Further layoffs imminent for production facilities

Whether laid off entriely or furloughed for several months, many workers face a cloudy 2020 financially. Photo: Le Toan

Duyen and her husband have been working for Hue Phong Leather Shoes Company Ltd. (Hue Phong Footwear), for many years. Established in 1992, Hue Phong Footwear’s main business activity is producing and exporting footwear products to EU and US markets. However from June 15, all workers of that factory will have to leave following the company’s layoff decision.

She said that her company will pay two months of salary to everyone and introduce some garment manufacturers for potential employment. “Nevertheless, it is not easy for us to find a job so soon after social distancing was eased and be able to afford living expenses in Ho Chi Minh City. Therefore, we decided to go back to our hometown and wait for a few months,” Duyen said.

Similarly, Thuy, a 50-year-old worker at the same facility, has been concerned about her future. She has been with the company more than 10 years and is now facing the sudden layoff and loss of income.

Duyen and Thuy share their fate with around 2,200 other workers at the manufacturer which has made these final cuts in an attempt to cope with its losses.

Nguyen Quang Hung, the company’s head of human resources, said that since the outbreak of the coronavirus pandemic, Hue Phong Footwear has been under pressure from supply chain disruptions as much of its raw material supply relies on China. When the virus spread in the United States and Europe, the company was hit with mass order cancellations from these buyers.

“Our workers have been temporarily suspended from work but still earn a basic salary. However, it remains uncertain when our clients can resume orders. Therefore, we must take this very difficult decision to lay off our workers in order to weather this crisis,” he said.

Elsewhere, 8,000 workers from Chi Hung Company Ltd. in the southern province of Binh Duong went on strike between May 27 and 30. Chi Hung Company, wholly invested by All Wells International Co., Ltd. (British Virgin Islands) is specialised in manufacturing different kinds of sport shoes including the famous Adidas football boot. Due to shrinking demand from customers, the company had trouble acquiring new orders for its production. Therefore, the company let many workers temporarily stop working, only granting them small allowances until June. From July and August, the company will suspend or terminate workers’ contracts without compensation or allowance if the situation continues.

Meanwhile, garment group Seething Vietnam Co., Ltd. in Haiphong Industrial Zone also took dramatic measures and laid off 390 of its 560 workers. Many of them were shocked as they did not receive any previous salaries before the news arrived. Thus, hundreds of workers gathered in front of the company to protest and claim their rights.

Although Vietnam has managed to flatten the pandemic curve and ramp up efforts to restart the economy, export prospects remain grim. With the EU and the US being the two largest markets, there have been many cases for Vietnamese exporters where the customers have either cancelled orders or simply voided their contracts due to force majeure. If local companies cannot find new orders, it seems inevitable that there will be more mass layoffs in the future, troubling the lives of Vietnamese workers.

The pandemic has so far negatively impacted around 85 per cent of businesses in Vietnam and forced many to streamline their workforce, according to data from the General Statistics Office (GSO). Businesses listed problems such as smaller markets, lower input of materials, and a lack of capital, while operating expenses remained mostly unchanged.

The GSO estimated that if the pandemic lasts until end of the second quarter, 134,000 businesses might have to cease operation. Should the crisis go on until the end of the year, this number might rise to 205,000 businesses. At the end of the first quarter this year, around 22 per cent of labourers had already lost their jobs, 7.5 per cent took unpaid leaves, and nearly 10 per cent of them had their wages cut.

Nguyen Van Be, chairman of the Chi Minh City Export Industiral Zones Management Authority (HEPZA), told VIR that footwear, garments, and jewellery are among those industries hit the hardest by COVID-19. While companies still trade with partners in China, most major buyers in the EU and the US have been suspending or cancelling their orders, leaving Vietnamese producers with high inventories and a lack of new orders.

He also revealed that the number of laid-off workers has reached 10,000 in Ho Chi Minh City. Though companies are being urged to retain workers as it can be difficult to resume business once the crisis subsides, the situation could become worse for export-oriented manufacturers and, therefore, many have furloughed and cut salaries.

The General Department of Customs has released data on import-export activities in the first half of May. The pandemic has affected the country’s export turnover of goods in the period, reaching only $17.4 billion, down by 4.7 per cent over the previous period.

The Import-Export Department under the Ministry of Industry and Trade predicted dim prospects for Vietnam’s trade activities in the second quarter as the crisis has severely affected major export markets like Europe, the US, and Japan.

However, if the pandemic is contained soon, activities are expected to become robust in the second half of the year thanks to growing demand in the market as well as upcoming implementation of the EU-Vietnam Free Trade Agreement.

According to Ho Chi Minh City Export Processing and Industrial Zones Management Authority, as of June 2, more than 3,000 workers have had their labour contracts terminated across 44 foreign-invest enterprises (FIEs). Moreover, the number of workers whose employment contracts are suspended and those who have to take unpaid leave reaches more than 10,000.

Pham Van Cuong, deputy chief at Dong Nai Industrial Zones Management Authority, told VIR that approximately 10,000 workers at 79 companies have been affected by the pandemic there, with most involving FIEs. “Companies have done their utmost to maintain operation, however once their business operation weakens, businesses have the option to lay their workers off temporarily or permanently based on existing law,” he said.

At present, employees whose labour contracts are suspended or those who must take unpaid leave for a month or more will receive financial assistance of $77 (VND 1.8 million) per month from the government.

Beside the supporting package from the government, Dong Nai province also encourages companies in export processing and industrial zones to pay extra allowances for their laid-off workers.

Nguyen Thanh Nhan, deputy chief at Binh Duong Industrial Zones Management Authority stated that if the EU and the US – both major export markets for Vietnam – sustain their lockdowns, export companies will not be able to afford salaries for their workers.

Nhan said that an estimated 130 businesses and about 50,000 workers could be affected in Binh Duong province alone. Therefore, many companies are attempting to register with the government in order to receive financial support packages for their employees.