State sector minimum wage increase reduced from 24% to 9.5% percent, delayed two months

HANOI, Nov 1, 2012. The Government has committed to raise the state sector minimum wage by VND100,000 instead of VND250,000 as scheduled in July 2013, said Minister of Finance Vuong Dinh Hue at a session of the National Assembly (NA) meeting on Wednesday.

Thus, the state sector minimum wage will be increased from the current VND1.05 million/month to VND1.15 million, instead of VND1.3 million as originally planned.

The effective date would be from July 1 instead of May 1 as planned earlier.

Hue said: “The new scheme for wage hike is an effort of the Government after taking into account opinions of the NA and aspirations of salary earners.”

Phung Quoc Hien, chairman of the NA Finance and Budget Committee, said the scheme that Minister Hue presented agreed with the opinions of the committee members.

The state sector payroll covers as many as 22 million people, including seven million civil servants and 15 million at State-owned enterprises and other establishments.

If the state sector minimum wage would be increased from VND1.05 million to VND1.35 million effective May 1, 2013, the Government would have to secure an additional VND60 trillion, or nearly US$ 3 billion, a sum beyond the Government’s capacity in view that the State Budget revenue this year might run short of target.

“However, the amount gained from tightened spending could only reach about VND500 billion,” said Hien.

Finance Minister Hue said the fund for minimum wage hike was sourced from a cut of VND10 trillion in public investment. Therefore, public investment next year could only be VND170 trillion, instead of VND180 trillion as the Government estimated.

The Government previously suggested public investment in 2013 at VND180 trillion, in which VND39 trillion would be sourced from land sale and land use fee payments.

If such an amount could not be collected, especially when the property market is frozen, then the actual figure of public investment would only be VND140-141 trillion, very low compared to the huge investment demand, said Minister of Planning and Investment Bui Quang Vinh the day earlier.

“If we continued to raise wage, this figure would drop further,” he said at the session on Tuesday.

Dispersed and inefficient investment is currently a thorny problem. Minister Vinh said the Government and relevant ministries had made all-out efforts to address this situation.

Of the estimated public investment of VND180 trillion, some VND93.1 trillion, over 50%, will be financed by local budgets, according to a plan that the finance ministry and the planning ministry have submitted to the Government.

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