With just 266 confirmed cases and zero deaths (as of 14 April), Vietnam has – to date at least – been spared the worst consequences of the coronavirus outbreak. Despite this, the nation has been hit hard by a series of containment measures that have negatively impacted on its economically significant cross‑border trade flow with China.
As well as the ongoing trade‑flow disruption, the pandemic has also seriously compromised both the country’s tourism industry and its level of oil exports. In the case of the latter, demand has slumped worldwide following the widespread imposition of travel bans, stay‑at‑home orders and mandatory commercial shutdowns. Arguably, this couldn’t have come at a worse time for Vietnam, with the country having previously committed to a far‑reaching infrastructure renewal programme, much of which may no longer be immediately viable.
In particular, the negative economic impact of the outbreak may adversely affect many Vietnam‑sited projects sponsored under the terms of the Belt and Road Initiative (BRI) , China’s ambitious infrastructure development and trade facilitation programme. As it currently stands, the portfolio of related projects includes vital power plants, an improved rail freight network and a series of overseas‑investment‑friendly Special Economic Zones (SEZs).
In a bid to both protect these projects and stimulate the wider economy, the government has given the go‑ahead to a US$1.6 billion spending package that prioritises infrastructure, while offering business tax deferrals and freezing electricity prices until the end of the year. It is believed that further measures will follow in due course.
This relative downturn, however, follows a comparatively prosperous period for the country, which saw it emerge as one of the key beneficiaries of the US‑China trade dispute. This saw many of the larger mainland‑based manufacturers – including a substantial number in the automotive, textiles, consumer appliances and consumer durables sectors – and several logistics operators siphoning funds into the country as a way of reducing their liability to the punitive US import tariffs. The coronavirus outbreak, however, has inevitably put an end to all of that, with foreign direct investment falling from a high of $5.3 billion in January this year to just $1.1 billion the following month.
Looking more specifically at trade, concerns over the potential spread of the virus have seen the flood of exports from Vietnam’s substantial network of BRI ‑backed SEZs , industrial parks and specialist processing zones slow to a trickle. Many of these facilities have also suffered on account of the ongoing disruptions to the global supply chain, particularly those with a focus on electronics or agriculture, two of the country’s priority development sectors.
As testimony to this overall slowdown, the country’s major ports have all reported a significant drop in shipping volumes – Quang Nam is down 72%; Nam Dinh 36%; and Ho Chi Minh City 18%. Particularly hard hit have been many of the key China routes, with port authorities having been obliged to liaise with government agencies with regard to regulating the flow of ships and personnel between China, Japan and South Korea.
Another dampener on the overall level of economic activity has been the strict entry and departure rules that China has imposed on cross‑border land and rail transport, resulting in a sizable contraction to the bilateral transport of goods and materials. As of the end of last month, according to Vietnam’s Ministry of Industry and Trade (MIT) , the overall volume of cross‑border imports and exports had fallen to less than 50% of its pre‑outbreak level. As a consequence, the MIT is calling for the introduction of fast‑track customs clearance procedures between the two jurisdictions as it looks to reboot critical trade and supply chain activities via the Guangxi Autonomous Region , which has long been the established gateway for Chinese‑Vietnam trade.
Research.hktdc.com
