As Vietnam battles its worst coronavirus outbreak to date, more than one-third of its textile and garment sector is in limbo, the Southeast Asian nation’s leading industry group said this week.
Surging Covid-19 rates have forced 30 percent to 35 percent of the country’s apparel and footwear factories to suspend operations, intensifying sourcing headwinds that have led to shipment delays, bare shelves and higher prices, Vu Duc Giang, chairman of the Vietnam Textile and Apparel Association (VITAS), said at an online meeting on Monday. Companies from spider-silk producer Kraig Biocraft to shoemakers Puma and Wolverine have all lamented their challenges in Vietnam in recent weeks.
“I think that a number of these factories will even have to close for a long time, especially small and medium enterprises,” Vu said.
Most of these businesses, he noted, are unable to afford the live-work accommodations that support the health ministry’s “three-in-one spot” guidelines, which require employees to work, eat and sleep in one location to curb the spread of infection.
Vaccination rates in Vietnam are also abysmally low, particularly in key production areas in the southwestern and southeastern provinces. According to data from the health ministry, Vietnam has fully vaccinated only 700,000 people—or less than 1 percent of the country’s 98 million-strong population—since it rolled out its program in early March. The country has logged 174,000 cases and more than 2,070 deaths, most of them within the past month.
VITAS has repeatedly lobbied the Vietnamese government to get more shots in arms—and it’s not the only one, either.
In a recent letter to Prime Minister Phạm Minh Chính, the American Apparel and Footwear Association, an industry group whose members include Adidas, Gap and Under Armour, urged authorities to “prioritize the distribution of vaccines to Vietnam’s apparel, footwear and travel goods industries” and keep a “vital part of the Vietnam economy intact.”
In the balance hangs the future of the country’s garment industry, which just last year unseated Bangladesh as the world’s second-largest exporter of clothing after China. Though both countries saw profits tumble after spooked brands canceled or hit pause on orders, Vietnam benefited from sourcing shifting from China at the start of the outbreak, dispatching $29 billion worth of apparel, or 6.4 percent of the global market, in 2020.
The current outlook appears less rosy for Vietnam’s 2.5 million garment workers, 80 percent of whom are women, according to the Better Work initiative. On Monday, China’s Pou Chen Corporation announced that its Ho Chi Minh-based Pouyuen Vietnam factory, which supplies footwear to brands such as Adidas and Nike, would be prolonging its already extended lockdown from Aug. 1 to Aug. 9. The facility had originally been scheduled to close from July 14-23.
Pouyuen Vietnam is merely a microcosm of a wider industry. Without serious intervention, the losses from stilled production lines will only add up.
“In the last five months of the year, businesses could only start exporting again if the pandemic situation is completely under control,” Vu said. “In the most optimistic scenario, we can only achieve about $32-33 billion.”
In light of Vietnam’s “consistent approach” to managing the pandemic, it’s unlikely that garment factories will be permitted to operate even with stricter health and safety guidelines in place, as seen in Bangladesh, said Sofia Nazalya, Asia analyst at risk analysis firm Verisk Maplecroft.
But while ongoing lockdowns will have “clear operational impact for apparel companies,” the situation is unlikely to be better in neighboring garment hubs such as Cambodia and Indonesia, “which are also experiencing similar spikes in cases, and equally slow, if not worse, vaccination rates,” she told Sourcing Journal.
Meanwhile, VITAS says it’s confident the country’s factory situation will improve soon. “It is our top priority to do everything we can to help the sector through this crisis,” vice general secretary Hoang Ngoc Anh told Sourcing Journal.
Editor’s note: This story was updated on Aug. 6, 2021, to remove a misquote that 90 percent of Vietnam’s garment supply chains are “broken.”