Wood Product Exports Sharply Fall

Despite Vietnam’s sharp fall in export revenue last year, the wood processing industry still ranked 6^th in the list of the country’s key export items with export revenue of some US$2.8 billion. The country aims to gain wood export revenue of US$3.2 billion this year. However, the wood industry is encountering many difficulties due to bad impacts by the global economic slump.

The country is now home to around 2,520 wood product businesses, including 420 foreign-invested firms. Vietnam’s wood processing sector has lured 417 foreign-owned projects worth more than US$1 billion. Kaiser Company in Binh Duong alone, which doest not work at full capacity, exports 600 containers per month. Once Kaiser completes a 100-hectare project to build warehouses and depots, it can make a great contribution to increasing the sector’s wood product export revenue.

 

Over the past recent years, the wood processing industry has not only seen a sharp rise in plant number but also invested in equipment improvement to sharpen the product’s competitiveness in the world market. Domestic firms are also expanding their production scale with big names like Khai Vy, Tien Dat, Dai Thanh. Khai Vy Ltd. Co., with the two initial factories in Ho Chi Minh City and Binh Duong, has to date had four plants using 4,800 workers and exporting over 500 containers each month. It is seeking to buy another factory worth US$25 million.

 

With export turnover of US$2.8 billion in 2008, up 11 per cent on-year, the Vietnamese wood industry climbed up to the fifth position in the world standing behind China, Malaysia, Indonesia and Thailand. Vietnam is considered as a potential emerging rival in the wood industry thanks to low labour cost and abundant labour force.

 

So far, Vietnamese products are present in 120 countries worldwide and are very diversified. Among those, the US accounts for 41 per cent, the EU 28 per cent and Japan with Japan with 12.8 per cent of Vietnam’s total wood product export value. These are the biggest importers of Vietnam’s wood products, making up more than 80 per cent of the country’s aggregate wood product export. Besides, Vietnamese wood products are exported to South Korea, Canada, Norway, Hong Kong, Ukraine and several others. Particularly, the wood product export value to the US, Japan, the EU, Canada and South Korea has strongly increased with the main products namely outdoor tables and chairs, furniture, handicraft wood products, artificial boards, wood chips and many others.

In reality, the world’s wood production demand has decreased since late    2008, especially in the US and the EU with a decline of up to 30 per cent. This has affected Vietnam’s wood production and business. Currently, Vietnam has to import around 80 per cent of wood materials from Indonesia, Malaysia and Brazil. However, the material prices have been up 20-25 per cent and transport fees have also grown by 40 per cent.

 

According to Nguyen Ton Quyen, vice chairman of the Vietnam Wood and Forest Products Association (Vifores), local exporters can only ensure orders till April this year, while seeking new orders are still unknown. Due to order shortage, roughly 600,000 cubic metres of imported wood materials have not yet been used for production. If being kept in stock for a long time, their quality will be badly affected. In Bac Ninh, more than 300 wood companies, mostly traditional handicraft wood firms, are in a very difficult situation. Many among those have to stop operation and the rest has to cut production and dismiss workerse to maintain operation. Cung Quang Binh, director of Binh Nguyen Wood Company in Dong Ky, Bac Ninh province worried that “So far this year, his company’s staff number is lowered to 400 from 100 ealier. The biggest difficulty for it is outlet as all export contracts signed with China are now frozen”.

 

Southern Binh Duong province’s Department of Industry and Trade indicated that about 95 per cent of local wood exporters are coping with challenges as their partners stop contracts. The majority of customers only need 30-60 per cent of products compared to old orders.

 

Vifores said around 20 per cent of Vietnamese wood businesses are on the verge of bankruptcy, 30 per cent falling into difficulties and just 50 per cent can keep their operation.

 

Notably, slow change in design is one of major reasons weakening Vietnamese wood products’ competitiveness. In fact, up to 90 per cent of local exported wood products are sold via intermediate stage because Vietnam is not really able to retail products to consumers. Processing products under foreign partners’ orders turn Vietnamese firms into hired labourers, affecting Vietnam’s wood trademark in the world market.

 

According to forecasts, the country’s wood product export value will decline by 30-35 per cent and even signed contracts will be delayed or cancelled.

To gain the set target of US$3.6 billion in wood product export in 2010, experts said, the government, associations and wood companies should make greater effort. Associate. Prof. Nguyen Thi Huong from National Economics University said, the government should exempt export tariff for wood products temporarily in the context of the global economic slump. Besides, the government needs to extend time for loan payment, reduces or delays corporate income tax payment. The government should have a policy on trade promotion assistance and fund design contests to diversify products. It is important to stabilise the development of wood materials and boost forestation to meet demand for the wood industry.

 

Huong added that Vifores needs to set up an information channel on forestry product processing and trading, including wood material market; hold meetings for wood companies to exchange experience and discuss cooperation to form a network of marketing-supply-production-export, in which, each enterprise specialises in an area and acts as a link in the chain. The association is required to support its firms to deal with anti-dumping lawsuits.

 

Companies are urged further update information about the wood market and particularly study importers’ laws. They should concentrate on developing furniture and luxury products to earn more profits and deepen Vietnamese wood products’ strength.