vietnam’s labor export before and after the world economic crisis in 2008

How does the 2008 economic crisis impact on labor export activities in theworld in general and on Vietnam’s in particular?. 4.2 Scope of research - Substantive aspect of the Thesis: The

1 The rationale of the Thesis

For the recent decades, every country in the world has been experiencing therapid development of economic globalization and trade liberalization That hasresulted in free flows of goods, capital, and labor The movement of labor acrosscountry borders, also known as “labor export”, has brought about significanteconomic value and social benefits to developing countries including Vietnam

The State and the Party have always considered labor export as an importantsector of external economic and a part of the national policy to create jobs forlaborers, reduce poverty and unemployment Labor export is also influenced by theglobal economic fluctuation, especially the world’s 2008 economic crisis (hereinafter

to be referred to as the “2008 economic crisis”).

The 2008 economic crisis, which rooted from the financial crisis in the U.S andspread in international scale, has been posing tough challenges on Vietnam’s laborexport activities in the context of increasing competition in the international labormarket While the labor exporting countries in the region, that share similar conditions,are struggling to dominate the market, the labor receiving countries tend to reduceimports of unskilled labor and increase imports of skilled labor Therefore, since the

2008 economic crisis, Vietnam’s labor export has encountered a lot of difficulties due tomarket loss The fact that laborers have to repatriate early has raised a concern withcomplicated implications not only to the Government but labor exporting enterprises,local authorities, and laborers’ families

How to regain market for Vietnam’s labor export? How to create jobs forlaborers who have to early repatriate and to promote labor export in the context ofglobal economic crisis, especially in the upcoming time? To seek for appropriateanswer to the questions, it is essential that we study the impact of the 2008 economiccrisis on Vietnam’s labor export, thus to come up with feasible solutions to overcomethe difficulties and promote labor export For the aforementioned reasons, the topic

on “Vietnam’s labor export before and after the world economic crisis in 2008”

has been chosen by the author for her PhD Thesis

2 Status of research:

2.1 In the world

There are a lot of researches on different aspects of labor migration, issuesregarding the global economic crisis, and labor export, etc in the world However,there has not been any published research with the same topic as that of this doctoralThesis The published researches serve as useful reference source for the author to

complete this Thesis There are some prominent works such as: Why some Companies Emerge Stronger and Better from a Crisis: 7 Essential Lessons for Surviving Disaster (Book, published in June, 2009) by Ian I Mitroff, The real reason for the global financial crisis… the story no one’s talking about (Article, published in

2008) by Shah Filani The works are about 7 lessons that companies should learn inorder to promptly respond to the global economic crisis, how to make advantage ofthe very crisis and how to become stronger and better

In some other studies of labor export, authors have analyzed the role of labor export

to the country, the impact of their remittances as well as the issues arising from the labor

immigration Among all, the outstanding study was The Impact of Labor Immigration on households (Published in 1992) by GodFrey Funatilleke However, the materials deal with

more theoretical than practical aspects of the topic

W.Edwards Deming, author of Out of Crisis (a study published in July, 2009)

on an analysis of the impact of global economic crisis on labor market has concludedthat the 2008 economic crisis would decide upon the existence of many markets,including labor market; as well as would simultaneously result in employment andunemployment in many economies

Moreover, the Thesis has addressed some questions that have never been raised

by any foreign researchers, specifically: What are the causes of the 2008 economiccrisis? How does the 2008 economic crisis impact on labor export activities in theworld in general and on Vietnam’s in particular?

2.2 In Vietnam

With regard to labor export, there have been a lot of studies and researches

conducted by Vietnamese authors on the following topics: Labor Export and the National Employment Program – Actual status and Solutions (Published in 2007) by Nguyen Phuc Khanh, Solutions for Vietnamese Enterprises to Overcome Challenges and Achieve Goals in 2008 (Published in the Labor and Social Affair Magazine,

Vol.329 in 2008) by Nguyen Luong Trao, Achievements, Limitations, and Problems Challenging the Government management of Labor Export Activities in Vietnam

(Published in the Magazine of the Institute for European Studies in 2011) by Nguyen

Thi Huyen; Improving the Competitiveness to Expand and Maintain the Market Share of Labor Export in the New Context (Published in 2012) by Nguyen Luong

Trao However, this Thesis adopts a different approach to the necessity of improvingefficient management of labor export and solutions to promote labor export ascompared to these studies and researches

In the aforementioned researches, Vietnam’s labor export is analyzed indifferent dimensions However, there is not yet a systematic and comprehensiveresearch, both theoretically and practically, on Vietnam’s labor export before andafter the 2008 economic crisis in order to come up with solutions to boost laborexport in Vietnam in the new context – the post-crisis period This could be said of asthe first Doctoral on this topic

3 The Objectives and Missions of the Thesis

3.1 Objectives

The Thesis pursues the following main objectives:

- Address the theoretical and practical issues of Vietnam’s labor exports beforeand after the 2008 economic crisis

- Assess the actual status of Vietnam’s labor export before and after the 2008economic crisis

- Highlight the impacts of the 2008 economic crisis on Vietnam’s labor export

- Propose some solutions to boost up Vietnam’s labor export in the coming time

- To assess the actual status of Vietnam’s labor export before and after the

2008 economic crisis; to highlight the positive and negative impacts of the crisis onlabor export of Vietnam

- To address causes of inefficiency of Vietnam’s labor export for the past due

to the economic crisis

- To recommend solutions and directions to minimize negative impacts andenhance positive impacts of the crisis, aimed at promoting Vietnam’s labor export inthe post-crisis period.

4 Subject matter and scope of research

4.1 Subject matters of the Thesis are the issues related to Vietnam’s labor

export before and after the 2008 economic crisis, particularly the Government policyfor development of labor export before, during and after the 2008 crisis

The Thesis also provides an analysis of experiences of selected countries onhow to enhance labor export

4.2 Scope of research

- Substantive aspect of the Thesis: The research conducted within the

framework of this is restricted to analyzing impacts (both positive and negative) ofthe 2008 economic crisis on Vietnam’s labor export activities in the form of directexport, i.e sending Vietnamese laborers (experts, trainees and interns) overseas towork for a definite period of time in a legal and organized manner on the basis of theGovernment agreements, business contracts of enterprises licensed to export labor,bid award contracts, further training contracts and private contracts

- Spatial aspect of the Thesis: The Thesis selects the Philippines, Indonesia,

and India to explore their experiences on labor export and draw out lessons forVietnam as the Philippines and Indonesia are members of the ASEAN while India is

a successfully developing country in Asia which has created comparable advantages

in the international labor market thanks to its strategy of exporting IT professionals

- Scope of time: The Thesis studies the actual status of Vietnam’s labor export

from 2003 till now; then the author proposes some solutions to boost up labor export

of Vietnam in the upcoming time (from now to 2015 and 2020)

5 Methodology

- The Thesis was completed using two research methodologies: dialecticalmaterialism and historical materialism; on the basis of the viewpoints of the Party andthe Government on labor export

- The Thesis adopts the methods of systematization, analysis, commentary, statistics, and comparison to make a comparison of application practices of labor

exporting enterprises in Vietnam based on the theoretical background introduced inChapter 1 and the actual status of labor export in Chapter 2 in order to come up with

a comprehensive analysis of labor export

- In addition, the author also used another methods of sociological survey and expert consultation to gain knowledge on the role of labor export, thus seeking for

solutions to support and complete Vietnam’s policy framework for labor export in thepost-crisis period

6 Scientific Contributions of the Thesis

- Systemize and clarify theoretical issues related to labor export, especially thedefinition of labor export;

- Analyze impacts (both positive and negative) of the 2008 economic crisis onlabor export in general and labor export activities in Vietnam in particular;

- Analyze the actual status of Vietnam’s labor export before and after the 2008economic crisis;

- Propose solutions and directions to minimize negative impacts as well asenhance positive impacts of the 2008 economic crisis to boost up labor export ofVietnam in the upcoming time

7 Structure of the Thesis

Apart from the preface, list of abbreviation, list of figures and charts,references, and appendices, the Thesis consists of three chapters:

Chapter 1 Several theoretical and practical issues regarding labor export before and after the 2008 economic crisis.

Chapter 2 Actual status of Vietnam’s labor export before and after the 2008 economic crisis.

Chapter 3 Standpoints, directions and solutions to enhance Vietnam’s labor export after the 2008 economic crisis.

CHAPTER 1:

SEVERAL THEORETICAL AND PRACTICAL ISSUES REGARDING LABOR EXPORT BEFORE AND AFTER THE 2008 ECONOMIC CRISIS 1.1 THEORIES OF LABOR EXPORT

1.1.1 Definition and characteristics of labor export

1.1.1.1 How to define labor export?

Labor export means to sell labor to foreign markets As labor always goes withlaborers, in order to export labor, the first thing that needs to be done is to sendlaborers abroad to enable them to sell labor to foreign employers Vietnam does nothave a Law on Labor Export but has adopted a Law on Vietnamese laborers working

overseas In 2006 Vietnam adopted a Law on Vietnamese laborers going abroad towork on a contractual basis (which was ratified by the National Assembly of XIthLegislature on November 29, 2006 and came into effect in July 1, 2007) This Lawintroduced the concept of "sending laborers overseas to work" Pursuant to its Article

1, this Law governs the activities of “sending laborers overseas to work on acontractual basis; provides for the rights and obligations of laborers working overseas

on a contractual basis; rights and obligations of enterprises and non-profitorganizations sending laborers overseas to work on a contractual basis and of otherrelevant organizations and individuals

Labor export is defined as follows: Labor export, which in its essence is export

of goods being labor, means to send laborers overseas to work for a definite term on

a contractual basis or under an agreement entered into between relevant parties in accordance with the law of both sending and receiving countries in order to create physical and mental wealth to both employees and employers.

1.1.1.2 Characteristics of labor export

First, labor as an item of goods, subject matter of labor export

- With regard to the quality: The quality of labor as goods is reflected in terms

of skills, experiences, workmanship, durability and the endurance of an employee’slabor In assessing the quality of labor as a goods item, there are three factors thatneed to be taken into consideration including i) an employee’s health which depends

on one’s age, ii) his/her qualifications, skills, expertise and creativity and iii) his/herworking environment or workplace conditions

- With regard to the nature of labor as a goods item: As labor export is a form

of service exports, the quality of labor as a goods item cannot be determined throughthe quantitative criteria, and, on the contrary, must be assessed by using another set ofcriteria (including an employee’s responsiveness, experience, creativity as well ashis/her working, living and resting conditions overseas)

Second, characteristics of the labor export market

There exist a cooperation and also a competition between businesses and economicorganizations within a country which are authorized to send laborers to work overseas,and also among various labor-exporting countries It is more likely for a country thatpossesses a source of high quality and professional laborers and more diversified laborservices that can meet expectations of foreign employers to attract more contracts, spend

less on brokerage and generate more incomes for its laborers.

Third, characteristics of the relationship between various parties involved in labor export activities

From the first dimension being the international level of the relationship that

involves labor exporting and labor importing countries, the relationship between theparties involved in labor export activities is quite complicated because the partieshave to interact with laborers in both labor exporting and labor importing countries.This requires an adequate set of policies for import export and import is developed by

the two countries to ensure a balance of interest of all stakeholders The second dimension only relates to labor exporting countries only where labor export activities

give rise to a tripartite relation that involves employees, the State and labor exportingorganizations

Fourth, price nature of labor as labor as a goods item and limitations of its uses

This demonstrates the difference between exports of labor as a goods item andexports of ordinary merchandise The value of labor as a goods item consists of 3components (i) the value of subsistence materials necessary to reproduce labor ofemployees themselves, (ii) the value of subsistence materials necessary foremployees to feed their families, (iii) the costs of vocational training for employeesand the costs of meeting their spiritual and cultural needs

Labor export is a fixed-term activity and once the contract therefor is terminatedemployees are still able to sell their labor to the employers in need This is calledlabor re-export

Fifth, criteria for assessment of the labor export efficiency

The purpose of this Thesis is not to study the efficiency of labor export but theimpact of the world 2008 economic crisis on labor export in general and that ofVietnam in particular with an aim to come up with appropriate solutions to enhancelabor export at the post-crisis time As labor export targets at a type of goods which ishuman labor, its efficiency should be viewed from perspectives of economic andsocial efficiency More specifically, economic efficiency of labor export will beassessed using economic criteria which link to the benefits of stakeholders (includingemployees’ income either accrued or remitted to their families; turnover and profits

of labor exporting enterprises; labor export turnover; contributions to the State budgetfrom labor export activities)

1.1.2 Forms of labor export

1.1.2.1 Pursuant to the basis of their arising: labor exports are divided into 5 categories

including labor export on an agreement basis, labor export under contract, labor export inthe model of association, labor export under an order of labor exporting enterprises andlabor export under a contract for refresher or internship

1.1.2.2 Pursuant to the quality of labor as a goods item:

- Export of simple labor is the form that involves untrained laborers with low

qualifications, cheap prices and bad quality

- Export of trained labor means a form of exporting laborers who have been

trained at vocational training schools There is a tendency of increased demand in theinternational labor market for this form of labor export

- Export of highly qualified laborers is a form of exporting only experts,

scientists, technicians etc

1.1.2.3 Pursuant to the movement of labor as a goods item:

- Direct labor export means labor immigrates into another country or is sent

overseas to work for a definite term

- On-the-spot labor export means laborers live in their own countries but work

for foreign enterprises or economic organizations employees in the country

Labor export in Vietnam currently takes place in the following forms:

- Contracts for sending laborers to work overseas entered into with enterprisesauthorized to provide services of sending laborers overseas to work

- Contracts for sending laborers to work overseas entered into with bid-winning

or contracting enterprises or outbound investment organizations and or individualsengaged in sending laborers to work overseas;

- Contracts for sending laborers to work overseas in the form of refreshercourses entered into with enterprises licensed to send laborers to work under the form

of internship or refresher;

- Private contracts directly entered into between an individual and an overseas employers

1.1.3 Role and impact of labor export

1.1.3.1 For labor exporting countries

- Labor export plays an important role in job creation and implementation of welfare policies in favor of laborers: A majority of laborers sent overseas to work

comes from rural areas, or is being unemployed or underemployed

- Labor export has impact on the shift of the economic structure: Via labor

export, a group of laborers have improved their skills as a result of working overseas,making contribution to setting up a team of workers with industrial style who complywith labor rules, have expertise and working skills, foreign language capacity… Oncethis group of laborers repatriates, they shall better meet investors’ requirements andgradually will make a great contribution to a more logical movement of the economicstructure

- Labor export helps to improve the quality of a part of human resources: Via

labor export, laborers working in plants and enterprises would have modernizedindustrial style, be familiar with science-based production management methods andget better access to the external world Thus, after the time working overseas, theirskills and sense of compliance with labor rules become better, working style becomesmore professional and foreign language improves This makes a great contribution toimproving a part of laborers’ resources both in the receiving and home countries

- Labor export promotes external economic relationships: labor export is

playing greater and greater role as a catalyst of the international economic integrationand international labor division External economic relationships have paved the wayfor expanding labor export Labor export also serves as a bridge among culturalexchange activities, enhances mutual understanding between nations and improvespolitical standing and reputation of the labor exporting countries in the internationalarena

The important role of labor export in labor exporting countries is undeniable

However, labor export also has negative impacts on the socio-economic life of a

labor exporting country as follows:

- Labor Export might cause partial shortage of local labor In some labor

exporting countries, labor export may cause temporary scarcity in the areas that needsimple or skilled labor particularly in the countries or sectors with high economicgrowth rate or increased labor export without a plan for sustainable development ofhuman resources The phenomenon of "brain drain" seems to increase as a result of arise in exports of highly qualified laborers causing many difficulties for laborexporting countries, particularly the developing countries which are undergoing thecause of national industrialization and modernization

- Labor export might have adverse impact on social safety and security: When

a laborer is sent overseas to work, in addition to the positive aspects, they are alsoexposed to negative practices of the receiving country They repatriate together withthese bad habits and will consequently have a negative impact on the social life athome The foreign currency amount remitted by them sometimes is not usedeffectively leading to social disorders

- Labor export might increase criminals: Due to a loose management of labor

export and given the low target of labor export while the applicants for overseasemployment is increasing, some labor exporting enterprises have committedimproper actions such as bribery, corruption or frauds, and in some cases laborersmust to pay excessive prices, through export labor intermediaries, to be able to work

in a high-income market/country This also contributes to the increases in crimes andaffects the social security and safety

1.1.3.2 For labor importing countries

- Labor import helps to address the labor shortage issue of the labor importing country: Labor import has improved the situation of labor scarcity in the

receiving country, increased labor supply, released the supply-demand stress in thelabor market particularly for hard jobs which domestic laborers do not want to do orare not used to

- Labor import saves the initial costs of investments in laborers: Without

labor import, a labor importing country would have to expend on nurturing andtraining domestic workers until they reach the labor age Import of skilled workershelps to save a significant amount of training costs for the importing country

- Labor import contributes to the economic growth and social accumulation:

Imported laborers, while being engaged in production and consumption at the labor

importing country, make a certain contribution to the socio-economic development of thehost country via their payments of income tax, social insurance, health insurance and fees ofother types etc which results in an increase in the social accumulation of the host country

In addition to the above mentioned benefits of labor import to the importingcountry, labor import also makes the importing country exposed to the followingdisadvantages:

- Labor import may cause delays in the application of scientific advances and technological renovations: As employers too much rely on the low-cost imported

unskilled labor, they pay little attention to the application of scientific and technical

advances to production practices or to upgrading of working tools and appliancesresulting in them being stagnant in making reforms and adversely affecting themodernization process of the labor importing country as a whole.

- Labor import might lead to the over-dependence of a number of industries

on imported labor: Actually, import labor only works for a short time, normally

between 3 and 5 years, therefore the number and qualifications of this labor sourceare unstable, not to mention labor import very much depends on the Governmentimmigration policy and the socio-political situation etc Therefore, this over-dependence on import labor, in the long run, might have a negative impact on someindustries of the labor importing countries

- Labor import creates a community of immigrant-workers, which introduces

both good and bad to the lifestyle and traditions of the domestic communities Thisaffects the social order and security or might even cause loss of communitysolidarity More seriously, this can all lead to discrimination against nations/racesand undermine the relationship and friendship between nations

1.1.4 Factors affecting labor export

1.1.4.1 Demand for labor export: Demand for labor export in some countries is

influenced by the needs of the labor market of the importing country, income, livingand working conditions of laborers overseas, or by the labor import policy of the laborimporting countries There are also other factors such as religion, traditions and custom

as well as morality that have influence on demand for labor When the demand forimport labor increases it would create a great dynamic for the growth of labor exportactivities When domestic production in a labor importing country is reduced andunemployment rates gets higher, the demand for import labor will fall and as a resultlabor export activities will have to face with market-related difficulties

1.1.4.2 Supply of labor export: This depends on the quantity and quality of the laborers

ready to take part in labor export, and the labor export policy of each country After theworld 2008 economic crisis, its labor market is going through a screening whereby thequality of laborers engaged in labor export shall decide the supply of labor export

1.1.4.3 Institutional, organizational and managerial arrangements for labor export activities: These factors are influenced by the policy, instruction and laws of

both labor exporting and labor importing countries

1.2 THE WORLD 2008 ECONOMIC CRISIS AND ITS IMPLICATIONS TO LABOUR EXPORT ACTIVITIES

1.2.1 Definition, nature and cause of the world 2008 economic crisis

1.2.1.1 Definition of an economic crisis: A world economic crisis, also known as

the global economic crisis, is the serious decline of economic activities of which thefirst manifestation is the rapid economic downturn that takes place on aunrecoverable scale and cycles and which negatively sways the economy of multiplenations and the whole world

1.2.1.2 Nature of the world 2008 economic crisis

First, it is triggered by the financial and monetary crisis in the United States Secondly, the US financial crisis has spread to most of European and other countries Thirdly, the US financial crisis has led to an economic crisis on a global scale 1.2.1.3 Causes of the world economic crisis in 2008

First, potentially high risk implicit in the government easy policy allowing

commercial banks to conduct multiple operations

Secondly, lack of control of the US Government over the operation of new financial tools Thirdly, the US Government policy that allows speculative operations expand

and adversely affect the securities market

Fourthly, the bubble in the real estate market and loss of control thereof by the

U.S government.

As seen from the above analysis, the world economic crisis in 2008 was theoutcome of a uncontrolled race for profits that pushed the economy into recession andbrought about a new economic crisis being the world 2008 economic crisis

1.2.2 Implications of the world economic crisis in 2008 to labor export

1.2.2.1 Negative impact of the world economic crisis in 2008 on labor export.

1.2.2.2 The world economic crisis in 2008 changes the supply of labor export 1.2.2.3 The world economic crisis in 2008 forces the labor exporting countries reconsider their mechanisms of organization, administration and management of labor export activities

1.2.2.4 The world economic crisis in 2008 causes a disorder in the labor export