Vietnam's Next Economic Driver? Private and Foreign Education

Vietnam's Next Economic Driver? Private and Foreign Education

Thao Phuong, 28, IT engineer and an employee of Hanoi Posts Company, works on her laptop as a part-time e-trader selling fruit in Hanoi, in this May 2012 photo.

SourceHOANG DINH NAM/AFP/Getty

Why you should care

Families and private firms are increasingly driving the human resources communist Vietnam needs. 

Tung Pham wants to work in his country, Vietnam, but in an international firm that can pay him well. For that, his best bet isn’t his schooling in Vietnam, but the international affairs degree he has earned at George Washington University. To further bolster his chances, he now plans to return to the U.S. for a master’s degree. Vietnam shouldn’t complain.

For the better part of two decades now, Vietnam has experienced white-hot economic growth, attracting investment that once would have gone elsewhere. Riding on a low-wage and mostly low-skilled workforce, the country’s gross domestic product increased by 3,303 percent between 1990 and 2016, the fastest growth in Southeast Asia. That boom has enabled Vietnam to also emerge as a growing strategic player in the Indo-Pacific region, courted by countries like the U.S., India and Japan. But with the country’s economy moving up the value chain, its education system is failing to provide the skilled workforce needed for industry, spawning a challenge that threatens to derail Vietnam’s growth. It isn’t the communist state, but the private sector and individual families that are coming to the rescue.

University graduates in the country have the highest rates of unemployment, at 17 percent — far higher than the national unemployment rate of just over 2 percent. According to experts, that discrepancy is at least partially because of a skills gap. Students leaving higher education programs might have enough know-how for low-wage factory work, but not for the higher-paying jobs they’re chasing. Big tech employers in cities like Hanoi and Ho Chi Minh City, especially foreign companies, are making the calls. And they aren’t calling graduates. As salaries rise, so too do the prospects of more low-skilled jobs leaving the country — for instance, in manufacturing.

The responsibility of enhancing knowledge and skills rests on each young person.

Thi Tuyet Tran, Institute for Employment Research, Germany

But Vietnam’s youth, their families and industry aren’t sitting back. Poor English skills are often a challenge in seeking well-paid jobs, so parents are sending their children to private language centers to supplement their formal education. While some productivity gap between employer needs and the skill set of the available workforce is common across the world, Vietnam also has a peculiar challenge, suggests Thi Tuyet Tran, a researcher at the Institute for Employment Research in Germany. Students are taught from a young age to be obedient and aren’t encouraged enough to think critically, she says. That has led to a dearth of the outside-the-box thinking employers rely on. To counter that challenge, graduates are attending private training centers on information technology or other skills.

Private companies are offering solutions. The largest IT service company in Vietnam, the Corporation for Financing and Promoting Technology, opened the country’s first corporate university in 2006 and now enrolls around 17,000 students. When Intel opened a factory in Vietnam, it found only 90 applicants out of 2,000 were able to score 60 percent on its employment exam. Half of those lacked the requisite English. The company started to train workers in-house, has supported education initiatives and has helped train thousands of teachers in the country. The Higher Engineering Education Alliance Program, founded by Intel, Arizona State University and the United States Agency for International Development (USAID), has worked since 2010 to increase international-standard engineering schools in Vietnam. And more and more Vietnamese — like Tung — are choosing universities overseas.

“The responsibility of enhancing knowledge and skills rests on each young person,” says Thi, of the Institute for Employment Research.

The looming crisis, and Vietnam’s efforts to sidestep it, are both closely linked to the country’s economic journey. Much of Vietnam’s increase in economic productivity so far has relied on foreign investment. The Vietnam Institute of Economics estimates investment capital increased 9 percent per year from 2011 to 2017. But while Vietnam’s average labor productivity crept up to $4,259 in 2017 — 6 percent higher than the previous year — according to the government’s General Statistics Office, it still lags behind most other countries in the region. Vietnam had only 7 percent of Singapore’s labor productivity and 87.4 percent of that in Laos.

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A technician in a server room at Glass Egg Digital Media, a game developer and art production facility in Ho Chi Minh City in February 2015.

Source Justin Mott/The New York Times/Redux

Although public spending on education is more than 6 percent of GDP, significantly higher than what most major developing nations spend, the country’s graduates form what Ninh Nguyen, an English professor at Vietnam National University, calls a pyramid of employability. The best students at the top of the pyramid will always find good-paying jobs in their field of study. But the majority will not have the right skills when they graduate, Ninh says.

One reason, she believes, is that most university curriculum is still very conventional and rigid. Hoang Minh Phuong, a Hanoi student, agrees. She says the curriculum is too focused on the theoretical — including a heavy dose of Communist Party history and ideology. Now, as a backup plan, she’s learning embroidery at a trade village.

Vietnam’s economic growth, and the new wealth that has brought into the country, has also opened up education opportunities for the country’s millennials that simply didn’t exist for their parents’ generation. Many more can afford to travel abroad for higher studies. In 2016, 130,000 went abroad to study, an increase of 15 percent from the previous year (Japan was the most popular destination, attracting more than 29 percent of students). Yet, when these students return, they bring with them benefits for Vietnam, launching a host of startups that count on local connections with a fresh, global outlook.

For the country, these efforts at negating the limitations of Vietnam’s education system are critical. Sure, the country’s economy has grown at an average of 5 percent since 1990, an impressive feat. But a 2016 World Bank report says the country needs an annual GDP per capita growth rate of 7 percent for the next 20 years if it’s going to break into upper-middle-income territory by 2035. And that seems unlikely without upping the productivity of domestic workers.

In previous decades, such a shift would have needed the Communist Party’s leadership. Now, it’s happening almost without the party.

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