Vietnam furniture / Wooden furniture manufacturers come back to home market
Wooden furniture manufacturers have been warned that the challenges they meet in 2013 would be even tougher than the ones in 2012.
Commenting about the export turnover of $4.67 billion in 2012, Deputy Minister of Agriculture and Rural Development Ha Cong Tuan said this was an “encouraging result.”
Vietnam’s exports now can go directly to the 100 targeted markets, while they don’t have to go through intermediary markets like Taiwan, Singapore and South Korea any more.
Also according to Tuan, Vietnam ranks the sixth in the world, the second in Asia and the first in South East Asia in exporting timber and the products made of timber. The most important markets for Vietnam are the US, China, Europe and Japan
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However, Nguyen Ton Quyen, Deputy Chair of the Vietnam Association of Wood and Forestry Products, is not as optimistic as Tuan.
“The export growth has been brought mainly by the cheap labor force and the raw export products which have the lowest values in the added value chain,” Quyen noted.
Wooden furniture manufacturers have been warned that they would meet bigger barriers when penetrating the export markets due to the protectionist policies applied by importers. Especially, the importers would reinforce anti-dumping measures or require the certificates for wooden furniture products’ origin.
At present, Vietnamese exporters now have to prove that their products use the materials with FSC
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or show the documents to prove their legal origin. Since Vietnam still does not have a FSC wood market, it has to import $1 billion worth of wood materials every year.
Since the import prices and the transportation costs are on the rise, Vietnamese wood exporters find it hard to compete with Chinese and Malaysian who can control their material sources.
Since March 2013, European countries, the biggest clients of Vietnam, have been applying a new regulation which aims to tighten the control over the imports and prohibit the import of the wooden products made of illegally sourced timber.
The wood suppliers, including Vietnam, will have to show relevant documents to prove the origin of the wood. For example, they would have to provide the descriptions about the wood materials, show the countries where the wood is exploited, and provide detailed information about the suppliers. Meanwhile, it seems to be impossible for Vietnamese exporters, who buy wood from different sources and through a lot of different parties, to show the origin of wood.
Coming back to the home market
Meeting big barriers in export markets, wooden furniture manufacturers have been trying to seek new markets. However, the results of the searching remain modest, while it is very costly to exploit a new market. The Middle East or North Africa, for example, maintain specific cultural characteristics which makes it difficult to approach for trade exchange.
Vo Dai Hai, Deputy Head of the General Forestry Directorate, has noted that domestic wooden furniture manufacturers have missed the domestic market which also has very high demand.
Coming back to the home market is really a good idea, but it is not easy to be done. Domestic firms have been focusing on making products for export, while they don’t have much information about the domestic market.
If enterprises focus on the domestic market now, they would have to spend money to start their business from scratch, i.e. they would have to spend money and time to learn about the market demand, make designs and establish the distribution network.
US billionaire to expand operation in Vietnam
Ashley Furniture Industries CEO Todd Waneck is in Ho Chi Minh City to discuss the possibility of opening another factory in the southern province of Binh Duong.
He has met and worked with Pho Xinh CEO Duong Quoc Nam on a new plan for bilateral cooperation.
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The two companies recently signed in the US a memorandum of understanding (MoU) on joint investment cooperation worth US$10 million last July.
Accordingly, a distribution centre for Ashley products will open in 2014 with a chain of home stores and galleries put up in Pho Xinh supermarkets across Vietnam.
Waneck has visited Binh Duong where his company will build a new factory as part of its plan to withdraw its labourers in China and raise its employment in Vietnam from 4,000 at present to 10,000 by 2015.
Established in 1945, Ashley Furniture Industries are co-owned by the father and son of Ron and Todd Waneck who were once listed in the Forbes top 400 richest people in the US with total assets of US$1.5 billion.
Last year Ashley ranked 115th among the biggest private companies in the US with its total revenue reaching US$3.5 billion.
Todd Waneck joined the company in 1979 and has been in charge of its external activities for two decades.
The Waneck family is also known as financial supporter for the US Furniture Political Action Committee (FurnPAC) and politicians.
In 2006, Todd Waneck was awarded by the City of Hope National Cancer Institute-designated Comprehensive Cancer Center for his sponsorship programme.
How to penetrate the German market?
Vietnamese goods, buoyed by growth in consumer demand, are facing plenty of export opportunity in the German market.
Seizing these opportunities requires a business focus on ensuring their products can meet German consumers’ strict quality and hygiene standards.
Germany is Vietnam’s largest European Union trade partner. Two-way trade turnover hit US$3.695 billion in the first half of 2013, up 29.51 percent on the same period last year.
The volume of Vietnamese goods exported to Germany was estimated at US$2.352 billion, accounting for 18 percent of total export earnings from the EU and most of them went up in value.
Electronic devices and associated parts achieved the highest growth rate of more than 130 percent, followed by paper (up 85.32 percent).
Telephones and spare parts also increased by 80.9 percent to US$873.49 million, accounting for 37.13 percent of Vietnam’s total export earnings from Germany.
Of the figure garments came second with US$279.44 million (11.88 percent). Other notable earners include coffee (US$223.71 million), footwear (US$197.51 million), and computers and electronic devices (US$131.82 million).