Vietnam recorded the fastest growth rate in labor productivity between 1991 and 2012 when compared to other member countries of the Association of Southeast Asian Nations (ASEAN), according to a report recently released by the Institute of Chartered Accountants in England and Wales (ICAEW).

The country exhibited a remarkable 184 percent growth rate over this period, equivalent to five percent per year, the ICAEW said in its “Economic Insight: Southeast Asia” quarterly briefing Q1/2015, citing data from the International Labor Organization.

The country was followed by Thailand, Singapore, and Malaysia with 85 percent, 81 percent, and 80 percent, respectively.

All the major ASEAN economies achieved faster productivity growth than the U.S. between 1991 and 2012, with the exception of the Philippines, the report said.

Vietnam again saw the highest increase, at 76 percent, regarding employment by occupation data, calculating the share of the workforce in relatively skilled professions compared to unskilled occupations, during the period.

The result means Vietnam created more highly skilled jobs between 2001 and 2012, as the country continued its transition from an agrarian to a manufacturing-based economy, according to the report.

Singapore and Malaysia have invested substantial resources in productivity growth with subsidized or free courses for workers, in the former’s case, and assistance for employers to upskill their workers, in the latter’s case, the report said.

“Malaysia and Singapore changed their labor-relations strategy to pursue higher-value added industries, focusing on skills development, workplace flexibility, and productivity, when they were ready to move into the next phase of their development, after pursuing a cost-containment and cheap-labor strategy,” the ICAEW said in the report.

Vietnam currently competes on cost, as many technology multinationals are currently investing in the country in order to move production there, it added.

As a result, the country would benefit from maintaining low-cost production in the near future, it said.
Vietnam continues to cement its place as a major electronics producer, as the cost advantage moves out of China since wages there rise.

Its latest GDP figures show a strong six percent gain in 2014, on preliminary estimates, boosted by a 13.6 percent rise in exports.

However, like South Korea, Singapore and Malaysia before it, the natural next step will be to climb up the value chain as wages start to rise and skills improve, according to the report. In pockets, this development is visible in Vietnam, it said.

But it will take time for this to spread across larger sections of the economy, the ICAEW said, adding that it will also rely on the development of the requisite skills such as engineering, science, and programming.
The government has launched initiatives to train more accountants, because of which education becomes an essential determinant of productivity after a certain threshold is reached.

Vietnam’s higher education is patchy, though it has an advantage in strong foundation-level education, the report commented.

Its education system ranks far ahead of peers with similar income, the report said, adding that the system is in the top 20 for all three subjects, including math, reading and science, in the OECD’s PISA, ahead of most European countries and the U.S. –