Besides the certain achievements of wood industry last years, and new opportunities coming from Law on Forestry and free trade agreements, there are various difficulties and challenges this industry has to overcome to reach the target set forth.  

Wood and wood products are a key export segment in Vietnam

In 2017, the export value of lumber and forestry products was $8 billion, while the domestic sales was $1.47 billion. Wood and wood products became the sixth-ranking export item of Vietnam, capturing 6 per cent of the global market share. Vietnam ranks fifth over the world in terms of wood and wood products exports, as well as second in Asia, and the first in the ASEAN.

However, Nguyen Xuan Cuong, Minister of Agriculture and Rural Development, said: “$1.47 billion is a small number compared to Vietnam's potential. Thereby, the wood sector should evolve the domestic market to reach $4 billion in domestic consumption and $10 billion in wood and forestry products exports by 2020, according to the action plan for the development of the wood and wood products market in 2014-2020.”

In order to reach the target, the forestry industry set the $10.22-billion target in total product value in 2018, with the export value of wood and wooden products at $8.66 billion. It set the total product value target of $11.49 billion in 2019, with the export value of wood and wood products at $10 billion.

Favourable conditions and opportunities

The export value of wood and wooden products in the first two months of this year is estimated at $1.3 billion, up 20.1 per cent on-year. The US, China, and Japan are the top three export markets of Vietnam.

Nguyen Quoc Khanh, chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), said that the number of furniture production regions over the world has not increased, with the exception of the Asia-Pacific. Thereby, opportunities for enterprises’ development, potential markets, and good competitiveness all provide favourable conditions to this sector.

Meanwhile, China's anti-dumping lawsuits in the US resulted in smaller competition in furniture items. The demand for furniture in the world grows, while furniture production is a particular strength of Vietnamese enterprises.

Besides, as the 2017 Law on Forestry created favourable conditions, the new free trade agreements resulted in increasing taxes on raw agricultural products, as well as Vietnam's policy stability will strengthen the development of this sector.

“We have enough favourable conditions to develop the wood sector. If we miss this chance, Indonesia or Malaysia will surely surpass Vietnam to take control of the market, reaching the top of the ASEAN market,” emphasised Khanh.

Minister Cuong said that in order to hit the target of $4 billion in domestic consumption and $10 billion in export value by 2020, wood processing needs to capitalise on last year's successes to evolve in the coming time. Especially, it is necessary to boost forestation, apply scientific innovation to enhance productivity and value, and supply materials for domestic consumption and export.

Difficulties ahead

In addition to the advantages, Khanh also noted there are some challenges in front of the sector. The US is the first-ranking export market of Vietnam, but the US government has reduced corporate income tax (CIT) to 25 per cent (from 35) to develop the local wood sector. Thereby, Vietnamese enterprises should avoid sectors or items which are growing in the US.

Wood exports to the European market are not increasing, as the decreasing euro is causing difficulties for Vietnamese exports. Meanwhile, the demand from China, Japan, and South Korea is not rising. As a result, Vietnamese firms should break open new markets and take advantage of tax incentives.

VIR