Work paradox leaves Vietnamese factories in shock after COVID exodus

HO CHI MINH CITY – The COVID conundrum seen around the world has reached Vietnam: Millions of people are out of work, yet factories cannot hire enough workers to satisfy overseas customers, who are preparing for a holiday season already threatened by fragile global supply chains.

Government officials are begging workers, by text, to return to their jobs, and recruiters are dangling “crazy” benefits for new hires, as one executive put it. But labor shortage persists, even as companies from Samsung to Adidas and Lululemon need to ramp up production in Vietnam, high source of the world’s electronics and clothing.

In the key industrial province of Binh Duong, for example, suppliers only have half the workers they need, Navigos, which operates Vietnam’s largest job site, told Nikkei Asia on Monday.

The shortage may have been fueled by the largest exodus of workers from southern Vietnam, starting October 1 from Ho Chi Minh City, Binh Duong and other provinces.

The summer brought closures due to a pandemic across much of the country, which forced workers to sleep in factories and prevented travel between provinces. As soon as the authorities removed the barricades and barbed wire from the roads, tens of thousands of migrants rushed to their hometowns.

“It’s about surviving,” Jeffery Lee, deputy director of recruiting firm A8 Resource, said in an interview. “So factories have to help their workers survive if they don’t want them to leave.”

School closures, volatile regulations and the Lunar New Year holidays early next year further complicate Vietnam’s unprecedented paradox of concurrent labor shortages and widespread unemployment.

In response, companies are rushing to secure the workforce. A Sharp subsidiary, for example, offers an extra month’s salary to bring workers to Binh Duong, where it manufactures camera modules for smartphones and tablets. The same goes for Hoa Tho Textile and Garment, which also provides childcare services and housing to attract recruits, according to the government news site. Other companies are getting creative in retaining workers, from the Ford care package of hand gel and vitamins to Daphaco Electric Cable which buys laptops for staff children to use while in school.

“It’s crazy because it’s way beyond what factories in this region can afford,” Binh Duong Business Association president Mai Huu Tin told Nikkei. “But it does happen.”

Local governments intervene to bring workers back to industrial areas by bus, train or plane. Factories in the South increase wages by 15 to 20%instead of the more usual 5-10%, Navigos said. This can mean greater bargaining power for workers and increased inflation in Vietnam, spilling over to its major markets from America to Europe.

The COVID supply chain shock started as a global story of too many online shoppers versus not enough container ships or computer chips. But challenges have followed one another, including the shutdown of Vietnam in the third quarter, when the economy contracted for the first time since 2000, contributing to a downgrade in shares at Nike, for example, which has 200 suppliers in the country. Communist. The labor shortage threatens to accumulate new challenges.

Pou Chen, the world’s largest shoe supplier for buyers such as Nike and Adidas, opened its facility in Ho Chi Minh City on October 6 for the first time since July. He told local news site Zing that there was a shortage of 40,000 workers and told Nikkei that there were usually 56,000. Other companies post jobs for hundreds of recruits at a time. , offering free meals and bonuses if they stay for a month or more.

In Dong Nai province, the industrial zone authority has lighted factories to reopen, sometimes hundreds in a single day, including those of Chang Dae Vina, which makes device covers for Samsung, and WJM Furniture. , which supplies Puma and Armani. Workers can now move daily from approved areas, instead of staying overnight in factories.

Ford Vietnam chief executive Pham Van Dung told Nikkei that “the global pandemic has had a negative impact on the entire auto industry. Fortunately, thanks to swift action and efforts by the Vietnamese government, the situation has been brought under control, creating favorable conditions for automakers to resume production soon. “

Workers wear masks to reduce the risk of COVID-19 infection during their shifts at a factory in Hanoi on October 1. © Reuters

But returning is a difficult choice for workers, especially after the trying summer in southern Vietnam. Hoang Bon, a logistics manager, notes that the country did what few others have done to preserve supply chains and produce the world’s jeans and headphones: employees lived at work, the vast majority in the south. July 15 to September 30.

For migrants stranded in the region, October 1 was their first chance in months to leave. Many of those who have lost their jobs have chosen the safety net of their hometown, where they may not find work but at least have families for food and shelter, said Tu Phuong Nguyen, a labor researcher at the University of Adelaide.

But even the employees left. In the southeast, 1.5 million people left the labor force from the second to the third quarter, the General Bureau of Statistics said.Last week.

Michel Bertsch, managing director of furniture maker Geuther Vietnam, said he had retained almost all of his staff, but some could still take the wages they saved during the lockdown and return to their hometowns.

“It’s kind of like the game. No one has experienced this before, and no one knows what’s going to happen,” he said over the phone. Across the manufacturing sector, some workers will not return and wages will rise, he said, adding that it was also too late to ship goods in time for the holidays.

Analysts agree, saying not every product that isn’t in the ocean will already hit the shelves of overseas stores by Christmas. After China, Vietnam was the second largest exporter of clothing, footwear and textiles in 2020, according to data from United Nations Comtrade. It was the fifth largest furniture exporter and one of the main producers of electronics giants Intel and Samsung.

And there is another holiday to consider: Tet. As in China, millions of Vietnamese leave shopping malls for their rural hometowns every Lunar New Year. Now companies don’t know how many employees will return before the holidays, which fall in early February, or how much production can be completed before the week-long hiatus begins.

This adds another wrinkle to Vietnam’s economic recovery. Other countries have experienced the disconnect between labor supply and demand, as COVID fears have kept workers at home, and financial aid and competition among employers has allowed people to ‘be more difficult in the jobs they have taken. This disconnect is now apparent in Vietnam, where fears of being infected at work only really emerged during the summer upsurge in cases.

“Workers who have returned to their hometown are afraid to return to Ho Chi Minh City because they cannot provide for their families and they are afraid of the pandemic,” said Nguyen Anh Khuong, import-export manager of Daphaco, which has operations in the city and neighboring province of Long An.

He said if the infections spread, the area could lock up again, a risk that makes it harder to convince people to return.

While the north has rebounded again, many factories in the south are entering the third week of reopening still below half of their capacity, waiting to see how permits for transport, recruiting, vaccination, testing and reopening. workers are shaking. To revive the economy, vaccination in Ho Chi Minh City overtook much of the country, reaching 76.9% of residents on Friday.

Okay, the logistics manager said he had slept in his warehouse for months and still had dozens of colleagues doing the same at other facilities. His company, Annam Gourmet, a grocery retailer and supplier, is one of many who have turned to freelance writing and outsourcing to fill the workforce gap. The ongoing sleepovers, he said, were a short-term sacrifice to keep production going.

“If the workers had not chosen to do this, there would have been a lot more [supply chain] business disruptions and closures, ”he said.

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