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Vietnam employers seek minimum wage cap, while fabric exports boom

Employers call for maximum 12% rise in regional minimum wage payments in preparation for a tough 2015, while the country's fabric and clothing apparel exports grow 18% year-on-year throughout the first five months of 2014.

Photo: Minimum wage: bad for Vietnam’s garment industry? (Photo: Xinhua News Agency)
Minimum wage: bad for Vietnam's garment industry?

Employers' organisations in Vietnam have called on the government to keep any increase in the statutory minimum wage increase below 12% up until the end of 2015, with some even calling for a complete block on any such rise. The move comes with many businesses in the country anticipating another tough year, with recruitment and expansion likely to suffer.

The country minimum wage is currently set at between VND1.9-2.7 million (US$90-128) a month, depending on the exact regional location of the employer. According to National Wage Council regulations, any adjustments to the minimum wage have to be agreed between the representatives of employers, employees and the government.

At a recent meeting of the Vietnam Chamber of Commerce and Industry (VCCI) and the International Labour Organization in Vietnam, a number of employers' representatives recommended that any minimum wage increases remain in line with the growth in the Gross Domestic Product and overall inflation levels.

Regional minimum wages in the country grew by an average of 9.9 percent in 2010, 30.1 percent in 2012 and 15.2 percent in 2014. According to the VCCI, in 2010-2011 the growth rate matched that of the Consumer Price Index (CPI), but has been three times higher than CPI growth since 2012.

According to the VCCI, any minimum wage adjustments would largely affect the garment, footwear and fishery industries.

In other developments, Vietnam's exports of fabric and garments rose 18% year-on-year in the first five months of 2014, reaching US$7.505 billion, according to the latest government statistics.

With a total trade value of some $3.685 billion, the United States was the largest importer of Vietnamese fabric and apparel in the January-May 2014 period. Japan and South Korea came second and third, with exports valued at $965.373 million and $623.887 million, respectively.

Last month, the Vietnam Textile and Apparel Association (VITAS) called on the country's manufacturers to consider importing yarn and fabric from countries such as India, Indonesia, Malaysia, South Korea and Thailand. This came as bid to reduce Vietnam's dependence on China, its main supplier in the sector.

Last year, Vietnam's fabric and garment exports enjoyed overall growth of 18.9% year-on-year, rising to $17.946 billion. If the upward trend is sustained, the value of the country's fabric and garment exports is likely to reach the $20 billion mark this year.

Nguyen Quoc Uy, Ho Chi Minh City Office

Content provided by Picture: HKTDC Research
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