How to grow more trees, export more timber

A policy seminar on the linkage between businesses and afforestation households on April 17 in Hanoi

Lack of linkage

Vietnam pursues afforestation - the establishment of a forest where there was no previous tree cover - to increase carbon capture and help improve biodiversity. The added value is in the timber it provides.

But according to experts, although export turnover of the wood industry continues to increase, it still faces some systemic problems, such as the use of cheap labor and products with low added value, leading to lower labor productivity compared to Thailand and Malaysia.

At an April 17 policy seminar in Hanoi on the linkage between businesses and afforestation households, To Xuan Phuc from Forest Trends said a lack of linkage wastes investment resources, especially in the storage of raw materials. As many as 60-70 percent of the capital of processing businesses are tied up in the storage of raw materials, which they have to stockpile because the wood industry does not have specialized storage companies.

Phuc also said that a lack of linkage limits ability to specialize in different stages of the supply chain. Linking stages in the supply chain is an indispensable requirement of any industry, contributing to efficient use of resources, increased specialization, reduced risk and expanded markets.

Pioneers

Nonetheless, several models of association between businesses and afforestation households have been developed to provide certified timber. The Nam Dinh Forest Products Joint Stock Company (NAFOCO) is one of the pioneers in promoting linkage with afforestation households to meet orders of the IKEA Group.

The company piloted the model of afforestation to provide certified timber in Yen Bai Province’s Yen Binh District, covering an area of 1,000-3,000ha with the participation of 494 households in April 2016. In addition, the company also pledged to buy FSC-certified timber at prices at least 10 percent higher than the average selling price on the market at the time of transaction.

The Woodsland Company signed a joint venture agreement with 197 households in Tuyen Quang Province’s Yen Son District in 2016 for FSC-certified acacia plantation on an area of 848.09ha.

In addition, the Scansia Pacific Co., Ltd. signed an agreement with 564 afforestation households in seven districts of Quang Tri Province to underwrite raw materials. The company also financed costs for a group of households to register FSC certification, and pledged backing for acacia plantation households from the sixth year onwards to borrow up to VND4 million per ha per year at an interest rate of 0.2 percent. This lower than the average interest rate is designed to help growers extend the planting cycle and create a large source of timber. The company also pledged to buy FSC-certified acacia wood for at least 15-18 percent more than market prices at the time of transaction.

According to the Forest Stewardship Council (FSC)’s statistics, total certified forest area planted by households in Vietnam is 6,311ha.

Nguyen Ton Quyen, the deputy chairman and general secretary of the Vietnam Timber and Forest Products Association, said that the linkage between businesses and afforestation households is important because it will resolve three basic problems.

These are meeting the supply of wood materials, ensuring the origin and traceability of wood, and harmonizing interests between the parties. In addition, to ensure sustainable development, land disputes should be resolved and open mechanisms and policies should be promulgated, he added.