Business & Economy

After coronavirus victory, Vietnam seeks economic success

By Eric San Juan

Ho Chi Minh City, Vietnam, May 27 (efe-epa).- After its successful management of the COVID-19 epidemic without any deaths and with no local infections for 40 days, Vietnam is tackling its economic recovery with the aim of reinforcing its position as an alternative to China for international investors.

Last week it was announced that Apple had moved its production of AirPods Pro wireless headphones from China to Vietnam, a move that follows a trend which began with the outbreak of the trade war between Beijing and Washington and that seems to have accelerated due to the crisis unleashed by the novel coronavirus.

“Companies now are thinking about redesigning their supply chain network and moving manufacturing to other countries in Southeast Asia, especially to Vietnam… an attractive destination for investors and manufacturing alike,” Reza Akbari, professor and expert in supply chains from Ho Chi Minh City’s RMIT University, told EFE.

In addition to Apple, Akbari mentions the examples of Adidas, Samsung, Google, Microsoft and furniture company Lovesac, which in recent months have moved part of their production from China to Vietnam, a country with 96 million inhabitants that has multiplied in 30 years its Gross Domestic Product (GDP) by 10.

Another factor that Akbari says encourages investment in Vietnam is its success in the fight against the coronavirus pandemic, with 326 cases so far and no deaths, and its preparedness to face another outbreak.

Although borders are still closed, the country has recovered its usual activity – children have returned to school, shops, bars and restaurants have reopened and airlines are recovering their usual frequency of domestic flights.

Vingroup, the country’s largest industrial conglomerate, says it can produce up to 55,000 respirators per month, while the textile industry is capable of manufacturing 7 million cloth masks and 5.7 million disposable surgical masks daily.

“All these preparations can assure the investors the country remains cautious and ready to encounter any disruption and challenges,” said Akbari.

In a recent speech picked up by the local press, Minister of Investment and Planning Nguyen Chi Dung was confident that the good management of the health crisis serves to attract new investors and strengthen Vietnam’s global position.

The country achieved economic growth of 7 percent in 2019, in line with recent years, but its economy has been suffering since the beginning of the epidemic due to its strong ties with China, its number one trading partner, and due to the Vietnamese industry’s dependence on parts and raw materials from its northern neighbor.

“Several sectors in Vietnam from production (footwear, garments and textiles, electronics), construction and also service and trade heavily rely on imported materials from China. Vietnam’s imports from China were valued at $22.3 billion in December 2019 and slumped to $18.6 billion in January 2020,” said Akbari.

As the epidemic took its first steps outside of China (reaching Vietnam on Jan. 23), a tough few months were anticipated for Vietnam, which despite containing the virus, could not avoid the painful economic consequences after closing its borders and the temporary paralysis of the economy, which barely grew 3.8 percent in the first quarter, three points less than it did a year ago.

A recent report by the International Labor Organization calculated that 10 million workers will lose their jobs or their wages will be reduced in the second quarter of the year, while the International Monetary Fund lowered the growth forecast from 6.5 to 2.7 percent for this year.

The data does not seem to disrupt the mood of Hanoi’s communist government, which amid a global recession aims to exceed 5 percent, just under two points less than the 6.8 percent that had been set before the outbreak, in line with figures of previous years.

“We mustn’t allow the economy to grow at a slow pace. Only growth can help provide jobs, reduce poverty and ensure social security,” Prime Minister Nguyen Xuan Phuc said earlier this month.

To achieve this, he announced this week 30 percent tax cuts for small businesses with under 100 employees and $2.15 million annual revenue, which will mean $679 million less in the state’s coffers.

This measure, which will benefit 93 percent of the 760,000 businesses in the country, joins other relief packages presented in recent months, in particular a support plan of $2.5 billion especially for those in need, and a $10.8 billion credit package to stimulate the economy.

One of the most damaged sectors is tourism, which with closed borders tries to survive with a promotional campaign targeting domestic travel and plans to take advantage of its coronavirus-free status to attract foreign tourists when possible again.

Despite the difficulties, Akbari agrees with other analysts that see Vietnam as one of the countries in the best position to relaunch its economy and quotes a recent report of the Asian Development Bank, which places it as the nation with the highest growth in the region with an advance of 6.8 percent in 2021. EFE-EPA

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