More to be done: the case of Vietnam responses to COVID-19 to leave no-one behind

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INGSA/Koi Tū EXCLUSIVE

19th June 2020

Thuy Nguyen and
Riyanti Djalante 

United Nations University

Thuy is a Masters student at the United Nations University – Institute for the Advanced Study of Sustainability

Riyanti is an Academic Programme Officer, United Nations University – Institute for the Advanced Study of Sustainability

 

Vietnam has been considered an early success story for dealing with COVID-19. Yet more can be done to ensure that no one is left behind as they attempt to fortify their position in the global world.

Recipe for a successful COVID-19 response

Vietnam’s first case of COVID-19 appeared on January 23, 2020, and since then, the tally went up to 334 confirmed cases but with 0 deaths. As of June 16, 2020, the country has notched 61 consecutive days without a case of local transmission. Vietnam’s success in containing the pandemic seems to be quite a riddle. How can a country, with limited healthcare facilities,  survive the full force of a pandemic that has been challenging even the world’s most highly resourced countries?

Picture 1: Luu Yen The, a Vietnamese artist, designed a propaganda poster which urges people to wear mask in order to contain the spread of the COVID-19 pandemic.

The first reason could be stemmed from how the central government has framed the fight against the pandemic as “a fight against a common foreign enemy” through various directives, including No. 05 and 06/CT-TTg. While many Europeans and Americans have associated this COVID-19 pandemic with a more amiable, familiar foe – the seasonal flu - the Vietnamese government has juxtaposed the potential impacts of COVID-19 with the catastrophic threats of the SARS pandemic back in 2003.

This has stirred up a sense of emergency to deter the looming crisis, particularly since Vietnam shares a border with China. The widespread public health campaign on both conventional and social media platforms initiated by the government has also facilitated the unity of the population.   

Aggressive quarantine program combined with a contact tracing system have shown to effectively ease the expeditious spread of the virus. Not only people who were infected (identified as “F0” patients) are tracked, but the people who had direct or indirect contact with those F0 patients or suspected COVID-19 cases (designated as F1 and up to F5) also have the obligation to report to the government and conduct some forms of quarantine.

Approximately, 70,000 people were under inspected quarantine, either in centralized facilities or at home (Kokalari and Tran 2020). The central government has also implemented a unique scoring system to appraise the COVID-19 infection risk. Some of the evaluation indicators encompass health declaration, availability of hand sanitizer and disinfectant, appropriate physical distancing, among others. And enterprises that score below 50% will have to halt their operation temporarily.

Photo 2: People fill out the medical declaration forms before getting tested for the virus at a test station in Hanoi on April 1, 2020.

To avert the number of cases from accelerating, the central government has resorted to entry restrictions to all foreigners starting from March 22nd, and an uncompromising social-distancing order from April 1st to April 15th during which non-essential services were prohibited from operation. The use of face masks in public was also made mandatory, and unnecessary gatherings might be subject to heavy fines. People almost only left homes for groceries or to visit the hospital.

As a socialist country with a centralized one-party system, Vietnam could effectively exert control over people’s movements by accentuating the patriotism to the party, and the responsibility to act for the common welfare. Nonetheless, the Vietnamese government’s stringent measures might not be welcomed by countries functioning based on deregulation and privatization such as the United States. 

Yet, as an equalizer to the austere regulations, the central government has launched a VND62 trillion (approximately US$2.6 billion) financial package to support the poor and businesses, and a separate US$10.8 billion credit support package for various business lines (Dezan Shira & Associates 2020).

But, amidst the success of successfully containing the spread of the virus, there are many people left behind

As effective as social-distancing measures are, the impacts of COVID-19 are by no means under control. Particularly, the economic crisis precipitated by the pandemic has imposed far-reaching impacts on the vulnerable workforce which includes women, unskilled laborers, migrant workers, and those in the informal economy.

In Vietnam, about 40.8% of the labor force are working in sectors witnessing significant decline in output, reduced wages, and even layoffs such as accommodation and catering services, manufacturing, wholesale and retail trade, among others (ILO 2020). Most of these labor-intensive sectors tend to employ unskilled or migrant workers, and do not provide them with a transparent employment contract and basic social benefits such as sick leave or health insurance. The support packages initiated by the government also do not cater for those without a legitimate proof of their employment.  Since the door to earning a living closes, many people could not tend to their families. Many also grapple with even basic charges such as water or electricity, and fall deeper into poverty.

Photo 3: Vietnamese women at work. Source: Kate Ferguson

 

Therefore, when designing support packages, the government needs to pay special attention to the vulnerable who are not regulated, registered, and covered by labor laws. Women are at the forefront of vulnerabilities as well. They are over-represented in the informal economy, but are not recognized in institutional decision-making. Many women are involved in small vendors or household services which are, by nature, insecure, poorly paid, and exploitative. The pandemic might further exacerbate the position of women in the labor market, so it is imperative that policy responses integrate a gender approach to strengthen and advocate the rights of women.

Additionally, the loss of employment or reduced wages of parents might cast a shadow over the future of children. As the crisis unwinds, the rate of school dropouts, malnourishment, family violence, and child labor could increase dramatically, prompting long-term and irremediable consequences on the development of human capital. It is necessary, therefore, to provide support packages to children with difficulties under the forms of tuition grants or cash assistance.

School closure due to COVID-19 might also impose a ‘pile-on’ effect and lead to a learning crisis, as students start losing their knowledge and interests in school. Furthermore, for students who live in poor rural areas and do not own the necessary telecommunication facilities, remote learning is a luxury they can not afford. This interruption in education can dishearten students from going to school for fear of falling behind their peers. Hence, how to rebuild the loss in learning, and how to help students catch up with and re-join their learning level, are a few questions that schools and educators need to consider. The wake of the crisis has also displayed an urgent need for the overall education system to reengineer and integrate more online platforms, so that it can withstand the volatile future risks.

For the Economy to Bounce Back, Vietnam Needs to Focus on Internal Growth

The unprecedented global health crisis has also disrupted both the global supply and demand of manufactured goods, placing a burden on the Vietnamese economy which heavily relies on global trade. With both export to GDP and import to GDP ratios surpassing 100% (World Bank 2020), Vietnam is particularly vulnerable to external shocks from the global market and has indeed witnessed a significant economic slowdown and precarity. According to the General Statistics Office of Vietnam, its GDP growth declined to 3.8% in the first quarter of 2020, compared to 6.8% in the same period (Hai Yen 2020a).

Photo 4: A female employee works at the Maxport garment company in Hanoi, Vietnam. Source: Kham

As a result, when crafting a post-COVID-19 development plan, the government might need to consider strategies to ameliorate the resilience of the supply chain and to expand the domestic consumption market. The pandemic might be impeding the progress of international trade, but it also presents an opportunity for Vietnam to grow internally. By taking this chance, Vietnam can divert the economy away from solely exports, and strive to foster the resilience and competitiveness of the Vietnamese businesses.

But supporting enterprises is not an overnight task. Approximately 98% of enterprises in Vietnam are small and medium-sized, which have to shoulder a huge economic  burden due to the disruption in the global supply and demand. Even though Vietnam’s commercial banks have allocated US$44 billion of loans to assist those businesses, many have not been able to receive these loans to support their working capital (Hai Yen 2020b).

The reason is simple: bad debt. Various commercial banks are timorous to lend to small businesses for fear of their repayment capacity. However, small and medium enterprises (SMEs) are indeed the engines for the economic growth and poverty reduction in Vietnam, contributing 40% to the overall GDP in 2019 (Samuel 2019). Given that approximately 35,000 businesses could not endure the economic shocks and went bankrupt during the first three months of 2020 (Pham Van 2020), the doubt of commercial banks might eliminate the survival chance of many other SMEs, and drag down the opportunity to bounce back of the Vietnamese economy. 

Counteractively, the government should identify and provide appropriate cash disbursements to enterprises that strive to maintain their business and refrain from layoffs through adjusting working hours, dividing workloads, providing online training, or reducing wages in accordance with the guidelines provided by the trade unions. This strategy will encourage businesses to retain workers, thus minimizing the employment shock to the society while maintaining worker productivity for faster recovery post-COVID-19.

Potentials for Vietnam to Fortify its Position as an Attractive Investment Destination

Photo 5: Saigon Skyline. Source: Peter Nguyen

Currently, many nations, European and American alike, attempt to pull back their companies from China to prevent the Beijing government from cornering the whole global supply chain system. This clarion call to preempt China from being the singular manufacturing destination is the reason why many countries are seeking new locations to invest in. As Vietnam has been able to contain the pandemic and is opening up their economy, the government has a trump card to attract the capital outflows from China. Unfortunately, in this race for investment, Vietnam is not the only competitor. India, Malaysia, and Thailand have also been revising and introducing various incentives to invite foreign investment.

To couple with that, most of the workers in Vietnam are unskilled. So, despite the alluring low labor cost, many foreign companies have been reluctant to move production facilities from China to Vietnam. To polish the attractiveness of Vietnam as a destination for investment, it is essential to elevate the skills of the Vietnamese workforce by investing more in education and vocational training. Spending time in classroom is not sufficient. Instead, schools should strengthen their connection with businesses and encourage them to accept interns. By doing so, students will be able to attain pragmatic skills while at the same time supporting businesses in regaining their lost productivity. Schools should also be given an autonomy to revise the curriculum to meet the needs of the labor market.

This is also the time for Vietnam to ramp up infrastructure spending. Rather than a shortage of foreign direct investment (FDI), Vietnam is lacking the adequate infrastructure to handle the needs of foreign companies. Frequent traffic congestion and power outages are two main bottlenecks in the country’s FDI attraction. Therefore, by pouring public investment into infrastructure projects such as highway or bridge construction, the government will be able to attract more FDI, encourage businesses to jump-start their operation, and provide jobs for a large number of low-skilled workers whose livelihoods are severely affected by the pandemic.

Realizing the cruciality of public investment to foster the nation’s economic recovery and social investment, the government set a disbursement target of VND700 trillion (approximately US$30 billion), more than double the actual disbursed number in 2019 (Ngoc Thuy and Minh Anh 2020). Whether the public fund actually translates into the augmentation in Vietnam’s infrastructure is still to be seen, but the government’s focus on infrastructure spending is a milestone to further amplify Vietnam’s attractiveness as a target for FDI.  

            The COVID-19 pandemic has induced severe cascading impacts on all societal and economic facets. With the temporarily halt of various businesses, the livelihoods of many people have been strained to a bitter point. Successfully containing the COVID-19 is merely the first step. As Vietnam is proceeding forwards in recovery, the government needs to respond timely to the needs of those in difficulties but barely heard, and to restructure the domestic economic system towards a resilient trajectory so as to confront any unforeseeable risks. The COVID-19 crisis will eventually reach a termination point. But to step out of this pandemic with full credence, the government needs to help those in needs get back on their feet, and ensure a high level of public trust, the backbone of a resilient society.

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Picture 1: Retrieved from The Guardian - https://www.theguardian.com/global-development/2020/apr/09/in-a-war-we-draw-vietnams-artists-join-fight-against-covid-19

Picture 2: Source: Giang Huy (Retrieved from: https://e.vnexpress.net/news/news/two-community-transmission-cases-up-vietnam-covid-19-count-to-251-4081249.html

Picture 3: Source: Kate Ferguson (Retrieved from: https://unsplash.com/photos/rem9J638fPs)

Picture 4: Source: Kham (Retrieved from: https://www.reuters.com/article/us-health-coronavirus-vietnam-economy/after-swift-virus-success-vietnam-sets-sights-on-post-pandemic-business-idUSKBN22K08B)

Picture 5: Source: Peter Nguyen (Retrieved from https://unsplash.com/photos/soYzQJvctKI

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References

Dezan Shira & Associates (2020). Vietnam’s economic well-placed for lift off after coronavirus containment. chaohanoi.

Hai Yen (2020a). Covid-19 to benefit Vietnam’s long-term economic prospects: VinaCapital. Hanoitimes.

Hai Yen (2020b). Solutions beyond fiscal support to boost Vietnam’s long-term economic growth. Hanoitimes.

ILO. (2020). Vietnam can well address labor market challenges.

Kokalari, M., and Tran, H. (2020). COVID-19’s economic impact on Vietnam intensifies. VinaCapital.

Ngoc Thuy and Minh Anh. (2020). Public investment remains priority for Vietnam economy’s post-pandemic recovery. Hanoitimes.

Pham Van. (2020). Covid-19 could bankrupt 50 pct of Vietnamese enterprises: VCCI. Vnexpress International.

Samuel, P. (2019). Government incentives for SMEs in Vietnam – New circulars. Vietnam Briefing.

World Bank. (2020). Vietnam trade statistics: Exports, imports, products, tariffs, GDP, and related development indicator.