Human Resources in Vietnam and the United States - Case Study Example

Introduction Vietnam is currently classified amongst the fastest growing economies worldwide. Its major growth was recorded in 1997 when it hit a remarkable 9.1%. This happened at a time when the Asian countries had been hit by a financial crisis. Foreign investors view Vietnam as having a high potential for investment. However, the government is not famed for encouraging foreign investors. There exists strong government control in the market. The human resource of Vietnam is characterized by reliable and active workers, with a tradition of respect for erudition and authority (Frederic S. Mishkin, 2005, pp. 22-25). The agreement on bilateral trade between Vietnam and the United States in 2002 led to an increase in the importation of Vietnamese products in the United States. These products are mainly Textiles which reached a high of US$2.6 million in total in the first 3 quarters of 2003 (Rajaratnam, 2001, pp. 1005). Human resource in Vietnam is similar to human resource in the U.S. at the same time they have differences but manage to carry on economic business. The Bilateral Trade Agreement between the United States and Vietnam led to the institutionalization of relations in economic ventures. The standard relations of the United States were broadened in favor of Vietnam. The tariffs on Vietnam exports to the United States were reduced by more than 35 percent, thereby opening up the United States market to the exports of Vietnamese investors. These were competing on a level ground with other competitors in the American market. The Vietnamese exporters gained foothold in this enormous market and are still exporting without trade barriers in the United States. The main exports are textiles and footwear (Frederic S. Mishkin, 2005, pp. 13-16). The low tariffs led to the Vietnamese manufacturers setting their aim at the American market. Human Resources in the United States and Vietnam Human resources are the amalgamation of conventionally organizational workforce utility with performance, workers associations and resource arrangement. It is an important factor of production that is combined with other factors to aid in production. The purpose of human resources is to make the most of the return on investment from the enterprise’s human capital and curtail economic risk. Human resources improvement is an agenda for the extension of an individual’s capital inside an enterprise. It is a mixture of teaching and tutoring aimed at ensuring the incessant enrichment and development of both the person and the enterprise. The Vietnam human resources are composed of about 40 million workers; the annual recruitment rate is relatively high, with more than 1.5 million people joining the labor force each year (Raghuram G. Rajan, 2005, pp. 1-3). Many foreign investors invest in Vietnam due to this huge labor force that is relatively cheap. The scarcity of trained and skilled labor in Vietnam makes the few employees who are skilled to move from one job to the other as well as companies taking employees from other companies to utilize their skills while offering a better pay. This mainly occurs between companies that require highly skilled labor. Employers are compelled to ensure that employees get maximum satisfaction in a bid to ensure that they retained the greatly needed skills. On the other hand the United States is known to be amongst the countries that offer their human resources the best working conditions. The human resources are composed of about 140 million people. In addition to the large workforce is the high level of skills. This is a significant difference from the human resource of Vietnam that is largely lacking in skills. Education and training is highly emphasized in the United States leading to the highly qualified human resources. American human resources are among the most industrious internationally and generate products or services in an hour than the majority of their European equivalent. Generally, working overtime in Vietnam is encouraged through paying workers one and a half times the normal pay on the number of hours worked overtime. Workers are allowed to go on strike under distinct circumstances by the labor law. Human resources in Vietnam solve Labor issues internally within their enterprise before the issues can be taken to the provincial council. There is a provincial people’s court which determines the decision to strike. Workers in the most significant sectors of the economy are normally not allowed to strike. Sectors such as national security and the electricity company can not go on strike. The State and federal law are responsible for overruling the human resources working conditions. There exists a national provision against child as well as public and state laws that that give directions on the number of holidays that workers are entitled. The law also addresses matters concerning safety in working areas (Frederic S. Mishkin, 2005, pp. 27-31). In Vietnam the nature of human resource has undergone significant changes due to foreign investment. Workers have had the opportunity to access modern technology in production through employment in foreign companies. Their management techniques have improved due to experience gained from interaction with managers in the foreign countries. In the United States, advancement in the level of skills is mainly due to human resource development through workers training. In case of new innovations, workers undergo refresher trainings that enhance their performance and their adaptability to the new technology. Vietnam, as in the United States has experienced a reduction in the level of unemployment tending towards 2.9 percent annual employment creation. The United States has also been successful in reducing the level of unemployment. According to Geoffrey (2003, p.16), “The level of un-employment had reduced to 4.2 percent” this was a relatively significant decrease, in regard to the status of unemployment in many economies worldwide. However, there is a tendency towards discrimination in employment depending on race and sex in the United States. Unemployment in women is high amongst women and blacks. However, an Executive Order that was issued in 1998 proscribes discrimination in employment. In Vietnam, the government emphasizes on employment of Vietnam citizens. Foreign companies are not allowed to employ more than 3% of the total work force as foreigners (Geoffrey, 2006, pp. 6-12). The major problem faced by human resources in United States is high levels of retirement. Once workers retire, the remaining workforce has to pay more taxes in order to pay for programs supporting the retirees. Currently, the number of people retiring at an earlier age of 55 to 64 years has increased than it was before. This has led to a significance decrease in the older experienced workforce. In Vietnam, the difference is brought about by the fact that there is a great deficiency in human resources. This leads to workers retiring at an older age than in America. Vietnam has no social programs for supporting retirees. This becomes a discouragement for workers to retire at an early age, unlike in the United States where government plans such as social security program encourage early retirement. More over, the modern institutions in the United States produce a large number of highly qualified graduates to join the labor force each year. Provision of a retirement arrangement to human resources is a valuable attraction and preservation instrument. This has been understood in the United States as an important factor to improve the productivity of human resources Fang Zhao 2005, pp. 32-37). Where as the potential for industrial human resources in Vietnam is high, there exists a looming danger due to the deficiency for skilled labor force. There is a great shortage of the desired technicians and managers for industries. This is a threat to the country’s endeavors to industrialize. Investors are finding it costly to invest in Vietnam and then hire expensive foreign technicians and managers. With this trend, multinational companies will tend to establish their businesses in other countries where skilled and less costly labor is available. Vietnam should follow the example of the United States to promote skilled labor in order to encourage foreign investors in to the country. With the protective policies exhibited by Vietnam, investors may fail to invest in the country. It is therefore necessary that the dependence on foreign investors is reduced through technological advancement within the country through promotion of technical training (Geoffrey, 2006, pp. 16-21). Earlier on, the Vietnamese government introduced a system that consists of educational institutions that offer vocational training. This is where technical skills are taught to the work force from industries and educational institutions. This has seen an improvement in the level of skills amongst the labor force, although it is faced by major problems associated with lack of experience managers and technical experts. There is also a shortage of equipment, hindering the quality of lectures that can be offered. Such problems do not exist in the United States. The educational institutions are well equipped to produce the best human resources. Technical personnel and managers are also available to oversee the educational institutions. Human resources take refresher courses every once in a while to upgrade their skills. Economic business in America and Vietnam in the Context of Human Resources Human resources recruitment in Vietnam by United States’ companies is mainly through domestic contacts. Advertisement for recruitment of workers is only permitted where the local contacts fail to get employees to fit the positions. The government mainly prefers that the American companies hire Vietnamese human resources. This is a major difference between Vietnam and the United States where a considerable percentage of the human resources are foreigners. Many companies from the United States have an interest of investing in Vietnam. However, Vietnam still maintains that their significance to the economy should be thoroughly evaluated. The United States’ companies possess advanced technology and skills that will be introduced in to the human resources of Vietnam. If they are keen to capture the managerial and modern production techniques, Vietnam may benefit through the improvement of its human resources in terms of skills. Foreign companies are still restricted in the choice of business enterprises they can engage in. It takes a considerable period of time for the companies to get approval to establish factories. However, Vietnamese government has realized that the most appropriate way of covering the trade deficit that exists between it and the United States is expanding the prospects of its investments instead of suppressing them. After the bilateral trade agreement, business between America and Vietnam has expanded significantly (Fang Zhao 2005, p. 35). In the recent past, the economy of Vietnam has been rising and falling, due to refurbishment. The Gross Domestic Product is growing rapidly at 8.5%. This is attributed to the acceptance of the Vietnamese government to liberalize the market for foreign companies to introduce their capital in to the country. However foreign companies find it hard to transact business in Vietnam. This is because the understanding of Vietnamese towards business is quite different from many other countries including the United States. Business in Vietnam is viewed as an activity between two parties whereby one has to give while the other takes. There is a common believe that one has to loose. There is a general lack of positive view towards business. In the contrary, Americans believe that business between two countries is a mutual undertaking in which both benefit from the outcome. Major problems arise when investors from America and the West misinterpret the Vietnamese view. They end up making deals that on the side of Vietnam are subject to change if they are deemed unfit for the country. Agreements are of utmost importance in the business environment of Vietnamese. All the participants in an agreement are involved in consensus building and also in formulating the guidelines. Minority opinions are ignored are normally ignored in the deals. The Vietnamese government imposes certain decrees to ensure that domestic human resources and companies benefit from any foreign investment venture in the country. This includes the decrees in procurement. Bidders for supplies have to ensure that they promise to supply a considerable component of their locally manufactured products together with the foreign supplies. An example is the supply of Information Technology equipment from foreign companies. There has to be a certain amount of the supplies that have been manufactured by Vietnamese companies (Fang Zhao 2005, pp. 37-44). The same case applies to employment rules whereby the human resources have to be drawn in large proportions from the domestic labor force. However, the American companies do not view this as a hindrance since they would like to cooperate with Vietnamese Information Technology companies to assist the Vietnamese to develop better skills in software development. In order for this to be achieved, it is important to purchase the products from local companies so that they can learn and know how to make improvements on them. To reciprocate the assistance, offered by the United States, the government has agreed to promote the use of licensed products from Microsoft. This will be a major mile stone for the American company to reduce the problem of pirated software. The government has also promised to ensure that all state corporations and agents use genuine software. Since the cooperation of America and Vietnam began, positive developments have been occurring, and the view of the United States will be proved in the sense that both parties will benefit rather than the conservative thought of Vietnamese that one party must loose while the other gains. Currently, Vietnam is viewed as a haven for investment. Many countries are competing for the opportunities, but America has close ties with Vietnam, making it a better competitor than many other Asian countries neighboring Vietnam. Maintenance of this position and achieving maximum benefits from the venture requires proper investment strategies in order for both nations to achieve the desired goals. Vietnam will acquire improved skills for the human resources while the United States will benefit from the investment by its companies. The economic strengths are many, in spite of lack of skilled labor. This requires a little improvement because there are many youthful workers. The challenge of the unskilled labor will certainly be alleviated by collaboration between the country and foreign countries such as that of the United States. Now that Vietnam has opened up for free trade agreements, the economic growth is expected to shoot up to a high level of more than 9 percent. The strategic location of Vietnam on the globe is a factor that will enhance realization of the country’s objectives as it attracts a good number of foreign investors. (Fang Zhao 2005, pp. 28-32). Major challenges can only be caused by inability to cope with unexpected occurrences as well as the impact of financial globalization. This is because with the opening of the domestic market to foreign investment, there will occur several changes that the country has to cope with. It is also a challenge for a liberalized market for the first time to keep up and maintain while effectively handling the problems associated. Conclusion Human resource development through training is very important in the industrial sector. Lack of skilled man power in a country discourages foreign investors who tend to move their companies to countries that can provide cheap and skilled labor. Labor can not be useful without the required technical skills. Vietnam offers cheap labor but it does not match the standards that are required in production and management of industries. The country may suffer a loss if the capacity of the available human resource is not improved through training as well as upgrading the technical institutions to offer quality and up to date technical skills. If the current human resource status is not improved, the dependence on foreign investors will always prevail in Vietnam. The United States has identified opportunities for investment in Vietnam. If the country removes the existing trade barriers, there is a possibility that the human resource in Vietnam will improve through learning experiences from the highly industrialized United States investors. There are major differences that exist between the human resources of the two economies. However, these should not be viewed as barriers to business and cooperation. Vietnam has a lot to learn from the developed United States Especially in terms of technological advancement. Economies that do not cooperate with others do not have a chance to improve on their production strategies, since these are acquired through experience from interaction with diverse economies. Bibliography 1. Fang Z. (2005) “Human Resource in Vietnam” International Journal of Entrepreneurial Behavior & Research. Vol. 11 No. 1, July, pp. 25-41 18 Sep 2008 2. Frederic S. Mishkin (2005) “Is Financial Globalization Beneficial?” Working Paper 11891, National Bureau of Economic Research, Cambridge 3. Rajaratnam, (2001) “Innovations in Developing Countries: Human Resource Development” Journal on Industrialization. vol. 5, no. 3, September, pp. 121-126 4. Geoffrey M. (2006) “Entrepreneurship and Human Resources ” Journal on Human Resources and Innovation Management, Vol. 1, No. 1, December, p.229 5. Raghuram G. R. (2005) “Has Financial Development Made The World Riskier?” Working Paper 11728, National Bureau of Economic Research, Cambridge Read More