Vietnam warned of strict Covid lockdown forcing foreign companies out

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Foreign investors in Vietnam have warned the government that its strict lockdown to control Covid-19 in the south of the country has forced some companies to shift production to other markets.

The message from four leading chambers of commerce came as one of the world’s toughest containment campaigns in and around Ho Chi Minh City disrupted operations at one of the world’s leading manufacturing centers. ‘Asia.

“Businesses need a clear roadmap and a certain date for reopening now,” the American, European and South Korean chambers of commerce in Vietnam and the US-Asean Business Council said in a letter to Pham Minh Chinh, Prime Minister of Vietnam.

“Surveys carried out by our associations show that at least 20% of our manufacturer members have already transferred part of their production to another country, with other discussions in progress,” the groups wrote in a letter sent the week. last.

They said many of their members receive “nightly calls to regional and global headquarters to decide which customers to honor, which to decline and which production to move.”

After containing the first wave of the pandemic last year, Vietnam suffered a record wave of infections blamed on the Delta variant. This prompted the government to rush late to buy and administer vaccines.

Authorities in greater Ho Chi Minh City, the center of the epidemic, restricted most travel and imposed strict rules on factory work from early July, effectively forcing companies to choose between housing and feeding them. workers in “manufacturing bubbles” or shut down.

Some restrictions have been relaxed recently, but the city remains largely under lockdown.

The restrictions have particularly affected operations in labor-intensive sectors. Companies whose suppliers or operations have been disrupted range from chipmaker Intel and automaker Toyota to housewares retailer Ikea and sportswear brands Nike and Adidas.

In addition to driving bans around Ho Chi Minh City, where the large urban area sprawls into neighboring provinces that have different rules, companies have expressed frustration with restrictions on entry into Vietnam for foreign professionals. .

“Policies to control the spread of the virus have posed significant operational challenges for Vietnamese businesses, especially with frequent regulatory changes that are announced and implemented on very short notice,” Adam Sitkoff, Executive Director of the Chamber of American commerce in Hanoi, the Financial Times reported.

“The crippling restrictions on the economy are not lasting, and after months of severe restrictions on activities and travel, I am happy to see economic activity gradually pick up here,” he added.

The corporate reaction poses a challenge for the Chinh government, which seized power in April after a five-year reshuffle of the ruling Communist Party in Vietnam.

Before the pandemic, Vietnam had one of the fastest growing economies in Asia, thanks to investor-friendly tax and other policies, and its network of free trade agreements. The country is a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and has concluded a free trade agreement with the EU.

Vietnam, which before the pandemic was a destination of choice for multinational companies seeking to diversify their operations outside of China, “was missing out on investment opportunities that may not return,” the groups warned.

“Investments will not increase without a clear plan for reopening and recovery,” they said. “Even existing companies have most of the investment plans on hold, given the current uncertainties.”

Chinh has held online meetings with investors from the United States, Europe, Japan and others in recent weeks, some of which lasted several hours, during which they expressed their frustrations and concerns.

Follow John Reed on Twitter: @JohnReedwrites