Possibly unfamiliar by many before the outbreak of COVID-19, Vietnam being a small country just south of coastal China with a population size of 97 million has now earned its stripes as a winner against the invisible enemy that is causing a turmoil in the world. Just as how it managed to keep the SARS outbreak under control back in year 2003, the country once again has been praised by the World Health Organization (WHO) on the efficiency of its response measures in fighting the deadly virus. As of 14th April 2020, Vietnam has kept the total number of cases at only 266 with a fatality rate of zero.
Following the footsteps of countries like Philippines and Malaysia, the Prime Minister of Vietnam has mandated a strict social distancing throughout the country for 22 days. Restriction of such in multiple countries undeniably will leave a long-lasting impact on the prospects of the country.
While most industries are adversely impacted by the pandemic, it is apparent that the big winners are businesses that revolve around E-commerce, particularly those fulfilling the basic necessities of people, for instance food retail, food service and delivery businesses. A change in consumer behaviour can be observed when the switch to online grocery shopping from the typical wet markets or traditional retail stores is happening at an accelerated rate – 57% of Vietnamese consumers has proclaimed the switch to online shopping according to a March survey by Ipsos MORI. Apart from that, E-wallet services are also starting to gain momentum in this cash-based country following the advice of State Bank of Vietnam (SBV) to limit cash usage, in order to reduce the risk of infection.
This shift from offline to online could be expected to stay even after the virus subsides. The reason is simple and straightforward – the number of phone subscribers have reached 129.5 million, and more than half of the country has access to internet. While the state of digital economy in the country poses a low-hanging fruit, the current pandemic acts as a trigger to push for higher adoption. Consumers having a taste of making purchases online during the period of strict social distancing are likely to value the convenience they could enjoy, forming a new habit of filling the carts with clicks. The growth in the E-commerce sector would in turn flourish the E-wallet sector, as this would be the only digital payment option for the unbanked population, which constitutes about 37% of Vietnamese adults.
Looking at the macroeconomic level, Vietnam is a rising star as a manufacturing hub in Asia due to its low labour costs, attractive tax regime, geographical advantages and open trade policies. Even before the virus outbreak, many Vietnamese manufacturers have skillfully integrated themselves into the supply chain of Chinese firms that are relocating due to rising wages at home, particularly in industries which China wants to exit, in order to focus on higher-end products.
The supply chain disruptions caused by the pandemic have hit the world hard, noticing the over-reliance on China for production. Businesses could be expected to consider diversifying and relocating their supply chains out of China as they learn the importance of not to put all eggs in the same basket. This could eventually result in a shift in the global supply chains and investments. As such, Vietnam undoubtedly would be a big beneficiary, winning over foreign direct investments (FDI) in the foreseeable future. The accelerated movement of production facilities from China to Vietnam during the breakout of US-China trade war would serve as great precedence.
Apart from the above, there are also other notable impacts or trends that are likely to remain after the situation returns to normalcy, for example remote working, remote healthcare, digital community and others. Having these online practices transitioned into a new norm would help Vietnam in upping the game of digitalization, while a surge in FDI for manufacturing would also boost the GDP growth of the country. All in all, despite the temporary damage to its economy, Vietnam will soon be back on the rise, moving a step nearer to the other more developed countries.