COVID-19 and the Effects on Supply Chains in Vietnam

Alberto VettorettiManaging Partner, Dezan Shira & Associates

The COVID-19 pandemic has slowed global trade and disrupted supply chains. The virus, which first started in China, shut manufacturing facilities for an extended period of time. As China, known as the factory of the world, shut factories, it resulted in a ripple effect battering global supply chains with businesses struggling to source raw inputs.

This has particularly affected Vietnam, which relies on China for importing raw materials for its industries while also exporting to the country. A survey in February by the American Chamber of Commerce (AmCham) revealed that a majority of its members were reporting difficulties in sourcing supplies and materials from Chinese suppliers. In addition, 70 percent of its members stated they were operating at just 70 percent capacity.

Businesses suspending production

Several automobile manufactures including, Honda, Toyota, Nissan and Ford that have production plants in Vietnam have suspended production due to the pandemic. Business across all sectors in Vietnam are facing disruptions particularly as Vietnam is currently in a two-week social isolation program until April 15, where only essential businesses operate.

Vietnam economy resilient: World Bank

And yet, while Vietnam remains exposed to COVID-19, its economy remains resilient as per the World Bank. In its report East Asian and the Pacific in the Time of COVID-19, Vietnam due to its integration with the global economy has suffered due to the pandemic particularly hurting manufacturing and tourism. Nevertheless, exports expanded by 8 percent in the first 2 months of the year, while FDI inflows amounted to US$2.5 billion.

While this remains a difficult time, Vietnam is poised to overcome the ongoing crisis. The report further states that while the pandemic can affect Vietnam’s economy in the short term – if the virus is contained – in the long-term Vietnam can manage external risks by diversifying trade flows and improving competitiveness.

Supply chains upended

Even so, with borders closed and trade limited – countries are likely to stagger opening their borders for regular operations. For example, when a port in Wuhan – the epicenter of the pandemic – opened for business, several countries in that same week closed their borders. Ethiopia closed its land borders, Myanmar canceled all commercial flights, while the US, Canada, and most of Europe introduced restrictions.

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This article is produced by Vietnam Briefing, a premium source of information for investors looking to set up and conduct business in Vietnam. The site is a publishing arm of Dezan Shira & Associates, a leading foreign investment consultancy in Asia with over 27 years of experience assisting businesses with market entry, site selection, legal, tax, accounting, HR and payroll services throughout the region.

Dezan Shira & Associates is pleased to introduce our Covid-19 portal, dedicated to providing businesses with an extensive roundup of the latest developments, policy updates, and solutions to help manage your business operation during the outbreak. Checking in daily to keep up to date with new updates!

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