Electronics producers in Vietnam see trouble, opportunity amid economic woes

By Ames Gross

Following the Vietnamese Tet (Lunar New Year) festival in early 2009, the demand for electronics in Vietnam has dropped steeply, signifying what is likely to be a rough year for electronics producers both domestically and abroad. In the first two months of 2009, Vietnamese total exports fell more than 5% from 2008 while electronics exports dropped by more than 13%.

While it is normal in Vietnam for demand for electronics to fall after Tet, industry insiders foresee the trend continuing deeper into 2009 than usual. Others worry that supply will greatly exceed demand this year as a result of newly instituted WTO import tax cuts that came into affect in January.

Domestically, many electronics producers have turned to promotional programs to attract customers.

In addition to discounts, Sony and Nguyen Kim Electronics have even begun to give out free shirts and movie tickets to customers.

The need to encourage consumers to spend is not surprising.

An estimated 500,000 Vietnamese workers lost their jobs last year, and the government expects that at least 400,000 more will be laid off in 2009. When workers are laid off, most return to the countryside to live with their families, who are often no longer receiving remittances from other family members who have also lost jobs in urban areas.

With the Vietnamese workforce growing by almost one million workers each year, the economic downturn could not have come at a worse time.

However, where many officials project great losses for 2009, some employers are continuing to hire workers. The government has also used the economic downtown to emphasize the need for strike prevention and increased worker training.

Some hiring despite economy

Indeed, some electronics manufacturers are planning to hire more workers in 2009. Most hires will occur in the Industrial Parks (IP) and Export Processing Zones (EPZ) of Ho Chi Minh City, where the electronics components industries are located alongside textile, packing and shoe factories. (See, also: Venture Outsource interview with president of Saigon High Tech Park)

Although export demand is down, many companies are still receiving orders for goods, but they do not have enough workers to meet the demand. As such, some are planning to offer increased salaries and entertainment activities to attract workers. Others have loosened job requirements to attract new workers to the industry. For example, some companies have increased the age limit for workers to 36, no longer requiring them to be between 18 and 25 years of age.

Legal revisions to prevent worker strikes

Although some industries in Ho Chi Minh City are hiring workers, elsewhere in Vietnam companies are facing increased worker tension as layoffs increase. National Assembly deputies and local businesses are trying to reformulate provisions of the Labor Law to prevent authorities from having to intervene in labor disputes. Instead, they hope to establish a mediatory group between workers and employees to prevent strikes from occurring.

Disagreements about worker payment and salary scales are the primary motivations behind employee strikes that have occurred over the past year.

In Ho Chi Minh City, 95 strikes occurred in 2008, an increase from 65 in 2007. Over 56,000 workers took part in 94 strikes in Binh Duong.

Because all labor union representatives are workers, the effectiveness of unions in mediation is limited. Workers are often afraid of confronting bosses out of fear of being fired. In turn, changes to the law will likely lead to more worker disputes even if they succeed in reducing the number of strikes.

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