Managing Human Resources. in Vietnam

Transcription

1 VIETNAM BRIEFING The Practical Application of Vietnam Business Volume III - Number I Daily Business News Available at Managing Human Resources in Vietnam In This Issue: Managing Human Resources Managing Payroll Mandatory Benefits for Employees Regional Update: The Urban Renewal of Hanoi and Ho Chi Minh City

2 In this issue of Vietnam Briefing, we tackle the legal aspects of managing human resources in Vietnam. Many foreign investors move operations to Vietnam to take advantage of its skilled and inexpensive labor force. As the economy expands further and more businesses enters the country, an increasing important part of corporate strategy will be finding ways to effectively motivate staff while also complying with local labor laws. We cover various topics under recruitment and hiring including salary, mandatory benefits, labor contract, work permits, working hours, bonuses, trade unions and insurance. We also look at the ongoing urban renewal of Hanoi and Ho Chi Minh City as the cities expand to accommodate more local and foreign investment. The articles in this issue of Vietnam Briefing were written in coordination with the foreign direct investment and tax consultancy Dezan Shira & Associates based in their primary offices in Hanoi. Please contact the firm at if you have any questions. Best regards, Welcome to Vietnam Briefing! Joyce Roque Editor, Vietnam Briefing Complete information about the firm, staff, practice, services offered, China / Hong Kong / India / Vietnam business advisory and tax information. Senior Vietnam personnel: VIETNAM BRIEFING Vietnam Briefing Daily News Alberto Vettoretti Managing Partner Vietnam Hoang Thu Huyen Country Manager Hanoi Resources: VIETNAM BRIEFING Our quarterly magazine and daily news service detailing all aspects of foreign direct investment law and tax into Vietnam. Our popular monthly publication and daily news service addressing technical matters concerning foreign investors and China law and tax. COMPLIMENTARY WEEKLY ROUND UP Sign up today for our complimentary Vietnam and Asia business and regulatory round up at INDIA BRIEFING Our bimonthly magazine and daily news service detailing all aspects of foreign direct investment law and tax into India. 2point6billion.com Produced in association with Dezan Shira & Associates since Our Asia web site commenting on matters on trade, investment, political relations and comparisons between the emerging nations of China and India. This issue s cover photo is by clip works under the creative commons license. This photo was taken at Cao Dai Temple located 60 miles northwest of Ho Chi Minh City. Cao Dai is a syncretist, monotheistic Vietnamese religious movement that blends elements of Buddhism, Taoism, Confucianism and Catholicism. The temple's architecture reflects the religion's ideology fusing many different styles in one structure. All materials and contents 2010 Asia Briefing Ltd. No reproduction, copying or translation of materials without prior permission of the publisher. Contact: editor@vietnam-briefing.com

3 Managing Human Resources in Vietnam [ By Hoang Thu Huyen, Dezan Shira & Associates ] One of Vietnam s major advantages is its skilled and inexpensive labor force that makes it an attractive destination for foreign investors. According to the 2009 census, Vietnam has a population of 85.8 million people, making it the third most populated country in Southeast Asia and 13th in the world. The population is expected to grow to 87 million this year, half of which will be under 30 years old. Foreign companies wanting to do business in the country must ensure they follow the provisions of the Labor Code. It contains the legal framework for the rights and obligations of employers and employees with respect to working hours, labor agreements, social insurance, overtime, strikes, and termination of employment contracts, to name a few. In addition, there are regularly issued decrees and circulars guiding the provisions of the code. Recruitment P r e v i o u s l y, f o r e i g n e n t e r p r i s e s were required to recruit Vietnamese employees via a local employment service agency, but now companies can hire directly. This has made it easier for employers to manage their internal recruitment needs provided that they provide a list of hired employees to local labor authorities. A c c o r d i n g t o Vi e t n a m e s e l a w, employees must be at least 15 years old with a proven capacity to work. Laws do not state the maximum age for employees but provide a retirement age for the purpose of pension calculation only. On average, retirement ages for male and female employees are 60 and 55 respectively. Senior employees who continue to work pass the retirement age are eligible for extra benefits and pension payments. On recruiting foreigners, since April 2008 the 3 percent cap on foreigner employee to local employee ratio for enterprises has been removed. Employers in Vietnam can now hire an unlimited number of foreigners as long as the employees meet requirements to work as managers, executive directors and experts and the position cannot be filled by a local hire. Each foreign enterprise shall be allowed to hire a minimum of three expatriate employees. However, the employer must have a training program for Vietnamese employees to be allowed to take over these positions in the future as required by the government. In the case of a foreigner internally transferring within an enterprise s representative office and foreign branch, at least 20 percent of the total number of the managers, executive directors and experts with a commercial presence within the country must be Vietnamese citizens. Foreigners wishing to work in Vietnam must be at least 18 years of age with good health; be a manager, executive director or an expert who possess technical qualifications and professional experience; and not have a criminal record due to a national security offense nor currently be subject to criminal prosecution or any criminal sentence in Vietnam and overseas. All foreigners working in the company for a period of three months or more are required to obtain a work permit with the exception of the member of a limited liability company with two or more members, the owner of a one member limited liability company and members of the board of management of a shareholding company. The employer is required to submit work permit applications to the local labor department for its expatriate employees. A Vietnamese work permit is good for up to 36 months with the option to extend if needed. Following the latest draft regulation from the Ministry of Labor, War Invalids and Social Affairs, foreigners working in the country will be given until July 2010 to apply for a work permit or risk being deported back to their home countries. Foreign nationals who have been working in Vietnam for more than three months without a work permit will not have their visas or their temporary residence cards extended. The new draft regulation also adds a fine for employers found violating foreign employee requirements varying from US$268 to US$535. The labor contract There are three kinds of labor contracts under Vietnamese law: A labor contract with indefinite term in which two parties do not determine the term and the time for its termination Vietnam Briefing

4 Managing Human Resources in Vietnam A labor contract with definite term in which the two parties determine the term and the time for its termination as a period of 12 months to 36 months A labor contract for a specific or seasonal job with a term of less than 12 months A labor contract with definite term or for seasonal jobs must be renewed within 30 days after the expiry date if the employee continues working otherwise the signed contract shall become a labor contract with indefinite term. Moreover, if the labor contract is renewed after two definite contracts, the two parties must sign a labor contract with indefinite term regardless of any reason. A seasonal labor contract for a term of less than 12 months is prohibited to apply for permanent jobs lasting for a year or more, except for cases wherein there is a need to fill temporary vacancies during military service, maternity leave or other temporary leaves. Moreover, a labor contract must be made in writing and signed directly between the employer and the employee in duplicate where each party retains one copy. However, a contract with a term of less than three months or relating to housework can be done so verbally but both parties will also be subject to the tenets of the labor code as a matter of course. A labor contract must also contain provisions such as scope of work, working hours, rest breaks, wages, job location, term of contract, conditions on occupational safety, hygiene and social insurance. Employers can use a standard form or customize a labor contract themselves by following the guidelines prescribed by law. In the case of hiring foreign employees, the contract shall be written in Vietnamese with possibly a section written in a foreign language. Legal validity shall only apply to the conditions stated in Vietnamese language. Probationary agreements are often included in the contracts. Probation can last 60 days for highly qualified employees and a maximum of 30 days for others. During that period, either party may terminate the labor contract without giving advance notice and without any compensation if work performance does not meet job requirements. Both employer and employee may unilaterally terminate a contract in certain circumstances specified under the labor code. A 45 day notice is required for indefinite term contracts, 3 0 d a y n o t i c e f o r d e f i n i t e t e r m contracts and three day notice for seasonal contracts. In some cases, the employer will be required to discuss the termination with the executive committee of the trade union. Working hours and breaks The law allows for eight hour working days and a 48 hour working week. An employer and an employee may agree on overtime provided that the number of additional hours does not exceed 4 hours a day or 200 hours per year. In some special cases, this limit may be extended to a maximum of 300 hours subject to the approval of the relevant competent state authority. Since 1999, government employees have adopted a 40 hour work week. Businesses are thus encouraged to adopt the same. Employees are allowed at least a halfhour break within eight consecutive working hours, and a minimum 24 hour rest period per week. Employees working on night shift are to be given a 45 minute break per shift and a 12 hour rest period in between two shifts. Employees are entitled to company paid holidays during the following: New Year Holiday- January 1 Lunar New Year Holiday- four days on the final day of the end of the year and the first three days of the new lunar year Anniversary of King Hung s death- on the 10th day of the third lunar month Victory Day- April 30 International Labor Day- May 1 National Day- September 2 Where the public holidays referred to above coincide with a weekly day off, the employee shall be entitled to take the following day off as well. Annual leave Employees working for a company for a year will enjoy a paid annual leave of 12 days. The number of paid annual leave is increased by one day for every five years of working for the same employer. For employees working less than one year, their paid annual leave is prorated to their actual working period or they may alternatively receive payment in exchange for unused leave. In addition to annual leave, an employee is allowed to take paid leave to deal with personal affairs. An employee is allowed a three day leave for their own wedding; a one day leave on the wedding day of their children; and three day funeral leave for a death in the immediate family. Company working rules Companies which employ ten or more people must have a copy of company rules or internal labor regulations registered with the provincial labor department. Company working rules include contents such as working and rest hours, rules and orders in the company, labor safety, hygiene in the workplace, protection of assets, business and technology confidentiality, and sanction methods to name a few. Company rules shall be the legal basis for enforcing employee discipline. Trade unions All local and foreign companies in the country are required to allow their staff to form trade unions to represent and protect their rights under the labor collective. Employees may establish a local trade union within six months from the establishment of the company. If a local trade union is not created by the employees after that period, local trade union authorities shall assign a provisional Executive Committee of Trade Union provided that there are at least five employees joining. Foreign companies with trade unions must contribute an amount equivalent to one percent of an employee s monthly salary to the trade union fund. F o r m o re a d v i c e o n m a n a g i n g human resources in Vietnam, please Dezan Shira & Associates at vietnam@dezshira.com. 4 Vietnam Briefing 2010

5 Managing Payroll in Vietnam [ By Hoang Thu Huyen, Dezan Shira & Associates ] In recent years, FDI flow into the country has been improving and an increasing number of foreign companies are establishing and operating businesses in Vietnam. A thorough knowledge of the Vietnamese salary structure is therefore vital to attracting, maintaining and more importantly motivating quality staff to stay and contribute to the growth of the company. Salary and wages The salary of Vietnamese employees working in foreign companies in Vi e t n a m i s d e t e r m i n e d t h r o u g h negotiation between two parties although it should not be less than the minimum rates regulated by the government. The rates applicable starting Jan. 1, 2010 are as follows: VND1,340,000 (US$70.5) per month for enterprises operating in the inner city districts of Hanoi and Ho Chi Minh City VND1,190,000 (US$62.6) per month for enterprises operating in outer city districts of Hanoi and Ho Chi Minh City; inner city districts of Haiphong; districts of Danang; districts of Can Tho City; Halong City in Quang Ninh Province; Bien Hoa and some districts in Dong Nai Province; the township of Thu Dau Mot and the rural districts of Thuan An, Di An, Ben Cat and Tan Uyen in Binh Duong Province; Vung Tau City, the township of Ba Ria and Tan Thanh district in Ba Ria Vung Tau Province V N D 1, 0 4 0, ( U S $ ) f o r enterprises operating in cities under provincial governments and select districts and VND1,000,000 (US$52.6) per month for enterprises operating in the areas not covered by the rates previously mentioned The U.S. dollar prices quoted previously are based on the exchange rate: US$1 is to VND19,000. The above minimum wage rates are only for Vietnamese employees doing the most basic work in normal working conditions. For those who have passed vocational training courses,including company training, wages are at least seven percent higher than minimum wage rates. Employers are encouraged to pay higher than minimum wage rates mentioned above. Employees who work extra hours will be paid for those hours based on their current wages as follows: on regular working days be paid at least 150 percent; on the weekend be paid at least 200 percent; on holidays and paid leave days be paid at least 300 percent. In cases wherein the extra working hours are at night, they will be paid more according to the regulations. When employees are given time off in compensation for extra working hours, employers will only pay for the difference between the wages during normal working hours and overtime work. Employees on night shifts are required to be paid at least 30 percent higher than normal working hour wages. Salaries paid to Vietnamese staff working for foreign companies must be denominated in Vietnamese dong. Foreign employers may base salary rates in Vietnamese dong or U.S. dollars. For salaries based in U.S. dollars, employers must convert the amount into Vietnamese dong following the average exchange rate on the inter-bank foreign currency market. In general, a typical monthly salary package will include gross salary and mandatory insurance. Personal income tax will be levied on the balance after deducting mandatory insurance contributions. Companies may now print their own customized personal income tax receipts according to a circular released by the Ministry of Finance in March. Prior to Circular 37, employers had to use pre-printed PIT receipt books from local tax authorities. Customized PIT receipts must first obtain pre-approval from tax authorities and contain all items provided in the standard form. Employers will be allowed to print their own receipts if they meet the following conditions: withholding organization is a legal entity in accordance with the law; withholding organization has a tax code; suitable computer and software system are maintained; and withholding organization has not been penalized for more than two tax offenses in the last year. Remember that local and foreigninvested companies doing business in the country are required by law to comply with Vietnam accounting standards (VAS) when recording their financial transactions. The laws are Vietnam Briefing

6 Managing Payroll in Vietnam based on international accounting standards, although not entirely since it is still being continually revised and changed. Fulfilling VAS requirements is a challenging task, more so for foreign small and medium-sized enterprises entering the country to save on manufacturing costs and working on limited resources. Foreign companies may opt to change how they follow the VAS-based on their own business needs but will need to get prior approval from the Ministry of Finance before doing so. Additionally, foreign companies may choose to manage two accounting records; one that is based on the VAS and another compiled specifically for the overseas head office. Vietnam only began revising its accounting laws in 2000 and in 2006 launched its new accounting standards. In a nutshell, the VAS requires that accounting records include: the use of Vietnamese language; the use of Vietnamese dong as the accounting currency; compliance with the Vietnam chart of accounts; producing numerous reports as specified by VAS regulations; printing all reports on a monthly basis and having it signed by the General Director and affixed with the company seal. Foreign companies wanting to use another currency for their financial records need to submit an application form to the Ministry of Finance. The accounting currency unit must be mainly used for a foreign company s banking transactions, services and selling prices quotations. It is also allowed to use the same foreign currency as the currency unit to account for revenue, employee salary and payment of material costs. A u t h o r i t i e s h a v e b e e n w o r k i n g towards strengthening corporate accounting system although on average, enforcement has been relatively lax when it comes to implementing full VAS compliance. Be warned though that there have been recent reports that some provincial tax authorities cite VAS non-compliance as a basis for collecting additional tax and recovering paid VAT refunds. Tax authorities can penalize companies for VAS non-compliance through the disallowance of input VAT credits; the withdrawal of corporate income tax incentives and the change to the method for application of corporate income tax. Companies are advised to double check their accounting system, taking care to spot possible VAS non-compliance issues. Bonuses Bonuses are given by employers based on company earnings, performance and also as a way of boosting company morale and productivity. There are various kinds of bonuses which companies in Vietnam grant their employees during the year. A 13th month salary is usually applied as a kind of annual bonus by both local and foreign companies in Vietnam for employees working with the company at least a year. For employees working for less than a year, the bonus will be prorated based on the actual employment period. Employees will often receive it together with their 12th month salary or at the beginning of the following year. In addition there is also a special bonus called Lunar New Year bonus or Tet bonus often paid to employees before they leave for the Lunar New Year holiday. Again the amount of the bonus will be dependent on company and employee performance. In cases where there is severe competition in the labor market, the Tet bonus is a way of motivating and maintaining staff. These bonuses can range from being a small amount of money to being equal to 14th month salary or even amount to a year s worth of salary if company business does well. Apart from the large annual bonuses described above, employees can also enjoy small bonuses during public holidays or special days such as International Labor Day and National Day. Senior management and other valued employees can be offered bonuses in the form of share certificates typically with a vesting period. Stocks can be sold only after an employee has worked for the company after a specified period of time. This method brings benefits to both employers and employees in terms of motivating employees to improve performance and increase business for the company. Employers must take note that all salaries and bonuses are subject to personal income tax in Vietnam. Other allowances and benefits Apart from salary and bonuses, an employee may be entitled to several kinds of allowances and monetary or non- monetary benefits designed to retain staff. Some allowances and benefits are subject to personal income tax although some are also not. Taxable benefits include housing rent, payments for power, water and associated services for employees amounting to more than 15 percent of total taxable income; transportation allowance; premiums for life insurance; health care services; entertainment; sports and athletics; or membership fees to golf clubs, tennis courts and other exclusive clubs. Some are considered tax exempted in cases of housing benefit worth less than 15 percent of the total taxable income; transportation and entertainment allowance if they are used on a share basis and the individual s name is not specifically mentioned, or mid-shift meal allowances given by employers. Prefixed lump sum amounts or khoan chi amounts for telephone, stationery, uniforms and per diem allowances are not subject to tax if the amounts are within the levels set out under relevant regulations. Foreigners working in Vietnam are now exempted from personal income tax for various benefits such as relocation allowance for the employees moving into the country; the home leave airfare; and school fee for the expatriates children paid by the employer following the labor contract. For more information or advice on managing payroll in Vietnam, please Dezan Shira & Associates at vietnam@dezshira.com or visit 6 Vietnam Briefing 2010

7 Mandatory Benefits for Employees [ By Hoang Thu Huyen, Dezan Shira & Associates ] Vietnam s social security scheme, the mandatory benefits applied for employees working in Vietnam, includes three categories: Social insurance Health insurance Unemployment insurance This scheme applies to all domestic and foreign companies operating in Vietnam that employ workers under the labor contracts with a definite term of over three months and for labor contracts with indefinite terms. Contributions to social security are based on the employees monthly salary or wage stated in the labor contract and is capped at 20 times the legal standard minimum salary regulated by the government in cases wherein the salary is equivalent or higher than 20 times of minimum salary. The minimum salary for government and state-owned company employees has been increased to VND730,000 from VND650,000 starting May 1, C o n t r i b u t i o n s a r e w i t h h e l d b y employers who will register and pay social, health and unemployment insurance on behalf of their employees at the provincial Department of Labor, Invalids and Social Affairs monthly. Social and unemployment insurance are compulsory only for Vietnamese staff, while health insurance applies to both Vietnamese and foreign staff employed following Vietnam s labor code. Social insurance Employers and employees are required to make contributions to the State Social Insurance Fund equal to 16 percent of gross income from the employers and 6 percent from employees. Those percentages will be increased by 1 percent every two years starting from January 2010 until it reaches 18 percent for employers and 8 percent for employees. For employees working under an employment contract that is less than three months in duration, social insurance will be inclusive to their salary for the spontaneous payment of their social insurance fund or other insurance forms. Employees will be given social insurance books for keeping track of all social insurance payments. The fund covers employee benefits including sick leave, maternity leave, allowances for work-related accidents and occupational diseases, retirement, and survivors benefits. Sick leave allowance Sick leave allowance is given to employees who are ill, recovering from an accident, or taking care of sick children less than seven years old. Applicable allowance and leave days vary depending on the number of years the employees have paid social insurance. The maximum time granted per year for sick leave is 30 days in cases of less than 15 years of social insurance payment, and can be increased to 60 days in case the employees have paid more than 30 years insurance. The allowance granted in lieu of salary is equal to 75 percent of the salary of the previous month s contribution. Certification from a medical care establishment is a must to claim for sick leave allowance. Maternity allowance Employees are entitled to maternity benefits not only when giving a birth, but also when adopting children less than four months old provided that they have made social insurance contributions for six months and within twelve months before childbirth or adoption. On average, female employees have the right to take maternity leave for four months. If giving birth to twins or more, employees are entitled an additional 30 day leave for each extra child. Female employees are also entitled to take a one-day-leave for each prenatal check-up, with a maximum of five. Furthermore, they can enjoy maternity benefits for miscarriage, abortion or stillbirth, and even for taking contraceptive measures such as implanting an intrauterine device or sterilization measures although the number of leave days is less than standard cases. Maternity allowance is paid to the beneficiaries and is equivalent to 100 percent of the six month average contribution preceding the leave. In addition, employees are entitled to a Vietnam Briefing

8 Mandatory Benefits for Employees lump-sum allowance equivalent to two months of standard minimum salary for each child upon giving birth or adopting a child of under four months old. Allowance for workrelated accidents and occupational diseases Employees will enjoy allowance for work-related accidents or diseases if they suffer from a working capacity decrease of at least 5 percent. In cases where the decrease is between 5 percent and 30 percent, employees are entitled to a lump-sum allowance and more than 30 percent qualifies them for a pension. A higher allowance is given for a bigger ratio of labor capacity loss. Employees suffering from a working capacity decrease of at least 81 percent will be entitled to an attendance pension equivalent to the standard minimum salary in addition to the pension mentioned above. If an employee dies due to work-related injury or disease, the family shall be paid a lump-sum allowance equivalent to 36 months of standard minimum salary. Pension allowance Pension is granted to a female employee of 55 years old or a male employee of 60 years old with at least 20 years of social insurance contribution. A lower pension will be granted to some cases, which do not meet these aforementioned requirements but meet some subrequirements. Monthly pension is calculated upon the number of years of social insurance contribution and the average monthly salary identified for monthly social insurance payment. The maximum rate is equivalent to 75 percent of the average salary while the lowest pension is equivalent to the standard minimum salary. Employees who have made social insurance contributions of more than 30 years for men and 25 years for women are entitled to an old-age grant which is 0.5 percent of the average salary for each multiplied by the extra years that they contributed. For example, a man retiring after working for 34 years will receive an old age grant of 0.5 percent multiplied by the extra four years of contribution. For those ineligible to avail of pension, a lump-sum allowance will be granted depending on years of social insurance contribution. For each year, employees are entitled to one and a half of their average monthly salary. Mortality allowance Upon death, whether the employee is paying into social insurance, deferring payment between jobs, or collecting monthly pension or allowance for a work injury or occupational disease, an allowance equivalent to the 10 month standard minimum salary will be paid by the social security fund to cover the funeral. Upon meeting requirements, a survivor allowance equivalent to 50 percent or 70 percent of the standard minimum salary shall be given to the family or relatives of employees on a monthly basis. Health insurance In the past, Vietnam s social security scheme only applied to Vietnamese staff and expatriates were exempted from contributing to the social security funds. However, according to new regulations on health insurance valid from October 1, 2009, foreign employees working in Vietnam under labor contracts with indefinite terms or a definite term of over three months will be subject to the mandatory health insurance scheme in the same manner as Vietnamese staff. Health insurance cards shall be issued to participants. Bearers of compulsory health insurance cards are entitled to the health insurance regime for medical examination and treatment of inpatients and outpatients at authorized medical establishments. Prior to 2010, the monthly health insurance premium was equal to 3 percent of employees monthly salaries or wages, of which 2 percent shall be paid by employers and 1 percent by employees. Beginning this year, such rates were increased to 4.5 percent of which 3 percent will be paid by employers and 1.5 percent by employees. Employees working under less than three month employment contracts can receive salary with health insurance included like social insurance. Unemployment insurance Unemployment insurance is applicable starting January 1, 2009 which requires 1 percent to be paid by the employer and another 1 percent to be paid by the employee. This type of insurance will make employees ineligible to receive severance pay when a labor contract is terminated beginning January 1, 2009, unless the company does not register and pay unemployment insurance for their employees during that period. Jobless persons are entitled to three months unemployment allowance if they have contributed to the insurance fund for less than 36 months and at least 12 months. They can avail of six months worth of benefits if they have contributed to the fund for 36 to 72 months; nine months of benefits if they have contributed to the fund for 72 to 144 months and 12 months allowance if they have contributed for more 144 months to the fund. The unemployment allowance is equal to 60 percent of the persons former average six month salary. Jobless persons are entitled to health insurance benefits. They can avail of an apprenticeship for a maximum six months in addition to free employment consultancy and recruitment services. F o r m o re a d v i c e o n t h i s t o p i c, Dezan Shira & Associates at vietnam@dezshira.com or visit 8 Vietnam Briefing 2010

9 Mandatory Benefits for Employees Summary of social security contributions for both employers and employees Year Social insurance Health insurance Unemployment insurance Total contribution Employer Employee Total Employer Employee Total Employer Employee Total < % 5% 20% 2% 1% 3% 1% 1% 2% 25% % 6% 22% 3% 1.5% 4.5% 1% 1% 2% 28.5% % 7% 24% 3% 1.5% 4.5% 1% 1% 2% 30.5% From % 8% 26% 3% 1.5% 4.5% 1% 1% 2% 32.5% Employing Workers in Vietnam Vietnam ranked 103 overall in terms of flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labor Organization according to the Doing Business 2010 project conducted by the World Bank. This ranking was measured based on the following indices: rigidity of employment, the difficulty of hiring, rigidity of hours, difficulty of redundancy, and firing cost in the country. According to the study, the rigidity of employment index is the average of the difficulty of hiring index, the rigidity of hours index, and the difficulty of redundancy index. The difficulty of hiring index measures the applicability and maximum duration of fixed-term contracts and minimum wage for trainee or first-time employee while the rigidity of hours index looks at the scheduling of nonstandard work hours and annual paid leave. The difficulty of redundancy index gives quantitative value to notification a n d a p p r o v a l r e q u i r e m e n t s f o r termination of a redundant worker or a group of redundant workers, obligation to reassign or retrain and priority rules for redundancy and reemployment. Lastly, firing cost measures the notice requirements, severance payments and penalties due when terminating a redundant worker in terms of weeks of salary. The Doing Business project regularly measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. Doing Business 2010 ranking of Vietnam in employing workers as compared to good practice and selected economies: Employing Workers Global Rank Australia Thailand Malaysia Vietnam Lao PRD Philippines Indonesia The following graphs illustrates employment indicators in Vietnam over the past three years: 22 Rigidity of employment index (0-100) Vietnam East Asia & Pacific 100 Redundancy costs (weeks of salary) Vietnam East Asia & Pacific Source: The World Bank Group, Doing Business 2010 Vietnam Briefing

10 The Urban Renewal of Hanoi and Ho Chi Minh City [ By Joyce Roque, Vietnam Briefing ] Vietnam s two major business centers Hanoi and Ho Chi Minh City are expanding the scope of their urban areas to accommodate the influx of foreign and local investment. Currently the country s business capital and largest city, Ho Chi Minh City, is struggling to contain its growth. Traffic jams are a common occurrence. A 15 minute trip to the airport can easily turn into more than an hour s journey during peak hours. Ho Chi Minh City has a population of 7.1 million people as of 2009 and is projected to grow to 10 million by The city needs to develop its public infrastructure to meet the needs of its burgeoning population and expanding economy. Downtown real estate prices have been unstable in the past years because of lack of supply. The local government has decided to address this issue by developing new urban centers. These new urban centers will include the Thu Thiem city center in District 2 and the Phu My Hung urban area in District 7. Thu Thiem city center is a 737 hectare area strategically located within Ho Chi Minh City s northeast growth corridor. It is opposite the Saigon River and borders District 9 and the downtown areas of District 1, District 7 and the Binh Thanh District. The center s strategic location to the Saigon River gives it the advantage of easy access to a vital part of commerce and transport in the city. The Thu Thiem peninsula has 8.5 kilometers of frontage along the river which has its share of warehouses, storage and shipping facilities. The area s connection to the river will help develop it further as a commercial area that will connect the old and new business centers of the city. While it cannot replace or even recreate the historic capital s distinct colonial architecture, it will serve to showcase the modern face of Vietnam as the city embraces more commercial reforms. Planning for the area began in 2003 and construction is currently ongoing. Thu Thiem is still open to infrastructure investments and, once completed, it will replace the historical city center as the new city center consisting of residential and office areas, pools, parks and 40 story buildings. The area will be linked to downtown Ho Chi Minh City through new bridges and roads. The government Ho Chi Minh City photo by Don Tho/Flickr 10 Vietnam Briefing 2010

11 Hanoi photo by Greg Hayter/Flickr has built an east-west tunnel and roadway in addition to the Thu Thiem Bridge which opened in It is also relocating ports along the Saigon River. Another urban center is the 600 hectare Phu My Hung New City Center in District 7 where a lot of the city s international schools are found. The area has the US$100 million Nguyen Van Linh Avenue connecting it to the Tan Thuan Export Processing Zone, Saigon Port areas and the Mekong Delta area. Top foreign companies Unilever and Manulife have placed their headquarters in Phu My Hung. On the Nguyen Van Linh road there are also residential sections with plans to build a university, a high-tech center and a nature reservation park in the future. One of the major investors in the city center is the Phu My Hung Corporation, a joint venture company between Taiwan-based Central Trading and Development Corporation and Tan Thuan Industrial Promotion Company. The company funded the construction of Nguyen Van Linh Avenue and has committed to build the Hiep Phuoc Power Plant and Tan Thuan Export Processing Zone. Primarily designed by American and Asian architects, the area s design has already garnered recognition from the Vietnamese government, the World Bank and the American Institute of Architects. Last year, the new Saigon Exhibition and Convention Center opened adding to other scenic projects in the area like the Waterfront, Sky Garden, Riverside and Phu Gia 99. Ho Chi Minh City is also developing a six line subway system, scheduled to be fully operational by 2020, to alleviate the city s worsening traffic situation and lessen reliance on motorbikes for transportation. The first line of the metro subway system is slated to be finished by The Japan Bank for International Cooperation has promised to provide US$904.7 million worth of financing for the US$1.1 billion project. Like Ho Chi Minh City, Hanoi has b e g u n p l a n s t o s l o w l y g r o w t h e city since 2008 as part of its grand preparations to celebrate its 1,000 year anniversary in October. Hanoi s limits will stretch to include adjacent provinces to make more space for national projects in the capital city. The expansion has already absorbed the provinces of Hatay, Hoa Binh or Vinh Phuc; making the old Hanoi with its crawling French colonial architecture the center of the new expanded city. Plans to grow the scope of the city will inevitably change its old-world charm but hopefully spare the architecture from its days as the capital of French Indochina from being gobbled up by skyscrapers. The city s construction department has announced it will propose regulations to maintain the 970 state-owned French colonial-style villas, although 804 of which are reportedly being misused. The decision to grow Hanoi will allow it to attract more investment projects as well as address real estate and labor shortages, aspects that have hampered the city s economic growth. According to real estate company Savills, high population density and limited land for apartment project development in the city center has moved demand for apartments towards outer districts where the infrastructure has been well developed. It will also make Hanoi more competitive when the city expands to 3,344 square kilometers. Hanoi authorities have already approved a US$314 million West Lake Urban Area to be built in Nghia Do Ward in Cau Giay District, Xuan La Ward in Tay Ho District and Xuan Dinh and Co Nhue Wards in Tu Liem District. Despite being issued a license in 2006, land clearance issues have stalled the Regional Updates project from starting. The proposed 207 hectare urban center will feature an administration center, a financial and trade exchange center, and a cultural center along with office and residential buildings to be constructed by South Korean companies. The government is set to initially transfer 20 hectares of land for the first phase of the project before the city s upcoming anniversary in October. When the city s full expansion is achieved, population is expected to jump from 6.5 million to 12 million people. The master plan to develop the city from its present size will continue through 2030 and will involve slowly growing Hanoi from a capital city into a capital region with satellite townships surrounding it. There are also plans to build the Gia Lam urban area and the Gia Lam science and entertainment park by 2020 at a cost of US$260 million and US$150 million respectively. Each project will occupy 400 hectares of land and will be located about eight to ten kilometers from downtown Hanoi. By 2015, former military airport Gia Lam will be open to domestic flights to lessen congestion in Noi Bai International Airport. The newly renovated airport is nearer to downtown Hanoi and only 15 minutes away by bus. It will have an initial capacity to accommodate 162,000 passengers annually, with capacity increasing to 300,000 by A proposal for the final master plan of the city will be submitted at the National Assembly this year. Until then plans to develop the northern region along the Hong River and relocate residents are still pending approval. In the end, the local governments of Hanoi and Ho Chi Minh City will have the responsibility of striking a delicate balance between development and heritage preservation that will hopefully reinvent both cities without negating their past. F o r m o re i n f o r m a t i o n o n d o i n g b u s i n e s s i n V i e t n a m, p l e a s e e - m a i l v i e t n a d e z s h i r a. c o m or visit Vietnam Briefing

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