Solutions to promote Vietnam's export of wood and wood products in the near future

The wood industry is one of the industries directly affected by the Covid-19 epidemic. Exports were disrupted due to import delays by partner countries due to the epidemic, canceled orders or delayed delivery. Many enterprises face difficulties, but thanks to the efforts of the Government, ministries and sectors with a series of effective solutions to cope with the Covid-19 epidemic, along with the efforts of the business community, wood export activities and wood products still achieved positive results in 2020, contributing to the growth momentum of the whole country.

1. Export of wood and wood products

According to the Vietnam import and export report, Vietnam's export turnover of wood and wood products in 2020 reached 12.37 billion USD, up 16.2% compared to 2019. Particularly for wood products, with a turnover of 9.54 billion USD, up 22.5% compared to 2019 accounting for 77.2% of the total export turnover of wood and wood products, up compared to the proportion of 73 .7% of 2019.

In 2020, the export of wood and wood products rose to the 6th position in terms of export turnover of goods/group of goods of Vietnam. It can be affirmed that this is a miracle year for Vietnam's export of wood and wood products in the context of the global economic downturn, commodity export activities face many difficulties.

Regarding the export market: Vietnam exports wood and wood products mainly to the US, China, Korea, Japan and EU-27 markets. Export turnover to these five key markets reached 10.78 billion USD in 2020, up 19% compared to 2019, accounting for 89.7% of total export turnover of wood and wood products. In which, the United States is the largest market and recorded the highest growth among Vietnam's key export markets for wood and wood products, reaching 6.98 billion USD, up 36% compared to 2019; accounting for 58% of the total export turnover of wood and wood products of Vietnam. In addition, the export turnover of wood and wood products to the Canadian and Thai markets had a good growth rate of 15%, 23% respectively compared to 2019 and a slight increase in the Korean market, up 2%. compared to 2019. On the contrary, there was a sharp decrease in some markets in the UK, India, Indonesia, and a slight decrease in some markets such as Japan, China, EU-27, down by -3%, -4% and -5 respectively. % compared to 2019.

Table 1. Vietnam's export market share of wood and wood products in 2020

Source: VIFOREST, Binh Dinh FPA, HAWA, BIFA and Forest Trends compiled from import and export statistics of the General Department of Vietnam Customs

Table 2. Vietnam's export market for wood and wood products in 2019-2020

Unit: USD

Source: VIFOREST, Binh Dinh FPA, HAWA, BIFA and Forest Trends compiled from import and export statistics of the General Department of Vietnam Customs

Export items: Wood products with high export value in 2020 include: wood chips; tablets; peeled board; particle board; fiberboard; plywood; seat; wooden. Among these, plywood is the product that recorded a high increase of 94% in volume and 51% in value, followed by seat with an increase of 32% in export value, and wooden furniture with an increase of 22% in value compared to 2019. The export value and volume of some wood and wood products in 2019-2020 are as follows:

Table 3: Exports of wood and wood products of Vietnam in 2019-2020

Unit: USD

Source: VIFOREST, Binh Dinh FPA, HAWA, BIFA and Forest Trends compiled from import and export statistics of the General Department of Vietnam Customs

Despite the strong outbreak of the COVID-19 epidemic, which had a serious impact on the wood processing and exporting industry, this industry still managed to overcome and maintain production stability, achieving strong growth thanks to the great contribution of businesses, entrepreneurs, forest owners and managers in the whole industry is always creative, researching and changing many methods and forms of marketing and sales to expand the market. Businesses and associations in the industry have made efforts to find ways and directions for themselves even though the epidemic is still complicated. Instead of only knowing through direct sales channels, promoting goods through fairs, businesses and associations quickly switched to online sales.

In addition, with the attention of the whole political system, the National Assembly, Government, ministries and branches have issued many policies to support wood processing and exporting enterprises to overcome difficulties caused by the impact of the  Covid-19 epidemic such as: Circular No. 01/2020/TT-NHNN of the State Bank dated March 13^th, 2020 restructured the repayment term, exempted and reduced interest and fees, and kept the debt group unchanged; Decree No. 41/2020/NĐ-CP of the government dated April 8^th, 2020 extending the deadline for paying tax and land rent; Resolution No. 42/NQ-CP of the Government dated April 9^th, 2020 and Decision No. 15/QĐ-TTg of the Prime Minister dated April 24^th, 2020 on measures and policies to support workers affected by job loss.

The above policies have timely supported businesses and workers in the wood and wood product processing industry to overcome difficulties, restore and stabilize production during the epidemic, creating more impetus for the wood export industry to reach the target in 2020. Along with supportive policies of the Government, new-generation Free Trade Agreements such as CPTPP, EVFTA and RCEP Agreement have also contributed to the rapid growth of Vietnam's wood industry in recent years.

It can be said that 2020 is a successful year for the wood processing and export industry with impressive growth, a bright spot in the export picture of our country.

2. Opportunities and challenges in the coming time

* Opportunities

In order to maintain the growth momentum in 2020 and promote the export of wood and wood products further in 2021 and the following years, enterprises processing and exporting wood and wood products need to seize and make good use of every opportunity. Specifically:

+ Enterprises need to grasp and take full advantage of the benefits brought by FTAs, especially focusing on exploiting a number of FTAs that have just been signed between Vietnam and a number of markets, and continue to look for emerging markets. , potential, market diversification.

+ To step up trade promotion activities, it is necessary to focus on key products with high potential for development, such as wooden furniture.

+ Implement continuous, new and attractive promotional programs to strengthen the identity and enhance the product's image and brand; promote the application of information technology, develop e-commerce and increase the export of goods through the distribution network of foreign retail groups; actively research the market and meet the strictest technical fence standards.

In addition to seizing and making good use of all opportunities, the export prospect of the wood industry in 2021 is also very positive thanks to increased demand from main consumption markets, especially the US market. Trade tensions between the United States and China are far from over. Disruption in furniture production and export in key markets due to the impact of the Covid-19 epidemic.

New-generation Free Trade Agreements have a high level of commitment to help Vietnamese wood businesses reach many customers around the world.

+ For the US market, exporting wood and wood products to this market always accounts for a high proportion. 2020 is the first year that Vietnam overtakes China to become the largest wooden furniture supplier to the United States. In 2021, the US market is facing a housing shortage. So, according to a forecast from the American Mortgage Bankers Association (MBA), in 2021 the single-family home market in the United States will reach about 1,134 million house. In 2020 to reach 1,165 million houses and in 2023 to reach 1,210 million houses. The strong growth of the housing market will lead to a large demand for furniture in the United States in the coming years.

+ China is a large supplier of wooden furniture to the US, but due to the high tariff barriers imposed by the US, the US's import market share from China plummeted.

+ Major furniture producing countries in the EU such as Italy, Germany, and Poland have all had production interruptions due to the impact of the Covid-19 epidemic, while the demand for these items in the EU is very large. This is an opportunity for furniture manufacturing markets in the world to boost exports to the EU, including Vietnam.

+ New-generation Free Trade Agreements with a high level of commitment and comprehensiveness will help enhance Vietnam's position in the world, helping Vietnamese wood enterprises approach an important link position in chains value of existing wood products to global customers, creating a positive spillover effect to potential buyers, promoting increased import and export of goods and services between Vietnam and many regions and countries.

+ The new generation of Free Trade Agreements aims to create an open, favorable and transparent business environment for businesses in the field of trade, import and export, services, investment in the production of wood products. Regarding tax rates, the signatories to the Agreement often give preferential import tax rates to 0% immediately or in 4-6 years for the Vietnamese wood industry; helping to improve the competitiveness of Vietnamese wood products with products from other wood exporting countries.

* Challenges

Despite Covid-19, the wood industry continued to maintain a high growth momentum in the first 5 months of 2021, export of wood and wood products was estimated at 6.6 billion USD, up 61.3% over the same period in 2020. In which, the export of wood products was estimated at 5.1 billion USD, up 79.4% over the same period in 2020. This is a positive export signal for Vietnam's wood industry, but the industry still faces many challenges such as:

+ Global trade over the past time, although there have been signs of improvement, still contains unpredictable fluctuations when diplomatic and economic relations between major economies are becoming tense. Trade wars between great powers and protectionism bring risks and negative impacts on Vietnam's exports in general and the wood processing industry in particular.

+ The increase in competition of the main producing countries in the world, both in terms of price, design, quality... as well as increasing investment in advanced technology for export wood processing by ASEAN countries. The major afforestation and raw material supplying countries in the region have been having policies to restrict and strictly manage the exploitation and export of raw timber. In order to protect the environment, many countries have issued regulations on legal timber traceability.

+ For wood industry enterprises, the competitiveness of Vietnamese wood processing and exporting enterprises is mostly not really strong and unsustainable (scattered investment, small scale, using borrowed capital, few ability to invest in advanced technology and chain management processes; mainly outsourcing, highly dependent on customers' orders, designs and models...); The competitive advantages of Vietnam (such as many workers, cheap labor) are no longer as dominant as before. In particular, the source of raw materials is still dependent on imports, while the control of the legal origin of imported wood has not been tight.

3. Solutions to promote the export of wood and wood products

According to the Ministry of Agriculture and Rural Development, in order to promote strengths and potentials and maintain growth momentum, in the immediate future, in 2021, the export of wood and wood products will strive to reach a value of 14.5 billion USD - 15 billion USD, an increase of about 14-15% compared to 2020, creating momentum towards an export figure of 20 billion USD by 2025. To achieve this goal, in the coming time, the Government, ministries, branches and localities need to implement a number of solutions to promote processing and export of wood and wood products.

Firstly, in terms of market expansion, trade promotion, continuing to popularize the benefits that new-generation free trade agreements bring to support businesses in optimally exploiting the market. At the same time, continue to support businesses to effectively implement trade promotion programs to exploit major markets such as the US, EU, Japan, Korea as well as other emerging and potential markets.

Secondly, on ensuring raw materials for the wood processing industry: In the coming time, it is necessary to maintain an open import policy, creating conditions for enterprises to import raw materials for production and export as well as have policy to ensure the source of raw materials. Accordingly, it is necessary to soon have a plan to develop a stable source of raw materials for wood processing, and at the same time increase the afforestation of large timber materials to meet the growing demand for materials for the wood processing and export industry; consider the plant quarantine exemption for imported logs and sawn timber when wood exporting countries to Vietnam have obtained phytosanitary certificates to remove difficulties and obstacles for importers. In addition, strictly controlling trade fraud is a very important issue for the wood industry. In particular, the Voluntary Partnership Agreement on Forest Law Enforcement (VPA/FLEGT), a part of the EVFTA, will greatly affect the Vietnamese wood industry in the near future. Therefore, it is necessary to soon put the VPA/FLEGT Agreement into practice and strictly implement it; control the import of timber on the list of CITES according to regulations.

Thirdly, to enhance the quality of human resources for the industry: It is necessary to allocate funds for human resource training programs of the wood industry, trade promotion, construction, and trade promotion of the wood industry; prioritize the implementation of training programs, improve skills, ensure the supply of human resources for the wood production and processing industry; supporting universities, colleges and vocational schools in training interior and exterior design.

Fourthly, improve competitiveness: Continue to monitor, urge as well as closely coordinate with ministries, branches and localities to focus on effectively implementing solutions to improve competitiveness and exploit existing advantages of the processing industry. timber towards achieving the goals set out in the Decision No. 1137/QĐ-TTg dated August 3^rd, 2017 of the Prime Minister approving the Project on Enhancing the competitiveness of Vietnam's export products by 2020, with a vision to 2030. At the same time, coordinate with ministries and sectors to enhance taking advantage of opportunities from FTAs by promoting widely propaganda on FTA preferences, ways to take advantage and how to take advantage of FTA preferences, and guide enterprises understand and grasp the rules of origin of the importing country; organize the issuance of Certificates of Origin in the direction of modernization and electronicization, and strengthen the implementation of the self-certification mechanism of origin.

Fifthly, localities also need to take advantage of opportunities from Free Trade Agreements (FTAs) and on the basis of advantages in natural conditions, labor, and local production to develop production of key products and plan to attract investment in the production and processing of these products for export; have appropriate and specific export orientation for export products with local strengths.

Sixthly, industry and business associations need to strengthen the application of science and technology, effectively use raw materials, diversify products, reduce costs, improve productivity, quality, efficiency and competitiveness; Strengthen cooperation, create and form a link chain from raw material production to export to improve the efficiency of the supply chain, focusing on building Vietnamese brands for export products; Actively deploying joint activities to create a centralized wood processing and supply area, including an industrial park supporting services for wood processing; Capture and take full advantage of the benefits brought by FTAs, especially focusing on exploiting a number of FTAs that have just been signed between Vietnam and a number of markets, continuing to look for emerging, potential and diversified markets diversification.

Do Thi Bich Thuy

Department of Information, Library and Trade Promotion - VIOIT