High lending rates and surging prices for production input materials have led to a rising unemployment rate in HCM City this month, according to the City's Association of Enterprises.

Small and medium sized enterprises (SMEs) are facing particular difficulties at this time. According to a survey conducted by the Vietnam Association of Small and Medium Enterprises, 20 percent of the city's SMEs have closed their doors and 60 percent have been forced to cut their work forces while dealing with reduced revenues and operational difficulties.

As a result, an estimated one third of the city's enterprises have recently declared bankruptcy and thousands of workers have lost their jobs.

Nguyen Cao Thang, deputy director of the HCM City Employment Promotion Centre, said an increasing number of job seekers come to his centre every day.

"In the first eight months of 2011, more than 70,000 people registered as unemployed [at the centre] while only about 67,000 people registered for all of 2010," Thang said.

Tran Tuan Anh, deputy director of the city's Centre for Human Resources and Labour Market Information, attributed the growing unemployment rate to the imbalance between wages and the consumer price index.

"Most workers say that they cannot live on their wages," he said.

In response, the Government recently decided to increase the minimum wage in the city to 2 million VND (100 USD) per month beginning October 1, he said.

However, the Government's decision may pose additional challenges for SMEs, particularly when it comes to social insurance for their employees. The amount they contribute to the insurance scheme is based on employee salaries. As such, there may be a pay rise but contributions to the insurance scheme may be frozen.

The high inflation rate combined with the price increase for input materials, high lending rates and legally mandated pay rises have forced some SME's to reduce production as well as their work force.

Ho Van Loi, director of the Ho Loi Garment Company said: "I have never faced so many difficulties and challenges as I have recently. The price of input materials is increasing rapidly while salaries are also rising. It is also very difficult for us to access credit. To cope with these difficulties we have been forced to cut production and about one-fourth of our labour force."

The Labour Information Market in HCM City has forecast approximately 26,000 job vacancies in the city this month, an increase of about 10 percent compared with August, particularly in the services, sales, marketing and construction sectors.

Anh mentioned problems with "virtual recruitment" which saw some employers asking for more workers than they actually required while also only offering a probationary salary of about 75-80 percent of the negotiable salary or even lower.

However, Nguyen Tan Dinh, deputy director of the city's industrial parks (IP) and export processing zones (EPZ) said many of these advertisers didn't really need to recruit new workers but used the job listings as PR for their enterprises.

He asked the workers to think twice before making the decision to take on new employment.

"You should invest more in improving your technical skills and stabilising yourself in one place in order to create development opportunities instead of spending time, effort and even money to look for new jobs," Dinh said./.