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Vietnam Manufacturers Face Tough Decisions

It’s a tough choice between creating “bubbles” or choosing a temporary shutdown for manufacturers in Vietnam.

On Friday, as the two-week lockdown on the economic powerhouse and manufacturing base of Ho Chi Minh City came up for review, the Standing Committee of the City Party announced a strengthening of the implementation of Directive 16, and an extension of the total lockdown until Aug. 1.

The directive is intended to curb and control the spread of Covid-19.

The country that saw remarkable control during the pandemic last year—with less than 1,500 cases by end-2020, has been seeing a fast spread of Covid in July, and in characteristic style, the government has moved fast to take containment measures. This has created a new set of circumstances for manufacturers, described as ‘3 on site’—which means working, eating and sleeping within the factory spaces.

This has resulted in rapid movement. The creation of tents, toilets and food facilities within the existing spaces as well as regular coronavirus testing. It is not just the workers, but management as well who have moved into this stay-in bubble mode, creating some semblance of order within the chaos.

“All I can say is that the stress levels are really high, and for a factory that has more than 500 workers it is not quite worth it in terms of organizing the food and living conditions in these makeshift conditions. As Directive 16 will be implemented more strongly from this week, it will be harder to make it work,” a factory owner told Sourcing Journal on condition of anonymity.

There are more than 6,000 factories in the sector in Vietnam, which employ more than three million workers. More than half of Vietnam’s apparel factories are located in the Mekong and Dong Nai areas.

“We’re working from home, the pressure has really amped up with the need to be really cautious with Covid-19,” said Arusha Mehta, marketing manager, Goldmark Limited, a design and buying house based in Ho Chi Minh City. “Trade hasn’t stopped, export hasn’t stopped, but the focus is on being doubly careful.”

Mehta said that one of the major changes has been the focus on a better understanding with global companies.

“Post Covid, we’re putting a lot of emphasis on collaboration with the clients—that’s a kind of precedent that’s been set in the last year,” she said. “Some of the mills we are working with are taking a breather. Some production is being pushed back a couple of weeks. But everything is being done according to protocol, with the buffer that we had taken into consideration.”

However, creating bubbles is no easy task—especially for larger factories.

The simpler choice is to choose a shut-down period, which many have opted for, as creating 24-hour facilities on short notice is a logistical nightmare.

Companies were being prepped in June for this possible eventuality. A notice issued by the HCMC Export Processing Zone and Industrial Park Authority (Hepza), for example, had advised companies to prepare for working in isolation.

Other bottlenecks include a step up paperwork involving testing.

In Hanoi, the requirements for factories, agencies and enterprises is to have Covid testing for workers every three to five days.

“The ‘3 on spot’ arrangement is a short-term solution for the factories during this critical period,” observed Nguyen Hong Ha, program manager, Better Work Vietnam. “The government has issued guidance with strict requirements on what needs to be done by the factories before they can apply this practice/arrangement to ensure workers’ safety, health and in accordance with the labor laws.”

Factories must submit their plan to the relevant authorities before being inspected and then approved. The factories also must ensure that workers voluntarily agree with arrangements. This means workers are entitled to choose to stay home and follow other arrangements regulated by labor law (for example, they can receive compensation which is not less than the minimum wage for the first 14 days and after that it will be subject to negotiation between workers and employers).

“Obviously, not so many factories are able to follow these strict requirements and thus they would temporarily close the business. In my view, in this health crisis situation, it is important that any option/solution should put the workers’ safety as the top priority and that is also the persistent message from the government,” she said.

In 2020, Vietnam recorded an export turnover of $29.5 billion from textile and garment products, down 10.2 percent from 2019, according to the General Statistic Office.

In 2021, exports have been up 15 percent from January to May, at $12.2 billion.