Eight solutions suggested for supply chain disruption in southern key economic zone

The goods supply chain that connects HCM City and provinces in the southern key economic zone plays an important role in the economic development and social stability of the entire region. But it has been disrupted because of Covid-19.

Eight solutions suggested for supply chain disruption in southern key economic zone

Import and export activities have declined because of the lack of orders, attributed to a drop in global demand. The other problems, including interrupted global supply chains, higher shipping costs, longer shipping and goods handling time, lack of customs and storage services, and the lack of both private and public services all have made the situation more serious.

The inter- and intra-regional logistics networks have been disrupted. Businesspeople, direct and indirect workers in the logistics system cannot work because they have not been fully vaccinated. The required high testing frequency has led to increased production costs and the risk of shippers getting infected.

Meanwhile, the inconsistency among cities and provinces in applying anti-pandemic measures has further increased the disruption of the chain and connections in the regional economy.

As a result, goods production of supporting industries and manufacturing of finished products in the southern key economic zone has been seriously affected. Enterprises also are suffering from a labor shortage as workers have not been fully vaccinated.

Associate Prof Tran Tien Khai and Prof Nguyen Trong Hoai from the University of Economics HCM City have suggested eight solutions to the problems.

Short-term solutions

Solution 1: vaccination

Speeding up the vaccination of direct and indirect workers in the entire production system and supply chain of the southern key economic region. Vaccination priority should be given to workers in warehouses, loading/unloading and transport of goods from ports to production and consumption places. Next are businesspeople, workers in supply chains, workers in industrial zones, factories and processing workshops, and the workforce in the trading sector.

Solution 2: Uniform regulations for all localities

Uniform regulations between provinces and cities are needed to avoid creating administrative barriers to the movement of labor and goods within the region.

Solution 3: Restoring labor supply for industrial zones (IZs), factories

Urgently clearing the way for the movement of local human resources to restore the workforce for production and business, including businesspeople and workers in supply chains, factories and processing workshops that make products for domestic consumption and export.

Medium-term solutions 2022-2025

Solution 4: Fiscal policy

Budget money allocated to reinvestments, production and business, especially in labor intensive industries; postponement of scattered and unprofitable investments. Also, it’s necessary to design specific policies to help enterprises restructure debts.

 

Providing preferential loans to people and businesses to help restore production and business activities hit by the pandemic.

Solution 5: Tax remission

Reducing and exempting VAT and Corporate Income Tax on production and business activities in a reasonable way. Reducing and exempting personal income tax on the groups of workers with low taxable-income thresholds to restore demand.

Long-term solutions post-2025 period

Solution 6: Welfare and social security for workers

A fundamental solution is to reasonably reduce the budget contributions of provinces and the whole region to increase investment capacity for socio-economic development and provide for social security for workers.

Ensuring basic living conditions for workers and employees. Improving the quality of workers’ lives with changes to the minimum wage policy applied to the private sector. Gradually raising the minimum wage level to cover the price slippage, and striving to build a reasonable minimum income threshold.

Cities/provinces need to propose to the Government minimum wage thresholds suited to local price levels and living standards. It’s necessary to give up the view of competing with a cheap labor force to attract FDI.

Solution 7: Multipolar development of industrial belt through improvement of local transport infrastructure

Multipolar development for industrial production is necessary. The improvement of intra-regional connection capability and the establishment of a foundation for the expansion and scattering of IZs will be implemented on the basis of investments to upgrade transport infrastructure.

This will reduce the concentration density of workers, ease pressure on technical and social infrastructure in IZs in some cities and provinces, thus facilitating workers to move to other cities and provinces. The solution will help develop local economies and reduce social costs of the entire region.

Solution 8: Investments in research and development (R&D) and technology renovation

It’s necessary to increase modern technology content and proportion of highly qualified workers in factories to increase productivity, improving workers’ lives. 

Tran Tien Khai - Nguyen Trong Hoai (University of Economics - HCM City)

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