Vietnam’s Wood Processing Industry
Seeking Government Support
|Vietnam’s domestic wood processing
industry, the country’s fifth
largest hard currency earner, needs more support from the government,
industry associations and companies to reach its export value target
for 2009-10, reported Vietnam News. Because of 2008’s export
value of $2.8 billion, the industry has became the fifth-largest
wood-product exporter in the world after China, Malaysia, Indonesia and
In spite of high growth in recent years, Vietnamese wood processors have had fewer orders in 2009 because of the global downturn, said Nguyen Ton Quyen, Chairman of the Vietnam Timber and Forestry Products Association. Vietnam has about 2,520 wood processing establishments, of which 420 are foreign-invested, according to the association. The export target is US$3.2 billion for 2010. Among the many local wood exporters, Khai Vy is one of the most successful, with four plants employing 4,800 workers and exporting over 500 containers of wood furniture each month. Kaiser in Binh Duong province is also a major producer in the same class.
Export Dropped drastically in 2009
Vietnamese wood furniture products are exported to 120 countries, of which the US imports up to 30% of the country’s total wood furniture and forestry product value. The United States is Vietnam’s biggest importer of wood products, with the EU and Japan together representing 55% of imports.
The global recession has lowered the purchasing power of the US and EU markets by 30%, and as a result fewer export contracts have been signed.
A representative of the southern Binh Duong province’s Department of Trade and Industry said that about 95% of Vietnam’s wood furniture exporters faced difficulties because their partners had cancelled or reduced import orders.
Contracts have fallen between 30% and 60% recently, compared to the same period last year, putting many companies on the brink of bankruptcy. Quyen also said that only 50% of those involved in the wood processing industry could withstand the downturn and the remaining half were in a danger of bankruptcy or experiencing severe hardships.
Cung Quang Binh, director of the Binh Nguyen Wood Furniture Company in northern Bac Ninh province, said his company exported all of its products to China but over the last few months, the market became frozen. "To survive, we have had to reduce the number of employees from 100 to 40," he said.
Bac Ninh province has more than 300 wood processors, most of which are making wooden handicrafts. In previous years, they could earn US$50 million in export value annually, but the figure has dropped 70% this year, according to Nguyen Van Khanh, chairman of the Bac Ninh Timber Association.
Seeking Government Support
- Industry insiders said that to realise the export targets, the government should temporarily stop collecting export taxes on wood products at a time when the market is fluctuating wildly.
- Wood processors’ debt-repayment periods should also be extended and the government should allow wood processors to pay less in corporate income taxes or delay their payments.
- In addition, companies should be provided with easier access to loans to have enough working capital for production.
- Executives said the government must have more preferential policies to encourage domestic and foreign enterprises to invest in the wood industry to modernise production technology and improve product quality.
- The association should encourage each company to be responsible for one process, including wood material supply, production or export.
- To ensure sustainable development, experts said wood enterprises must pay more attention to the domestic market to fully tap its potential, particularly when export markets are soft.
A survey of 210 families in urban areas made by the timber association shows each Vietnamese family spent 3 million dong (US$170) on average for wood products per year while guesthouses and hotels paid 12 million (US$675) and 30 million dong (US$1,700), respectively.
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