Vietnam's wood industry seeks solutions to access international markets

Reinforcing businesses in the wood industry

The Vietnam Wood and Furniture Industry Forum was organized on July 28 with the theme "Reinforcing for new opportunities". The event was attended by over 200 businesses, associations and experts in the wood industry.

According to Mr. Le Hoang Tai, Deputy Director of the Department of Trade Promotion under the Ministry of Industry and Trade, Vietnam's export of commodities faced numerous challenges in the first six months of 2023. As a result, Vietnam's wood processing industry must re-assess its goals and find new development directions for the industry.

According to economist Pham Phu Ngoc Trai, the current reduction in the orders of wood product is only temporary. Vietnam's furniture industry has the potential to develop strongly within the next five to ten years. “Compared to the average global GDP development of 3%, the compound growth rate of the global furniture industry is 4.5%. On the other hand, Vietnam's wood processing industry grows at an average rate of 15.4% per year, which demonstrates its excellent potential for development", analyzed Mr. Trai.

Similarly, Mr. Nguyen Quoc Khanh, Chairman of HAWA, believes that the impressive growth rate allows Vietnamese businesses to seize the initiative in the global integration. Furthermore, Vietnamese businesses made every effort to adapt to the recent global market decline.

“On the one hand, businesses in the wood industry reorganized their production apparatus and streamlined their production model in order to reduce costs. On the other hand, they attempted to fully utilize the support from trade promotion agencies to find new markets", explained Mr. Khanh. Additionally, the wood industry saw a new wave of movement, which can be refered to as an expansion of the trading band, in response to the global market challenges. Namely, Vietnam's major furniture brands are expanding their presence in potential export markets, with a focus on wealthy countries in the Middle East such as Saudi Arabia and Dubai. Accordingly, these new markets will allow Vietnamese businesses to supply for new super real estate projects.

According to Mr. Khanh, the export target of 2023 is achievable because purchase orders for Vietnamese wood products are rapidly recovering.

Mr. Tran Si Chuong, a development economist, recommends Vietnamese businesses to reinforce their internal resources in preparation for new purchase orders when the market recovers. "The combination of multiple negative adjustments has forced the global market to operate differently so participants must promptly adapt to these new rules", analyzed Mr. Chuong.

"Vietnam's furniture industry has the opportunity to benefit from the investment wave and post-inflation growth wave. However, the problems lies in the ability to adapt to current challenges and how the industry's sustainable development strategy is implemented", commented Mr. Chad Ovel, General Director of Mekong Capital.

Green transition and establishing export linkages

According to Mr. Pham Phu Ngoc Trai, the global market has an increasing demand for sustainability in furniture products. Consequently, the sustainability factor has become a requirement to participate in the global market.

According to Mr. Trai, green transition is currently the solution to improve the competitiveness of Vietnamese products. Additionally, Vietnamese businesses will face new requirements such as the Carbon Border Adjustment Mechanism (CBAM) proposed by the European Commission, which enters into effect in October 2023. Goods imported into the European market will incur additional costs if they fail to convert to a lower-emission production model in exchange for carbon credits. If the wood industry can re-organize and connect with partners using the current sizeable reserve of planted forests in Vietnam, the carbon credits market is an excellent development opportunity for Vietnamese furniture businesses.

"Vietnam's wood processing industry must adjust its vision towards becoming a sustainable world furniture supplier", emphasized Mr. Pham Phu Ngoc Trai.

According to Ms. Pham Thi Ngoc Thuy, Director of Division IV, new market challenges related to the EU Deforestation Regulation (EUDR) or the Net Zero mission will help Vietnam's wood processing industry develop in a more sustainable manner. Moreover, new regulations will allow the industry to attract additional investment flows from foreign investors.

In addition, Mr. Nguyen Quoc Khanh proposed the establishment of a logistics center which will promote the trade of Vietnamese furniture products in various key market, starting with the US. Consequently, the center will enable export businesses to reach consumers in their target markets at a low cost.

“A single investment business will find it difficult to operate effectively due to the exceedingly high costs and associated risks. However, the establishment of a common center for export businesses in foreign countries will partially resolve issues such as legality, warehouse, management of goods, human resoure and so on. Operation costs will also be greatly reduced in exchange for enhanced professionalism", Mr. Khanh affirmed.

Within the framework of the forum, the Organizing Committee announced the upcoming HawaExpo 2024, which will take place from March 6 to March 9, 2024. HawaExpo 2024 is the largest specialized international fair in Vietnam with the participation of 700 businesses in the field of wooden furniture and fine arts of Vietnam. The fair aims to welcome 30,000 visitors from 200 countries with an impressive global promotion campaign.