Exporting wood to new opportunities

	Changing the market, exporting wood is facing big challenge
	Exporting woods absolutely achieves $US 10 billion in 2020
	Exported wooden pallets need to prove legitimacy

n 2019, export of timber and forest products aims to reach 10.8 - 11 billion USD. Photo: N.Thanh.

Many immense opportunities

According to the Ministry of Agriculture and Rural Development, in 2019, the entire forestry sector strives to achieve the value of export turnover from 1.5 to 1.7 billion USD, corresponding to growth of 16-18% compared to 2018, reaching the total price value of wood and forest products expected export turnover to reach 10.8 - 11 billion USD. Considering the overall market potential in 2019, as well as further into the future, it is easy to see quite a number of favorable conditions that will promote the export of timber and wood products. Minister of Agriculture and Rural Development Nguyen Xuan Cuong analyzed: the global furniture market size is very large with an indoor furniture value of about US$ 430 billion and an outdoor furniture value of about US$ 150 billion

. Currently the export turnover of timber and forest products in Vietnam accounts for only 6% of the global market share. Besides traditional markets, the increase in consumption in new and potential markets such as Canada, Asia - Europe Economic Union, Central South Asia ... opens opportunities for Vietnam's furniture export in the coming time.

In addition, with the implementation of the roadmap of Free Trade Agreements (FTAs), import duties on many goods of participating countries will continue to be reduced or removed, creating competitive advantages for goods export for Vietnam. Specifically, the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and Vietnam - EU Agreement (EVFTA) will completely eliminate tariffs on wooden furniture items once they become effective. The VPA / FLEGT Agreement between Vietnam and EU will be approved in early 2019, opening up opportunities to improve the competitiveness of Vietnamese furniture when exporting to the EU, creating an international reputation for Vietnam’s wood products in the international market ... "The source of sustainable domestic materials is becoming more and more advantageous for the wood and forest product processing industry while maintaining the ability to export surplus at a higher level. This is the basis for forming its own identity, growth breakthroughs towards a legal, quality and sustainable production center of the world,” said Minister Nguyen Xuan Cuong.

Regarding this issue, Mr. Huynh Van Hanh - Vice Chairman of HCM City Fine Arts and Wood Processing Association said: Vietnam's wood industry after a period of development and accumulation has built a strong foundation of production ability with modern technology innovations, and the step by step improvement of corporate governance. The main export markets for timber and wood products in Vietnam are stable and growing. "Trade in the furniture sector, thanks to favorable conditions, increased by about 4% in 2018, with the growth concentrated mainly in the Asia-Pacific region. Currently, the main exporters are China, with 35% market share and growing, Germany with 8% is stable, Italy and Poland are stable at 7%, Vietnam is 6%, doubling its growth rate and accounting for 63% of the total export of wooden furniture in the world. Our starting point is very low while the market opportunities in the future are still very favourable, and if there is a breakthrough policy, the wood industry will have a spectacular breakthrough. “

Notably, according to Mr. Hanh, unlike many types of products and wooden products that belong to the basic demand group, there is no abnormal increase or decrease. Export market reaches more than 100 economies so it does not depend too much on any market. Where businesses can open the market, keep going there, and not be afraid of competition. The source of raw materials is the only natural resource that can be reproduced right in the country, so the sustainability is very high.

Many challenges

In addition to favorable factors, Vietnam's wood export also faces many challenges. According to the Ministry of Agriculture and Rural Development, typically there is a lack of cooperation and linkage between manufacturing, processing and exporting enterprises with forest growers for improving the quality of timber from planted forests. Timber plantations are mainly small, exploited early, of low quality, and along with the rapid development of wood processing establishments, this could create pressure on raw materials, while imported materials are increasingly scarce and expensive. In addition, international protectionism is on the rise; Trade conflicts between major economies that are major markets in this sector will certainly impact on many aspects, with both advantages and disadvantages for increasing the sustainability of export processing industry with timber and forest products. Requiring the management of "clean" timber and origin of products is a challenge for state management.

Representative of Binh Dinh Timber and Forest Products Association analyzed: Currently, the United States is the largest export market of Vietnamese wooden furniture. Vietnam is becoming the main competitor, many orders are moving from China to Vietnam to export wood products to the United States with many similar advantages. Therefore, foreign investment flows (mainly from China) poured into direct competition of labor and raw materials, putting pressure on domestic enterprises. "Low-cost strategy also poses a risk of flooding of goods, leading to anti-dumping taxes, and even investigation of trade frauds against Vietnamese wood products. Global wood material flows into China currently shifting into Vietnam is an advantage for producers, but also pushes domestic suppliers of wood materials into a difficult situation when raw material prices fall deeply," said Binh Dinh Wood and Forest Products Association’s representative.

Some experts stated that the technology and innovation gap is also a big challenge that the wood industry must seriously recognize. Vulnerabilities in labor productivity, management and technical levels still exist in many wood processing factories. With large production contracts, many small and medium-sized companies have limited investment ability, they do not develop original designs, lack their own brand, and few technology updates have hindered efforts to win orders...

To accompany the business

In order to promote the development of a sustainable wood processing and export industry, Binh Dinh Association of Wood and Forest Products proposes to the Government and ministries and sectors to continue to create a clear legal framework to support the export-oriented economy through capital incentives, increasing credit limits for manufacturing and manufacturing sectors and small and medium-sized enterprises in the private sector; consider the source of domestic plantation timber and imported timber as a basis to ensure material security for the wood processing industry; attracting clean investment capital into the furniture industry; promoting green manufacturing to become a new economic growth engine, a new advantage in international competition.

Deeply analyzing the technology perspective, Mrs. Duong Thi Tu Trinh, Director of Thuong Nguyen Co., said: When the Technology Revolution 4.0 is going strongly, the continuity between processing technology and wood production is born. In the face of the Industrial Revolution 4.0, wood processing enterprises have only tended to develop and catch up with the trend of machinery technology to meet the increasing demand of the market. "In order to do this, the State needs a mechanism to encourage the wood processing machinery industry to develop in parallel with the wood production industry towards sustainable development. The State should create conditions for enterprises to buy wood processing machinery such as from Germany, Italy, Japan, or at least Taiwan (China), so that woodworking machinery enterprises can produce Vietnamese-branded machines. The wood processing machine industry is looking for technology to buy, it is currently not strong enough with the constraints and funding of millions of dollars," Mrs. Tu Anh said.

Mrs. Tu Anh made specific suggestions such as: There should be tax incentives and conditions for importing advanced machinery, equipment and technology in accordance with Vietnam's industrial conditions from developed countries (like the US, Canada, Germany, Italy) that are more convenient with the support of technology transfer of machinery operation, equipment use, and qualification; creating conditions for businesses to access preferential medium and long-term capital to buy machinery and equipment to improve wood processing technology, including auxiliary technology ... In addition, the State should have synchronizing policies in wood production so that wood enterprises can participate in the supply chain, enough to receive larger orders today.