Vietnam: Best yet to come for recovery of business

Businesses continue to pin their hopes on the swift recovery of Vietnam’s economy, with foreign ones in particular cautiously optimistic about their prospects in the country moving into next year.

Adam Koulaksezian, executive director of the French Chamber of Commerce and Industry in Vietnam, told VIR, “In Ho Chi Minh City and neighbouring provinces like Dong Nai and Binh Duong, where a majority of our 260 corporate members have their headquarters, it is a relief to see that business sentiment is on the mend.”

But even if some businesses are experiencing a fantastic comeback since the reopening, 2021 has been an arduous journey for the majority of the French businesses in Vietnam. “Generally speaking though, if the positive trend is maintained with no new restrictions in 2022 looming over the economy, we are highly confident regarding the rebound of French businesses in Vietnam,” he added.

Koulaksezian explained that more optimism has followed Prime Minister Pham Minh Chinh’s official visit to Paris in early November, where he held talks with top political leaders including French counterpart Jean Castex and President Emmanuel Macron, as well as high-level talks with French businesses in key sectors. They resulted in major agreements which reaffirmed the deepening of the pair’s strategic partnership.

The challenges faced by French investors and businesses post-pandemic are being inflicted on everyone else as new coronavirus variants threaten to disrupt aviation, food and beverages, hospitality, and tourism plans once more.

The latest report by Maybank Kim Eng noted that the worst looked to be over with the easing of lockdown measures since early October, but the pace of economic recovery and aforementioned bumps in the road with COVID-19 will likely be gradual amid a muted manufacturing and services recovery. A more substantial and broad-based economic recovery will likely take shape in 2022.

The report said that manufacturing recovery this time may be weaker than the V-shaped rebound seen last year because of labour shortages and supply chain disruptions. While factories across major industrial parks in key manufacturing hubs have largely resumed operations, it was estimated that production has only recovered to around 70 per cent of full capacity. Manufacturing indexes remained in the contractionary territory for the fourth consecutive month in September, further underscoring the challenging near-term manufacturing outlook.

However, it pointed out that exports improved in October amid easing lockdown restrictions and economic reopening. Exports rebounded into positive territory in October, growing by 0.3 per cent, led by higher exports for machinery (13.1 per cent against 5.7 per cent in Sep) and computer and electronic components (8.3 per cent compared to 6.8 per cent in September). A softer decline in textile and garment exports (-4.4 per cent compared to -21.1 per cent in September) also supported the recovery.

Based on the current and forecast export figures, Kenneth Atkinson, founder and senior advisor at Grant Thornton Vietnam, believes that foreign businesses are recovering well. “Based on my understanding, industrial zones with a vaccinated workforce are running at about 70-90 per cent capacity compared to the start of the year,” he said.

However, there are several key challenges facing companies in the southern provinces that have yet to be solved, including a lack of workforce, supply chain disruptions including delayed raw materials, and shipping issues caused by lack of containers and rapid price increases. In particular, there are difficulties with workforce numbers as many people returned home to agricultural provinces or have long commutes which make it difficult to cross provincial borders to enter Binh Duong.

“Businesses are also dealing with high absenteeism due to coronavirus infections, or a fear of getting infected, or medical reasons making them vulnerable such as underlying conditions and pregnancy. In addition, there are still time-consuming procedures to get approval for foreign experts to enter or even return to Vietnam to support operations at this critical juncture,” Atkinson said.

Source: VIR