COVID-19: A view from Vietnam

New Zealander Warrick Cleine has been based in Vietnam since 1998 and is currently KPMG’s Chief Executive in Ho Chi Minh City. KPMG is now the largest professional services organisation in the country, with 28 partners and over 1,000 employees.

Warrick is also Chairman of the New Zealand Chamber of Commerce in Vietnam, and was one of nearly 100 Asia-based businesspeople who responded to an Asia New Zealand Foundation survey, gauging business sentiment and behavior across the region during the COVID-19 pandemic. He spoke to Graeme Acton about how Vietnam has tamed the virus and the economic way forward for the country.  

The thing that struck me in the survey was the degree of business optimism in parts of Asia at the moment – what are you seeing?

Definitely some optimism. I had a meeting yesterday with some big clients , and they were all talking about how COVID has allowed them to fast-track things that  would have taken years to get through otherwise .

The forces of conservatism that exist within some corporates has been swept aside with an attitude of “look – we just have to do this”.

In terms of adoption of new tech, development of new products, moving away from things that aren’t really working. In a place like Vietnam, some of the laws in place have been suspended, allowing you to do things business-wise that were really hard before. Many companies are taking advantage of that.

In terms of the optimism – I also feel quite optimistic but I have SKY-TV UK news here and the UK right now looks awful. If you watch that stuff all day you do feel the sky is falling.

Here it’s a a different perspective, and we’re busy here at KPMG, clients are on the phone, things are moving.

Warrick Cleine, KPMG Vietnam CEO / photo KPMG

I went through the SARS epidemic here in Vietnam, a terrible situation, but once it was done and over, it developed into a bit of a golden age immediately afterwards.

Also with the GFC economies like this, robust dynamic economies, in a way the GFC fuelled globalisation and manufacturing in countries like this, as consumers want cheaper goods, countries like this have the ability to meet that market, and producers are looking for the margins that can be gained here.

I was reading Winston Peter’s comments this morning, about the end of globalisation and so on. It's going to be different, and supply chains are going to be looked at, but a lot of that stuff is overstated. Winston’s gotta wake up to that, if he really wants an end to globalisation. I mean countries like this could start making their own milk powder.

How disrupted has Vietnam been by COVID-19? It seems to have dealt with the virus remarkably well.

Very disrupted for sure, but in different ways to New Zealand and other nations.

The disruption hasn’t come in the working world – factories stayed open, my company stayed open - disruption here has been around the travel and transport space, people in and out, and around the economic outlook.

You’ve had to change your setting from a high growth to a low growth world, a big change for the business world - change in demand, delayed projects, all of those things. January we were looking forward to a boom, February that was gone.  

Vietnam is being lauded as a success story against the disease – how did they do it?

They saw it coming, they had dealt with SARS and other viruses coming out of China and they moved early, months before nations in the west had realised what was happening.

I think the other thing is that with Vietnam’s communist government, they are very good at some things - propaganda, their ability to educate the public and so on.

All the huge propaganda billboards became anti-COVID back in January, praising the nurses and doctors, pushing social distancing. The public bought into the social distancing policy straight away, they got right behind the government. 

Anti-COVID health warning billboard in Hanoi. Photo: VNA

Testing here has also been massive. There have been up to 70,000 people here quarantined in army camps, no mucking around. The government has been ruthless on tracking and tracing people.

From a personal point of view, right from the start the issue was not so much catching the virus, but being in a group of people which may have had exposure to a carrier – in which case you and your family would be taken away to quarantine. There would be soldiers at your door, and no questions asked.

So they were smart - I think Vietnam was one of the first to shut the border with China and at the time everyone though 'oh yeah, any excuse to shut the border with China'. But I think perhaps they had been given some official word , I’m not sure.

Nobody’s questioned the lockdown, it’s really loose, but generally people are inside and keeping socially distanced. It's not like its being enforced by the police on the streets.

As far as doing business in Vietnam – is the government supporting the business community?

No, there is very little support from the government, they don’t have the fiscal headroom to do what New Zealand or the UK or whoever have done, that ability to pay people’s wages, so there have been specific poverty relief schemes, mostly getting food to people.

What they’ve done is put subtle pressure on companies to support their employees if they can. The counter to that is that the government is making clear that health comes before economy, and they have been clear they expect the factories to keep running, and now they are over the worst of it the message is very much “get your business open”, because they don’t want that social unrest that may come from no incomes, and they just can’t afford to subsidise workers.

Is Vietnam experiencing any sort of boom with business being diverted from China to an apparently “safer” country?

Yes, but this has been the story of Vietnam in the years while Trump has been President - manufacturing coming into Vietnam from China. He’s done a great deal to “Make Vietnam Great Again". That was the campaign of his wasn’t it? 

It’s too soon to say that it is going to accelerate hugely, but companies are looking at shifting capacity to Vietnam, and we are seeing that there is extreme worry about political risk in China now, and hostility towards to China, and that’s accelerating the geo-political conversation with some companies.

So, with Japan for example you are seeing the government spending billions to help companies shift their supply chains out of China.

And they will come here because Vietnam is in the CPTPP with Japan and others, and all the issues around cost reduction and so on.

Also, Vietnam has a great raft of trading agreements with the EU and others, so that’s going to be a big story in the next few years. The IMF is expecting a big kick in growth in Vietnam next year for example.

Is that Japanese investment in electronics, or the auto sector or...?

It's largely electronics yes, food chain tech-type things from the big Japanese corporations, things like robots, more on the industrial side of electronics, aircraft parts, products like that.

As far as New Zealand products coming into Vietnam at the moment , what are you seeing?

Well, I went to the supermarket the other day and it’s good to see NZ dairy products in there. It's primarily food but also timber and so on.

I think the NZ supply chain for companies like Fonterra is OK, their products are in the market.

Some of the service sector has been impacted, the education providers have it tough - but not so much on the goods.

What’s the biggest barrier to New Zealand exporters in Vietnam. Is it transport?

Transport in the short term for sure, but I think the work the New Zealand government has been doing with Singapore around shipping and so on is probably most important for access anyway.

I think the logistics are disrupted, the flights, issues around quarantine for crews and so on, but I think the bigger issue going forward is the export readiness in NZ companies, the old bugbear, and that’s just about companies not have good strategies around accessing markets like this one.

The second issue is going to be the tourism and travel. If New Zealand remains isolated then it becomes harder to get here from there, but if the rest of the world is coming in and Kiwis are not, that could be a big issue around establishing new relationships and new markets.

This is where the likes of the Asia New Zealand Foundation are going to be super-important to leverage into, in order to make up for that deficiency.

Thirdly the possibility of a recession – I think New Zealand has to be wary that the world is going to be impacted differently. If you believe in the mantra that “ if you get the health story right will lead to the best economic outcome”, then most of Asia is going to come out of this fairly OK compared to the US and EU, UK etc, so as an export market, that focus by New Zealand on economies that have not been impacted badly is going to be pretty important.

What is the “old bugbear” issue you mentioned? What is it that some New Zealand companies don’t get about access to Asia?

Too many Kiwi exporters are frankly delusional about their product, and why people would want to buy it.

Exporters will come in with a product they will freely admit is not as good as a European alternative, but costs more than that alternative, and yet they still think people will buy it.

The competitive advantage has to be more than that it’s from New Zealand, when that may not actually relate to people’s buying decisions.

I mean, poorly explained, poorly thought through, vague assumptions that people will buy it because we are “clean and green”. Sometimes that works, but quite often it doesn’t.

There are now loads of places that can tell the “clean-green” story. I have been a critic of the “she’ll be right” attitude to export, which says 'we don’t need to understand the competition or the market', and that attitude is a genuine disadvantage.

Do you see that changing with younger people getting involved?

Yes, there are some green shoots in some spaces, where younger people coming through with a more internationalist view. The most successful companies outside the big ones just have a really good product and they have done the research.

You’ve been involved in the Asia New Zealand Foundation’s business internship programme in your current role as head of KPMG in Vietnam – what’s your feeling on the value that the programme brings?

It's very valuable, but it's hard right now to measure that - I mean you have to go back to the Colombo Plan in the 1960’s, things like that when Asians were coming to New Zealand to study. The benefit of those things is even stronger now. If we have the PM or whoever coming through here, we are knocking on the door of those people, who are now in senior positions here and elsewhere in Asia. That’s the benefit.

And I think it’s going to be the case with those Asia New Zealand Foundation internships, it might be a decade from now when that benefit comes back, but it’s a benefit that will be very enduring.

This firm, KPMG, it’s full of 23-year-old Vietnamese who’ve developed relationships with young Kiwis, and those Kiwis who’ve been involved with the internship programme here have a great insight on Asia and doing business here. We were running one of the first internship programmes, and they are worth celebrating.

How do you see Vietnam in five years?

It's steadily moving forward but the income per capita is still low and there is a way to go, but Vietnam sees its own destiny and way forward from where it is now.

It's determined to avoid the mistakes of other Asian nations, and I feel optimistic that they will get there given their drive to do so, and the ability of the government to set the direction.

Bronze statue of Vietnamese President Ho Chi Minh, in the city that bears his name. Photo: 123rf

The Vietnamese government right now probably has the most legitimacy it’s had in years, and that’s given it the courage to move forward.

I think the country will come back stronger after COVID, they’ll be an important market for New Zealand, and until 2040 or so they are in that golden demographic where they have two people working for every person not working, and that’s a great position to be in. 

- Asia Media Centre