We had all hoped that the scare around Coronavirus would die down in a few weeks, but the monster just seems to be getting bigger. Now the fear is not only limited to China and its neighbouring countries, but has spread worldwide!
The picture at one level seems to be more positive as China reports that workers are getting back to the factories, but feelers from many insiders indicate that the menace is far from over. Many working in China share that though factories are opening in large number, the actual attendance is very low and will continue to impact the supply chain for a longer time than many had anticipated.
A recent study by the China Garment Association claims that 80.8 per cent of workers have resumed work, and the number of returnees accounted for 66.3 per cent of the number of workers employed under normal production conditions; hence the return to work situation has significantly improved.
The report always admits that the shortage of workers is still the primary problem facing the resumption of work in the apparel industry. The survey results showed that 55.6 per cent of the surveyed enterprises reported a shortage of labour and difficulty in returning to work. Secondly, the poor supply and marketing in the upstream and downstream of the industrial chain has a major impact on the production and operation of apparel enterprises.
While everyone is confident that China will bounce back strongly after the pandemic is brought under control, which as the scenario looks now, is not anytime soon; there are opportunities for other manufacturing destinations that could be longterm. One thing is for sure – global buyers are now convinced that they cannot exclusively rely on China or for that matter on any one country for their products. This will shake up the current spread of textile business over a larger base. Which countries will eventually benefit, is still anyone’s guess.
From all possible calculations, Vietnam will definitely get a good share. There are so many factors in its favour. For one, a lot of production has already been transferred from China to the north of Vietnam and buyers know that the competency of China is replicated in these factories. This factor by itself is a big edge.
There is however much more in Vietnam’s kitty than just shifting of production base. The inherent factors that have helped the country grow in apparel manufacturing over the last few years will be highlighted: High-end production capabilities, skilled and literate workers, conducive environment for business, FTA with a number of countries and of course the EVFTA that defines huge opportunities in Europe.
Adding to this growing list of positives, is the recent decision of the European Union to partially withdraw the EBA (Everything But Arms) scheme it had with Cambodia that allowed all imports from Cambodia (except armaments) to be dutyfree and quota-free. Though the move is a big blow to the Cambodian industry, it translates into opportunities for Vietnam.
Knowing the determination of the Vietnam industry and the political stability that makes Vietnam such an attractive destination, I am confident that work on a long-term growth strategy must have already started.
What is needed now, is the foresight to plug the gaps and ensure that the backward linkages are put in place at the earliest to avail the benefits of what Vietnam has in its basket as opportunities. These are very interesting times for the country and they have a lot to gain, provided the leadership takes critical steps in the right direction!