Wood processing firms hit hard by COVID-19 crisis

April 09, 2020 - 10:54

Vietnamese wood processing firms have reduced production or suspended operations as most of the major importing countries for their products face hardships because of the COVID-19 pandemic. 


At a wood processing factory in Đồng Nai. The wood processing industry has encountered difficulties due to the impact of the Covid-19 pandemic. — Photo Đồng Nai newspaper

HCM CITY — Vietnamese wood processing firms have reduced production or suspended operations as most of the major importing countries for their products face hardships because of the COVID-19 pandemic. 

A new study conducted by the Việt Nam Timber and Forest Product Association, the Handicraft and Wood Industry Association of HCM City, the Bình Dương Furniture Association, the Forest Products Association of Bình Định, and Forest Trends pointed out the negative impact of Covid-19 on production and trading of wooden products.

The report said that 76 per cent out of 124 polled Vietnamese firms in the wood processing sector reported total initial damage of VNĐ 3.066 trillion (US$129.86 million) due to the Covid-19 pandemic, with most firms reducing production scale and some of them stopping operation.

About 24 per cent of enterprises had not yet calculated their losses.

In addition, over half (51 per cent) of surveyed firms said they had to shrink their production scale due to the pandemic, while 35 per cent were operating normally but will have to suspend production in the near future. 

Seven per cent have ceased operations, and only seven per cent of them were still operating normally as of the end of March.

According to wood processing firms, the US and EU markets account for about 50 per cent and 10 per cent of Việt Nam’s total wooden product exports, respectively. But since mid-March, these markets have been seriously affected by the pandemic.

To reduce the spread of COVID-19, the Governments of these countries are applying strong policies such as border closures and closing all non-essential stores. This has led to serious disruptions in the global supply chain, with many commercial transactions delayed or cancelled, they said.

Since mid-March, many Vietnamese firms have received notices from the US and the EU to delay or stop delivery, even for products that were already produced or are in the production process, according to the survey.

Many importers have cut their orders, delayed payments, or cancelled orders.

Some Vietnamese firms have also received notices that their large customers are on the verge of bankruptcy.

The wood processing industry is an export-driven sector, so the current pandemic situation has seriously affected exports, analysts said. 

Stagnant production has also led to a significant reduction in the size of the labour force.

According to the survey, 105 enterprises who provided labour information to the survey had a total of 47,506 employees before the COVID-19 outbreak, but 21,410 of that number have stopped working.

Due to the large number of unemployed workers, businesses have asked the Government to offer financial support to help labourers who have lost their jobs.

In addition, some enterprises have also petitioned the Government to suspend the payment of value-added tax on imported input goods.

The Government should put in place mechanisms and policies to support businesses to help restore production and export when the pandemic is contained in the near future.

According to Vietnam Customs, Việt Nam’s wood and wooden exports reached $1.6 billion in the first two months of the year, a year-on-year increase of 18 per cent.

However, with the outbreak of COVID-19 occurring in Việt Nam’s key export markets, the sector’s export turnover is expected to decrease sharply in the coming time. — VNS