Businesses grumble as Vietnam's new foreign labor rules begin to bite

By An Dien, Thanh Nien News

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The increased involvement of local authorities could exacerbate bureaucratic nightmares and may fuel corruption, company execs say

Foreign workers at the healthcare company B.Braun Vietnam. Experts say the most glaring problem in a new decree on foreign labor is that it requires a foreign work permit applicant to have both a four-year university degree in an exactly relevant subject, and five years' experience in the field. The five-year experience requirement would deter several major foreign investment projects that need specially trained staff and require a level of skill not immediately available in Vietnam, they say. Photo by Ngoc Thang

Vietnam's recent tightening of regulations on foreign workers, which involves even more red tape, is exacting a toll on a corporate sector already dogged by a lingering human resource crisis.

Like a 2011 decree on foreign labor, a new one that took effect on November 1 continues to make it incumbent on employers to prove that they require foreign workers for jobs that Vietnamese simply cannot fill.

But the new decree also reduces the validity of work permits for a broad category of foreign workers from three to two years, a provision that could aggravate the shortage of skilled workers already felt acutely by both foreign and local companies, company executives and analysts point out.


They say the most glaring problem is that the decree requires a foreign work permit applicant to have both a four-year university degree in an exactly relevant subject, and five years' experience in the field.

"[The requirement] rules out a large number of valuable engineering and other technical personnel from countries that have three-year programs in vocational training for these positions," Fred Burke, Ho Chi Minh City-based managing director of the law firm Baker & McKenzie (Vietnam) Ltd., told Vietweek.

Companies from South Korea, a leading foreign investor in Vietnam, have apparently been hit hard by this requirement.

At a recent meeting between the government and the Vietnam Business Forum - a consortium of international and local business associations and chambers of commerce - Kim Jung In, chairman of the Korea Chamber of Business in Vietnam, said the new rules would make it "impossible" for foreign graduates and professionals to obtain work permits. He dismissed the new decree as "too strict" and "unnecessary".

Currently, in South Korea there are 650 technical high schools that have been established in various sectors including textiles, electronics, information technology (IT), design, automobiles, or computers to train students to develop an expertise in their chosen field.

"Although graduates from these high schools have a high-level of expertise due to their three-year technical training, Korean companies in Vietnam are having a problem hiring these experts due to Vietnam's foreign work permit conditions," Kim said.

Foreign firms lament that Vietnam's poorly trained graduates have left them struggling to find enough recruits. It is in this context that they are asking the government to relax the work permit rules so that foreign workers would only need to have either a bachelor degree or five years of work experience.

Experts say the five-year experience requirement would also deter several major foreign investment projects that need specially trained staff and require a level of skill not immediately available in Vietnam.

"English teachers, for example, may graduate from a four-year university program but not necessarily have five years of experience teaching English," Burke said.

"We have also seen cases where artisans such as furniture stain applicators do not have any particular technical degree but have many years of work experience in the same industry, which is now moving into Vietnam," he said. "Without these experts, the industry cannot move into Vietnam and Vietnam cannot benefit from the new jobs it creates."

A survey conducted this year by the Vietnam Business Forum that included over 83 companies from foreign business associations and chambers of commerce confirmed that technical expertise and the dearth of qualified Vietnamese candidates are the two main reasons companies employ foreign nationals in Vietnam.

A recent World Bank report also pointed to a "shortage of workers with the right skills" that has troubled the corporate sector.

"The skills gap is particularly acute among applicants for jobs in technical, professional and managerial positions, while a shortage in applicants is common among more elementary occupations," the report said.

No turning back

Foreign companies have urged the government to extend the validity of work permits to five years, arguing that more time is needed to complete the transfer of skills and knowledge.

But Vietnamese authorities have pointed to Singapore and Malaysia, which also grant two-year work permits, to defend the legitimacy of their rules.

"Vietnam's current two-year validity period is therefore acceptable," Doan Mau Diep, deputy labor minister, said at a meeting in June with the Vietnam Business Forum.

But what Vietnam is apparently glossing over is that while it applies almost the same requirements for a broad category of foreign workers whatever the type of company, job, or industry, both Singapore and Malaysia have some broad categories of work permits that distinguish between "workers", "technicians", "managers" and "professionals".

The red tape in those countries is not nearly as arduous as in Vietnam as well.

While the average timeframe to prepare required documents to apply for a work permit is between two to three months in Vietnam, it takes applicants less than one month to do so in Singapore and less than two months in Malaysia. While foreign workers have to apply manually in Vietnam, they can do it online in both Singapore and Malaysia.

Perhaps the most striking difference is that while the work permit applications must get approval at both the provincial and national levels in Vietnam, Singapore and Malaysia only need central government approval.

Another major administrative hurdle facing investors and businesses in Vietnam is a new requirement that employers will have to get approval from the chairman of provincial people's committees, the local governments, to hire foreign workers in their respective localities. They then also have to complete all the formalities required by the labor ministry and other agencies as before.

China-ed out of a job

Many experts have said there is currently no hope in sight for Vietnam to ease its grip on foreign labor management.

In a country where a growing backlash against an influx of illegal foreign workers has shown no sign of letup, lawmakers have repeatedly urged the government to tighten controls on foreign workers.

Lawmakers, local authorities, and experts lament that unlicensed and unskilled foreign workers, particularly Chinese, have stolen jobs, stayed on illegally, and harassed locals. Media stories of medical clinics in Ho Chi Minh City and Hanoi being fined for various violations - including the employment of unlicensed Chinese doctors or selling expired drugs - have also continued to surface.

There are thousands of illegal foreign workers at construction sites across Vietnam, according to a recent government report to the National Assembly, Vietnam's legislature. The report did not dwell on the nationalities of the "foreign workers" but pointed out that many of the construction projects are being implemented by Chinese contractors.

An increasing number of African nationals have also been caught overstaying their 15-day visa to find jobs in Vietnam or committing crimes like robberies and drug trading, it said.

By the end of 2012 there were 77,359 foreign workers, 31,330 of them without work permits, the labor ministry said. But authorities have not ruled out the possibility that the actual number of illegal foreign workers could be much higher.

At a house session last September, Nguyen Kim Khoa, chairman of the parliamentary committee on defense and security, urged lawmakers who are drafting the law on immigration and residence to spell out local authorities' responsibilities at the commune level to ensure better management of foreign workers in their localities

"The foreign labor issue is getting increasingly complicated," he said at the time.

"˜A complete nightmare'

It remains to be seen how much bearing the proposed mandate to manage foreign labor at the local level would have on businesses. But for those who are not targeted by the new decree, the collateral damage has already been done.

"It has been a complete nightmare for most companies since the new decree came out," Nicola Connolly, vice chairwoman of the European Chamber of Commerce (EuroCham) in Vietnam, told Vietweek.

Several provinces across Vietnam have stopped issuing working permits altogether as local governments are either unclear of the guidelines or balk at the considerable administrative burdens placed on them in administering the cumbersome procedure.

The involvement of the provincial people's committees would only add another level of administration as they are not experienced in the process of issuing work permits, Connolly said.

"[It] also can invite bribery to speed [up] the process."


A decree on managing foreign labor which took effect on November 1 and supplanted a 2011 one scraps a provision allowing foreign manual laborers to work for up to three months without a work permit. This privilege will henceforth be extended only to those who come to handle complicated technical or technological issues that are beyond the foreign experts already based in Vietnam.

It also enlarges the category of foreign workers exempt from obtaining a work permit. Those added to the category are teachers at foreign institutions sent to work in international schools in Vietnam managed by foreign agencies, volunteers, those with master's degrees and advising, teaching, or researching at Vietnamese tertiary or vocational institutions for a maximum of one month, and foreign workers who come here under international agreements to which state agencies are a signatory.

Earlier, the exemption had only applied to members or owners of limited liability companies, lawyers registered with the Ministry of Justice, those dispatched by foreign companies to work in their offices in Vietnam (in 11 designated sectors), heads of foreign representative offices, and project managers and individuals authorized by NGOs to work in Vietnam.

But while the decree enlarges the category of foreign workers exempt from obtaining a work permit, it also then burdens them with more red tape by requiring them to apply for a certificate saying they do not have to obtain one.


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