Please quit
Bigger redundancy payouts could speed reforms at state firms and boost
the private sector
HANOI & DANANG - Slapping his knees, construction-site supervisor Le
Trung
Trien concedes he's no spring chicken. "I can't walk up 10 floors to see
what the workers are doing," sighs the 57-year-old, who has toiled at
state-owned Hanoi construction firm Vinaconco No. 2 for 27 years. "I
feel
I'm a burden to the company." Not for much longer: By mid-October, Trien
and
252 co-workers will leave after pocketing cash payouts and other perks,
the
first batch of state employees to opt for voluntary redundancy under the
Vietnamese government's new scheme to speed up reforms at overstaffed
state-owned firms.
The $400 million scheme, backed by the World Bank and other donors, aims
to
lift the burden of surplus workers from heavily indebted state firms;
this,
in turn, will accelerate privatization that will help resolve all the
bad
debts weighing on Vietnam's state banks. The scheme could also boost
Vietnam's private sector if these workers use part of their cash payouts
to
start private businesses or expand existing household enterprises.
Trien,
for example, plans to use his 50- million-dong ($3,260) redundancy
payment
to open a small electronics shop in Hanoi.
Compared with China, Vietnam has relatively few state workers to make
redundant. With about 80% of Vietnamese earning their living from
agriculture, only 1.6 million work in the country's 5,650 state firms,
of
whom up to 400,000 will be laid off over the next five years, according
to
official estimates. Yet the political sensitivities loom large.
Vietnam's
communist leaders are loath to appear insensitive to the plight of state
workers or the party faithful who run state companies.
But neither could the leadership ignore the glacial progress of
privatization, or "equitization" as the government prefers to call it,
whereby selected state companies transfer most of their shares into
private
hands, with the state typically retaining a 20% stake. Of 1,800 state
firms
targeted for privatization by 2003, only 79 companies made the grade in
the
first half of 2002. Many managers said they lacked the confidence to
make
the transition partly because there was no consensus on how to shed
unproductive workers.
Balance sheets, however, make clear that the transition must be made: By
the
end of last year, state firms had debts of 190 trillion dong, roughly 10
times more than their registered assets. And having committed itself to
an
ambitious reform timetable negotiated with the International Monetary
Fund,
the regime couldn't afford to wait any longer.
To tempt workers to quit, the government is offering an incentive-laden
package. Compared to the late 1980s and early 1990s, when state workers
were
laid off with a tiny lump sum and no pension, the new package is
generous:
two months of basic salary per year of service, a lump sum of 5 million
dong, an additional six months of full salary, and, at retirement age
(60
for men, 55 for women), a monthly pension payment.
Overstaffing rate
With the first tranche of $100 million from the World Bank, the scheme
will
be launched by mid-October at seven pilot firms. Of Vinaconco No. 2's
1,700
workers, 14% are opting for the package. At the other pilot firms,
percentages range from 13%-67%, according to a preliminary count.
Studies
have shown that the overstaffing rate at state firms hovers at around
20%.
Many Vietnamese still perceive the state system as more secure than
private
enterprise. "Suddenly I'll stop working for the socialist republic. I
feel
sad about this," says Le Thi Song, 47, the manager of a state-run
restaurant
in Danang, who hopes to become a free- lance accountant.
There's also a danger that the redundancy scheme will become a revolving
door. In Danang, for instance, all 55 workers of state-run Non Nuoc
resort,
an array of boxy cement buildings on a dilapidated beachfront, have
opted
for redundancy. Their enthusiasm may stem, however, from a management
promise that they'll be rehired after the resort merges with another
state
firm and resurfaces as a limited liability company.
Although workers must pay back 50% of their package if they return to a
state firm, the resort's general manager, Phan Tan Nien, has different
ideas. "It's not a state company any more, it's a limited company. They
don't have to pay anything back," he argues. But officials in both Hanoi
and
Danang insist that's illegal.
In any case, cutting the workforce is just one small step toward raising
competitiveness. Managers must prove they can run profitable companies
without relying on a safety net of endless state handouts.
By Margot Cohen - The Far Eastern Economic Review - September 26, 2002.
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