Foreign companies struggle to navigate coronavirus bumps

By Dat Nguyen   February 18, 2020 | 04:37 pm PT
Foreign companies struggle to navigate coronavirus bumps
Container trucks at Vietnam’s Kim Thanh Border Gate No.2 with China in the northern province of Lao Cai on February 16, 2020. Photo by VnExpress/Giang Huy.
Foreign direct investment companies in Vietnam are facing bottlenecks in sourcing materials and parts from China due to Covid-19.

A spokesperson of Italy-headquartered Datalogic Vietnam, producing barcode readers and sensors, said it relies on daily and weekly imports of parts and materials from China. As the coronavirus outbreak limits border trade activities, its 400 staff might have to stop working to wait for imports.

Datalogic Vietnam is among a dozen FDI firms in Saigon Hi-Tech Park, including chipset maker Intel Vietnam and electrical equipment maker Schneider Electric Vietnam, to recently propose normalization of border trade activities between Vietnam and China.

Over 2,000 factories in HCMC are in need of machines, parts and materials from China for manufacturing, having failed to find an alternative market, said the proposal submitted to the government by Ho Chi Minh City Exports Processing and Industrial Zones Authority Business Association (HBA).

Cargo flights between both countries should be resumed to ensure manufacturing could continue, it said.

The world’s largest smartphone maker Samsung is also facing obstacles in Vietnam. With hundreds of containers carrying components from China stuck at the border, the company’s sales could plummet by half this year if the situation continues, the Ministry of Planning and Investment reported earlier this month.

LG is also meeting difficulties in importing materials from China.

Other foreign companies have suspended plans to conduct market research in Vietnam, and existing investors could delay their capital increase into the country, the ministry stated.

Around 70 percent of respondents to a survey of U.S. firms in Vietnam stated Covid-19 could reduce revenues by 10 percent or less this year, according to a American Chamber of Commerce (AmCham) survey.

Nearly 76 percent of German businesses in Vietnam have been directly impacted by the outbreak and expect damages to their business results, according to the Delegation of German Industry and Commerce in Vietnam.

Chief representative Takeo Nakajima of JETRO Hanoi said at a forum last week the outbreak could have negative impacts on Japanese business plans to expand across Vietnam in the next two years.

The challenges facing FDI firms could contribute to declining government revenue this year, the planning ministry estimates.

In case the outbreak is contained in Q2, government revenue could suffer a loss of VND42.3 trillion ($1.82 billion) due to dwindling trade value with China, it added.

Some companies are making moves to save business. Samsung has begun flying electronic components for its latest Galaxy phones from China to its factories in Vietnam as it grapples with sweeping supply chain disruptions caused by coronavirus, Financial Times reported.

Covid-19 has infected 16 people in Vietnam and killed 2,009 globally.

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