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Vietnam Textile and Apparel Association (VITAS) said its members has faces extremely difficulties due to the complicated context of the Covid-19 pandemic in Ho Chi Minh City (HCMC) and southern provinces since the period of Quarter III/2021.

A mass of textile and garment enterprises have been faced production shutdown or interruption, fail to fulfill orders, delivery delay, deliver by plane or have orders canceled by clients which caused supply chain disruptions. Many enterprises in the southern provinces tried to arrange production in the mode of “3 in place”, “1 route for 2 destinations”, or the production plan of “4 greens” but only maintained about 10 or 30% laborers at work with much additional costs.

“Loss is not only in term of finance but also in reputation to partners”, emphasized VITAS. Data shows that September’s export turnover is estimated at US$ 3 billion, decreased 9.2% compared to August 2021, and decreased 10.5% over the same period last year. According to VITAS, in addition to various negative impacts on the supply chain, Vietnam’s textile and garment industry also faces labor difficulties.

At the Covid-19 outbreak happened in April and May in some northern provinces, laborers had to temporarily stop working at the interval of 30 or 45 days or in alternate leave. The textile and garment industry then continued suffering the next “punch” in the southern region with Delta variant. Almost enterprises had to close or reduce at least 60 or 70% their employees because of failure to meet working requirements or in fear of infection.

Besides, a numerous laborer quitting job and returning to their hometown will make enterprises difficult even at the post-pandemic. VITAS said that it is estimated that nearly one million laborers in the sector will be affected by job lay-off, rotational leave, working time reduction, unpaid leave, labor contract suspension and income cutback.

Based on the complicated context of the Covid-19 in many localities, especially in HCMC and southern provinces, VITAS believe that the last 3 months of 2021 will be another extremely difficult time. The highest risk is the possibility of supply chain disruption due to orders transferring and labor shortage upon their leaving to hometown for the pandemic protection. “Neither of these problems can be solved in one or two days,” noted VITAS. Accordingly, it will be hard to reach the goal of 2021 in achieving the value of US$39 billion in 2019.

The most positive scenario with the assumption that Vietnam can control the pandemic and realize the “new normal” since early 10/2021, the export turnover is likely to reach about US$ 37.5 or 38 billion. The average scenario, in case the Covid-19 is still complicated with blockage in localities and industrial zones in 11/2021, the export turnover of the whole year is expected to reach about US$ 36 or 36.5 billion. The least positive scenario is that the pandemic is bad till early 12/2021, the export turnover is expected to reach only US$ 33.5 or 34 billion.

To remove difficulties in cash flow to prevent enterprises from falling into liquidation, the representative for textile and garment enterprises recommended to delay their payables to state. For example, it is proposed to stop contributing the retirement and survivorship fund as specified in Resolution No. 68 in one year since the application of the document. Enterprises located in the localities applying Directive 16 are entitled to a 50% reduction of the payable amount.

For Vietnam General Confederation of Labor, VITAS propose to stop collecting trade union fee until 30/6/2022 instead of 50% as prescribed in Document No. 2059. Additionally, VITAS recommend to reduce costs in order to facilitate production and business of enterprises. For example, the State Bank of Vietnam directed the banking system not to lower the credit limit for enterprises facing difficulties due to Covid-19, continue to reduce the lending interest rate to at least 1% per year as well as extend the payback and interest period of this year and the following year. Moreover, VITAS propose State continue to reduce electricity prices and VAT of 20 or 30% for enterprises in localities complying with Directive 16 until the end of 6/2022. In the long term, VITAS propose to promptly issue a strategy on developing the textile industry to solve the inadequacies in VAT payment regulations for enterprises using domestic fabrics for export or for local export textiles. The Law on Trade Union 2012 is also proposed to be amended matching to relevant provisions of the Labor Code 2019 in the direction of reducing level of trade union dues from 2% to the maximum of 1%. Along with that, regulations on the payment rate of social and unemployment insurance is suggested to be revised in order to avoid a too high rate that is beyond the actual balance of the enterprise and its employees.

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