The informal economy in Vietnam Study for the ilo

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The informal economy in Vietnam 


Study for the ILO 













Jean-Pierre Cling, Mireille Razafindrakoto and François Roubaud 



March 2010 










Executive Summary 



1. Survey of literature on the informal economy in Vietnam 




 Few studies on the informal economy in Vietnam 


1.2. Studies on this subject have been constrained by the lack of data 



2. Assessment of official sources 


2.1. The blurred contours of the informal sector in Vietnam 


2.2. Implementation of a statistical framework 



3. An outlook at the informal economy in Vietnam 


3.1. The informal economy in Vietnam 


3.2. The informal sector in Hanoi and HCMC 



4. The dynamics of the informal sector in Vietnam 


4.1.The informal economy is here to stay 


4.2. Evolution 2007-2009 and impact of the crisis 



5. Determinants of formality and informality 


5.1. The “multi-segmented” informal sector 


5.2. Explanatory factors for registration 



6. Policies 


6.1. No policies towards the informal sector in Vietnam 


6.2. The need for targeted policies 






Annex 1: List of persons interviewed 



Annex 2: List of abbreviations 



Annex 3: Tables on the informal sector 




List of tables in Annex 3 (p. 38). 


Table 1: Main jobs in the informal sector by industry, Viet Nam 2007 


Table 2: Number of formal and informal HBs jobs by industry in Vietnam 


Table 3: Socio-demographic characteristics of occupied workers by institutional sector 

in Vietnam (%) 


Table 4: Main job characteristics by institutional sector in Vietnam 


Table 5: Socio-demographic characteristics of labour force by institutional sectors  

(Hanoi and HCMC) 


Table 6: Informal employment in the main job by institutional sector in Vietnam 


Table 7: Type of premises among informal household businesses (% of HBs) 


Table 8:  Average size of IHBs and rate of wage earners 


Table 9: Working hours and earnings in the informal sector (including heads of HBs) 


Table 10:  Informal sector job type structure (% of HBs)  


Table 11:  Characteristics of jobs in the informal sector 


Table 12: Investment amounts and ratios in the informal sector 


Table 13: Problems with public officials and corruption in the informal sector 


Table 14: Five main problems encountered by the informal sector (% of HBs) 


Table 15: Five main needs for assistance of the informal sector (% of HBs) 


Table 16: Future prospects for the heads of informal production units (% of HBs) 


Table 17: Projections of employment in the informal sector in Vietnam (2007-2015) 


Table 18: Employment by institutional sector and area in LFS 2007 & 2009 


Table 19: Employment by institutional sector and area in LFS 2007 & 2009 (%) 



Paradoxically, despite its economic weight, knowledge of the informal economy is extremely 

limited in Vietnam as it is in most developing countries and researchers, whether Vietnamese 

or foreign, have paid little attention to the subject. This situation is due to a number of factors. 

First of all, the concept of what constitutes “informal” is vague with a multitude of definitions 

having been put forward by different authors. Secondly, measuring the informal economy is a 

tricky business since it operates on the fringes of the economy. Thirdly, the informal economy 

suffers from a lack of interest on the part of the authorities as it does not pay (or pays little) 

taxes and is seen more as a nuisance (especially in the towns) and a mark of 

underdevelopment inevitably doomed to extinction by the country’s economic growth. These 

elements explain why there has been no really significant effort to date to improve knowledge 

in this area. Moreover, in Vietnam as in other developing countries, the current international 

economic crisis is supposed to provoke employment losses and employment restructuring. 

This increases the interest for the informal economy, which is one of the main victims of the 



That is why the ILO in Vietnam has decided to commission a “Study on the Informal economy 

in Vietnam”. Apart from the ILO’s obvious interest in labour market functioning and policies 

for statutory reasons, it should be reminded that the ILO was one of the pioneers of the 

concept of “informal sector” that drew on the African experience documented in the famous 

1972 study. This report sets out to amend this situation by providing accurate statistical data 

and in-depth analyses on the informal sector and informal employment in Vietnam for the 

first time ever. It draws on the results of several statistical surveys conducted with support 

from the authors and largely refers to a book recently published on this subject (Cling et alii

2010). It is also based on some research lead by the authors on the impact of the economic 

crisis in Vietnam and on several interviews conducted with officials from the Ministry of 

Labour, Invalids and Social Affairs, the Ministry of Planning and Investment and the Ministry 

of Finance, as well as with Vietnamese academics. Last of all, this report has benefitted from 

the debates which took place during the National Workshop on the Informal Sector and 

Informal Employment in Vietnam, organized by the “Labour Market Project” (European 

Commission-MoLISA-ILO) on 4


 March 2010 in Hanoi.




Previous to 2007, the statistical information on the informal economy (in terms of labour, 

income and production) in Vietnam was scarce. Two main sources provided data on non-farm 

household businesses (NFHBs) and among them registered and non registered ones: the 

Vietnam Household Living Standards Survey (VHLSS) and the Annual Household Business 

Survey (AHBS). The two sources provide highly discrepant estimates. While the VHLSS 

estimates the number of NFHBs in Vietnam at 9.3 million in 2002, the respective figure given 

by the AHBS is 2.9 million. Despite careful intents to reconcile the two databases, the gap 

remains highly significant. As regards informal employment, this relatively new concept had 

never been measured in Vietnam.  


Acknowledging these shortcomings, the General Statistics Office (GSO) launched in 2006 a 

joint research project with the French Institute of Research for Development (IRD-DIAL); the 

prime objective was to set up a statistical system that would measure Vietnam’s informal 

sector and informal employment in a comprehensive and sustainable way, and in-keeping 

with international recommendations. The outputs of this still ongoing initiative are many- 

fold, providing the core inputs for this report.  




The authors wish to thank Ina Pietschmann for her support during the preparation of this report and for her 

valuable comments made on a first draft. Usual caveats apply. 


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