Wood Export: Many Concerns Exist

Major barriers to Vietnam’s woodwork shipments are the US Lacey Act and the EU Forest Law Enforcement, Governance and Trade (FLEGT). According to the Lacey Act, exporters are obliged to submit declarations and certificates bearing the names, types, nationalities and logging methods of wood and wood-related products. Or, in other words, products must be certified by the Forest Stewardship Council (FSC). The EU FLEGT will take effect in January 2012. Both laws require exporters to present all production processes, from exploiting to finished products, in a transparent and clear manner. These are serious obstacles for woodworking enterprises and exporters in Vietnam because no State or private entity has been officially named to grant FSC certificates for woodwork exporters.

 

What is more, smallholding producers and households are unlikely to obtain FSC certificates because of complex procedures and high costs, which may amount to thousands of US dollars. According to the Quang Ninh Department of Agriculture and Rural Development, the province has 427,000 ha of forest and more than 40 wood processors and producers. However, very few of them have obtained FSC certificates.

 

Meanwhile, the competitiveness of Vietnam's woodwork companies is not as high as in regional countries like Myanmar, Malaysia and Indonesia because they have enough timber supplies; thus, their input costs are lower. According to statistics, Vietnam has to import 80 percent of raw materials (4 million cubic metres of logs and accessories from 26 countries and territories). As a result, it is very difficult to control the origin and legality of timber. This is a grave difficulty for Vietnamese exporters, especially when shipping products to traditional markets like the US (accounting for 45 percent of Vietnam’s woodwork exports) and the EU (30 percent).

 

Vietnamese woodwork companies are unevenly located throughout the country. The northern region accounts for only some 14 percent of 3,000 woodworking companies, the northern central region takes up 6 percent, and 80 percent are in southern central and southern regions. Vietnamese companies also have to import materials for production like paint, glue and paper, because Vietnamese supporting industries remain undeveloped in the country.

 

Particularly, woodworking technologies are quite outdated in Vietnam, where a substantial majority of equipment and machines are made by Taiwan, China, and only a small proportion are imported from Germany, Italy and Japan. Vietnamese companies have small and medium operating scales, weak governance and insufficient technical workers, and lack funds; hence, their products are not diverse.

 

Currently, the Government has focused its efforts on curbing inflation and reducing trade deficit. This is totally true on the national scale, but it is not for some specific industries like the wood industry, which is heavily dependent on imported materials. Besides, interest rates are too high for Vietnamese woodwork to be competitive on global markets.

 

Additionally, policies on land tax and forestland accumulation in Vietnam are not really appropriate, regulations on natural forest are not actually practical and woodworking businesses have difficulty accessing forestland to build their own material zones.

 

To address these concerns, Vietnam needs long-term strategic solutions to ensure the sustainable development of timber export in particular and the timber industry in general.

 

First of all, it needs a new national woodworking network plan to rationalise regional distribution, balance restructure, and develop domestic woodwork processors. Currently, most wood processing enterprises are concentrated in the south while the northern wood processing industry is weak. Foreign-invested companies make up a large proportion. In addition, the country needs to set up material importing and supplying centres or log markets for major regions, and reorganise the material supply system. In the long term, the woodwork export sector should be professionally organised into three groups: material suppliers, producers and exporters.

 

Second, Vietnam needs to create stable imported timber sources to strengthen market stability, sign long-term supply contracts, clarify origins and legality to meet requirements in importing nations. It also needs policies to expand traditional markets like the US, the EU and Japan and seek out new ones like Russia, Eastern Europe and Africa.

 

Third, woodwork enterprises need to improve their competitiveness by modernising equipment and technologies to enhance productivity and product quality, and boost export of highly refined wooden products to increase the value of products. Especially, leading corporate and product brand names are needed to increase the proportion of direct export and boost product competitiveness by diversifying options, improving design and capacity to compete with other rivals, particularly Chinese.

 

Last but not least, the Government needs to promote investment for forestation to increase material supply, have encouragement and incentive policies (land, capital, taxation, etc) to attract domestic and foreign investors to focus on material forests to reduce the volume of imported timber.