Many factories and workshops in industrial zones in southern Vietnam are facing a paradox: reopening production but lack of human resources. Without consistent and smooth epidemic prevention measures from the central to local levels to facilitate the resumption of production activities, Vietnam’s “attractiveness” is at risk of being affected in the context that Vietnam strives to become the “destination” of many foreign investors in recent years.
Vietnam’s three months of strict anti-epidemic have caused most production activities to stall, orders not to be fulfilled, many foreign enterprises have had to move part of their production to third countries. According to the recommendations of businesses, foreign investors, as well as domestic enterprises, the Vietnamese government has switched from the policy of “Zero Covid” to “living together” with the coronavirus.
However, after three weeks of opening production, many factories still have to operate in moderation: Nearly 18% of about 22,000 enterprises, surveyed by the General Statistics Office, said there was a shortage of labor, especially in the southeast region the figure is 30.6% and mainly in the manufacturing of leather and footwear, apparel, electrical and electronic equipment, and computers. VnExpress page on October 23 stated that the main reason was “it is difficult to bring back workers,” “localities have not yet agreed on travel, workers have not received enough vaccines.”
These two shortcomings were highlighted by Mr. Jean-Jacques Bouflet, vice president of the European Chamber of Commerce in Vietnam (EuroCham), and Ms. Delphine Rousselet, executive director of EuroCham, in an interview with RFI Vietnamese on October 6th. These two leaders have seen positive signs of changes in the anti-epidemic strategy from the Vietnamese government since mid-September when foreign businesses submitted a strategic proposal for “Pandemic prevention and control in Vietnam” each region” and especially since the meeting with the prime minister.
RFI: Madame Delphine Rousselet, you are the chief executive officer of EuroCham. After a meeting with representatives of foreign businesses in mid-September 2021, the Vietnamese government changed its way of fighting the epidemic, from “Zero Covid” to “living with” coronavirus. What role did EuroCham, along with the American Chamber of Commerce (AmCham), the Korean Chamber of Commerce (KoCham), and the US-ASEAN Business Council (USABC), play in this decision?
Delphine Rousselet: Yes, I think of course we all play an important role because EuroCham represents more than 1,000 foreign companies investing in Vietnam, and other colleagues like AmCham and KoCham, also represent more than 1,000 foreign companies investing in Vietnam representing many foreign enterprises operating in Vietnam, including non-manufacturing companies. This means involving a lot of jobs in Vietnam.
Our voices were also heard. We often work together to make our voices heard, because, in fact, European businesses face the same difficulties as American, Korean, British, or Canadian businesses. In addition to reflecting the difficulties to the Vietnamese government, we also bring our anti-epidemic experiences in many countries to contribute to the Vietnamese side, for example, 4 months ago, the situation was like this, now it is like this. The effective measure around the world is probably vaccination, not “three in place.” This method of “eating-sleeping-working on the spot” cannot be applied for a long time, but can only be maintained for a few weeks because it is too difficult.
So we acted on different levels. The first is through the voice of a large number of businesses and members of the chambers of commerce. Next is to send to the government the anti-epidemic strategies of each country, including European countries, that can be applied in Vietnam. Another action that we take is to simultaneously report to European governments in order to maximize the supply of vaccines to Vietnam. So there has been a lot of vaccine aid to Vietnam thanks in part to the information we transferred from Vietnam to the European Union.
RFI: What are the consequences of the fourth outbreak in Vietnam for European businesses?
D.Rousselet: We have published on the EuroCham website, as well as on many articles, polling data of members, according to which more than 20% of enterprises have had to relocate production from Vietnam. Urgent action must therefore be taken as this shift has just begun but is likely to worsen in the future.
But from a few days ago, the situation has changed, employees can come to the office, blockade measures have been lifted, barriers have been removed, and travel is easier. And authorities in many southern provinces have told us that workers can travel intercity to get to the factory, whereas a few weeks ago it was impossible.
In short, we all believe. We see that the situation is moving in the right direction, although it is still days or weeks before it is fully stabilized as some provincial governments are still reluctant to let factories reopen. Many restrictive measures are still in place, so many factories are still not operating at full capacity. But we hope the situation will be resolved soon.
RFI: Recently, Vietnam’s state-controlled media continuously has articles, to reassure the public, that foreign enterprises do not leave Vietnam. How did she feel?
D.Rousselet: Of course it’s a huge risk for the government, for the economy because if foreign businesses withdraw from Vietnam, this means losing a lot of jobs.
I don’t think there are a lot of big investors leaving Vietnam right now, I haven’t heard the news. On the contrary, there are certainly many sources of investment that have shrunk or stalled. The question now is whether the investment sources that are on hold or suspended will be deployed in Vietnam or will be transferred to another country. Right now I don’t have an answer.
EVFTA Agreement and a year of Covid
The EU-Vietnam Free Trade Agreement (EVFTA) officially took effect on August 1, 2020. EVFTA plays a very important role in the economic and trade development of Vietnam. Investment, import, and export activities between the two sides are also facilitated thanks to the EVFTA. However, the EVFTA came into effect at a time when Europe was suffering from an epidemiological crisis and now Vietnam.
RFI: Dear Mr. Jean-Jacques Bouflet, you are the vice president of the European Business Association in Vietnam, would you please tell me if the current epidemic situation causes delays to investment projects from both sides of Vietnam. and Europe?
Jean-Jacques Bouflet: First, investing is by definition long-term. Many EuroCham members who are foreign companies, such as Germany, France, and Italy have also prepared to operate in Vietnam. So they know Vietnam, understand that these anti-epidemic measures are only temporary, although very strict, and all indicators are good for 2022.
2021 is likely to be difficult. For 2022, the situation is said to be positive and will not hurt investment, although the amount of investment in Vietnam is reduced. It is clear that direct investment has decreased by 15% compared to 2019, which means that the year before Covid and although it has been gradually recovered in 2021 compared to 2020. There is a little potential for growth but indicators now only forecast from 2 to 3 points while before it was 6 points.
You mentioned that the trade agreement took effect from August 2020, but the investment protection agreement has not yet taken effect because it still has to wait for two ratifications, from the European Union, and from each member country. This process is not yet complete, member states have not yet ratified it. Therefore, the investment protection agreement has not yet taken effect and has not brought about the positive effects we wanted.
RFI: In general, are European businesses satisfied with the improvements and reforms made by Vietnam since the EVFTA took effect? What is the investment future of European businesses like?
J.J. Bouflet: A series of reform measures have been carried out for many years and strengthened in the direction of simplifying and facilitating trade and activities of foreign enterprises, especially in Europe. I must say that the Prime Minister of Vietnam has been talking with EuroCham for 4 hours to listen to us, trying to understand our problems clearly proves that the Vietnamese government wants to be really urgent.
But beyond the statements, we hope they will be implemented despite the current Covid situation and strict measures being enacted. We understand the government’s wishes in terms of health, but those measures have had a huge impact on the economy.
Nevertheless, it should be noted that the government’s willingness to open up is an incentive for foreign investment in general, facilitating the sustainable activity. We are happy. That is one reason for EuroCham to actively cooperate with the Vietnamese authorities. Everyone expects investment and activity to flourish as soon as 2022, unless, of course, the situation suddenly worsens.
RFI Vietnamese would like to thank Mr. Jean-Jacques Bouflet, Vice President of the European Chamber of Commerce in Vietnam (EuroCham), and Ms. Delphine Rousselet, Managing Director of EuroCham.