Companies struggle to limit layoffs

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  Workers arrange steel structures at a construction site in Hanoi. Construction is one of many industries that have seen labor demand fall this year. Photo: Reuters

Despite doing all they can to retain workers, firms throughout Vietnam are decreasing production and either downsizing workforces or drastically reducing working hours due to lowered demand from both domestic and overseas markets.

"We have sought ways to keep on as many workers as possible, but orders from foreign customers have plummeted by over 20 percent over the past few months and cutting employees has been unavoidable," said Nguyen Ngoc Quang, director of a garment firm in Hanoi.

Quang said his firm has discharged 20 percent of its workers, after previously reducing their hours.

"Our main markets, the US and EU, have not showed signs of recovery from the economic slowdown. I don't think the orders from the customers will rebound anytime soon. We may have to continue to lay off workers," he said.

More than 26,300 companies shut down or halted operations in the first six months of this year, up 5.4 percent from the same period last year, according to the General Statistics Office. Of the closures, 4,100 companies have shut down permanently, a year-on-year increase of 35.4 percent.

Tran Anh Tuan, vice director of the Ho Chi Minh City Center for Forecasting Manpower Needs and Labor Market Information, said that many firms, especially those in labor-intensive industries such as garments, footwear and seafood have had to narrow or temporarily cease production due to lower demand from foreign customers.

Vietnam's bigger corporations have had to lay off workers as well.

Bui Van Khich, vice general director of state-owned coal mining company Vinacomin, said the coal sector, due to lower sales in both domestic and foreign markets, would only be able to keep 50,000 out of its 138,000 current employees.

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"We are planning to reduce output by 3-4 million tons of coal in the third quarter of this year. This means we have to cut workers," he said.

But those workers who survived the layoffs now only work 20 days a month, as opposed to 26 previously.

The shipping industry has seen similar difficulties, where over 18,500 are now underemployed, local media reported recently. More than half of the laborers work for troubled shipbuilder Vinashin or state shipper Vinalines.

Although the Vietnam Steel Corporation has not cut employees, it has reduced their working hours.

A company executive said that while none of its 41 subsidiaries have stopped production, "some companies are only operating 10 days a month."

Nguyen Thi Lan Huong, head of the Labor and Social Science Institute under the Ministry of Labor, War Invalids and Social Affairs, said unemployment has risen over the past few months, with firms not only cutting manual laborers, but white-collar ones as well.

"Many experts in their fields have registered to receive unemployment benefits as foreign invested firms have narrowed their business in Vietnam," she said.

Statistics from the labor ministry show that there were 175,000 new claims for unemployment benefits in the first five months alone.

Meanwhile, the demand for workers is down due to the fact that only 5,900 new companies were established in the first half of the year, according to the General Statistics Office in Hanoi.

Labor demand within 44 of 59 surveyed industries, including architecture, real estate, construction and accounting, decreased in the first half of this year, according to a recent survey by VietnamWorks, an online recruitment site.

Vietnam's unemployment rate rose to 2.29 percent in the first six months compared to 2.22 percent a year ago, the General Statistics Office said, warning that more jobs would be cut if the economic downturn worsens.

"The jobless rate in Vietnam now is still low," said the office's director Do Thuc. He said that the rate climbed as high as 2.9 percent under similar tough conditions in 2009.

Thuc said a person is only considered jobless if they do not have any source of income during the seven day period when the survey is conducted, adding that anyone who has another source of income, no matter how paltry or temporary, is not counted.

According to the office, 31.7 percent of companies in Vietnam plan to downsize.

A report by the Economic Committee of the National Assembly issued last week said that it is difficult to accurately track changes within the labor market due to the lack of figures on workers' incomes. The report also noted that many firms try to keep employees on the payroll as long as possible to avoid rehiring costs when the economy recovers.

Additionally, unemployment benefits only provide limited coverage and therefore the majority of workers in Vietnam avoid becoming completely out of work, often turning to "unofficial" labor markets, where working conditions are worse and incomes are lower.

"We forecast the high unemployment months ago, when the economy started to slow down," said Vu Trung Chinh, head of the Hanoi Job Center.

"Many firms, hurt by higher production costs and lower sales, have narrowed production and reduced their workforce. Thus, the unemployment number rises, while fewer jobs are created," he said.

The center has received 1,500 applications for unemployment every month since early this year, twice as many as the same period last year, Chinh said.

And up to 30 percent of the recently unemployed are university graduates.

Vietnam's economy expanded 4.66 percent in the second quarter, following a 4 percent growth in the first quarter. Experts now do not expect growth to exceed 5 percent this year.

The labor ministry said it was seeking suggestions from provincial authorities in order to draft a plan to raise the minimum wage 25-38 percent by the start of 2013. However, some firms said that now is not the time for the government to increase the minimum wage because doing so would force them to cut more jobs.

The ministry said the plan may be delayed until mid-2013 since many businesses are still struggling.

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