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Vietnam's business hub easing back into action

Vietnam's business hub easing back into action

Wednesday 06, 10 2021
Ho Chi Minh City - the business hub of Vietnam, underwent three months of strict lockdown due to the COVID-19 fourth outbreak. At the beginning of October, the city started lifting restrictions, letting business flow again.

Companies started reopening

In the three days of reopening from October 1, there had been 5,297 companies registered for reopening. Many others were preparing their facilities, equipment, and labor sources.

According to a survey conducted by the Center for Human Resource Forecasting and Labor Market Information, more than 42,700 people are looking for jobs. The demand for labor recruitment of enterprises is from 43,600 to 56,800 people.

Human Resource Forecasting and Labor Market Information

Tens of thousands of workers have returned to their hometowns in recent months. Companies plan to call workers back to the city but must meet the conditions set out in the safety criteria issued by the Department of Industry and Trade.

In Ho Chi Minh City, there are currently 127 job counseling and introduction units in the area that have a license to operate, with the City Job Center and the City Youth Employment Service Center as the cores.

These units are surveying job demands, thereby consult employees, to introduce a specific list of employees for the business to interview. In addition, after graduating from vocational schools and colleges, students from vocational schools and colleges will be introduced to jobs by job placement centers and provide labor resources for businesses.

Reopen with difficulties

Companies will be facing much hardship when reopening.

Firstly, the small and medium enterprises (SME) will find it hard to get back on track. Most SMEs stopped operation for the last three months, and despite having no income, they still have to keep employees on-site to ensure having adequate laborers for the time of reopening.

However, when it is time for reopening, due to the strict regulations applying still, reconnecting with the supply chain will be hard for the SMEs. Some of their business partners are either reorganizing or have retreated from the market, and the SMEs' comeback will not be as fluently as hoped.

Covid 19

Another additional pressure is the cost of COVID-19 testing. Three months without income while still having to carry out regular COVID testing have worn out many companies. If there are no adjustments, the testing will become a burden for SMEs.

Secondly, the cash flow is drying up. Most small-scale enterprises assess that their cash flow can only keep them going for three more months at best.

In August, the Private Economic Development Research Board (Board IV) surveyed more than 21,500 enterprises of many economic sectors. Only 16% of surveyed enterprises tried to maintain production and business activities even though they could not operate at full capacity. Nearly half of these said that the current cash flow could help them maintain operations from one to less than three months. Even foreign-invested enterprises (FDI) are facing cash flow shortages.

Finally, as mentioned above, the shortage of labor will also be a hindrance when reopening businesses. When the pandemic was at its peak in August, many laborers returned to their hometowns. To bring them back into the city now is not easy. There will be troubles with the pandemic prevention regulations, and the workers who went home might have yet to be vaccinated. It will soon be the end of 2021, so employees may be reluctant to come back to work. The labor deficit in all industries until the end of the year will be around 35-37%.

Three deciding factors in economic recovery

The reopening of Ho Chi Minh City will spur the economy of Vietnam. The economic growth of this city will depend on three factors:

  • Make the right move. With the decision to co-exist with the virus, Ho Chi Minh City has developed plans to reopen and restore socio-economic activities. Healthcare facilities are well organized to fend off the pandemic, and the vaccination rate is high. These are the factors that help the city in gradually lifting its barriers, the right and inevitable move at the moment.

economic recovery

  • Careful planning based on reality. Ho Chi Minh City plans on a safe reopening and will try to prevent the scenario where lockdown needs to be applied again.

  • Solve the labor shortage problem. Ho Chi Minh City's economic structure is 62% of trade and services. However, in the past three months, almost all commerce and services had to stop operating. Therefore, the service industry needs to consider and have an open roadmap to restore development. According to many enterprises, the city should soon coordinate with provinces and cities to bring back workers to businesses, both in the production and trade and service sectors.


Compiled by VietnamCredit

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