Vietnam’s furniture makers claim tax laws are stacked against them

Vietnam’s wooden furniture makers complain that although their exports to other countries are burdened by high tariffs and strict standards, wooden furniture made elsewhere enters Vietnam freely.

Wooden furniture manufacturers in Vietnam have concentrated on making products for export. Now, according to a report in the vernacular newspaper Nguoi Lao Dong, they have woken up to a startling fact: Vietnam’s three billion dollar a year domestic market is falling to foreign, chiefly Chinese, competitors. Some Vietnamese companies have been trying to “reoccupy” the domestic market. Experts warn that they’ll find it hard going unless they get support from the State.

Tax policies disadvantage domestic manufacturers

It used to be that wooden furniture imports bore a tariff of 10 percent or higher. However, the tariff has been lowered to a level of zero to three percent since the beginning of 2009.

Apparently, though Vietnamese companies manage to export furniture under contract to Western countries at competitive prices, with the current tariff their products are not so price competitive in Vietnam itself.

Meanwhile, the export tariff on timber has been lowered from over ten percent to zero. Foreign enterprises are now buying wood from Vietnam to make products. Some of the finished products are exported profitably back to Vietnam.

The Dong Nai Forest Products Processing Association and HCM City Handicraft and Wood Industry Association (HAWA) have many times proposed to the Ministry of Industry and Trade and the Ministry of Finance that the timber export tariff be reinstated and the tariff on finished wood products be raised. The ministries have not yet replied.

Wooden furniture manufacturers predict that if the situation cannot be improved, many enterprises will die. Huynh Quang Thanh, Director of Hiep Long Furniture Co. (Binh Duong) says that elimination of the timber export tariff reduction has triggered an export boom. With demand high, furniture-grade timber prices have been increasing continuously from four million dong or less per cubic metre to six million dong, squeezing domestic furniture makers’ profit margin down to ten percent or less. Thanh says that for some companies now, the more they produce, the greater their losses.

Manufacturers plead for help

Dang Quoc Hung, the head of the Kim Boi Wooden Furniture Co. (HCM City), is upset. He says that Vietnam’s exports to other countries now have to bear high tariffs of ten to fifteen percent. Hung also complains that the importing countries have installed ‘technical barriers’ to wood products imports. Exporters must prove the origin of the materials they use and meet strict consumer safety requirements. By contrast, furniture imported into Vietnam faces no barriers at all.

[In both the EU and the United States, laws have recently gone into force that require furniture makers to certify that the wood used in their products was not ‘illegally sourced.’ The country of origin and species name of the wood must now be clearly stated on all imported furniture. – VNNB]

Dien Quang Hiep, head of the Minh Phat Furniture Co. (also HCM City) is studying the Vietnamese internal market. “Our companies really want to conquer the home market, he says, but are intimidated by the work that will require. To be able to sell products widely in Vietnam, they’ll have to invest in a distribution network, conduct market surveys of consumers’ taste, and design suitable products. To accomplish all those things,” Hiep concludes, “they need the support from the State.”

HAWA Chairman Huynh Van Hanh agrees that the biggest problem of domestic furniture makers is an inadequate distribution network. Hanh thinks that manufacturers should cooperate with trading companies to distribute their furniture. Distributors can take on the work of considering market demand and tastes, and then place orders with manufacturers. That should ensure that manufacturers will have big orders, allowing them to reduce the production cost and make competitive products.-Nguoi lao dong

Tags: Vietnam Furniture makers