Productivity key for firms

In economics, Total Factor Productivity (TFP), also called multi-factor productivity, is the portion of output not explained by the amount of inputs used in production. As such, its level is determined by how efficiently and intensely the inputs are utilised in production.

According to Thoi Bao Kinh Te Vietnam (Vietnam Economic Times), TFP, a real driver of sustainable growth within an economy, will be increased due to the efficient ultilisation of investment capital power and labour capacity, through the application of advanced science and technology, innovation of production management techniques and improvement of labour force quality.

At a conference on "TFP and its application in corporate governance" held by the Foreign Trade University (FTU) on January 19 in Hanoi, experts said TFP is the most crucial factor to transform the growth model of an economy from quantity to quality, from wide-scale growth to in-depth growth and sustainable growth.

According to former head of the Institute of Statistical Science under the General Statistics Office Tang Van Khien, the growth of TFP, in fact, is the growth in production output achieved by improving the efficiency in the utilisation of capital, fixed assets and labour, through technology renovation, production rationalisation and the improvement in management capacity and labour force quality.

Only TFP-based economic development remains stable and sustainable, Khien said, adding that it brings about surplus value to the society to create preconditions for expanding production scale and contribute to improving living conditions, Khien was quoted by Thoi Bao Kinh Te Vietnam as saying.

He added that TFP growth reflect the advancement of science and technology, showing the results of technological innovation and labour quality improvement.

Nguyen Thuy Anh from FTU told Thoi Bao Kinh Te Vietnam that enterprises need to formulate specific action plans, create effective mechanisms to encourage their employees, adjust wages and remuneration of employees according to their labour productivity.

Thuy Anh said productivity of a company depends on several factors such as capital power, labour capacity and other resources.

But for small and medium-sized enterprises, if they are unable to measure their productivity growth, they can consider the link between the above factors to discover how their businesses' productivity changes over times, then compare with their peers, to offer specific solutions to increase their productivity, she added.

According to Thoi Bao Kinh Te Vietnam, promoting the application of science and technology is the decisive factor to sustainable economic development.

But many Vietnamese enterprises are engaged in production with the severe lack of basic industry. Most of materials must be imported from foreign countries. In addition, transportation costs and import taxes are causing many difficulties for businesses, the newspaper said.