FDI in the woodwork industry has been increasing rapidly in recent years, especially since the US-China trade war.

The Foreign Investment Agency (FIA) reported that there were 966 FIEs in the industry, an increase of 11.4 percent compared with 2018 with total investment capital of $6.3 billion, up by 13.2 percent.

Of these, 663 FIEs export wood and wood-made products, accounting for 15 percent of 4,464 enterprises in the industry, up by 26 percent.

Export turnover from FIEs has increased rapidly. In 2019 it was nearly equal to that of Vietnamese enterprises. The enterprises exported $4.95 billion worth of products in 2019, or 48 percent of the total export turnover of $10.3 billion.

The growth rate obtained by FIEs in that year exceeded the growth rate obtained by Vietnamese enterprises, 25 percent vs 19 percent.

More and more foreign invested enterprises (FIEs) in Vietnam have begun exporting woodwork products as Vietnamese enterprises increasingly lose market share.

The targeted markets of FIEs are still the traditional markets of Vietnam’s woodwork industry. 

The woodwork exports by FIEs to seven markets with export turnover of $50 million or higher were below expectations. In 2019, only five markets had turnover of over $100 million.

Of these, the US was the biggest importer ($3.5 billion in import turnover) and fastest growing market (up by 35 percent). Meanwhile, the export turnover to China and South Korea decreased by 24 percent and 31 percent, respectively.

Analysts say that boosting export is difficult as Vietnam is one of the countries that has suffered from material shortage in Covid-19.

Do Xuan Lap, chair of Vinafores, said FIEs bear direct impacts from Covid-19 because of close relations with China.

There has been no official assessment about the impact of the epidemic on FIEs in the woodwork industry, but Lap’s analysis is reasonable. First, there are many Chinese invested enterprises operating in the industry in Vietnam. The policies on travel limitations have directly affected Chinese workers at factories.

Second, FIEs in the woodwork industry not only include enterprises owned by investors from China, but also from other countries which depend on Chinese material supplies. Covid-19 might have caused interruption in the material supply chain.

FIEs act an important link in Vietnam’s production chain which aims to export $20 billion worth of products by 2025. Therefore, To Xuan Phuc from Forest Trends believe that it is necessary to have policies to connect FIEs and Vietnamese enterprises.

Mai Lan 

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