Brexit to affect VN wood sector

Update: June, 16/2016 - 09:00
Workers produce wood products at PISICO Joint Stock Company in Bình Định Province. Việt Nam exported $270 million of wood products to the UK in 2015, accounting for nearly one-third of the country’s total wood exports to the EU. — VNA/VNS Photo Vũ Sinh
Viet Nam News

HÀ NỘI – Việt Nam’s exports of timber and wood products to the UK would be affected by Britain’s exit from the European Union (EU), industry insiders said.

According to the Vietnam Wood and Forest Product Association (VIFORES), Việt Nam is one of the three biggest wood exporters to the UK along with Indonesia and Malaysia. The UK is also the largest EU importer of Việt Nam’s timber products.

In 2015, Việt Nam exported wood and timber products worth about US$900 million to the EU, including $270 million to the UK which singly made up 4 per cent of the total timber export turnover of Việt Nam.

In the first five months of the year, the timber export turnover was US$248 million, posting a 42 per cent year-on-year decrease. The exported amount in the period was also reduced 39 per cent from the same period last year to 1.8 million tonnes.

If exports did not improve in the second half of the year, export turnover for the whole year would be less than US$600 million, a reduction of half from last year. The total timber export volume would only be seven million tonnes, which would be equivalent to 60 per cent of last year’s export volume. The country has seen a big inventory of timber, VIFORES said.

Secretary General of the Forest Products Association of Bình Định (FPA Bình Định), Trần Huy Lê told the workshop to discuss the impacts of Brexit from the EU on the Vietnamese wood sector in Hanoi on Thursday that the UK has been the second most important market (after Germany) for wood companies in the central province of Bình Định.

The event was jointly held by VIFORES, the HCM City Fine Arts and Timber Processing Association, FPA Bình Định, and International Forest Trends.

The UK leaving the EU had already impacted on business orders, he said, noting that some customers demanded price cuts of 5-7 per cent, while others have asked to reduce the number of orders. Tô Xuân Phúc from Forest Trends said Brexit had caused devaluation of the pound, which negatively affects Việt Nam’s wood export prices.

Additionally, the decreasing demand in house construction in the UK would directly impact on the Vietnamese wood sector, he added. The volume of timber products imported from Việt Nam to the market is likely to reduce in the future, he said.

Several timber and wood product businesses said the export tax of 2 per cent levied on the product from the beginning of the year in the context of abundant supply and decreasing consumption caused difficulties for the industry.

The tax is equivalent to an increase of US$2.5 to $2.8 a tonne. Firms therefore had to reduce purchasing prices for their inputs as well as lower profits to maintain exports.

Timber and wood products have been key export staples of Việt Nam.

He said the Government should have an overall assessment of the industry’s situation before levying the tax due to the difference of business scales, input areas and infrastructure.

Deputy Minister of Agriculture and Rural Development Hà Công Tuấn said the industry’s restructure would be vital to improving its export value.

"Viet Nam has been among the biggest timber and wood products exporters in the world. However, the industry has seen unsustainable development."

“The ministry has given priority for the restructure of the timber and wood sector. There would not be sustainable development if the industry is in hot development,” Tuấn said. According to the Ministry of Industry and Trade’s Department of Import and Export, Việt Nam’s goods exports to the UK make up about 2.9 per cent of the total export turnover, so Brexit will not affect the exports of Việt Nam much.

The UK was a pioneer in implementing the EU Timber Regulation (EUTR) and negotiating the Voluntary Partnership Agreement (VPA) under the Forestry Law Enforcement, Governance and Trade (FLEGT) for countries exporting tropical timber products to the EU, experts said, adding that Brexit does not affect the FLEGT VPA negotiation between Việt Nam and the EU. -- VNS