Foreign business group leaders project massive layoffs in Q1

Several leaders of foreign business groups have predicted the worst in massive layoffs at companies operating in Viet Nam will come in this first quarter because of dwindling orders from overseas and scaled-down business.

Companies have just finished the budget calculations for 2009 and any downsizing decisions that they have taken will start to be implemented in the beginning of the New Year, said Sami Kteily, chairman of the Canadian Chamber of Commerce in Viet Nam (CanCham).

“I believe the first quarter of the year will be the worst,” Kteily answered the Daily’s question about the massive layoff in Vietnam as the global slump deepens.

Alain Cany, chairman of the European Chamber of Commerce in Viet Nam (EuroCham), said he believed the layoff situation would be worst after the Lunar New Year holidays, or Tet, and last until the last quarter.

Sharing the view of massive job cuts is Shimi Sumathi Muthu Kunju, president of the Malaysian Business Chamber (MBC) in Vietnam. “… the worst is yet to come and we are just at the beginning of the downturn,” she warned.

Kunju explained quite a number of the foreign invested companies shipped goods to the United States and other developed markets, but orders from these markets had dried up.

“It doesn’t take a rocket scientist to predict layoffs in such companies. I would say it could be as early as this first quarter,” she said.

Thomas Siebert of the American Chamber of Commerce in Vietnam (AmCham Vietnam) said about two-thirds of U.S. imports from Vietnam were consumer goods which include apparel (42%), footwear (12%), and furniture (11%).

“These categories of goods suffer in the consumer downturn, making it likely that Vietnam’s exports to the U.S. will drop in 2009. This will reduce export earnings, and more importantly, will reduce employment in Vietnam,” said Siebert, who is chairman of AmCham in HCMC.

Siebert furthered consumer spending had dropped sharply in the U.S., down 8% in December last year compared with the same earlier period, and that all sectors were hit.

Siebert said Vietnam’s major export markets were in recession.

“The U.S., which accounts for 26% of Vietnam’s exports, EU, 19% and Japan, 16% are all in recession, which will most likely last until the end of 2009 or mid-2010,” he said.

However, Siebert and other executives of foreign business groups in Vietnam asked by the Daily said they had not heard of any major layoffs among member companies of their business groups.

Local employment officials estimated tens of thousands of workers lost their jobs in 2008, with more than 75% at foreign-invested companies in manufacturing. The Ministry of Labor, War Invalids and Social Welfare put layoffs in 2009 at 150,000, but experts said the real number could be much higher.

European companies have not reported major employment reduction, but Cany of EuroCham said some companies had seen a significant decrease in business orders for 2009 and may have to lay off workers by degrees.

Cany said in more difficult times EuroCham member companies had to reduce costs and expenses. “Layoff is only one cost-cutting measure and probably the one of last resort when you see the downturn of your business to last for a long period.”

As the U.S. is hard hit by the global financial crisis, Siebert said AmCham member companies in Vietnam could reduce employment.

“Most companies would prefer not to lay off workers. But if they have no orders, then they have no income to pay workers,” he said.

Kunju of MBC said lay-off may not be the best solution for some companies but may be the only solution for others. She proposed some situational measures including getting the staff to agree to temporary wage cuts until the situation improves, and that the management should take the first salary cut.

Kteily of CanCham suggested companies work harder to tap new markets and reduce their profit margins to remain competitive and within reach of many customers. “Customers will continue to buy, but they will be more price conscious during this challenging period,” he commented. (SGT)