Required co-operation among timber industry enterprises

According to Vietnam Timber & Forest Product Association (VIFORES), after seven first months of 2010, exports of timber product is estimated at over 1.78 billion, up 32.6% over the same period in 2009. Especially, export orders of timber processing businesses signed in 2010 have reached $ 3 billion threshold.

Glad yet worried

According to Mr. Nguyen Ton Quyen, Deputy Chairman and Secretary General of VIFORES, market demand bounces back after a period of decline due to recession, orders has been signed until the end of 2010 with a total turnover of $3 billion, up $ 400 million over 2009. In addition to the recovery in traditional markets like Japan, EU, Vietnam’s furniture has initially penetrated markets of some countries of Eastern Europe. Although relatively modest quantity, potential for export is relatively large. A relatively good point with the business sector is that it has been more than three months since Lacey law (law on declaration of timber origin) applied to exports to the U.S took effect on 1-May, there hasn’t been any Vietnamese lot of goods returned by this market. These positive signals are also acknowledged by many timber exporters of the whole country. However, these enterprises seem to concern about the disadvantages of wood raw material price increases, declining orders, shortage of labor.

Besides, that the furniture market becomes exciting again recovers the competition to buy wood raw material which strongly increases material prices while Vietnam cannot control the material sources by itself.

According VIFORES, to achieve turnover as planned, the timber for processing in 2010 is 6.4 million m3, while the domestic supply responses only 1.6 million m3, many timber plantations annually produce big output (5 million m3/year) but mainly small wood for paper, pulp and artificial boards production. Thus, Vietnam still has to import from 4-5 million m3 of timber per year. While imported wood prices is growing rapidly, the supply is scarce. Compared with early 2010, the price of imported timber from the main markets like the U.S., New Zealand increased from 15-30% (depending on type), of which strongest increases fell in pine and oak. This is a major setback of the timber industry because presently Vietnam has to import about 70% of wood materials. In the short-term, to deal the problem of domestic raw material prices, recently VIFORES and HCMC Fine Arts and Timber Processing Association has submitted an official letter to the Ministry of Industry and Commerce requesting measures to prevent massive timber export of preliminary processed forest timber (primarily rubber and Acacia) to China. Specifically, the letter requests for prohibited export of round wood and sawn wood in any pre-processed form; with refined wood products remaining current tax rate of 0%.

Another obstacle for Vietnam’s timber industry is that apart from traditional markets, we have yet exploited more new markets. Mr. Quyen said that in 2009 VIFORES and some furniture exporters conducted a survey in Belgian market with the purpose of establishing a bonded warehouses here. Although the Vietnam side fully met the legal requirements, it has been unable to make this plan because there wasn’t any authority to act as a clue. If there is a bonded warehouse here, Vietnam’s exports to markets of Eastern Europe will be very convenient and take advantage of abundant and rich raw materials of this region. Russian market is also evaluated as potential market especially for Vietnam’s wood products (furniture import demand in the Russian market amounts at around 7-8 billion per year) but how to promote this market, who is the organizer, where to get funds are still unanswered questions. Apart from Belgium and Russia, Vietnam businesses yet fails to effectively exploit other fertile markets such as India, Central Asia (Kazakhstan, Kyrgyzstan , Uzbekistan …)

To establish a timber transaction center of the three regionsVice Chairman of the HCMC Arts and Timber Processing Association, Mr. Tran Quoc Manh said although presently there haven’t been any shipment from Vietnam that exports to the U.S. market is returned, we have to still uphold the spirit of vigilance. To ensure the requirements of the importing country, the timber industry should necessarily use legal timber sources. This is a big challenge for Vietnam’s timber business. Accordingly, Mr. Manh recommended that in order to do this, businesses need to fully and detaily know source, origin, quantity and type of timber for export every year and at the same time must understand very clearly orders in terms of designs and consumption markets. In addition, to deal with commercial litigations (anti-dumping, anti-subsidy) of the U.S. domestic producers, Vietnam enterprises should diversify markets to the failure in one market would not affect to their business in other markets.

Mr. Manh added, 2009 exports of furniture of the 10 ASEAN countries (about 11 billion dollars) is only half that of China (22 billion). Not to mention, even in the ASEAN countries, Vietnamese business’s competitiveness is still behind Malaysia, Myanmar and Indonesia primarily due to weak capital, which is depending on as much as 70% of imported raw materials. Meanwhile, not only Vietnam but other countries, China in particular are also selling well.

In addition, Vietnam’s join in the WTO will create more opportunities to expand its export markets, especially the opportunity to receive large orders, so the connection and cooperation among its enterprises will help increase the competitiveness of Vietnamese timber in the international market. The co-operation plan also helps businesses to overcome barriers of continuous increase of imported timber prices. Currently there are more than 600 furniture exporters and almost the same number of timber import clues. This dispersal not only leads to uncertainty about prices but also makes business negotiations take longer and cost transportation charges. Thus in order to develop sustainably the co-operation solution is considered the most effective. – VCCI

Tags: Vietnam timber, Vietnam Timber exports

Posted by VBN on Aug 21 2010. Filed under Industry. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry