Year that was: How Vietnam’s businesses survived historic difficulties

The Covid-19 pandemic made 2021 a challenging year for companies, but many managed to make strategic changes to overcome what were unprecedented restrictions.

The year started off on a positive note, and the Purchasing Managers Index hit 51.3 in January and climbed to 54.7 in April, despite the closure of several industrial hubs in the north due to the third wave of Covid, according to British information provider IHS Markit.

A score of above 50 indicates growth while below 50 means the sector is contracting.

pointsVietnam's Purchasing Managers’ Index, 202151.351.351.651.653.653.654.754.753.153.144.144.145.145.140.240.240.240.252.152.152.252.2JanFebMarAprMayJunJulAugSepOctNov37.54042.54547.55052.55557.5Jun● Value: 44.1

In the first four months, the number of businesses that were set up surged by 17.5 percent year-on-year to 44,200, indicating an economic recovery.

Revenues from retail and services rose 10 percent to VND1,695.6 trillion ($73.94 billion) in the period, domestic tourism started to pick up and companies began to call for resumption of international flight routes to boost recovery.

But then came the fourth wave in April and set back businesses’ recovery.

With hundreds of new infections every day in the second quarter and thousands in the third, HCMC started to impose restrictions in June and kept them in place until September end.

Other southern localities too reported large numbers of cases, mostly of the Delta variant, and factories were forced to keep their workers on-site as travel was prohibited, a huge financial burden.

"Having workers stay in the factory increases costs and cuts our productivity by half," Nguyen Huu Tuan, human resources director of textile company Thanh Cong in HCMC’s Tan Phu District said.

His company began to house 2,200 employees in mid-July, but a month later 400 went home because of safety concerns and the desire to be with their family.

The PMI fell to 40.2 in August and September, signaling the worst deterioration in the health of the manufacturing sector since April 2020, according to IHS Markit.

"Vietnamese manufacturers are facing a near-impossible task at present as the restrictions put in place to try and contain the spread of the Covid-19 outbreak in the country constrain their ability to produce goods," Andrew Harker, economics director at IHS Markit, said at that time.

The policy also caused major difficulties for foreign companies.

Since Vietnam is the second largest supplier of apparel, footwear and travel goods to the U.S., accounting for 20 percent of all that country’s imports, the American Apparel & Footwear Association in July called on the two countries’ governments to speed up vaccine distribution to major suppliers of Adidas, Gap and other brands.