The Social Impacts of the Global Economic Crisis on Two Craft Villages in Viet Nam: A rapid assessment report | Debt

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For this study, empirical evidence was collected at focus group discussions and in-depth interviews with various social and business groups in three villages in Viet Nam. Four major findings have been extrapolated: migrant workers in these craft villages have borne the main brunt of the global economic crisis
    Oxfam Discussion Paper    The Social Impacts of the Global   Economic Crisis on Two   Craft Villages in Viet Nam    A rapid assessment report   Nguyen Tam Giang, independent consultant   Oxfam GB (Vietnam)   February 2009 For this study, empirical evidence was collected at focus group discussions and in-depth interviews with various social and business groups in three villages in Viet Nam. Four major findings have been extrapolated  : migrant workers in these craft villages have borne the main brunt of the  global economic crisis; many small producers have been able to use savings to survive the first part of the crisis; some producers have been able to diversify to avoid initial impacts of the crisis; and the current  global economic crisis is not the only cause of business decline in the three villages studied.   Oxfam Discussion Papers   Oxfam Discussion Papers are written to contribute to public debate and to invite feedback on development and humanitarian policy issues. They are ‘work in progress’ documents, and do not necessarily constitute final publications or reflect Oxfam policy positions. The views and recommendations expressed are those of the author and not necessarily those of Oxfam. For more information, or to comment on this document, email    A rapid assessment of the social impacts of the economic crisis on two craft villages 1  Box 1: Vietnamese craft villages in crisis?   Vietnam has 2,790 craft villages, 240 of which specialize in traditional crafts, generating 11 million jobs, both regular and casual, including those for the elderly, children, and people with disabilities. According to statistics from 38 cities and provinces, nine craft villages have  become bankrupt, and 124 others are closing down and struggling to maintain their production. In addition, 2166 household producers from the craft villages have declared bankruptcy, and 468 businesses are slowing down their operations. In early 2009, over 50 percent of the workers (less than 30 percent being casual workers and more than 20 percent skilled workers) from the craft villages became unemployed, a total of more than five million workers. The outstanding debts of the craft villages, businesses, cooperatives and household producers in the reported 38 cities and provinces amount to 2,169.064 billion VND with 12.342 billion VND overdue. Many businesses have bad debts. The situation is particularly serious in the craft villages that produce fine-art articles, iron, steel, and paper. (A synthesis from media sources published in mid-February 2009) 1 Main findings This study has dispelled two major myths generated by the Vietnamese media recently. When the foregoing statistics were announced, much of the Vietnamese media generated a misleading impression that most of the craft villagers had become unemployed and fallen in critical production and living conditions; and that the on-going global economic crisis was totally responsible for the difficulties of Vietnamese craft villages. While this may be true elsewhere, it is not really the case in the three craft villages that the research team visited in the middle of February 2009. From empirical evidence collected at focus group discussions and in-depth interviews with various social and business groups, four major findings have been extrapolated: 1.  Migrant workers bore the main brunt of the economic slowdown in these craft villages. The reason is clear: as a result of the traditional Asian values that remain respected and practiced strongly in northern rural Vietnam, village producers follow an implicit rule of employment: family members first, followed by relatives, fellow villagers, and then the rest. In the ‘downsize’ period, this priority hierarchy influences the sequence of unemployment, from ‘the rest’ to the core. In addition, migrant workers usually are less skilled than indigenous workers, who should thus be retained in order to avoid de- skilling and to produce new designs for displays or for exhibition fairs. Therefore, the immediate consequences are recognised most obviously among migrant workers. 2. Both craft villages have experienced a multi-year period of robust growth, especially from their export activities. Thanks to the traditional value of thrift that is quite popular among northern rural people, many businesses and household producers accumulated some savings that become useful for them in avoiding credit-related problems and 1 This component report reflects the findings of a rapid assessment in two well-known craft villages near Hanoi: Bat Trang ceramics/porcelain (comprising the two villages of Bat Trang and Giang Cao) and Ha Thai lacquer, in order to provide information on the social impacts of the financial/economic crisis in the craft sector in Vietnam. 2    helped them survive at least the initial period of the crisis. Because of this, no signs of seriously deteriorating living conditions have been recorded (casual hunger, psychological anxiety, children dropping out of school, or even the sale of assets to buy food). 3. Unlike in Bat Trang and Giang Cao, where households mobilise all resources for ceramic and porcelain production and business, many households in Ha Thai maintain their approach of livelihood diversification with a combination of lacquer work, agriculture, paper-gold making, and others. Therefore, the impacts of the current economic crisis on households in Ha Thai are less obvious than those in Bat Trang and Giang Cao. Also, there exists a different division of labour in the production chain in the three villages, resulting in different livelihood impacts. In Bat Trang and Giang Cao, production is more concentrated within a producer  , while in Ha Thai, the division of labour among different  parts of the production chain is very clear. Ha Thai businesses, therefore, can be more  flexible in adjusting their production scales in difficult times. 4. The on-going  global crisis is not the sole cause of the business decline in the three craft villages. Rather, their decline is caused by multiple problems accumulated over the past few years in these villages. The two biggest blows have been the ‘price storm’ in early 2008 and the current ‘demand shock’. The global economic crisis may be viewed as the last nail in the coffin of a number of businesses and household producers. 2 Background information on the research sites  2.1. Bat Trang and Giang Cao villages 2   Bat Trang Commune has two villages: Bat Trang and Giang Cao, with 11 residential units. The Commune has 1,721 households with a population of 7,528 . In the employment structure, 84 percent of working-age people are directly engaged in fine-art porcelain and ceramics production; 15 percent in trading and services, including the production and supply of clay and enamel, providing services for tourists, and indirectly promoting the craft; and one percent in other services (e.g. hairdressing). Business situation: The Commune has 60 small-sized businesses (with 50 or less workers), and two army enterprises involved in ceramics and porcelain production. It has one joint- stock company for tourism and trade, 3 which is not faring well so currently rents its space to other producers. The Hapro Fair in the middle of Bat Trang village has generated more outlets for its residents. Giang Cao village used to be in a more favourable position as it is located near the main road. Around 80 percent of household producers have shops in which to sell their own products. The number of household producers was reduced from 1,200 in    2004 to 970 in 2007 and to 800 by the end of 2008 . Meanwhile, the total revenues of the  4 Commune were decreased from  226 billion VND in 2007 to 175 billion VND in 2008 . An annual per-capita income is between 8.5 million VND and 10 million VND. Most of the cultivable land will be acquired for the concentrated site of the craft village. Not everybody can afford land in the concentrated industrial site. The remaining 21 ha will be designated for growing sandalwood and mother-of-pearl trees. Production and input supply: Main inputs for ceramics and porcelain production include clay, fuel, moulds, paper packages (or pallets), gas, and petroleum. Among these, enamel and colouring have to be imported from China and Japan respectively. Many others, such as clay, fuel, and paper, can be supplied on credit. Workers for a producer include shapers, repairers, 2 The statistics for this section come from the Chair of Bat Trang Commune People’s Committee. 3 This joint-stock company belongs to the Ministry of Industry and Trade. 4 The actual figures may be higher, as many craft businesses rely heavily on informal transactions.  3    enamel makers, painters, kiln loaders, bakers, coal-people, and driers. As many as 70 percent of the kilns are gas-fired. The box kilns require higher labour costs, while product quality is not high. Some local households are suppliers of inputs for the village producers. Export orientation: Around 70–80 percent of businesses’ revenues chiefly come from exports. Most household producers operate as satellites for businesses. 5 Products are exported to  Japan, Taiwan, South Korea, New Zealand, European Community members, and the USA. A 6 big market share comes from Asian countries, due to cultural similarities. As many as 70 percent of the commune households use broadband Internet services (ADSL). Producers have launched several hundred websites to market their products. All producers have their own email addresses to communicate with their customers from southern provinces and abroad. Customers can order samples or send pictures by e-communication. Online searches for customers account for 10–15 percent of the marketing strategy. Recently, some foreign corporate customers, such as those from Taiwan and South Korea, purchased products directly from production kilns, to reduce intermediary costs. They sell these products to supermarkets or other outlets in their home countries. The gender dimension: In many cases, male workers are believed to be more skilful and so are engaged in sophisticated painting work and earn more money (this is also due to the harmful nature of their work as a consequence of paint odour). Nevertheless, more women, normally aged 18–40, tend to be employed to carry out simple and light tasks that are more suitable for them. Women aged 40 or more do not qualify, as they are seen as being too slow.  2.2. Ha Thai village 7    Ha Thai village has around 780 households with 3,300 people. As many as 85–87 percent of the village households are engaged in lacquer production, while the rest are involved in rice growing, retailing and other services. Business situation : Ha Thai has around 20 companies that have a capital of over five billion VND and employ around 30–50 workers. Sales revenues dropped by 35–40 percent in 2008, as compared with those in 2007. Some producers chiefly provide products, of both average- and high-quality, for domestic consumption. A production and business centre is under construction in order to promote the craft. Boom times : The years of 1995–96 (when lacquer products were marketed widely) and 2000– 2005 were the most successful, when a business might employ up to 50 workers on its shop floor, and an additional 150 to work in their own homes. Home-based employment is common, as workers are able manage their own time better, thus working more effectively, and earning higher incomes.  Production and input supply: Inputs for lacquer production include paint, wooden, bamboo and rattan frames, paper pulp, paper chips, abrasive paper, composite materials, alluvial soil and some additives. Glossy paint is imported from Taiwan, Japan and China, while abrasive paper is imported from Taiwan, Japan and South Korea. Export orientation : Up to 70 percent of the village lacquer products have been exported. The village’s products have been exported to Japan, South Korea, Taiwan, Western Europe, and the USA, with Japanese customers being the most demanding, followed by those from South Korea, who, as some local businesspeople complain, often try to squeeze prices. American customers 5 For instance, Minh Hai Co. one of the biggest businesses in Bat Trang Commune, produces 70 percent of their goods and have the rest made by household producers. The Director explained that for certain types of products, his company cannot obtain quality as high as some household producers can (e.g. enamel), so contract them out. 6 Minh Hai Co. exports 70 percent of its products to Japan and 20 percent to Europe. 7 The statistics from this section come from the Chair of Duyen Thai Commune People’s Committee. 4  
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