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Exports of timber and timber products reached a turnover of US$11 billion in 2019. Photo: Nguyen Thanh

According to the Department of Agro-product Processing and Market Development (Ministry of Agriculture and Rural Development), exports of timber and timber product exports in the first 11 months of 2019 were estimated at US$9.64 billion, a year-on-year increase of 9.5 percent. Now, exports of timber and timber products are expected to reach $11 billion. The United States, Japan, China and South Korea remain Vietnam’s four largest import markets for timber and timber products, with about 81 percent of total export value. For the US, exports reached $4.2 billion, up to 34.5 percent.

It has been assessed that Vietnam has made better use of export opportunities than tropical timber exporters such as Indonesia, Malaysia or some other nations. This is a driving force to promote exports of Vietnamese timber and timber products to the US.

The Agro-product Processing and Market Development Department said US-China trade tensions along with Vietnam's participation in new generation free trade agreements (FTAs) such as the CPTPP, FTA Vietnam-EU (EVFTA) have contributed to attracting foreign direct investment into Vietnam’s timber industry.

According to the report "Foreign investment in Vietnam's timber industry" Vietnam Timber and Forest Product Association, foreign direct investment (FDI) in the timber processing sector has increased rapidly, especially since 2018.

Among investors, China, Japan and South Korea are countries with a large number of projects and large scale of investment. By the end of September 2019, Vietnam's timber industry received 67 new investment projects, with total investment capital of over $581 million, 2.3 times higher than total registered capital of 2018.

To expand production, many FDI enterprises have decided to increase investment, of which Hong Kong (China) is the territory with the largest amount of capital increases at 10 times, three times higher than 2018; followed by China, the United States and the British Virgin Islands. Total increased capital in the first nine months of 2019 reached $200.4 million, 1.8 times higher than the increase in 2018.

Chairman of the Binh Duong Furniture Association (BIFA) said the levy of a tax of 10 – 25 percent by the US on timber imports from China makes Chinese timber enterprises almost unacceptable. To continue exporting to the US, they have to shift their investment to other countries, such as Vietnam.

Despite identifying FDI as a driving force for the development of the timber industry, the Agro-product Processing and Market Development Department said this poses many challenges as well as difficulties for the quality control of projects, receiving small-scale projects with outdated technologies, and failing to meet environmental protection requirements.

Notably, the FDI increase into the timber industry also has the risk of trade fraud and fake origin to take advantage of lower import taxes from Vietnam than from China to the US.

Foreign investment increases in wood processing industry Foreign direct investment in the wood processing industry has increased rapidly especially since 2018 the Vietnam Timber ...

Hiep said the shift of investment capital into the timber industry from China to Vietnam has started to put significant pressure on Vietnamese enterprises, typically in labour recruitment and anxiety about risks of origin fraud.