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Updated on: 15 May, 2020
As of 15 May, 2020, Vietnam had not recorded any new communities with Covid-19 infections for 29 days. Transmission risks in the community are ‘very low’ yet still latent. All services except for clubs and karaoke parlours have been resumed, but with preventative measures.
In April, VCCI conducted a rapid assessment with 700 enterprises and business associations from 46 provinces/cities across the country. The survey sample includes a large number of enterprises in manufacturing (including in garment, footwear, electronics); wholesale, retail and repairing; transportation and warehousing; accommodation and food services; supporting service; education and training; agriculture – forestry and fisheries; construction; finance; health etc.. These are industries greatly affected by the Covid-19 pandemic. The sample was structured as follows: more than 8% are state-owned enterprises (SOEs), about 71% are domestic private enterprises (DPEs) and more than 20% are foreign-invested enterprises (FDIEs). The composition of the survey sample includes all sizes of enterprises in terms of employment, from small, medium to large enterprises. Among them, the group of enterprises with more than 500 employees accounts for 25.57% and the ones with fewer than 10 employees account for 10.51%.
The key impact of the Covid-19 pandemic on enterprises
The Covid-19 pandemic has had very severe impact on production and on the business activities of enterprises, including a number of key ones as follows.
Changes of employment
In the context of the current challenges to maintain production and business activities, it is not difficult to predict the employment situation. About 76% of enterprises announced that the number of employed workers will decrease. Typically, the rate of labour reduction is from 10% to 50%. In particular, almost 10% of enterprises will reduce over 50% of employed workers. The largest reduction in labour takes place in DPEs (71.18%).
By sector, the largest labour cuts occur in enterprises for education and training and professional activities (83%), accommodation and food services (81%) and manufacturing (78%). However, with tens of millions of workers working in manufacturing, especially garment and textiles, footwear, electronics, food processing and wood processing, the number of enterprises cutting employment, and the number of unemployed workers has the potential to reach the millions.
Please see full summary report here.
Leading international organisations have considerably lowered growth forecasts for Vietnam this year. The World Bank estimates a growth of 4.9%, and the International Monetary Fund (IMF): just 2.7%. Vietnam’s GDP growth in the first quarter fell to a 10 year low of 3.82%.
However, On 9 May, 2020, at a meeting with businesses national wide as well as ministries and sectors, Prime Minister Nguyen Xuan Phuc announced the target GDP growth rate of over 5% (the original target was 6.8%) and keeping inflation under 4% this year. He has called for greater efforts to restart the national economy by focusing on attracting investment from domestic economic sectors, firstly the private sector, and foreign direct investment (FDI), stepping up exports, promoting public capital disbursement and encouraging domestic consumption. The government maintains the suspension of the entry of foreigners and requires foreign experts and those arriving for official purposes be quarantined under the supervision of the health sector.
‘Vietnam’s textile and apparel industry has never faced negative growth in both imports and exports like that,’ said Vitas Vice Chairman Truong Van Cam
The reduction is reflected the industry’s lack of export orders, adding that those figures are forecast to drop further in May and June because most export orders for those months have been cancelled.
In such a situation, many enterprises have shifted to producing cloth face masks to meet domestic demand and exports. However, the export value at USD 63 million from face masks from January 1 to April 19 was too small compared to the total export textile and garment value of USD 10 billion in the first four months of the year, according to Vitas.
However at the virtual conference of Prime Minister with businesses nationwide, Vive Prisident of VITAS stated that compared to many other major exporting countries, the Vietnam textile and garment industry is still trying to hold out. In the past months, that has been difficult. But textile enterprises have not yet closed production. Although growth declined significantly, the decrease of 6.6% in the past 4 months is still lower than other exporting countries, with a decrease of 14-15%. In particular, the number of unemployed workers currently stands at 20,000 employees, instead of 40,000 unemployed mentioned in the example given earlier.
The textile and garment industry is predicted to have a significant reduction in total export value this year. In the most positive scenario, its export value will reach about USD 35 billion this year, down 10% year-on-year.
In a realistic scenario, the industry’s export value is estimated to reach about USD 33.5 billion, while in a bad case scenario, the export value will only hit USD 30-31 billion in 2020.
The government issued Decision No 15/2020/QD-TTg on 24 April, guiding the implementation of Resolution 42. The Decision consists of forms and applications that can be used by businesses and employees for submitting their applications. As Vietnam looks to restart its economy after the social isolation measures were lifted, these incentives will be welcomed by businesses and employees alike and shows the government’s push to further kick-start trade activities.
VITAS Recommendations during Phase 2 of Covid-19
VITAS will further propose to Ministries, GDVC, SBV the prompt introduction of supporting measures to textile enterprises affected by Covid-19, with emphasis on the following topics:
Mnet and Oxfam are advocating MOLISA for the development of the guideline for implementing Resolution 42/NQ-CP on Security Package to ensure the right target in the shortest time and without delay.
The MOILISA has released 08 Instructional Videos on the VND 62,000 billion support package in the spirit of Resolution No. 42 / NQ-CP and Decision No. 15/2020 / QD-TTg in which 4 polices relating to workers and employers: http://bovoinddn.molisa.gov.vn/trang-chu/video
The National public service portal launched six public services to assist people and enterprises affected by the COVID-19 pandemic. The services include applications for financial support for citizens whose jobs have been impacted by the coronavirus, with a maximum of VND1.8 million per month for three months on offer.
They also feature loans applications for employers to pay wages, registering for tax payment deadline extensions, suspending payment to retirement and survivor funds and receiving reports and requests related to COVID-19 assistance.
Minister and Chairman of the Government Office Mai Tiến Dũng said the new services would assist 4 million labourers and employers affected by the pandemic and shorten the waiting time for receiving the support compared to applying offline by six to 10 days. For further information, please access: https://ncovi.dichvucong.gov.vn/p/home/dvc-ncovid-danh-sach-dich-vu-cong.html
According to a survey, VCCI proposes a number of recommendations to the government, enterprises and worker representatives organisations to mitigate the impact of Covid-19 pandemic on labour and employment in enterprises
Some specific recommendations are:
To the government
To the enterprises and employer’s representative organisations
To the workers and worker representatives organisation
This is the time to be sharing between many different parties, especially workers and worker’s representative organisations. Consideration should be given to the adjustment of contribution from enterprises to trade union funds, create favourable conditions for development of enterprises; consider reducing worked hours and reducing wages during the epidemic time to share costs with enterprises. Workers need to take advantage to enjoy training and self-training to improve skills to better meet job requirements once the epidemic has been over.
VITAS continues to propose the halt of social and union dues by 2020; the National Assembly to soon approve the Vietnam – EU Free Trade Agreement (EVFTA), ministries and branches to prepare guidelines on the implementation of EVFTA so that enterprises can grasp it in time.
On 21 April 2020, VITAS signed the Joint Statement with more than 60 national associations and organisations around the world representing the global textile, footwear, tourism and fashion industries to appeal to governments, stakeholders and supply chain partners, taking responsible action to deal with Covid-19. This Joint Statement is on a larger scale than the STAR Statement.
As with many other garment factories in Vietnam, Long Ma Co.ltd (ID 2266) was also met with big challenges from the supply from China, leading to a shortage of materials for production. Long Ma has also been facing the challenges of order cancellations from other buyers. In February, Long Ma actively shared its difficulties with Fair Wear member brand Bierbaum Proenen, expecting the brand’s support. After exploring the situation and the capacity of Long Ma, Bierbaum Proenen agreed to increase double orders to support the factory in keeping production stable. This is huge support for the factory in general, and for workers in particular, given the difficult circumstances. Therefore, Long Ma is one of the few factories in Vietnam that does not need to reduce working hours and that can still keep up regular operations.