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Oxfam Discussion Paper

The Social Impacts of the Global


Economic Crisis on Enterprises and
Workers in Vietnamese Industrial
Parks
A rapid assessment report

Nguyen Ngoc Anh (DEPOCEN) and Nguyen Thi Thu Phuong


(Center for Analysis and Forecasting Vietnam Academy of
Social Sciences)

For the Viet Nam Academy of Social Sciences, with support from
Oxfam GB and the World Bank

July 2010

For this study of the social impact of the global economic crisis on the
formal sector in Vietnam, interviews were carried out with four
enterprises and 23 workers at industrial parks near Ha Noi. Four key
findings have been extrapolated: businesses have been trying to retain
some production and skilled workforce despite lack of orders by a variety
of strategies; nonetheless there has been huge unemployment; those still
employed have reduced income and raised living costs; workers are
responding to this by: accepting lower-paid jobs, waiting for more
vacancies on the industrial parks, studying, or returning to their home
towns; loss of remittances for education is impacting workers and their
families, but the impact of home areas is otherwise low or unknown.

Oxfam Discussion Papers


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For more information, or to comment on this paper, email research@oxfam.org.uk
A. Impacts on enterprises in industrial parks1

1. Background information
The research for this section was conducted in early 2009 at two industrial parks near
Hanoi, Thang Long Industrial Park and Quang Minh Industrial Park. Originally, the
research was planned to focus only on Thang Long Industrial Park. However, the
response rate from enterprises located in Thang Long Industrial Park was unusually low.
Only two enterprises out of nearly 50 contacted agreed to meet with the researchers,
although the research team made considerable efforts to increase the response rate.2 This
may be explained by the difficult situation that enterprises are currently facing. They
hesitate to disclose information at this sensitive time. Therefore, the research team
decided to conduct further interviews with enterprise owners at a similar park, Quang
Minh Industrial Park. These interviews were only possible thanks to personal contacts
and connections. Quang Minh is a good substitute for Thang Long Industrial Park for
several reasons. Firstly, like Thang Long Park, Quang Minh Park mainly hosts investors
from Japan. Secondly, Quang Minh Industrial Park is located quite close to Thang Long
Industrial Park (they are on the same road from Noi Bai airport to Hanoi city centre, only
15 minutes drive away from each other). In total, the research teams conducted four
interviews with enterprise owners, two in Thang Long Industrial Park and two in Quang
Minh Industrial Park.

Brief overview of Thang Long Industrial Park


Thang Long Industrial Park was established in 1997 by Sumitomo Corporation in a joint
venture with a local partner, Dong Anh Mechanic Company. The park is located in Dong
Anh district, just across the Red River from the centre of Hanoi. The location is
considered by investors as ideal as it is situated between Noi Bai airport and the centre of
Hanoi. The park is considered one of the biggest and most successful in the north of
Vietnam. In total, there are 85 investors (tenants) in the Park, of which 67 are
manufacturing factories, and the remainder are offices. The park houses many big names
such as Canon and Yamaha. The majority of investors are export-oriented firms.

Brief overview of Quang Minh Industrial Park


Quang Minh Industrial Park was established in 2001, and is one of the seven biggest
industrial parks in Viet Nam. The park is located in Me Linh district (formerly part of
Vinh Phuc province). Similarly to Thang Long Park, the location of Quang Minh IP is
considered by investors as ideal as it is situated between Noi Bai airport and the centre of
Hanoi. The park hosts both foreign direct investors (FDIs) and domestic investors whose
production is mainly for the export market.

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2. Major findings3
The impact of the economic crisis
To varying degrees, almost all FDI enterprises, from hi-tech to labour intensive, in the
two industrial parks are being affected by the economic crisis. There is evidence that
labour-intensive enterprises are more likely to be affected. The economic crisis has hit
investors in the parks quite hard. Most of the factories have cut back their production,
only one or two being able to maintain their production levels. With the economic crisis
unfolding since November/December 2008, the production of investors in the Thang-
Long and Quang Minh industrial parks has contracted significantly, especially for
electronics and automobile manufacturers, and other sub-contractors, due to the fact that
they are export-oriented manufacturers. For example, the severe situation in Thang Long
Industrial Park can be seen in the fact that industrial water usage within the park has
decreased by 3040%.4
Although no mass cancellation of orders has taken place, there is evidence that the
number of orders has dropped significantly. As a result, the sales and production of
these FDI enterprises has dropped significantly, in some cases sales decreasing by 30
40% (Nissin), and even 50% (Inoac). The cancellations of orders and drop in production
and sales are due to a significant drop in export demand, as these companies are set up
in the industrial parks for the purpose of producing for the export market.5
In 2008, the demand for labour was very high and it was difficult to recruit enough
employees. Vacancies were abundant and employees could shop around for good jobs.
However, the situation has changed dramatically since November 2008. The demand for
labour is virtually zero, there are no vacancies to be found.
Although no direct evidence of financial strain was reported during the interviews, it
seems that investors in the Thang Long Park have had to plan a financing scheme to deal
with the current financial difficulties. In particular, the Thang Long Management Board
(an FDI firm) has had to re-schedule rent payment for many tenants (from advance
payment to monthly payment).

Coping strategies
In the face of the economic recession, all the enterprises interviewed are cutting back
their costs using various strategies.

Cost-saving
The companies interviewed were found to have cut costs by intensifying their cost
savings such as cutting back on electricity, office materials and labour cost (examples
include no over-time payments, reducing the number of work shifts, paying 70% wages
for days off and encouraging workers to take holidays).

Laying off employees


As most of the enterprises in the two industrial parks were using temporary and seasonal
workers, these workers were the first to be made redundant. As these workers are
employed on short-term contracts, the employers tend to let them go once their contracts
expire.
A representative of the developer (landlord) of Thang Long Industrial Park says that
among 50 000 workers in TLIP, 3 000 have lost their jobs since late 2008; and the current
demand for new workers is reaching zero. However, it seems that a much higher number
of jobs in TLIP have been lost in reality, according to our interviews with workers and
some sources from mass media.

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The FDI enterprises in TLIP prefer a workers voluntary resignation rather than a
redundancy in downsizing, as redundancies need to follow a strict procedure
stipulated by the Labour Code and may affect the companys prestige. In fact, the
representative of the TLIP developer comments that none of the reported 3 000 workers
who have lost their jobs in the past several months were made redundant.
Regarding permanent workers who have often received training, the decision is more
difficult for the employers. They tend to keep key and important staff while encouraging
the less skilled to resign. The employers do not lay off their employees in a
straightforward manner. They instead encourage voluntary redundancy, whereby the
workers will submit their resignation in return for some benefits such as a lump-sum
payment equivalent to one or two months wages. Another factor is that the economic
down-turn occurred at the annual Tet holiday; this encouraged workers to hand in their
resignation to get the compensation money to go back home for Tet.
However, laying-off, especially for permanent employees, seems to be a difficult decision
for investors due to the cost of re-hiring and training later. As a result they have adopted
several tactics such as work-sharing schemes, encouraging employees to take long
holidays and paying 70% of wages for employees to stay at home for some time. At the
same time, to keep up the morale of the remaining employees, while still paying their
wages, they ask them employees to do such things as cleaning and maintaining the
factories.

Finding new customers/orders


One of the solutions often suggested is to find new customers and orders. In the face of
economic recession, companies now realise that they rely too much on orders from big
producers. Given the decreased number of orders, they are now attempting to switch to
other lines of products.

Stock-piling
Firms that produce mainly for export, in order to keep their employees expecting the
current economic recession to be over soon, have tried to maintain a minimum level of
production, and keep stock-piling.

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B. Impacts on workers in Thang Long industrial
park6

1. Characteristics of workers in Thang Long Industrial


Park who are they?
Most of the workers in Thang Long Industrial Park (IP) in Hanoi are migrant workers,
mainly from the northern provinces of Vinh Phuc, Son La, Nghe An, Bac Giang, Ninh
Binh, Phu Tho, Ha Tinh and Ha Tay. According to Vietnam Economics News (2009), 70% of
the total of 737 500 workers in IPs and EPZs are migrant workers. They are often from
households facing shortage of land or low income in rural areas.
Land policy since 1993 provides land for current household members at that time. No
more land is given due to births or taken due to deaths since 1993. This means that those
currently becoming adults face the risk of landlessness. Since the IP recruits labour from
18 to 24 years old only, most young workers cite landlessness as the first reason why they
migrated to the urban IP7 (Box 1).

Box 1 Landlessness led to migration for work in the IP


Female worker Nguyn Th H, from Phu Tho province comes from a family of five (parents
and two brothers) with only 4 sao of rice field (1 sao=360m2) and no livestock. She and her
elder brother are both migrant workers and only the youngest is now studying, due to
landlessness. Only her parents are now working on the field.

Most migrant workers have to rent a place to live. Not every enterprise has a dormitory
for migrant workers. Even migrant workers for big enterprises which have hostels felt
uncomfortable with the hostel regulations because they often work overtime and late
shifts. Two or three workers share a room of eight to ten square metres.
One characteristic of IP workers is their specific position in a production line. To
undertake a certain role in a mass production line, the worker is given a short training
period (maximum about 1 month for technical work and just 2 days for simple jobs). As
working in a production line requires different actions for each role, there are no big
differences in skills between newly-recruited and experienced workers. However, young
workers have an advantage in a working environment of high pressure for accuracy,
concentration, speed and productivity.
As a certain position in a production line may not require very high qualifications, most
of workers obtain only an upper secondary education.8 High school graduates are able to
find work after passing entrance tests of simple skills. Faced with rush orders and lack of
workers, enterprises will also recruit lower secondary graduates. Only technical
positions require higher education qualifications.
Shift working is a principal requirement for IP workers. Enterprises can divide
production into three shifts (e.g. 6 am2 pm, 2 pm10 pm, and 10 pm6am the next day)
or 2 shifts (e.g. day shift from 8 am to 8:30 :pm, and night shift from 8:30 pm to 8 am the
next day). According to the Labour Code, shift and overtime work paid at at least one
and a half times normal pay. Under high pressure of productivity and volume, shift
work and overtime for rush orders are very hard even for young workers.
Most of the workers are female.9 The proportion of women depends on the
characteristics of the work and products. In factories doing work such as electronics
assembly, women

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account for 90 per cent of the workers. On the other hand, male workers are the majority
in motorbike factories, or heavy and harmful jobs.
About 80% of workers are unmarried, said those interviewed.10 Many female workers
think of getting married after some years working in the IP. Some other workers over the
advantageous age of 1824 try to focus on hard work to earn money while their health is
good enough for the IP production environment. On the other hand, shift work of 12
hours a day is hard to combine with marriage and having children.
Migrant workers are characterized by relatively high social capital. Workers from the
same home town or living in the same hostel often support each other by such means as
informing each other about job opportunities, lending money, recommending well-paid
jobs, etc. When 6070% of labourers from the commune of origin migrate for work, the
base of information available from their network is huge, said a female worker.
Information from an IP worker from the same home town helped him to avoid paying
millions of dong to an employment agency, said a worker from Vinh Phuc province.
Workers do not highly value the trade unions role due to its irregular activities and poor
support in terms of job information and labour contracts.

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2. The economic crisis boom and IP workers
unemployment
The fourth quarter of 2008 is considered to have marked the peak of the laying-off of IP
workers due to the economic crisis. Many companies have cut jobs and made
redundancies since October 2008, leading to a sharp increase in numbers of laid-off
workers. The workers interviewed describe large numbers of workers crowding and
some even crying on the road in front of the IP entrance when thousands lost jobs in
November 2008.
The first quarter of 2009 has still seen redundancies on smaller scales. According to the
Thang Long IP Management Board, in the two months before lunar New Year 2009
alone, nearly 1 000 workers in the IP became jobless solely due to enterprises cutting jobs
(Viet Nam Express, 2009) (Box 2).
The peak in cutting jobs before Tet seems to coincide with the business cycle in IPs when
1-year contracts of workers come to an end. Annually, enterprises start new recruitment
after the Tet holiday. Then, before the lunar New Year (Tet holiday), many of workers
who had completed their 1-year contracts were informed their labour contracts would
not be extended.

Box 2 Nearly 20% of all workers laid off in Thang Long IP


Panasonic announces it will cut 500 jobs in its optical disk factory in the first wave. Nissei
Company encourages workers to terminate their contracts due to the lack of orders and gets
1 600 to leave before Tet. Canon cuts 1 200 jobs. Sumimoto makes 1 500 and 600 workers
redundant in December 2008 and after Tet, respectively.
Nguyen Phu Diep, head of the Labour Management Department in Hanoi IPs and EPZs,
says that 19 enterprises in Hanoi IPs and EPZs have cut 4 300 job and that about 20% of all
workers, equivalent to 10 000 workers in Thang Long IP, are estimated to be jobless this
coming year (Viet Nam Express, 2/2009).

Worker reduction in production lines also results in redundancies in the dependant


services group. The cooking group is to cut 30% of jobs.
The scale of redundancies depends on enterprise scale; big companies often make a huge
cuts in the number of workers. For instance, enterprises can reduce from 6 000 to 1 000,
or 15 000 to 10 000, and 1 000 to 800 workers, but in enterprises with about 600 workers,
the number remains constant with reduced workload or temporary rotational days off.
In addition, cuts seem to be characterized by products. Enterprises which produce
household commodities (knives, scissors, etc.) do not downsize workers but reduce
overtime because of diminished orders. Electronics assembly companies seem to face
more redundancies. This can also depend on the market where the product is sold.
Bigger cuts take place USmarket-oriented enterprises than those selling in Japan or
developing countries.
In addition to outright redundancies, enterprises have offered workers 6070 per cent of
their salaries for temporary rotational days off since Tet/February 2009. They feared that
they would be unable to recruit sufficiently skilled workers when the economy
recovered. The Tet holiday allowance was longer than usual this year about 10 days.
Temporary days off can go up to 34 months. One enterprise announced 20 days off and
then 2 weeks following.
Enterprises tighten their regulations in order to increase the number of unplanned
dismissals. Any small harmless mistake against production regulations will immediately
lead to the worker being dismissed that day.

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3. The economic crisis Changes in IP workers jobs
and income
3.1. Current employees11
a. Changes of job and productivity
Workload in IP factories has experienced a huge drop. For instance, working time
decreases from 1012 hours before to about 4 hours per day, only 34 days per week,
with no working overtime or shifts or during the weekend (Saturday and Sunday).
Only some production lines remain in operation with low productivity (Box 3) where
workers take 1015 minutes rest after each 5 minutes working. In lines without any
operation, workers are arranged to do other things such as cleaning, storing, cutting
grass, etc. In case of no more odd jobs remaining to be done, workers are still in their
lines without doing anything.

Box 3 Workers in an electronics assembling enterprise: huge drop in


workload and productivity
60% of 5 000 workers in an electronics assembling enterprise were made redundant in 2
waves. The enterprise has three factories for TV remote controllers, chips and speakers
which have eight production lines each. After two large layings-off, there are now only about
100 workers in one line in the chip and speaker factories. Six out of eight production lines in
the remote controller factory are still operating with a 50% reduction in output, from 6 000
units per day per line from the beginning of the year until August 2008, to only 3000 units at
present. Workers were spending two working days per week standing still without operation
in the line in February 2009.

b. Changes in incomes
Enterprises, in difficult time, can seek for some cost saving solutions but cannot reduce
the basic salary of workers, for two reasons. Firstly, basic salaries in other sectors, and the
labour market in general, are rising. Secondly, the trend to increase salaries in other
enterprises in the IP as one way to attract workers, especially in times of rush orders,
itself means enterprises cannot cut salaries. Enterprises have to increase salaries or else
deal with worker strikes (Box 4).

Box 4 Striking for higher salaries


A female worker in Company X in North Thang Long IP joined two strikes in October and
November 2008 to request a higher salary on hearing of an increase in salary in other
companies. As a result, her basic salary has increased from 1 120 000 dong to 1 220 000
dong per month. However, she complained I am still dissatisfied, as it is lower than the rate
of 1 300 000 dong per month paid to my friends in other companies.

Thus, in order to attract workers, it is impossible to reduce salaries. In fact, basic salaries
have increased in 2008 and the growth rate is about eight per cent annually.
Despite a small increase in basic salary in 2008, workers income still fell sharply as their
incomes were mainly from working overtime and extra shifts. In the past, workers were
paid about 2 million dong per month for working 12 hours a day, 4 days a week. They
even could earn about 3 million dong per month if they worked more overtime in
Saturday and Sunday, got the best qualification rank of level A, and had management
allowances. In the economic crisis, no overtime or extra work due to lack of orders has
reduced their income to the basis salary alone, at about 1.3 million dong per month.
Moreover, if those workers receive 70% of their salary for rotational days off instead of
an outright lay-off, their income sits at only about 1 million dong per month. That

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income is unsustainable in the context of increasing prices and living costs in the IP (Box
5).

Box 5 Salary increase cannot catch up with increases in prices


Monthly rent for a room for two to three people has risen 60% from about 250 000 dong two
years ago to 400 000 dong in 2009. In 2008, workers earned only 100 000 dong extra in
their salary at 1 250 000 dong per month while they had to pay 30 000 dong more for rent,
and 10 000 more for electricity and water supply, and more for the increase in prices in daily
markets. Daily costs are estimated to have doubled when workers face increases from 10
000 to 20 000 dong for a meal and 5 000 to 10 000 dong for a kilo of rice. In general, all
workers interviewed have found that their salary increase cannot cover the price increases.

In addition to their basic salary, workers are often paid extra monthly allowances such as
200 000 dong for transport, 50 000 dong for regular attendance, overtime allowances, or
50 000 dong for accommodation. Team leaders can get extra management allowances per
month, e.g. 50 000 dong or even 300 000-500 000 dong for higher management level.
Workers can get 200 000 dong as hazard allowance for such jobs as thermal treatment.
By taking out social and healthcare insurance over a year, workers are granted a social
insurance book. Female workers can enjoy maternity benefits. However, most female
workers are unmarried and sometimes constrained by internal regulations to work over
six months before marriage.
The crisis has led to cuts in allowances. Rotational daysoff on request by the enterprise
precludes a regular attendance allowance. Enterprises announce they will drop some
allowances such as travel. At the same time, labour qualification ranking and cutting the
salaries of less-qualified workers is also a way to cut down workers income in the crisis.
c. Changes in labour contract terms
Newly recruited workers normally have a 3 month contract of training on the job first,
then a 1-year, and then 3-year or long-term contracts. In fact, most workers in North
Thang Long IP have contracts of 3 years as the longest duration due to the IPs recent
establishment.
Since October 2008, aware of coming difficulties, enterprises have only signed short-term
contracts of just 3 or 6 months. Labour screening can be seen in qualification ranking and
contract extension duration. In detail, in order to keep skilled workers, enterprises sign 1-
year contracts with them but shorter ones with less skilled workers. However,
enterprises can still fail to keep workers on 1-year contracts when they grow frustrated
with getting only 70% of their salaries for rotational days off instead of an outright
redundancy.

3.2. Laid-off workers12


a. Who becomes unemployed first?
Newly recruited workers become unemployed first when their contracts are not renewed
after completion of their 3-month contracts for training on the job. Second are some cases
of employees with some months remaining of their first 1-year contracts who voluntarily
submit proposals to terminate them due to worry about being dismissed first as being
newly recruited. The next voluntary leavers are workers who are ranked as the lowest
qualified labour in the production line and fear being dismissed without unemployment
support (Box 6).

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Box 6 Labour ranking or screening? Voluntary redundancy for
unemployment benefits upon fear of dismissal
Enterprise under Corporation X: in total 5 000 workers in this enterprise were announced to
be voluntarily unemployed due to the lack of orders. The enterprise provides unemployment
benefits for the first 2 000 volunteers. Therefore, worry about becoming jobless without
benefits hurries workers to submit proposals to end contracts.
Labour ranking in Company Y: Workers in a production line have to self-assess their
production performance from A as the best to B, C and D. Bonuses for the lunar new year of
2009 was 14 000 dong for level D, 500000 for level C, 1.4 million for level B, and 1.7 million
for level A, which have to account for 1, 10, 70 and 19% of the total workers, respectively.
Labour ranking in Company Z: Similarly, workers rank themselves into in level A (15% of the
total), level B (30%), level C (20%), and level D (the remaining 35%). Workers were given
130% of the lunar month salary as bonus for Tet 2008, but only one-month salary plus 500
000 dong for level A in Tet 2009 (300 000, and 150 000 dong for levels B and C respectively,
and nothing extra for D).

Labour ranking, on the one hand, is the basis for the Tet bonus. On the other hand, it
implies unqualified workers of levels C and D should fear unemployment without
benefits. Those workers consequently voluntarily submit proposals to end their contracts
to get unemployment benefits.
Additionally, a group of workers become jobless after a period in which they become
frustrated with rotational days off or too poorly-paid jobs. Despite their expectation of
having one or two months wages as unemployment benefit and getting new jobs with
higher salaries somewhere else, workers now struggle to find new jobs during the crisis.
Price increases and too low salaries led to the voluntary resignation of a female worker in
Company X as her monthly salary of 1 200 000 dong and 200 000 more in allowances fail
to cover her daily expenses.
Unplanned dismissal cases because of breaches of production regulations have risen in
the crisis period. Interviewees mentioned tightened supervision and even the smallest
mistakes such as being a few minutes late arriving or wearing a necklace leading to
certain dismissal. This never happened before the crisis.
b. No income
Due to regularly working overtime, most IP workers do not have the time and energy to
do second jobs. As a consequence, being laid off means the loss of their sole income for
daily expenses. They then depend on the unemployment benefit received from the
enterprise. This benefit is quite different among different enterprises. In most cases it was
one or two months salary or even less (Box 7). The maximum benefit is two months
salary, while unemployment has continued for about half of this year or even since the
middle of last year.

Box 7 Labour screening in Company M


Workers were ranked from the 1st group the worst to the 5th the best performance.
Then, without notice, three groups of workers were treated differently. The first group were
asked to renew their contracts for 1 year. The second group, the next day, were asked to
renew their contracts for 3 months. The day after that, the last group were requested to give
back their uniforms and equipment, end their contracts and leave the factory.

Among laid-off workers, those ranked pointing group 1 were dismissed without any
unemployment benefit, and workers in ranks 34 receive half a months salary
allowance for being jobless.
Laid-off workers cannot find income from secondary and new jobs, and so can only hang
around their hostel and watch the IP notice board for job opportunities.

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c. Support by enterprises
The Prime Minister has requested that a policy be drawn up to provide for laid-off
workers; however, it has not been specified by the Ministry of Labour, Invalids and
Social Affairs. According to the Labour Code, the employer has to pay unemployment
benefit of one months salary for each year worked. In practice, not all enterprises are
able to implement such a benefit.
In the crisis, enterprises face too many difficulties to provide high unemployment
benefits for laid-off workers. Enterprises apply different redundancy policies. They often
pay one months salary for voluntarily redundant workers. Some workers get two
months salary, where it can be clearly seen that if those workers are laid off before Tet
then one months salary is basically their Tet bonus. Workers recruited less than a year
ago get only half of a months salary for redundancy. No benefit is paid for workers
caught making mistakes or dismissed due to their low labour ranking or incompliance
with enterprises regulations.
There is also a lack of travel support for laid-off migrant workers. Relations with
enterprises come to an end when workers return their uniforms and working tools and
leave the factory. The last contact is only sending their last months salary and other
benefits via an ATM account at the end of the month, and handing over the social
insurance book six months later (where they have worked for over a year). In practice,
workers neither withdraw money from the social insurance book nor keep it to continue
the system participation. Most laid-off workers have only been recruited a few months
before and so lose the benefits of the contributions they have already made to the social
insurance scheme. They have not recognised the social insurance role.
d. Changes in job opportunities
Before the crisis, labour mobility was very high even within the IP. Workers could find
better jobs thanks to various recruitment announcements with specific salaries. For
instance, workers could leave their existing heavy and high-pressure job to apply for
better jobs with lighter workloads and higher incomes in other enterprises.
After Tet, the IP notice board was often covered fully by recruitment announcements for
hundreds of workers. But currently, there are few announcements for few positions, e.g.
four workers only. Ouright or temporarily redundant workers are faced with difficulties
finding new jobs in every enterprise. These workers are willing to apply for any suitable
position without consideration of salary.

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4. Impacts of the crisis on IP workers lives: How do
they cope?
4.1. Current employees
Cut down expenses, no savings and remittances for families
Workers are trying to save on all their expenses during the crisis (Box 8). The first item to
be cut down is meals. No breakfast, only one self-cooked meal with cheap vegetables and
tofu when a better one with meat or fish is served at work. This allows them to save
about 500 000 dong per month for meals. Then, they try to save spending on travel, and
mobile charges are lowered by sending textmessages instead of making phone calls.

Box 8 Workers living expenses


One female worker says that they can save almost nothing. Monthly, she usually pays about
200 000 dong for rent including water and electricity, 100 000 dong for sundries such as
shampoo, shower gel, soap, etc., 100,000 dong for going home three or four times a month,
150 000 dong for breakfast, and 300 000 dong for daily meals. In addition, she has the cost of
various spending on clothes, mobile phone bills, birthday and wedding presents, presents for
her family, guests, medicines in case of illness, etc. Unemployment currently forces her to
sleep over meals. She spends 5 000 dong on vegetables and tofu for some self-cooked
meals (one a day). She brings rice from home.

Another male worker spends about 160 000 dong monthly on rent, 100 000 dong for
meals when self-catering which is very rarely, otherwise 10 00015 000 for a meal at
restaurants, 150 000 dong for a birthday party, 50 000200 000 dong on a marriage
present depending on relationship, on tobacco, etc. They fall into debt, or also try to
reduce all spending.
In addition, some workers face the risk of rent increases when their old roommates
become unemployed and return to their home areas, and there is no one to share the rent
with. They may agree to move to a hostel further away to share the rent with others. In
case of illness, pregnancy or dependent children, workers also face the risk of health
expenses.
Before the crisis, workers earned enough income from overtime and extra shifts to save.
Older female workers proved themselves good thrift practitioners and saved more than
their juniors. They sent money to their families to save or in preparation for marriage.
Female workers could have monthly savings of about 500 000 to 800 000, or even 1
million dong. Some other workers can save three to four sums of 500 000600 000 dong
per year. However, it is also common to see that young workers without duties to
support or take care of the household are unaware of or unable to keep savings due to
their low salaries.
At the moment, it is impossible for workers to save. On the contrary, savings from the
past are now being spent while waiting for new jobs. No savings mean no remittances.
When workers cannot cut down their already tightened consumption any further, they
borrow from each other or from friends in their home towns. Instead of sending
remittances to their families, these workers even ask for money from family and friends
in their home areas. (Box 9).

Box 9 Money from home sent to workers waiting for jobs in IP


One female worker receives 70% of her salary for rotational days off instead of an outright
dismissal. She was discouraged by notification of having the next 20 days off. She asked for
money from her home in the rural areas as her 70% salary is not enough for her living
expense and the fee of over 200 000 dong for a vocational course.

12
Another male worker receiving 70 per cent of salary for rotational days off borrowed 500
000 dong from a friend in his home town when he was back home for rice last month. He
cannot borrow from his roommates or colleagues because they are in the same difficult
situation.
Staying at hostels and looking for jobs with psychological changes
Being laid off or on rotational days off, workers staying at hostels fall into lethargy and
depression. Under high pressure of dismissal and contract termination (Box 10) as well as
fear of no unemployment benefits, workers volunteer to stop working to get one or two
months salary as unemployment benefit.

Box 10 Enterprises become stricter in mistake catching in order to


dismiss workers
Workers are always under pressure, strain and fear of dismissal. The number of
redundancies can be higher resulting from more and more mistake catching, said some
workers.
A series of enterprises regulations became more severe to workers, such as 30 minutes for
rest in case of illness instead of 1 hour as before, or loss of regular attendance allowance
and half of daily salary for being 1 minute late. Moreover, dismissal can be forced on any
sick workers, workers who fail to work in the third shift, workers who have two to three days
off, workers with little rest sitting down during their alternative tasks such as grass cutting, or
unmarried workers with rings or earrings at work.

The more days they have to take off, the more frustrated workers are. They always worry
about being laid off for a half or full month. Due to the stress of being laid off and failure
to find new jobs, workers can do nothing except gossip with others.

Return to home towns in the short term to wait for job opportunities
Most workers, especially whose home towns are near to the IP, facing long periods of
days off and having high social capital for job information, intend to return to their home
towns to wait for job opportunities. Returning to their home towns can help workers to
save daily expenses when faced with inadequate incomes. It may be done after only two
or three days off if workers come from provinces surrounding Hanoi and travel back
does not cost them much. This strategy can be easily recognized by the fact that 5070%
of rooms in each hostel, or even 100%, are unlet.
Apart from the above three risk reduction strategies, a small percentage of workers who
already have experience and information from secondary jobs try to find other jobs
(despite lower salaries) in the IP (such as working in the kitchen) or outside as
mechanics, hair-dressers assistants, cooking, delivering meals, etc. Facing difficulties
finding this kind of work due to unclear information on day-off duration, workers with
70 per cent of their salaries for rotational days off can only hang around in their hostel,
watching the notice board without any plan for earning.
Some workers studying at the technical school spend more time on studying. The North
Thang Long Technical and Economics School is close to the IP and about 70 per cent of its
students are IP workers. The school has arranged favourable conditions for workers to
follow courses in the crisis period (Box 11).

Box 11 Support for IP workers who are studying at the Technical School
In early 2009, after a petition from 125 outright laid-off and rotational day-off workers, the
School encouraged these students to take advantages of days off for studying and began to
support them by certification for getting social loans for students (about 30% of total
students), three months extra time to pay educational fees, fee collection by appropriate
term, assessment results remaining applicable for one to two years not studying study, and
maintaining contacts with IP enterprises for job information.

13
Workers find it hard to work twelve hours and then another four and a half hours for classes
every day. They are afraid of informing their employers about their studies due to fear of
making managers worry about reduced productivity.

4.2. Redundant workers


The strategy of those who are unable to sustain life in the cities due to marriage and
children is also to return to their home towns and not migrate for work again. Avoiding
shift-based and overtime work, these workers accept returning to agricultural production
or find some paid employment in their home town. Meanwhile, most laid off workers
head back to the rural areas for a short time and search for jobs at the IP later.
Otherwise, redundant workers keep staying in hostels near to the IP and wait for jobs.
After the longer Tet holiday than previous years, they migrated back to the city. The Tet
holiday was usually from 30th December to 4th January of the lunar year; however, in
2009, workers came to enterprises later, on 10th January at the earliest. This is partly
due to enterprises policy of a longer holiday; also, as high social capital gave them
information about the rarity of recruiting announcements in the IP, they returned more
slowly to the city.
Workers fund their spending from redundancy benefits and savings or even borrowings
from relatives and friends while waiting for job opportunities. This group involves
young workers who would be given priority for recruitments in IP. The older workers
from 25 to 27 years old who have worked about three years in the IP find it hard to find
jobs there and so do not wait for jobs in the IP. Those staying and waiting for jobs cut
their daily expenses as much as possible, for instance by sleeping over meals, bringing
foodstuffs from home, asking to live in dormitories to reduce accommodation costs, and
simple meals.
If the situation becomes a long-term crisis without job opportunities, then they are
prepared to return to their home towns for paid employment with a lower salary or even
go back to agricultural production as the last resort.
Another strategy to deal with the situation is to study. A determined group of outright
unemployed and rotational day-off workers are making efforts to start intermediate
study and vocational training by getting loans or asking for money from home.
However, the monthly tuition fee of about 270 000 dong can be a burden on these
workers and their households, even when they get social loans for students of 800 000
dong per month. Because the interviewees had not yet finished the training course when
this report was written, it is not known whether those who started courses continued to
study or not, especially in such difficult circumstances.

14
5. Other consequences of unemployment in the
economic crisis
Impact on other household members
Most migrant workers are young and single and leave their home towns for non-
agricultural jobs in order to ease the burden on their families due to landlessness. They
therefore have little responsibility for household income when they are. As a result, the
impact of unemployment in the economic crisis through loss of remittances from migrant
workers seems to be low.
However, in cases where brothers or sisters migrated together and some did so for study,
then becoming outright unemployed or on rotational days off is a serious problem as
regards remittances to support their siblings education (Box 12). In other cases of
working and studying at the same time, redundant workers have to ask for money from
home for their daily expenses and fees for ongoing courses. As a consequence, the
financial burden on their family can become heavier.

Box 12 Failure to send money to support a sisters studies


Worker M is worried as she is unable to get money to pay for her sisters education. Her
family of two parents with seven children are small traders in their home town. The eldest
brother has his own family, two sisters worked at the IP (one unemployed), one younger is
studying on an intermediate course in Hanoi, and the three youngest are at primary and
secondary schools. Previously, M managed her income of about 2 million dong per month so
as to support her sisters education with 1 million dong. M has received 70 per cent of her
salary for rotational days off since December 2008 and can no longer send money for her
sister.

Having a brother in university and parents in his home town, another worker on days
off, K, sent money to his brother 3 times last year and one time this year (before Tet),
sending 400 000500 000 dong each time. He is now not only unable to send money for
his brother but has also borrowed 500 000 dong for daily expenses. He now spends 200
000 dong per month on rent, and 400 000 dong on meals (reduced from 1 million
previously).
Impacts on the destination become an issue when laid-off workers and rotational day-off
workers return to their home towns. The landlessness may be serious. As a result,
redundant wage labour is on the rise, since households having land will reduce use of
hired labour or availability of land for rent. The possible increase in redundant labour in
agricultural home towns and its impact remain as yet unstudied.
Impacts on areas surrounding the IP
The main impact on areas surrounding the IP is a reduction in services consumption by
IP migrant workers (Box 14). Most hostels have had to close 70 per cent of their rooms,
despite lower rent, because most workers have returned to their home towns.
Availability of other services for workers has declined proportionately.

Box 14 Sharp decrease in services for migrant workers


Vong La commune provided 60% of the land for the construction of Thang Long IP. Its little
remaining agricultural land is not cultivated due to poor internal irrigation. The local economic
structure was changed towards services for IP workers and labour for the IP (but only about
200 local people actually work in the IP). Services for IP workers contribute 25 per cent of
the GDP of the commune.

15
Villagers had already invested their land compensation of 65 million dong per sao (1
sao=360m2) into hostels for rent, food shops, and other services for IP workers. Providing
hostels for migrant workers become the main livelihood of 200 households in the
commune of over 1,500 households in total. The crisis happened exactly at a time of IP
expansion (Phase 3), when consequently many households had just invested a lot of
money in building hostels. These families suffered from the shock of a drop in demand
for rented accommodation and no income from new rooms.
In terms of local security, the IP surroundings have been often considered unsecure with
problems such as mobile phone and motorbike robbery, theft, etc., for a long time. This
situation has not worsened since the crisis started. However, a number of laid-off and
day-off workers hanging around the area and having low income pose a potential risk of
increasing crime.

16
Notes
1. Nguyen Ngoc Anh (DEPOCEN).
2. The team first sent an introduction letter from the World Bank and Oxfam, and
followed up by telephone calls.
3. In the context of the economic crisis and recession, Vietnams low wage level is
an important advantage. For this reason the managements will not cut wages or the
number of employees as much as they would in other countries. Cash-flow is very
important and wage is an important element of cash-flow. In some cases, the
management of parent companies may consider shifting production from other countries
to Vietnam.
4. This is also partly reflected in the fact that when the research team contacted
companies to arrange interviews, there were several occasions on which the factories
were temporary closed for some time during the month/week.
5. There are some consistent rumours that companies in certain sectors are not
affected by the economic recession, namely high-tech, pharmaceutical and health
equipment companies. An interviewed high-tech company informed us that their sales
were up 10% year on year, although the year before the number was 30%.
6. Nguyen Thi Thu Phuong (Center for Analysis and Forecasting Vietnam
Academy of Social Sciences), 2/2009.
The research team interviewed 18 female and 5 male workers in total, aged 1927 years
old, at their hostels near Thang Long Industrial Park. They also carried out three focus
group discussions (1 male and 2 female groups). Among the 18 female workers, 5 are
laid off, 7 are on rotational days off with 70% of salary, 5 were working when interviewed
but would afterwards be on rotational days off with 70% of salary, and 1 was then
working. Among them, 5 are students in a vocational school nearby the industrial park.
Among 5 male workers, 3 are currently working (2 in kitchens) and 2 are on rotational
days off with 60 and 70% of salary.
7. Of 16 workers who talked about the reasons for their migration, 9 mentioned
landlessness in their home town. 5 talked about social networks through which their
friends and relatives informed them about job opportunities after they completed
secondary education. Other reasons mentioned were low income from agriculture (2
workers) and other non-agriculture (2 workers).
8. Out of 18 workers interviewed, 16 finished upper secondary education, but only 2
obtained a college education.
9. According to Vietnam Economics Times (2009), there are 60 per cent women
among 737500 workers in IPs and EPZs in Hanoi.
10. Only 1 married worker among 23 interviewees.
11. Of 23 interviewees, 18 are current workers. However, 9 of them have rotational
days off and 5 more have been informed of coming rotational days off. Workers with
rotational days off only receive 6070% of their salary on those days. One worker was a
team leader who was going to quit the job because of maternity. She would then migrate
back to her home town as the IP working environment is not appropriate for a mother.
12. Five out of 23 interviewees are unemployed. Of those, one voluntarily left the job
to receive two months salary as benefit for unemployment. One left the job because the
income was too low. Three were refused extensions to their labour contracts and did not
mention unemployment benefit. None of them were dismissed because of breaches of
production regulations. These five redundant workers are staying at hostels close to the
IP and searching for new job opportunities.

17
Oxfam GB July 2010
This paper was written by Nguyen Ngoc Anh (DEPOCEN) and Nguyen Thi Thu Phuong (Center
for Analysis and Forecasting Vietnam Academy of Social Sciences). Oxfam acknowledges the
assistance of the Vietnam Academy of Social Sciences Center for Analysis and Forecasting and
World Bank Vietnam in its production.
The text may be used free of charge for the purposes of advocacy, campaigning, education, and
research, provided that the source is acknowledged in full. The copyright holder requests that all
such use be registered with them for impact assessment purposes. For copying in any other
circumstances, or for re-use in other publications, or for translation or adaptation, permission
must be secured and a fee may be charged. E-mail publish@oxfam.org.uk.
For further information on the issues raised in this paper please e-mail
advocacy@oxfaminternational.org.
The information in this publication is correct at the time of going to press.
Oxfam is a registered charity in England and Wales (no 202918) and Scotland (SC039042).
Oxfam GB is a member of Oxfam International.
www.oxfam.org

Oxfam is an international confederation of fourteen organizations working together in more than 100
countries to find lasting solutions to poverty and injustice: Oxfam America (www.oxfamamerica.org),
Oxfam Australia (www.oxfam.org.au), Oxfam-in-Belgium (www.oxfamsol.be), Oxfam Canada
(www.oxfam.ca), Oxfam France (www.oxfamfrance.org), Oxfam Germany (www.oxfam.de), Oxfam
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(www.intermonoxfam.org), Oxfam Ireland (www.oxfamireland.org), Oxfam Mexico
(www.oxfammexico.org), Oxfam New Zealand (www.oxfam.org.nz), Oxfam Novib
(www.oxfamnovib.nl), Oxfam Quebec (www.oxfam.qc.ca)

The following organizations are currently observer members of Oxfam, working towards full
affiliation:
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Please write to any of the agencies for further information, or visit www.oxfam.org. Email:
advocacy@oxfaminternational.org

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