The Social Impacts of the Global Economic Crisis on Two Craft Villages in Viet Nam: A rapid...

8/7/2019 The Social Impacts of the Global Economic Crisis on Two Craft Villages in Viet Nam: A rapid assessment report

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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 threevillages in Viet Nam. Four major findings have been extrapolated:migrant workers in these craft villages have borne the main brunt of theglobal economic crisis; many small producers have been able to usesavings to survive the first part of the crisis; some producers have beenable to diversify to avoid initial impacts of the crisis; and the currentglobal economic crisis is not the only cause of business decline in thethree villages studied.

Oxfam Discussion Papers

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A rapid assessment of the social impacts of theeconomic 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 11million jobs, both regular and casual, including those for the elderly, children, and people withdisabilities. According to statistics from 38 cities and provinces, nine craft villages have becomebankrupt, and 124 others are closing down and struggling to maintain their production. Inaddition, 2166 household producers from the craft villages have declared bankruptcy, and 468businesses are slowing down their operations.

In early 2009, over 50 percent of the workers (less than 30 percent being casual workers andmore than 20 percent skilled workers) from the craft villages became unemployed, a total of morethan five million workers.

The outstanding debts of the craft villages, businesses, cooperativesand household producers in

the reported 38 cities and provinces amount to 2,169.064 billion VND with 12.342 billion VNDoverdue. Many businesses have bad debts. The situation is particularly serious in the craftvillages that produce fine-art articles, iron, steel, and paper.

(A synthesis from media sources published in mid-February 2009)

1 Main findingsThis study has dispelled two major myths generated by the Vietnamese media recently.When the foregoing statistics were announced, much of the Vietnamese media generated amisleading 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 wastotally responsible for the difficulties of Vietnamese craft villages. While this may be trueelsewhere, it is not really the case in the three craft villages that the research team visited inthe middle of February 2009.

From empirical evidence collected at focus group discussions and in-depth interviews with varioussocial 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 andpracticed strongly in northern rural Vietnam, village producers follow an implicit rule ofemployment: family members first, followed by relatives, fellow villagers, and then therest. In the downsize period, this priority hierarchy influences the sequence of

unemployment, from the rest to the core. In addition, migrant workers usually are lessskilled 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, theimmediate consequences are recognised most obviously among migrant workers.

2. Both craft villages have experienced a multi-year period of robust growth, especiallyfrom their export activities. Thanks to the traditional value of thrift that is quite popularamong northern rural people, many businesses and household producers accumulatedsome savings that become useful for them in avoiding credit-related problems and

1This 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.

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helped them survive at least the initial period of the crisis. Because of this, no signs ofseriously deteriorating living conditions have been recorded (casual hunger,psychological anxiety, children dropping out of school, or even the sale of assets to buyfood).

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 theirapproach of livelihood diversification with a combination of lacquer work, agriculture,paper-gold making, and others. Therefore, the impacts of the current economic crisis onhouseholds 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 moreconcentrated within a producer, while in Ha Thai, the division of labour among differentparts of the production chain is very clear. Ha Thai businesses, therefore, can be moreflexible 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 craftvillages. Rather, their decline is caused by multiple problems accumulated over the pastfew years in these villages. The two biggest blows have been the price storm in early2008 and the current demand shock. The global economic crisis may be viewed as thelast 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 villages2

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 employmentstructure, 84 percentof working-age people are directly engaged in fine-art porcelain andceramics production; 15 percentin trading and services, including the production and supply

of clay and enamel, providing services for tourists, and indirectly promoting the craft; andone percentin 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 toother producers. The Hapro Fair in the middle of Bat Trang village has generated moreoutlets for its residents. Giang Cao village used to be in a more favourable position as it islocated near the main road. Around 80 percent of household producers have shops in whichto sell their own products. The number of household producers was reduced from 1,200 in2004 to 970 in 2007 and to 800 by the end of 2008. Meanwhile, the total revenues of the

4Commune 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. Noteverybody can afford land in the concentrated industrial site. The remaining 21 ha will bedesignated for growing sandalwood and mother-of-pearl trees.

Production and input supply: Main inputs for ceramics and porcelain production includeclay, fuel, moulds, paper packages (or pallets), gas, and petroleum. Among these, enamel andcolouring 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 Peoples 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.

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enamel makers, painters, kiln loaders, bakers, coal-people, and driers. As many as 70 percentof the kilns are gas-fired. The box kilns require higher labour costs, while product quality isnot high. Some local households are suppliers of inputs for the village producers.

Export orientation: Around 7080 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. A6

big market share comes from Asian countries, due to cultural similarities. As many as 70percent of the commune households use broadband Internet services (ADSL). Producers havelaunched several hundred websites to market their products. All producers have their ownemail addresses to communicate with their customers from southern provinces and abroad.Customers can order samples or send pictures by e-communication. Online searches forcustomers account for 1015 percent of the marketing strategy. Recently, some foreigncorporate customers, such as those from Taiwan and South Korea, purchased productsdirectly from production kilns, to reduce intermediary costs. They sell these products tosupermarkets 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 harmfulnature of their work as a consequence of paint odour). Nevertheless, more women, normallyaged 1840, tend to be employed to carry out simple and light tasks that are more suitable forthem. Women aged 40 or more do not qualify, as they are seen as being too slow.

2.2. Ha Thai village7

Ha Thai village has around 780 households with 3,300 people. As many as 8587 percent ofthe village households are engaged in lacquer production, while the rest are involved in ricegrowing, retailing and other services.

Business situation: Ha Thai has around 20 companies that have a capital of over five billionVND and employ around 3050 workers. Sales revenues dropped by 3540 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 underconstruction in order to promote the craft.

Boom times: The years of 199596 (when lacquer products were marketed widely) and 20002005 were the most successful, when a business might employ up to 50 workers on its shopfloor, and an additional 150 to work in their own homes. Home-based employment iscommon, 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, bambooand rattan frames, paper pulp, paper chips, abrasive paper, composite materials, alluvial soiland some additives. Glossy paint is imported from Taiwan, Japan and China, while abrasivepaper is imported from Taiwan, Japan and South Korea.

Export orientation: Up to 70 percent of the village lacquer products have been exported. Thevillages products have been exported to Japan, South Korea, Taiwan, Western Europe, and theUSA, 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 Peoples Committee.

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are seen as the most tolerable, and have placed many large orders, especially after VietnamsWTO entry. The USA is an important market, as it has many large distributors that sell thevillages lacquer products not only to retailing supermarkets within the USA, but also to 40other countries.

Environmental problems: water sources such as ponds and wells are believed to be polluted

by paint- and oil-produced waste. Water from septic tanks and lacquer work are poured intothe public pond.

3 Trends in orders and production

3.1. Pre-Tet

Production termination: Bat Trang and Giang Cao villages used to have a total of 1,000household producers with their own shops. However, the figure dropped to more than 600

by September 2008.8

The remainder shifted to other types of employment. Many peoplebelieve that if the crisis lingers on through 2009, more producers will follow. Householdswith stronger financial capacity may shift to gas-fired kilns, possibly using loans from banksor the Environment Fund (if the Funds requirements become more relaxed). In Ha Thai,around 10 household producers closed down their workshops in the last quarter of 2008.

Relative slow sales and difficult tax collection: Normally, the several weeks before Tet are agood time for business. However, many producers share the view that their recent pre-Tet

sales declined remarkably as compared with the same periods in previous years.9

The 20days before the recent Tet was considered the only chance over 12 months when localproducers could sell a relatively large amount of their products. Even so, many producersstill have many products in stock as a result of slow sales. Tax collection also encountersdifficulties, given the sales crisis.

In Ha Thai, sales and revenues in late 2008 and early 2009 reportedly declined by 3040

percent.

10

In the previous years, producers had many substantial orders for Christmaspresents (usually in November and December) and had to work hard until the (lunar) New

Years Eve.11

Despite the general downward trend of orders, there appears to be a sharperdecline in orders for exports and lower-quality products for domestic consumption. Severalproducers of high-quality products for domestic consumption (paintings) say they have notbeen affected significantly and still anticipate high demands. Furthermore, those whoproduce paintings for celebrations of long-lived people earned well in 2008.

Rescheduled delivery: Five businesses in Bat Trang Commune had their contracts

rescheduled.12

For Minh Hai Co., orders used to be placed 10 days before delivery, and arenow placed 15 or more days before delivery, as corporate customers need to study theirmarket demands (of supermarkets, retailers, etc.) more carefully. In Ha Thai village,distributors become more uncertain about demand. Normally, products should be delivered1.5 or two months after contracts are signed, but in recent months, delivery has commonlybeen made three or four months after contract-signing.

8 According to some senior members of the craft guild in Bat Trang.

9The Director of Minh Hai Co. said that its sales turnover decreased by around 30 percent.

10 According to the group discussion with village officials.

11One of the biggest companies in the village disclosed that it barely received any orders from foreign

customers at the end of last year (only a small order worth 4050 million VND from France).12 Contracts are signed with businesses, not households who work as satellite producers.

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ed,

Partial contract cancellation: In Ha Thai, an estimated 15 percent of the contracts were

partially cancelled in the last few months of 2008, with no specific reasons provid13

although it had never happened before. Consequently, some producers keep a substantialamount of finished products in stock. When orders are cancelled, it is hard to sell productswith designs ordered by foreign customers. However, no order cancellation is reported in thecase of Bat Trang and Giang Cao, despite fewer orders.

3.2. Post-Tet

No new orders: In Bat Trang and Giang Cao, orders are placed on a monthly basis. Since Tet,many businesses have not received new orders. In Ha Thai, orders have reportedly beenreduced from all importing countries. Customers have asked local producers to wait and see.Some foreign customers reported that they have sold only 40 percent of the products in stock.Domestic demand is reportedly also on the decline.

Only small customers: In Ha Thai, there remain only a few small buyers (known asbackpacker tourists, who visit the village and come up with the idea to trade some products toearn a small profit). They become life-savers for some businesses in the crisis, as they buyseveral millions VND worth of goods in stock. Meanwhile, local officials and residentsbelieve that there are fewer tourists to Bat Trang as compared with the same period inprevious years, although there are no available statistics on this trend.

No contracts from fairs: In Ha Thai, local producers usually pin high hopes on contractssigned after international fairs abroad. However, there were no visitors to their lacquerexhibition in Germany in late February 2009. The best hope is another fair in Thailand inearly March 2009. If no contracts are signed after this fair, it is certain that 2009 will have beena gloomy year for Ha Thais business.

3.3. Multiple domestic difficulties before the global crisis

Bat Trang and Giang Cao: Since March or April 2008, customers have stopped purchasing,and some cancelled their orders. Some take their ordered products but reschedule new orders

as a consequence of slow sales. Some businesses, such as Hop Luc and Song Cuong,14 werefailing even before the current global crisis, due to their failure to overcome the multipleaccumulated challenges listed in the table below. As a result of the pre-crisis at home and theglobal crisis, Hop Lucs monthly sales dropped substantially from three or four containersper month (from early 2008) to only one or even no containers. The number of its employeeshas decreased from the previous 100 to only seven at the time of the research.

Ha Thai: Since May 2008, businesses have received increasingly fewer orders, and lost somecommitted customers as a consequence of slow sales. Major foreign distributors (chieflybased in the USA) have reduced amounts of their orders.

13 Customers only say that they cannot sell well, without complaining about high prices; some require

certain changes of product designs.

14 Hop Luc is the only cooperative that has survived since the central planning economy. In 2008,

the cooperative could export only five containers to Taiwan. The last shipment was made in December

2008, and it has not received any further orders since. Other cooperatives, such as Song Cuong, have to

stop their production as a consequence of the lack of orders.

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Some customers placed new orders but at squeezed prices, which leaves nomargin profits for producers, given soaring input prices.

Therefore, many prodonly, without earning years ago, to maintaiwait for growth recoveworkers immediately.

Limited businesscapacity

Local producers struggle on their own in production and business toaccommodate themselves to the market, without formal assistance fororientation or strategies;

Some households cannot do their business well due to limited capacity.

Businesses and housbigger businesses affsubstantial impacts o

Most businesses and as:

o They opfacilities

o Many pr(around

o Lack of

o Lack of snegotia

o Limited

o Lack of

o Lack of

18

In Bat Trang commune, some household producers say that they have slightly raised their selling prices for some products, by acatch up with the prevailing input price hikes.

19 In Ha Thai, only a couple of companies, viz Thanh Ninh and Thanh Son, can conduct direct transactions with foreign customers

village and like some products but then involve a professional trading company in Hanoi as an intermediary. Many local producers

have earned more contracts for them.


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manual work of fine-areplicated.22

Foreign exchange The USD appreciated against the VND, which resulted in more expensiveimported inputs;

Infrastructure Lack of good tourist infrastructure. The tourist infrastructvillage;

Goods-transport infraenter the village, and

the highway;23

No exhibition centres

22 Approximately one percent of the households remain loyal to the traditional manual arts work.

23 The Districts Peoples Committee has recently upgraded the entry road. Tradesmen could have doubled or tripled their selling

those applicable to Hanois intermediaries.

24 A big exhibition centre is under construction in the village.


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;2

3.4. Added difficulties in the global crisis

Businesses and household producers that survived the domestic crisis of inflation haveencountered the following difficulties in the global crisis:

The size of many orders depends on the number of tourists, especially foreign ones. Since late

2008, Minh Hai Company has seen its number of visitors shrunk by 20 percent and its salesturnover by 3040 percent

5

Many domestic customers have tightened their belts to prepare for possible bumpy ridesahead;

Customers become more demanding (in terms of designs, quality and prices) as comparedwith three or four years ago;

Different types of products may result in different types of demand shock. For instance, manyceramic and porcelain products of Bat Trang can be used for both decorative display and morepractical purposes, while lacquer products of Ha Thai can be used for decorative display only.Therefore, decorative-only products will be cut off first of all in the austerity list, while some BatTrang products may still be sold for domestic consumption. Even so, ceramics and porcelainproducts are not essential commodities in daily consumption (unlike food or clothes).

3.5. Credit-related issues

Traditional practices save villagers from vulnerabilities in production and business

Many Bat Trang producers have been operating for dozens of years, so have accumulated somesavings. Many of them have run their production on their own equity. For a long time, producershave been able to buy most of their inputs on credit from suppliers, thanks to mutual trust.Therefore, very few have had problems with banks as a consequence of 2008s soaring interestrates and later credit crunch. Similarly, in Ha Thai, many producers try to operate within theirown equity.

However, some local suppliers in Bat Trang complain about their substantial losses as a result ofproducers bad debts, some of which may last for seven or eight years, with no interest. Supplierssuffered further losses after the soaring inflation in 2008. Some producers also sold their productsto foreign customers on credit. One business became bankrupt after being cheated by a SouthKorean importer.

Few producers have debt-related problems

Few producers who attempted to upgrade their production facilities have borrowed from banks.For instance, in late 2007, one of the apparently most pioneering producers in the Communeborrowed over one billion VND from a commercial bank to transform their gas-fired kiln intocoal-fired one, following a Chinese model, to reduce costs. However, the prices of exclusive coalfor this kiln soared according to the world market levels after Vietnams WTO entry, from 800,000

VND per tonne in mid-2007 to 1.52 million VND per tonne in late 2007, to 4.5 million VND pertonne in early 2008. The producer had to buy this coal from the sole distributor in Quang Ninh.Consequently, it cost nine million VND per coal-fired batch, while it cost only seven million VNDper gas-fired batch. The producer decided to destroy his newly-built kiln, selling it as iron scrapfor only 50 million VND and bearing an outstanding debt of 1.5 billion VND from the bank.

Recently, only two or three household producers have become bankrupt and have to rely on theirsocial network (kin, relatives and close friends). In Bat Trang Commune, local people can accesssome credit sources, such as the Social Policy Bank, and trust-based funds of the Womens Union,the Youths Union and the Veterans Union from which they can receive soft loans without

25 According to the Director of Minh Hai, 80 percent of its orders come from tourists, 10 percent from on-line marketing, and 10

percent from domestic sales.

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collateral. In Duyen Thai Commune, some credit sources include those from the Fund for PoorHouseholds, the Fund for Students, the Social Policy Bank, and the Agricultural and RuralDevelopment Bank (AgriBank).

In Ha Thai, some producers26

have borrowed cash from banks to invest in production floor andfacilities in the villages production and exhibition centre and now fail to pay debts as a result of

prolonged losses. Sacombank has recently frozen their debts totalling four billion VND.However, no producers have been subject to the Guilds penalty of craft suspension. Few havesold their land while others have borrowed from their social network to pay amortisation debts.Many producers (an estimated 80 percent of the households) who have borrowed cash to investin their shop floors in the villages production and exhibition centre are deeply concerned about

obtained.what to do when fewer or no orders are27

Barriers in credit access

Local officials and producers have heard about the subsidised credit scheme in theGovernments stimulus package through the media, but official information has not reachedthe commune level;

Household producers are aware that such assistance is designated for businesses, but not yet

for household producers;

Businesses are concerned that loans may not help much when they do not have orders oroutlets. If they have orders, producers do not mind borrowing without subsidised interestrates;

Businesses cannot demonstrate their financial capacity, as they do not have invoices or receiptsof transactions, so do not meet the requirements of the stimulus plan;

Through the craft guilds, commercial banks can provide loans (without preferentialtreatment to non-poor household producers) but loan eligibility conditions are normally hardfor local producers and businesses to satisfy (for instance, requirements of good productionand business plans);

s Some producers in Ha Thai turn to loan shark28

for quick cash to pay suppliers (from Hanoi andother localities) which, unlike local suppliers in Bat Trang, refuse to sell on credit, especiallywhen prices have changed considerably over the past few years;

Poor households dared not apply for loans, as they do not know how to invest this moneyeffectively.

26 Some believe that the rate is around 30 percent of the household producers.

27 For instance, Phuc Cuong Co. invested 1.3 billion VND in its workshop in 2008 and now lacks

working capital while receiving no export orders.

28 Interest rates levied by loan sharks may amount to 30 percent per month.

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4 Strategies to adjust production and consumption patternsin response to demand shocks

Table 2: Household producers with the greatest difficulties

Bat Trang & Giang Cao Ha Thai

Outdated production (use of box kilns);

Limited designs and samples;

Poor technical skills;29

No reputation for product quality.

Newly established;

Limited capital (which results in difficulty to survive losses,especially when bank lending interest rates rocket);

Export-oriented businesses.


Bigger business with large amounts of capital;

Good reputation for high-quality products;

Havg designed or produced special and unique products;30

Good production techniques;

Good management;

Better marketing strategy (improved trademarks, extendedconnections and use of IT);

Stable outlets (committed customers, stable prices);

Long-term customers may introduce more customers;

Affording to market products abro13

ad.

Good reputation;

Long-term committed customers;

Nationwide distribution networks;

Diversification of livelihoods;

Having members who pursuehigher education.

Table 3: Household producers with the least difficulties

29 For instance, while good workers can produce 10 quality products per batch, poor-skilled workers can make only six.

30 For instance, some producers have created a special type of enamel and kept it as a family secret.

31For instance, Quang Mex and Minh Hai Companies. Minh Hai representatives attended some exhibition fairs in

Japan, Hong Kong, France, and Germany to introduce some special products, such as fake antiquities and light holders.

However, few businesses can afford to attend international fairs, as it is very costly, although many contracts may be

obtained thereby.

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Table 4: Businesses and household producers coping strategies in production andconsumption

Strategies Bat Trang & Giang Cao Ha Thai

Labourrestructure

Reduce numbers of employees;32

Some retain a few skilled workers to avoid

deskilling.33

Some send children to vocational courses,or to work overseas;

Some shift to other types of employment(retailing, paper trading and other services);

Some producers are engaged in productionsteps which they contracted out in theperiod of good growth.

Livelihood

shift Many producers have closed workshops or

put them for rent.

Productionrestructure

Cancelling plans to expand shop floors andinvest in equipment;

No longer seeking new partners to expandproduction;

Shrinking production scales;

Reducing production capacity;

Not changing employment structure but

workshop conditions to reduce the numbers

Slowing down and downsizing production towait for the return of the growth;

One big producer considers the crisis agood timing to invest in facilities/ workshopswhile production is halted.

3of batches.

4

Change ofproductiontechniques

Using machines to raise productivity;

Changing new production techniques (forinstance, the use of mass-printingtechnologies in lieu of conventional manualwork);

Some attempt to skip production steps,lowering product quality and underminingthe villages reputation.

Newmarketing

New products and new customers. Marketing more new samples abroad;

Turning to other parts of the domestic

32 In its peak time (early 2008), Minh Hai Co. employed 200 workers but now has 70 employees. The company also

plans to reduce the number of shop-keepers if the numbers of tourists continue to be on the decline. Its shop-keepers are

local village girls who have been taught some English and Japanese and some marketing skills, as locals are believed to

be able to introduce the production process better than non-locals.

33 Although there is nothing much to produce, many businesses and household producers have to

retain skilled employees to avoid de-skilling in a hope that the latter may be used when orders return. At its

peak time, Hop Luc Cooperative employed 100 workers with 75 being women. It now retains only seven workers but

has nothing for them to do.34 For instance, it is reduced from 20 batches to five or six

per month.

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market: delivering products directly tosouvenir shops in Hanoi, in which they werenot keenly interested during the period of

good growth;35

or production of worship

articles.

Unclearorientation Suffering from revenue losses to retain

customers and production;

Some wait for 2009s first quarter to be overand see what to do next.

Continued efforts to sustain oneself as long

as possible;

Some producers will think about copingstrategies only when lacquer work dies outcompletely.

The major approach to survive the crisis in both villages is to receive revenues from their ownlabour only, no longer from business profits. There are no unpaid apprentices in either village.Apprentices can receive at least 25,000 VND per day (Bat Trang and Giang Cao) and 10,000 VNDper day (Ha Thai).

4.2. Alternative livelihoods

Bat Trang and Giang Cao

After closing down their production, many failed households have shifted to the following typesof employment:

Becoming employed for other producers (painting, turning, transporting products bybicycles);

Providing tourist fun services (shaping, painting, breaking pottery products to relievestress);

Retailing services (confectionary, food, fruit, clothes );

Cooking and selling local specialities;

Agricultural activities (renting land for growing green vegetables and environment-friendlytrees);

Repairing bicycles;

Housemaid; child-minding.

According to some permanent members of the Bat Trang Guild Management Board, if the crisislingers on, many more producers will definitely have to terminate their production. Somestronger producers may shift from box kilns to gas-fired ones if they can access funds from eitherbank loans or the Environment Fund jointly set up by the Ministry of Science and Technologyand a UN agency. However, to be eligible for an amortisation loan from the Environment Fund,household producers must strictly follow its guidelines which may not be always suitable tohousehold conditions.

Ha Thai

Most officials and people believe that when lacquer production slows down, only part of theirlivelihood and incomes has been affected, and therefore no households have fallen into povertyinstantly, as there exist other employment opportunities. For instance, the Commune has run anumber of industrial extension courses, not only for lacquer work, but also for industrial sewingand other handicrafts.

35Many businesses only delivered goods directly to souvenir shops in Hanoi after their loss of USSR and

Polish customers in the early 1990s. During the period of good growth, people from souvenir shops had tocome to village businesses and producers to collect goods.

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Some villagers have shifted to rice cultivation and services. In Ha Thai, every household isallocated some field land although areas may vary depending upon household membercharacteristics. In the period of good growth of lacquer work, producers rent or give their field

3land to poorer farmers,

36many of whom hail from Thanh Hoa Province,

7for cultivation, which

requires hardwork but provides low incomes. Often, only old people work on the field. However,

most of the field land may be acquired for the construction of the Bac Thuong Tin industrial zonein late 2009. Local officials and people are deeply concerned about the loss of field land which3may at least ensure their food security8

when other types of livelihood fail. Some suggest that

the remaining cultivable land (around 30-40 percent of the Communes total arable land) shouldbe shifted to growing safe vegetables for quick rotation of harvests (three to four crops per year).

In addition, some villagers have shifted to trading paper-gold to Hanois wholesalers whichexport it to Taiwan and Macao as these countries have the same practice of burning papercommodities to the dead. But very makers of paper-gold, who are often old people or children,do not earn much but wholesalers can earn considerably, especially over the past two years,which is partly attributed to large export volumes.

Many youths do not want to continue traditional lacquer work which, they believe, brings low

returns and high risks for human health and the environment. Only those youths who are unableto enter universities or colleges have to continue this type of employment, which is still betterthan rice cultivation or work in factories.

4.3. The communes craft guilds

The positive role of the communes craft guilds:

Serving as a useful forum for members to exchange experience in production;

Providing guarantee for members to receive loans, for instance, from the Environment Fundto develop gas-fired kilns;

Producing counterarguments to policies relating to the crafts;

Protecting members interests;

Settling (reconciling) disputes about product designs and labour (unfair treatment of workers;attraction of each others good workers ).

Nevertheless, some members are not convinced of the role of the guilds, listing some of theirfailures as follows:

Failure to unite all producers and suppliers for a common voice;

Failure to develop good guidelines;

Failure to produce good impacts on members production and business;

Lack of legitimate authority (therefore, its functions over conflict settlement are confined to

reconciliation. Unsuccessful cases are forwarded to administrative courts for further settlement).

4.4. Plans for new investments

Bat Trang and Giang Cao: The concentrated 18-ha craft site is under construction, a quarterwhich is designated for workshop floors. The whole area has been rented. However, the

36 Some households employ farmers from Thanh Hoa to work on their rice fields.

37 According to the Head of the Ha Thai Lacquerwork Craft Guild, more than 100 migrants from Thanh

Hoa worked in the village fields during seasonal periods. Now most of this farm-work is taken up by local

villagers from Ha Thai.

38 Each household spends only two months on its rice field every year.

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Commune has not had any specific development plans to facilitate the production and businessof the craft villages.

Many businesses and household producers remain unsure of what to do in the coming time, ifthe crisis still lingers. Some think about shifting to tourism but Bat Trang has not had afavourable infrastructure for tourism, except for the central porcelain market. Meanwhile, it may

take five years to invest in a good infrastructure for tourism. A 15-billion-VND tourist harbour isunder construction and expected to be completed by late 2009. Once completed, it is expected togenerate only 20 service jobs, but receive more tourists. At present, the Commune welcomes20,000 tourists annually.

5 Impacts on household welfare

5.1. Migratory workers bear the brunt

As producers downsize themselves, migratory workers become the first redundancies. Nobusinesses or producers in Bat Trang, Giang Cao and Ha Thai pay any types of insurance,redundancy or unemployment benefits for their workers. Contracts are informally and signed on

an annual basis, and salaries are paid either on a pay-as-you-work daily rate basis, or on a piece-meal basis. Most migratory workers still maintain their agricultural work at home so only take upcraft jobs during their off-farm seasons. Some of their household members remain on the farm.Producers say that it is very hard to find workers during farm seasons, despite higher pays. Craftwork provides additional incomes rather than being the main livelihood of migratory workers. Itis believed that redundant migratory workers will rely on the field, start up retailing services,and take up construction work or some sidelines in their home villages.

Meanwhile, local villagers still maintain their employment either for their own households or forhouseholds of their relatives. Generally, living conditions of most local people remain stable asthey have savings from the long period of good growth.

Bat Trang and Giang Cao: Producers employ a considerable numbers of migratory workers,

chiefly from the neighbouring province of Hung Yen, followed by Ha Tay, Hai Duong, Ha Bacand Bac Ninh,. Workers from Hung Yen do not stay overnight, while those from other provincesdo. More than 500 migratory workers rent their accommodation in the commune. There existsome small human markets within the Commune, where employers can pick up their casualemployees. Before 2008, local household producers employed around 10,000 migratory workers,

with no clear gender imbalance, and this figure was reduced by 60 percent after Tet.39

Ha Thai: Usually, household producers employ around 400 migratory workers, from Phu Tho(chiefly), Hoa Binh, Ha Nam, Nam Dinh, Thai Binh and Thanh Hoa. Some local villagerscomplain about problems caused by migratory workers, such as social insecurity (thefts) andother social evils.

Some producers find it more costly to employ migratory workers. Each migratory worker earnsaround one million VND, without having to pay board and lodging as they stay with theiremployers. Meanwhile, local workers also earn around one million VND or slightly more. Mostmigratory workers have not returned since Tet as producers have not received any new orders.

39According to some senior members of the craft guild.

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5.2. Formal and informal assistance

Formal assistance for businesses and producers:40

The energy-saving project from the Vietnam Environment Fund requires some conditionsunsuitable to local households in Bat Trang Commune. Some households have limited space

which can fit the proposed model; Many businesses enjoy income tax reduction worth three to four million VND at their final

accounting;

The commune administration cannot provide any significant assistance, except facilitatingpaperwork for loans.

Mutual support:

Generally, competing producers do not help each other but try to keep production techniques andbusiness information as much as possible. Confidentiality in terms of production and business isparticularly important given a lack of an enforced intellectual property protection system.Producers do not register their designs due to the following reasons:

Lack of proper awareness and knowledge of intellectual property rights (as a result of poorgeneral education level);

Costly and lengthy process of registration.

However, there is some limited support amongst household producers related by blood. Theymay share some designs and techniques. Also, Bat Trang has a study encouragement fund worth16 million VND for young students, with contributions from local businesses and households.

5.3. Changing total consumption and consumption patterns within thehouseholds

Some early signs of austerity have been recorded in both villages, although in different ways.

However, the crisiss impacts on household welfare in the three villages have not been so seriousto the extent of bankruptcy, childrens school drop-out or sales of land or assets. Few villagershave to rely on some loans from other fellow villagers. In Bat Trang, which had enjoyed morerobust growth before the crisis, producers have accumulated some considerable savings by localstandards. Nevertheless, they restructure their consumption patterns by cutting expenditures onsome expensive items, rather than using their savings for working capital (around 300-400million VND). In particular:

Less spending on upgrading or new construction of houses (it usually happens at the year-end);

Less spending on fashionable durables (motorbikes, automobiles, machines, flat-screen TVs andother electronic facilities );

Less spending on tourism: usually, at the beginning of the previous years, many householdsbought tours, foreign and domestic alike. But the numbers of such tours have been reducedvisibly this year;

Considerably lower pre-Tet sales of decorative items (such as expensive cherry blossom flowers,Kumquat trees, );

Less spending on meat consumption (the sales of pork, beef and chickens have been reportedlylowered in recent months).

40This scheme, jointly run by the Ministry of Science and Technology and an UN Agency, offers an

annual lending interest rate of 0.6 percent. It is reported to have disbursed 19 billion VND in Bat Trang

Commune by the moment of the assessment.

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Meanwhile, in Ha Thai, which enjoyed more modest growth (than Bat Trang) during its hey day,some local people have to trim down their expenditures on daily-use essential items, such as foodand clothes, and do not buy unnecessary goods.

5.4. Assistance for poor and near-poor households

In the research sites, poor households are those that suffer from chronic poverty, withpermanently old, sick, disabled and lonely members.

Bat Trang: The Commune has 13 poor households according to the old poverty lines. Both theDistrict and the Commune have the Funds for the Poor.

Duyen Thai: The Commune has 49 poor households with more than 400 people (according to theold poverty lines) or more than 80 poor households (according to the new poverty lines). Ha ThaiVillage alone has 30 poor households (according to the old poverty lines) or around 40 poorhouseholds (according to the new poverty lines). Apart from entitlements for poor households,they may receive some occasional assistance, viz Tet gifts and some production inputs (fertiliserin 2007). However, near-poor households have not received any assistance.

Only poor households have considerably reduced the nutrition quality of their meals as a

consequence of slowed-down production. Mr. and Ms. N. V. T.41 earned more than one million VNDper month from lacquer work in 2007 but have seen their montly incomes decreased by 25 percentsince November 2008. Their household produces lacquer worship articles, whose pre-Tet productionand sales slowed down as compared with the same periods of the previous years.

5.5. Rescue measures

Table 5: Some rescue measures recommended by local producers:


The Communes authority has requested for more cash

allocations for the Funds of the Womens Union, the YouthsUnion and the Veterans Union to help their members indifficulty;

The Government should pay attention to marketing Bat Trangsproducts, through the Guild or the local administration;

Financial support should be provided for producers with boxkilns to upgrade their facilities;

Scientists should study how to reduce gas consumption forvarious types of products.

Vietnamese trade attaches abroad should help

explore foreign market demand, which,however, may negatively result in the favour-granting mechanism in business;

Local producers should be equipped with some

basic knowledge of trade.42

Some rescue measures officially recommended by the Bat Trang Guild to Hanois PeoplesCommittee

1. The State should provide part of the stimulus package for household producers;

2. Household producers should increase their production for domestic consumption;

3. Export-oriented businesses should create more designs;

41This household is classified as poor according to the old poverty lines.

42Since the collapse of Binh Minh Cooperative in the early 1990s, many local producers have shifted from

agriculture to handicrafts, without any chance to study basic trade knowledge. They had to start up anddevelop their work on their own, without any formal assistance.

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4. The State should provide continued training for high-skilled workers;

5. Banks should continue reschedule debt payments for businesses in difficulty;

6. Tax payment should be rescheduled; more tax reduction and exemption should be

provided to encourage businesses.

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Annex 1: Research methods

The study was conducted three weeks after Tet, which is a quiet time for shopping andfor orders in the three craft villages every year. Also, observation was made in two weekdays, which are not a busy time for shops. They often have more visitors duringweekends. Also, according to the interviewees, around 30 or 40 percent of the kilns havenot resumed their work after Tet. Therefore, it remains unclear whether these producerswill stop their production or just halt it for some time after Tet.

Given these hypothetical biases, the findings presented in this report are based on thesynthesis of various sources (employees, household producers, businesses, senior members of thecraft guilds, and commune and village officials), the comparison of various periods (boom times,the domestic crisis, and the global crisis, including pre-Tet and post-Tet in relation to the same periodsof the previous years), and the understanding of invisible factors underlying visiblephenomena. Such an exercise of triangulation aims to achieve the highest possible validity of

the information provided herein.In fact, the research team has interviewed 12 representatives from craft companies andcooperatives, 17 from household producers, 12 workers, with four being female, and sixsenior officials of the communes, villages and craft guilds.

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Annex 2: Illustrative photographs

Photo 1: Assistants from the electronic and electric equipment shop in Bat Trang Commune saytheir pre-Tet sales went down sharply despite many discount offers.

Photo 2: Some household producers shift to using their workshop floors for tourist fun services.This is a pottery-breaking service to relieve stress.

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Photo 3: The only ATM located in Bat Trang Commune was much-frequented by local producersand businesspeople who withdrew cash from their sales transactions. It now becomes rarely used.

Photo 4: Song Cuong, one of the few cooperatives in Bat Trang Commune, now receives neitherorders nor visitors to its showroom.

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Photo 5: An unsuccessful producer has been employed to transport products on his bicycle forfellow producers in Bat Trang

Photo 6: A pottery workshop which was closed down in early 2009

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Photo 7: An old-fashioned box kiln for pottery production, which was deserted in early 2009.

Photo 8: This pair of vases should be sold for 1.8 million VND to spare some business profits giventhe soaring input prices. However, the pair has long remained unsold, even only for 1.5 million VND.

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Photo 9: A pottery kiln has been dismantled to make room for a temporary fast-food restaurant.

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Photo 10: The shop-keeper has been sitting idle all day during one of the tourist seasons in BatTrang Commune.

Photo 11: A poor household produces lacquer worship articles for domestic consumption. The yard

used to be packed with products during better business periods. But it became rather spacious atthe moment of research.

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Oxfam GB April 2009

Oxfam GB is a member of Oxfam International. Registered charity no. 202918.

The text may be used free of charge for the purposes of advocacy, campaigning, education, andresearch, provided that the source is acknowledged in full. The copyright holder requests that all

such use be registered with them for impact assessment purposes. For copying in any othercircumstances, or for re-use in other publications, or for translation or adaptation, permissionmust be secured and a fee may be charged. E-mail [email protected]

For further information on the issues raised in this paper please [email protected] or go to www.oxfam.org.uk.

The information in this publication is correct at the time of going to press.

Oxfam is a registered charity in England and Wales (no 202918) and Scotland (SC039042).Oxfam GB is a member of Oxfam International.

www.oxfam.org.uk
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