Factories brace for ‘cold winter’ as Western orders decline

For the last several months, workers at bag manufacturer Virtue King Vietnam have not had overtime because there is no extra work for them after their eight-hour shifts.

“Orders have been plunging by 20-30% year-on-year even though Christmas is coming up,” Nguyen Thanh Can, chairman of the Binh Duong-based company, told VnExpress International.

He said that the strongest declines were seen in Europe and the U.S., while other markets such as Canada, China, Japan and South Korea also lowered their purchases.

A customer who used to order 10,000 units of a product is now buying 7,000, he said.

Footwear maker V.P. in Ho Chi Minh City, an exporter to European countries with a major focus on Spain, said that the company has seen orders fall nearly 30% over last year.

The decline burdens the company with more challenges after it already faced difficulties this August and September in sourcing materials from other countries; and earlier this year, it had faced difficulties in recruiting employees, said deputy CEO Pham Thi Minh Thu.

With less orders, workers have seen their incomes decline and make life more difficult, she added.

Many other factories in Vietnam are in a similar situation as residents of Western nations tighten spending amidst rising inflation.

Vietnam’s exports in September fell by 14.3% over August, the second lowest this year, according to the General Statistics Office.

In the third quarter, 65% of exporters saw new orders decline or stay the same as the second quarter, it added.

Garments, one of Vietnam’s biggest export items, is set to post slower growth for the remainder of this year as demand from American and European buyers fall and retailers there still have high inventories, analysts of Rong Viet Securities said in a note.

The fall of the EUR against the USD might also affect buyers’ sentiment in Europe, they added.

Tran Viet Anh, deputy chairman of the HCMC Union of Business Associations, said that as many European countries go through a “cold winter” with a decline in energy supply, customers are spending less on non-essential items like new footwear and clothes, opting instead to use what they already own. This will bring down Vietnam’s exports, he said.

However, factories are striving to take good care of their workers in preparation for an eventual recovery.

Can of Virtue King Vietnam said that the company will ensure employees receive their annual Tet bonus this year. The Tet bonus is a usually paid every year to employees as they prepare to celebrate the new Lunar New Year, the most important festival in Vietnam.

But the bonus might be split in two parts, with the first 70% being given before the holiday and the remainder after, Can said.

At V.P., workers will get their entire bonus, Thu said, adding that she will continue to look for new clients to increase orders.

Prime Minister Pham Minh Chinh said earlier this month that amid the strengthening of the U.S. dollar, Vietnam needs to increase its exports by diversifying markets and products.

Government bodies and domestic companies need to cooperate with foreign direct investment firms to help boost exports, he added.