General

From factories in Vietnam and Malaysia, to barber shops in Manila, to office buildings in Singapore, Southeast Asian governments are pushing ahead with reopening plans to strike a balance between controlling the epidemic and maintaining the flow of personnel and capital.

As we all know, Southeast Asia's manufacturing industry is known for its low labor costs, flexible manufacturing capabilities, and an expanding market. Manufacturing industries in Malaysia, Thailand, Indonesia, and Vietnam are on the rise. Without the epidemic, these Southeast Asian countries are expected to rank among the top 15 most competitive manufacturing countries in the world.

However, the arrival of the epidemic, whether it is Malaysia’s "closure of the country" or the "three locals" principles (eating on the spot, production on the spot, and living on the spot) in various parts of Vietnam, have reflected the serious problems behind the manufacturing industry in Southeast Asia. There are cluster infections, and most of them come from factories and transportation industries.

Moreover, the vaccination rate in Southeast Asian countries is also very low. In Malaysia, which has the highest connection rate, only about 23.8% of the population has completed the vaccination.

Up to now, the epidemic situation in Southeast Asia has not decreased but increased. If the blockade continues as before, not only will the epidemic not be controlled, the country’s economy will most likely collapse.

01

The blockade may severely hit the economy and affect the global supply chain

Southeast Asian countries are the world’s important raw material supply and manufacturing processing bases. Vietnam’s textile industry, Malaysia’s chips, Vietnam’s mobile phone manufacturing, and Thailand’s automobile factories all occupy an important position in the global manufacturing supply chain.

As the number of daily confirmed cases hit a record high, Malaysia cut its economic growth forecast for 2021 by half to 3% to 4%.

Vietnam and Singapore, which set their economic growth forecasts at 6% and 7% respectively, are facing increasing pressure to solve the problem of global supply chain congestion and avoid frustrating foreign investors’ interest in Vietnam.

In terms of the impact on the global supply chain, Vietnam has the greatest risk.

The Ministry of Trade of Vietnam warned this month that many factories have been closed due to strict restrictions, and Vietnam is likely to lose overseas customers as a result. The country’s European Chamber of Commerce estimates that 18% of its members have transferred some products to other countries to ensure that their supply chains are protected, and more members are expected to follow suit.

Affected by the epidemic, the business of European companies in Vietnam has been greatly reduced. According to a report by Vietnam's "Vietnam Express" on September 10, nearly 80% of European companies in Vietnam had poor operating performance in the past three months, and 29% of them said they were "very bad" due to the long period of social isolation.

This is the result of a business environment index (BCI) survey conducted by the European Chamber of Commerce in Vietnam (Eurocham) and 2,000 member companies during the lockdown and social distancing. The BCI index is only 15.2 points, the lowest level in the past 10 years.

Alain Cany, chairman of the European Chamber of Commerce, said that the fourth wave of the outbreak is seriously affecting business activities in Vietnam. If the lockdown, social distancing and activity restrictions last longer, new investment projects may be at risk, and the company may Consider relocating to another place.

The survey results showed that most European companies (76%) in Vietnam had poor operating performance in the past three months (June-August), and 29% of them said they were “very bad”. Currently, only 7% of companies are operating in good condition.

European companies in Vietnam are expected to "slightly improve" in the next three months. Overall, it will still be at a terrible level (71% of companies).

02

Continuously introduce new anti-epidemic measures to ensure the smooth reopening of the economy

Although Southeast Asian countries have been fighting the virus longer than most countries in the world, they have failed to reduce the number of confirmed cases, but unemployment is increasing. Under such circumstances, the patience of the people in Southeast Asia is running out, and the government has to choose to make changes.

Indonesia, the largest economy in Southeast Asia, is focusing on long-term measures. The government is trying to strengthen regulations, such as mandatory regulations on masks that have lasted for several years. Indonesia has also formulated a "roadmap" for specific areas such as offices and schools to establish longer-term rules under the new normal.

The Philippines is trying to implement travel restrictions in more targeted areas to replace national or regional blockades, even to include streets or houses.

In Manila, the government is considering the use of “vaccine bubbles” in workplaces and public transportation. This measure allows fully vaccinated people to travel or travel freely at their destinations without isolation.

Vietnam is also experimenting with this measure. Hanoi has set up travel checkpoints, and the government has formulated different restrictions based on the virus risks in different parts of the city.

In Malaysia, only those with a vaccine card can go to the cinema. Singapore requires restaurants to check the vaccination status of diners.

03

The bilateral trade volume between China and Vietnam in the first eight months broke through the US$100 billion mark

According to a report by Vietnam’s “Investment News” on September 15, the General Administration of Customs of Vietnam announced that as of the end of August, Vietnam’s exports to China amounted to US$33.35 billion, a year-on-year increase of 22.3%, accounting for 15.6% of the country’s total exports. The main commodities exported to China are: telephones and accessories (US$8.06 billion, an increase of 65%), computers, electronic products and accessories (US$6.62 billion, a decrease of 8%).

Imports from China amounted to US$72.04 billion, a year-on-year increase of 46.1%. It accounts for 33.3% of the country's total imports. The main imported commodities are: mechanical and electrical equipment and accessories (US$16.73 billion, an increase of 71%), computers, electronic products and accessories (US$13.49 billion, an increase of 34%), telephones and accessories (US$5.83 billion, an increase of 62%), textiles and clothing , Footwear raw materials (including cotton, cloth, textile yarn, clothing and footwear raw materials totaling 9.2 billion US dollars, an increase of 35%).

In the first eight months, the bilateral trade volume between China and Vietnam reached 105.39 billion U.S. dollars. China is currently Vietnam's first and only trading partner to break the US$100 billion mark. Vietnam has a trade deficit of nearly 39 billion U.S. dollars with China.