Vietnam gasps for air as Delta deals a lethal blow

This time last year, Vietnam was a Covid-19 world-beater, so much so that it donated face masks and other personal protective equipment (PPE) to advanced Western nations hard-hit by the pandemic.  Vietnam recorded just 1,500 infections and 35 deaths for the whole of 2020, a remarkable feat for a nation of over 90 million and a testament to its early and stringent containment measures next door to the disease’s initial epicenter in China. At the same time, Vietnam was also one of the few Asian countries that saw positive economic growth last year, powered by industrial exports that underscored the country’s increasingly prominent position in global supply chains.  But that all changed in July this year as the country shifted from Covid success story to cautionary tale due to a surge in cases caused mostly by the highly contagious Delta variant. Much of Ho Chi Minh City, the southern economic hub, has been closed for months with residents only allowed to leave their homes for special reasons. Hanoi, the capital, is also under lockdown.  Business activity across the country has ground to a halt, with workers unable to commute and business and factory owners forced to conduct regular testing of their staff.  As of September 6, Vietnam had recorded more than 530,000 infections, 13,385 deaths and the daily infection rate continues to climb.  By late August, Nikkei Asia ranked Vietnam joint last, in 120th place tied with Thailand, on its Covid-19 Recovery Index.  Much of this has been exacerbated by Vietnam’s low vaccination rate, with just 18% of the population having so far received one jab and just 2.8% fully vaccinated – one of the lowest rates in Asia.  Residents wait to provide swab samples for Covid-19 testing along a street in Hanoi on August 18, 2021, amidst a government-imposed lockdown to stop the spread of the coronavirus. Photo: AFP / Nhac Nguyen Commentators are divided on who’s chiefly to blame. Some have claimed it was the government, which was slow to procure vaccines in early 2021 due to its previous success in containing the pandemic.  Others assert it has been a combination of nationalistic resistance to accept Chinese-made vaccines and the government’s desire to develop its own locally-made vaccines.  While acknowledging certain mistakes, the Vietnamese government has sought to blame the latest spike on events beyond its control. “The Delta variant is destroying all anti-pandemic achievements,” Vietnam’s health minister, Nguyen Thanh Long, said according to local reports.  As health conditions deteriorate, Vietnamese officials are going back to the Covid-containing drawing board.  Earlier this month, authorities in Ho Chi Minh City, the current epicenter of the country’s pandemic battle, considered reopening certain parts of the city from September 15, as part of a transition from a “zero tolerance” to a “living with Covid” strategy. There is growing pressure to strike a new balance. Doom and gloom claims are making the rounds that major international investors from Samsung to Nike may walk away from the country if Covid isn’t quickly brought under control.  That would hit Vietnam’s recently earned reputation as a trusted factory of the world after many major global brands recently shifted their supply chains and factories out of China and into Vietnam.   Investor flight fears may be overwrought, for now, but economic slippage caused by Covid is a rising risk.   Fitch Ratings reported in late August that the latest wave “poses significant risks” to its earlier forecast of 6% gross domestic product (GDP) growth in 2021, although it is still probable that the economy will grow and not contract this year.  A street artist paints a mural depicting Covid-19 frontline workers along a street in Hanoi on June 15, 2021. Photo: AFP / Nhac Nguyen The ratings agency added that if Vietnam’s GDP performance over 2020 and2021 are taken together, then the country is still expected to be the best economic performer in Southeast Asia.   That may explain why the Vietnamese dong is one of the few Southeast Asian currencies that has appreciated against the US dollar this year. The Thai baht has declined some 8% against the greenback after outperforming most Asian currencies in both 2019 and 2020. At some point soon, analysts predict, Vietnam will get its rising infection rate and laggard vaccination campaign under control and in order, even if that means adopting its new policy of living with a bearable number of Covid cases that don’t overwhelm health facilities.  Moreover, what attracted international investors to Vietnam before the pandemic struck in January 2020 have are still present even with the country’s recent poor performance in handling Covid in recent months.  Global interest in decoupling supply chains away from China will be alive and well in 2022, when Vietnam is likely to have recovered from the worst of its current pandemic crisi

Vietnam gasps for air as Delta deals a lethal blow

This time last year, Vietnam was a Covid-19 world-beater, so much so that it donated face masks and other personal protective equipment (PPE) to advanced Western nations hard-hit by the pandemic. 

Vietnam recorded just 1,500 infections and 35 deaths for the whole of 2020, a remarkable feat for a nation of over 90 million and a testament to its early and stringent containment measures next door to the disease’s initial epicenter in China.

At the same time, Vietnam was also one of the few Asian countries that saw positive economic growth last year, powered by industrial exports that underscored the country’s increasingly prominent position in global supply chains. 

But that all changed in July this year as the country shifted from Covid success story to cautionary tale due to a surge in cases caused mostly by the highly contagious Delta variant.

Much of Ho Chi Minh City, the southern economic hub, has been closed for months with residents only allowed to leave their homes for special reasons. Hanoi, the capital, is also under lockdown. 

Business activity across the country has ground to a halt, with workers unable to commute and business and factory owners forced to conduct regular testing of their staff. 

As of September 6, Vietnam had recorded more than 530,000 infections, 13,385 deaths and the daily infection rate continues to climb.  By late August, Nikkei Asia ranked Vietnam joint last, in 120th place tied with Thailand, on its Covid-19 Recovery Index. 

Much of this has been exacerbated by Vietnam’s low vaccination rate, with just 18% of the population having so far received one jab and just 2.8% fully vaccinated – one of the lowest rates in Asia. 

Residents wait to provide swab samples for Covid-19 testing along a street in Hanoi on August 18, 2021, amidst a government-imposed lockdown to stop the spread of the coronavirus. Photo: AFP / Nhac Nguyen

Commentators are divided on who’s chiefly to blame. Some have claimed it was the government, which was slow to procure vaccines in early 2021 due to its previous success in containing the pandemic. 

Others assert it has been a combination of nationalistic resistance to accept Chinese-made vaccines and the government’s desire to develop its own locally-made vaccines. 

While acknowledging certain mistakes, the Vietnamese government has sought to blame the latest spike on events beyond its control. “The Delta variant is destroying all anti-pandemic achievements,” Vietnam’s health minister, Nguyen Thanh Long, said according to local reports. 

As health conditions deteriorate, Vietnamese officials are going back to the Covid-containing drawing board. 

Earlier this month, authorities in Ho Chi Minh City, the current epicenter of the country’s pandemic battle, considered reopening certain parts of the city from September 15, as part of a transition from a “zero tolerance” to a “living with Covid” strategy.

There is growing pressure to strike a new balance. Doom and gloom claims are making the rounds that major international investors from Samsung to Nike may walk away from the country if Covid isn’t quickly brought under control. 

That would hit Vietnam’s recently earned reputation as a trusted factory of the world after many major global brands recently shifted their supply chains and factories out of China and into Vietnam.  

Investor flight fears may be overwrought, for now, but economic slippage caused by Covid is a rising risk.  

Fitch Ratings reported in late August that the latest wave “poses significant risks” to its earlier forecast of 6% gross domestic product (GDP) growth in 2021, although it is still probable that the economy will grow and not contract this year. 

A street artist paints a mural depicting Covid-19 frontline workers along a street in Hanoi on June 15, 2021. Photo: AFP / Nhac Nguyen

The ratings agency added that if Vietnam’s GDP performance over 2020 and2021 are taken together, then the country is still expected to be the best economic performer in Southeast Asia.  

That may explain why the Vietnamese dong is one of the few Southeast Asian currencies that has appreciated against the US dollar this year. The Thai baht has declined some 8% against the greenback after outperforming most Asian currencies in both 2019 and 2020.

At some point soon, analysts predict, Vietnam will get its rising infection rate and laggard vaccination campaign under control and in order, even if that means adopting its new policy of living with a bearable number of Covid cases that don’t overwhelm health facilities. 

Moreover, what attracted international investors to Vietnam before the pandemic struck in January 2020 have are still present even with the country’s recent poor performance in handling Covid in recent months. 

Global interest in decoupling supply chains away from China will be alive and well in 2022, when Vietnam is likely to have recovered from the worst of its current pandemic crisis. 

Vietnam remains one of Asia’s most open countries for free trade, with tariffs imposed on European Union (EU), US and other partners’ goods set to decline significantly in coming years under new trade pacts. 

Under the Donald Trump administration, Vietnam faced the possibility of punitive tariffs in response to Washington’s fixation on its large trade surplus. In 2020, the US Treasury also labeled Vietnam a currency manipulator, a designation that threatened trade reprisals. 

But these Trump-era disputes have been put to bed under US President Joe Biden, with the two sides reaching an agreement that resulted in no penalties for Hanoi earlier this year. 

Debate is lively and ongoing about how the Covid surge has dented the ruling Communist Party’s legitimacy, always tough to measure in a country without a free press.

The party appeared buoyant throughout 2020 as it successfully brought the nation together against the virus in a spirit of defiance and unity. 

Dissent against the party’s authoritarianism has grown over the past decade, including over social media, yet many commentators agreed Hanoi’s uncharacteristic transparency and competence in dealing with the pandemic last year built new trust among the populace. 

It is probably only coincidence that the worst of the pandemic struck soon after a quinquennial change of administration at the Communist Party’s national congress in January. 

On the occasion, the technocrat Nguyen Xuan Phuc was moved to the ceremonial position of state president, while the relatively inexperienced Pham Minh Chinh succeeded him as prime minister.  

Vietnam’s newly elected Prime Minister Pham Minh Chinh (R) presenting a flower bouquet to President Nguyen Xuan Phuc (L) during the National Assembly’s spring session in Hanoi, APRIL 5, 2021. Photo: AFP / Vietnam News Agency / Stringer

Whatever the party’s political troubles at home, Vietnam’s current Covid plight has sparked an outpouring of support and charity from key international partners, an indication that the country’s global reputation has been bolstered, not weakened, by its current woes. 

Half a dozen European states including the UK, Germany, Italy and Poland have individually donated hundreds of thousands of Covid-19 vaccines in recent weeks.

European countries donated at least 1.5 million vaccines to Vietnam in August alone. On September 3, Germany pledged to donate an additional 2.5 million AstraZeneca vaccines to Vietnam. 

The United States, which now counts Vietnam as a key ally in Asia, had provided at least six million vaccines to the country as of late August, while it received one of the first tranches of US-donated vaccines back in July. 

Japan and Australia have also donated vaccines to Vietnam, which is also one of the larger recipients of doses provided through the COVAX facility, of which US and European states are the majority funders. 

After India provided Vietnam with oxygen canisters on September 1, the country’s ambassador to New Delhi, Pham Sanh Chau, said: “We will never forget this. A friend in need is a friend indeed.”

On one hand, many countries are repaying the charity that Vietnam showed them in 2020, when the pandemic was controlled in Vietnam but raged elsewhere. 

In early 2020, when Europe was the epicenter of the pandemic, Vietnam gifted half a million face masks to several European states and 250,000 to the US. In April last year, it donated $100,000 worth of face masks and other medical supplies to Japan.

Vietnamese friendship associations and local diaspora groups – some of which are controlled by the Vietnamese Communist Party – also played key roles across Europe and North America in raising money for relief efforts.

On the other hand, foreign partners and investors have a self-interest in getting Vietnam on a quick path to recovery due to its growing importance in global supply chains.

Vietnam is now the US’ 13th largest goods trading partner and EU’s 15th largest.

For many Western countries, Vietnam is a strategic location to bolster their own “vaccine diplomacy” in the developing world amid rising criticism of rich world hoarding of vaccines.  

US Vice President Kamala Harris visits the National Institute of Hygiene and Epidemiology (NIHE) where 270,000 doses of Pfizer vaccine arrived earlier in the morning, in Hanoi, Vietnam, August 26, 2021. Photo: AFP / Evelyn Hockstein

Up until July, the Vietnamese government refused to accept vaccine donations from Beijing because of pervasive anti-China sentiment in the country, which officials in Hanoi feared would lead to broad vaccine skepticism.

Although Vietnam has now taken delivery of some vaccines from China, the bulk of its current stock consists of Western-made doses. 

Cambodia, which now boasts one of the world’s best vaccination rates, has depended largely on Chinese-made vaccines. So, too, have other Southeast Asian states like Indonesia. 

Turning health crisis into diplomatic opportunity, Hanoi looks set to use the goodwill shown by international partners to strengthen alliances. 

National Assembly chairman Vuong Dinh Hue is currently touring Europe, the first visit by a Vietnamese politician since the pandemic began.

While there, he aims to win support for the EU-Vietnam Investment Protection Agreement, which still awaits approval by most EU member states and could be delayed due to human rights concerns. 

Still, there are rumors that a senior Vietnamese politician, most likely President Phuc, will visit Washington either this year or next amid speculation the erstwhile battlefield foes could upgrade their ties to a “strategic partnership.”