Vietnamese wood processing industry, which has achieved vigorous growth over the past years, is now in need of around US$4 billion by 2010 to finance forest development, material imports and equipment upgrading, among others, to facilitate further development.
Nguyen Ton Quyen, vice chairman of the Vietnam Timber and Forest Product Association (Vietfores), says more than 2,000 wood processors in the country are in need of funds to grow forests for wood, buy equipment and add operating capital.
“This is a three-pronged investment approach but financial resources are most important,” he says.
Forecasts by the Ministry of Agriculture and Rural Development indicate that the industry’s exports will amount to US$4 billion by 2010 and the figure will double by 2020. However, the Ministry of Trade seems to be more optimistic given the industry’s current strong growth and its forecasts put the country’s total woodwork exports by 2010 at US$5.7 billion, compared to this year’s only US$2 billion.
Quyen says that to obtain US$4 billion or US$5.7 billion exports by 2010, the industry will need a minimum investment of US$4 billion, with US$1.5 billion going to expanding forests in the country. International organizations have already pledged a total of US$600 million in aid for Vietnam to mainly grow forests for wood.
Processors will need at least US$2 billion to finance their day-to-day operations and new equipment and wood imports, Quyen says, adding this amount will come from commercial bank loans.
Tran Van Hao, assistant director of Savi-Woodtech factory in Ho Chi Minh City, says the shortage of funds is what wood processors are most worried about at the moment because new orders are rising and export markets are being expanded.
“Capital is the biggest worry for companies that take orders beyond their financial capability,” he says, adding that if they manage to implement the orders on their own, their output capacity will be certainly insufficient.
If they partner with other processors to fulfill the orders, they will not be certain whether or not their partners can meet the requirements of customers. The only way out here is to borrow from banks to finance their expansion and staff recruitment,” he said.
Over the past one month, the Hanoi-based Technological and Commercial Bank of Vietnam (Techcombank), in coordination with Vietfores, has organized a series of seminars on financing of wood processors in Hanoi, Danang and Ho Chi Minh City.
Luu Duc Khanh, deputy general director of Techcombank, says the biggest challenge facing the domestic wood processing industry is how to cope with the lack of funds.
“Many businesses have told us that they have foreign customers but often shun their orders for fear of inability to fulfill their large orders.”
With more than 90 transaction offices nationwide and 10,000 branches of foreign banks with which Techcombank has corresponding banking relations, the bank can provide loans with competitive interest rates for processors to pay for wood imports and workers, Khanh says. Companies can use their imported wood as collateral to take out loans from the bank and the loans can account for 70 per cent to 80 per cent of the value of mortgaged wood.
For exports, companies can borrow an amount, in both local and foreign currency, equivalent to a maximum of 70 per cent of a letter of credit (L/C). Techcombank also provides telegraphic transfer, documentary collection, documentary of payment and documentary of acceptance and factoring services for woodwork exporters.
The bank’s other services are also offered to wood processors to avoid foreign exchange risk, including spot, forward, swap and option.
“We are bringing flexible financial services to make customers feel secure about financial matters,” Khanh says.
In other news, the local wood processing industry has exported more than US$1.2 billion worth of woodworks in the first eight months of this year, hitting an on-year rise of nearly 21 per cent, said the latest report of the Government Statistics Office.
Saigon Times Daily
Vietnamese
