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When the coronavirus first reached Vietnam in January 2020, its communist leadership undertook one of the most successful restraint policies in the world. Officials compare the campaign to fight Covid-19 into a war – a powerful metaphor in a country with a recent history of winning it.
By imposing strict quarantines and a complete rail-and-rail system — with the help of the tools and staff of a police state — the country was able to eradicate local infections and eradicate new outbreaks by the middle of the year. Vietnam’s apparent success in recovery as usual intensifies its pitch for foreign investors as a less geopolitical laden alternative to China.
A year later, the more contagious Delta variant of coronavirus brings new infections to more than 10,000 a day, raising doubts about the future of one of the leading manufacturing centers in Asia. Nikkei Asia is now the last place in Vietnam, in the 120th place linked to Thailand its Covid-19 recovery index, the criteria of which include the infection management of countries and the roll-out of vaccines – an area in which Vietnam has not adequately planned.
“There have been several waves of Covid and each time they were able to stop it,” said Huong Le Thu, a senior analyst at the Australian Strategic Policy Institute and author of a paper about the response of the coronavirus in Vietnam. “But this time it was harder to get Delta under control.”
Vietnam’s model last year of careful detection and detection, and then locking people up in contamination clusters, “wastes precious time,” said Alex Vuving, a professor at the Asia-Pacific Center for Security Studies in Honolulu. variant ‘conducive’ provides to distribute environment ”.
The outbreak hit hardest in Ho Chi Minh City, the densely populated business district of Vietnam, where authorities enforced a 12-hour curfew, banned most movements and deployed thousands of troops. Trademarks including Nike and Adidas disrupted their operations, highlighting Vietnam’s growing role in global supply chains. Toyota has also announced a 27-line production suspension at 14 of its Japanese factories due to a shortage of parts in Southeast Asia — mostly Vietnam, but also Malaysia, which is also struggling with rising cases.
Prime Minister Pham Minh Chinh, who was named in the Communist Party’s five-year leadership shuffle in February, and his new government are in a hurry to secure and administer more vaccines and get the economy back on track. In a one-party state whose leaders derive much of their legitimacy from delivering economic growth, this is an important task.
As the country’s former strategy for emergency cases is now strong, most of Hanoi’s focus is on preventing infections and keeping business going. Some companies use a ‘three-on-the-spot’ model to get factory workers to work, eat and sleep. But it is difficult for employees and expensive for businesses. Some multinationals have hired managers at hotels in the city center.
VinaCapital, the investment manager of Ho Chi Minh City, said in a note to clients last week that large foreign companies can afford to pay for hotels, but that companies that offer lower value-added products such as clothing, shoes or furniture produce, it finds it difficult to maintain their production ”. He noted that Vietnam’s exports of these products fell in August, saying that the decline, coupled with lower consumption, was likely to slow the growth of gross domestic product in Vietnam.
“The restrictions severely limit the country’s production capacity,” said Nguyen Phuong Linh, co-director of Control Risks. “Some factories were afraid to take on new orders because they were worried they would not be able to complete them without enough workers.” However, she adds that the disruption is likely to be a ‘short-term issue’, as Vietnam is still an attractive option for foreign investors compared to other countries in Asia.
The government has set a goal to bring the outbreak in Ho Chi Minh City under control by September 15, as defined by a 20% reduction in the daily deaths of Covid and the number of Covid patients discharged from hospital becomes greater than the number allowed.
The bigger question is whether Vietnam can combat the crisis fast enough to alienate foreign investors. At present, there are few clear signs of sales; the dong is one of the few currencies in Southeast Asia that rose against the dollar this year. As one economist puts it: “Things between the US and China are not going away.”