Enterprises Face Difficulties and Risk of Falling Out of Global Supply Chains due to Covid

Although Vietnam has dealt with previous COVID-19 outbreak with spectacular success, businesses are facing difficulties and the risk of being kicked out of global supply chains.
August 16, 2021 | 16:55
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Enterprises at risk of falling out of global supply chains due to fourth outbreak
Textile enterprises have orders for next year, but production is stagnating. Photo: thanhnien

Despite the complicated developments of the Covid-19 pandemic since the beginning of the year, thanks to the flexible application of prevention measures and creativity in production, many economic sectors still have impressive growth, typically textiles, footwear, wood, electronics... However, after their happiness, businesses are facing difficulties and the risk of falling out of global supply chains.

In a talk with VIR, Van Thong, director of Nam Anh Trading JSC, one of the leading firms manufacturing polyester, nylon, and polyester blend fabrics to supply local and foreign fashion brands, said that the health crisis has halted all production and business activities since early-July.

“We export and provide fabrics to international partners in Japan, South Korea, Germany, Australia, and the US. Due to COVID-19 and the social distancing in Ho Chi Minh City and Southern provinces, we had to request delaying orders,” Thong shared. “However, I am not sure that they can wait until we resume production.”

Nam Anh is one of thousands of enterprises stuck by the pandemic and facing the risk of falling out the global supply chain by the prolonged paralysis from teh pandemic.

According to the Vietnam Textile and Apparel Association (VITAS), in the first seven months of the year, the sector's export turnover was $22.86 billion, a 50 per cent rise on-year, surpassing Bangladesh to rank second over the world, following China only.

“However, August has been full of woes for textile and garment businesses as they had to stop almost all production facilities in 19 southern provinces,” said Vu Duc Giang, VITAS chairman.

He said numerous firms had orders to fultil until the end of the first quarter of 2022, but they are now worried about being unable to meet deadlines and keeping contracts with partners.

He said that foreign partners continue asking if Vietnam can overcome the pandemic in August or September, and how many employees of their Vietnames partners have been vaccinated. “Two weeks ago, thousands of workers had to return to their hometown, so only about 1 per cent of employees is vaccinated. It will be quite a challenge to resume production,” the VITAS chairman added.

Enterprises at risk of falling out of global supply chains due to fourth outbreak
Enterprises may be left behind the global supply chains. Photo: VNN

Similar troubles are reported in the wood sector. Ngo Sy Hoai, vice chairman of Vietnam Timber and Forest Product Association said that they reported outstanding outcomes in the first seven months. Export value reached the full-year 2020 figure, with a 53.7 per cent growth on-year. This helped Vietnam replace China as the leading wood and furniture provider in the US market.

“However, most businesses in this sector are based in Binh Duong, Ho Chi Minh City, and Dong Nai, which are all suffering from COVID-19. This makes worry that we will not be able to meet orders in time and lose the market share we gained,” said Hoai.

In fact, interruption of the global supply chain is a concern for all enterprises, even as difficulties around stay-at-work measures have been revealed after a month of implementation. Meanwhile, several product lines were judged non-essential to maintain production during social distancing, affecting those that could continue.

“A completed product needs a lot of parts for assembly. For example, packaging is not defined as an essential item, but we cannot pack and distribute products without them,” a representative of the American Chamber of Commerce (AmCham) said, adding that they faced a lot of difficulties in implementing stay-at-work measures. “We should facilitate businesses as much as possible to maintain production and mitigate the interruption of supply chains, especially for export,” he said.

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