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.

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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 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 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-
3
stock company for tourism and trade, 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.
5
Most household producers operate as satellites for businesses. 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 village7

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
are seen as the most tolerable, and have placed many large orders, especially after Vietnam’s
WTO entry. The USA is an important market, as it has many large distributors that sell the
village’s lacquer products not only to retailing supermarkets within the USA, but also to 40
other 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 into
the 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 1,000
household producers with their own shops. However, the figure dropped to more than 600
8
by September 2008. The remainder shifted to other types of employment. Many people
believe that if the crisis lingers on through 2009, more producers will follow. Households
with stronger financial capacity may shift to gas-fired kilns, possibly using loans from banks
or the Environment Fund (if the Fund’s 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 a
good time for business. However, many producers share the view that their recent pre-Tet
9
sales declined remarkably as compared with the same periods in previous years. The 20
days before the recent Tet was considered the only chance over 12 months when local
producers could sell a relatively large amount of their products. Even so, many producers
still have many products in stock as a result of slow sales. Tax collection also encounters
difficulties, given the sales crisis.
In Ha Thai, sales and revenues in late 2008 and early 2009 reportedly declined by 30–40
10
percent. In the previous years, producers had many substantial orders for Christmas
presents (usually in November and December) and had to work hard until the (lunar) New
11
Year’s Eve. Despite the general downward trend of orders, there appears to be a sharper
decline in orders for exports and lower-quality products for domestic consumption. Several
producers of high-quality products for domestic consumption (paintings) say they have not
been affected significantly and still anticipate high demands. Furthermore, those who
produce paintings for celebrations of long-lived people earned well in 2008.
Rescheduled delivery: Five businesses in Bat Trang Commune had their contracts
12
rescheduled. For Minh Hai Co., orders used to be placed 10 days before delivery, and are
now placed 15 or more days before delivery, as corporate customers need to study their
market demands (of supermarkets, retailers, etc.) more carefully. In Ha Thai village,
distributors become more uncertain about demand. Normally, products should be delivered
1.5 or two months after contracts are signed, but in recent months, delivery has commonly
been made three or four months after contract-signing.

8
According to some senior members of the craft guild in Bat Trang.
9
The Director of Minh Hai Co. said that its sales turnover decreased by around 30 percent.
10
According to the group discussion with village officials.
11
One 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 40–50 million VND from France).
12 Contracts are signed with businesses, not households who work as satellite producers.

5
Partial contract cancellation: In Ha Thai, an estimated 15 percent of the contracts were
13
partially cancelled in the last few months of 2008, with no specific reasons provid ed,
although it had never happened before. Consequently, some producers keep a substantial
amount of finished products in stock. When orders are cancelled, it is hard to sell products
with designs ordered by foreign customers. However, no order cancellation is reported in the
case 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 been
reduced 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 as
‘backpacker tourists’, who visit the village and come up with the idea to trade some products to
earn a small profit). They become ‘life-savers’ for some businesses in the crisis, as they buy
several millions VND worth of goods in stock. Meanwhile, local officials and residents
believe that there are fewer tourists to Bat Trang as compared with the same period in
previous years, although there are no available statistics on this trend.
No contracts from fairs: In Ha Thai, local producers usually pin high hopes on contracts
signed after international fairs abroad. However, there were no visitors to their lacquer
exhibition in Germany in late February 2009. The best hope is another fair in Thailand in
early March 2009. If no contracts are signed after this fair, it is certain that 2009 will have been
a gloomy year for Ha Thai’s 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
14
as a consequence of slow sales. Some businesses, such as Hop Luc and Song Cuong, were
failing even before the current global crisis, due to their failure to overcome the multiple
accumulated challenges listed in the table below. As a result of the pre-crisis at home and the
global crisis, Hop Luc’s monthly sales dropped substantially from three or four containers
per month (from early 2008) to only one or even no containers. The number of its employees
has 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 some
committed customers as a consequence of slow sales. Major foreign distributors (chiefly
based 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.

6
 Table 1: Pre-crisis difficulties in the craft villages

Difficulties Bat Trang & Giang Cao Ha Thai

Sharply increased • Gas prices15 increased four times in April and May 2008, from 13,000 to
16
input prices (as a 13,500 to 17,000 to 19,000 VND. While the price of oil in the world
result of inflation) market declined from 148 USD to less than 50 USD per barrel, the prices
of gas decreased from 20,500 VND to 10,800 VND, and then rose to
15,500 VND without any further reduction;
• The price of petroleum went up sharply in mid-2008 while the VND
appreciated against the USD, which meant lower profits for producers;17
• The prices of coal, wood and clay sky-rocketed (the prices of wood nearly
tripled from 450,000 VND to 800,000 VND to 1.2 million VND; the price of
clay also doubled);
• Prices of oil and petroleum soared in mid-2008. The prices of paint
went up from 270,000-280,000 VND per can (27 litres) to 700,000
VND per can when the prices of oil and petroleum reached its peak
last year (from May to July 2008). When the petroleum prices dropped
drastically to 11,000 VND per litre, the price of paint went down to
600,000 VND per can only (while many producers believe it should be
down to 300,000 VND per can);
• Labour wages have increased;
• Many producers express deep concerns over expected increases of
electricity prices and basic salaries in the second half of 2009.

• Labour prices increased: The media alluded to the estimated increase of

worker wages, so many workers demanded increased wages even before the
National Assembly met to discuss this issue;

• The prices of paper packaging increased remarkably, by 250 percent, from

2,800 VND to 9,000 VND per meter. Some producers shifted to pallet
packaging, which reduced costs but resulted in more breakages and thus
deductions in payment. Some unsympathetic customers requested
considerable compensation.

Unchanged output • Prices of products cannot be raised, as it may lead to loss of committed • At customers’ requests, selling prices of lacquer products cannot be
prices18 + customers, which would result in substantially reduced profits; raised;
reduced profits

15
Fuel accounts for 25-40 percent of the costs of pottery production, according to local producers.
16 Producers may loss two or three million VND for each small batch. Despite the soaring prices of inputs, producers had to buy some when they were in the middle of a batch.
17
The prices of petroleum accounted for 40 percent of input costs as producers consume it for kiln burning and goods transporting.

7
 • Some customers placed new orders but at squeezed prices, which leaves no
margin profits for producers, given soaring input prices.
• Therefore, many producers earn some money from their own labour
only, without earning good business profits as they did a couple of
years ago, to maintain their production and avoid worker de-skilling to
wait for growth recovery. Otherwise, it may not be easy to find skilled
workers immediately.

Limited business • Local producers struggle on their own in production and business to • Businesses and household producers struggle on their own, and only
capacity accommodate themselves to the market, without formal assistance for bigger businesses afford international fairs, which cannot produce
orientation or strategies; substantial impacts on the village’s production;

• Some households cannot do their business well due to limited capacity. • Most businesses and producers cannot approach foreign customers19
as:
o They operate on a small-scale basis, lack physical
facilities and business worthiness;

o Many producers do not have sufficient financial capacity

(around 500–1,000 million VND is required);

o Lack of knowledge of trade and the outside world;

o Lack of skills in foreign languages, communication, and

negotiation;

o Limited understanding of transaction procedures;

o Lack of online marketing campaigns;

o Lack of organisational capacity.

18
In Bat Trang commune, some household producers say that they have slightly raised their selling prices for some products, by around five percent, which still fail to
catch 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. Some foreign customers visit the
village and like some products but then involve a professional trading company in Hanoi as an intermediary. Many local producers believe that direct transactions would
have earned more contracts for them.

8
 • Except for businesses, most local producers do not have clear
investment and business plans for their production. Only businesses
have some separate amounts of working capital;

• The village’s reputation and trademarks remain little known.

Saturated demand • Ceramics and porcelain demand became saturated from 2004, as producers • This is the third sales and revenue crisis since 1986: The first was in
failed to offer new and special designs. the late 1980s and early 1990s when traditional customers from the
USSR and Poland stopped buying; the second was in 2002 when
tourism declined as a result of the SAS epidemics breakout.

Increasingly fiercer Internal: Intra-craft: There are more producers, while the demand fails to catch up;
competition • Some businesspeople may offer customers of neighbouring shops some 95 percent of households are engaged in lacquer production. Ha Thai also
concessions, such as on-credit purchase or reduction of a few cents per has to compete with newly emerging lacquer craft villages, such as Duyen
(resulting in lower certain product; Truong and Phuc An villages (in the same Commune) and another village
output prices and in the neighbouring District of Phu Xuyen.21
producers’ profits) • Some producers copy designs of others and reduce production costs;
From outside craft: Competition comes from villages in the production
• Legal loopholes in intellectual property rights may lead to some chain for certain products. For instance, producers from Bat Trang try to
disadvantages for some designers. Some households that can produce attract workers from Ha Thai, thus enabling them to produce lacquer-
special enamel strictly protect their formula as it is impossible to make a suit covered porcelain and ceramics products to compete with producers from
against common infringements of intellectual property rights.20 Ha Thai.

External:
• Traditional producers compete, chiefly in designs and enamel colour, with
new rivals from neighbouring communes within the District, such as Kim Lan,
Đa Tốn, and Đông Dư, and even from the neighbouring District of Châu Quỳ.

Mechanisation • Recent technological improvements have led to mass production, which • Lacquer products have been modernised to reduce production costs
causes oversupply. (for instance, using ready-made paint and reducing sophisticated

20
Therefore, good businesses, such as Minh Hai, have to rely on their prestige and long-term relationships to keep their customers against such violations from rivals.
21 These villages have produced lacquer products for two or three years.

9
 manual work of fine-art articles) so it is easier to be imitated and
replicated.22

Foreign exchange • The USD appreciated against the VND, which resulted in more expensive
imported inputs;

Infrastructure • Lack of good tourist infrastructure. • The tourist infrastructure is poor, even without signposts to access the
village;

• Goods-transport infrastructure is poor: 29-seat automobiles cannot

enter the village, and trucks are uploaded onto trucks on the side of
the highway;23

• No exhibition centres in the village.24

22
Approximately one percent of the households remain loyal to the traditional manual arts work.
23
The District’s People’s Committee has recently upgraded the entry road. Tradesmen could have doubled or tripled their selling prices for tourists as compared with
those applicable to Hanoi’s intermediaries.
24
A big exhibition centre is under construction in the village.

10
3.4. Added difficulties in the global crisis
Businesses and household producers that survived the domestic crisis of inflation have
encountered 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 sales
25
turnover by 30–40 percent;
• Many domestic customers have tightened their belts to prepare for possible bumpy rides
ahead;
• Customers become more demanding (in terms of designs, quality and prices) as compared
with three or four years ago;
• Different types of products may result in different types of demand shock. For instance, many
ceramic and porcelain products of Bat Trang can be used for both decorative display and more
practical 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 Bat
Trang products may still be sold for domestic consumption. Even so, ceramics and porcelain
products 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 some
savings. Many of them have run their production on their own equity. For a long time, producers
have 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 2008’s soaring interest
rates and later credit crunch. Similarly, in Ha Thai, many producers try to operate within their
own equity.
However, some local suppliers in Bat Trang complain about their substantial losses as a result of
producers’ bad debts, some of which may last for seven or eight years, with no interest. Suppliers
suffered further losses after the soaring inflation in 2008. Some producers also sold their products
to foreign customers on credit. One business became bankrupt after being cheated by a South
Korean 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 Commune
borrowed over one billion VND from a commercial bank to transform their gas-fired kiln into
coal-fired one, following a Chinese model, to reduce costs. However, the prices of exclusive coal
for this kiln soared according to the world market levels after Vietnam’s WTO entry, from 800,000
VND per tonne in mid-2007 to 1.5–2 million VND per tonne in late 2007, to 4.5 million VND per
tonne 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 VND
per gas-fired batch. The producer decided to destroy his newly-built kiln, selling it as iron scrap
for 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 their
social network (kin, relatives and close friends). In Bat Trang Commune, local people can access
some credit sources, such as the Social Policy Bank, and trust-based funds of the Women’s Union,
the Youth’s 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.

11
collateral. In Duyen Thai Commune, some credit sources include those from the Fund for Poor
Households, the Fund for Students, the Social Policy Bank, and the Agricultural and Rural
Development Bank (AgriBank).
26
In Ha Thai, some producers have borrowed cash from banks to invest in production floor and
facilities in the village’s 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 Guild’s penalty of craft suspension. Few have
sold 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 invest
in their shop floors in the village’s production and exhibition centre are deeply concerned about
27
what to do when fewer or no orders are obtained.

Barriers in credit access

• Local officials and producers have heard about the subsidised credit scheme in the
Government’s stimulus package through the media, but official information has not reached
the 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 or
outlets. If they have orders, producers do not mind borrowing without subsidised interest
rates;
• Businesses cannot demonstrate their financial capacity, as they do not have invoices or receipts
of transactions, so do not meet the requirements of the stimulus plan;
• Through the craft guilds, commercial banks can provide loans (without preferential
treatment to non-poor household producers) but loan eligibility conditions are normally hard
for local producers and businesses to satisfy (for instance, requirements of good production
and business plans);
28
• Some producers in Ha Thai turn to loan shark s for quick cash to pay suppliers (from Hanoi and
other localities) which, unlike local suppliers in Bat Trang, refuse to sell on credit, especially
when 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 money
effectively.

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.

12
 4 Strategies to adjust production and consumption patterns
in response to demand shocks

Table 2: Household producers with the greatest difficulties

Bat Trang & Giang Cao Ha Thai

• Outdated production (use of box kilns); • Newly established;

• Limited designs and samples; • Limited capital (which results in difficulty to survive losses,
especially when bank lending interest rates rocket);
29
• Poor technical skills;
• Export-oriented businesses.
• No reputation for product quality.

Table 3: Household producers with the least difficulties

Bat Trang & Giang Cao Ha Thai

• Bigger business with large amounts of capital; • Good reputation;

• Good reputation for high-quality products; • Long-term committed customers;

30 • Nationwide distribution networks;

• Havg designed or produced special and unique products;

• Good production techniques; • Diversification of livelihoods;

• Good management; • Having members who pursue

higher education.
• Better marketing strategy (improved trademarks, extended
connections and use of IT);

• Stable outlets (committed customers, stable prices);

• Long-term customers may introduce more customers;

31
• Affording to market products abro ad.

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.
31
For 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.

13
 Table 4: Businesses and household producers’ coping strategies in production and
consumption

Strategie Bat Trang & Giang Cao Ha Thai

s

Labour 32 Some send children to vocational courses,

• Reduce numbers of employees; •
restructure or to work overseas;
• Some retain a few skilled workers to avoid
33 • Some shift to other types of employment
deskilling. (retailing, paper trading and other services);

• Some producers are engaged in production

steps which they contracted out in the
period of good growth.

Livelihood • Many producers have closed workshops or

shift put them for rent.

Production • Cancelling plans to expand shop floors and • Slowing down and downsizing production to
restructure invest in equipment; wait for the return of the growth;

• No longer seeking new partners to expand • One big producer considers the crisis a
production; good timing to invest in facilities/ workshops
while production is halted.
• Shrinking production scales;

• Reducing production capacity;

• Not changing employment structure but

workshop conditions to reduce the numbers
34
of batches.

Change of • Using machines to raise productivity;

production
techniques • Changing new production techniques (for
instance, the use of mass-printing
technologies in lieu of conventional manual
work);

• Some attempt to skip production steps,

lowering product quality and undermining
the village’s reputation.

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

14
 market: delivering products directly to
souvenir shops in Hanoi, in which they were
not keenly interested during the period of
35
good growth; or production of worship
articles.

Unclear • Suffering from revenue losses to retain • Continued efforts to sustain oneself as long
orientation customers and production; as possible;

• Some wait for 2009’s first quarter to be over • Some producers will think about coping
and see what to do next. strategies only when lacquer work dies out
completely.

The major approach to survive the crisis in both villages is to receive revenues from their own
labour 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 VND
per 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 types
of employment:
• Becoming employed for other producers (painting, turning, transporting products by
bicycles…);
• Providing tourist fun services (shaping, painting, breaking pottery products to relieve
stress…);
• Retailing services (confectionary, food, fruit, clothes …);
• Cooking and selling local specialities;
• Agricultural activities (renting land for growing green vegetables and environment-friendly
trees);
• Repairing bicycles;
• Housemaid; child-minding.
According to some permanent members of the Bat Trang Guild Management Board, if the crisis
lingers on, many more producers will definitely have to terminate their production. Some
stronger producers may shift from box kilns to gas-fired ones if they can access funds from either
bank loans or the Environment Fund jointly set up by the Ministry of Science and Technology
and 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 to
household conditions.

Ha Thai
Most officials and people believe that when lacquer production slows down, only part of their
livelihood and incomes has been affected, and therefore no households have fallen into poverty
instantly, as there exist other employment opportunities. For instance, the Commune has run a
number of industrial extension courses, not only for lacquer work, but also for industrial sewing
and other handicrafts.

35
Many 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 to
come to village businesses and producers to collect goods.

15
Some villagers have shifted to rice cultivation and services. In Ha Thai, every household is
allocated some field land although areas may vary depending upon household member
characteristics. In the period of good growth of lacquer work, producers rent or give their field
36 37
land to poorer farmers, many of whom hail from Thanh Hoa Province, for 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 zone
in late 2009. Local officials and people are deeply concerned about the loss of field land which
38
may at least ensure their food security when other types of livelihood fail. Some suggest that
the remaining cultivable land (around 30-40 percent of the Commune’s total arable land) should
be 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 Hanoi’s wholesalers which
export it to Taiwan and Macao as these countries have the same practice of burning paper
commodities 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 unable
to enter universities or colleges have to continue this type of employment, which is still better
than rice cultivation or work in factories.

4.3. The commune’s craft guilds

The positive role of the commune’s 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 Fund
to 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 other’s good workers …).
Nevertheless, some members are not convinced of the role of the guilds, listing some of their
failures 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 quarter
which 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.

16
Commune has not had any specific development plans to facilitate the production and business
of the craft villages.
Many businesses and household producers remain unsure of what to do in the coming time, if
the crisis still lingers. Some think about shifting to tourism but Bat Trang has not had a
favourable 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 is
under construction and expected to be completed by late 2009. Once completed, it is expected to
generate only 20 service jobs, but receive more tourists. At present, the Commune welcomes
20,000 tourists annually.

5 Impacts on household welfare

5.1. Migratory workers bear the brunt
As producers downsize themselves, migratory workers become the first redundancies. No
businesses 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 up
craft 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. Craft
work provides additional incomes rather than being the main livelihood of migratory workers. It
is 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 for
households of their relatives. Generally, living conditions of most local people remain stable as
they 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 Bac
and Bac Ninh,. Workers from Hung Yen do not stay overnight, while those from other provinces
do. More than 500 migratory workers rent their accommodation in the commune. There exist
some small ‘human markets’ within the Commune, where employers can pick up their casual
employees. Before 2008, local household producers employed around 10,000 migratory workers,
39
with no clear gender imbalance, and this figure was reduced by 60 percent after Tet.
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 villagers
complain about problems caused by migratory workers, such as social insecurity (thefts) and
other social evils.
Some producers find it more costly to employ migratory workers. Each migratory worker earns
around one million VND, without having to pay board and lodging as they stay with their
employers. Meanwhile, local workers also earn around one million VND or slightly more. Most
migratory workers have not returned since Tet as producers have not received any new orders.

39
According to some senior members of the craft guild.

17
5.2. Formal and informal assistance
Formal assistance for businesses and producers:
40
• The energy-saving project from the Vietnam Environment Fund requires some conditions
unsuitable 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 facilitating
paperwork for loans.

Mutual support:
Generally, competing producers do not help each other but try to keep production techniques and
business information as much as possible. Confidentiality in terms of production and business is
particularly 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 poor
general education level);
• Costly and lengthy process of registration.
However, there is some limited support amongst household producers related by blood. They
may share some designs and techniques. Also, Bat Trang has a study encouragement fund worth
16 million VND for young students, with contributions from local businesses and households.

5.3. Changing total consumption and consumption patterns within the

households
Some early signs of austerity have been recorded in both villages, although in different ways.
However, the crisis’s impacts on household welfare in the three villages have not been so serious
to the extent of bankruptcy, children’s school drop-out or sales of land or assets. Few villagers
have to rely on some loans from other fellow villagers. In Bat Trang, which had enjoyed more
robust growth before the crisis, producers have accumulated some considerable savings by local
standards. Nevertheless, they restructure their consumption patterns by cutting expenditures on
some expensive items, rather than using their savings for working capital (around 300-400
million 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 and
other electronic facilities …);
• Less spending on tourism: usually, at the beginning of the previous years, many households
bought tours, foreign and domestic alike. But the numbers of such tours have been reduced
visibly 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 reportedly
lowered in recent months).

40
This 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.

18
 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 food
and 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, with
permanently old, sick, disabled and lonely members.
Bat Trang: The Commune has 13 poor households according to the old poverty lines. Both the
District and the Commune have the Funds for the Poor.
Duyen Thai: The Commune has 49 poor households with more than 400 people (according to the
old poverty lines) or more than 80 poor households (according to the new poverty lines). Ha Thai
Village alone has 30 poor households (according to the old poverty lines) or around 40 poor
households (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 (fertiliser
in 2007). However, near-poor households have not received any assistance.
Only poor households have considerably reduced the nutrition quality of their meals as a
41
consequence of slowed-down production. Mr. and Ms. N. V. T. earned more than one million VND
per month from lacquer work in 2007 but have seen their montly incomes decreased by 25 percent
since November 2008. Their household produces lacquer worship articles, whose pre-Tet production
and 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:

Bat Trang & Giang Cao Ha Thai

• The Commune’s authority has requested for more cash • Vietnamese trade attaches abroad should help
allocations for the Funds of the Women’s Union, the Youth’s explore foreign market demand, which,
Union and the Veterans’ Union to help their members in however, may negatively result in the favour-
difficulty; granting mechanism in business;

• The Government should pay attention to marketing Bat Trang’s • Local producers should be equipped with some
products, through the Guild or the local administration; basic knowledge of trade.
42

• Financial support should be provided for producers with box

kilns to upgrade their facilities;

• Scientists should study how to reduce gas consumption for

various types of products.

Some rescue measures officially recommended by the Bat Trang Guild to Hanoi’s People’s
Committee
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;

41
This household is classified as ‘poor’ according to the old poverty lines.
42
Since 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 and
develop their work on their own, without any formal assistance.

19
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.

20
Annex 1: Research methods
The study was conducted three weeks after Tet, which is a quiet time for shopping and
for orders in the three craft villages every year. Also, observation was made in two week
days, which are not a busy time for shops. They often have more visitors during
weekends. Also, according to the interviewees, around 30 or 40 percent of the kilns have
not resumed their work after Tet. Therefore, it remains unclear whether these producers
will 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 the
synthesis of various sources (employees, household producers, businesses, senior members of the
craft 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 periods
of the previous years), and the understanding of invisible factors underlying visible
phenomena. 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 and
cooperatives, 17 from household producers, 12 workers, with four being female, and six
senior officials of the communes, villages and craft guilds.

21
Annex 2: Illustrative photographs

Photo 1: Assistants from the electronic and electric equipment shop in Bat Trang Commune say
their 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.

22
Photo 3: The only ATM located in Bat Trang Commune was much-frequented by local producers
and 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 neither
orders nor visitors to its showroom.

23
Photo 5: An unsuccessful producer has been employed to transport products on his bicycle for
fellow producers in Bat Trang

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

24
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 given
the soaring input prices. However, the pair has long remained unsold, even only for 1.5 million VND.

25
Photo 9: A pottery kiln has been dismantled to make room for a temporary fast-food restaurant.

26
Photo 10: The shop-keeper has been sitting idle all day during one of the tourist seasons in Bat
Trang 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 at
the moment of research.

27
© Oxfam GB April 2009
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28