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1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL) DIAL Développement, Institutions & Analyses de Long terme IRD Institut de Recherche pour le Développement Faculty of Development Economics, College of Economics, VNU, October, 8th, 2009

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Page 1: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

1

“The informal sector in Vietnam:new analysis and impact of the

current crisis”Jean-Pierre Cling

Mireille Razafindrakoto, François Roubaud

(IRD-DIAL)

DIAL Développement, Institutions & Analyses de Long termeIRD Institut de Recherche pour le Développement

Faculty of Development Economics, College of Economics, VNU, October, 8th, 2009

Page 2: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Outline Introduction Employment & the informal sector in Vietnam Employment, working conditions and income

in the informal sector in Hanoi & HCMC Comparison with other developing countries Impact of the crisis Conclusion

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New data on employment and the Informal sector in Vietnam

IRD-DIAL/GSO-ISS project (2006-2010) Measurement of the scope of the informal sector and analysis of its characteristics

1. Diagnosis of existing surveys, instruments or analysis.

2. Elaboration of a specific survey or tools adapted to the Vietnamese context Support for the design of LFS 2007 & 2009 questionnaire Implementation of a specific survey on Informal sector in HN and HCMC (Dec 2007 -January 2008 & october 2009) Assessment of the LFS (GSO &MOLISA in 2007) and proposals for the future

3. Survey analysis

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Page 4: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

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The main economic approaches of the informal economyThe main economic approaches of the informal economy

Source: Based on Roubaud (1994)

1. 2a. 2b.

Main focus Production techniques

Public regulations

Public regulations

Economic « vein » Keynesian Liberal Marxist

Seminal Author (BIT, 1972) (De Soto, 1987) (Castells, 1989)

Economic behaviour - households strategy to generate their own employment

- subsistance, poverty

- To escape inhibitive State interventions

- Prohibitive transaction costs of legalization

- Strategy of international capital to lower labour costs

- precarization

Main characteristics Micro-entreprises,

labour intensive

Micro-entreprises,

entrepreneurial skills

Big firms (internl.)

Unprotected labour

Economic policies Capacity building, micro-credit,

sub-contracting, Workfare programs

Market friendly policies,

liberalization, State

retrenchment, property right

Welfare State enforcement, labour and

social security legislation

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(2) Employment and informal sector in Vietnam

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Income strucure % Quintil I Quintil II

Quintil III Quintil IV

Quintil V Total

informal wage income 18,0% 20,1% 15,6% 10,6% 4,9% 9,9%

income of informal PU 8,3% 11,8% 13,6% 14,9% 11,2% 12,3%

formal wage income 3,3% 7,5% 13,3% 21,3% 27,5% 20,8%

income of formal PU 1,2% 1,6% 4,5% 5,8% 16,0% 9,9%

farm income 47,3% 43,0% 36,2% 28,9% 15,3% 25,8%

sub-total : labor income 78,1% 84,0% 83,3% 81,5% 74,9% 78,6%

distributed profits 0,7% 0,7% 0,9% 1,3% 3,6% 2,3%

income from public transfers 7,4% 5,8% 5,7% 6,2% 4,0% 5,1%

income from private transfers (inc. domestic remittances)

13,0% 8,8% 8,3% 8,1% 9,4% 9,1%

income from remittances (from abroad) 0,3% 0,4% 1,5% 2,4% 7,1% 4,2%

income from house rent 0,1% 0,0% 0,2% 0,2% 0,6% 0,4%

land income 0,4% 0,2% 0,1% 0,2% 0,4% 0,3%

Total 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

Source : own estimates based on VHLSS 2004

VIETNAM

Income structure by source and quintiles, national level, 2004

Labor income is the main source of income in Vietnam

Page 7: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

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Factor Urban Rural Total

informal wage income 2,1 1,5 1,9

income of informal PU 7,2 9,0 8,9

formal wage income 22,7 13,1 23,1

income of formal PU 30,4 21,2 26,5

farm income 2,6 34,1 9,4

sub-total : labour income 65,1 78,8 70,0

distributed profits 8,6 1,2 5,9

income from public transfers 1,5 2,0 2,3

income from private transfers (incl domestic remittances)

10,6 6,8 9,2

income from remittances (from abroad) 10,4 10,7 10,2

income from house rent 1,2 0,3 0,9

land income 2,7 0,2 1,6

Total 100 100 100

Inequality of per capita household income by income source Shorrocks’ decomposition method

Source : own estimates based on VHLSS 2004

VIETNAM

As well the main source of income inequality in Vietnam

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Wage workers’ share in Vietnam

Sources : VLSS 1998, VHLSS 2002 et 2004 ; Our own estimates.

Share of wage workers income in the budget of households (expenditures)(région, quintiles)

En % 1997 2004 1997 2004

Nord-Est 9,8 36,0 Quintile 1 15,6 23,5

Nord-Ouest 5,6 29,6 Quintile 2 14,5 29,9

Delta du Fleuve Rouge 18,2 38,4 Quintile 3 16,3 33,6

Côte du Centre-Nord 13,8 30,1 Quintile 4 17,6 38,0

Côte du Centre-Sud 24,1 39,8 Quintile 5 26,5 43,5

Hauts-Plateaux du Centre 4,2 29,4

Sud-Est 34,1 44,0 Urbain 33,4 43,1

Delta du Mékong 16,7 32,6 Rural 12,3 32,6

Total 20,8 37,6 Total 20,8 37,6

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Quintile 1 Quintile2 Quintile 3 Quintile 4 Quintile 5 Total

Self employed informal

5,3% 10,8% 15,6% 17,5% 14,9% 12,9%

Wage worker informal

14,8% 19,3% 17,6% 13,5% 9,0% 14,8%

Self employed farm 77,0% 62,1% 50,6% 39,5% 23,2% 50,2%

Self employed formal

0,6% 2,1% 3,8% 7,2% 15,6% 5,9%

Wage worker formal

2,3% 5,7% 12,4% 22,3% 37,4% 16,1%

Total 100,0% 100,0% 100,0% 100,0% 100,0% 100,0%

% Non-farm informal/total non farm

87,5% 79,3% 67,2% 51,2% 31,1% 55,7%

The poorer the household, the higher the proportion of informal sector workers in Vietnam (2004)

Source : own estimates based on VHLSS 2004

Note: quintile 1 is the poorest; quintile V the richest

Employment structure by institutional sector and by income quintiles

VIETNAM

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Sector

Nb jobs Structure

(1000) (%)

Public 4 950 10.7

Foreign Enterprise 910 2.0

Domestic 2 650 5.7

Formal Household Business 3 600 7.8

Informal Household Business 10 900 23.5

Agriculture 23 100 50.0

Total 46 100 100

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The broad picture

Employment by institutional sector

Source: LFS2007, GSO ; authors’calculation

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The broad pictureEconomic weight of the informal sector in Vietnam

11

12.4 million jobs (23% of the occupied labour force; 50% of non agricultural jobs

8.4 million production units (micro-entreprise; average size: 1.5)

228.767 billion VND (20% of GDP; 25% of non primary GDP)

The weight of the Informal sector in Viet Nam, 2007

Informal sector Jobs Production Units Value added (billions)

Main Second Total Main Second Total LFS LFS*P2

Number (millions) 10,866 1,547 12,413 7,338 1,042 8,381 141,298 228,767

Share of total 23.5% 18.4% 22.7% 87.6% 12.4% 100% 12.4% 20.0%

Share of non primary 47.3% 78.1% 49.8% - - - 15,5% 25.1% Share of Hanoi +HCM / National

14.0% 2.9% 12.6% 14.3% 2.3% 12.8% 19.4% 19.4%

Source : Labour Force Survey 2007 (LFS), National, GSO; IS&HB 2007, Hanoi and HCM city, IRD/ISS. Authors’s calculation. As the LFS just captures labour incomes, the value added in the informal sector is approximated by the sum of total incomes.

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The broad picture: Share of informal sector in total employment, and poverty rate by province

Page 13: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Share of the informal sector in terms of employment (1998-2006)

13Sources : VLSS 1998, VHLSS 2002, 2004 et 2006; authors’calculation

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Page 14: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Main characteristics of employment by institutional sector

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Tenure(years)

Wage worker (%)

Social security (%)

Hours/week

(average)

Average income per month

(1,000 VND)Public 11.3 98.7 87.4 44.4 1,717

Foreign Enterprise 4.1 99.4 82.8 51.0 1,622

Domestic 4.5 92.4 42.8 51.5 1,682

Formal Household Business

7.2 34.4 1.9 52.4 1,762

Informal Household Business

8.0 23.9 0 47.5 1,097

Agriculture 17.0 7.2 0.1 39.5 652

Total Vietnam 12.5 30.0 14.2 43.8 1,060

Source: LFS2007, GSO ; calculs des auteurs

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Page 15: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Some characteristics of The Informal Sector jobs

2/3 in rural areas but first source of jobs creation in urban areas (32% vs 24% for public jobs)

low level of education

Gender balanced (49%)

Main Job characteristics by institutional sectors (1)

Sector Jobs

(Number) Structure

(%) Rural (%)

Female (%)

Age >=12 Grade (%)

Public 4,953,600 10.7 43.9 45.7 38.1 79.3 Foreign Entreprise 907,700 2.0 56.6 61.2 28.6 51.8 Domestic Enterprise 2,646,000 5.7 49.2 39.5 31.7 47.3 Formal Household Business 3,583,800 7.8 46.0 46.5 36.9 31.2 Informal Household Business 10,865,800 23.5 66.9 48.7 38.3 15.7 Agriculture 23,118,100 50.0 94.1 51.6 39.5 9.2 Total 46,211,200 100 75.2 49.4 38.2 23.1

Source: LFS2007, GSO ; Authors’calculation. 0.3% of non response.

Page 16: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Informal Employment in Viet Nam

86% of main jobs (39.6 millions)

The main part in Agriculture and the Informal sector

But also in the formal sector: 13% of public jobs; 17% in foreign entreprises; 57% in domestic entreprises

Informal employment in main job by institutional sector, Vietnam 2007

Job Number Structure Public Sector

Foreign Enterprise

Domestic Enterprise

Formal Household Business

Informal Household Business Agriculture

Formal 6,583,200 14.2% 87.4% 82.8% 42.7% 1.8% 0% 1.0% Informal 39,628,000 85.8% 12.6% 17.2% 57.3% 98.2% 100% 99.0% Total 46,211,200 100% 100% 100% 100% 100% 100% 100%

Source: LFS2007, GSO ; Authors’calculation.

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(3)

(3) Employment and labour conditions in the Informal sector

in Hanoi and HCMC

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The broad picture Employment by institutional sector

Source: LFS2007, GSO ; authors’calculation

Informal Sector: first source of employment (around 30% of total empl.; 35% of non-agricultural empl.; 52% of private non-agricultural empl. in Hanoi, 42% in HCMC)In average more than 1/3 of households draw entirely or partly their income from informal production units

-Sector

Jobs (Number) Structure (%)

Hanoi HCMC Hanoi HCMC

Public 452 200 625 119 28,6 19,7

Foreign Entreprise 72 900 211 292 4,6 6,7

Domestic Enterprise 222 800 600 291 14,1 18,9

Formal Household Business 137 300 554 119 8,7 17,5

Informal Household Business 473 200 1 044 000 29,9 32,9

Agriculture 209 100 110 525 13,2 3,5

Total 1 582 400 3 175 400 100 100

Page 19: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Characteristics of the informal production units

Structure (% d’UP)

Structure (% jobs)

Average size of IPU

No premises (streets, market)

At home

Hanoi

Industry 18.2 27.8 2.2 6.5 85.4 Trade 37.3 32.6 1.3 45.3 32.5 Services 44.5 39.6 1.3 49.1 36.9 Total IHB 100 /80.5 100/ 72.5 1.4 39.9 44.1 Total FHB 19.5 27.5 2.3 5.8 35.3 Total HB 100 100 1.6 33.3 42.4

HCMCIndustry 21,9 29,6 2,0 2,0 91,5Trade 32,2 28,7 1,3 42,5 41,5Services 45,9 41,1 1,4 50,2 38,1Total IHB 100/74,6 100/62,4 1,5 37,2 50,9Total FHB 25,4 37,6 2,6 2,9 36,3Total HB 100 100 1,8 28,5 47,1

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Source: HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

Page 20: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Characteristics of jobs by institutional sector (Hanoi & HCMC)

Rural (%) Female (%) grade>=12 (%)

  HN HCM HN HCM HN HCM

Public 20,2 9,9 45,7 469,4 86,5 76,7

Foreign Enterprise39,9 26,7 48,4 57,0 86,4 58,7

Domestic Enterprise23,2 11,5 41,6 38,1 80,1 62,2

Formal HB 17,4 9,9 54,0 48,6 55,5 37,0

Informal Household Business 47,2 18,6 48,7 50,0 33,2 20,6

Agriculture 87,2 81,5 61,2 40,0 13,0 10,7

Total 38,3 16,6 49,0 46,8 57,2 44,9

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Source: HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

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Precarious jobs in the informal sector

Rate of wage earners

(%)

Labour condition of “dependant” workers (excl. Head of HB)

% of temporary

workers

% without contract

% with written contract

% benefit from social

security

HN HCM HN HCM HN HCM HN HCM HN HCM

Industry 37,9 35,2 34,2 20,7 41,5 46,4 3,6 0,0 0,0 11,4

Trade 3,5 7,1 23,8 13,7 92,1 84,4 0,0 0,0 1,1 0,6

Services 9,0 10,0 25,0 17,9 71,8 69,7 0,1 0,0 0,7 0,0

Total IHB 15,3 16,9 29,4 18,3 60,7 61,9 2,0 0,0 0,4 5,4

Total FHB31,4 41,4 9,8 8,3 62,2 36,8 9,1 7,1 1,5 2,9

Total HB 19,7 26,3 21,4 12,9 61,3 48,4 4,9 3,8 0,9 4,1

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Source: HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

Page 22: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Long working hours and low remuneration

 

Weekly working hours (average)

Monthly incomeaverage

(1000 VND)

Monthly income Median

(1000 VND)

Hanoi HCM Hanoi HCM Hanoi HCM

Employer 52,2 54,8 4 410 5 835 3 090 3 800

Own account worker 49,1 52,1 3 114 2 850 1 733 1 586

Unpaid family worker 41,8 48,4 0 0 0 0

Wage worker 53,6 53,4 1 354 1 303 1 400 1 200

Paid apprentice 60,4 56,7 902 1 108 900 900

Unpaid apprentice 60,0 58,6 0 0 0 0

Partner 52,6 55,4 2 703 3 281 1 300 2 562

Total IHB (Informal) 49,3 52,1 2 573 2 415 1 500 1 371

Total formal HB (FHB) 54,4 59,9 3 589 3 737 1 500 1 500

Total Household Business (HB) 50,7 55,0 2 852 2 912 1 500 1 400

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Source: HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

Page 23: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Distribution of income (Hanoi)Thousands of VND

23

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Source: HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

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(4)

(4) Comparison with Other Developing Countries

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Comparison with other countries Labour structure of the informal sector

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Vietnam Cameroon Madagascar WAEMU

Hanoi HCMC Douala Yaoundé Antananarivo

Job type (%) 

Self-employment 72,7 70,7 69,5 72,1 69.5 73,6

No wage-earner 17,5 18,6 23,2 16,8 16.9 16,4

Wage-earner 7,4 7,8 6,2 9,5 12.2 8,0

Mix 2,4 2,8 1,1 1,6 1.4 2,1

Total 100,0 100,0 100,0 100,0 100.0 100,0

Rate of wage-earners 15,3 16,9 10,9 16,8 16.4 13,6

Average Size of IHBs 1,4 1,5 1,5 1,6 1.5 1,5

Work burden

Weekly working hours (average)

49,3 52,1 44,4 48,8 41,0 46,1

Income (USD)

Average monthly income

133 121 100 135 46 128

Median monthly income

84 77 55 92 17 36

Sources: phase 2 of 1-2-3 Surveys: PARSTAT (2001-2003), EESI (2005), Madagascar (2001) and Informal Sector Survey (ISS), Hanoi (2007), Ho Chi Minh (2008), GSO-ISS / IRD-DIAL.

Page 26: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

Comparison with African countries Demographic characteristics of workers in

the informal sector

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Vietnam Cameroon Madagascar WAEMU

Hanoi HCMC Douala YaoundéAntananariv

o% female workers-Informal sector 50,3 55,5 47.5 44.4 51.8 52.0- Formal sector 48,3 42,3 21.8 31.2 41.9 23.5-Total 49,0 46,8 40.4 40.3 47.1 45.0% young workers (<25 years)-Informal sector 11,9 10,9 28.7 27.7 23.6 32.4Average age-Informal sector 39,1 39,6 32.5 31.6 35.4 31.8-Formal sector 37,4 36,1 37.4 37.1 35.3 36.7-Total 38,0 37,3 33.9 33.3 35.3 33.0Average number years of schooling (years)-Informal sector 9,4 7,9 7.8 8.0 6.6 3.6Tenure (months) -Informal sector 6,2 7,3 4.6 4.0 7.2 6.2-Formal sector 12,0 8,2 6.2 5.0 6.1 7.6-Total 10,0 7,9 5.0 4.3 6.7 6.5

Sources: phase 2 of 1-2-3 Surveys: PARSTAT (2001-2003), EESI (2005), Madagascar (2001) and Informal Sector Survey (ISS), Hanoi (2007), Ho Chi Minh (2008), GSO-ISS / IRD-DIAL.

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Linkage with the formal sector and competition

IS has no direct linkages with the formal sector (no system of sub-contracting by enterprise) High level of competition beetwen HB themselves

(%) Main destination of production Type of competition

HB Household % competitors= HB

  HN HCM WAEMU HN HCM WAEMU HN HCM WAEMU

Industry22 51 12 52 41 71 98 88 85

Trade 25 23 25 74 74 63 98 93 87

Services 4 3 9 95 97 87 96 97 84

Total IHB 19 21 18 75 76 71 97 94 86

Sources: Enquêtes 1-2-3, Phase 1: PARSTAT (2001-2003), : HB&IS survey, Hanoi (2007), Ho Chi Minh City (2008), GSO-ISS / IRD-DIAL.

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Very low demand for bank loans or for credit from MFOMoreover, no other support structure (public or private), to provide technical assistance, capacity-building, access to market, information, etc.

Access to credit and to other support structures

 

Apply for bank loans

%

Micro-finance Organization

Apply for credit

%

HN HCM HN HCM

Total IHB 7,8 5,5 1,6 7,4

Total FHB 14,4 16,7 1,7 5,2

Total HB 9,1 8,3 1,6 6,9

  Cotonou Dakar Douala Yaoundé Hanoi HCMC

% IHB with capital which have invested

32,7  32,8  40,8 37,6 14,0 18,7

% IHB which have applied for bank loans

12,8  10,6  15,9 12,9 7,8 5,5

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Prospects of informal production units

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Source: 1-2-3 Surveys Phase 2: PARSTAT (2001-2003), EESI (2005), Madagascar (2001) and ESI GSO/ISS-IRD/DIAL. Hanoi and HCMC

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(5) Impact of the crisis

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2007 (LFS adjusted)

2010 (Projections)

2015(Projections)

Institutional sector Nb (1 000) Structure Nb (1 000) Structure

Nb (1 000) Structure

Public sector 4,921 10.8% 4,865 9.9% 4,810 9.1%

Foreign Entreprise 902 2.0% 1,508 3.1% 2,522 4.8%

Domestic Enterprise 2,628 5.7% 3,932 8.0% 5,883 11.1%

Formal Household Business 3,560 7.8% 3,679 7.5% 3,801 7.2%

Informal Household Business 10,794 23.6% 12,759 26.0% 14,444 27.2%

Agriculture 22,957 50.0% 22,253 45.4% 2, 570 40.7%Total 45,762 100% 48,996 100% 53,031 100%

Unemployment 1,043 2.2% 1,084 2.2% 1,209 2.2%

Active population 46,805 100% 50,080 100% 54,240 100%

Sources : LFS2007, GSO ; RGPH1999-2009, GSO ; Projection of population by age, United Nations, 2009.

Hypotheses :•1. Population growth rate (RGPH2009) : a) slowdown (1,2%/year) ; b) urbanisation (urbai 3,4% ; rural 0,4%)•2. Demographic divident (the15-65 year old share in total population grows from 59% to 68% between 2000-2015)•3. Activity rate constant by age group•4. Extrapolation of past sector employment trands 2003-2007 (agriculture : -1%/year ; public sector: -0,4% ; foreign companies : +18,7% ; domestic companies : +14,4% ; formal HBs : +1,1%)•5. Constant unemployment rate (2% ; slight decrease in the past) The informal sector (residual) : growth of employment and of share in total employment

Employment forecasts in the informal sector in Vietnam by 2015

(not taking into account the crisis 2008/09: following past trends)

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What impact of the crisis on employment?

32

The macro-economic impact of the crisis is still difficult to evaluate because of the lack of data (GDP, employment, etc.).World Bank, Taking Stock, June 2009 Premières estimations de l’impact sur l’emploi à partir de calculs d’élasticité emploi/production (PNUD; VASS; IRC):

According to UNDP, the elasticity of employment to GDP growth is 0.24 (2005-2007)Therefore, a growth of around 8.5% is needed to absorb the growth of the active population (2%/year that is around 1 million jobs+200 000 agricultural jobs lost).With less than 5% GDP growth in 2009, UNDP forecasts that the urban unemployment rate could rise from 4,6% to around 7% in 2009 (8% according to EIU).

ε =Employment growth rate, %

GDP growth rate, %

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Evolution of GDP and of the unemployment rate

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Source: GSO

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Evolution of employment and unemployment in Vietnam in 2009

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Sector Share in GDP

(2007)

Number of jobs2007

(Millions)

Number of jobs 2008(Millions)

% GDP growth2009*

% employment growth2009*

Employment growth 2009(Thousands)

Agriculture 18% 23,1 nc 4% 0 0

Public sector 41% 5,0 nc 4% 0 0

Formal private sector**

17% 7,0 7,1 6% 1,2 +100.000

Informal sector 24% 10,9 Nc 6% ??? ???

Total employment 100% 46,0 46,8 5% ??? ???

Unemployment 1,1 1,2 +300.000

Active population 47,0 48,0 +1.000.000

Source: GSO; *Forecasts; ** Incl. Formal HBs

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Evolution of employment and unemployment in Vietnam in 2009

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Analysis based on GDP and active population growth :1/ GDP growth forecast is 5% (maximum)2/ Considering the relationship between unemployment and GDP growth on the LT, the unemployment rate could rise from 2,4% to 3%3/This represents an increase of unemployment by 300 ,000.4/ The active population increases by around 1 million/year and total employment therefore increases by 700,000 in 2009 (=1 million-300,000).5/ Considering an employment/production growth of 0.19 in the formal private sector(source : PNUD) and a 6% production growth forecast in this sector, job creations in the formal sector reach around 100,000 jobs (+1,2%).6/ The residual of 600,000 jobs (=700,000-100.000) corresponds to employment growth in the informal sector which employs most new entrants on the labour market.7/ Employment growth in the informal sector in 2009 would reach around 5% in 2009/2008.

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Page 36: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

What impact of the crisis on the informal sector?

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The UNDP method raises a problem: it does not take into account the informal sector.Variation of the demand for goods (+/-) Variation of supply of labour (+).Global impact global (employment/incomes): very negative

Under the hypothesis of a 5% growth in 2009, around 900.000 new entrants would not find a job in the formal sector (supposing that agricultural and public employment are stable and that the number of years of schooling does not vary) Increase of informal employment and (limited) increase of unemployment.LFS surveys (national) and IS surveys (Hanoi and HCMC) 2009 will bring some major information on this subject...we will be able to decide between two alternative results(increase of unemployment vs increase of informal sector employm.)

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Page 37: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

(6) Conclusion (…)

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Main messages:Predominent weight of IS in employmentThe IS is the sector where average incomes are the lowest (except from agriculture) It is a marginal sector, not integrated to the rest of the economyPublic policies do not cover the informal sector (micro-finance, etc.) Impact of the crisis: not much increase in unemployment but reduction of wage incomes in the private sector. Two contradictory impacts of the crisis on the informal sector: Increase of employment in ISReduction of demand & more competition Decrease of income, more precariousness

Page 38: 1 “The informal sector in Vietnam: new analysis and impact of the current crisis” Jean-Pierre Cling Mireille Razafindrakoto, François Roubaud (IRD-DIAL)

(…) Conclusion Some policy recommendations

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In the short run: need for a support policy for the informal sector (impact of the crisis)

Medium & long run: public support would help to improve the business environment, reduce vulnerability and support expansion and higher productivity

Improved access to credit Incentives to increase registration? Need for training

Monitoring system Need for more analysis