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Northern power shortage acts as drag on economic output

After running out of orders and finding it hard to raise funding, businesses are now facing electricity shortages.

The power shortage has his all industries in the north in the last two weeks. Official statistics show that 88,000 enterprises shut down temporarily or for good in the first five months of this year.

A recent survey by VnExpress and the government’s Private Economic Development Research Board of nearly 10,000 businesses found 82% planning to contract operations or stop doing business this year.

Nguyen Minh Chau, director of Hanoi CNC Accurate Mechanical Company based in the capital’s Quang Minh Industrial Park, said: “This year’s economic recession [in many countries] has led to a decrease in orders. If you are lucky enough to get orders, the lead time is short and delivery is urgent.”

Meanwhile, blackouts, which happen suddenly or without proper notice, make it hard for businesses to fulfill orders in time, he said.

Vu Khac Tiep, deputy director of Hanoi food processor Song Phuong Trading and Manufacturing Joint Stock Company, said the power outages are a burden on businesses that are seeking to recover after Covid.

Song Phuong modernized its factory last year, and so 90% of its lines currently use electricity, but the power outage has reduced its capacity by 40%, he said.

Power outages also increase expenses, he said. “Workers take breaks in the middle of production shifts [due to blackouts]. Arranging schedules for workers to work irregularly leads to increased labor costs.”

The company is poised to get orders from China and Europe, but, instead of being happy, Tiep expressed concern because the production would have to be undertaken at the peak of summer with the possibility of longer and more frequent blackouts.

According to the Ministry of Industry and Trade, the daily electricity shortfall is 30.9 million kilowatt-hours, rising to 50.8 million kilowatt-hours on some days.

“If the power outages persist for long, the possibility of losing contracts to businesses in the south is very high,” Tiep said. The southern region has no or few blackouts.

Many large foreign enterprises are among those suffering from the electricity shortages. Hong Sun, chairman of the Korean Business Association in Vietnam, told VnExpress that many member companies are suffering from power outages two or three times a week.

“[This means] order fulfillment is delayed and machinery and goods are affected while fixed costs still have to be paid.”

They are worried they would have to pay compensation if deliveries are not done in time, he said.

The association, which represents nearly 10,000 South Korean businesses in Vietnam, has petitioned Prime Minister Pham Minh Chinh to take remedial measures.

The services sector is also badly affected by the power situation.

Pham Quoc Long, chairman of the Vietnam Ship Agents, Brokers and Maritime Services Providers Association, said the electricity shortage has caused ports in the north to be congested, causing losses across the board.

Hai Phong Port clears on a normal day some 15,000 twenty-foot equivalent units, equivalent to eight or nine ships, of cargo.

Loading and unloading a vessel takes around 20 hours.

Long said: “Vessels enter the wharf but there is no electricity, resulting in cargo piling up. Losses to the port and shipping companies are US$30,000-40,000 per ship. Every day there are 20-30 ships coming in or leaving, and so the damage is not small.”

Ports have invested heavily in high technology, and so use electricity instead of gasoline. Besides the actual losses, they therefore also face the risk of loss of reputation.

Large supermarkets and shopping malls are badly affected by the outages. They have to use their own generators, switch off air conditioning in most areas and even turn off chicken ovens.

Most production and service businesses are cutting down output and saving power, and asking customers to sympathize with their situation.

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