Vietnam furniture exporters

Growing local market attracts furniture exporters.

- Furniture makers found the way to foreign markets this year too rough with many obstacles including high interest rates and increasing material prices,

so they switch to the local market, which has a growing demand.

“Most of furniture exporters borrow money from banks as furniture business requires large sources of capital,” said general director Huynh Quang Thanh of the furniture maker Hiep Long.
Higher interest rates and increasing material prices have raised his firm’s input costs. As a result, he’s considering raising the prices, which weakened local exporters’ competitiveness on the global market, Thanh said.

Commercial banks are now offering deposit interest rates of 12-13 per cent, up from 11 percent earlier this month according to a number of lenders’ websites.

Borrowers can now expect to pay 16-18 per cent interest on loans.

Thanh added that local furniture makers were also anxious about prices of material for production, which kept rising so far this year.

“Rubber wood price jumped sharply to VND5.4 million ($270) per cubic meter from VND3.4 million per cubic meter as China is strongly buying Vietnam’s raw wood, which has low export taxes,” he said.

“The Ho Chi Minh City Handicraft and Wood Industry Association asked relevant units to raise the raw wood taxes, but they haven’t replied,” said Ngo Hong Thu,

deputy general director of the Truong Thanh Furniture Corporation.

Demand for Vietnam’s furniture in the Euro market is slumping this year because of the economic recession.

Thu said Truong Thanh’s sales in Euro declined to 35 percent from 55 percent this year.

Many local exporters expect the amount of orders from European customers will drop further in 2011.

Growing local market

“Vietnam’s furniture products hit store sheaves in 120 countries around the world with a turnover of $3 billion per annum.

Sales of imported furniture products meanwhile make 80 per cent of importers’ revenue,” said Vo Quang Ha, general director of the furniture maker Tan Vinh Cuu.

“Therefore, some furniture makers including us switch our sales to the local market.

We earned more than 300 orders at the Vietbuild and Vifa furniture exhibitions at Ho Chi Minh City this year,” Ha said.

Furniture maker 4P director Nguyen Van Luat said his firm rebound to the local market as the furniture demand at offices was increasing sharply this year.

“The competitiveness at foreign markets is pretty high now as exporters have to verify wood origins and submit many kinds of certificates,” Luat said.

Duong Quoc Nam, director of Hoang Nam Joint Stock Company, said the firm’s sales from the local market grew 20 per cent annually since 2008.

Improving forest law enforcement priority

- Vietnam wanted to finish negotiations and sign the Forest Law Enforcement, Governance and Trade /Voluntary Partnerships Agreement (FLEGT/VPA)

with the European Union late next year to facilitate Vietnamese wooden products entering the EU market.

Addressing a national consultation workshop on FLEGT/VPA on August 3, Deputy Minister of Agriculture and Rural Development Hua Duc Nhi said

that Vietnam's timber processing industry had developed remarkably, creating jobs and contributing to the country's poverty reduction.

However, he said, the industry faced challenges including low efficiency and productivity, a disadvantaged financial environment and especially meeting new requirements

on logging and sustainable timber sources.

The FLEGT Action Plan, approved by the EU in 2003, will take effect in March 2013 as one of EU's responses to international concerns about illegal logging and trading.

It sets out supply-and-demand measures to combat the problem. The implementation of the FLEGT/VPA aims to establish control

and licensing procedures in timber producing and processing countries to ensure that only products made from legally-harvested timber can enter the EU.

Vietnam and the EU started formal negotiations for the bilateral FLEGT/VPA last May and expect to sign the agreement late next year.

"Global level consumer markets are changing and Vietnam needs to be prepared," said Hans Farhammer, first secretary and head of Economic Co-operation, EU Delegation to Vietnam ,

adding that European consumers now demanded guarantees to demonstrate that the products were not having negative environmental and social impacts.

The FLEGT VPA process will help Vietnam respond to these changing market requirements, he said.

Nguyen Tuong Van, head of Vietnam 's standing office for FLEGT, said that Vietnam had about 3,400 enterprises that employed 300,000 in the timber processing sector.

Last year, wood product export turnover reached $3.34 billion, 10 times higher than in 2000. The EU market is the second largest importer of Vietnamese wooden furniture,

accounting for 30 per cent of total exports, just behind the United States with 45 per cent. In 2009, there was about 16.24 million ha of forestry land in Vietnam,

48 per cent of which provided material for the wood processing industry. However, Vietnam still had to import wood/timber from other countries including Malaysia and Laos.

Van said that complicated domestic timber flows and different timber sources made it difficult to control illegal logging, making Vietnam a high risk exporter.

"This fact has urged the country's action plan to adapt, improve awareness and develop a legal frame work and timber legality assurance system," she said.

These negotiations will help Vietnam maintain and expand markets and avoid a recession in a sector that provides jobs for hundred of thousands of people.

They will also improve the national image and trade brand as well as law enforcement in the sector.