Speaking at a seminar on the industry in HCM City on July 14, Huynh Van Hanh, deputy chairman of the Handicraft and Wood Association of HCM City (Hawa), said that as much as 70 percent of enterprises involved in the wood processing industry are small, with investment capital of less than VND1 billion. 

"They are very vulnerable to changes in macro-economic policies as well as fluctuations in the global economy," he said. 

The current high bank loan interest rate and an increase in input costs have caused difficulties for enterprises in the sector, especially for small – and medium-sized ones, he said. 

Hanh said the wood industry estimates to need roughly 10 million cubic metres of timber a year, of which domestic production could provide about 4.8-5 million cubic metres.  Thus, roughly 4-5 million cubic metres of timber should be imported to meet the sector's demand. 

In the past few months, the cost of imported wood materials has surged 15 percent. Imported chemicals used in wood processing have also gone up by 30-40 percent, he said. 

With export prices remaining the same while production costs are increasing, many wood product exporters have decided not to sign new export contracts. 

Hanh said the cost of timber will also increase to obtain legal timber sources, under the EU's Forest Law Enforcement and Governance and the US's Lacey Act, which ban the import of any wood products made from illegally harvested timber. 

Enterprises would take high risks since they are highly dependent on imported timber and plywood, he said, adding that they need to know clearly about their timber sources. 

Vietnam earned more than US$3.4 billion from exporting handicraft, wood and wood products last year. 

There are more than 2,500 wood processing firms employing 250,800 workers in the country, located mainly in HCM City and southern Binh Duong, Dong Nai and central Binh Dinh provinces.