This chapter assesses the potential of FDI to enhance job quality - both wage and non-wage working conditions - and skills development in Viet Nam. The chapter examines the governance framework and policy mix that support the impact of foreign investment on labour market outcomes, focusing on institutional arrangements and policies at the intersection of investment, employment and skills development.
FDI Qualities Review of Viet Nam
Powering the Next Growth Phase
Abstract
An abundant and cost-effective labour market force has made Viet Nam an attractive destination for foreign direct investment (FDI), particularly in labour-intensive and low value-added sectors. The rise of FDI to Viet Nam has led to substantial contributions to job creation, primarily in manufacturing activities such as textiles and garments, footwear, and most recently electronics. In 2023, foreign firms contributed to over a third of total formal employment in Viet Nam, rising significantly from 22% in 2010. Nearly 90% of those jobs are in the manufacturing sector, underscoring the sector’s central role in Viet Nam’s industrialisation and integration in global value chains (GVCs) in recent decades. Employment gains associated with greenfield FDI have not been evenly distributed across regions. Most new jobs are concentrated in major urban centres, particularly Ha Noi and Ho Chi Minh City, contributing to regional disparities in employment opportunities.
While FDI has contributed significantly to creating jobs in Viet Nam, its impact on job quality and skills transfer and development remains limited. The bulk of FDI has been directed to the manufacturing sector, where wages in foreign firms are on average 23% higher than in domestic firms, but this difference remains relatively modest compared to other sectors. In addition, the specialisation on low-skilled activities has created little incentive for firms to invest in workforce development, with only 20% of foreign firms offering training opportunities. The share is nevertheless twice higher than domestic firms, representing an important channel for skills diffusion. Viet Nam has untapped potential to attract FDI in more skill-intensive sectors, including digital, financial services, education, and healthcare, which currently receive minimal FDI. However, regulatory restrictions to FDI persist in key sectors such as telecommunications and financial services.
As Viet Nam looks to attract investment in skills- and knowledge-intensive activities, skills development will become even more of a priority. Enterprises are increasingly identifying shortages for specific skills, including managerial skills, language proficiencies, and technical skills to support high-tech and knowledge-intensive sectors, including digital and green sectors. Shifting demographics such as a rapidly ageing population underscores the need for proactive policy interventions, including reskilling and upskilling opportunities, to mitigate for labour market shifts. Viet Nam has embedded skills development prominently across high-level strategic documents, but implementation is spread across a complex interplay of government agencies, requiring efforts to consolidate objectives and establish institutional mechanisms for co-ordination between government bodies responsible for labour and skills policies. Linkages between businesses, training providers and educational establishments are likewise limited, constraining the responsiveness of the education system to evolving industry needs. Skills foresight exercises are also underway but only in few pilot sectors.
Investment incentives tie more benefits to job creation rather than skills development. Viet Nam’s investment incentives primarily include income-based incentives (i.e. CIT exemptions and reduced rates) which offer generous benefits for lengthy periods of time to attract FDI to certain sectors. The newly established Investment Support Fund also offers financial incentives (i.e. cash grants) to high-tech industries, covering up to 50% of eligible costs on skills development. While eligible activities under Viet Nam’s tax incentive framework include labour-intensive manufacturing projects, the instruments are more likely to lead to significant revenue losses, which in turn reduces the fiscal space to pursue broader investment climate improvements, including skills development. Broader tax system factors, such as limited transparency over the incentive framework, can also hinder take-up of incentives by businesses.
Viet Nam has increasingly incorporated labour provisions into international trade and investment agreements. Agreements such as the EU-Viet Nam Free Trade Agreement (EVFTA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) include provisions on labour standards and skills development. These provisions range from reaffirming commitment to international labour standards to mandating more concrete actions, such as the non-derogation from labour laws for investment purposes. The inclusion of these provisions has led to important labour market reforms in Viet Nam, including the revised Labour Code (2019) and ratification of two ILO conventions: No. 98 on the Right to Organise and Collective Bargaining and No. 105 on the Abolition of Forced Labour. Viet Nam also introduced provisions supporting the establishment of enterprise-level worker organisations independent of the Viet Nam General Confederation of Labour (VGCL). Ensuring workers’ voice arrangements can help identify and address issues faced by foreign firms, including with respect to skills development. However, no independent worker organisation has been established to date, pending guidelines for firms on the establishment and operation of independent worker organisations. The investment community, including the Foreign Investment Agency, could also play a more active role in facilitating entry of foreign talent, an area that has been identified as an obstacle by foreign firms.
Establish mechanisms to systemically involve the investment community in skills development, either by expanding the National Council for Education and Human Resource Development to include larger private sector representation or by supporting the establishment of sector-specific skills councils. Renewed efforts to institutionalise such platforms, building on pilots and initiatives such as the Logistics Industry Reference Council, would help align skills development with industry needs, strengthen business–education linkages, and address emerging skills demands, including in digital and green sectors.
Prioritise expenditure-based investment incentives to support skills development. Viet Nam relies on generous income-based incentives (i.e. CIT exemptions and reduced CIT rates) to attract FDI and stimulate job creation in certain sectors. However, these incentives are more likely to lead to revenue losses that could otherwise be allocated to support broader investment climate improvements, including skills development. Shifting to expenditure-based incentives (i.e. tax allowances and tax credits) could more effectively encourage foreign firms to invest in skills development while limiting fiscal costs.
Consider easing regulatory FDI restrictions in skills-intensive sectors. Viet Nam features a relatively open FDI environment, but restrictions persist in sectors such as telecommunications and financial services, including foreign ownership caps and licensing requirements. These sectors benefit from a high-skilled workforce, and easing these key restrictions would help generate new skill-intensive jobs while enhancing opportunities for knowledge transfer and skills diffusion.
Expand and institutionalise skills assessment and anticipation systems as integral components of a broader, well-equipped labour market information system, building on current forecasting initiatives in sectors such as garments and ports. Active engagement of the investment community (i.e. FIA and foreign firms) can improve the predictive value of skills forecasts, as FDI decisions act as forward-looking indicators of future skills demand. Strengthening co-ordination between MoHA, MoF and key stakeholders will be important to the success of such initiatives and ensuring they inform responsive and evidence-based policies.
Develop a data-driven approach to investment promotion that aligns FDI attraction with Viet Nam’s skills and labour market priorities. Develop an investment promotion strategy based on data-driven prioritisation models, which takes into account the domestic skills base and mitigates for potential job displacement effects. Strengthening co-ordination between national and provincial promotion bodies and reforming the governance and mandate of FIA would further reinforce implementation, efficiency, and investor trust.
Continue advancing domestic labour market reforms to maximise the contribution of FDI to quality job creation. Viet Nam could strengthen collective bargaining and freedom of association rights, streamline the employment of foreign talent, and reduce informality. These measures would improve labour standards in foreign firms and support more inclusive labour market outcomes, while building on recent progress, including the 2025 revisions to the Trade Union and Employment Laws and the ratification of two ILO Conventions.
Strengthen industry-education linkages to better align skills development with skills needs. Viet Nam could encourage foreign firms to take a more active role in skills development, including through public-private partnerships with technical and vocational education and training (TVET) institutions, and participation in co-ordination bodies with education providers (e.g. sector skills councils and industry advisory boards). Pursue broader TVET reforms to encourage industry engagement by expanding workplace-based training, upskilling teachers, advancing digital delivery, and promoting flexible, competency-based programmes.
Continue to incorporate labour considerations in international trade and investment agreements. Viet Nam is a signatory of several international trade and investment agreements that include labour commitments, such as the EU-Viet Nam Free Trade Agreement. This has led to important labour market reforms in Viet Nam, which supports the generation of quality jobs, including by FDI. To this end, Viet Nam is encouraged to continue engaging in international trade and investment agreements that feature labour considerations and commitments.
Continue advancing the agenda for responsible business conduct (RBC) and implementing the National Action Plan on RBC by strengthening labour enforcement mechanisms and promoting awareness of RBC among businesses and policymakers. Integrating labour-related criteria into public procurement criteria and embedding RBC principles in State-Owned Enterprises (SOEs) would further promote RBC across the economy.
Viet Nam boasts an abundant, young and cost-effective workforce. Since the policy reforms of the Doi Moi in the late 1980s, Viet Nam has developed a conducive environment for investment, driven partly by the availability of a young and cost-effective workforce (OECD, 2018[1]). Improvements in access to and the quality of education have expanded the pool of educated workers, reinforcing Viet Nam’s appeal to foreign investors and helping sustain strong inflows of FDI (McGuinness et al., 2021[2]). In 2024, Viet Nam’s labour force participation rate stood at 68.9%, at a level higher than all other comparator economies selected for this study, including the average of 61% among OECD economies (Figure 4.1, Panel B). Unemployment has been historically low, reaching 2% in 2024, remaining the same level from a decade earlier. The unemployment rate in Viet Nam is only higher than in Thailand among comparator economies, and lower than the average for ASEAN of 2.5% and OECD of 5% (Figure 4.1, Panel A).
While the labour force participation rate is high, informality remains pervasive. The majority of workers in Viet Nam operate in the informal sector, at 64.6% of total employment in 2024, in a share that is higher than comparator economies such as Jordan, Georgia, Portugal and Romania (Figure 4.1, Panel D.). Many informal workers tend to be in the agriculture sector, occupying low-skilled jobs, and located mainly in rural areas. By definition, informal workers have limited access to job-related benefits, with limited access to social protection, lower wages, and uncertain job security. In addition, the transition of informal workers to formal employment is hindered by their lower access to upskilling opportunities than formal workers. As such, informal workers tend to find themselves in precarious employment conditions (ILO, 2021[3]). Tackling informality becomes crucial to not only expand coverage to social protection and improve job quality overall, but also to stimulate entrepreneurship and business expansion. To that end, lowering the burden on small businesses to comply with government regulations (i.e. business registration, tax payments) has been recommended to help drive businesses towards formalisation and in turn stimulate further job creation (OECD, 2023[4]). Public policies aimed at improving education can also contribute to reducing informality, as informal workers are often low-skilled and typically include young entrants to the labour market (OECD, 2025[5]).
Note: Panel D presents comparator economies for which informality data is available according to the 19th ICLS definition.
Source: OECD based on ILO (2026[6]) ILOSTAT, https://ilostat.ilo.org/data/.
Commitments to improving the access to education underpin the high participation of the workforce. Viet Nam’s investment in basic education has culminated in high-quality outcomes, including near-universal enrolment in primary and lower secondary schools (OECD, 2025[5]). According to the results of the OECD Programme for International Student Assessment (PISA), Vietnamese students score on-par with the OECD average on reading, mathematics and science (OECD, 2023[7]). At the upper-secondary level, however, enrolment rates are marked by socioeconomic disparities, with higher education costs posing significant barriers for vulnerable populations. Enrolment in tertiary education also still lags behind peer economies and the OECD average. In 2022, Viet Nam’s gross tertiary enrolment stood at 42%, which remains lower relative to Indonesia (45%), Thailand (46%), Colombia (59%), and the OECD average (78%) (UNESCO Institute for Statistics, 2022[8]). Making upper-secondary school mandatory and increasing spending on tertiary education will be key to improving education outcomes and supporting long-term economic development (OECD, 2025[5]).
Employment is concentrated in low-skilled occupations, although demand for high-skilled labour is gradually rising. As Viet Nam integrated into global trade networks, growing number of jobs were created in the export-oriented manufacturing sector, particularly in textiles, leather, wearing apparel, and, more recently, electronics manufacturing. The growth of the manufacturing sector coincided with the reallocation of labour from agriculture to industry, although agriculture continues to employ a significant share of the workforce (Figure 4.2, Panel A). Given the labour-intensive and routine nature of production in these sectors, employment has been concentrated in low-skilled work (i.e. assembly work). In 2024, over a quarter of total employment was based in unskilled occupations, and a further 15% of workers were employed as machine operators or assemblers (Figure 4.2, Panel B). At the same time, Viet Nam is gradually shifting towards developing higher value-added and skill-intensive sectors, such as high-tech industries. This transition presents challenges in the form of persistent skills shortages, including for basic and advanced digital skills, which limits workers’ ability to seize new opportunities in the digital economy, and holds back Viet Nam’s digital transformation (OECD, 2023[4]). Responding to these growing skills needs will likely be crucial for Viet Nam’s future economic growth (Van Can and Dang, 2024[9]), and will shape the capacity to absorb incoming FDI in skill-intensive activities.
Note: This Figure reflects preliminary 2024 data.
Source: OECD based on NSO (2026[10]) Employment Statistics, https://www.nso.gov.vn/en/employment/.
Viet Nam is undergoing significant demographic shifts, which brings important implications for the labour market and longer-term economic trajectory. The Vietnamese population is rapidly ageing, driven by an increasing life expectancy and declining birth rates, a trend that is shared more broadly by Southeast Asian economies. The old-age dependency ratio1 in Viet Nam will increase from 14% in 2025 to 32% by 2050 (UN, 2024[11]). This follows a period of favourable demographics: between 1995 and 2020, the working-age population grew at more than twice the pace of the overall population, reaching 61% of the total population in 2020 and providing a substantial demographic dividend. Looking ahead, the share of working-age adults in the total population is projected to decline to around 59% by 2045 (OECD, 2025[5]).
The consequences for the labour market and economic competitiveness are already beginning to materialise. For example, in textiles and garments, employers are facing increasing difficulty in recruiting younger workers (ILO/Viet Nam Textile and Apparel Association, 2025[12]). Rising manufacturing wages, which nearly tripled between 2010 and 2022, combined with weaknesses in upper secondary and tertiary education, may further erode the cost and skills competitiveness that has underpinned Viet Nam's ability to attract FDI (OECD, 2025[5]). To mitigate for these demographic trends, Viet Nam is recommended to upgrade education and training, particularly at the upper secondary and tertiary levels and in closer co‑ordination with the business sector, to sustain productivity growth and maintain the skills base needed to attract higher-value FDI. Expanding pension coverage, reducing labour informality, and strengthening the fiscal framework to meet rising social protection and healthcare spending needs are also identified as priorities (OECD, 2020[13]; 2023[4]).
The contribution of FDI on job quality and skills occurs through various transmission channels. Foreign enterprises may have a direct impact in the labour market by generating jobs, providing better working conditions or contributing to upskilling (Box 4.1). Indirectly, foreign enterprises may create competition or imitation effects by incentivising domestic peers to provide higher wages or invest in skills development. For instance, evidence shows that a greater presence of foreign firms in Viet Nam is associated with higher average wages of domestic private firms (Hoi and Pomfret, 2010[14]). One example is in a select Vietnamese service industry (i.e. professional, scientific and technical services), where the presence of foreign firms created wage spillovers by incentivising domestic firms to pay more competitive wages (Nguyen, 2020[15]). Evidence also suggests that increases of FDI in services sectors is linked with increased numbers of VET graduates (Ibarra-Olivo et al., 2024[16]), therefore contributing to the supply of skilled workers. Foreign firms can also have negative effects, for example when they engage in poor labour practices in their supply chains or when competition for talent drains skilled workers from domestic firms.
The entry and operations of foreign firms affect the demand for skilled and unskilled labour in the host country, with concomitant effects on employment and wages (Figure 4.3). FDI can also affect non-wage working conditions, including job security and core labour standards. FDI effects on labour market outcomes involve several transmission channels (orange box). Outcomes can result from foreign firms’ direct operations, such as hiring new workers or firing incumbents following a foreign takeover or offering better or worse working conditions than domestic firms. Foreign firms’ direct operations have also spillover effects arising from: (1) their value chain relationships with domestic firms, whether buyers or suppliers; (2) market interactions through competition and imitation (or learning) effects; (3) and labour mobility of workers between foreign and domestic firms.
Source: (OECD, 2022[17]).
The premise underlying the existence of FDI spillovers is that foreign firms are technologically superior and, in turn, benefits might spill over to domestic firms. Value chain relationships or labour mobility between foreign and domestic firms can create knowledge spillovers, and in turn raise productivity, wages and employment. FDI spillovers on labour market outcomes are often specific to certain segments of the workforce, industries, or locations. They are also not always positive if, for instance, foreign firms have irresponsible labour practices with their suppliers or if competition for talent leads to less skilled workers in domestic firms. The intensity of such adverse impacts depends on how fast the labour market adjusts to external shocks. For instance, FDI hardly increases the share of skilled workers and worsens wage disparities when skills shortages are severe and labour mobility is constrained.
The direction and magnitude of the combined direct and spillover effects of FDI on labour market outcomes ultimately depends on the economic structure of the host country and domestic firms’ characteristics (size, productivity level, skill-intensity, business and labour practices), labour market characteristics (employment levels, share of skilled labour, unionisation rates, etc.) and the policies and institutions in place (blue box). Whether FDI improves or undermines labour market outcomes depends also on the type of activity of foreign firms and the extent to which they export home country practices and norms or adopt instead those of the host country.
Source: OECD (2022[17]) FDI Qualities Policy Toolkit, https://doi.org/10.1787/7ba74100-en.
4.3.1. FDI drives more than one third of formal employment in Viet Nam
Reforms introduced under the Doi Moi have resulted in a steady increase of FDI and its contribution to employment since the late 1980s. In the early stages, FDI had a relatively limited impact on employment as investment was directed to capital-intensive sectors such as oil and gas (Rhys Jenkins, 2006[18]). Subsequent reforms to the legal framework for investment in the 1990s have allowed investors to play an important role in diversifying the economy and supporting Viet Nam’s industrialisation (OECD, 2018[1]). Viet Nam’s accession to the WTO in 2007 and the ratification of numerous free trade agreements provided further scope for export-oriented investment in the manufacturing sector, which reinforced FDI’s contribution to employment (Fukase, 2013[19]). Viet Nam’s investment climate, characterised by attractive tax incentives, an abundant workforce, and competitive wages provided a fertile environment for foreign presence in labour-intensive and low-skilled manufacturing activities, including electronics, textiles and garment industries. In turn, the share of employment generated by foreign firms amounted to 34% of total formal employment in 2023, rising from 22% in 2010 (Figure 4.4, Panel A). The share of employment by foreign firms in Viet Nam is higher than many peer economies, including the average for OECD of 21% (Figure 4.4, Panel B).
Note: Panel B country aggregates exclude agriculture, financial and insurance activities, education services, healthcare, arts, entertainment and recreation, other services, and public administration (corresponding to ISIC rev. 4 sectors B-N, excluding K). Data for Viet Nam refers to percentage of total employment. Other country aggregates refer to percentage of private sector employment
Source: OECD elaboration based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/; and OECD (2023[21]) AMNE Database, https://www.oecd.org/en/data/datasets/multinational-enterprises-and-global-value-chains.html.
4.3.2. Jobs created by FDI are largely in manufacturing and around urban hubs
Nearly nine out of ten jobs created by FDI are in the manufacturing sector. Owing to the importance of the manufacturing sector in Viet Nam’s economy, nearly 90% of jobs created by foreign enterprises are in the manufacturing sector, a share that is almost three times as much as domestic firms (Figure 4.5, Panel A). Greenfield FDI data further highlights Viet Nam’s strong specialisation on manufacturing relative to other peer economies. Between 2014 and 2024, 78% of jobs generated by greenfield FDI in Viet Nam was in manufacturing—a higher share than all peer economies, including Indonesia (65%), Thailand (62%), or Malaysia (45%) (Figure 4.5, Panel B). On average, each million USD of greenfield FDI announced between 2022 and 2024 is expected to have created 9 direct jobs. The most job-intensive subsectors include business machinery and equipment, textiles, non-automotive transport OEM, and wood products (Financial Times, 2024[22]) (Figure 4.5, Panel C). Importantly, women represent more than half of the manufacturing workforce, predominately in textiles and garments, leather and footwear, and the rapidly growing electronics sector. While FDI inflows to the manufacturing sector have created many job opportunities in the labour market, particularly for women, these jobs are concentrated in low-skilled and low value-added activities, with limited prospects for career advancement and at times precarious job conditions (Chapter 4).
Service sectors account for a negligible but growing share of employment driven by FDI. Since the economic reforms of the late 1980s, Viet Nam has undergone a steady shift in labour allocation from agricultural subsistence toward export‑oriented manufacturing (OECD, 2018[1]). FDI has accelerated this reallocation to manufacturing and, to a much lesser extent, service sectors. In 2023, foreign firms in service sectors accounted for nearly 12% of total employment, doubling earlier amounts in 2006. In service sectors, employment at foreign firms was spread near equally between transportation and storage, professional activities, finance and banking, and information and communication activities between 2019 and 2023 (Figure 4.5, Panel A). Lower shares of employment in these activities may be partly explained by persisting regulatory restrictions on FDI, particularly in transport and telecommunications, where Viet Nam had historically imposed above average restrictions in comparison to ASEAN and OECD levels (OECD, 2018[1]) (Section 4.4.2).
Source: OECD based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/; Financial Times (2024[22]), fDi Markets (database), https://www.fdimarkets.com/.
Job opportunities created by FDI are concentrated in urban centres such as Ha Noi and Ho Chi Minh City, where investors tend to locate themselves to facilitate access to larger markets and better infrastructure, as is the case in other economies. Between 2014 and 2023, nearly three quarters of FDI inflows and associated job opportunities were concentrated in the Southeast and Red River Delta regions, where Ha Noi and Ho Chi Minh City are the primary beneficiaries (Figure 4.6, Panel A). However, FDI is creating jobs at a faster rate outside of urban centres, which may be a result of foreign investors increasingly locating themselves in rural areas to benefit from more competitive wages and low-skilled labour. In the northern midland and mountainous areas, for example, employment generated by FDI has been expanding by an average growth rate of 5% between 2014 and 2024, in part due to the higher concentration of industrial zones in northern areas of Viet Nam (Figure 4.6, Panel B). Conversely, FDI-driven job creation in the Southeast region has risen by an average annual growth rate of nearly 3%. Despite the overall increase in jobs generated by FDI in the Southeast region, which has doubled in nominal terms since 2006, the share of total employment has declined from 72% in 2006 to 42% in 2023, which signals a more balanced labour distribution across regions relative to previous decades.
Nonetheless, other regions benefit little from the impact of FDI on employment. The Central Highlands region accounted for less than 1% of jobs created by FDI in 2023, or around 21 000 jobs in total. The factors contributing to these regional disparities are complex, including geographic location, infrastructure, and the local business climate. The mountainous terrain and lack of access to the seaport have constrained FDI inflows, including in labour-intensive and export-oriented manufacturing projects (NSO, 2021[23]). According to the Provincial Competitiveness Index (PCI), an annual survey that assesses the economic governance quality of provincial authorities since 2005, the Central Highlands region ranked in the bottom tier across several indices on the business climate in 2024, including the level of transparency in the business environment, length of bureaucratic procedures and inspections, and the extent of proactivity of provincial authorities in addressing business concerns (VCCI, 2025[24]). At the core of this challenge is the decentralisation of certain government functions, such as investment promotion and facilitation, which fosters competition between provinces but disadvantages provinces with less resources and institutional capacity to do so, an issue that has become evident in recent years (OECD, 2018[1]).
Source: OECD elaboration based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/.
4.3.3. Foreign firm wages are on average 21% higher than Vietnamese firms
An abundant and cost-effective labour force has long been a key feature of Viet Nam’s investment climate. The average monthly earnings for workers in Viet Nam, which stood at 330 USD in 2023, fall far below many peer economies, and is roughly half the average for ASEAN economies. Variations in wages exist across sectors, with the highest average monthly earnings in the information and communication sector at around 506 USD per month, while the lowest earnings are at nearly 223 USD in the agriculture sector (ILO, 2024[25]). Viet Nam has taken important steps towards regulating the minimum wage which, since 2012, has been set according to the development level and living costs of each region (ILO, 2024[26]). As of July 2024, the minimum wage varies from VND 3 450 000 million (around USD 135) to nearly VND 5 million (around USD 195) depending on the region (Government of Viet Nam, 2024[27]).
FDI to Viet Nam has contributed to higher wages across all economic sectors relative to domestic firms. According to the World Bank Enterprise Survey (WBES) of Viet Nam, the foreign firm wage premium in Viet Nam are on average higher than all peer economies chosen for this analysis except Peru, as well as higher relative to the average levels of OECD and ASEAN economies, where foreign firms tend to pay on average 26% and 31% higher wages, respectively (Figure 4.7, Panel A). However, the WBES is based on firm-reported surveys, and the sectoral coverage may differ from official data of the NSO. Data provided by the NSO show that overall, in 2023, foreign firms paid 21% higher wages on average than domestic peers, and this rate has more than doubled from 8% in 2006 (Figure 4.7, Panel C). This long-standing foreign firm wage premium is partly a result of government policy that, until 2011, mandated higher minimum wage requirements for foreign enterprises relative to domestic ones. Since 2012, uniform minimum wage requirements were applied to both domestic and foreign firms, according to a scale that accounts for the development level of each region (ILO, 2024[26]). Despite the overall positive wage premia associated with foreign firms, the extent of these benefits varies significantly by sector.
Foreign firm wage premia are positive across all sectors but are lowest in manufacturing, which is also Viet Nam’s most FDI‑intensive sector. Viet Nam’s large and cost-effective workforce has long attracted foreign investors to labour‑intensive manufacturing industries, which received more than half of total FDI inflows since 2020. Because of the large presence of foreign firms and employment in manufacturing, the sector also accounts for the largest share of the total foreign wage bill, amounting to 80% in 2019-2023 (Figure 4.7, Panel B). Yet reliance on low‑skilled labour reduces incentives for foreign manufacturers to offer competitive wages compared to domestic peers, resulting in a relatively modest 23% foreign firm wage premium in 2023, considerably lower than in services or agriculture. Given the outsized weight of manufacturing in FDI employment relative to other sectors, the overall foreign firm wage premium economy‑wide averages around 21% in 2023.
Service sectors tend to offer better working conditions but attract smaller share of foreign investment. In 2023, foreign firms in service sectors paid on average 90% higher wages than domestic peers, a wage gap that has narrowed from 133% in 2006. The largest wage premia within services were recorded in professional and technical services (177%), education (162%), wholesale and retail (122%), transport (99%) and healthcare (60%). These subsectors collectively accounted for 21% of the total foreign firm wage bill in 2023, reflecting their relatively modest footprint in the foreign‑invested economy despite their higher premiums. Given the markedly higher wage premia in services, policies that attract more FDI into service activities may positively influence job quality and skills development. This is especially relevant in subsectors such as healthcare and education, which not only exhibit high foreign firm wage premia but also contribute to more inclusive labour market outcomes (Chapter 4).
Foreign firm wage premia have risen rapidly in agriculture, but FDI inflows remained negligible. Foreign firms in agriculture offered on average 105% higher wages than domestic firms in 2023, which has risen significantly from a negative foreign firm wage premium of -14% in 2006. Despite the role of the agriculture sector in Viet Nam’s economy, the sector tends to receive negligible amounts of FDI. Between 2020 and 2024, less than 1% of total FDI inflows were directed to the agriculture sector.
Note: Panel A: The indicator registers a positive value if foreign firms outperform domestic firms, and a negative value if foreign firms underperform on average. Confidence intervals are reported at the 95% confidence level. Panel C: Other sectors refer to mining and quarrying, construction, electricity generation and utilities.
Source: OECD calculations based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/; and World Bank (2025[28]) Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
Foreign firms pay well above the minimum wage across all regions, including relative to domestic firms. Since 2012, Viet Nam has enforced a unified minimum wage applicable to both domestic and foreign firms, with differentiations based on region to account for disparities in living costs and development levels. In 2024, the lowest regional minimum wage stood at VND 3 450 000 million (around USD 135) for predominately rural and remote provinces, including Central Highlands, while the highest tier is equal to nearly VND 5 million (around USD 195), and includes urban centres such as Ha Noi and Ho Chi Minh City (Government of Viet Nam, 2024[27]). In 2023, the average monthly wage at foreign firms was USD 161, compared to 130 USD at non-state enterprises (Figure 4.8, Panel A). Between 2013 and 2023, wages paid by foreign firms were well above the minimum wage for all regions. In the Southeast region, for example, foreign firms paid an average monthly wage of USD 410, compared to USD 333 among domestic firms and nearly double the minimum wage tier of USD 195 for urban centres (Figure 4.8, Panel B). Domestic labour market regulations, such as minimum wage legislation, help ensure that foreign firms do not offer less favourable working conditions than domestic peers, thereby safeguarding rather than undermining labour standards in the host economy (OECD, 2022[17]). Evidence also suggests that Viet Nam’s minimum wage legislation have led to reduced income inequality since 2012, particularly in the formal sector, by raising wages at the lower end of the distribution (Henrik Hansen, 2016[29]).’
Source: OECD elaboration based on NSO (2026[20]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/.
4.3.4. Foreign firms create more jobs in low-skilled activities
The supply of jobs by foreign firms are concentrated in low value-added and low-skilled activities. The manufacturing sector accounts for an important share of FDI inflows to Viet Nam, attracting nearly 60% of FDI inflows between 2014 and 2024, and generating nearly 90% of employment in foreign firms between 2013 and 2023 (Figure 4.9). Within the manufacturing sector, foreign firms are primarily engaged in the production of electronics, basic metals, rubber and plastics, textiles, apparel and leather manufacturing (NSO, 2021[23]). The bulk of these jobs require basic skills, such as manual assembly work. In turn, high-skilled workers represent only 6% of labour at foreign manufacturing firms, measured by the share of workers with university degrees or higher. This is consistent with broader labour market conditions, in which elementary occupations accounted for 30% of the labour force in 2022, in comparison to 14% who were employed as plant or machine operators and assemblers (NSO, 2025[30]).
The concentration of FDI in low-skilled manufacturing activities may pose long-term risks to employment, particularly due to advances in automation, which may displace workers who lack the skills to transition to new job opportunities, or lead firms to relocate themselves in other economies in response to cost reductions (OECD, 2020[13]). These shifts are also likely to disproportionately affect women who are overrepresented in the manufacturing workforce (Chapter 4), which provides more impetus to leverage the impact FDI to support skills development and spillovers and contribute to the growth of sectors offering greater opportunities for medium- to high-skilled employment.
Note: The size of the bubbles reflects the share of total employment at foreign firms between 2013 and 2023.
Source: OECD elaboration based on NSO (2026[20]), Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/.
In sectors other than manufacturing, foreign firms are more likely to rely on skilled labour than domestic peers. In 2016, foreign firms had higher shares of skilled labour in their workforce in almost all sectors of the economy relative to domestic firms, in the exception of the financial and banking services sector (Figure 4.10, Panel A). The share of skilled workers at foreign firms exceeds 50% in several sectors such as education (78%), professional and technical services (75%), information and communication (74%), financial and banking services (60%), and health care (55%). This is not surprising, as foreign firms tend to bring in new technologies that create demands for more skilled labour (OECD, 2022[17]). However, the trend is less evident in manufacturing, where foreign firms tend to operate in lower skill-intensive activities, attracted by Viet Nam’s competitive wages and abundant labour. The largest skills disparity between domestic and foreign firms is in the transportation and logistics sector, where the share of high-skilled workers represented 43% of labour at foreign firms, in comparison to 21% in domestic firms.
Many sectors have potential for skills spillovers but attract low levels of FDI. Since foreign firms are more skills intensive than their domestic peers in various sectors, increased FDI in these activities could contribute to skills spillovers to the domestic labour force. However, these sectors tend to receive smaller shares of FDI inflows. For example, sectors where high-skilled workers comprise more than half of the workforce have collectively accounted for 5% of total FDI inflows and less than 3% of foreign firm employment. This leaves scope to increase the presence of FDI in these activities to support skills spillovers and knowledge transfers to domestic workers.
Note: Panel A: Higher skilled labour comprises workers with bachelor’s degrees or higher. Pane B: Short-term training category includes untrained workers.
Source: OECD elaboration based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/.
4.3.5. Foreign firms are more likely to offer on-the-job training than Vietnamese peers, but less so than comparator economies
Firms are increasingly expressing difficulties recruiting workers with relevant skills. In 2023, around 30% of foreign firms in Viet Nam identified an inadequately educated workforce as a major constraint, nearly three times higher than domestic firms (Figure 4.11, Panel A). The lack of skilled labour is identified as a more pressing issue for foreign firms in Viet Nam than other comparator economies such as Malaysia, Thailand, and Indonesia, but lower than Romania and Uzbekistan. On the regional level, concerns of skills gaps are more pronounced in Viet Nam than the average for ASEAN economies of 14%. The skills that are in-demand include managerial and leadership skills, language proficiencies, and occupation-specific technical skills (World Bank, 2022[31]). In 2023, less than 1% of Viet Nam’s workforce were in management or leadership roles, in comparison to 26% in elementary occupations (NSO, 2025[30]). Such skill shortages may also limit women’s career advancements prospects, as they constitute a significant proportion of workers in the manufacturing sector yet remain underrepresented in managerial roles (Chapter 4). Consultations with stakeholders confirmed shortages for managerial skills but identified additional priorities, including marketing, employability or navigation skills, and certain occupation-specific skills (e.g. software programming, warehouse management).
Viet Nam is also facing a growing demand for talent relevant to the digital and green sectors. As Viet Nam is currently seeking to attract investment in more knowledge-intensive and high-tech industries, such as semiconductors, investors have increasingly raised concerns over shortages for specific talent, such as digital skills (Viet Nam Business Forum, 2024[32]). According to the World Economic Forum’s “Global Competitiveness Report” of 2019, digital skills (i.e. computer skills, basic coding, digital reading) among the Vietnamese population are relatively lower in comparison to peer economies such as Indonesia, Malaysia, Thailand, as well as below the regional and OECD averages (WEF, 2019[33]). The supply of advanced skills is also insufficient, such as these required to support the semiconductor industry. The current workforce is estimated at around 15 000 technicians and engineers, significantly below the projected requirement of 50 000 by 2030 to meet market demand (Vietnam+, 2025[34]). Skills shortages are also a concern among investors in green sectors such as renewable energies, where difficulties exist in recruiting engineers, renewable energy project managers and specialised technicians (Chapter 6).
Driven by their skills needs, foreign firms are more likely to offer in-house training opportunities than domestic firms. While FDI may raise the demand for skilled labour in the host economy, foreign firms may also simultaneously increase the supply of skills, including by offering training opportunities for employees to meet their own demands for skills (OECD, 2022[17]). In Viet Nam, foreign firms are twice as likely to offer training opportunities than domestic firms (Figure 4.11, Panel B). This represents an important channel for skills development and upgrading, including in sectors with lower skills intensity such as manufacturing. Beyond providing direct training opportunities, FDI can contribute to skills development through various other transmission channels, including through labour mobility and competition or imitation effects (Box 4.1). The demand for skills by FDI firms may also lead to increases in the supply of skilled workers in the host economy. In Viet Nam, there is evidence showing that increased in FDI in service sectors are associated with a rise in the supply of technical and vocational education and training (TVET) graduates (Ibarra-Olivo et al., 2024[16]), implying a growing incentive for prospective workers to acquire skills that align with new job opportunities created by FDI.
While positive, foreign firms based in Viet Nam remain far less likely to offer upskilling opportunities than peer economies. The performance premium of foreign companies in skills development of employees is lower than many other economies, including the average levels of ASEAN and OECD economies. Only nearly 20% of foreign firms offer training opportunities in Viet Nam, in comparison to 42% in ASEAN and 58% in OECD economies. This implies strong potential to improve such transmissions channels for skills development through effective policy interventions.
Note: This Figure refers to data in 2025 or latest available year for each country. Data for Viet Nam refers to 2023.
Source: OECD calculations based on World Bank (2025[28]), Enterprise Surveys, https://www.enterprisesurveys.org/en/data.
4.4.1. Labour market enhancements are part of Viet Nam’s strategic outlook, but co‑ordination could be strengthened
The improvement of labour market conditions is a priority that underpins many Viet Nam’s high-level strategic documents (Table 4.1). The Socio-economic Development Plan (2021-2025) sets out priorities on wages, vocational education, digital skills, and business–training linkages, alongside measurable targets such as raising the share of workers with certifiable training to at least 28% (National Assembly of Viet Nam, 2021[35]). The recent Resolution 71-NQ/TW of the Politburo places the education sector at the centre of Viet Nam’s plans to achieve high-income status by 2045. Complementary sectoral strategies reinforce these priorities: the National Digital Transformation Programme emphasises digital skills; the Vocational Education Strategy (2021-2030, vision to 2045) seeks to expand enrolment and industry-relevant training, including through private and FDI-linked institutions. Most recently, Viet Nam approved the plan on Developing Human Resources for the Semiconductor Industry to 2030 (Prime Minister of Viet Nam, 2024[36]). Other strategies and plans exist for various other economic activities, including on the industry level, such as chemicals, agriculture and fisheries, textile and garments, all of which reflect the importance of aligning workforce development.
Positively, Viet Nam’s overarching strategy for investment also incorporates considerations for the labour market and skills development. The strategy emphasises the impact of FDI on skills development through various transmission channels, including by directly promoting FDI inflows to the education sector and encouraging the establishment of foreign vocational training institutions. The strategy also identifies the direct role of foreign enterprises in skills development by encouraging enterprises to train Vietnamese workers and enable them to take on higher-level roles. Recommendations include promoting diverse training modalities, such as certifiable online courses, to facilitate easier access to upskilling opportunities, and foster co-operation with investors to deliver demand-driven training programmes through order placements. To create an ecosystem that is conducive for the impact of FDI on skills development, the strategy calls for aligning the education and training system more closely with labour market demands for certain skills, such as digital skills.
Select strategic documents for job quality and skills
Source: OECD based on (National Assembly of Viet Nam, 2021[35]; Prime Minister of Viet Nam, 2022[37]; Prime Minister of Viet Nam, 2022[37]; Prime Minister of Viet Nam, 2014[38]; Prime Minister of Viet Nam, 2021[39]; Prime Minister of Viet Nam, 2020[40]; Prime Minister of Viet Nam, 2022[37]; Prime Minister of Viet Nam, 2024[36]).
The impact of FDI on employment and skills is influenced by several policy domains, and therefore falls under the purview of a broad range of stakeholders, including several ministries, social partners, and private sector representatives, such as foreign firms themselves. Given the multitude of actors involved, employing a whole-of-government approach to skills policy is essential. This involves establishing co-ordination mechanisms among stakeholders to achieve consensus and ensure that investment policies are adapted to labour market conditions, and vice versa. It also becomes important that responsibilities are balanced, defined, sufficiently funded, and mutually understood by all actors (OECD, 2022[17]). To support horizontal co-ordination at the intersection of FDI, employment and skills, governments adopt varying modalities depending on their national context, such as interministerial committees or councils that include the investment community, or boards of investment promotion agencies (IPAs) that involve the labour and skills communities.
Although skills development is embedded in Viet Nam’s outlook, co-ordination between government agencies could be strengthened. In Viet Nam, a plethora of government actors are responsible for policies relevant to investment, employment and skills development (Figure 4.12). Government bodies mandated with the formulation of investment policy include the Ministry of Finance (MoF). Its designated implementing body, the Foreign Investment Agency (FIA), acts as Viet Nam’s main investment promotion agency (IPA), and is responsible for investment promotion and facilitation activities at the national level. Viet Nam has a decentralised system for investment promotion and facilitation, devolving certain responsibilities to provinces, which constitute the entry point for investors. At the subnational level, each province has a Department of Department of Finance responsible for promoting investment, supporting investor entry, and enforcing investment-related regulations within the respective jurisdictions. For the investment portfolio alone, several national and subnational actors are involved in driving policy formulation and implementation, which has its strengths and drawbacks (Section 4.4.4).
Similarly, decision-making in skills policy is shared among different governmental departments and agencies in Viet Nam. Formerly, the Ministry of Labour, War Invalids and Social Affairs assumed the responsibilities of setting labour policies, including wages, social insurance, occupational health and safety, vocational education, and horizontal policy areas such as gender equality. Following the government restructuring efforts in 2025, aimed at increasing the efficiency of public administration, the functions of MOLISA were redistributed across several ministries, of which many functions fell under the Ministry of Home Affairs (MoHA). Currently, the policy domains of employment and skills development involve an interplay of public and private stakeholders, and these include:
MOHA performs state functions relevant to employment, including wages, social insurance, and occupational safety and health; the regulation of associations, social and charitable funds, and NGOs; as well as youth and gender affairs. MoHA is also responsible for collecting and forecasting labour market information and managing the National Wage Council (Government of Viet Nam, 2025[41]).
Ministry of Education and Training is mandated to regulate and oversee education and vocational training establishments, which includes setting the national standards for skills vocational skills and issuing national vocational skill certificates (Government of Viet Nam, 2025[42]).
Viet Nam Chamber of Commerce and Industry (VCCI) serves as the national representative body of the Vietnamese business community. Its mandate is to support and advocate for business development, promote sound industrial relations, and contribute to Viet Nam’s socio-economic development. VCCI is an independent body that engages closely in policy dialogue with the government of Viet Nam.
Viet Nam General Confederation of Labour (VGCL) was established in 1929 as the national trade union organisation. It operates as a socio-political organisation under the Viet Nam Fatherland Front and is designated the national representative of employees in labour relations. VGCL participates in tripartite consultations on labour policy, such as minimum wage discussions through the National Wage Council.
Other public and private stakeholders play a role in shaping policy on employment and skills. For example, the Ministry of Industry and Trade develops policies and strategies for sectoral development, in which skills development plays a key role. Provincial-level departments under the ministries oversee the implementation of labour policy in their respective localities. Viet Nam benefits from the input of business associations and international partners, such as the ILO, GIZ, and the Viet Nam Business Forum. The latter provides a platform for enterprises and public sector stakeholders to identify needs related to skills and employment in its Working Group on Human Resources (Viet Nam Business Forum, 2024[32]).
The extent of the investment community’s involvement in the Vietnamese skills system remains limited. Currently, Viet Nam lacks mechanisms that institutionalise the involvement of the investment community, such as the IPA and foreign firms, in shaping the direction of skills development. In Viet Nam’s case, where foreign firms are responsible for over a third of total employment, such mechanisms would help reduce the gap between the information produced and the skills needs driven by FDI, as the investment community often has access to unique information on MNEs’ operations and run surveys to identify their challenges and skills needs (OECD, 2022[17]). In Viet Nam, mechanisms exist to foster collaboration among government agencies on skills policy, notably through the National Council for Education and Human Resource Development, which includes 27 representatives from key ministries and educational institutions. However, the MoF and FIA are not members of the Council, which leaves it unclear whether investment considerations figure into in assessments of skills supply and demand or in the design of education programmes. Consultations with stakeholders equally indicate that the Council is represented primarily by academia with little participation and direct input of employers. Viet Nam also engages with the international business community vis-a-vis the Viet Nam Business Forum, but not in a systemic way.
Viet Nam can strengthen the role of foreign firms in shaping skills development policies. The mandate and membership of the existing National Council for Education and Human Resource Development to include representatives from the investment community and private sector. Alternatively, Viet Nam could envisage establishing dedicated sector-specific mechanisms to bring together business associations, trade unions, non-governmental organisations, educational and government institutions. Consultations with stakeholders indicated previous efforts to pilot sectoral skills councils in Viet Nam, including for the agriculture and tourism sectors, but these initiatives have not fully materialised due to lack of sustainable funding mechanisms among other factors. Reinvigorating these efforts and institutionalising mechanisms of co-ordination would help build consensus between stakeholders on what the priority skills needs are and how to address them. The Logistics Industry Reference Council, established in 2017, demonstrates the potential of such a platform to deliver benefits for employers and educational establishments within a specific sector. The experiences of other economies also illustrate other modalities for high-level co-ordination between investment and skills development (Box 4.2), although the design of such mechanisms will depend on policy priorities and institutional context.
Institutions with a mandate on investment policy, employment or skills development
Source: OECD elaboration.
Ireland’s National Skills Council
The National Skills Council (NSC) was established in 2024 to provide advice on priority skills needs and secure delivery of the identified needs. The NSC brings together a broad range of actors, including representatives from the relevant government departments, academia, enterprises and social partners. As a member of the NSC, the CEO of IDA Ireland, the Irish IPA, is charged with providing regular updates on sectoral opportunities and potential target areas for increased FDI and advice on issues associated with the availability of skills to support employment. The 2021-2024 investment promotion strategy indicates that the IPA will collaborate with the Department of Education and Skills, the National Skills Council, or the Expert Group on Future Skills Needs. The National Skills Strategy 2025 sets the overall vision for skills policy and details the responsibilities and members of the National Skills Council.
Rwanda Development Board
Rwanda Development Board (RDB) is a government institution whose mandate is to accelerate Rwanda’s economic development by enabling private sector growth. RDB is responsible for promoting domestic and foreign investment, but other key services include skills development and improving workers’ employability. The Chief Skills Office was established under the RDB in 2018 to align skills development with labour market demands. It is mandated to provide effective oversight and co‑ordination in the skills development and employment promotion ecosystem. The goals of the Chief Skills Office include promoting and co-ordinating sectoral skills and capacity development strategies to meet private sector needs; conducting labour market assessments to identify current and future skills requirements in priority sectors and key investment projects; and facilitating labour market integration through innovative partnerships and targeted interventions.
Source: OECD (2022[17]), FDI Qualities Policy Toolkit, https://www.oecd.org/en/publications/fdi-qualities-policy-toolkit_7ba74100-en.html.
4.4.2. Viet Nam features an open FDI environment, but regulatory restrictions persist in skill-intensive sectors
Viet Nam has a relatively open and non-discriminatory FDI environment, owing to the gradual liberalisation and active removal of restrictions to FDI since the Doi Moi economic reforms (OECD, 2018[1]). According to the OECD FDI Restrictiveness Index2 (FDI Index) in 2023, Viet Nam’s FDI regulatory regime is more open than many peers, including Malaysia, the Philippines, Indonesia, and Thailand, but it remains more restrictive overall than Singapore, Brunei Darussalam, Cambodia, and Malaysia (OECD, 2024[43]). Viet Nam’s FDI restrictions vary across sectors, with several service sectors being subject to more stringent regulations, including when compared to the OECD average (Figure 4.13).
Skill-intensive sectors, such as telecommunications and financial services, remain relatively restrictive for foreign investment. While Viet Nam has actively liberalised the FDI regulatory environment over the past few decades, the easing of restrictions on telecommunications and financial services has been slower. In digital sectors, Viet Nam's restrictiveness to FDI remains above the average levels of both the ASEAN and non-OECD economies (Chapter 3). Stringent FDI regulations on the telecommunications and financial services sectors have important implications on skills development, as these sectors benefit from the highest shares of skilled workers, representing 74% and 60% of workers at foreign firms, respectively (Section 4.3.4).
In the telecoms sector, stringent requirements are applied to foreign ownership. Foreign investors may own up to 65% of companies providing services that do not involve network infrastructure, but cannot hold a majority stake in businesses that build or operate such infrastructure. High-level approval is also required for certain investment projects in the telecoms sector. Easing restrictions on the telecommunications sector could support skills diffusion through greater transfer of specialised expertise and broader digital skills adoption, while providing stronger incentives for domestic firms to invest in workforce training. However, benefits may not be evenly distributed, as increased foreign participation could bid up wages for high-skilled workers and intensify competitive pressure on domestic firms, with potential effects on workforce restructuring and wage inequality
Ownership caps and licensing requirements are similarly applied to foreign investors in the financial services sector. Ownership in Vietnamese banks is limited to 30%, with the Prime Minister’s authorisation required in specific cases above the mentioned threshold (e.g. restructuring weak credit institutions facing difficulties) (OECD, 2018[1]). The government's large ownership shares in key commercial banks constitute an additional barrier to foreign participation. Lifting these restrictions could generate positive effects on competition, financial development, and skills spillovers (OECD, 2025[5]), though liberalisation efforts of any sector would need to be carefully assessed and calibrated to Viet Nam's regulatory capacity and broader policy priorities.
FDI regulatory restrictiveness index, ranging from 0 (not restrictive) to 1 (very restrictive), 2024
Note: The OECD FDI Regulatory Restrictiveness Index measures statutory restrictions on FDI across four policy categories: i) foreign equity limits; ii) screening and approval of foreign investment; iii) restrictions on key foreign personnel; and iv) other operational restrictions. Individual measures are evaluated on a 0 (fully open to FDI) to 1 (fully closed) scale based on a scoring framework that captures the varying degrees of restrictiveness of the covered FDI policies.
Source: OECD elaboration based on NSO (2026[20]) Enterprise Statistics, https://www.nso.gov.vn/en/enterprises/ and FDI Regulatory Restrictiveness Index (2026[44]), https://www.oecd.org/en/topics/sub-issues/sustainable-investment/fdi-regulatory-restrictiveness-index.html.
4.4.3. Viet Nam has undertaken important labour market reforms, and continuing this momentum will be important
Viet Nam has taken important legal reforms to improve labour market conditions, evident by the number of labour regulations that have been revised in recent years. The Labour Code of 2012 was revised in 2019 to establish the right to form worker representative organisations (WROs) and engage in collective bargaining, alongside wage setting mechanisms and expansion of social protection coverage (Viet Nam Briefing, 2021[45]). The reforms were partly incentivised by labour commitments under Viet Nam’s stock of international trade and investment agreements (Section 4.4.4). In 2025, a revision of the Trade Union Law expanded union membership rights to foreign workers (Viet Nam Investment Review, 2024[46]), while the Employment Law of 2025 introduced several changes, including a strengthened role for employment services, expanded unemployment benefits, and codification of a labour market information system. In 2025, a new Social Insurance Law came into effect that seeks to expand coverage and improve administration. The effectiveness of these reforms is reflected in business sentiment, as only 3.7% of foreign firms reported labour regulations as one of their biggest obstacles in 2023 (World Bank, 2025[28]). These efforts to improve the domestic legal framework for labour ensures that FDI does not result in worsening work conditions but rather supports the generation of quality jobs (OECD, 2022[17]).
Similarly, Viet Nam passed a series wage reforms aimed at adapting labour costs to the pace of economic development. The first statutory minimum wage rate was set in 1992, at the time applicable only for foreign enterprises. It was later extended to domestic private firms, albeit at a lower rate than their foreign counterparts (Schmillen and Packard, 2016[47]). Efforts to improve wage setting mechanisms led to the establishment of the National Wage Council in 2013, with an advisory role on the minimum wage, and benefitting from tripartite representation from MOLISA (now MoHA), the VGCL, and central employer organisations. At the same time, Viet Nam unified the minimum wage for both domestic and foreign firms in the private sector to eliminate discrimination between workers at domestic and foreign firms, while maintaining regional differentiation to reflect variations in living costs and development levels (ILO, 2024[26]). A separate wage scale had long been retained for workers in the public sector, which was considered less competitive than wages in the private sector (Schmillen and Packard, 2016[47]). Positively, wage reform continues to be a priority of Viet Nam, reflected as an objective under the SEDS plan for 2021-2025, and implementation efforts are supported by key development partners such as ILO.
Administrative barriers on the employment of foreign workers may limit diffusion of managerial or technical skills. Until recently, foreign firms cited difficulties in recruiting foreign labour, notably due to cumbersome visa and work permit application processes, including for personnel with technical or managerial experience (i.e. managers, executive directors, and technical workers) (Viet Nam Business Forum, 2024[32]; EuroCham, 2025[48]). Although these regulatory constraints would not necessarily dissuade investors’ interests, they nonetheless prevent the effective diffusion of know-how and managerial expertise, an area where skills shortages persist in the domestic labour market. Streamlining procedures for work permits and improving transparency in recruitment regulations could help foreign firms meet their skills needs in the short- and medium-term, while at the same time supporting skills and knowledge transfer. In August 2025, the Government of Viet Nam introduced Decree 219/2025/ND-CP to set clearer procedures, new categories of exemptions, and decentralisation of work permit issuance to provincial authorities (2025[49]). These are positive steps that help address important barriers to attracting foreign talent, but further streamlining and guidance is needed (EuroCham, 2025[48]). Viet Nam may also envisage a greater role for investment promotion and facilitation bodies, such as the FIA and provincial subsidiaries, to assist firms in recruiting and facilitating entry of talent (Section 4.4.4).
There is further scope to improve labour market regulations and ensure that FDI does not lead to worsening labour conditions in Viet Nam. Domestic labour market regulations, such as collective bargaining and workers’ voice arrangements, can contribute to the betterment of working conditions at MNEs (Box 4.3). In Viet Nam, collective bargaining coverage rate stood at 24.5% in 2018, higher than many comparator economies, but remains lower than the OECD rate of 33.5% in 2024 (ILO, 2026[6]; OECD, 2025[50]). Where collective bargaining mechanisms are in place, agreements remain predominately at the enterprise-level, and less so at the industry-level or between multiple employers. Strengthening collective bargaining rights and workers’ voice arrangements in their various forms can benefit employees in foreign enterprises and is associated with higher wages, stronger productivity and greater job satisfaction (OECD, 2019[51]; Blanchflower and Bryson, 2020[52]).
Viet Nam is encouraged to maintain momentum in advancing collective bargaining and freedom of association rights. The 2019 Labour Code represents important progress by legally recognising the right to establish worker representative organisations (WROs) independent of the VGCL and granting them equal standing in collective bargaining. However, challenges persist in practice. Since the Labour Code came into effect in 2021, no independent WROs have been established, pending implementing regulations that enable the formation of such organisations (Cox and Le Queux, 2023[53]). While revisions of the Trade Union Law of 2012 envisage rights for foreign workers to join trade unions, restrictions remain on the ability of those workers to form and organise their own unions. In addition, among the eight fundamental ILO Conventions, Viet Nam is yet to ratify ILO Convention No. 87 on Freedom of Association and Protection of the Right to Organise Convention. Nonetheless, Viet Nam has taken important steps to creating an enabling legal framework for freedom of association and collective bargaining in recent years, and sustaining this momentum will require concentrated efforts to translate these legal reforms into practice.
Reducing pervasive labour informality is also critical to improve the impact of FDI on job quality and skills. High levels of informal employment can limit the enforcement of labour standards, which in turn constrains the capacity of foreign firms to provide decent work. Viet Nam has taken recent efforts to support formalisation, including the introduction of voluntary social insurance schemes to extend coverage to informal workers and simplified business registration procedures to reduce barriers to formalisation. Awareness campaigns have also been launched to promote registration and compliance with labour and tax obligations (ILO, 2025[54]). These efforts are positive but there is further scope to advance formalisation by strengthening labour inspections, improving enforcement of labour regulations, and expanding legal protections for informal workers. There is also a need to better integrate informal workers into social insurance systems and improve co-ordination across relevant institutions to support implementation. Such measures can help ensure FDI contributes more effectively to decent work and inclusive growth (OECD, 2022[17]). Evidence from Viet Nam also shows that higher FDI inflows is associated with a smaller informal economy, particularly when supported by a strong governance framework, as FDI encourages formal business practices and generates demand for formally employed labour (Huynh and Tran, 2025[55]).
FDI, together with innovation, trade and migration transform the world of work. Collective bargaining and workers’ voice can ensure that all workers and companies benefit from current transformations by helping formulate joint solutions to emerging challenges (e.g. technological advancements, work-life balance), and by complementing policies to anticipate skills needs or assist displaced workers. Sector-level collective bargaining is associated with lower wage inequality between workers while wages and other working conditions tend to be better in firms with employee representation (OECD, 2019[51]).
Effective systems of collective bargaining are important in the context of large and profitable foreign firms: the FDI Qualities Indicators suggest that foreign firms’ productivity-related rents translate poorly into wage benefits, particularly in less skill-intensive firms. Sharing rents is observed less among firms with lower-skilled workers because of workers’ lower bargaining power. Collective bargaining could help achieve fairer sharing of benefits between firms and workers (Criscuolo et al., 2020[56]).
In practice, even when there is a right to collectively bargain, foreign firms’ negotiation power may still be stronger that of domestic firms, possibly reflecting union fears that wage demands (or negative shocks) may lead to the relocation of production (OECD, 2008[57]). One consequence of this bargaining imbalance has been the development of transnational workers’ representations to better co-ordinate workers’ bargaining policies. For instance, in the European Union, European Works Councils are consulted by MNE management on decisions at European level that affect workers’ employment or working conditions.
4.4.4. International agreements are key to improving labour conditions in Viet Nam
International trade and investment agreements
Viet Nam’s stock of international trade and investment agreements increasingly incorporates labour considerations. This reflects international practice more broadly, as labour standards are increasingly becoming a feature of such agreements, with provisions that seek to reinforce or improve the domestic legal framework by integrating explicit safeguards of labour standards, for example to prohibit lowering labour standards for the purposes of attracting FDI. Other provisions may seek to directly influence investor behaviour in relation to labour standards (OECD, 2022[17]). However, incorporating provisions related to labour in international trade and investment agreements does not guarantee their implementation, as the provisions can be drafted narrowly or broadly, which affects their scope and prospects for implementation. Their enforceability also varies, depending on the legal nature and binding force of the provision. Some provisions seek to only reaffirm existing commitments under international labour standards (declaratory provision), while others set out parties’ obligation to achieve a specific result through a specific conduct (provision of result). The legal nature of these provisions therefore influences greatly the scope in which FDI can have on sustainable development (OECD, 2024[58]).
Viet Nam is a signatory to three international trade agreements that include provisions on labour standards and skills development. The EU-Viet Nam Free Trade Agreement (EVFTA), which came into force on 1 August 2020, contains several provisions that reinforce the labour market outcomes of FDI. For example, the EVFTA underscores existing commitments under international labour instruments (e.g. ILO Decent Work Agenda, OECD Guidelines for Multinational Enterprises on Responsible Business Conduct) and includes an obligation to take steps towards ratifying fundamental ILO conventions (Articles 13.1, 13.4 and 13.10). In the same vein of international co-operation, the EVFTA seeks to strengthen co-operation between parties on labour-related matters by implementing capacity building activities or sharing best practices (Articles 16.2 and Article 13.14). Several provisions entail binding obligations, for example to not derogate or fail to enforce relevant labour laws to promote investment (Article 13.3), take into consideration the necessary technical information and international standards to inform the implementation of labour policies (Article 13.11), ensure that measures aimed at protecting labour conditions are developed and implemented in a transparent manner (Article 13.12).
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free trade agreement features similar labour-related provisions. Viet Nam is among 11 signatories to the CPTPP free trade agreement, which entered into force on 14 January 2019 for Viet Nam. The agreement includes a stand-alone chapter on labour that has implications on investment. Similar to the EVFTA, the CPTPP includes a binding provision for parties to adopt and uphold labour rights under the ILO Declaration for Fundamental Principles and Rights at Work, which includes elimination of discrimination in employment, freedom of association and collective bargaining (Article 19.3). The provision also calls on parties to implement regulations and practices that ensure quality jobs in terms of minimum wages, work hours and occupational safety and health. In addition to the CPTPP and the EVFTA, the Eurasian Economic Union – Viet Nam free trade agreement includes few labour-related provisions, primarily to uphold existing commitments ILO core labour standards (Article 12.7), discourage the derogation of labour standards for investment promotion purposes (Article 12.4), and expand co-operation on labour issues (Article 12.5).
The adoption of international trade and investment agreements with labour commitments has led to tangible improvements of labour market conditions in Viet Nam. The ratification of treaties with labour provisions, such as the EVFTA and CPTPP, increased the momentum for important labour market reforms in Viet Nam, materialising in the adoption of a revised Labour Code in 2019, and the ratification of two ILO conventions: No. 98 on the Right to Organise and Collective Bargaining and No. 105 on the Abolition of Forced Labour (Corley-Coulibaly, Ebert and Richiardi, 2023[59]). Viet Nam is encouraged to continue engaging in agreements that feature labour considerations as such provisions can lead to improved working conditions, therefore reinforcing the impact FDI may have on the labour market.
Responsible business conduct
Viet Nam has made important progress in advancing Responsible Business Conduct (RBC) in recent years, including with the adoption of its first “National Action Plan for Law and Policy Improvement to Promote Responsible Business Practices in Viet Nam” (2023-2027). In the area of labour, Viet Nam’s National Action Plan (NAP) on RBC seeks to align the domestic legal framework for labour with international commitments, including by reviewing and reforming laws on occupational safety, employment, and trade unions. The NAP also sets objectives related to job protection and retention in the context of digitalisation. To strengthen enforcement, the NAP includes measures to improve grievance mechanisms and establish dedicated databases on labour-related RBC. Viet Nam could continue to implement the NAP and build on these efforts by raising awareness of RBC among businesses and employers, strengthening implementation of the Labour Code, and ensuring meaningful participation of all stakeholders, including worker organisations, in the development of RBC policies. Viet Nam could also integrate labour-related criteria in public procurement frameworks and embed RBC considerations in the operations of State-Owned Enterprises (SOEs). Aligning SOE reforms with RBC expectations also offer opportunities for the government to lead by example.
4.4.5. Investment promotion and facilitation for FDI and its impact on employment and skills development
Financial and tax incentives for investment
Tax incentives in Viet Nam are primarily designed to encourage job creation rather than upskilling or reskilling of workers. This pattern is not unique to Viet Nam, as 44% of economies in 2024 offered at least one tax incentive tied to employment and job creation, compared to 36% with at least one incentive to improve job quality and skills (OECD, 2025[60]). In Viet Nam, tax incentives predominately target job creation in the manufacturing sector. The Law on Corporate Income Tax of 2025 provides tax benefits to manufacturing projects that may be extended if projects employ a minimum of 6 000 workers on a regular basis. Under this scheme, investment projects are granted a full corporate income tax (CIT) exemption for a period of four years, followed by a partial exemption for nine years, once the project generates revenue. A reduced CIT rate of 10% is also applied when the project progresses to generate profit. Other tax benefits are provided to projects that employ many female workers, including in the manufacturing sector, but these incentives warrant an assessment to determine whether the design features (e.g. sector targeting) serve Viet Nam’s national objectives of transitioning to higher value-added and knowledge-intensive activities. Vocational training establishments benefit from similar tax incentives, including CIT exemptions and reduced CIT rates. This reflects Viet Nam’s broader priorities of promoting FDI to the vocational education sector. The aim is to expand foreign presence and establish greater business-education linkages to help meet industry skills needs (Section 4.4.1).
Financial support is provided to incentivise skills development in high-tech industries. In December 2024, Viet Nam established the Investment Support Fund (ISF) with the foremost objective of attracting and retaining investment in certain high-tech activities, including high-tech product manufacturing. The ISF provides financial incentives to support skills development and improve job quality, covering up to 50% of eligible expenditures on workforce development, including costs for training programmes as well as the salaries of Vietnamese engineers and managerial staff (Government of Viet Nam, 2024[61]).
Viet Nam could consider shifting towards expenditure-based incentives to more effectively stimulate skills development. At present, Viet Nam offers generous tax incentives and often for lengthy periods of time, most commonly in the form of income-based incentives (i.e. partial to full CIT exemptions and reduced CIT rates), which are generally less effective in stimulating additional investment and more prone to result in forgone revenue than expenditure-based incentives (e.g. tax allowances and tax credits) (IMF et al., 2015[62]). Reducing or phasing out generous income-based incentives will also create more fiscal space to pursue broader investment climate improvements, such as upgrading transport, digital and green infrastructure, or investing in education and skills development (OECD, 2023[4]; 2025[5]). International experience provides examples of expenditure-based tax incentives targeted towards raising the skills of workers in certain sectors, for example in Indonesia, Argentina, Mauritius and Costa Rica (Box 4.4). However, as is the case with all tax incentives, their impact depends on Viet Nam’s framework for monitoring and evaluating the instruments for effectiveness.
Broader factors of with the tax system may hinder uptake of investment incentives by firms. Viet Nam’s framework for tax incentives is widely considered complex, with information on the generosity and eligibility criteria of tax incentives generally spread across a number of laws, decrees, circulars and information notes (OECD, 2018[1]). Stakeholder consultations suggest that this complexity in navigating and applying for tax incentives can act as a deterrent for potential investors. For instance, tax incentives introduced in 2013 to reimburse training costs have seen limited uptake due to administrative burdens and procedural complexity. Previous surveys show that only a few enterprises were aware of tax incentives related to vocational training establishments (NIVET, 2017[63]). To address such barriers to transparency, Viet Nam is recommended to consolidate all tax incentives into the main body of the tax law (OECD, 2018[1]). Viet Nam could also consider complementary efforts to raise awareness of tax incentives can involve establishing a public inventory of investment incentives, or publishing incentive-specific guides to help investors navigate and access available incentives (OECD, 2023[64]).
Indonesia – Tax allowance (enhanced) for skills development activities
Companies that organise training programmes, internships, apprenticeships or other educational activities aimed at developing certain workforce competencies are eligible for an enhanced allowance of up to 200% of related expenditures from their gross taxable income.
Argentina – Tax credit for training and supplier development
Argentina provides a tax credit programme that covers up to 100% of eligible training expenses, usable against national taxes. The scheme is open to MSMEs, large firms, and co-operatives, with reimbursement levels ranging from 35-100% for staff training to 90-100% for supplier development and 100% for SME projects or training infrastructure. Recent calls have emphasised digitalisation, innovation, and technology upgrading, underscoring the programme’s role in boosting competitiveness and value chains.
Costa Rica – Tax credit for skills and supplier development in select manufacturing activities
Manufacturing firms under the Free Zone Regime are eligible for a tax credit covering expenses on training and education of Costa Rican employees or SME suppliers, provided they are linked to the company’s operations, as well as reinvestment of profits in new fixed assets. The credit is capped at 10% of taxable income per period, and applies only to firms meeting strategic sector criteria, such as operating in advanced industries, employing at least 200 workers, investing 0.5% of sales in R&D, or holding recognised environmental certifications.
Mauritius – Tax allowance (enhanced) for training costs
Companies with an annual turnover not exceeding Rs 100 million (or USD 2 195 000) in the Island of Rodrigues are eligible for an enhanced tax allowance of up to 200% of eligible expenditures, including training costs of employees.
Source: Mauritius Revenue Authority (2025[65]), National budget 2025/26: Fiscal measures highlights, https://mra.mu/download/BudgetHighlights2025.pdf; Government of Argentina (2024[66]), SME training tax credit, https://argentina.gob.ar/produccion/credito-fiscal-para-capacitacion-pyme; Costa Rican Foreign Trade Promoter (2025[67]), Free trade zone guide: Special regimes, https://procomer.com/wp-content/uploads/2025/07/Free-Zone-Regime-Guide-EN.pdf; Republic of Indonesia (2019[68]), Industries hope to improve labors' skills with tax deduction, https://setkab.go.id/en/industries-hope-to-improve-labors-skills-with-tax-deduction/.
Investment promotion and facilitation
Viet Nam could adopt an approach to investment promotion that better aligns with the domestic skills base. FDI is currently prioritised in more knowledge- and skill-intensive sectors, such as high-tech industries, based on the Strategy for Investment Co-operation for 2021 to 2030. However, growth in these sectors is already constrained by shortages of relevant skills, and additional FDI may intensify competition for scarce talent. Future investment promotion efforts could therefore be guided by dynamic, data driven prioritisation models (Chapter 1) that also account for the domestic skills base and realities of the labour market. In this context, Viet Nam could consider targeting medium- and high-technology industries, while also supporting higher value-added niches within traditional sectors such as manufacturing, which remains a critical source of employment for lower-skilled workers. Other promising sectors include telecommunications, as well as financial and professional services, which exhibit positive foreign firm premia and relatively higher skill intensity. These sectors are among the most productive and maintain strong linkages with the broader economy (Madani, Davies and Nguyen, 2023[69]), increasing the potential for FDI spillovers through labour mobility, competition and imitation.
Investment promotion and facilitation bodies could play a stronger intermediary role to support firms in recruiting talent. Foreign firms in Viet Nam report persistent difficulties in recruiting foreign labour, citing cumbersome visa and work permit application processes, particularly for technical or managerial foreign workers recruited to help address skills shortages (Viet Nam Business Forum, 2024[32]; EuroCham, 2025[48]). Viet Nam has taken recent steps to simplify procedures and clarify the roles of government agencies in issuing work permits but further streamlining and guidance is needed (EuroCham, 2025[48]). Investment bodies could support this process by serving as intermediaries between firms and relevant labour authorities at the provincial and national levels. Providing specialised assistance for talent attraction is becoming an increasingly commonplace practice among IPAs, including in peer economies. For instance, Thailand established a Strategic Talent Centre to facilitate the admission of skilled foreign workers by providing mechanisms for validating their qualifications and collaborating with the national IPA to assist foreign job seekers with their work permit procedures (OECD, 2021[70]).
The decentralisation of investment promotion and facilitation efforts contribute to an uneven contribution of FDI to job creation and skills. While delegating these functions to provinces can stimulate competition and improve the investment climate, excessive competition may favour provinces with greater resources and capacity, marginalising less-equipped regions (OECD, 2018[1]; 2020[13]). This disparity is reflected in the PCI, which shows wide variation in provincial governance on labour, including the time costs firms incur in complying with regulations. Urban centres such as Ha Noi and Ho Chi Minh City rank highest on labour policy indicators, including ease of recruitment and skilled labour availability (VCCI, 2025[24]). Without stronger co-ordination, decentralisation may reinforce the concentration of FDI in urban centres offering greater ease of doing business and deeper talent pools, limiting employment and skills spillovers elsewhere. The consolidation of provinces from 63 to 34 in 2025 may help address resource and capacity imbalances, although its impact remains uncertain. The role of the MoF and FIA could be strengthened to co-ordinate provincial FDI promotion efforts and ensure consistent policy implementation across provinces, as recommended by the OECD in past reviews (2018[1]). Viet Nam could also consider wider reforms to the governance and mandate of the FIA to maximise efficiency, accountability and investor trust (Chapter 1).
4.4.6. Viet Nam would benefit from greater involvement of the investment community to forecast skills and design skills programmes
As Viet Nam prioritises FDI to more knowledge- and skills-intensive activities, parallel efforts will be required to align the domestic skills base with the evolving needs of MNEs. Current FDI inflows are concentrated in low value-added and low-skill intensive activities (Section 4.3.4), but Viet Nam is actively increasing its efforts to promote FDI to more knowledge- and skills-intensive sectors, including high-tech industries and green activities, as reflected in the Strategy for Investment Co-operation for 2021-2030. Against this backdrop, firms are increasingly expressing shortages for certain skills, such as digital and green skills and managerial expertise (Viet Nam Business Forum, 2024[32]). Increased FDI to high-tech sectors will also aggravate risks of job displacement unless accompanied by skills development programmes dedicated to adapting the workforce to new or alternative job opportunities. These trends increase the impetus for Viet Nam to support its skills system and policies, including in collaboration with MoF, FIA and MNEs, to be able absorb new FDI inflows and mitigate for displacement effects.
Skills anticipation systems
Expanding skills assessment and anticipation initiatives would help align the education system with the evolving needs of the private sector. Viet Nam is conducting several skills forecast exercises, with support from development partners, in specific industries such as garments and more recently the port industry through the Logistics Industry Reference Council (ILO, 2025[71]). These initiatives are key to providing policymakers with reliable data to craft effective skills strategies and therefore merit additional support to be expanded and institutionalised across key sectors. The active involvement of the investment community in such exercises is also crucial, as FDI decisions and trends can serve as a forward-looking indicator on what skills will be in demand in the future (OECD, 2022[17]). Information on foreign firms’ operations and skills needs could be used to design educational programmes, particularly in sectors where they play a significant role. More broadly, skills anticipation initiatives form part of a wider labour market information system, which in Viet Nam remains under development, although its legal basis was strengthened in the Employment Law of 2025. The strategic importance of an up-to-date labour market information system is already reflected in SEDS 2021-2030, which constitute important first steps towards integrating such systems and supporting evidence-based workforce planning. Going forward, Viet Nam could expand skills foresight exercises to additional sectors, leveraging insights of foreign firms, and maintaining close co-ordination between MoHA, MoF and other key stakeholders (e.g. employer organisations) to ensure that the information produced effectively informs policymaking on skills.
Education-industry linkages
Viet Nam could encourage skills development initiatives led by enterprises, including in the form of public-private partnerships with the TVET system. While some foreign firms have established in-house training centres to address their skills needs (Sheldon and Kwon, 2023[72]), such initiatives remain limited and often focused on firm-specific, job-related skills (ADB, 2020[73]). Samsung is a notable example of a foreign enterprise investing in skill upgrading in Viet Nam, implementing initiatives such as the Samsung Smart Schools or New Hope Schools in rural or impoverished areas. However, the case remains that Samsung’s workforce consists largely of semi-skilled workers, and skills development initiatives are likely to have limited impact on higher skills upgrading (Sheldon and Kwon, 2023[72]; OECD, 2025[5]). It also remains unclear to what extent training centres led by foreign enterprises are established in partnership with the TVET system, or whether the programmes produce skills that are certifiable by Viet Nam. Stakeholder consultations have indicated that FDI enterprises start their own training centres but without formal recognition. Past studies highlight challenges facing foreign enterprises in establishing their own training centres, such as lengthy administrative procedures and limited perception of the effectiveness of the TVET system (ADB, 2020[73]).
Foreign enterprises could more actively engage in curriculum design for education and TVET institutions. Lack of linkages between enterprises and educational institutions is often cited as a barrier to increasing the relevance of TVET education in Viet Nam (ADB, 2020[73]; Viet Nam Business Forum, 2024[32]; OECD, 2020[13]). The TVET system could respond more effectively to business needs by systematically integrating their considerations into the design and delivery of training programmes, an issue that enterprises themselves have raised (Viet Nam Business Forum, 2024[32]). When effectively supported, local sector skills councils that bring together TVET providers, government stakeholders, and private sector representatives could help tailor programmes more effectively to industry needs, alongside national-level co-ordination mechanisms that ensure overall direction of skills policy (Section 4.4.1). Indeed, participation in the pilot sector skills councils, for example, was associated with increased enrolment in TVET, better alignment of curricula with industry needs, and greater recognition among firms of the benefits of closer collaboration with education providers (GIZ, 2024[74]). Development partners (e.g. GIZ, ILO) are working to create business-education linkages, such as the creation of a working group on skills development in the textile and garment sector, bringing together representatives from businesses and TVET institutions (ILO, 2024[75]).
Industry advisory boards could help align educational offerings at universities with skills needs. Stakeholder consultations indicated that such mechanisms exist but remain rare within universities. Resolution No. 57-NQ/TW of the Politburo introduced in December 2024, reinforces this agenda by calling for stronger industry–education partnerships—encouraging enterprises and universities to collaborate in research, innovation, and technology transfer, and promoting joint investment in advanced technology and digital skills training to better match workforce development with industrial needs. Viet Nam could further strengthen these linkages by formalising advisory mechanisms within universities, enabling industry representatives to provide regular input on curriculum design, research priorities, and workforce development initiatives.
Wider reforms to the TVET system are needed to encourage industry engagement with Vietnamese TVET establishments. Options for this include establishing vocational tracks in secondary education with workplace-based trainings, increasing investment towards upskilling TVET teachers and advancing the digital transformation of the TVET system more broadly, for instance to provide alternative modes of training online (OECD, 2025[5]). Further efforts could also focus on enhancing the flexibility of the TVET system towards learners by developing modular, competency-based training programmes that allow learners to accumulate micro-credentials and move easily between courses and institutions, while harmonising frameworks for qualifications, changes to encourage learner participation and reduce confusion among employers (GIZ, 2025[76]).
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← 1. The old-age dependency ratio refers to the ratio of the population aged 65 and over to the number of persons of working age (i.e. 25-64 years old).
← 2. The FDI Index measures foreign equity restrictions; discriminatory screening or approval mechanisms; restrictions on key foreign personnel and operational restrictions.