Chinese FDI overwhelming the wood industry, with low investment capital

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Enterprises in the wood processing and exporting industry in Vietnam want to be able to attract selective FDI with relatively new technologies. Photo: Nguyen Thanh

According to the latest information from the General Department of Forestry (Ministry of Agriculture and Rural Development), in 2021, the wood and forest product processing industry will have 203 newly registered enterprises, including 46 FDI enterprises.

Specifically, there are 41 enterprises from China (36 enterprises from Mainland China, five enterprises from Taiwan); three enterprises from South Korea; Canada and Finland each have one business.

Providing in-depth analysis of FDI enterprises investing in the wood industry in 2021, Bui Chinh Nghia, Deputy Director of the General Department of Forestry, said: The total registered capital of 46 FDI enterprises is US$71.6 million, an average of US$1.6 million/enterprise (China is US$1.54 million/enterprise; Taiwan is US$2.1 million/enterprise, Canada is US$5 million/enterprise).

Thus, the number of foreign enterprises registered for establishment is higher than in 2020 (46 compared to 36 enterprises), but the average registered capital per enterprise is much lower than the average of US$4.6 million/enterprise of 2020.

In attracting FDI into the wood industry, one of the problems in recent years is the emergence of "underground" and "hidden" investment, and put Vietnamese wood at risk of trade remedy investigations.

Nguyen Pham Nhu Ha, Deputy Head of the Department of Supervision, Management of Origin of Goods and Intellectual Property (Department of Supervision and Management of Customs, General Department of Customs), said that recently, she has witnessed many anti-dumping investigations into wood products.

There are two main forms of fraud that Chinese-invested enterprises are taking advantage of to get Vietnamese origin to export to some major markets, namely the US.

The first trick is an enterprise that imports peeled wood and plywood from China, but then takes the origin of Vietnam to export. Enterprises hardly do much processing, from raw materials to finished products.

The second common trick is that many enterprises buy raw materials from suppliers who are Chinese-invested enterprises, but each enterprise only buys a few products and then reassembles them. "The form of buying and selling wastes a lot of time for Customs authorities to investigate and collect information," Ha said.

Talking to Customs News, Do Xuan Lap, Chairman of the Vietnam Timber and Forest Products Association, suggested that the Government strictly control trade fraud, including FDI projects, especially projects with small scale, simple technology, production of goods with fraudulent signs and capital from China.

The control focuses on investment projects in groups of products with high risk of commercial fraud of the timber industry (the goods subject to anti-dumping tax by the US). Investment licensing should be carefully considered, prioritizing the use of high technology in the spirit of Resolution 50-NQ/TW dated August 20, 2019 of the Politburo on improving the quality of FDI investment.

"Technology in new investment projects in the wood industry needs to be appraised by the Advisory Council of the Vietnam Timber & Forest Products Association," said Do Xuan Lap.

Representatives of a number of wood industry enterprises expressed their view that the Ministry of Planning and Investment should have a "filter" on capital sources and investment scale of FDI projects. The wood processing industry accepts competition but must attract selective FDI with relatively new technology.