Friends of Vietnam Labour (FVL) NewsLetter - January 25, 2022
How does the global Covid-19 pandemic affect Vietnam's economy?
U.S.-Vietnam bilateral trade is on track to grow to $100 billion USD in 2021 and has doubled since the two countries normalized relations over a quarter century ago. The aggregate value for 2020 was $90.8 billion USD. However, Vietnam is forced to commit to reduce the US trade deficit, since according to a report by the US Census Bureau, Vietnam, up until November, 2021, exported about 73.6 billion USD and imported about 8.3 billion USD from the US (https://www.census.gov/foreign-trade/balance/c5520.html)
“From the start of the outbreak in 2020 until November, 2021, there has been more than one million Covid-19 infection cases in Vietnam resulting in almost twenty five thousand deaths”
According to Japanese financial newspaper Nikkei Asia dated 15-Nov-2021, Vietnam will be the beneficiary of European Union investments once the Covid-19 pandemic is over, principally from the UK and France, when these two countries' businesses competed for development opportunities in Vietnam. During Vietnam's prime minister's visit to Europe the week of 15-Nov-2021, Vietnam signed agreements to receive financial assistance from the UK and France in many different fields such as renewable energy and vaccine research valued up to $30 million USD. That was in addition to the trade benefits brought by the EVFTA and CPTPP trade agreements since early this year.
From the start of the outbreak in 2020 until November, 2021, there has been more than one million Covid-19 infection cases in Vietnam resulting in almost twenty five thousand deaths. The corona virus originating in Wuhan China has and will continue to demolish and reshape current economic, political and social rules. Will the new era end up being a 'stable world' or a time for major social upheavals based on volatile values? Life as we know it has been greatly reshaped since the second half of 2020 following waves after waves of news about the pandemic. Since early 2020, the world had taken on a posture to deal with an ongoing economic decline.
Particularly in Vietnam, the mandatory lockdown measures to control the spread of the Wuhan-2019 virus has slowed economic activities, caused massive unemployment while the border closures has negatively affected the supply of food and foodstuff (https://apnews.com/article/serbia-chinese-factory-vietnamese-workers-harsh-conditions-67431ad5f51b553357911dea24c70359)
Consequently, Vietnam will not be able to sidestep the impact of the pandemic with its socialist driven market economy where stability has never been in good supply. Political economics is a field requiring a level of discipline, morality and transparency of the highest order, but socialist regimes have been known to be lacking these critical components. In the fight against the Wuhan-19 pandemic in Vietnam, for example, we have seen orders that were extreme, unscientific and compassionless coming from the government. Those decisions have caused anguish and economic setbacks to millions of the poor already devastated by the pandemic.
“the Federal Republic of Germany manufacturer's operation in Vietnam is looking into shifting its manufacturing operations to another country. However, Adidas also expressed hope that its factories in Vietnam would resume operation in mid-August if the lockdown measures were lifted. Twenty eight percent of Adidas footwear by volume was produced in Vietnam and, until October 2021, Adidas had not been able to restart its operation”
Economic setbacks experienced by the people translate directly to an economic recession at the national level as seen below:
So far in 2021, the Vietnam economy has been significantly subdued since a prolonged national lockdown will inevitably lead to an economic depression due to manufacturing and business activities coming to a halt for many months. Also during this year, the splendor and magic of development projects, projects which are ill-conceived and lacking vision, have been used to cover up lurking antagonistic social issues such as the perpetual poverty gripping a majority of the population of Vietnam, the social inequalities and the trauma of peasants leaving the farmland and then having to return.
Until the end of October this year, at least 103 seafood processing plants in the South of Vietnam had to shutdown temporarily due to lockdown measures and strict social distancing requirements to contain the spread of Covid-19 in many parts of the country. International clothing and footwear manufacturers such as Nike and Adidas have been heavily impacted when Saigon, the manufacturing center of Vietnam, was under the measure of "lockdown in place x 3" (the workers work, eat and live at the plant 24 hours a day) to guard against and contain the Covid-19 pandemic.
On 06 of August, 2021, a Financial Review story, sourced from a financial forecast announced the same week by Adidas, stated that the Federal Republic of Germany manufacturer's operation in Vietnam is looking into shifting its manufacturing operations to another country. However, Adidas also expressed hope that its factories in Vietnam would resume operation in mid-August if the lockdown measures were lifted. Twenty eight percent of Adidas footwear by volume was produced in Vietnam and, until October 2021, Adidas had not been able to restart its operation. Nike has also shifted its manufacturing to other suppliers when the supply chain in Vietnam broke down and some of its suppliers had to close down for many weeks in the fight against the spread of Covid-19.
On 03 of December, 2021, when the Omicron variant appeared in Vietnam, the stock market looked bleak right from the market open. Scores of stocks dropped in price resulting in a red-across-the-board market down day. Shares of NVL lost 3%, CVR down by 2.3%, PLX down by 2.7%, BCM off by 2.3%...
“Many in the general population and amongst the workers were facing famine and needed help. The many decades of economic developments under the socialist doctrine's direction have not come up with a dependable and stable social security system, with the majority of the population not having any savings”
In the afternoon session, selling pressure caused stock prices of scores of companies to fall steeply with many individual stocks dropping to or exposed their price floors. Many investors have left the market, concerned about the first cases of Omicron infection in South East Asia. Some major stocks lost significantly, with BCM's price floor dropping to 49,300 VN Dong per share, GVR dropping 5.6% to 36,500 VN Dong per share, BID down by 5% at 42,000 VN Dong per share. During that time, small and medium cap stocks such as ASM, GEX, TCH... have all gone down to their price floors.
The chronic poverty that has gripped the population and the manual labor workers has manifested itself so clearly during the lockdown and temporary pause in economic activities to fight the pandemic. Many in the general population and amongst the workers were facing famine and needed help. The many decades of economic developments under the socialist doctrine's direction have not come up with a dependable and stable social security system, with the majority of the population not having any savings. The lack of savings is due to the government keeping a lid on wages, depressing them to a subsistence level in order to attract foreign investments. That subsistence pay scale is a tax policy failure since it does not redistribute wealth to the neediest groups in society.
Therefore the many months of lockdown to fight the Covid-19 pandemic helped uncover the reality that, for the last 30 years, the social security system for workers outside of government services has been nonexistent. Without the spontaneous aid from the private sector in the months of August, September and November of 2021,the three million laborers-workers would not have the means to escape Saigon and Bình-Dương to take refuge back in their villages when the economic lockdown ordered by the communist government of Vietnam went into effect in those three months.
Watching the peasants who left their villages in search of work coming back in streams of motorbikes carrying exhausted riders leaving Saigon and Bình-Dương have demonstrated that the class of skilled workers able to permanently relocate to the cities or near large industrial complexes does not exist, but in its place are masses of peasants huddling in ghettos, selling their unskilled labor on the cheap.
The stream of motorbikes appearing during the pandemic, in the months of August through October of 2021, cannot be rationalized in any other way except that the socialist dogma directed industrialization policy has not only failed but also caused severe damage to the economy of Vietnam during the pandemic.
The broken supply chain is a result of the socialist dogma directed economy. In Vietnam, the Covid-19 pandemic is the drop that spilled the glass as far as following in the path of a market economy directed by socialist dogma. The market economy model under direction of the socialist dogma is just an improbable concept since the market economy is a product of capitalism that can never be mixed-in with socialism which has the ultimate goal of eradicating the former.
In this day and age, as never before, capitalism commands a global character and has achieved major successes, especially in liberating mankind from production tasks while improving productivity, developing science, industries, culture,... Many capitalist countries, from their own advanced economic conditions and also as a result of the struggles of the working class and the laborers, have measures to adjust and put in place a set of social benefits that are far better now when compared to the benefits of the 20th century.
However the socialist doctrine directed market economy in Vietnam is encountering a multi-faceted crisis in healthcare, in social as well as in the political arena under the impacts of the Covid-19 pandemic and the fourth industrial revolution. The economic recession has laid bare the social inequities, the drastic worsening of the workers' living standards with unemployment accelerating, and the gap between the have and have-not widening ever larger, raising the specter of frictions and conflicts between the rich and the poor (to be continued).
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