Vietnam: News analysis

Coronavirus: Vietnam punches above its weight in response, but not out of the woods yet

While it may be too early to count victories in this coronavirus pandemic, Vietnam has probably moved further than its South-east Asian neighbours along this front.

On Thursday, as a two-week long nationwide lockdown lapsed, Hanoi extended stringent restrictions on only 12 "high-risk" cities and provinces out of 63.

Another 16 medium-risk localities had more leeway in opening stores providing non-essential goods and services. The country's total cases of infection: 268.

Analysts largely agree that Vietnam, whose per capita gross domestic product (GDP) is among the lowest in Asean, has punched above its weight in terms of its response to the pandemic.

Vietnam's cautious reinstatement of commercial life will be instructive as governments elsewhere have been forced to weigh the health threat posed by Covid-19 against the economic pain of containing the virus via lockdowns.

"The authorities have exceeded expectations on that front and were quick to close borders and restrict movement in areas of the country where clusters of cases were developing," said Eurasia Group analyst Peter Mumford.

A 12-country poll by Ipsos Business Consulting showed that "Vietnamese people have a general positive sentiment towards... state measures", its country head Phong Quach told The Straits Times. In its March 12-14 survey, well over 80 per cent of Vietnamese respondents expected things to return to normal by June, making them more optimistic than respondents in the US, Italy, France, Russia, Japan and India. But Vietnam tied with China as the biggest worrier over the financial fallout. Sixty-four per cent felt the virus posed a "high" or "very high" threat to their jobs and businesses.

Millions of jobs are at stake in Vietnam, one of the world's largest garment exporters, as fashion companies in Western markets cancel orders or hold up shipments of completed goods.

Unlike Thailand, which is giving out 5,000 baht (S$218) in monthly support for those who have lost their jobs, and Singapore, which has various financial reliefs, including a one-off $600 handout to every adult, Vietnam has considerably less fiscal means to extend long-term bailouts because it consistently runs up budget deficits, say economists.

Earlier this month, Prime Minister Nguyen Xuan Phuc approved a relatively modest 62 trillion dong (S$3.8 billion) bailout package that would, among other things, give employees who had their work contracts suspended 1.8 million dong a month, for up to three months.

But economists say the size of Vietnam's informal economy - estimated at 30 per cent of its GDP - also makes it difficult for aid to reach the hardest hit. Workers in this category include street vendors and waiters in small restaurants.

 AGENCE FRANCE-PRESSE
Vietnamese sewing face masks. Millions of jobs are at stake in Vietnam, one of the world's largest garment exporters, as companies in Western markets cancel orders or hold up shipments of completed goods. PHOTO: AGENCE FRANCE-PRESSE

Dr Pham The Anh, who heads the macroeconomics unit at the National Economics University in Hanoi, said: "They do not have labour contracts and are not classified as people losing their jobs. They do not belong even to what are classified as 'poor' households."

 
 
 

The Vietnamese government, which is "quite sensitive to criticism from the public", faces a dilemma, said Dr Nguyen Duc Thanh, founder and chief adviser of the Vietnam Institute for Economic and Policy Research.

With its daily increase in new infections steadily kept low, Hanoi is in relatively uncharted territory.

It needs to keep the public optimistic enough to shoulder the temporary financial pain, while relaxing lockdown curbs to restore livelihoods and stave off a sudden surge of cases that would reignite public concern, said Dr Thanh.

"The situation needs to be handled very skilfully, given the finances of this government is very limited. So far it has done quite well, but… nobody knows how long this will go on."

 
A version of this article appeared in the print edition of The Straits Times on April 18, 2020, with the headline 'Country punches above its weight in response, but not out of the woods yet'. Print Edition | Subscribe