Wooden furniture exporters need low interest rates, not tax incentives

Wooden furniture exporters now have products, but cannot sell them, they have orders, but dare not sign contracts. Vietnamese products have become less competitive on the international market because of the high interest rates.

The high inventory level has made wooden furniture manufacturers groan. They cannot sell their products because the products are not competitive in prices, while they cannot lower the export prices because of the input material price increases.

Vo Truong Thanh, General Director of Truong Thanh Wooden Furniture Group, who has returned from the Las Vegas wooden furniture trade fair, has admitted that the prices offered by foreign wooden manufacturers are lower than Vietnam’s.

Thanh said that Vietnamese exporters have to set up high export prices because they have to pay higher for the production costs, when the lending interest rates, the input material prices and the labor costs all have increased since the beginning of the year. Meanwhile, the world market has only accepted the five percent price increase.

As a result, a lot of Vietnamese manufacturers cannot get orders and many have to halt their operation.

According to Thanh, who is also Chair of the Binh Duong provincial Wooden Furniture Association, there are about 2000 wooden furniture manufacturers, while 30-35 percent of which have halted their operation or have been operating at moderate level. Meanwhile, the other 45 percent of enterprises just can break even and only 20-25 percent still can make profits.

Do Thi Loan, Deputy Chair of the association, said that the input material prices have increased by 25 percent on average, while the materials in high demand have seen the increase of 30 percent over the previous year. Especially, rubber timber has seen the prices increasing by 75-100 percent, since the timber has been hunted by Chinese businessmen.

In 2010, rubber timber was priced at just 3.5 million dong per cubic meters, while the price has soared to 6.5 million dong. Veneer and plywood imported from China have also seen the price increase of 23 percent, from 500 dollar per cubic meter to 620 dollars.

Loan said that in fact, the prices of the materials imported from the US or Europe have increased by 10-15 percent only, but Vietnamese importers have to pay higher by 25 percent due to the depreciation of the dong.

As a result, wooden furniture products remain unsold because the products cannot compete in prices with foreign made products.

“There have been no official statistics about the inventory volume, but I am sure the volume is huge,” Loan said.

She went on to say that wooden furniture manufacturers may face bigger difficulties in the time to come, when they are imposed the anti-dumping duties of 32 percent on the beds for bedrooms in the US.

Thanh from Truong Thanh said the expected post-tax profit of Truong Thanh would be about 110 billion dong only. Truong Thanh has invested in developing the material growing areas, which allows it to control 30 percent of the materials needed.

However, the number of enterprises which can have timber material sources like Truong Thanh remains modest. According to Tran Quoc Manh, Deputy Chair of the HCM City Fine Arts and Wooden Furniture Association, with the overly high interest rates, enterprises dare not borrow money to store materials, and they have to accept to purchase materials at different moments at high prices for processing.

Manh said that orders would come in rapid fire towards the end of the year, but many enterprises do not dare to accept orders, because they foresee losses.

Loan has stressed that the decision by the National Assembly to reduce the corporate income tax by 30 percent will make no significance. “What we need now not the tax incentives, but the low interest rates to maintain production,” Loan said.

According to Loan, in other regional countries, businesses can borrow money at four percent per annum, while Vietnamese enterprises have to pay 8.5 percent for foreign currency loans and 24 percent per annum for dong loans. – Vietnamnet

Tags: Vietnam furniture exports