Vietnam benefits from China’s COVID policy

RODION EBBIGHAUSEN

CHENNAI: Vietnam was one of the few countries whose economy grew during the coronavirus pandemic in 2020. Many say this was due to early and rigorous action by the government and a zero-COVID strategy that kept case numbers low for a long time. However, in summer 2021, before the Omicron variant changed how countries approached pandemic policy, the Delta variant’s spread in Vietnam began to spiral out of control. As infection rates climbed, factories from international companies like Samsung, Apple, Nike and Zara were forced to close for weeks. Workers returned to their home villages in chaotic conditions. According to the World Bank, Vietnam’s annual economic growth fell to 2.58%. Vietnam decided to change its strategy and pushed ahead with a vaccination campaign, which had previously been neglected. Hanoi took a pragmatic approach and, unlike China, also used Western vaccines.

“Vietnam got its act together relatively quickly, and that shows the adaptive capacity of the Vietnamese system,” Daniel Müller, manager at the German Asia-Pacific Business Association, told DW. Meanwhile, almost all coronavirus restrictions have been lifted in Vietnam.

The risk of further lockdowns is low, said Dang Duc Anh, director of Vietnam’s National Institute of Hygiene and Epidemiology, according to Reuters news agency. The Asian Development Bank forecasts Vietnam’s economy to grow 6.5% in 2022 and 6.7% in 2023. There are signs Vietnam’s economy is benefiting from its altered pandemic policy. Many companies, especially in the electronics industry, are putting up a lot of money. South Korean electronics giant Samsung announced in February it would invest a further $920 million in Vietnam.

There is also a continuing trend of moving high-tech production from China to Vietnam. Chinese electronics groups such as Luxshare Precision Industry, Goertek, and Taiwanese iPhone assembler Pegatron, are moving facilities to Vietnam, according to the German electronics trade magazine Elektronik Praxis. “Vietnam will be one of the main beneficiaries of shifting supply chains,” Raphael Mok from the consultancy Fitch Solutions told Reuters. Müller from the German Asia-Pacific Business Association said that Vietnam has “always been in the spotlight” of German companies. “The real run hasn’t started yet, but that could change now because business dissatisfaction in China has now reached a level that didn’t exist before,” Müller said.

China is drawing increasing criticism with its zero-COVID policy and weeks-long lockdowns that can be set off by a relatively low number of infections. The ongoing lockdown in the business and production metropolis of Shanghai has created global supply chain problems as factories and ports sit still. Despite good prospects, there are also challenges for Vietnam’s economy. First, there is Vietnam’s deep integration into global supply chains, which is both a blessing and a curse.

Vietnam’s open economic policy of recent years integrating into global supply chains has made the growth success story possible in the first place. However, the downside is that Vietnam is dependent on supplies of raw materials and component products, some of which are missing or delayed due to the pandemic.

Vietnam is also vulnerable to the increasing geopolitical tensions between the US and China. Resilient supply chains are therefore key for Vietnam’s continued economic strength. However, the country is not yet well enough positioned in this area, according to Müller.

Digital supply chains, for example, are not yet sufficiently in focus in Vietnam, he said. Digital supply chains comprise the digital networking of all processes and steps in a supply chain to monitor them in real time and make them even more efficient.

This article was provided by Deutsche Welle

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