Growing Unrest Hits Vietnam’s Factories

Inflation has been a huge issue in Vietnam, with the country’s workers suffering from Asia’s highest inflation rate. Vietnamese workers have been protesting to get better wages, and the number of strikes doubled in 2011 over the previous year. As reported by the Vietnamese government, last year there were 857 strikes reported through the first eleven months of the year, a period that saw the country’s inflation rate average 18 percent.

Over the past years Vietnam has been successful in attracting low-cost manufacturers from China and other counties, who moved or started operations in Vietnam as a way of escaping increasingly high wages in their own countries.

An attractiveness of Vietnam to Chinese factory owners is the labor costs.  Wages for unskilled factory workers in Vietnam are estimated to be around US$100 per month, compared to the estimated $300 per month in southern China.  These low wages not only attracted Chinese manufacturers, but also brought major international companies to Vietnam, including the U.S.’s Intel and Nike and Japan’s Canon, as well as hundreds of manufacturers from South Korea and Taiwan.

But, Vietnam has been struggling through a period of economic problems. The government pushed growth at any cost through the availability of cheap credit to state owned enterprises (SOEs).  Other structural problems exist in its economy as well.  The price Vietnam has been forced to pay is very high inflation.

Jonathan Pincus, the head of Harvard University’s economics program in Ho Chi Minh City was quoted by the Financial Times as stating, “Manufacturing companies are squeezed on both sides, by buyers that are squeezing down product prices and workers that are constantly demanding more money because of the rising cost of living.”

Worker strikes are a major problem for Vietnam’s government.  The country’s government is very concerned about the strikes moving from one in factories over wages, to becoming focused on the government itself, and therefore a real threat to the country’s political stability.

 

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