Vietnam’s status as manufacturing powerhouse is shaken by Covid surge

• Nikkei Asia now ranks Vietnam joint last, in 120th place tied with Thailand, on its Covid-19 Recovery index, whose criteria includes countries’ infection management and rollout of vaccines — an area in which Vietnam failed to plan adequately.
• “There had been several waves of Covid and each time they were able to contain it,” says Huong Le Thu, a senior analyst at the Australian Strategic Policy Institute and author of a paper on Vietnam’s coronavirus response. “But this time Delta has proved harder to bring under control.”
• “The restrictions are seriously constraining the manufacturing capacity in the country,” says Nguyen Phuong Linh, associate director at Control Risks. “Some factories have been afraid to take new orders because they were worried they wouldn’t be able to complete them without enough workers.”
• However, she adds, the disruption is likely to be a “short-term issue because Vietnam is still an attractive option for foreign investors vis-à-vis other countries in Asia”.
• The government has set a target of bringing the outbreak in Ho Chi Minh City under control by 15 Sep 21, as defined by a 20% reduction in daily Covid deaths and the number of Covid patients being discharged from hospital exceeding the number admitted.
• The bigger question is whether Vietnam can contain the crisis quickly enough to avoid alienating foreign investors. For now, there are few overt signs of divestment; the dong has been one of south-east Asia’s few currencies to appreciate against the dollar in 2021. As one economist puts it: “The US-China stuff is not going away.”

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