From shoes and sweaters to auto parts and coffee, Vietnam’s strict and prolonged coronavirus lockdown has triggered product shortages among global brands such as Nike and Gap, which have become increasingly reliant on the nation’s manufacturers. ‘South East Asia.
The increases at Vietnamese factories are part of a larger crisis around the globe that is pushing inflation up and raising concerns about the pace of the global economic recovery.
At a fabric factory east of Hanoi, Claudia Anselmi – the Italian director of Hung Yen Knitting & Dyeing, a key cog in the supply chain of several European and American clothing giants – worries daily if the factory can keep the lights on.
His production plunged 50% when the last devastating virus wave in Vietnam first hit in the spring, and he faces perpetual problems getting the yarn he needs for his synthetic material.
âAt first we ran out of people (to work) because everyone was stuck at home,â said Anselmi, whose company fabric is then used in swimwear and sportswear for women. customers such as Nike, Adidas and Gap.
Now, “travel restrictions have compromised all entry and exit logistics (…) this has created long, long delays,” she told AFP. “We only survive if we have the stock.”
As lockdowns gradually loosen across the country as infections steadily decline, millions of Vietnamese have been on stay-at-home orders for months.
And a complex web of checkpoints and confusing travel permit regulations have made life impossible for truck drivers and businesses trying to move goods across, as well as in and out of the country.
Hamza Harti, managing director of FM Logistic Vietnam, said several drivers in the Mekong Delta were forced to wait three days and three nights in their vehicle to enter the city of Can Tho.
“They were without food, without anything,” he told a French Chamber of Commerce roundtable in Hanoi.
– Traveling production –
Delays and restrictions are a major headache for foreign companies, many of which have pivoted to Southeast Asia from China in recent years – a trend accelerated by the deadly trade war between Washington and Beijing.
In the south – the epicenter of Vietnam’s fight against Covid-19 – up to 90% of the clothing sector’s supply chains have been severed, the Vietnam Textile and Clothing Association said in August. clothing (Vitas), according to official media.
Nike – which warned last week that it was grappling with a shortage of its sports equipment and slashed its sales forecasts – notably singled out Vietnam, saying 80 percent of its factories in the south and near half of its garment factories in the country had closed.
The sports colossus obtains about half of his shoes in the communist country.
While some factories were able to set up a system where staff could eat, work and sleep on-site to bypass lockdown restrictions, Vitas said the cost was prohibitive for many.
Japanese retailer Fast, which owns popular brand Uniqlo, also blamed the situation in Vietnam for delays on sweaters, sweatpants, hoodies and dresses, while Adidas said chain issues supply – including within the country – could cost it as much as 500 million euros ($ 585 million) in sales by the end of the year.
Even with the prospect of easing lockdowns, many are concerned about the long-term impact on Vietnamese manufacturing, with Nike and Adidas admitting they were looking to temporarily produce elsewhere.
In a letter to Prime Minister Pham Minh Chinh, major trade associations representing the United States, European Union, South Korea and countries in Southeast Asia sounded the alarm bells regarding the displacement production outside Vietnam, warning that 20% of its manufacturer members had already left.
âOnce the production changes, it’s hard to come back,â they wrote.
Nguyen Thi Anh Tuyet, deputy general manager of Maxport Vietnam, whose 6,000 employees make sportswear for Lululemon, Asics and Nike, told AFP the company was “very worried” that customers were withdrawing orders – even though he was one of the lucky few who made it through these brutal recent months largely unharmed.
Without foreign clients, “our workers would be unemployed,” she said.
– Coffee, cars –
The pandemic has not only hit the country’s textile industry, but also threatens the world’s coffee supply, with Vietnam being the world’s largest producer of robusta beans, the variety used in instant coffee. Raw material prices are now at a four-year high.
Automakers have not escaped either – Toyota cut production for September and October in part due to virus concerns, told AFP that “the impact has been significant in Vietnam,” as well as in Malaysia.
The shortages have been compounded by increased demand in the West after a virus-induced crisis.
Back at his textile factory near Hanoi, Anselmi believes companies will stick with Vietnam if it can return to some sort of normalcy in October.
“If we can keep the factories running, I think the confidence (in Vietnam) is still there.”
bur-aph / pdw / dan