Wood Industry Struggling for Stimulus Solutions

 

The Vietnam Wood and Forest Products Association (Vifores) said Vietnamese wood production and trading companies are facing an imminent obstacle of fewer export markets. Major importing markets of the U.S., Japan and EU have cut wood imports. At present, up to 90 percent of Vietnamese wood export companies are enduring contract cancels by their partners while some other clients’ orders make up to only 30 percent-60 percent of the older volumes, putting almost enterprises in capital shortfall. Mr Nguyen Ton Quyen, Vice Chairman of the Vifores said Vietnam’s woodwork export hit US$1.3 billion in the first six months of this year, down 30 percent from a year earlier.

 

In addition, more and more big markets take protection measures, hindering Vietnam’s exports. Vietnamese woodwork exports are facing tight controls over quality and origins when being exported to the U.S. and EU. In 2009, the wood sector of Vietnam is also facing new challenges when ASEAN countries join hand to raise competitiveness. In this circumstance, around 20 percent of Vietnamese wood companies are on the verge of bankruptcy, 30 percent are facing difficulties and only 50 percent can survive well.

 

Also, Vietnamese wood production, processing and trading companies are encountering with a decrease in materials and domestic supply. The American Hardwood Export Council (AHEC), Vietnam is taking lead in ASEAN in terms of woodwork exports. However, domestic wood materials can satisfy only 20 percent of the demand and enterprises have to import the rest of 80 percent at high prices. In 2007, the wood sector of Vietnam spent over US$1 billion importing wood material and artificial planks. At present, around 500,000-600,000 cubic metres of wood materials are stockpiled at the Saigong, Danang and Quy Nhon ports amid economic crisis, regardless of inventories of enterprises.

 

In the near term, Vietnam may incur narrower wood export markets as wood furniture exports to the U.S. and EU will fall 30 percent-35 percent while some contracts will be delayed or cancelled. Expert said that the wood export revenue of Vietnam will grow only 8 percent-10 percent in 2009.

The Vifores said that the government of Vietnam should continue to support wood enterprises by maintaining imminent policies in order to help them deal with current difficulties.

 

 In financial policies, the Vifores proposed the government to cut corporate income taxes by 30 percent for the fourth quarter of 2008 and the whole 2009 for wood production and trading companies. The association also suggested extending term of paying corporate income taxes by nine months for wood production and trading companies with larger inventories. It also recommended the government to reform import-export procedures, shorten time of goods customs declaration and simplify tax refunding procedures for wood material imports to process for exports. Enterprises should apply goods deliveries at bonded warehouses in major export markets to remove payment obstacles and minimize risks. The association will coordinate with enterprises to make plans build bonded warehouses in some large markets of the U.S., EU, Japan and Russia to submit to the prime minister for approval soon.

 

Moreover, Vifores proposed the government to take specific measures to facilitate enterprises to access to capital sources with priority given to small and medium-sized enterprises in wood production and trading for exports. The government should also guide credit institutions in providing loans with negotiated interest rates in pursuant to the Resolution No. 23/2008/QH12 dated November 6, 2008 by the National Assembly on the socioeconomic development plan for 2009.