Industrial plants in Southeast Asia affected by vaccination problems, Delta

A worker inspects newly made gloves at the Top Glove factory in Shah Alam, Malaysia, August 26, 2020. REUTERS / Lim Huey Teng / File Photo

BANGKOK / KUALA LUMPUR, Aug.4 (Reuters) – New outbreaks of the Delta coronavirus variant in Southeast Asia have crippled its industrial sector, disrupting the global supply of products such as rubber gloves, semiconductors and SUVs and threatening the region’s $ 3 trillion recovery.

A series of factory surveys this week showed that business activity in most Southeast Asian economies fell sharply in July, unlike the more resilient manufacturing economies in Northeast Asia and Southeast Asia. the West, where business growth slowed but remained expanding. Read more

The economic disruption in Southeast Asia caused by the virus has been compounded by slow progress in immunization in the region of 600 million people. Governments have struggled to secure doses and imposed costly shutdowns that have left many factories without workers.

Setbacks threaten the growth of one of the most resilient emerging market blocs in the world, which has weathered various global crises over the past decades thanks to broad, solid economic reforms and its proximity to China.

HSBC economists warn that low vaccination rates in Indonesia, Vietnam, the Philippines and Thailand, along with the uncertain effectiveness of their vaccines, are putting their economies at risk.

“This means that the populations of these countries could remain vulnerable not only to the current epidemic, but to any future mutations that may develop,” HSBC said. “Touch-and-go restrictions are likely to continue, weighing on near-term growth prospects.”

For manufacturers in Southeast Asia, who are competitive in large part due to low-cost labor and access to raw materials, the impact of new epidemics on labor supply -work has been a major production bottleneck.

In Thailand, Asia’s fourth-largest auto exporter and production base for major global auto brands, Toyota Motor Corp (7203.T) suspended production at three of its factories in July due to parts shortages caused by the pandemic. Read more

HIGH DEMAND, LOW PRODUCTION

Siam Agro-Food Industry, a Thai exporter of processed fruit, relies heavily on migrant labor and has only been able to fill 400 of the 550 positions, as workers return to their country and are unable to return due to closing borders.

“There are 350 tons of fruit per day, but now we can only take 250 tons due to the lack of manpower to process them,” said Ghanyapad Tantipipatpong, president of Siam Agro-Food Industry.

“There is a strong demand from export markets, like the United States, our main market. The problem now is production.

In Vietnam, home to facilities owned by global companies such as Samsung, Foxconn and Nike, companies in the south of the country have been forced to keep workers in isolation at their production sites overnight.

Industrial production in several southern cities and provinces, where strict movement restrictions were imposed from July, fell sharply, the government’s statistics office said last week.

In Malaysia, which supplies around 67% of the global rubber glove market, lockdown restrictions forced many glove makers to shut down operations in June and July. Read more

Since then, the relaxed restrictions have allowed 60% of the workforce to return after the country’s glove manufacturers’ association pleaded with the government to take over the industry, citing concerns from global buyers. The association is now calling for a full return. Read more

The disruption in Southeast Asia is already causing suffering elsewhere, with German chipmaker Infineon Technologies (IFXGn.DE) expecting a tens of millions of dollars impact from the shutdowns of its Malaysian plant. The slowdown will in turn affect Infineon’s automotive customers. Read more

Daniel Bernbeck, CEO of the Malaysian-German Chamber of Commerce and Industry, said Malaysia’s strict quarantine rules have also made it difficult for high-end manufacturers such as chipmakers to bring expertise to it. necessary technique.

Analysts warn that the risks go beyond the simple blow to production.

Moody’s Investors Service said Asia-Pacific economies with “concentrated economic structures” and weak institutions would be hit hardest.

“These are lower middle income economies, with deep scars that may increase social risks,” Moody’s said. “In some of these economies, the high debt burden limits the fiscal space for governments to withstand the pandemic. “

Reporting by Liz Lee in Kuala Lumpur, Khanh Vu in Hanoi, Orathai Sriring in Bangkok and Gayatri Suroyo in Jakarta; Writing by Sam Holmes; Editing by Raju Gopalakrishnan

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