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Wood industry copes with economic downturn
Due to the global economic crisis, the wood industry is facing difficult times. Almost all enterprises in the sector have reported difficulties in accessing the government’s stimulus package, especially in terms of finding markets and receiving capital.
Difficulties remain as markets shrink
Challenges facing the wood industry were the main theme of a seminar held in Hanoi recently to assess upcoming opportunities and challenges and to propose policies for the sector’s sustainable development.
Tran Quoc Manh, general director of Sai Gon Production and Trade Joint Stock Company said that although the wood industry has readily adapted to the new market, it is still a fledging sector vulnerable to fluctuations in the world economy. By the end of the fourth quarter of 2008, most of enterprises had met their orders. But in the first quarter of this year, orders became fewer and fewer. “I believe that the wood industry will continue to face difficulties in the second and third quarters of this year”, said Mr Manh.
According to the Vietnam Wood and Forestry Association, the impact of the global economic recession has reduced the demand for wood products, with an estimated drop of 30 percent in the US and EU markets alone in 2008. This has seriously affected production and business activities for Vietnam’s wood processing enterprises. According to statistics of the Ministry of Industry and Trade, in the first two months of the year, Vietnam’s export turnover of wood products fell by more than 26 percent. Interior wood products and outdoor furniture exports to the US and EU markets are likely to shrink by 30-35 percent while many signed contracts will be delayed.
In addition, some laws on trade protection, such as the US Lacey Act and the EU Action Plan for Forest Law Enforcement, Governance and Trade (FLEGT) have also caused many difficulties for Vietnamese enterprises.
Deputy Chairman of the Vietnam Wood and Forestry Association, Nguyen Ton Quyen expressed his concern about Vietnam’s traditional export markets, such as the EU and the US where Vietnam faces tough competition from countries like China, Malaysia, and Thailand. Meanwhile, the Russian market, which imports US$10 billion in wood products each year, has not been adequately exploited yet.
The wood sector is not likely to reach its export target of US$ 3 billion this year, Mr Quyen added.
For sustainable development
In the current situation, some enterprises have had to halt their production activities while others have suffered heavy losses or gone bankrupt. Director of Hung Long Development Co, Ltd, Tran Duc Thuan said that the demand for wood products in the local market is increasing rapidly, up 15 percent per year. Since 2008, the company has shifted its focus to the local market. In 2009, the company’s share in the local market is expected to account for as much as 80 percent, up 30 percent compared to 2008.
Mr Thuan said the biggest difficulty for enterprises in approaching the local market is that they have not created sufficient brand-name awareness among consumers. Therefore, it is necessary to speed up trade promotion programmes to expand the market. Mr Manh said wood enterprises have encountered difficulties in terms of capital and production capacity, so it is difficult for them to participate in trade promotion programmes. “If enterprises have not got involved in these programmes, they will not receive orders”, said Mr Manh.
To cope with the economic downturn, Mr Quyen proposed three urgent solutions. First, banks should revamp the provision of loans through guarantee of associations or communal people’s committees. Second, the state should provide further support to trade promotion programmes to create new outlets. Third, enterprises should actively build strategies for their products and improve the skills of workers.
VietNamNet/VOV
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