AEC - A Game Changer
August 9, 2015
The formation of the ASEAN Economic Community later this year will alter the human resources landscape for both businesses and employees.
Vietnam’s economy rebounded strongly in 2014 and has continued to do so in the early months of this year. Though not always apparent, there have been many positive changes. The country is welcoming waves of foreign investment, with the proportion coming from Asian and Southeast Asian countries such as Japan, Thailand, and Malaysia increasing significantly. Vietnamese enterprises are also making plans to expand and develop their business in regional areas such as Myanmar, the Philippines, and Cambodia. Trade will become more and more facilitative, especially as Vietnam will be part of the ASEAN Economic Community (AEC), which comes into being later this year.
Vietnam is a developing country, with greater labor mobility and market flexibility compared to other regional countries. Workers have more occupational choice as talent remains scarce while the needs of businesses continue to be high. The AEC is therefore seen as a catalyst for both businesses and workers, creating interaction with external markets and resolving existing obstacles and difficulties.
So what benefits will Vietnamese workers receive from the AEC as it turns Vietnam into an open market, lifting almost all barriers between businesses in ASEAN?
- Firstly, it is clear that Vietnamese workers will not only have opportunities within Vietnam but also in regional markets;
- Vietnamese workers will have more opportunities to interact with professionals in neighboring countries and at the same time enhance their experience and polish their skills;
- Labour mobility, which is inherently not one of Vietnam’s strong points, will be improved considerably.
Meanwhile, the benefits to Vietnamese businesses from this economic integration regarding human resources are as follows:
- As the AEC is an open market, human capital from neighboring countries will also find employment opportunities in Vietnam, leading to an abundant supply of workers;
- Labour supply will increase, with more variety and diversity;
- Businesses will have an ample choice of skillful and experienced candidates, bringing a breath of fresh air to the company.
According to a survey conducted in 2014, 76% of Vietnamese businesses know little about the AEC, with a greater level of awareness found in larger companies. It seems clear that MNCs and foreign businesses have already prepared to recruit staff from neighboring countries. Using online tools and social media such as Facebook and LinkedIn, together with multimedia support like Skype and video conferencing, allows businesses to more readily come into contact with these workers. MNCs in particular already have a multicultural environment and employee exchange policies in place within their organization, putting them in a much better position to recruit talent from ASEAN countries.
In the meantime, large Vietnamese companies exhibit a thorough awareness of the AEC but preparations regarding market dynamics and recruitment remain only in the early stages. This is partly because these companies are still in a process of creating stability and professionalism within themselves, so adopting a multicultural environment when improvements and adaptation are needed is no simple matter.
For small and medium-sized enterprises, their first and foremost priority remains to concentrate on their internal operations before moving out into the region.
The AEC doesn’t just open up more opportunities for businesses, it also presents challenges. Many people are concerned that Vietnamese businesses will face a “brain drain”. Great people will leave, finding jobs at companies with better policies and higher incomes. This appears inevitable.
All businesses must, therefore, be particularly cautious in their preparations for when the AEC comes into being.
Internal stability and preparations for regional integration – “Sailing out to the big sea”
Expanding recruitment practices to include approaching foreign candidates can only be effective if a business has standardized systems and processes so that an easily adaptable environment can be created for any nationality or culture.
Communications and changes in attitude among higher management levels – the key players regarding multicultural integration – is necessary. There must be a long term program in place for managers and leaders to fully equip themselves with the knowledge needed to seize the many “eye-popping” opportunities on offer at the regional and international levels.
Innovative retention schemes are also needed to retain talent during fiercer competition.
On top of this, businesses should invest in HR management and IT systems and form a solid financial foundation and management system to carve out a solid position when joining the AEC.
Businesses must clearly understand their strengths and weaknesses, their culture, and their expectations for recruitment to have proper manpower planning and resourcing, as not every foreigner can work well in all positions.
To retain talent a business must fully understand the strategies and strengths of other firms and determine the strengths and competitive advantages their own business holds in order to introduce practical employee retention policies.
Information regarding compensation and rewards for foreign candidates specific to Vietnam, taking into account differences in living standards and the cost of living, must be carefully researched through a range of available methods such as international salary survey companies, so that an appropriate salary rate can be identified that attracts talent and delivers a clear message to candidates.
The working methods of foreign employees in neighboring countries and their expectations while working in Vietnam must also be fully analyzed to ensure an efficient allocation of resources.
Information regarding paperwork, labor laws pertaining to foreigners, and work permits and visas, etc., also matters worth investigating.
Working with professionals
The general tendency of businesses in advanced countries is to work and cooperate closely with a trusted partner or seek advice from experts. Becoming part of the AEC is not just a trend; businesses must have solid preparations and undertake definite steps. Working with specialised consulting agencies will help businesses determine their needs, gain an awareness of the total cost of engaging foreign workers, and clarify the contribution these workers can make to the business. Issues concerning procedures, information on labour laws, paperwork, and administrative processes, as well as communicating the strengths of the Vietnam market and the businesses’ working environment are also properly clarified for the business and employees alike when professional advice is sought.
It is clear that the AEC will expand the personnel horizons for businesses, with a rising supply of workers of greater caliber.
It will, however, present major challenges for businesses in talent retention. In order to “sail out to the big sea”, businesses must first understand themselves, identify their strengths and areas that require improvement regarding employment needs, and develop suitable HR strategies to maximize the opportunities to come from the AEC while guaranteeing their competitive edge. Businesses must invest in HR management and improve their training programs to broaden the vision of their higher management levels when the AEC comes into being.