Vietnamese wood industry targets high growth
Vietnamese wood industry targets high growth
The goal of the Sustainable Wood Processing Industry Development Scheme in Vietnam, for the period 2021 to 2030, is to achieve an export target of USD 25 bn for wood and forest products.
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However, to accomplish this ambitious goal, the wood industry needs to remove many bottlenecks in the supply of raw materials, higher labor productivity, and better access to production technology.
Growth target
In the first three months of the year, the export turnover of the wood industry in Vietnam reached USD 3.94 bn, up by 3% compared to 2021. Furniture businesses are now full with orders until the third quarter and some businesses even have orders until the end of the year, because the world's demand for furniture is still on the rise.
According to calculations, if the average export value is kept at about USD 1.5 bn per month, the whole industry target of reaching USD 16.5 bn this year is quite feasible. In 2021, despite many difficulties due to the Covid-19 pandemic in the third quarter, the wood industry still maintained its position among the top export industries in the country, at over USD 10 bn. Specifically, the whole industry reached a target of USD 14.8 bn, an increase of nearly 20% compared to 2020.
Looking back at the development and growth of the wood industry over the years, Ms. Do Thi Thu Huong, a member of the research team at Private Economic Development Research Board (Board IV), reporting on "Vietnam's timber industry and strategic issues, orienting development solutions to 2030", said that in the last ten years, the growth rate of Vietnam's wood processing industry is among the most dynamic in the world. Vietnam is currently ranked seventh in the world in terms of wood products and furniture production, second in exports in the Asia Pacific region, and fifth in the world, with the main export markets being the US, Japan, and China.
Vietnam's wood and wood products, as well as furniture are continuously being ranked in the top ten industries with the largest export turnover in the country. It is an industry that has brought in the third largest export surplus in recent years, contributing an important source of foreign currency to the country’s foreign exchange reserves. The woodworking and furniture manufacturing industries contribute greatly to jobs creation, providing more than half a million jobs, ranking fifth in the volume of workers among the manufacturing and processing industries.
Remove bottlenecks
Despite the rapid growth, Vietnam's wood industry is facing many problems, in which the supply of raw materials is constantly facing huge bottlenecks that need to be removed so that the whole industry can grow sustainably. According to statistics, currently the domestic supply of raw materials can only meet about 75% of the total processing demand, including the exploitation of cultivated forests and extraction of scattered crops, and rubber wood.
Each year, Vietnam still has to import about 8.5 mn cubic meters of wood, accounting for 25% of the total volume for the wood processing industry. At first glance, 75% of domestic raw materials is not a small amount, but the problem is that the certified forest area only accounts for 8.4% of the total cultivated forest area of the country, covering about 307,000 hectares. However, the area of forest planted by households is mainly for small wood.
Domestic raw materials have not met the demand so far and imported materials also face many risks, especially in the current volatile world situation. According to a survey of Board IV, in 311 private enterprises in the industry, only 10% of enterprises have signed long-term contracts of 36 months or more with domestic raw material suppliers, and around 7% of enterprises have long-term contracts with foreign raw material suppliers.
Talking about the fact that domestic enterprises have not promoted linkage with afforestation schemes of households, Mr. Thang Van Thong, from the Hao Hung Group, said that currently there are only a few enterprises associated directly with households who are allocated forest land, but this area is very small, only 1,000 hectares at the most. The Hao Hung Group is one of the few enterprises that are part of this scheme.
According to Mr. Thong, there are three types of land which are natural forests, namely, with no biomass reserves; barren land; and land located in forestry companies in provinces which are still very large. With these land funds, if the association and Board IV can propose to the Government to change mechanisms and policies to turn forest land for production, it will create a huge amount of wood, and after ten years there will no longer be worry about raw material areas. According to Mr. Do Xuan Lap, Chairman of the Vietnam Timber and Forest Products Association, in the forestry development chain, the afforestation chain is the most effective and profitable in forestry and wood processing stages.
Labor problems
Mr. Nguyen Liem, Chairman of the Binh Duong Wood Processing Association, said that the labor force in Binh Duong province has currently been reduced by 100,000 people compared to the previous year. The reason is because of the Covid-19 pandemic when many workers returned to their hometowns. Now many provinces and cities in the Mekong Delta and the Central parts of the country have established industrial zones, which should attract workers back to the locality to work. However, enterprises in the wood industry must focus on solutions to improve productivity and invest in better equipment. Investment in equipment and machinery alone is not simple. For large-scale factories it is still possible, but for small and medium-sized factories, it is not easy to find extra investment capital.
According to a survey data of 436 enterprises of Board IV, nearly 58% of production technology or machinery and equipment of enterprises in the wood and wood product processing industry and furniture manufacturing enterprises have production year dated about 2010 or earlier. As for labor, out of a total of more than half a million workers working in the wood and furniture processing industry, only 55% are skilled workers, and the remaining are rather untrained or totally inexperienced.
Despite a rapid growth rate, Vietnam's wood industry cannot avoid competition from neighboring countries such as China, Malaysia, or Indonesia. Therefore, in order for the wood industry to develop sustainably, both the Government and businesses need to join hands to solve many problems, such as the policy of linking afforestation and the development of support industries; policies to support loans; promote linkage between enterprises in the supply chain; and have an effective long-term human resource training strategy.
