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Vietnam’s Biggest City ‘Gradually Opening’

Vietnam’s largest city will begin easing its coronavirus restrictions beginning Friday, officials said, bringing to a gradual end four months of strict curbs that have ground commercial activity to a halt and left some of the world’s biggest brands scrambling in the runup to the busiest shopping season of the year.

“All checkpoints on the streets will be lifted and no travel permits will be needed after today,” Le Hoa Binh, deputy chairman of the Ho Chi Minh City People’s Committee, said at a press conference Thursday. “We are gradually opening but put our residents’ safety first.”

The industrial hub of Ho Chi Minh City, home to 9 million people, has shouldered the worst of the Southeast Asian nation’s crippling delta surge, accounting for half of its 780,000 Covid-19 cases and 80 percent of the 19,000 deaths. Authorities have been ramping up their inoculation program; more than 98 percent of the city’s adults have received at least one shot and nearly half have been jabbed twice. Vietnam’s overall vaccination rate, however, remains dismal with only 9.3 percent of its 98 million-strong population fully vaccinated because of global supply shortages.

The temporary closures of myriad factories in the world’s No. 3 garment exporter after China and Bangladesh have caused significant upheaval in a supply chain already battling headwinds from congested ports, container shortages, and rising labor and freight costs. As a workaround, some retailers have resorted to chartering their own planes and shipping vessels to move products.

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Many Western retailers are bracing themselves for sparser shelves than usual when the holidays approach. Nike slashed its revenue forecast last week after admitting the supply-chain bottleneck in Vietnam, where 80 percent of its footwear suppliers are closed, has cost it 10 weeks of production since mid-July, creating a “gap to the flow of inventory” scheduled for delivery starting mid-October. According to a recent analysis by Wall Street research firm BTIG, two months of “virtually no unit production” at the sportswear giant’s factory partners in Vietnam have deprived it of 80 million pairs of shoes. Another four months at half capacity could see the loss of 160 million pairs in total.

Swiss firm On, which sourced 97 percent of its footwear in Vietnam last year and all of it in the first half of 2021, reported in a recent filing that it expects production disruptions to “continue to adversely impact our business, financial condition and results of operations for the remainder of 2021 and 2022.” Adidas warned last month that factory-closure-induced delays in Vietnam, which makes up 28 percent of the German firm’s sourcing base, could contribute to an estimated 500 million euros ($578 million) in lost sales in the back half of the year. In August, Under Armour, which obtains one-third of its apparel and footwear from the country, described a “very fluid situation” because of manufacturing and logistics logjams, though it credited its well-balanced sourcing platform” across Europe, the Middle East, South America and Latin America as a reason it’s in a better place than its rivals.

Saitex, whose “clean” denim factory in Vietnam supplies to brands such as Everlane and Madewell, has been able to maintain capacity at just under 50 percent with measures such as providing its employees with personal protective equipment, regular testing and on-campus housing. Although shipments are still delayed and costs have ticked up, the company has been able to alleviate some of the pressure by shifting a portion of its orders to its new outpost in Los Angeles.

“The recent wave of Covid cases in the country and the subsequent restrictions have affected our operations,” Sanjeev Bahl, founder and CEO of Saitex, told Sourcing Journal. “As unfortunate as these restrictions and delays are to the business, we must ensure that the employees’ wellbeing comes first and we’re confident that manufacturing will rebound in Vietnam.”

But Vietnam’s own economy has come under strain, and it may continue to face duress as some businesses eye a return to China after years of breaking away due to the one-two punch of growing costs and the U.S.-China trade war.

The country’s General Statistics Office reported Monday that its gross domestic product slid 6.17 percent year over year for the July-September period, the first such decline in two decades.

Growth in the final quarter of the year could be 5.3 percent following an expansion of 1.4 percent in the first nine months of the year.

Some 94 percent of the country’s companies are facing “difficulties” because of supply-chain disruptions, labor shortages and the higher costs of managing “three-in-one place” bubbles where workers eat, sleep and work in one place, Pham Dinh Thuy, head of industrial statistics at the agency, told a briefing in the capital of Hanoi. “Companies are exhausted,” Pham said. “The government is working on multiple measures to help quickly get companies and businesses back to normal operations.”