Industry battles to balance budgets

The recent resurgence of the pandemic inside Vietnam has caused headaches for the industry. Photo: Le Toan

Last week, workers at four companies in Hoa Khanh, Van Don, Tho Quang, and Hoa Cam industrial zones (IZs) in Danang contracted coronavirus. As the report of these patients testing positive arrived, it raised an alarm of having clusters of infections at crowded IZs.

The four companies with patients are garment producer Kane-M Company (400 workers), candle manufacturing firm Sinaran (500 workers), plastic toy producer Matrix (2,000 workers), and seafood producer Danang Sea-products Import-Export Corporation (800 labourers). Kane-M suspended operations from July 31, while the three other companies are still in operation.

Nguyen Thanh Trung, director of a trade union of hi-tech and IZs in Danang, told VIR that the IZs are home to 77,000 workers so there are high risks of infection. However, most companies maintain their manufacturing so they have carefully implemented preventive measures to ensure health and safety for employees. All companies in the zones are also reducing on-site workers to lower the risks further.

Trung added that each company has its own plan to support workers during the crisis. The trade union in the city has so far granted a financial package worth VND500,000 ($21.70) each to support 500 disadvantaged workers. “We are trying to balance our budget to grant more financial support for workers in the coming time,” he said.

At that time, one patient had contracted coronavirus in the southern province of Dong Nai, which houses lots of factories and manufacturers as well. Fortunately, the patient does not work in any IZ.

Pham Van Cuong, deputy director of Dong Nai Industrial Zones Management Authority, told VIR that there will be more cases in Dong Nai in the coming time as several factories are still operational with a large number of workers. The province will try to act fast to locate the infected workers in order to avoid any cluster of infections in the community.

There are 196 manufacturers in Dong Nai’s 32 IZs, most of which are foreign-invested companies. To fight against the pandemic, Dong Nai leaders are following guidance from local health authorities like cleaning hands, a safe distance from others, and wearing a mask.

Backing to Danang, as the central coast city reimposed social distancing from July 28, the lives of workers have become harder than ever before.

Ly Ngoc, a 37-year-old worker at a dress manufacturer, said that her company was forced to close due to a lack of new orders. It is hard for her to find a new job while the city is under social distancing.

At present, she receives a basic salary from the company which is barely sufficient for buying food. The total money in her bank account is only VND2 million ($86). She has to withdraw VND500,000 ($21) to buy some vegetables and packages of instant noodles for the second social distancing period. She and her only child don’t dare to spend more than VND50,000 ($2) per day.

Meanwhile, Tu Anh has been working at Pouyuen Vietnam Company Ltd., in Ho Chi Minh City for six years. She has suffered from aplastic anemia for four years and needs money to pay for blood transfusion, which costs around VND10 million ($434) for each round of treatment. However, as a single mother Tu Anh knows that it is difficult to follow doctor’s advice. She has spent her tiny income on renting and tuition fees for her two children, and the monthly expense drains her purse.

The new wave of coronavirus is causing more struggles and challenges to more Vietnamese workers like Ngoc and Tu Anh. Hue Phong Leather Shoes Company Ltd. in Ho Chi Minh City is set to lay off over 1,500 workers on August 30. The decision is rubbing salt into the wound as the footwear producer has previously already let go of around 2,500 workers between May and June.

According to the latest survey by recruitment and staffing agency Adecco, 93 per cent of companies’ financial performance has been affected by COVID-19. Among those, 43 per cent of severely-impacted businesses saw revenues declining from 21 per cent to as much as 40 per cent. The top three industries with revenues negatively struck by the pandemic were food and beverages (47 per cent), real estate (56 per cent), and manufacturing (44 per cent).

Alongside declining revenue and business activities, many companies face tough decisions on their labour force, including employee layoffs or salary reduction. Some 30 per cent of businesses have reduced the number of employees from between 1-20 per cent, while 16 per cent of business have had to cut up to 40 per cent of employees.

For further risk mitigation, 58 per cent of companies have chosen to freeze all new hires, especially at large corporate level (75 per cent) compared to small- and medium-sized enterprises (50-56 per cent), according to the report.

Despite the negative prospects, Michael Kokalari, chief economist at VinaCapital, pointed out some bright sides. He said that Vietnam’s government learnt important lessons during the first COVID-19 wave. “For that reason, we don’t expect the economic impact of the current outbreak to be as negative as the first wave was, especially as Prime Minister Phuc repeatedly stressed the need to keep Vietnam’s economy functioning as much as possible while containing COVID-19,” he said.

Regarding slowing orders from the United States and Europe for the products manufactured in Vietnam, there are significant differences between individual factories’ order books, depending on the products they produce. For example, the demand for medical gloves has surged, so those factories cannot keep up with demand.

Also, recent US retail sales figures show that the demand for “stay at home” goods such as tablet computers, furniture, and home office equipment (with many of these products being made in Vietnam) are above pre-pandemic levels.

Furthermore, US garment sales surged in July, which should benefit Vietnam’s garment factories in the coming weeks.