Tangled Vietnam Supply Chain Highlights Threat to Global Economy

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Vietnam is on the front lines of the battle for global supply chains.

The troubles are increasingly clear in trade and manufacturing data, with the latest purchasing managers index readings for August falling to their lowest level since April 2020, deep in contractionary territory.

Tangled Vietnam Supply Chain Highlights Threat to Global Economy

Of 53 countries in Bloomberg’s Covid Resilience Ranking, the bottom five are all in Southeast Asia, with Vietnam -- at No. 50 -- down four spots from the previous month amid a resurgent outbreak and lagging vaccination drive. Those same five countries provide about 6% of global exports and supply crucial inputs to the world’s top economies, including half of U.S. semiconductor imports, according to estimates by Natixis. 

Tangled Vietnam Supply Chain Highlights Threat to Global Economy

That’s not just a crisis for Vietnam, which remained one of the world’s rare high-growth trade powerhouses even well into the pandemic. Global brands already struggling with sky-high shipping costs are scrambling to protect workers in the trade powerhouse’s factories, and to untangle supply chains that snarl further with every port closure or production suspension across Asia-- just as the order period for the year-end holiday shopping season is underway.

“We’re quickly moving into a situation where American kids are going to open gift-wrapped boxes under the Christmas tree to find a little note that says, ‘Sorry, that cool present from your Mom and Dad isn’t available right now. Please wait about six months,’” said Adam Sitkoff, executive director of the American Chamber of Commerce in Hanoi.

Calling Pfizer

Last week’s visit to Hanoi by U.S. Vice President Kamala Harris, which brought an additional 1 million vaccine doses on top of the 5 million the U.S. had already given donated to Vietnam, couldn’t alter the stark reality: Less than 3% of Vietnam’s 100 million-plus population is fully vaccinated, and infections and deaths are reaching grim levels each day. 

Tangled Vietnam Supply Chain Highlights Threat to Global Economy

The 1 million additional vaccines were half of what China pledged to Vietnam a day before Harris’s arrival. China has donated 2.7 million vaccine doses to Vietnam, including 500,000 prioritized for Chinese citizens working in Vietnam, Vietnamese who need to travel to China for work or study and residents along the Chinese border. 

Vietnam’s government has prioritized vaccinating workers at factories, from Samsung Electronics Co. in the north to Intel Corp. and garment factories in Ho Chi Minh City.

“The big U.S. companies should call Pfizer and Washington and say it’s critical for U.S. companies to keep their production live, so give more vaccines to Vietnam quickly,” said Csaba Bundik, Hanoi-based chief executive officer of CETA Consulting, and former executive director of the European Chamber of Commerce in Vietnam. 

‘Minor’ donation

On her two-day visit, Harris acknowledged Vietnam’s supply to the U.S. of personal protective equipment early in the pandemic, and opened the Centers for Disease Control and Prevention’s Southeast Asia regional office in Hanoi. The U.S. added $23 million in aid for Vietnam’s pandemic response, bringing the total it has supplied to about $44 million, according to the White House. 

Tangled Vietnam Supply Chain Highlights Threat to Global Economy

The vaccine donation is “a sign that the Biden administration has listened to the concerns raised by our industry,” Steve Lamar, president and CEO of the American Apparel and Footwear Association, said by email this week. “That said, there is still a long way to go in the battle with Covid-19, and we will continue to highlight the difficulties faced by our partner countries and the need for more vaccines.”

Vietnamese businesses and consumers expressed gratitude for the vaccine donations, while echoing the cry of many developing nations that advanced economies should do more to share their vaccine supplies in the interest of all.

“Six million is so minor for such a big vaccine-producing country, especially when we have been supplying a lot to the U.S.,” said Nguyen Sy Hoe, deputy general director of Vietnamese furniture producer Phu Tai Corp., which makes home furnishings for Wal-Mart Stores Inc. outlets in the U.S. and European markets. “Many Vietnamese companies are facing a big chance of not being able to make the planned deliveries for the coming holiday season, so helping us is also benefiting them.” 

©2021 Bloomberg L.P.

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