Global gloom darkens over Vietnam

The whirr of 200 sewing machines fills a Vietnamese factory hall, where workers and bosses hope desperately that the wheels will keep spinning once the global downturn hits home.
Row upon row of workers, most of them women, are busy making handbags, backpacks and briefcases for customers as far away as Germany, Hungary and Mexico in this plant, set amid rice fields on the outskirts of Hanoi.
They are the backbone of Vietnam’s post-war success story, part of an army of low-wage laborers who have transformed a poverty – stricken command economy since Vietnam in the 1980s embraced the model of export-led growth.
For more than a decade, textile and apparel exports have helped drive national economic growth rates above 7.5 percent – lifting the fortunes of businesses such as the Ladoda Company, whose staff grew to 400 from 15 in 16 years.
But now – with the dark clouds of recession gathering over the United States, Europe and many of Vietnam’s other export markets – many of the workers here have started to worry that tougher times may lie ahead.
“I heard on TV and the radio that the world economy is in bad shape,” said 33-year-old Nguyen Thi Thuy, who supports two children with her performance based wage of around VND1.7 million (US$100) a month.
“I am sure it will affect Vietnam and our company in some way.”
It is a concern shared by the management of the company, although both Thuy and her boss said that through hard work and innovation this family-run business hopes to dodge the bullet of a global downturn.
“We are worried,” admitted deputy director Dinh Tuan Anh, the owner’s son. “The crisis has really affected our business plans.”
Orders from some overseas clients had started falling months before the Wall Street meltdown, Anh told AFP, while domestic woes, including double-digit inflation and expensive bank loans, had piled pressure on the company.
“In June our Czech client placed an order for only 2,000 to 3,000 backpacks,” he said. “They used to order 5,000.
“A US client used to place orders for up to VND300,000 ($18) per backpack. Now they want backpacks for VNDVND60,000. They have told us to reduce the detailing on the products to make them cheaper.”
Adam Sitkoff, executive chairman of the American Chamber of Commerce in Hanoi, expects things could get worse before they get better.
“There’s no question you’re seeing a slowing in worldwide growth,” he said.
“Economies aren’t expanding, businesses aren’t expanding, the value of assets is going down. People are going to be more fearful and have less money to spend. That affects exports from emerging markets.”
Vietnam – which weathered the 1997-98 Asian crisis better than many neighbors because of its relative isolation – has since become far more globally integrated and last year joined the World Trade Organization.
“Vietnam’s single largest export market is the United States,” said Sitkoff. “Almost 45 percent of Vietnamese exports to the US are clothing and shoes.

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