Enterprises in Vietnam can now hire an unlimited number of foreigners. In late March, the Vietnamese Government issued Decree 34/2008/ND-CP replacing all the previous regulations on the employment and management of foreigners working in Vietnam, which removes the 3 per cent cap on foreigners to the number of local employees in an enterprise.
Under the new rule, chief representatives, heads of foreign branches and employees of foreign contractor will receive work permit exemption. Gannon’s chief executive officer Walter Blocker praised the new regulation as it would allow more foreign experts and skilled workers to come to Vietnam.
“The 3 per cent cap on foreign employees was introduced several years ago and the American business community responded with a letter and position challenging the logic of such law. Vietnam needs valuable training from foreign experts and should encourage foreign skilled workers to live in Vietnam,” Blocker said.
“As Vietnam works to overhaul its education system, the supply of experienced, well trained middle, upper middle and senior management of Vietnamese origin is being well outstripped by demand. The result of this shortage is costly for everyone,” he added.
Government statistics show the largest number of foreigners is working in education and training, financial and banking, stock, hi-tech, legal consulting, real estate and construction sectors.
“The removal of the 3 per cent cap is a positive move and one that allows companies to make decisions on the employment of foreigners based on their business needs. It also shows the Vietnamese Government’s willingness to comply with its World Trade Organization (WTO) commitments,” said Phan Thi Thuy Duong, PricewaterhouseCoopers’ Ho Chi Minh City-based expert.
PricewaterhouseCoopers lawyers, however, said that Decree 34 still came along with more stringent procedures for obtaining and extending a work permit. “The requirement to obtain a work permit makes sense and foreigners coming to Vietnam expect that they will need to do so. However, the documentation requirements continue to be overly onerous, particularly the need to have all documents notarised and legalised,” Duong said.
Under the company’s judgment, the new criteria would not affect those currently working under a valid work permit but those wishing to extend the work permits. The new rule also requires an employer to be able to show that at least 20 per cent of the total number of its managers, executives and specialists are Vietnamese citizens.
“Although this provision is in line with Vietnam’s WTO commitments, it would not seem consistent with the general removal of the foreign employee ratio limitations,” according to PricewaterhouseCoopers. Blocker, meanwhile, said even though more foreigners were allowed to work in Vietnam, poor infrastructure and the high cost of housing, educating, and providing medical service made their living in Vietnam difficult. “Vietnam has chipped away at its cost advance in the region because of poor urban planning, unfocused infrastructure development, and cumbersome licencing of projects that will bring great benefit to the nation,” Blocker said.
“As a result, Vietnam is again returning to a hardship posting for foreign families adding cost to employers and deterring the attractiveness of bringing the best trainers in to best benefit the nation,” he added.
Blocker stressed that in the situation that Vietnam was in a severe lack of experts and skilled workers, the country needed to be a place that was open and attractive to foreign experts who could help “train the trainers” and prepare the next generation of leaders.