Vietnam has emerged as one of the four largest wood product exporters in Southeast Asia, and its products have established a firm foothold in 20 markets worldwide. The European Union, Japan and the US are the country’s largest wood product importers which make up more than 70 percent of the wood product sector’s total export value. Of the figure, the European Union accounts for 28 percent, Japan 24 percent and the US more than 20 percent.

In recent years, the US has taken the lead in the growth rate of importing Vietnam’s wood products.

After Vietnam joins the World Trade Organisation, local wood producers will enjoy lower tariffs imposed on imported wood materials and exported products. Lower expenditure will help increase the effectiveness of business activities and create competitive advantages on the market. The question is how to make use of this golden chance.

Since May 1, 2004, the US has imposed high anti-dumping tariffs on wood products from China – Vietnam’s main rival on the US market. This is another golden chance for Vietnam to boost wood exports to this lucrative market.

In addition to the expanded EU market, trade relations between Vietnam and Japan have created a new and large market for wood products from Vietnam.

Vietnam now has 1,250 businesses, including 60 foreign-invested, involved in processing wood products for export, which attract as many as 170,000 employees. Large-sized woodwork processing complexes have been established in HCM City, Hanoi, Binh Duong and Dong Nai provinces.

However, the sector still faces challenges. Vietnamese wood product exports make up a relatively small proportion on the world market. Its exports only represent 7.5 percent of Japan’s wood product imports, 0.92 percent of total US imports and 0.25 percent of total EU imports.

Vietnam has industrious, creative and skilful artisans, but due to low labour costs, it has not fully developed the human factor in production. Some highly-skilled artisans have moved from domestic into foreign-invested businesses to enjoy higher salaries.

In addition, domestic businesses are competing toughly with Chinese wood producers who have recently established factories in Vietnam to avoid high tariffs from the US market. Notably, Chinese businesses knew how to capitalise on Vietnam’s low labour costs and the application of modern technology.

Another challenge is that domestic wood materials do not meet the sector’s demand. More often than not, the sector has to import up to 80 percent of the wood material volume needed for export contracts. Currently, the price of wood materials is soaring due to forest fires, flooding, and degraded environment.

Vietnam’s major wood material suppliers such as Laos, Myanmar and Indonesia have recently ordered a ban of exporting unprocessed wood, forcing Vietnam to import semi-processed products at higher prices.

In addition, the soaring prices of oil and fuels on the world market also lead to higher transport costs.

According to statistics, in the past three years the price of wood materials in Vietnam has increased by 20-22 percent to cause a sharp decline in business profits.

Vietnam aims to fetch US$5.5 billion worth of wood product exports by 2010, and the target will probably be surpassed after the country joins the WTO. However, to realise the target, domestic wood product businesses should make greater efforts to overcome the above-mentioned challenges. Environmentalists have warned that if Vietnam does not improve its environment, it will have to import 100 percent of wood materials in the next five years.