve the livelihoods of 600 million women and men living in the region, but only if decisive action is taken to manage it effectively.

The ILO/ADB study, “ASEAN Community 2015: Managing integration for better jobs and shared prosperity” was presented in Hanoi on Thursday 4 September, at the national policy dialogue with the same theme co-organized by the Ministry of Labour, Invalids and Social Affairs.

The AEC will allow for a freer flow of skilled labour, services, investment and goods among the ten ASEAN Member States.

“The new report indicates that Viet Nam will be among the countries that benefit more than others from the deeper regional integration as its economy is heavily reliant on external trade,” said Yoshiteru Uramoto, ILO Assistant Director-General and Regional Director for Asia and the Pacific.

It foresees robust employment growth in sectors such as construction, transportation, garment and food processing.

If determination and efforts are put in place, Viet Nam’s productivity could more than double by 2025, compared to 2010.

“With increased trade and investment flows, the pace of structural change to higher value sectors will accelerate,” said Tomoyuki Kimura, Country Director of ADB Viet Nam. “This could allow Viet Nam to compete in global markets based on higher productivity and skills.”
The report also finds that between 2010 and 2025, overall demand for medium-skilled employment will grow the fastest, by 28 per cent, and create new job opportunities for millions of people.

However, jobseekers without the right skills and experience may not be able to seize these new opportunities.

The report also points out that two out of three of the new jobs could be lower quality, “vulnerable” jobs, such as own-account or family workers.

Currently, despite the country’s formidable economic progress, nearly half of Viet Nam’s workers are in agriculture, where productivity, incomes and working conditions are typically low compared to some other ASEAN economies.

“Unless decisively managed, this could increase inequality and worsen existing labour market deficits – such as vulnerable and informal employment, and working poverty,” said Uramoto.

To counter this, Viet Nam and other Member States need to develop policies and institutions that support inclusive and fair development.

“Viet Nam is aware of the importance of the AEC 2015 and its opportunities as well as challenges,” said Minister of Labour, Invalids and Social Affairs, Pham Thi Hai Chuyen. “Bearing in mind that this unique chance cannot be missed, we are doing our best to prepare for the deeper integration and ensure that its benefits are enjoyed by all.”

The report suggests that the first priority measures should be taken to boost productivity and job quality in agriculture and diversifying manufacturing employment into new sectors, while continuing to support the garment industry.

Secondly, social protection coverage needs to be extended, including the national unemployment insurance scheme. This will help cushion the effects of structural transformation and ease workers into emerging, more productive sectors.

Third, skills development institutions need to be strengthened. Targeted efforts are needed to improve secondary education and vocational training to meet the expected growth in demand for medium-skilled workers.

More modern collective bargaining systems, to create a more stable business environment, are also needed. This would also help to ensure that productivity gains translate into higher wages and better working conditions, and so a stronger domestic market.

Finally, there is a need to improve both the protection of migrant workers and systems for recognizing their skills, particularly in sectors dominated by low and medium-skilled workers such as construction.

See full report and Viet Nam Country Brief here.