Production base in covid-19 crisis

15Nov2021

B&Company

The flow of China Plus One has accelerated since the 10s, due to the increasing labor costs and labor shortages in China. According to report of JETRO, The share of export value of electrical equipment has increased to 2019, telephones and parts accounted for 19.5%, and computer electronic products and parts accounted for 13.6%. Export of FDI accounted for 42% of total export value in 2009. It increased by 70% to 2019. Export value of Domestic has also increased by more than two times from 2009.

Vietnam Top5 export products by export value

Source: JETRO¹ ²

Influence of Covid-19

As its generally known, Covid-19 caused terrible impact on our life economically In 2020. According to the study of JETRO in 2021². In April and May of 2020, Vienam’s export decreased by more than 10% from 2019. But in June, Export by FDI started to increased from the same month of 2019. In result, growth of Vienam’s export through year in 2020 increased by 7% from 2019. we can see those growth was led by FDI. Exports by domestic companies decreased, but exports by FDI increased by more than 10% from 2019. In my opinion, back ground of this is considered that remote-work is widespread all over the world and It created huge demand for Computer electronic and related parts which produced in Vietnam.

Source: Vietnam customs⁴

Since the fourth wave of Covid-19 came in July 2021, labor shortage occurred. More than 90 percent of factories had to suspend operation for three months under lockdown (VNEXPRESS). Tens of thousands of workers from rural area went back to their home-town for fear of Covid-19 and lost job. The shortage is worst in the southeastern region where 30.6%face a labor shortage. The industries affected most are leather and related products in which 52% of companies have a shortage, apparel 49%, electrical equipment 44%, textile 39.5%, worthy of special mention is computers and optical products only 5.6% .Production of this industry has been widely mechanized, so aren’t affected much. Nguyen Thi Thuy, vice president of the Vietnam Textile and Apparel Union said⁴ The shortage has increased from October when the factory reopen. Also many workers are unable to return work, because they haven’t reached conditions to move across the prefectures. In order to keep increasing Vietnam’s export value after pandemic, Increasing price of industrial land is also serious issue. According to the research of CBRE⁵,price of industrial land increased by 10-20% in south Vietnam (Binh Duong, Dong Nai and Long An), increased by 5-10% in north Vietnam(Bac Ninh and Hai Phong). occupancy rate ⁶ ⁷ is over 80% in south, over 70% in north(IIpvietnam). Due to many foreign companies move production base from China and lack of industrial park. If it keep increasing, There is possibility to lose competitive advantages in nearly future against surrounding countries such as Thailand, Indonesia etc.

The travel restrictions will be easen all over the world in 2022⁸. Vietnam need to develop more industrial park and clearly conditions for resuming business activities. and loosen pandemic-related restrictions to solve labor shortage.

Reference