C-19 CHRONICLES | 3RD EDITION

The “C-19 Chronicles Life & Business in Vietnam” is Indochina Legal’s publication series dedicated to providing legal and on-the-ground insights into the development of the pandemic in Vietnam.

Faced to the outbreak of the deadly Delta Variant from April 2021, the very determined or even harsh strategy adopted by Vietnam has eventually proved successful (to this date) in curbing the spread of the virus, allowing (combined with the formal acceptance to “live with the virus”) the gradual re-opening of the economy and the resumption of social life as of 1st October 2021. This success is evidenced by the significant drop in reported daily cases and deaths, as showed in the below chart. As of 22 October 2021, for a population of around 98,474,892 persons, the total number of deaths is 21,487.

This strategy revolved around two pillars (in addition to the “social distancing” measures taken since April 2020). First, strict lockdowns of varying degrees implemented over the country since late May in the COVID hotspots (including Ho Chi Minh City, Binh Duong, Dong Nai, Long An), but also in other provinces less affected by the outbreak (including Hanoi). Second, a massive vaccination campaign (see infra).

This strict lockdown over a three-month priod following months of social distancing and mobility restrictions has come with a heavy impact on the economy. Besides the “informal” sector, the tourism and hospitality industry has been the most affected, basically being at a standstill since March 2020 (except for domestic tourism), following the country’s border closure.

The outbreak has also taken a severe toll on Vietnam’s heavily export-oriented economy, highly dependent on the manufacturing sector. Forecasts on Vietnam’s GDP growth for 2021 have been revised downwards from the Vietnamese Government’s initial target of 6-7% to 3-5%, according to the Asian Development Bank.

The strict restrictions to people’s mobility have adversely affected manufacturers, struggling with severe disruptions of supply chains, temporary factory closures, transportation difficulties and labour and raw material shortages, despite the Vietnamese authorities’ efforts to maintain economic activities (see the 2nd edition of the C-19 Chronicles).

If many industrial zones in North Vietnam have been able to operate with limited interruptions or reduction of operations, factory shutdowns and workforce shortages have been widespread in the South Key Economic Zone, comprising HCMC and its adjacent provinces, where most garment and footwear manufacturers have their factories. In this zone, which accounts for 70% of the industry’s import and export turnover of the country, 80% of leather and footwear factories had to temporarily suspend production during the lockdowns, according to the Vietnam Leather, Footwear and Handbag Association (Lefaso).

For instance, Nike, which had sourced around 350 million pairs of sport shoes in Vietnam in 2020, has predicted a shortfall of up to 160 million pairs in 2021, representing a 45.7% production decrease year-on-year.

The lockdowns have also slowed down the planned relocations of factories from China to Vietnam, manufacturers prioritizing order completion over low custom tariffs. For instance, Apple and Google have recently announced that they would maintain production in China of respectively the latest airpods and the smartphone Pixel 6.

These delays, rising costs and diminishing production capabilities have indeed prompted a number of multinational companies to find alternative solutions outside of Vietnam, especially garments and footwear businesses. According to the European Chamber of Commerce (“Eurocham”), 18% of its members have already moved some of their production activities outside Vietnam while another 16% of Eurocham’s members are considering it.

Labor-intensive businesses, and particularly foreign investors, have consequently urged the authorities to ease restrictions on movement as quickly as possible to lessen long-lasting impact on the country’s manufacturing-led economy. In Ho Chi Minh City, the reopening of the economy initially planned for 15 September 2021 has been delayed, keeping businesses on tenterhooks for a clear road map and date for reopening.

Finally, on 1st October 2021, after 3 months of strict social distancing, the People’s Committee of Ho Chi Minh City issued Directive No. 18/CT-UBND (“Directive 18”) setting out a step-by-step plan to reopen the economy.

Directive 18 allows people to travel within the city, removing inner-city checkpoints and travel permits. Above all, most businesses are authorized to operate again, except those deemed as non-essential (i.e. bars, spas and beauty salons, restaurants, cinemas, dance halls, karaoke, gaming centers, etc.). Resuming operations is however subject to conditions laid out by Decision No. 3328/QD-BCD issued by the Steering Committee for Covid-19 Control of Ho Chi Minh City on 15 September 2021 (“Decision 3328”).

Decision 3328’s cornerstone is to condition the participation in business operations and social activities to a vaccination pass, using a QR code showing vaccination status on PC-Covid Viet Nam, a national unified mobile application.

Each category of businesses allowed to reopen is subject to a specific set of obligations, with (i) suppliers of goods (supermarkets, shopping malls, mini supermarkets, convenience and food retailing stores, traditional and wholesale markets); (ii) factories; and (iii) offices, being each subject to its own requirements.

For example, factories are allowed to operate upon the fulfillment of the following 7 criteria:

Employees must hold the “COVID Green Pass” or “COVID Green Pass (with limited access to certain activities)”;
Weekly testing of employees and transmission of the test results to local authorities;
Ensuring safety distances;
Taking inspection, supervision of COVID-19 prevention and control measures at the workplace including taking body temperature, wearing facemasks and washing hands;
Having medical equipments and supplies for COVID-19 prevention and control;
Organize meals for employees;
Control of transportation and accommodation of employees.

Also, businesses continue to be affected by disrupted supply chains and labor shortages, particularly in South Vietnam. As interprovincial travels are still heavily restricted, many workers cannot have access to factories, a large part of them having left for their hometown during the lockdowns. However, the number of workers having returned to their worksites is increasing gradually, with a ratio of over 70% out of 320,000 workers in HCMC industrial hub as of 20 October 2021.

As far as Binh Duong is concerned, Official Letter 2455/SYT-NVY of the Department of Health of Binh Duong has divided Binh Duong in 3 zones, from the most to the least impacted by the COVID-19 outbreak, as follows:

Zone 1: Thuan An city, Di An City, Tan Uyen Town

Zone 2: Thu Dau Mot City, Ben Cat Town

Zone 3: Phu Giao, Dau Tieng, Bau Bang, Bac Tan Uyen

Under Official Letter 4988/UBND-VX of the People’s Committee of Binh Duong dated 1st October 2021, mobility between districts is restricted in Zone 1 and 2 and allowed in Zone 3.

In accordance with Official Letter 3478/BQL-DN dated 6 October 2021 of Binh Duong Industrial Zone Authority, enterprises operating in the industrial zones of Binh Duong must also continue to implement restrictive models subject to prior approval by the competent authorities on a case-by-case basis (i.e. : “3 on-site”, “3 Green” or “flexible 3 on-site”).

Regarding mobility between provinces, the ministry of transport has issued Decision 1740/QĐ-BGTVT on interim guidelines on the organization of passenger transport activities to resume interprovincial travel. Accordingly, Ho Chi Minh City, Long An, Tay Dinh and Binh Duong have coordinated a plan to allow workers to travel between said provinces.

Nationwide, as Vietnam furthers its transition from “zero-COVID-19” policy towards a “living with the Virus” policy, the Vietnamese Government issued Resolution No. 128/NQ-CP on interim regulations on “Adapting safely, flexibly, effectively controlling the Covid-19 epidemic” dated 11 October 2021 (“Resolution 128”).

The severity of COVID-19 measures and restrictions shall gradually increase from level 1 to 4. Based on Decision No. 4800/QD-BYT of the Ministry of Health, local governments must self-assess their epidemic level with respect to the following 3 criteria:

Criteria 1: the new infection cases in the community/ 100,000 persons/ week (i.e. COVID-19 incidence rate).

Criteria 2: the rate of people aged 18 years old and over who have received at least 1 dose of COVID-19 vaccine.

Criteria 3: the capacity for providing medical treatments:

The provinces or cities under the central government have a plan providing hospitals and medical examination and treatment facilities (including private healthcare) a number of ICU beds sufficient to respond to the epidemic situation of level 4.
Districts have plans to set up mobile medical stations, teams to take care of infected people and to provide medical oxygen for commune’s medical facilities sufficient to respond to an occurrence of the epidemic.

A SUCCESSFUL VACCINE DIPLOMACY

As of late May 2021, when the Delta Variant started to rapidly spread across the country, only a mere 1% of the population was vaccinated with one dose, the lowest vaccination rate in all of South East Asia.

Vietnam had to swiftly reverse its strategy amidst global vaccine shortages. As a background information, as of 20 October 2021, only 4.51% of people in low-income countries had been vaccinated with at least one dose, compared to 62.79% in high-income countries, according to the Global Dashboard for Vaccine Equity (established by UNDP, WHO and Oxford University).

In spite of doomsday predictions, Vietnam successfully deployed a massive vaccination campaign resulting in 49.4% people vaccinated with one dose and 19.5% fully vaccinated as of 22 October 2021.

To achieve such a performance, besides overcoming the logistics challenges posed by the testing and vaccination campaign, Vietnam has been able to secure a steady and diverse supply of vaccine doses within a short period of time, while to this day most developing countries remain undersupplied.

The country’s vaccination diplomacy is largely credited for this performance. The Vietnamese authorities have coordinated their efforts in securing vaccines through diplomacy, establishing a Government Working Group as of 13 August 2021, led by the Minister of Foreign Affairs, to secure supplies and promote cooperation in production and technology transfer of vaccines, medical equipment and medicines. The country actively requested its economic partners to share vaccines, which has been reflected by the many donations made to Vietnam.

The significant donations highlight the economic importance of Vietnam for the global supply chain. Vietnam being the largest exporter in South-East Asia to both the E.U. and the U.S., many foreign companies have economic interests in the country’s manufacturing sector’s prompt recovery, which requires widespread vaccination to fully operate. The diverse sources of vaccines reflect the country’s balanced strategic relationships with the world’s major economic powers.

As result of this active diplomacy, several Vietnamese companies have already managed to secure transfers of vaccine technologies , such as:

Vingroup, who signed a contract for the domestic manufacturing rights of California-based Arcturus’s COVID-19 vaccines, including the ARCT-154 vaccine.
Polyvac, who has secured the transfer of semi finished doses for completion of the assembly process using its own staff, equipment and facilities.
Vabiotech, partnering with the Russian Direct Investment Fund for conditioning of Sputnik V.

Simultaneously, the country is still hoping to develop two entirely homegrown vaccines, namely Nanocovax and Covivac. Nanocovax has completed the third and final phase of human trials but has been held up due to a lack of data regarding its efficacy and Covivax has entered the second phase as of 18 August 2021.

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