Li & Fung's US clients face delays as Vietnam plants shut amid rioting

Global supplier ready to get goods from other regions if violence in Vietnam gets out of control

PUBLISHED : Thursday, 15 May, 2014, 1:54pm
UPDATED : Friday, 16 May, 2014, 12:47am

US clients of Li & Fung, the world's largest sourcing firm, face delays of about a week, as violent anti-Chinese riots in Vietnam have forced most foreign factories in Ho Chi Minh City to cease production.

However, the Hong Kong-based company, which counts Walmart Stores, Target and Gap among its customers, said damage to its suppliers has so far been minimal.

"We're talking about a week type of delay, not months. I believe that not only the factories but the government will not allow this to happen," chief executive Bruce Rockowitz said at the firm's annual general meeting yesterday. "It's mostly our American clients [that may be affected]," Rockowitz said.

"The good news is that this is a bit early for back-to-school [business]. When you get closer to the end of June and into July, then it becomes a lot more critical."

Protests erupted on Tuesday in Vietnam, which accounts for about 7 per cent of Li & Fung's sourcing base, after China installed an oil rig in an area of the South China Sea claimed by both countries.

More than a dozen foreign-owned factories had been set on fire by early Thursday after thousands of protesters went on a rampage.

"Let me just say, in our business model, we do not own any of our suppliers," group chairman William Fung Kwok-lun said.

"We don't, frankly, have a full assessment of the situation, as it's still happening. Most of our suppliers told us that they were closing the plant yesterday or the day before, just to make sure no workers are hurt. We are keeping a close watch on that situation."

Rockowitz said that if matters worsened in Vietnam, the firm could transfer production to other locations.

"There are plenty of other countries that we can move business to, such as China as well as places like Bangladesh and Cambodia, but I think it's premature to talk about moving anything," Rockowitz said.

"To be fair, if you're working with the countries we work in, generally, the countries seem to have these issues and it's quite volatile.

"Bangladesh is volatile. Thailand has its problems. We work through it. We manage it. We're very experienced. We do have contingency plans, but I don't think it will come to that."