Spurred by investors and the deterioration of its economy, Vietnam has decreed the gradual reopening of its factories, closed due to the debacle caused by the delta variant of the coronavirus. Whether Nike shoes or the latest iPhone will hit the Christmas trees of well-to-do families around the world this year will depend on the bobbin lace that the country has made to save its status as a factory on the planet, reached in the heat of China’s rising prices. and consolidated during the tariff war between the world’s two leading economies, without putting more lives at risk.
Vietnam, which emerged relatively unscathed from the first waves of COVID-19, has suffered harshly from the most contagious delta variant. Although for 15 months the country – which was closed to the world as a result of the pandemic – only registered 3,000 infections and 15 deaths, the irruption of the strain from India triggered infections and deaths last summer, reaching more than 800,000 cases and 20,000 deaths. The epicenter of the tragedy in a nation where by mid-October only 18% of its 98 million people had received the full vaccination schedule, according to Our World in Data, has been its industrial center, Ho Chi Minh City, to the south. from the country. More than 75% of the deaths have taken place in this city.
With no alternative to the massive contagions, the authorities decreed strict confinements and the temporary closure of factories in Ho Chi Minh City in July, allowing some to operate on the condition that they house their employees on site. A situation that has reversed the economic growth of the country in the past years; Although it managed to close 2020 with growth of 2.9% while neighboring nations sank, in the last quarter its GDP fell by 6.7% over the same period of the previous year. About five million Vietnamese lost their jobs in the summer, with industrial production and exports plummeting in August. So much so that the World Bank has revised its growth forecast for 2021: from the initial 4.8% to the current 2%.
“We cannot be closed any longer. We need to reopen the factories, ”emphasizes Tuan Chu, a professor at the School of Business and Management at RMIT University (Royal Melbourne Institute of Technology) in Vietnam. Despite the low vaccination rate, the authorities decreed the gradual reopening of factories in the south this month, encouraged by a break in infections and pressured by investors as a time of consumption such as Christmas is approaching.
And is that Vietnam plays an important role in the global supply chain, supplying furniture to groups such as Walmart, sneakers for Adidas – which has declared that the stoppage in Vietnam will cost 600 million dollars (515 million euros) in lost sales this year — or crucial components for smartphones from Apple or Samsung. It is the second largest supplier of clothing and shoes to the United States, after China, prompting 90 American companies, including Nike and Fruit of the Loom, to ask in a letter to the Biden Administration in August to accelerate the vaccine donations, underlining that “the health of our industry is directly dependent on the health of Vietnam’s industry.” At the end of that month, Kamala Harris, in the first visit of a US vice president to the country, promised to send one million doses, adding to the five million already donated.
Assistance that Vietnam hopes will help it achieve its goal of having 70% of its adult population vaccinated by next March. If fulfilled, the country plans to preserve the attractiveness that motivated manufacturers to move there from China last decade, given the rising costs in that country, a trend that increased as a result of the tariffs on the second world economy imposed by Donald Trump. Only in the last few months, due to factory closures, have there been signs to the contrary; According to the US Chamber of Commerce in Vietnam, up to 60% of the companies consulted considered moving to other countries in the region, such as China itself; some have already done so.
From Vietnam they are quick to allay fears that new waves of the virus or the current lack of labor – about 40% of workers in the industrial area of Ho Chi Minh City had not returned to their jobs at the beginning of October due to Part of the fear of contagion — prevent a stable recovery. “This is a temporary exodus,” says Tuan Chu. “They are starting to come back. Most entrepreneurs in the area are optimistic that they are receiving new orders and recruiting more labor. Many companies have even taken advantage of the lockdown to expand their factories, “he adds.
Time, the evolution of the virus, and Vietnam’s ability to adapt will tell whether its advantages to manufacturers outweigh its current drawbacks. Among the pros for this expert is the “stability of its policies”, in a country governed for decades by the Communist Party, “unlike the volatility of neighbors such as Thailand or Myanmar” and the still low operational cost.
But the Asian giant continues to have undeniable attractions. “Vietnam is a country similar to China 20 years ago, but with three major disadvantages: China already exists and Vietnam will never be able to have its economy of scale. Its population is aging as fast as China’s, so its labor costs will go up. And the world is in a deglobalization phase, so Vietnam does not have the wind in its favor that China had, “says Alicia García Herrero, chief economist for Asia Pacific at Natixis, who also sees pros:” The great advantage is that the Large multinationals want to continue in China for the domestic market, but not as an assembly platform for the rest of the world, so Vietnam should be able to continue attracting investment once they control the covid ”, he adds. Chu adds: “I think the reopening of the factories is sustainable. The Government cannot accept any more closures and has changed its strategy from “zero covid” (still defended by China) to learning to live with the virus ”.
China joins the donation of vaccines
The tense relations between Vietnam and China, which fought a brief war in 1979, seem to be going through a good time. Faced with Hanoi’s difficulties in vaccinating its population, Beijing has announced the donation of 5.7 million doses of Sinopharm. The donation can be an opportunity to build bridges with Vietnam, reluctant to be under the Chinese orbit – unlike neighbors like Myanmar or Cambodia, allies of the giant – while countering the influence of Washington. Carlyle Thayer, Professor Emeritus of Politics at the University of New South Wales in Australia, considers in a note that, as the two superpowers measure their forces, “Vietnam is the winner, because it accepts the aid without compromising its independence.”