Maintaining business stability a top task for foreign investors

Foreign-invested enterprises are working to ensure manufacturing operations continue as normally as possible

Michael Chan, head of sales, marketing, and customer service of BW Industrial Development JSC – a joint venture between global equity fund Warburg Pincus and local partner Becamex Investment Development Corporation, told VIR that though companies like it are bogged down in difficulties, they are trying to maintain normal operations.

For example, Genepa Vietnam, one of the largest woodworking businesses in Japan, has revealed that it has detected delays in delivery and insufficient quantities by suppliers while searching for alternative materials in Vietnam.

Chan said that in the long term, the demand from key markets such as China or the United States can be greatly impacted. “The global economy is slowing down, resulting in orders being cut, challenges in international shipping, redundancies, and the cancellation of trade shows – all of these are affecting business,” he said.

However, foreign-invested enterprises (FIEs) are actively implementing solutions to cope with the epidemic and ensure the health of their staff.

Nhut Vo, president of NS BlueScope Vietnam, told VIR that since BlueScope has abundant finances and an extensive supply system with numerous raw material suppliers, it can still ensure continuity in operations and production even during this period.

In its fight against the outbreak, BlueScope has been proactively implementing independent and effective disease control measures through its COVID-19 Disease Response Unit, with contingency plans for each different situation.

In particular, the strict implementation of health declarations, restriction of movement, and social distancing are important factors to limit infection.

Vo said, according to risk management protocols, depending on the job characteristics, employees are required to work remotely or in small groups to minimise community infection.

In addition, in the short term, BlueScope is also trying to minimise the layoffs by encouraging employees to use their annual days off during the period of social distancing, or reduce working hours while market demand is subdued.

Extra burdens

Meanwhile Nguyen Chi Thanh, deputy general director of French company Scavi JSC said that textile and garment enterprises are suffering from double impacts. While factories are facing with difficulties in material supplies for manufacturing, many other key markets such as the US and European countries have recently announced stopping or delaying the receipt of orders.

Thanh said that Scavi was luckier than many other textile and garment manufacturers because the majority of its customers from the US and Europe have opted to extend the deadline to receive orders or reduce the order volume, instead of cancelling orders. “Of course, we have to shoulder extra expenses for storage in Vietnam before we can export our products, but it could be far worse,” Thanh said.

He added that in 2019, Scavi had a total export turnover of $150 million, with the EU market contributing more than 55 per cent and the US over 40 per cent.

“We can maintain manufacturing activities and business activities because around 60 per cent of our materials are sourced from within the country. Our greatest difficulty right now is to keep safe our more than 12,000 employees in five factories nationwide,” Thanh said.

“Our production lines were designed under international standards so we can ensure safe distance between workers, and can provide the entire staff with masks, and the company has been strictly obeying all regulations to fight against the pandemic. So far, we have not had a single employee who tested positive for COVID-19,” he added.

He added that a comprehensive plan was issued throughout the company’s system in the time of social distancing from April 1 to 15, in which all requirements of the government will be fully obeyed. “The responsibility to implement this plan was assigned for every team leader of the five factories to ensure that the highest standards of safety will be observed across our system,” Thanh said.

Being more active to cope

Chan from BW asserted that the support programme for foreign investors, who account for 23 per cent of the total investment in the country (according to figures from the General Statistics Office in 2019), should be implemented soon, providing them with exemption from corporate income tax, reduction or exemption from corporate social insurance payments, and deferment on bank loan payments.

He also highlighted that in case the correct measures are in place, a crisis can also bring opportunities.

“On our part, we have certainly seen the positive sentiment that business leaders around the world now have for this impressive country. The pandemic could ultimately be a powerful catalyst for the migration of factories from China to Vietnam, possibly on a similar scale as during the US-China trade war last year,” Chan said.

Meanwhile, right from the beginning of the coronavirus outbreak, Scavi has changed part of its manufacturing activities to personal protective gear, masks, and caps from antibacterial fabrics to meet the domestic and export demand.

Although the production of these items only started about two months ago, Scavi has nearly 100 million masks ready to export abroad.

Thanh said that in the upcoming several weeks, Scavi could receive the permit from authorised agencies to export safety products using antibacterial fabric abroad. This permission will play an important role in its manufacturing strategy for 2020 which has been put far behind schedule by COVID-19 and the company will be hard-pressed to reach its plan of $180 million export turnover this year.

However, Thanh said that his top priority now is to maintain manufacturing operations and income for his employees and this has been successful so far.

Vo from BlueScope commented that in order to support the business community to overcome this difficult time, in addition to the financial measures which are being implemented by the government, it is necessary to focus on supporting enterprises, for example to freeze and extend due debts and support land rental costs. “Those can be achieved via adjusting policies on reducing income tax for workers and enterprises. As a result, enterprises can survive and overcome the pandemic, stabilise jobs for workers, and prepare to enter a growing phase after the outbreak is under control,” he said.

According to the Ministry of Planning and Investment, FIEs are suffering from a shortage of foreign experts and technicians while simultaneously encountering difficulties in importing raw input materials, negatively affecting production activities and the implementation of their projects nationally. Meanwhile, many FIEs have also endured severe financial difficulties as a result of the sharp decreases in consumption, leading to stagnancy in production, especially among businesses that had large export orders from countries hit by the coronavirus outbreak.