Covid-19 impact and responses: Vietnam

Updated on: 15 May, 2020

What is the current situation?

General information

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.

The situation with factory production

The total textile and garment export value in the first four months of this year dropped by 6.6% year-on-year to USD 10.64 billion, according to the Vietnam Textile and Apparel Association (Vitas).

‘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.

What are the government policies to support local businesses?

  • The Vietnamese government is planning to issue a variety of incentives to mitigate the economic impact of the Covid-19 outbreak. Recently, the Prime Minister issued Directive 11 on measures to help businesses affected by the pandemic. The incentives will include providing tax breaks, delaying tax payments, and land-use fees for businesses, costing the government US$1.16 billion (VND 27 trillion).
  • Vietnam’s central bank, the State Bank of Vietnam (SVB), has already cut interest rates from February, 2020. Further, the SVB has asked commercial banks in the country to lower interest rates.
  • Investors should seek help from qualified local advisors to better understand how the current and upcoming regulations affect their businesses.
  • The Ministry of Labour-Invalids and Social Affairs has issued a document to guide Vietnam Social Insurance on the conditions for this exemption. Accordingly, the general director of Vietnam Social Insurance asked social insurance divisions in cities and provinces to guide companies where at least 50% of staff members have lost their jobs to complete procedures to suspend payments to retirement and death funds. The postponement will last until the end of June. These suspended payments will also be exempt from interest. In case the epidemic is not brought under control by the end of June, impacted companies will be able to apply for an extension of the exemption.

What are the government policies and regulations to protect employees – the workers?

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.

What are local stakeholders doing to lobby their government?

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: 

  1. Proposal to exempt social insurance and union fees in 2020 for both employers and employees
  2. Proposal to postpone the payment of CIT in 2019 among businesses, and postpone the payment of VAT of all kinds for 2020
  3. Proposal to the government to spend the unemployment insurance fund funding 50% of the minimum wage among workers who are underemployed, and leaving enterprises to pay for the rest 50% to ensure the minimum income among employees. In the temporary absence of specific policies on exemption and reduction of social insurance and union fees, VITAS proposed that the government stop the collection of such fees from March to support businesses with the budget to pay for underemployed workers.
  4.  Proposing that the government guides commercial banks for:
    • The grace package to not pay the principal and interest on long-term loans due and payable in 2020.
    • Extending working loan time to 11 months, including the part borrowed due to slow materials and customers’ deferred payment and delays in delivery.
  5. Proposal to GDVC to promptly issue guiding documents on amending Official Letter No. 1431/TCHQ-GSQL dated 9 March 2020, specifying that the export of antibacterial cloth masks is not subject to obtaining a license by MOH as not being a medical mask, including the import of fabrics for mask production to compensate for the shortage of orders. Delay in the government’s support can result in losing those orders to the hands of competitors.
  6. Besides, VITAS also cooperated with MOIT, Trade Office in the United States and the Delegation of the European Union in Vietnam to submit the petition to the US Department of State and representatives of the European Union to verify the inaccurate information that ‘the US and EU markets officially discontinued importing Vietnamese textiles and garments’ to prevent enterprises from worrying.
  7.  VITAS joint statement on responsible purchasing practices amid the Covid-19 crisis: VITAS, working with other textile and garment business associations from six producing and export countries including china, Bangladesh, Pakistan, Cambodia, Myanmar will release one joint statement on Responsible Purchasing Practices amid the Covid-19 Crisis to call on global brand companies, retailers and traders to (i) consider all potential impacts on workers, small businesses in the supply chain when taking significant purchasing decisions; (ii) honour the terms of purchasing contracts, fulfil obligations therein, and not re-negotiate price or payment terms; (iii) take deliveries or shipments, and proceed with payment as agreed upon for goods already produced and currently in production with materials ready, and not cancel orders which are already in production.

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. 

What are local organisations doing to support and protect workers?

  • The Vietnam General Confederation of Labour (VGCL) and local trade union have organised many communication initiatives to guide the workers on how to be protected during the Covid-19 outbreak and advise the workers on the government policy, in case of isolation and work stoppage.
  • VGCL is conducting an impact assessment of Covid-19 on labourers. The findings of the research will be used for detailed solutions to support labourers.
  • ILO Better Work Vietnam has released the guidelines of labour plans for enterprises to responding the Covid-19 in English and Vietnamese.
  • CARE International in Vietnam is conducting the rapid gender analysis of Covid-19 in Vietnam on garment labour, a female ethnic minority group and informal workers in urban areas.
  • CDI continues a series of support for workers, including (i) providing legal aid for workers on their rights; (ii) online training for workers on relevant regulations and policy, soft skills; (iii) surveying the impact of Covid-19 to workers; (iv) advocating MOLISA in drafting guidelines for implementing Security Package; (v) advocating the landlords to reduce house rent; (vi) monitoring the implementation of government policies.

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:

  1. The policies to support the employees who take unpaid leave or have their contracts suspended
  2. The policies to support the employees who have their employment contract terminated, have employment contracts but are not eligible for unemployment benefits
  3. The employees lack of contract signing become unemployed due to the Covid-19 pandemic
  4. Policies to support employers to borrow capital to pay job stoppage wages to laborers

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:

What have been the responses and requests of business associations to support the industry?

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

  • Provide support packages for enterprises to pay workers for job termination or temporary leave due to factory disruption a result of the epidemic, and severance pay
  • The government should provide specific guidance on cases where a worker with a labour contract has to suspend the work or take unpaid leave due to the epidemic so that the worker can keep the job; review policies on flexible working time during the epidemic so that enterprises can reduce weekly worked hours and adjust salaries appropriately for workers; allow workers and employers to agree on the wage which is lower than the regional minimum wage during the epidemic time, on reduction of worked hours with corresponding payment
  • Regarding social insurance, unemployment insurance, and contribution to the trade union fund, trade union fee and regional minimum wage in 2021:
    • No regional minimum wage adjustment for 2021;
    • Temporarily suspend employers’ contributions to trade union funds, social insurance, health insurance, and unemployment insurance in 2020. The Government should submit to the National Assembly a proposal to reduce the unemployment insurance premium from 1% to 0.5% at least for a period of 6 to 12 months, to reduce the trade union fee from 2% to 1% for 2020.

To the enterprises and employer’s representative organisations

  • Implement corporate restructuring. This is the time to focus on reviewing the conditions for innovation of production and technologies, expanding markets, organising labour to improve efficiency and competitiveness, and preparing for new steps to be ready for development after the pandemic is over;
  • Quickly perform digital transition in enterprises. This solution has been repeatedly mentioned at both government and enterprise level under the influence of the Industrial Revolution 4.0;
  • Make savings, cut costs. This is a very ‘classical’ measure but it is very useful and compulsory for an enterprise to implement once it is facing difficulties in terms of supply and market, especially small and medium enterprises, micro enterprises and household businesses. It is necessary to review all costs and implement cost-cutting and reduction to the maximum possible extent;
  • Provide training and retraining for staff to better meet the current and future development requirements for the enterprise – the undone jobs due to time constraints; develop a flexible payment systems (which may be lower than the regional minimum wage);
  • Effective use of government support to stabilise production and take care of workers.

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.

What are international brands doing to support suppliers and protect workers?

As with many other garment factories in Vietnam, Long Ma (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.

Relevant links for more information