Wood exports branch out to new markets, exceed target

Businesses need to build sustainable value chains

Exceeding the target

According to the Vietnam Timber and Forest Product Association, Vietnam’s wood exports reached an estimated US$11.3-11.5 billion in 2019, exceeding the industry’s own target of US$10.5 billion.

Vietnam’s wood processing industry has become a key export industry, making it the leading wood exporter in Southeast Asia and the seventh in the world. Do Xuan Lap, chairman of the Vietnam Timber and Forest Product Association, attributes part of the export strength and growth to new market opportunities provided by free trade agreements. The industry’s 2020 export plan forecasts exports worth US$12 billion.

The Ministry of Industry and Trade’s Agency of Foreign Trade reports that exports of wood and wood products to the US rose sharply in 2019, and robust growth was recorded in markets such as Japan, the UK, Canada, Germany and the Netherlands. With Japan and Canada being members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that took effect in 2019, Vietnamese businesses have made good use of reduced tariffs to enter these markets.

The EU is also one of Vietnam’s main export markets of wood and wood products. When the EU-Vietnam Free Trade Agreement (EVFTA) is ratified and takes effect, probably in 2020, Vietnamese businesses can look forward to similar tariff cuts and trade advantages.

Nguyen Quoc Khanh, chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City, said Vietnam’s wood exports rank first in Southeast Asia and second in Asia. The wood industry has maintained a stable growth rate for the last two decades.

Vietnam’s wood exports are dominated by furniture, although exports of fuel wood have been rising. Furniture exports are oriented particularly towards North America and Europe, whereas most fuel wood exports are destined for Japan and the Republic of Korea.

Building sustainable value chains

Do Xuan Lap believes Vietnam’s wood exports are well positioned to achieve the growth target of 18-20 percent in 2020, with the US likely to remain Vietnam’s largest export market, followed by the Republic of Korea and Japan. Vietnam’s wood exports to the EU are forecast to grow slowly in 2020 as Eastern European countries are emerging with better products. According to Do Xuan Lap, much work remains to achieve export turnover of US$20 billion by 2025 - a target set by Prime Minister Nguyen Xuan Phuc.

Sustainable value chains will play a crucial role in achieving this target. Experts advise Vietnam’s wood and wood product industry to integrate value chains, which include numerous tasks from planting forests, processing and commercialization of wood products to exports into its long-term sustainable development strategies.

In terms of strengthening environmental protection and limiting materials of mineral origin, the use of wood products is increasingly popular, creating favorable conditions for further development of the industry. However, firms need to make radical changes in business activities and strategies. In addition, institutions and policies need to be open and transparent to facilitate trade and production activities.