NATIONAL SECTOR EXPORT STRATEGY Wooden Furniture Industry in Vietnam

Prepared by: VIETRADE/ITC

Executive Summary.

Vietnam has a long tradition of producing traditional style furniture but is a relative

newcomer to the world of internationally tradeable lifestyle furniture for outdoor and indoor

use.

A very substantial production has developed very rapidly over the past 7 to 8 years kick

started by a number of fairly substantial FDI’s seeking lower labour costs. They have moved

from such East Asian locations as Taiwan, Philippines, Malaysia, Thailand and more recently

even China. This production arising from the influx of FDI’s has been further added to by the

arrival of the very large trading houses such as IKEA, Carrefours, B & Q, Walmart etc. They

are seeking bargain basement furniture at low cost as a hedge against over exposure to China

. This in turn has given rise to a very substantial number of Vietnamese start ups in furniture

to meet the demand. On the face of it all seems to be going well. Exports are rising at a

dramatic rate, employment is rising, industry appears to be on a roll. But is it ?.

The dramatic rise of the furniture industry is on poor foundations. A strategy to correct

direction and create an environment in which the furniture industry can become a real

economic success is essential if there is to any security for its contribution in the long term.

The current success is being achieved against a background of :

shortage of skilled workers

serious under capacity in training facilities

poor and outdated equipment

lack of environmentally certified forests in Vietnam

lack of an adequate home produced supply of raw materials

lack of trained and experienced marketing personnel.

weakness in design and

under-capacity of infrastructure

Taking into account these limitations of the indigenous industry and the fact that a very

considerable volume of the exports achieved are produced by foreign invested companies the

projected expansion of the industry’s exports clearly needs a defined strategy to enhance

sector competitiveness, boost the sector’s export value to meet government prtojections and

put it on a sustainable basis for long term development.

The strategy put forward in this report is designed to achieve a long term sustainably invested

industry, delivering real value to the Vietnamese economy, over the long term is essentially

to analyse the current value chain at every step and seek to capture the maximum benefit

for the Vietnamese economy while laying the foundations for a long term sustainable

industry

This strategy will be achieved by:

developing the indigenous capability to supply as much raw material as possible to

feed the industry and where this not possible ensuring that the infrastructure is put in

place to handle the imported material needs of the industry

through design and product development maximize the use of non timber natural

materials such as bamboo, rattan, and natural fibres such as water hyacinth etc

putting in place the training facilities at artisanal level, engineering level, design and

managerial level to provide the trained personnel where needed

bridging the gap in current availability of training facilities by giving direct assistance

to enterprises to employ outside expertise in technical, design, marketing, managerial

and financial expertise

at every opportunity promoting Vietnam as a realistic destination for sourcing

furniture and assisting attendance at International Trade Fairs as Vietnamese suppliers

while ensuring that those who do exhibit on national stands are capable of upholding

and enhancing the good name of Vietnamese furniture.

commencing branding of companies products as early as possible in a company’s

development

providing state of the art exhibition facilities to allow Vietnamese companies

showcase their products in a pleasant and credible venue

encouraging and incentivising FDI companies to put down roots so that they do not

easily move on to the next ‘cheap’ destination.

Using all opportunities presented by Information Technology to enhance Vietnam’s

access to international markets and optimise real returns on product delivered

ultimately achieving more efficient means of delivering furniture to the end user

while emphasising at every step the use of sustainable materials, clean manufacturing

environments and minimum carbon footprint in delivery to the customer.

The sustainable development of the furniture industry in Vietnam requires a long term

commitment from government. Ideally it should be assisted by a ‘one stop shop’1 under the

appropriate Ministry that can provide all the inputs and advise on all the facilities available

for assistance on management, marketing, training, grant aid, fiscal incentives etc.

1 A ‘one stop shop’ is a facility whereby investors in a given industry may seek advice on all aspects of

government policy towards that industry inclusive of the legislative framework, the fiscal framework and the

availability of incentives.

1 Introduction

1.1 Rationale

Traditional wooden furniture manufacture has a long tradition in Vietnam. Recently,

furniture manufacture has been booming. It has become one of the top 5 exported turnover

earners after crude oil, garment and textile, shoes and seafood.

The wooden furniture of Vietnam has been well recognized in international markets with

exports growing from $135 million in 1998, to US$1 billion in 2004 and reaching US$1.98

billion in 2006. By 2006, Vietnamese wooden furniture had already penetrated into 167

countries and territories in the world. This is up significantly from 58 countries in 1998, of

which United States of America, European Union and Japan are major ones with export

turnover in 2006 of US$774 million, US$400 million and US$280 million, respectively.

From 2000 - 2006, the export turnover of the industry increased with an annual growth rate

of 30%. By 2006, Vietnam had already overtaken Indonesia and Thailand to become one of

the top two woodwork exporting countries in the Southeast Asian region.

There are about 2,000 wood processing enterprises nationwide, creating jobs for almost

170,000 workers. The industry has contributed considerably to the improvement of living

standards for people in many rural areas of Vietnam. Not yet fully recognised, let alone

exploited, the development of the wooden furniture industry also brings about opportunities

for the development of other supporting industries in the country like hardware, accessories,

finishing materials, adhesives, veneers, machinery etc. and service industries in consultancy,

software, marketing, shipping, financing etc. All of these are yet to be fully captured in the

Value Chain.

There are still a lot of difficulties for the development of the wooden furniture industry in

Vietnam. It comes from both internal and external factors which are:

shortage of skilled workers

serious under capacity in training facilities and lack of higher education opportunities

in design and engineering for entrants to the industry

poor and outdated equipment in many factories

lack of certified forests in Vietnam and difficulties in sourcing timber, certified and

uncertified from world markets.

lack of trained and experienced marketing personnel and remoteness from the main

markets seriously limits the options for profitable sales.

weakness in design and engineering of furniture has led to a ‘sameness’ of product

seeking similar markets and thus pushing price as the first competitive advantage which

of course forces down profitability and therefore the ability to invest in design, product

development and engineering.

under-capacity of infrastructure both in surface transport and in port facilities will

increasingly limit efficient exports unless addressed in a coordinated fashion

Taking into account these limitations that impact all the sector, and particularly the

indigenous industry, and the fact that a very considerable volume of the exports achieved are

produced by foreign invested companies ( FDI’s) the projected expansion of the industry’s

exports clearly needs a defined strategy to enhance sector competitiveness, boost the

sector’s export value and shape up private enterprises to be viable and strong

competitors in the world furniture industry for the coming years. It has to be stressed it

is value that is the key not volume.

A strategy is particularly pertinent as the Ministry of Trade has set a target of US$ 5.56

billion by 2010 and the Prime Minister has set a target of US$ 7 billion by 2020.

1.2 Approach

The wooden furniture sector export strategy aims at developing a framework to meet the

objectives of promoting exports and advancing the development of the industry. Building on

a comprehensive assessment of the current value chain, export performance, export

competitiveness, critical success factors, related government policies and strategies and the

sector’s support network. This proposed strategy sets out a long-term vision and proposes

actions and measures that should be taken into account and implemented within the next 5

years.

The main tools applied are Value Chain Analysis and the Four - Wheel Gear Interactive

Frame provided by the ITC. A value chain consists of all the individuals or enterprises that

buy and sell from each other in order to supply a particular product or set of products

including vertical and horizontal linkages.

In the wooden furniture sector, the value chain can be described as a set of connected raw

material producers/suppliers (both wood and accessories), manufacturers, exporters on the

domestic side and importers, wholesalers, retailers and end-users in the international part of

the chain.

The Four - Wheel Gear Interactive Frame is used to create a comprehensive sector export

strategy by having a closer look at four categories of value chain development issues:

Border-In: This deals with issues related to:

(1) Capacity development that involves the sector’s production capacity. It deals with

improvement in productivity, increase in volume, improvement in quality and most

importantly, increased value;

(2) Diversification and product development such as producing new product lines and/or

related products;

(3) Human capital development that includes the development and training of human

resources and the encouragement and fostering of entrepreneurship within the sector.

Border: This deals with the issues related to:

(1) Infrastructure improvements necessary for the sector’s development;

(2) Trade facilitation which is necessary to improve trading effectiveness and value

capture;

(3) Reduction in the cost-of-doing business to maintain and improve the sector’s

competitiveness

Border-Out: This deals with the issues related to:

(1) Market access that includes tariff, non-tariff barriers and other related market entry

issues;

(2) In-market support services such as design, product development, exhibiting etc.

(3) Promotion and branding to build and reinforce the sector’s image in the target

markets

Development: This deals with issues related to the social and economic development of

the country that the sector contributes to.

2 The Sector’s Current Status

2.1 Product Groups

According to the present Harmonization System (HS), the wood furniture sector in Vietnam

can be classified into 8 basic groups, namely:

HS940161: Upholstered seats (wooden frame)

HS940169 : Non-upholstered seats, made of wood

HS940180 : Other chairs

HS940190 : Chair components

HS940330 : Home office furniture, made of wood

HS940340 : Built-in Kitchen furniture and Other Kitchen furniture, made of wood

HS940350 : Bedroom furniture, made of wood

HS940360 : Dining and living room furniture, made of wood

The products can be classified into indoor and outdoor as well. In many cases, it is classified

also into styles like Classic, Colonial, Rustic, Contemporary…

Wood furniture production in Vietnam is carried out in both craft villages and by industrial

processing (factory-based). There are 4 main centers for wood furniture production: In the

Red Delta river, in Binh Dinh province, Central Highlands (Gia Lai, Dak Lac) and Southern

Vietnam (Binh Duong, Hochiminh, Dong Nai and Long An)

In the red delta river, Ha Tay, Bac Ninh and Ha Noi is the first center where most of

traditional wooden carved furniture is produced. The famous centres are Dong Ky village

(Bac Ninh), Van Diem village (Ha Tay), Van Ha village (Ha Noi)… There are also many

other villages producing wooden furniture in Hai Duong, Vinh Phuc, Nam Dinh and Hung

Yen provinces. There are up to 342 craft villages making wooden furniture in Vietnam

creating jobs for 99,904 people2. Most of the carved wood furniture is for local use and it is

also exported to China, Laos, Taiwan and Hongkong market.

The big industrial production of wood furniture, other than traditional, in Vietnam is centered

in 3 main areas: Binh Dinh province, Central Highlands (Gia Lai, Dak Lac) and Southern

Vietnam (Binh Duong, Hochiminh, Dong Nai and Long An). The exports of wooden

furniture from Vietnam takes place mainly from these 3 areas, especially in the Southern

provinces of Vietnam and Binh Dinh province. From these areas various kinds of indoor and

outdoor furniture is made of natural forest wood, plantation wood or combinations of wood,

wood composites and other materials are manufactured. They are normally made and

exported to meet customer requirements. In addition woodchips are also exported in some

considerable volume from this area.

There is a large variation of enterprise within the industry. It ranges from mass production

with many machines and sophisticated CNC machinery ( mostly FDI’s ) to small family

production often with very poor machinery and relying largely on handwork. The production

of furniture products in family households is very common in the Vietnamese villages. This

family production can have major advantages. Typically, almost all production stages are

done by skilled handicrafts people. They use very simple machines. On the other hand it can

be difficult to achieve realistic volumes for bigger orders.

This allows for flexibility in meeting a variety of product and decoration and it is suitable for

those looking for specialties and sophisticated hand-made products. A problem arises when

larger orders are sought. There is not the organization to cope with volume. The quality

suffers, the producers miss delivery dates, the buyers are disappointed and the image of the

producers can be damaged.

2 JICA study, 2004

However, there are many companies that have quality certification and can manage

production properly to meet the quality and quantity demands of their customers. The better-

managed factories are well organised and there is a high degree of flow in production.

Workers have obtained specialised skills at defined functions. Managers are aware of how a

production facility should be set up in order to be efficient and productive. Many of the mass

producers in Vietnam are not focusing on a few series of products but instead they include a

broad array of products in their portfolios. This type of production needs a higher degree of

industrialisation and benefits greatly from the addition of modern CNC equipment and other

repetitive machinery and finishing environments.

2.2 The sector value chain

The value chain of wooden furniture is constituted with the participation of various

stakeholders. The major ones are; wood and board materials ( MDF, Particle board,

laminates, veneers ) finishing and adhesive materials, hardware and fittings, packaging,

equipment supply, selling agents, logistic agencies, research and development institutions,

wholesalers, retailers and consumers. ( See Value Chain below )

2.2.1 Wood from home sources:

Wood from home sources in Vietnam includes wood in natural forest, plantation wood and

artificial wood (MDF, Fiberboard, Particle board...)

The total natural forest in Vietnam is almost 8,2 million ha, of which 2,9 million ha is

classified as production forest3. The harvestable volume of wood from the natural forest is

strictly managed by the government. The harvesting quota is given on yearly basis for certain

provinces and the logging quantity is reducing year by year on a national scale. If in the

1990’s, the annual logging quantity was over 1 million M3, then it reduced to 300,000 M3 in

2000 and the quota for logging in 2006 is only 130,000 M3 nationwide.

Table 1: Logging quota in Vietnam

Year 1990s 2000 2003 2004 2005 2006

Harvesting

quota (m3)

Over 1

mil.

300,000 250,000 200,000 150,000 130,000

3 Data updated as 31 Dec., 2006 – MARD

* Services here refer to physical services such as kiln drying, tool maintenance and machine maintenance.

** Finishing Materials refers to consumable materials used for the preparation and finishing of the product such as adhesives, abrasives, diluents,

lacquers, paints etc The internal ‘Wood Furniture Manufacture’ for all its complexity is achieving only 25% of the Consumer Value. The

remaining 75% is in the External Value Chain. This highlights the opportunities for increasing retained value.

It should be noted that, the above yearly logging quantity from the natural forest is used for

various applications not only the processing of furniture but also wood for construction and

mining. It is estimated that about 60% of the wood from natural forest is used for production

of furniture (equal to 80,000 M3 in 2006).

The plantation forest in Vietnam is 2.2 million ha, of which area for production is 1.45

million ha (681,000 ha is matured forest). Harvesting quantities from plantation wood are

increasing year by year, from 800,000 M3 in 2000 to 1,950,000 M3 in 2004. Most of wood

from plantation forest in Vietnam is used for paper pulp production and the remaining is used

for mining stands, construction, man-made board materials and furniture production.

The volume for furniture production from plantation wood is estimated at 20% of the total

harvested volume. Total plantation wood for furniture production from 2003-2006 was about

1 million M3. The consumption of plantation wood for furniture in 2010 is estimated at 3.5

million M3. A similar volume of plantation wood for the production of man made board

materials is required in 20104. One of the weaknesses of plantation wood in Vietnam is its

small diameter. This means it cannot be used efficiently for furniture production. Most of it

goes to man made board materials and pulp chips. In addition there is still no FSC (certified)

wood in Vietnam either natural or plantation. for use in the furniture industry. (There is only

one company, OJI, a Japanese invested paper manufacturer, who has obtained FSC

certification for their plantation. This material is used for paper pulp. ).

In an effort to minimize the shortage of natural wood, the wood-based panel producers have

had much attention in terms of investment from the government. However, for whatever

reason, production has failed to meet projections. This has resulted in only 20% of total

processing capacity being achieved, of which:

Plywood production: 12 factories and 10 small-scale units with a designed capacity of

150,000 M3 of product per year; actually only achieving 60,000 M3 product per year

Particleboard, fiberboard production: 6 factories with a designed capacity of 88,000

m3 product per year have actual capacity of 45,000 M3 product per year

Laminated board production: 9 units with a designed capacity of 26,000 M3 of

product per year have actual capacity of 15,000 M3

This in general terms is an underachievement of 50%. And requires immediate and

determined analysis followed by appropriate technical assistance to improve the position.

From now to 2020, the government will focus on 2 main product types of man made board

materials, particle board and medium density fibre board (MDF) using plantation materials.

Wood-based panel production capacity of 540,000M3 product per year is projected,

4 According to forestry plan 2006-2010

320,000M3 of particle board product per year and 220.000M3 of fiber board product per

year. As a matter of fact, the quality of plantation forest in Vietnam is still poor resulted

from the quality of seedling, caring condition… therefore, most of wood are only suitable for

paper industry (wood chip) and material for artificial wood.

2.2.2 Imported wood

Vietnam wood processing industry has a consumption of 3-3.5 million M3 of timber per year

at present but domestic raw materials can only supply 20% of this amount while 80% is

imported. According to the statistics, Vietnam is importing wood materials from over 100

countries in the world. Wood import turnover is increasing year by year, going from

US$151.5 mil. in 2000 to US$ 535.8 mil. In 2004 imports accounted for 42-49% of total

export turnover of wood furniture in the same period. This is a very high dependency on

imports and highlights a major vulnerability for the producers of low cost outdoor furniture

which is made up entirely of solid wood.

Table 2: Import turnover of wood

Unit: 1000 US$

Type of wood Year

2000 2001 2002 2003 2004

Log 87,527 68,419 77,805 135,948 198,636

Sawn wood 34,894 56,489 118,259 147,308 229,571

Veneer 78 1,523 3,695 5,533 17,366

Shaped wood 576 761 3,014 3,436 2,014

Particle board 23,947 18,428 24,810 25,859 35,791

Fiber board 4,196 14,314 19,983 23,672 44,520

Ply board 116 769 1,349 1,175 2,197

Total 151,486 160,915 249,347 344,692 535,767

Growth rate 6% 55% 38% 55%

Import wood /

Export furniture 44% 42% 47% 48% 49%

Wood processing companies imported wood in different forms, from logs, sawn wood,

veneer, particle board, fibre board ( MDF ) and plywood… The species and countries of

origin for these woods in 2004 are from different countries in the world5:

Table 3: Source of imported wood

Logs Meranti Malaysia (90%) and Solomon Island (10%)

5 Source: General Statistic Office

Keruing and Kapur Malaysia (70%), Laos (12%), Papua New Guinea

and Australia.

Oak6 Malaysia (50%), Papua New Guinea (11%), Laos

(6%), Myanmar (5%), Uruguay (3%), USA (2%)

Sawnwood

Redwood:

Malaysia 48%, Laos 42%...

Kapu, Kempas,

Keruing, Ramin,

Teak, Balau

Cambodia (58%), Malaysia (10%), USA (7%),)

Indonesia (5%), Brazil (4%), New Zealand (3%)...

Oak USA (58%), Italy (15%), Ukraine (7%), Romania

(4%)

Other sawn wood Laos (20%), Cambodia (15%), Brazil (9%),

Malaysia (8%), Finland (6%)...

Veneer Taiwan (52%), China (12%), USA (10%)...

Particle

board

Malaysia (45%), Indonesia (25%), USA (10%),

Thailand, China...

Fiber board,

MDF

Malaysia (30%), Thailand (25%), Australia

(25%)...

Plywood China (35%), Japan (25%), Malaysia (20%)...

The cost of wood and man made board materials accounts for a very high percentage of the

product cost structure (40-65%+), therefore, looking for solutions to minimize the cost of

wood material as a percentage of selling price plays a very important role in improving the

competitiveness of the manufacturers. The fact that Malaysia supplied almost 50% of Oak

logs for Vietnamese wood manufacturers, while there’s no Oak in Malaysia but it is sourced

from the USA, Germany, Russia and Romania highlights the weakness of Vietnamese

companies in approaching appropriate sources of wood supply. The wood traders of Malaysia

were able to find better sources of wood supply to trade with Vietnamese manufacturers. The

same case happens when many US wood suppliers source wood from Canada and supply to

Vietnamese companies. The involvement of intermediaries, together with the increasing price

of wood recently, make the production costs of Vietnamese furniture less and less profitable

and seriously threatens competitiveness. This is major issue that has to be addressed.

At the same time, the main traditional suppliers of wood for Vietnam like Laos, Myanmar,

Indonesia, have already banned the exportation of logs. Therefore, Vietnamese companies

must import processed wood at higher prices. Moreover, most of the companies importing

wood independently in small quantity also make the CIF Vietnam price of wood higher. In

addition to these pressures, the rapidly rising demand for wood and wood products in

6 Oak is not necessarily indigenous to these countries but is cited here as these are the countries who are acting

as intermediaries in Oak supply, This highlights the current lack of expertise in sourcing.

China will put increasing pressure on the wood inventory of neighbouring exporting

countries. This has been highlighted by the World Wild Fund (WWF) who say the

demand of wood consumption in China will increase quickly.

In 2003, China imported about 42 million M3 of wood, of which over 50% came from

Malaysia, Indonesia and Russia. It is forecasted that the wood consumption of China will

reach 125 million M3/year in 2010. This will undoubtedly put pressure on prices.

The imported woods are both FSC and Non-FSC. The need for FSC wood is increasing in all

companies even though the cost of FSC wood is often 20-25% higher than non-certified

wood. The raw material cost is often accounting for 35-60% in the product cost in case of

outdoor furniture and it is higher in case of indoor (50-70%). There is no import duty on

wood, except for 10% VAT, which is not paid if the final product is re-exported. However,

shipping costs may add additional 40-60% extra to the costs of the actual wood

The government of Vietnam has decided to preserve the natural forest for valid

environmental reasons. This is wise. When these and further plantations come on stream

Vietnam will become better positioned for materials but it will not be self sufficient.

Meantime importing timber is a real constraint on Vietnamese manufacturers for

which strategies need to be developed to alleviate this strain. eg. More metal and less

wood in outdoor furniture achieved by innovative design, more bamboo, more fibre etc.

2.2.3 Other materials

The availability and supply of other materials like bamboo, rattan, water-hyacinth,

aluminum/metal, leather, ceramics, lacquer, glass, plastic etc must also play an important role

in the design, development and diversification of wooden furniture products. This is true for

all strata of the market.

These materials are all available in Vietnam but at different competitive levels as compared

to other countries in the world. Vietnam has sometimes been named “the country of

bamboo”, and therein lies huge potential. Bamboo itself together with other bamboo-based

products like laminated bamboo and woven bamboo can be a good combination when placed

alongside wood in the design and manufacture of furniture. However, as with rattan, bamboo

sources in Vietnam are under threat of shortage and need seriously applied efforts to

preserve and cultivate the sources. Prices are increasing by the year and Vietnam is now

importing both bamboo and rattan from China, Laos and Indonesia.

Due to this situation, the Government of Vietnam has already approved a strategy for

development of Non-Timber Forest Products up to 2015, of which bamboo and rattan are

important components.

Wood furniture in combination with metal is getting more and more attention from exporters,

but there are only a few factories in Vietnam yet where metal parts like fabricated or cast

frames can be produced. This needs development. The quality and design is still very limited

and wood furniture exporters often still need to import these metal parts from China or

somewhere else for their export orders. The development of metal and other inputs to the

industry are both vital and profitable and lead a greater ‘capture’ in the Value Chain.

2.2.4 Hardwares & accessories

Hardware, fittings and accessories can be produced and supplied by local manufacturers, by

traders and from foreign sources. Hardware such as bolts, nuts, screws, nails etc are produced

locally but are still very limited as to quality and variety. This supply side is a major

opportunity for a vibrant furniture industry. Taiwan is the perfect model for development of

this sector and case studies should be prepared for study by the industry’s strategists. Where

specialized fittings are required they are still imported from Germany, Italy, Japan, China and

Taiwan. In many cases, the importers will provide suitable hardware and/or specify

accessories that manufacturers need to use to ensure the quality of products. The more of this

that can be supplied from within Vietnam the better.

Other accessories and supplies like lacquer, paint, adhesives, foils, fabrics etc can be

produced in Vietnam, but again the higher quality materials still need to be imported.

The supply of such hardware and accessories are mainly concentrated in Hochiminh city and

this can cause a lot of difficulties for wood manufacturers in the North as the distribution

infrastructure is weak.

In some cases foreign companies have either set up their production of hardware and

accessories in Vietnam or are working in partnership with local trading companies.

Investment in this area should be encouraged and producers should be assisted to identify

local production when it has the potential to replace imports. Some of these companies have

also set up representative outlets in Vietnam to promote their sale.

2.2.5 Machinery

Machinery and equipment play an important role in achieving competitiveness in the

furniture industry. Basic wood processing machinery is produced in Vietnam and supplied

locally to many of the smaller producers and to large companies too There are several

companies specialized in this business but most of them are still in small scale (about 80%)

and medium scale (20%) producing very basic low technology equipment. Most of the more

sophisticated machinery is imported either new or secondhand. There is a shortage of skilled

personnel capable of using such equipment and the supplies infrastructure for software,

tooling and maintenance is still very basic. Often, where secondhand machinery is purchased,

the buyer does not have adequate access to instruction manuals for operation and

maintenance and the equipment proves a disappointment. Many wood processing workshops

are located next to wood craft villages (in Ha Tay and Bac Ninh provinces) and these

workshops are sometimes at household scale to make simple equipment like bench saws,

bandsaws, lathes, spindles and simple boring machines. These machines greatly improve the

productivity of wood processing in the craft villages but where the accuracy is required to

produce series all the same they are not reliable. Safety is also an issue that should receive

attention. Many of these types of machine are inadequately guarded. They are dangerous to

use even by very experienced workers.

The centre for manufacturing of wood processing machines in Vietnam is around Hochiminh

and Da Nang cities. The majority are in Hochiminh where most of the machines for wood

processing can be either produced or assembled with a certain percentage of parts imported

from Taiwan, China, or Japan. Basically, these manufacturers can meet demand of wood

processing companies for equipment of rough and semi-finished stages and they are trying to

invest in equipment to improve efficiency of their production. They are investing in CNC

machine tools to replace old technology and to achieve improved quality. The industry can

now produce and supply such machines as Finger Jointing Lines, Automatic double end

tenoners, copy shapers as well as the basic saws, planers, thicknessers etc.

There is no exact data on the percentage of wood processing machines that are imported but

it is likely that it is over 80%. This, as said earlier, is a big opportunity for local producers.

In 2006, the total amount of wood processing machines imported by Vietnamese wood

manufacturers cost about US$57 million. They were purchased from Japan, Italy, Taiwan,

China and Germany. More high quality machines will be imported as the number of furniture

manufacturers moving to the production of indoor furniture increases

The imported machines are supplied by a network of traders. Most of them are local traders,

some of them are foreign representative offices. There are also many cases where furniture

manufacturers contact and import directly from manufacturers overseas.

2.2.6 Technical, managerial and vocational skills training

The wood processing industry in Vietnam is supported by a system of research institutes and

training schools to provide processing knowledge to managers and workers for the industry.

There are three institutes and various training schools (including universities, high schools,

secondary schools, vocational technical schools, management cadres’s schools) nationwide.

The forestry training system within the Ministry of Agriculture and Rural development

comprises the Institute of Forestry Sciences (post graduate training), Forestry College in

Xuan Mai – Ha Tay province, 2 schools for training management staff in Agriculture and

Rural development in Hanoi and Ho Chi Minh city, 3 Central forestry high schools in Quang

Ninh, Dong Nai and Gia Lai provinces; Vocational training School for wood processing in

Ha Nam province, Central School for training forestry workers No.1 in Lang Son, No. in

Binh Dinh, No.3 in Binh Duong, No.4 in Phu Tho provinces. 2 training centers for staff in

forest protection and forestry management in the North and the South have been established.

In general, these training system has provided considerably the human resources for the

sector, but the quality of training available now, particularly in relation to machine

technology, materials technology, design, and marketing… is still poor.

Annually, training institutions within MARD are recruiting 5,170 students and pupils of

which 70 are Ph.D and Master students, 800 are university students in formal training , 450

are undergraduates in in-service training, 50 students in college training, 850 pupils in formal

high school, 400 pupils in in-service training school, 2,550 pupils in formal vocational

training.

Besides colleges and training institutions within the MARD, there are Thu Duc Agriculture

and Forestry College, University of Central highlands, Thai Nguyen Agriculture and Forestry

College under the Ministry of Education and Training. Provincial People’s Committees are

managing 10 forestry training institutions including 1 college (Hong Duc College – Thanh

Hoa province), 8 Training High Schools and 1 Vocational School. These schools admits 800

students for both formal and in-service forestry training at university-college, high school and

technical worker levels.

The number of trained staff and forestry workers by those institutions are more than 80,000

of which post-graduate training are 13,000 (Doctor 110, Master 200), Training High School

are 27,000 and skilled workers are 40,000.

However, the output of these courses are not always furniture production related except some

at vocational school level. Besides, this apparently massive training input is still not

translating into competent technicians on the ground. Under the pressure of labour shortage,

several cooperation models have been formulated effectively. The Agro-Forestry University

in Ho Chi Minh City has invited wood manufacturers to locate in the precinct of the

university and employ students as trainees to participate in production activities. Besides, the

model of Public-Private Partnership for training workers on woodworking has been

implemented in Dak Lak province under the technical and financial support of GTZ

(Germany).

2.2.7 Wood furniture manufacturers

According to the figures of the Ministry of Agriculture and Rural Development, there are

about 1,600-2,000 enterprises that specialize in wood processing and trading nationwide.

Among these companies, there are 374 state-owned companies, 324 foreign-invested

companies with the registration capital of US$1.2 billion (up to 14 December 2006) and the

others are indigenous private enterprises.

The aggregate wood processing capacity of these units is estimated at 3 million M3/year

(combination of solid wood and man-made boards). Most of these state processing and

trading enterprises are based in the Binh Dinh, Ho Chi Minh City , Binh Duong, Dong Nai ...

The scale of wood processing companies can be divided into there main groups:

Group 1. Large companies with a monthly production capacity of about 100 to 350 x 40ft

containers.

Group 2. Medium companies with a monthly production capacity of about 20 to 100 x 40ft

containers.

Group 3. Smaller companies with a monthly production capacity of less than 20 x 40ft

containers

Among these companies, there were already 99 companies with a Chain of Custody

certificate (COC )and the number of certified companies will be increased in the future. Most

of the large companies and some of the medium ones have also obtained ISO 9001-2000 and

SA 8000.

The wood processing companies are also in the process of building clusters that can foster

growth through cooperation and strategic alliances. Already, some manufacturers act as sub-

contractors for those with limited capacity or for specialty items. The manufacturers are

slowly learning that each must find its core competency and concentrate on that. At the same

time some are trying to become more vertically integrated in such areas as veneer and

veneered top production in order to have more control over costs and quality. In addition,

they are serving as suppliers to smaller furniture manufacturers.

The foreign wood processing companies ( FDI’s) play an important role for the development

of the industry in Vietnam, not only in term of export turnover but also in awareness of

technology, human resource training, diversifying products and even promote images of

wood processing industry to the world market. As labor costs began to swell and a shortage

of workers developed in their own countries foreign manufacturers from the US, Europe and

Japan began looking offshore to Malaysia, Singapore, Thailand, the Philippines, and more

recently Vietnam to find a suitable manufacturing environment. At this very moment there is

tremendous momentum in Vietnam as Taiwanese entrepreneurs build or expand large

factories in Vietnam, especially around Ho Chi Minh City, as they gear up to compete head-

to-head with the Chinese in resolute determination to export to U.S. and European markets. It

is obvious there is great confidence and optimism in the potential here and thus huge

investments are being made to gain a solid footing in this emerging furniture manufacturing

cluster. These new factories are equipped with new machinery and incorporate the latest

equipment in some areas — such as finishing.

2.2.8 Agents and sourcing companies.

These are independent individuals or companies which negotiate and settle business on the

instructions of their principals and which act as intermediaries between buyer and seller.

They do not buy or sell on their own account and work on a commission basis. Most agents

represent more than one manufacturer, although competition is avoided. Often the buying

agent has his office in the supplying country

There are many agents and sourcing companies buying wood furniture in Vietnam. Most are

just sourcing like Carrefour, Ikea, Diamond Keystone Associates but some are involved in

both sourcing and production like Scancom. The sourcing agents play an important role for

the development of the sector, for instance, Carrefour has imported US$ 20 million of

furniture in 2006 while Scancom has exported from Vietnam over 40 million US$ in the

same year.

2.2.9 Freight forwarding and transport

Shipping and forwarding companies either belong to local or foreign companies and offer

various kinds of services, from customs declaration and clearance to hiring containers,

chartering vessels, inland transportation etc. Competition between forwarding and shipping

companies is fierce. Each company is often strong at a certain shipping route. Freight in

Vietnam is often higher in than China due to lower traffic density and poor seaport

infrastructure.

2.2.10 Importers/ Wholesalers/Buying Groups

By buying on his own account the importer or wholesaler takes title to the goods and is

responsible for their further sale and distribution in his country and/or in other markets.

He/she is familiar with local markets and can supply considerable information and guidance

to the overseas manufacturer in addition to the primary business of buying and selling, such

as the administration of import and export procedures and holding of stock. The development

of a successful working relationship between manufacturer and importer can lead to a high

level of co-operation with regard to appropriate designs for the market, new trends, use of

materials and quality requirements.

Buying groups are formed to assist small retailers get better terms. They usually buy for a

collection of small companies. The buying groups act somewhat like a cooperative and seek

to achieve a better price and a better service by virtue of their buying volume. However

typically they do not stock and require that the furniture is delivered to its destination retail

store. This requires a little more sophistication on behalf of the manufacturer to do the

necessary paperwork and manage the logistics.

2.2.11 Retailers

Retailing is the last step in the distribution chain from manufacturer to consumer. Retailers

come in many different sizes from the small single unit known in the US as ‘Mom & Pop’

stores to the giant leviathans such as Walmart, IKEA and Carrefours.

The small units are usually specialists either, by product or by service. They buy from

wholesalers and do not normally carry stock. The wholesaler charges them for his service of

importing, stocking and distributing. The mark-ups vary but usually will be in the region of

80 to 100%, and sometimes more, of the FOB price. The retailer in turn will add a further

100%, plus or inclusive of local taxes, and so the furniture sold to the consumer ends up at

something in the region of 4 times the FOB cost to the consumer.

The next stage up is the buying groups who buy collectively on behalf of a number of

independent retailers. They take a percentage of the price of the goods landed for their

service of sourcing and selection. Normally 10% to 12% but the retailer incurs all the

handling charges from factory to store and thus the retail price ends up similar to that of the

furniture bought from a wholesaler but the retailer may achieve a mark-up of more than

100%.

The small chain stores come next. These are where you have localized groups of stores under

one ownership operating in one city or one state but not usually nationwide. They usually act

as their own wholesalers buying into a central warehouse and distributing around their own

stores. Again the furniture usually finds its way to the consumer at 4 times the FOB price.

The next group is the giant retailers such as the IKEAs, Walmarts, Carrefours etc. These

groups are masters of globalisation and have enormous purchasing power. They buy directly

from the manufacturer and sell on directly to the end consumer. They seek to benefit from

economies of scale and negotiate very hard when purchasing. They offer huge volumes and

demand very low prices. Typically they pay 20 –22% of the ultimate selling price in their

stores and so to supply them the manufacturer must be super efficient if he is to make a

profit. More and more these enormous buying groups are achieving monopolies in their

respective markets. Due to globalisation they have a hegemony in the marketplace and their

suppliers are swamped with huge volumes giving them little or no space to seek out higher

prices from other buyers.

Such buying groups have huge costs and inefficiencies in their systems. While they often sell

at a discount to the consumer this discount is achieved by ruthless buying practices. These

practices can be very destructive of the manufacturing base. It is essential to understand that

supplying the retailing giants requires extreme efficiency on behalf of the manufacturer or

profitability will be sacrificed to volume and the manufacturing company will ultimately fail.

Supplying such outlets can be a strong learning curve and build strong industrial stamina but

the goal should be to get closer to the end user. Alongside supplying such leviathan

companies it is essential that the supplying companies develop strategies that will lead them

into more independent supply chains.

2.2.12 Consumers

The consumer is the end user, the person who pays his money and takes the product home.

This is the end of the value chain. The consumer is motivated to make his purchase by style

and design, by location and quality of product and of store, by fashion and peer pressure and

by functional necessity. The price the consumer will pay is dictated by availability,

affordability, quality and payment terms.

2.3 Assessment of wood furniture performance

The export turnover of wood and wood furniture has grown quickly in recent years. From

the turnover of $344,940,000 in 2000 it has reached $1.1 billion in 2004, $1.56 billion in

2005 and $1.98 billion in 2006. Vietnam has also set the target for the turnover of $5.5

billion in 2010 with the annual growth rate of 29.8%.

Table 4: Export turnover for wood and wood furniture in Vietnam

Unit: 1000 US$

Year

2000 2001 2002 2003 2004 2005 2006

HS940161 0 467 594 1,392 17,868

HS940169 0

1,225

4,906

47,026

165,930

HS940180 55,869 42,488 70,789 59,597 2,926

HS940190 4,251 7,497 10,061 11,104 14,915

HS940330 60,007

35,081

68,499

76,771

69,438

HS940340 311

1,802

6,936

8,806

19,642

HS940350 7,121

14,356

48,269

54,923

228,464

HS940360 76,567

127,028

135,317

278,117

362,442

HS44 140,814 155,434 188,107 173,271 220,127

Total 344,940 385,378 533,478 711,007 1,101,75

2

1,560,00

0

1,980,0

00

Growth rate 12% 38% 33% 55% 42% 27%

Source: General Statistic Office (2007)

It is noted from the above table that, the total export turnover is also included of both wood

furniture (HS44) and wood materials HS4401-4421(Various kinds of woods and material

boards) are also counted.

The EU, Japan, the US and Australia are the biggest markets for Vietnamese furniture.

Shipments to the U.S. market alone reached US$744 million in 2006, 39% of the total. The

figure is expected to leap to US$1.26 billion in 2007, around half the country’s total. Exports

to the EU and Japan amounted to US$500 million and US$286 million in 2006 respectively,

up 300% and 200% against 2003. However, so far the ratio of wood furniture in these

markets are still very small as compared to its actual consumption. The markets (in order of

export turnover, from high to low) for specific furniture categories are as follows:

Table 5: The market for Vietnamese furniture

HS940161 UK, Denmark, Germany, Australia, Taiwan, Canada, Holand, Belgium

HS940169 Germany, UK, Holland, Belgium, Australia, Denmark...

HS940180 UK, Germany, Denmark, Taiwan, France...

HS940190 USA, Taiwan, Malaysia...

HS940330 USA, Japan, France, UK, S.Korea, Denmark.. (Most of these markets did

not show growth in recent years)

HS940340 USA, Japan, S.Korea, Taiwan, UK.... (US, Japan and S.Korea market

increased quickly).

HS940350 USA, Japan, UK, China, S.Korea, Australia... (US and Japan market

increased sharply, other ones were also grown stably at high rate)

HS940360 USA, Japan, France, Holland, UK, Germany, Australia... (US market

grown 100-300%/year, Japan market also grown stably)

The export turnover generated by foreign invested companies is a very big share of Vietnam

wood furniture processing industry. More than half the 2006 export revenue of US$1.93

billion came from the foreign-invested sector. The southern province of Binh Duong, which

accounts for around 40% of the country’s annual woodwork exports, now has 369 wood

processing enterprises, including 194 foreign-invested companies with combined investment

capital of more than US$700 million. Also, according to a statistic figure from a US

Consulting firm in Hochiminh which is specializing in promoting wood furniture for US

market, about 80% of wood furniture export turnover in Vietnam destined for the US market

is from the Chinese and Taiwanese invested companies in Hochiminh, Binh Duong, Dong

Nai as well as other traders in the third countries. This statistic alone underpin the need to

ensure that these companies put down roots.

Since Vietnam became an official member of the World Trade Organization in January 2007,

more foreign investors have been paying greater attention to the domestic wood processing

industry and operational foreign-invested enterprises also plan to expand their business in

Vietnam. For example, Taiwan’s Kaizer Wood Industry Co. has quadrupled its processing

capacity so that it can export 1,000 container loads a month, targeting export turnover of

US$60 million this year. According to the source of Vietnam Economic News, the export

turnover of top foreign invested wood furniture companies in 2006 are as follows:

Table 6: The export turnover of top foreign invested wood furniture companies in 2006

Company Export turnover (US$)

Scancom Vietnam 41.637.887

Green River Wood & Lumber 40.800.000

Theodore Alexander 34.591.588

Poh Huat Viet Nam 34.561.159

San Lim Furniture Vietnam 34.126.261

Latitude Tree (Vietnam) 29.844.014

Kaiser Vietnam 28,807,267

Great Veca Vietnam 26.148.977

Koda International 25,826,033

Standart Furniture Vietnam 21.023.016

RK Resources 19.656.991

Johnson Wood 18.620.162

FuTa (Vietnam) 18.373.433

Marumitsu-Vietnam 17.722.557

Chien Furniture Vietnam 17.622.965

The case of Kaiser expansion looks great but if looking at the math, one can find that the

value per container based on these figures is extremely low and may be not really economic

for Vietnam whatever about the company. About all that can be said is that it is keeping

people in jobs though probably for very low wages where it is more worthwhile to improve

the economic worth to the economy of Vietnam and not the volume.

2.4 Performance against Critical Success Factors

There are a number of critical success factors that determine competitiveness in the wood

furniture sector :

2.4.1 Government level:

Government must engage with industry, empower development in the industry and

provide the platform from which an innovative approach to the market is undertaken. It is

vital to the economic success of the furniture industry that companies get as far long the

value chain to the end consumer as possible. The efforts of government should at all

times bear this in mind.

The training facilities must be put in place at all levels, craft skills, technological skills,

design and innovation skills and marketing management skills.

The long term development of ‘homegrown’ timber supplies must be actively undertaken

to ensure maximum security of raw materials in the longer term and thus sustainability of

the industry.

A suitably qualified team should be selected/recruited to lead the industry and manage its

adaptation to the international market, manage its image and its value growth.

Sufficient companies must be encourages buy into proposed innovative approaches to the

marketing and branding of furniture from Vietnam and they must be prepared to

contribute to a ‘directorate’ to manage the operation.

2.4.2 Industry level:

2.4.2.1 Availability of wood material

Currently, as much as 42-49% of the export value of furniture from Vietnam goes out of the

country paying for wood and panel imports. This is an extremely high ratio and one that

should raise concerns for the overall viability of the industry long term.

Meanwhile, the supply sources in Vietnam’s neighboring countries like Laos and Cambodia

are depleting. The price of wood in Malaysia, Vietnam’s largest material provider, is rising

sharply and other exporters like Russia have increased export duties on wood materials. The

price of wood material imported by Vietnam in 2006 rose from 40 to 100 percent compared

to 2003. In addition, there does not exist a good plan for material import. Vietnam is also yet

to have long-term agreements at Governmental level with its major material exporters like

Russia, New Zealand, the US and South American countries.

According to the “New 5 million hectare forest-planting” programme, Vietnam will have 2

million hectares of protective forest and 3 million hectares of production forest in 2010. It

will be difficult for the Vietnamese forestry sector to reach this goal, so it is expected that

Vietnam must import around 75% of its timber in the coming years. There is no import duty

on wood, except for 10% VAT, which is not paid if the final product is re-exported.

However, shipping costs may add 60% extra to the costs of the actual wood.

Local wood supplies are not catching up and in many cases plantation timber is not being left

long enough to be really useful.“The Acacia logs are harvested too soon (6 years ) to allow

mature logs and thus logs with a more cost effective yield. It is preferable that suppliers

have access to larger diameter logs 10 to 12 years old. The problem is that the farmer and

the government want their money sooner and will not wait. Without larger logs higher

quality products cannot be made here in Vietnam”7

Species of wood to be planted in Vietnam, for instance, eucalyptus urophylla often provide

low quality wood while in other countries that have similar conditions like Vietnam, for

instance, Solomon Islands, South Africa, Uruguay and Brazil grow other planted eucalyptus

species like Deglupta, Saligna and Grandis. This provides much better wood quality. The

species to be planted and cultivation technique are still weak points of the forestry sector in

Vietnam.

The demand for certified wood is increasing and will soon become the norm due to pressures

from environmentalists and reinforced by acceptance of global warming as a reality.

However, there are still no certified forests in Vietnam yielding wood for furniture. The

government is moving towards certification of state managed forests and it is the generally

held opinion that sustainable exploitation of the forests is the best option to preserve the

forests from piracy and develop good management practice but natural forest will not yield

the necessary volumes.

As much as 42-49% of the cost of exported outdoor furniture is raw material cost. This leaves

very little value to be distributed to labour, overheads and profit. At this percentage for raw

material companies cannot make worthwhile profits or fund sustainable development of the

enterprises. This situation can only be made better by improved marketing, improved design

and product development and consistently good quality in product and service. All of these

are critical success factors.

2.4.2.2 Cluster Development and Supporting industries

The wood processing furniture sector is now facing the pressing problem of poor supporting

industries. Despite impressive growth over the past few years, the Vietnamese wood

processing sector is not harmoniously coordinated with related industries which produce

auxiliary materials and components for wood products. The accessories and auxiliary

7 Opinion of a big buyer for furniture in Vietnam

materials account for 5-10% (sometime up to 15-19% - the case of Forexco, 15-25%

Savimex) of the total product value (but it is only 3-5% in China as reported by some

companies).

Most of metal parts for furniture are being imported, even though there are already several

manufacturers in the South. The other ones like polyurethane (PU), adhesive, fabric,

leather... are being distributed by traders who are also importing from different countries.

PU lacquer and adhesive are the items that are largely consumed by both indoor and outdoor

manufacturers. They are being imported from Akzo Nobel (the Netherlands), Jowat

(Germany), Kony Bond (Japan) and some other local manufacturers like Inchem (Malaysia),

Duy Hoang... Auxiliary materials for the timber sector are not only highly priced but also of

low quality and sometimes hard to have delivered on time. The supply of textiles in

particular poses difficulties for wood processing and exporting enterprises. For example, a

textile enterprise agreed to produce cloth of a certain colour and pattern as required by

furniture manufacturer, but the cloth eventually delivered was not of the colour and pattern

agreed to, thus severely undermining the relationship between furniture manufacturer and its

customers and even leading to the cancellation of orders and claims for compensation.

2.4.2.3 Labor force

The universities and colleges can only provide a small percentage of the necessary labour to

the wood processing industry. The vocational training dedicated to wood processing has also

failed to meet enterprise demand, therefore, the wood processing industry is suffering from a

lack of skilled labour. Recent figures from Vietnam Forestry and Wood Products Association

(VIFORES) show that the industry needs around 122,400 workers, including almost 120,000

manual workers and 2,400 technical engineers and there is a shortage of about 20.000

workers now.

Because of the shortage of skilled labour, many companies have tried to attract the labour

from the other companies, especially the ones in the same areas (this is popularly happened

in Phu Tai IP of Binh Dinh province or industrial parks in Binh Duong province). Fighting

over good labour between the companies often happens and many companies have incurred

delays in delivery because of this issue.

Productivity in the bulk of enterprises visited was low. This was mainly due to poor product

engineering because the necessary trained middle management just did not exist. It was

found in interviews that lack of training presented one of the biggest obstacles to the long

term development of the industry. “ Labour turnover is a big problem you have them trained

and they leave. Quality perceptions are low and you have to train from scratch. Training of

supervisory management is vital. They would like short term training 2 to 3 times a year.

They would release staff for this training”

2.4.2.4 Equipment and Processing technologies

Most of the machinery used in production is locally made or imported from China, Taiwan,

Japan or Germany. Machines from Japan and Germany are typically second hand. The

machinery which is locally made, or imported from China or Taiwan, is often of poor quality

and outdated. This underdevelopment is due to the fact that the industry lacks sufficient

capital to invest in more sophisticated technology. However, as more and more companies

enter the Vietnamese market, the demand for more advanced machineries is expected to rise.

2.4.2.5 Product range

There are essentially four product groups making up the furniture exports of Vietnam.

Outdoor furniture; made from local and imported Acacia, Teak , Beech, Balau and

Eucalyptus.

Indoor furniture; made from imported Pine, Rubberwood and also hardwoods like

Ironwood, Rosewood, Mahogany and Redwoods.

Reproduction furniture; and ornate indoor furniture made largely from imported redwood .

A good trend that many wood furniture manufacturers are pursuing, is the combining of

wood and other natural materials or metal for unique designs.

Traditional carved furniture; this is made from imported wood from Laos and Cambodia

and some locally harvested wood. It is mostly aimed at local markets and those of China and

Taiwan.

Table 7: The popular species of wood for wood furniture in Vietnam

Indoor Outdoor

Products:

Dining set (tables, chair...), sofas and coffee

table, saloon chair, beds (King/Queen...),

bookcases, cabinets, buffets, cupboards...

Imported wood

Oak, Cherry, Walnut, Black Cedar, Pine,

Beech, Soft Maple..., Ebony, Rosewood,

mahogany,

Local wood (both natural and plantation)

Gioi/ Talauma Gioi A.Chev; Ebony,

Rosewood, mahogany, Re/ Cinamomum

albiflorum Eces;Thông nàng/ Podocarpus

Products:

Armchair, bench, rocking chair, coffee

table, table with extension, hammock,

steamer chair, sun lounge, swing, trolley,

footrest...

Imported wood

Meranti, Merbau, Manni, Keruing, Kapur,

Kempas, Pyinma, Pyinkado, Teak (white

and Yellow), Yellow Balau; Eucalyptus;

Acacia

Local wood (both natural and plantation)

Cho chi/ Parashorea stellata Kury;Acacia,

imbricatus B1; Rubber, Cherry, MDF,

Plywood & Veneer...

Eucalyptus...

2.4.2.6 Production costs

Labor costs per hour for Vietnamese workers range from 0.2-0.6 US$, for Indonesia from

0.3-0.4 US$, for China from 0.5-0.75 US$, for Malaysia from 1.25-1.40US$, for Thailand

from 1.5 US$ onwards and are about 5 US$ in Taiwan).

2.4.2.7 Product quality

Outdoor furniture is generally produced for the middle to lower end markets and sold to bulk

buyers at weak prices.

Indoor furniture produced for export by local companies is usually made from imported Pine

or Rubberwood and is directed to low end markets. Indoor furniture produced by FDI

companies is generally of better quality made largely from imported woods. They come to

Vietnam for cheap labour and a stable environment.

Reproduction furniture is made mostly for the local market but there are a few very large FDI

companies exporting strongly drawing on the ‘handicraft’ skills of the local workers and

using overseas designers and technicians. ( Theo Alexander is an excellent example )

Hand carved furniture produced in the North (Bac Ninh, Hanoi, Ha Tay) is underachieving

due to lack of design and markets are confined to China and Taiwan as well as the home

market at present. Consultation at government level for this resource has been limited as has

consultation with training institutions.

A major issue here too relative to quality is the need to ensure that wood is properly dried

before it is manufactured into furniture. Adequate kiln drying facilities to service industry’s

needs is critical to success in exporting.

2.4.2.8 Branding of Vietnam wood furniture

The branding of Vietnamese wood furniture in the world marketplace is not well recognized.

This is understandable as there is little or no joint national exhibits by Vietnamese companies

and few indigenous Vietnamese companies have extensive overseas exposure as individually

named / branded companies.

An example that the Vietnamese wood producers could usefully learn from is the model of

Taiwan. Taiwan started out into the furniture industry as lowest cost producer with little or

no locally available raw materials and little expertise. They gradually built up strength and

manufacturing know how from their close cooperation with the US market. The quickly

recognised there was a need to specialise to be competitive and that led them down the road

of forming very effective clusters and of developing the whole supply chain into their

industry. Now Taiwan has become a relatively high labour cost area an it is moving its

furniture manufacture off shore to such venues as China and more recently Vietnam.

However in the intervening years since it commencement in the mid 70’s Taiwan has

developed a huge supply side in fittings, hardware, machinery etc and it is now a major

supplier not just of furniture but of the ancillary materials and accessories for furniture

manufacture. Thus, the trademarks of Taiwanese furniture is the excellent quality of finish

relative to value, accomplished with good equipment, knowledge, and the use of good

finishing materials. In addition, excellent quality control measures are being implemented to

assure the appearance and durability meet or exceed customer expectations.

2.4.2.8 Design and Intellectual property.

Vietnam still lacks a national policy on the protection of trademarks and brands. Such policy

does need to be developed. However furniture design is notoriously difficult to protect. The

emphasis in the short term should be for enterprises to invest in good design and get that

design on to the market at a quality level that is difficult to copy cost effectively. This

process will be greatly assisted by determined efforts to improve productivity and by having

a policy of “no compromise” on quality.

2.4.2.9 Ability to supply larger quantities

Here the whole issue of ‘globalisation’ comes up. The bulk of outdoor furniture exports from

Vietnam are purchased by large multinational groups who require certified ( FSC or similar)

wood and whose purchasing policies leave little room for profits to the producers. The

supplying companies are often so busy with the ‘day to day’ pressures. Management does

not take time to think strategically about direction till it is too late. It must be stressed again

value addition is what profitable manufacture must achieve assisted by focused marketing

and good logistics.

Quoting one large international buyer “ we have 10 – 12 suppliers here in Vietnam on the

furniture side. All are supplying Acacia, garden furniture sourced strictly from plantations.

We are here for cheap labour but unless productivity improves it will not stay cheap and we

will move on”

Quoting another large multinational buyer; Yes, our prices are very tight but we give the

factories very big volumes. If they cannot meet those volumes reliably we cannot do business

with them. We left Indonesia to come to Vietnam because the Indonesians did not satisfy our

volumes.

This can be described as the ‘Hegemony’ of the giant multinational trading groups such as

Walmart, Sears, IKEA, Carrefours, Mitsui, Isetan, METRO, GB, B & Q etc brought about by

globalisation. These Leviathans now dominate the markets of the developed world. They

buy in vast quantities at punitive prices. They ‘imprison’ the producers with quantity but

leave no room for profit and typically they lock in the manufacturers to their ‘model’ of

trading leaving no room for exploration of other possible outlets.

Such business can have short term benefits for manufacturers seeking to build up

manufacturing stamina but in general companies who remain supplying such companies are

doomed to failure unless they take time to develop an alternative model of trading and build

up their own market presence through design, branding and service.

2.4.2.10 Product design and innovation

An estimated 90% of Vietnam’s production is based on customer specification. Little product

development and innovation is made on the industry’s own initiative, exporters lack design

competence. This is a major weakness and one which this strategy must address.

Vietnamese products have a highly uniform appearance, especially for outdoor furniture.

Vietnam lacks adequate research and development support for the production of furniture.

The market potential in the US, EU and Japan for low-cost, mass market suppliers is huge

however as the entire distribution chain upgrades to higher quality, better designed products

it still demands that pricing is held low and continually squeezes the manufacturer to meet

the lowest prices. At the moment Vietnamese suppliers are currently competing almost

entirely on the lowest price and are still being outbid by Chinese factories. This is a bad place

to be.

To supply a higher market, producers will need to upgrade their designs, quality, and

finishing techniques, and constantly stay on top of current design and consumer trends. They

must also commence ‘branding’ both individually as companies establishing their own brand

name but also as VIETNAM establishing VIETNAM as a source of well designed, well made

and affordable product. The objective has to be to get closer to the market and to have as

little ‘interference’ as possible between the producer and the end user. There is greater

long-term export potential for mid-sized companies that determinedly brand to supply better

products to mid-level international markets.

Recently, some big companies have set up their own design departments and, there is also a

trend towards hiring foreign designers to develop their products. Design is a must and design

training has to be a component of any strategy to upgrade and develop the industry.

2.4.2.11 Access to Financing

Access to financing sources plays a very important role for industry. The wood producers and

furniture manufacturers are no exception. They need finance to upgrade their equipment,

store enough materials for stable production and to finance sales. There are many different

sources of finance providers that wood producers can approach, from the commercial banks,

and the development banks to the capital and investment funds. In general, the procedures for

getting loans are very time-consuming even though it has been much improved in recent

times. Besides that, the high interest from the banks (about 12 to 15% a year) is the biggest

problem that causes difficulties for the producers and it reduces the competitiveness of the

sector. Further support to reduce the interest burden needs to be done to promote wood sector.

The Chinese government ordered its banks to offer lowest rates to wood manufacturers

several years ago.

2.4.2.12 Trade promotion

Vietnam’s competitors from other Asian countries, and from European countries too, have

more advanced trade promotion systems. They have important international trade fairs at

home and they attend the leading International Fairs collectively. Good information systems,

attract more foreign business visitors. Properly organized trade fair participation is vital to

the development of the industry.

Many international buyers report problems in identifying suitable suppliers in Vietnam and at

the same time, exporters report poor access to market related information and have little

knowledge about international market structures.

2.4.2.13 Entrepreneurial skills

Vietnam’s wood furniture sector is still a very young industry with many companies having

emerged during the last 2-5 years only. As a result, entrepreneurial skills, know-how on

marketing, financial planning, company organization, command of foreign languages etc are

still weak. Business managers manage everything from product development, marketing, and

quality management to financial management. There is no organizational hierarchy with

delineated functions within furniture enterprises. Hence, the structure of enterprises is

significantly weak, as business operation stops in the absence of the business manager.

2.4.2.14 Infrastructure

Shipping from Vietnam to markets in the US or Europe does not, generally, present any

logistical problems but costs of shipping tend to be more expensive. Compared with China,

Vietnamese exporters incur relatively high overseas transport costs for both sea and air

transport. Recent findings from the Georgetown University, USA8 on ocean freight from

China and Vietnam to the States show that “Ocean freight and delivery time from Vietnam to

the States for 50 containers are 322,000 US$ and 17-35 days, while those figures from China

are 136,000 US$ and 11 days, respectively”. International importers indicate that there are

10-30% hidden subsidies for Chinese exporters

Infrastructure, especially the availability of suitable seaports, has become a major concern for

the development of the furniture industry in several provinces. For the time being, there is a

trend towards moving processing factories from the Central Highlands provinces to the wood

processing centers like Hochiminh, Binh Duong and Binh Dinh. This is done to reduce the

transportation cost to the port and increase the sourcing capacity of supporting accessories

(fabric, metal parts, finishes etc. ). The processing factories in the provinces are then just

specialized in parts and accessories production for the final assembly factory in the wood-

centered areas. (Wood furniture manufacturers in Gia Lai is an example, they have to pay

between US$300 and US$650 for a 40’ container to Quy Nhon and Saigon port, respectively

while the cost from Binh Duong to Saigon is just US$100)

The road condition in the Southern provinces is another issue. Most of the roads in this area

only allow trucks of less than 25 tons, but containers of imported wood usually weigh more

than 30 tons. To transport the wood to the factories, wood processing companies must divide

the volume of imported wood into smaller loads, which further increases the production cost.

2.4.2.15 Other logistical issues

Other logistics and commercial issues for woodwork export activities cover payment through

banks, warehousing, customs declaration and related services. All of these issues are

acceptable, except storage facilities, which are still poor. For many years, the Ministry of

Trade (now the Ministry of Industry and Trade) has been asking the association to call for

member enterprises to establish wood import and storage hubs in three regions of Vietnam,

but its effort has not borne fruit and every woodwork enterprise still has its own plans for

importing wood, which unintentionally pushes up the cost of input materials.

2.4.2.16 Summary of Critical Success factors.

1. Government should be pro active in providing an enabling environment for industry to

thrive. Raw material security, training facilities, financing and infrastructure are the

8 Workshop in Binh Dinh, organized by MPDF-IFC.

critical issues.

2. Industry must be managed profitably to ensure adequate funding is in place to fuel

development and attract the investment necessary. Value not volume is the critical issue.

3. Branding of product must be established and nurtured to ensure customer satisfaction and

customer loyalty.

4. Marketing, Design , Innovation and Product Development must be actively pursued to

ensure value addition to products and market take-up of production.

5. Quality and value for money must be relentlessly pursued.

6. Employee attraction and retention is vital to the long term success of individual

companies. Social responsibility at all levels of the enterprise is essential.

2.5 International Competitiveness

Benchmarking the Sector's Business Environment is a major spur to achieving

competitiveness The average profitability being achieved by local Vietnamese companies

ranging from 10-12% for outdoor furniture, it was even less than 10% in many cases. Indoor

furniture manufacturers get higher profit, but also ranging from 12 to 20% only. Carving/

Reproduction items can gain best profit, especially for local market (25-40%).

In the markets that Vietnam is operating in, its competitors for wood based furniture are

Indonesia, Malaysia and China in case of outdoor furniture and China, Malaysia, Taiwan for

indoor furniture

Table 8: The competitiveness of Vietnamese furniture vs. others in the region

Outdoor Furniture

Indonesia Vietnam

Advantages

Plentiful indigenous wood supply,

particularly Teak and other durable

hardwoods. FSC available on some Teak.

Low cost labour

Dutch trading relationship effective in

reaching markets.

Long standing trading relations with US

market

Competitive advantages of Vietnam against

Indonesia are: Consistency, due date

delivery and quality are more important

than price. Vietnam should make use its

competitiveness in term of:

Low cost labour with relatively higher

productivity

Better business infrastructure

Stable environment

Lower prices

Consistency in quality at given price

levels

Disadvantages

Inconsistent quality

Unreliable delivery

A difficult financial regulatory

environment

Malaysia Vietnam

Advantages

Plentiful indigenous hard wood supply at

supported prices.

Good exporting infrastructure.

Good container prices.

Long term relationships.

Competitive Advantages against Malaysia

at the moment is mostly price and ability to

do large volumes.

Disadvantages

Higher wage costs and poorer

productivity leaves Malaysia expensive.

Peoples Republic of China

Vietnam

Advantages

Supported energy and logistic costs

internally.

Good exporting infrastructure.

Consistent quality.

Competitive Advantages against China at

the moment is mostly price but also as a

hedge against over exposure to the Chinese

market.

Indoor Furniture

Indonesia. Vietnam.

Advantages. Advantages.

Good supply of redwoods including

Mahogany.

Excellent tradition of hand carving

Mahogany in Classical styles

Good supplies of Rattan and

Rubberwood

Dutch trading experience

Long term relationships with US

companies

Growing experience through FDI’s in

this sector who have come for low cost

labour and are contributing a lot in design

and manufacturing expertise.

Potential of wood carving districts to

adapt to international Classical styles.

Price

Wide range of handicrafts adaptable to

life style furniture.

Competitive advantage in Vietnam is

with FDI’s only who can gear their

branding and their experience to take

advantage of the low cost labour and

lower costs in overheads.

Disadvantages.

Inconsistent quality due to poor

engineering.

Reputation for having over exploited the

forests make Western buyers wary now

Unreliable delivery dates

Malaysia Vietnam

Advantages

Plentiful supply of Rubberwood at

subsidised prices.

Excellent infrastructure

Excellent hardware and ancillary supplies

position

Excellent exhibition facilities

Excellent industry technology service

provided by government ( MTIB )

Competitive advantage in Vietnam is with

FDI’s only who can gear their branding and

their experience to take advantage of the

low cost labour and lower costs in

overheads. Indigenous industries are not yet

competitive except at a very basic level of

product

Disadvantages

Higher wages

Lower productivity generally than either

China or Vietnam

China Vietnam

Advantages.

Subsidised energy

Good man made board availability at a

discount to world prices..

Excellent infrastructure

Excellent hardware and ancillary supplies

position

Rapidly developing Design competence

Excellent exhibition facilities

Vietnam has little if any competitive

advantages over China on general furniture

and lifestyle furniture. There are some

advantages to Vietnam at two extremes:

In hand carved traditional furniture where

cost of labour can make the Vietnamese

more competitive but as China

industrialises this production the

advantage will be eroded.

At the very cheap furniture end of the

market lower labour costs have the

potential to be an advantage to

Vietnamese companies.

Disadvantages.

There are still many companies in China

who are not competent to export but who try

to. This is a pitfall that many foreign buyers

do not recognise and so they often do not

get what they contracted for.

3 Framework Conditions

3.1 Government Sector Policy

Decision 08/ 2001/ QD-TTg dated 11/01/2001 issued by Prime Minister on promulgation

on the regulation of special-use, protection, and natural production forests.

Decision 178/2001/QĐ-TTg dated 12/11/2001 issued by Prime Minister on beneficiary

rights and duties of forest and forest land allocated, contracted households and

individuals.

Instruction 12/2003/CT-TTG dated 16/5/2003 issued by Prime Minister on strengthening

urgent measures for forest protection and development.

Directive 19/2004/CT-TTG dated 1/6/2004 issued by Prime Minister on the development

of timber and forest product processing industries.

Decree 200/2004/ND-CP dated 3/12/2004 issued by the Government on arrangement,

renovation and development of State Forest Enterprises.

Forest Protection and Development Law approved by the National Assembly in

3/12/2004.

Law on forest protection and development, passed by the Xi National Assembly of the

Socialist Republic of Vietnam at its 6 session on Dec 3, 2004.

MARD promulgated the Decision number 3/2005/QĐ-BNN on 5/1/2005 regarding

Regulations on wood exploitation in support of house building to poor ethnic minority

people who are suffering hard life based on the Decision number 134/2004/QĐ – TTg,

promulgated by the Prime Minster on 20/7/2004.

Technology- economic norm for forest regeneration, forestation, and forest protection

was promulgated by MARD on 6 July 2005.

MARD promulgated the Decision regarding Regulation on checking and taking over the

plantation forest, regenerated forest, plantation forest carring, forest protection, zoning

natural forest for rehabilitation on 24 January 2005.

The major trees list for production forest plantation in 9 forestry-ecological zones was

promulgated by MARD on 15 March 2005.

Regulation on Wood and other forest products exploitation was promulgated by MARD

on 7 July 2005

Regulation on the forest classification criteria for special-use forest was promulgated by

MARD on 12 Oct 2005.

Regulation on the forest classification criteria for watershed protection forest was

promulgated by MARD on 12 Oct 2005.

Regulation on Forestry Seed and Seedling Management was promulgated by MARD.

Decision No.279/2005/QD-TTg dated 03 November 2005 Promulgating the Regulation

on elaboration and implementation of the 2006-2010 national trade promotion program

Decree No. 23/2006/ND-CP of March 3, 2006, on the implementation of the law on

forest protection and development

Decision No. 186/2006/QĐ-TTg on promulgation of the Forest management regulations,

by the Prime Minister, on 14/8/2006

Decision No. 142/2006/QĐ-TTg on approval of the project on state forest enterprises

arrangement and renovation belonged to MARD, promulgated by Prime Minister, on

19/6/2006

Decision No 62/2006/QĐ-BNN on approval of the Forest Reproductive Material Strategy

for 2006 – 2020, promulgated by MARD, on 16/8/2006

Decision No. 2366/QĐ/BNN-LN on approval of the National non-timber forest products

conservation and development strategy in 2006-2020, promulgated by MARD, on

17/8/2006

Resolution on objectives readjustment of the 5 Million Hectare Reforestation Project,

period 2006-2010, adopted at the 10th

session of the XI National Assembly on 29

November 2006.

Decision No. 106/2006/QĐ-BNN, on Guidance of Village Community Forestry

Management, promulgated by MARD, on 27/1/2007

Decision No.18/2007/QD-TTg, dated 5 February 2007 by the Prime Minister on Vietnam

Forestry Development Strategy 2006-2020

Vietnam Forestry Development Strategy 2006 - 2020

Circular No. 38/2007/TT-BNN regarding guidance on forest withdrawal, lease and

allocation to organizations, households, individuals and village communities (The MARD

issued on 25/4/2007)

Decree No. 48/2007/NDD-CP on principles and methods of forests valuation. The

Government promulgated this Decree on 28/3/2007

Joint circular No. 15/2007/TTLT-BTC-BNN&PTNT, regarding guidance on state budget

utilization and management for forestry seed, animal race and crop plants seed. The

MARD and Ministry of Finance issued this circular on 8/3/2007

The general point of view from the above policies is to develop a sustainable forest to serve

the needs of processing and environmental protection (The overall goal of forestry

development in Vietnam is to establish a national forest cover of 43-44 percent by 2010).

More encouragements are given to the processing and exportation of plantation wood.

The incentives are also given to the forest plantation, especially the promotion of the

economic tree plantation. Some background on financial incentives are:

Reduction in the interest rates for investments in forest plantations (to between 0-5

percent for the first rotation cycle);

Exemptions from land taxes for the first 2 production cycles for each species and

increasing forest protection contracts (presumably both with villagers, SFEs and

companies) through a more adequate sharing of benefits;

Provision of seedlings to farmers; and

Encouragement of joint ventures in plantation establishment, log processing and export

manufacturing.

There are also a number of incentives behind plantation production in Vietnam, these

include:

Longer land leases for plantations than for other activities;

Exemptions from land rent for the first five years; and

A 50-percent reduction in land rent for the five years following planting.

To encourage wood processing for export, since 1998, the Government of Vietnam had

promulgated legal documents on exportation of wooden furniture and importation of raw

wood materials (Decree No.57/1998/ND-CP dated 31 July 1998 of the Government;

Decision No.65/1998/QD-TTg dated 24 March 1998 of the Prime Minister and Circular

No.122/1999/TT-BNN-PTLN dated 27 March 1998 of the MARD) in order to manage the

exportation of furniture produced from natural wood and creating favourable conditions for

the importation of the wood materials and utilization of the planted wood. The import duty

for wood materials (logs and lumbers and wooden sheet for veneering) is given at zero

percent.

In 2004, to encourage wood processing for export the Prime Minister instructs the ministries,

branches, provincial/municipal People's Committees to well perform the following tasks:

Organize domestic production and import, meeting in time the demands for raw materials

for the wood-processing industry, producing wood articles for domestic consumption and

export.

Review, amend and supplement policies in order to assist and create favorable conditions

for enterprises of all economic sectors to participate in investing in wood article

processing and production, meeting domestic consumption and export demands.

Continue reviewing, amending and supplementing in time policies, administrative

procedures to remove problems and difficulties for wood product manufacture; provide

necessary guidance and support for enterprises in seeking outlets and stepping up

export of wood products.

For trade promotion activities, the government has support exporters, in general and furniture

exporters, in particular in participation in international trade fairs (100% fee for standard

stand), marketing mission (air-ticket and travelling)… In-coming missions, training courses,

promotion publications are also partly supported by the government.

3.2 Institutions

Ministry of Agriculture and Rural Development (MARD) will be in charge of all

forestry-related issues, from plantation, protection to processing. There are three

departments involve in these works: Department of Forestry, Forest Protection

Department, and, Department of Agriculture and Forestry Product Processing and Salt

Management. The specific duties of MARD are as follows:

Expeditiously review, finalize and approve the plannings on planting of raw material

forests, ensuring the stable supply of raw materials for wood processing industry; mark

off appropriate areas afforested with big timber trees, rare precious indigenous

trees, thus creating stable sources of timber in order to maintain and develop the

production of fine-art handicraft wood articles.

Direct the selection of plant structure suitable to the conditions of each region, yielding

economic efficiency and ensuring standards of raw materials for wood product

manufacture and processing; and at the same time work out measures to ensure adequate

forestry saplings (including research, home-made and imported ones) for planting of raw-

material forest; well perform the work of forestry promotion, the transfer of technical

advances on production of saplings, forest-planting, tending and protecting techniques.

On the basis of planning on raw-material forest planting, review and supplement policies

in order to further encourage various economic sectors to invest in afforestation,

benefiting from forests which supply raw materials for wood processing industry,

particularly the policies on land, investment, credit, support in saplings, construction of

infrastructure for raw materials zones, on forestry promotion and product sale.

Quickly make a preliminary review of the experimental investment and production of

artificial boards at home, fully evaluate the investment efficiency and outlets in order to

work out orientations for development in the coming years; on that basis, work out

solutions to meet the demands for artificial boards for domestic consumption and raw

materials for production of wood articles for export.

The Ministry of Planning and Investment (MPI) and Ministry of Finance (MoFi), in

cooperation with MARD, will balance and allocate funds by calculating the revenue

sources from the state budget and other fund sources to implement different forestry

development programs. The Ministry of Planning and Investment, the Ministry of

Finance and Vietnam State Bank shall, according to their respective functions and tasks,

direct the implementation of credit policies to support export and reward those who top

the wood product export turnovers according to general regulations; propose or

promulgate according to competence and direct the implementation of, policies on

investment, credit incentives for raw-material production, wood product processing and

manufacture.

The Ministry of Natural Resources and Environment (MONRE), together with MARD,

will provide guidance to local levels to review the land use planning, allocation and

leasing of forest land

The Ministry of Trade shall assume the prime responsibility for, and coordinate with the

concerned ministries and/or branches in, guiding and supporting enterprises in seeking

and selecting the import markets based on the demands for import of raw-material wood;

review, amend and supplement mechanisms and policies and organize and facilitate the

import in order to adequately supply raw-material timber, particularly natural forest

timber, for the production of wood articles

The Ministry of Trade shall assume the prime responsibility for, and coordinate with the

Ministry of Agriculture and Rural Development and Vietnam Association of Timber and

Forest Products in, well performing a number of tasks:

To supply information on wood product import demands, the current wood product

import regulations of some major countries; to supplement policies, remove obstacles and

difficulties in time in order to continue stepping up the wood product export, particularly

to markets where exist great demands such as North America, EU, Japan, China and

ASEAN.

On the basis of annual national trade promotion programs, to organize international wood

article fairs in big cities in the country, at the same time to select, organize and guide

Vietnamese enterprises to participate in international wood articles fairs organized in

various countries and territories in the world in order to introduce and advertise for

Vietnamese wood products, to actively seek customers and sign export contracts;

To reach agreement with Vietnam Association of Timber and Forest Products on

establishing a Website on wood products as well as wood product-manufacturing and/or

exporting enterprises of Vietnam.

To create favorable conditions for Vietnam Association of Timber and Forest Products to

participate in exchanges and strengthen relations with Associations of Timber and Forest

Products within ASEAN and in the world.

To proceed with negotiations at the governmental level between Vietnam and countries in

the region and the world on import of raw material timber by mode of barter, creating

legal basis for wood-processing enterprises to materialize.

The Ministry of Industry shall assume the prime responsibility for, and coordinate with

the Ministry of Agriculture and Rural Development, Vietnam Association of Timber and

Forest Products in, evaluating the present situation, orientation and gathering demands for

renewal of wood product-processing and manufacturing equipment and technology; on

that basis work out appropriate support policies for, and direct the research into, domestic

manufacture and import thereof; enhance the cooperation between the mechanical

engineering industry and the wood-processing industry.

The Ministry of Labor, War Invalids and Social Affairs shall assume the prime

responsibility for identifying the demands for training of technical workers and high-skill

laborers; review and formulate policies to renovate and upgrade the existing training

establishments in association with the addition of tasks of training in wood processing;

consider and open more new training establishments in a number of localities where exist

burning demands; conduct recruitment and training to satisfy demands of enterprises and

craft villages.

The General Statistics Office (GSO), together with MARD and related agencies, will

identify the contents, criteria and indicators to be used for monitoring and evaluation of

forestry sector; steer and provide guidance to local levels to conduct statistics, forest

inventory…

People’s committees of provinces and cities directly under central government are

responsible for development and implementation of forestry development programs in

their respective areas. Support the construction of infrastructure of concentrated

production areas, settling difficulties in production grounds for enterprises, traditional

craft villages to operate in the field of processing and manufacturing wood products for

export.

3.3 Trade Support Network

At the end of 1998, the Minister of Trade (now Ministry of Industry and Trade) of Viet Nam

issued a decision on the establishment of the Trade Promotion Commission. In July 2000, the

prime minister issued a decision on the establishment of the Trade Promotion Agency

(VIETRADE) directly under the control of the Ministry of Trade. VIETRADE was

authorized to undertake the same functions and activities as other national trade promotion

organizations throughout the world and plays the guiding role on trade promotion.

Currently, in terms of organizational structure, VIETRADE has five departments, a

representative office in Ho Chi Minh and two overseas trade centers in New York and Dubai

(see figure below). In the future, it is likely that VIETRADE will establish some additional

export development centers in key areas in Viet Nam as well as trade centers abroad. The

agency is now drafting proposals for the establishment of such centers for submission to the

relevant authorities.

Ministry of

Industry and Trade

VIETRADE

Vietnam Trade Center

in Dubai

Vietnam Trade Center

in New York

Further on, in 15 provinces and municipalities directly subordinated to the central

Government, Trade Promotion Offices/Centers report to the provincial Trade Departments.

These offices/centers have vertical links with VIETRADE.

In addition to VIETRADE, other trade support organizations are also active in the sector.

These are:

Vietnam Association of Timber and Forest Products (VIFOREST): Vietnam

Association of timber & forest products was established on 8 May 2000, which is an

Volunteer non-government organization to gather and represent for business community,

aiming at development, protection and supporting for various businesses to contribute to

the social-economic development of the country, fostering economic cooperating

relations, science and technologies between Vietnam and others on the basis of mutual

benefits and equality.

VIFOREST offers many training courses for wood processing companies nationwide, at

the same time, organizes different trade promotion events for wood processing companies

like participating in the international trade fairs, trade marketing mission.

Vietnam Chamber of Commerce and Industry (VCCI): The Vietnam Chamber of

Commerce and Industry (VCCI) is an independent and non-governmental organization

that was established in 1963. In addition to its role of representing the interests of the

business community in Viet Nam, VCCI is also involved in trade promotion. Every year

VCCI organizes trade missions for craft exporters to foreign markets (e.g. Hong Kong,

Japan, Germany) and organizes exporters to participate in international trade fairs. VCCI

has launched a trade postal VNemart (www.vnemart.com) in late 2002 to help build up a

bridge between Vietnamese enterprises and the international business community via

internet. VCCI has also offered marketing services (SME directory preparation and

introduction, e-commerce), training (mainly business courses by university professors

and managers), information provision, consulting services (management plan and

financial analysis) and research.

Trade representatives of Vietnam in foreign countries: There are 41 Vietnamese

Commerce Sections abroad, which collect market information to support the strategy

development of the Ministry of Trade and provide information on target markets to

exporters from various sectors.

Trade representatives of foreign countries in Vietnam: Embassies, Commercial

Sections of foreign countries and foreign representative offices in Vietnam conduct some

activities in the trade promotion field.

Department for SME promotion of the Ministry of Planning and Investment: The

Department for SME Promotion mainly supports small and medium-sized enterprises

through investment, credit, production, marketing, strengthening of competitiveness,

export promotion, information, consulting services and human resource development.

Technological instructions, machinery protection and training are to be provided in the

technology support center for small and medium-sized enterprise, which will be built in

Hanoi, Da Nang and HCMC.

Local Wood Associations: In recent years, in parallel with the rapidly increasing number

of enterprises, some wood processing associations have been formed in different

provinces e.g. Hochiminh, Ha Tay, Bac Ninh…. One of the main tasks of these

associations is to support and assist member companies in developing business and

boosting exports. However, except Hochiminh City Wood and Handicraft Association

(HAWA), all of these institutions still lack the capacity to successfully and efficiently

carry out their mission. They need both human and financial resources.

International donor projects: There are many international donor projects working on

wood processing promotion. The German Technical Co-operation Agency (GTZ)

recently work to support forestry development strategy. It also support to introduce new

processing techniques, marketing…Besides, WWF is working to promote FSC in

Vietnam, ADB with huge fund (both loans and grants from the Government of Finland,

the Netherlands….) try to develop forestry resources in many provinces in Vienam…

3.4 Financial Support Funds

As far as the trade finance is concerned, for the time being, sector enterprises can access the

following sources of finance:

Development Bank of Vietnam (DBV): The Government has established a

Development Assistance Fund to support exporters in Vietnam in general. The wood

furniture exporters can get loan from (DBV) at very low interest rate for their investment

project.

The National Export Support Fund: Set up by the Government to provide preferential

export credits and export credit guarantees in order to support enterprises producing

export goods, conducting export business and expanding the export market. The craft

exporters can borrow short-term loans for the purchase of raw materials and production

elements to perform the export contracts. The borrowing levels shall not exceed 80% of

the L/C value of not exceed 70% of the export contract value.

The National Scientific and Technological Development Support Fund: Provides

credits with favorable conditions or preferential interest rates, in order to support

investors in studying and applying scientific, technical and technological advances,

technological transfer and renewal.

Fund from trade promotion programs: Exporters can be supported by covering 50% of

expenses for hiring domestic and foreign experts to advise on export development and

designing models and products to raise the quality of goods and services. They will be

also supported by 50% of expenses for being trained in Vietnam or other countries for

improvement of export capacity and business skills. For overseas training courses, the

support shall be concentrated on specialized training courses of no more than 3 months to

develop new products. Besides, the exporters can be supported with 100% of expenses

for commodity pavilions, overall decoration of trade fair booths and organization of

workshops (if any), for participating in overseas trade fairs and/or exhibitions; 100% of

airfares and costs of organization of workshops and commercial transaction meetings, for

market surveys or commercial transactions in foreign countries etc.

National Fund for Job Creation: The craft producers and exporters can borrow money

from the National Fund for Job Creation with an amount of up to VND 20 milllion or 500

million respectively and at a preferential interest.

Fund for rural industrial extension: The Ministry of Industry will spend budgets for

the development of rural industries in term of technology innovation, product

development, trade promotion etc.

Funds from programs and projects: The Government has approved the total fund

requirements for the Strategy for the entire period 2006 – 2020 is VND 106,759.06

billion, in which the demand for the period 2006 – 2010 is VND 33,885.34 billion, and

for the period 2011 – 2020 is VND 72,873.72 billion.

Table 9: Fund for development of forestry sector in Vietnam 2006-2020

No. Item 2006-2010 2011-2020 Total %

A Investment costs 31,946.17 68,413.63 100,359.80 94

1 Sustainable forest management

and development program

16,214.55 28,220.80 44,435.35 44.3

2 Forest protection, biodiversity

conservation, and environmental

services development program

3,871.00 10,262.60 14,133.60 14.1

3 Timber and forest product

processing and trade program

10,428.07 26,662.50 37,090.57 37

4 Research, education, training

and forestry extension program

546.96 848.82 1,359.80 1.3

5 Renovation of forest sector

institutions, policy, planning and

monitoring program

885.57 2,418.91 3,304.48 3.3

B Regular costs 1,939.17 4,460.09 6,399.26 6.0

Total funds needed 33,885.34 72,873.72 106,759.06 100

In addition to the above funding sources, wood furniture manufacturers and exporters can

borrow money from the financial system in Vietnam in accordance with the Credit Law.

Specifically, they can obtain loans from:

Commercial Banks (4 state-owned banks with more than 1,200 branches

nationwide, 36 joint stock banks, 15 branches of foreign banks, 4 joint-venture banks)

People Credit Funds

Bank for the Social Policies

Although all banks try to offer the best services for their customers, they all require collateral

for the amounts, even if that collateral is directly possessed by the borrowers or guaranteed

by a third party.

Recently, there’re a lot of capital and investment fund wanted to provide fund for potential

wood processing companies. That were the case of International Finance Corporation

(belongs to World Bank), VinaCapital, Aureos Investment Fund, Indochina Capital…

Mekong Enterprise Fund Ltd., Penm…

3.5 Export Services

Independent quality control organizations such as SGS (Switzerland), OMIC (Japan),

Vinacontrol (Vietnam) are operating in Vietnam and can be authorized by importers to make

final inspections. Also, fumigation companies are available and work effectively. Quality

checking organization, that is specializing for wood furniture has been also set up in Vietnam

.

Transportation services are widely offered by different companies (state-owned, private or

foreign companies). There are hundreds of shipping companies and forwarding agencies in

Vietnam, wood furniture can be shipped from Vietnam to any country in the world (even “to

door” service) either by sea or by air, even by truck load to neighboring countries like China,

Laos and Cambodia. The shipping companies and forwarding agencies also offer handling

services (both in Vietnam and upon arrival abroad). Professional packaging services are also

offered.

Express carriers operating in Vietnam like DHL, UPS, FedEx, EMS, etc. facilitate the

business transactions between Vietnamese exporters and foreign buyers. However, ocean and

air freight in Vietnam is much more expensive than in China, which is one of the key

problems that impinges on the competitiveness of the Vietnamese furniture exporting sector.

4. SWOT analysis of the sector

Table 10: SWOT analysis of woof furniture in Vietnam

Strengths

Plentiful labour that is readily adaptable

and low cost relative to neighbouring

countries

Excellent handicraft skills and a wide

range of handicraft materials that give a

basis for decoration and differentiation in

the product

An attractive environment for FDI by

furniture companies due to its plentiful

low cost labour and relatively stable

environment both socially and fiscally.

The Government of Vietnam facilitates

incentives for the sustainable

development of the furniture industry.

The Vietnamese worker is flexible and

has a striving work ethic that makes the

development of a business an exciting

and rewarding activity for those

entrepreneurs able to invest in enterprise.

Weaknesses

The Vietnamese furniture industry is

heavily dependent on imported raw

material. Almost 80% of wood used is

imported.

The very rapid growth of the furniture

producing industry is masking serious

problems in management such as lack of

marketing, poor pricing, lack of training

and a general euphoria that the increases

in exports can continue regardless.

There is a serious lack of effective

associations to take care of the interests

of the industry and guide its

development.

There is a shortage of training

institutions. Those that do exist are weak

and have little input to industry’s needs.

The institutions urgently need adaptation

to meet the needs of the industry.

Vietnam has a growing name as a good

destination for investment in furniture

production, capable of competing with

China with much less exposure to risk

Recent accession to membership of WTO

gives Vietnam a regulatory environment

which is relatively predictable.

In no small measure due to its recent

history Vietnam is the focus of much

international development aid and it is

developing the capacity to effectively

absorb such aid.

There is a working export oriented

infrastructure in Vietnam that has

successfully minimized ‘red tape’ on both

necessary imported inputs and exported

product.

The supplies infrastructure for

machinery, tooling, finishing and fittings

materials is underdeveloped for an

industry as large as it is.

The lack of a design culture in furniture

and the lack of designers and design

schools to develop it

The lack of basic market information has

led to acceptance of pricing well below

that achieveable in the market place.

General technical know-how is only

embryonic and there are no institutions

that are catering expressly for the urgent

upgrade of technological know – how.

Industry overall is producing relatively

low quality product selling with no

advantage other than ‘lowest price‘ to

large multinationals who bring large

quantities of sales but with little or no

margins.

Lack of an International Exhibition

facility that meets international standards

reduces the opportunity for exposure to

international buyers.

Opportunities

Furniture manufacture is still a ‘sunrise’

industry in S.E. Asia. There is ample

space in the market place for quality

producers supplying well designed

furniture to controlled quality and on

time.

Vietnam has a long history of stability

from the 10th

Century through to the latter

half of the 19th

Century during which arts

and crafts flourished leaving behind a

legacy that can now be drawn upon for

design and decoration. This was further

tempered by the French period which

enhanced the already developed arts.

Threats

The biggest threat to the long term

development of the Vietnamese furniture

is unprofitable or only very marginal

production for large multinationals. This

ties up vast amounts of capacity for

minimum, if any, profit and leaves little

or no scope for future development of the

enterprises or workforces engaged in this

business.

Lack of exposure of senior management

to international markets and technical and

financial training and the lack of training

for designers, middle management,

technical supervisors and skilled workers

Being a relative newcomer to the market

there is still time for Vietnam to develop

a presence in the market through design,

quality and business culture. It is

essential to differentiate from its

immediate neighbours but this

differentiation should be based on

positive aspects of quality, design,

presentation, service and consistency and

NOT just on price.

The traditional furniture production area

in Bac Ninh has enormous potential in a

number of areas;

a) Product designed for the international

market using the existing styles as the

basis for design development to meet

international tastes, and,

b) The production of Classic French and

English styles initially for the US market

and then the European market.

c) The production of decorative

components as sub contractors to the

large indigenous and FDI companies.

The IT Age presents many opportunities

for innovative manufacture, marketing

and distribution. Creative exploitation of

IT can ensure that Vietnam captures the

maximum return possible for its

producers and the country as a whole. It

is an appropriate time for Vietnam to

create its own business model for its

furniture industry rather than slavishly

follow former development patterns.

The need to develop a material supply

side in Vietnam is clear. It is essential

that in doing so plantations and natural

forests are developed within the

guidelines of sustainability whether it be

under Forest Stewardship Council (FSC)

or other model.

The development of a strong furniture

presents a major threat to the medium

term development of the industry.

Indeed the necessity to introduce training

on short, medium and long term

perspectives could be termed a crisis

needing immediate action.

A high proportion of current exports are

being produced by FDI companies. Many

of them have come to Vietnam to avail of

low cost labour and flexible workforces.

They will be tempted leave again when

( if ) cheaper labour from a third country

threatens their margins. It is important

that every opportunity is taken to learn

from these companies, to integrate them

into the industry structure and to

encourage them to stay and develop in

Vietnam.

The ongoing debate on global warming

may substantially increase the cost of

transport and thus increase the cost of

wood imports and the export of finished

product. This would threaten the

competitiveness of many marginal

producers.

India, with cheap labour, maturing Teak

plantations and an excellent position on

sea routes may emerge as a competitive

threat to the outdoor producers before

they have had time to establish

themselves and develop their identity and

their market niche.

Competition from Vietnam’s

neighbouring countries is expected to

intensify as a result of the

implementation of the Asian Free Trade

Agreement (AFTA). This may also lead

to curtailment of their raw material

supply to Vietnam.

Competition from wood material

supplying countries like Brazil, South

industry, of necessity, demands the

development of a strong service industry

to supply that production. This has the

potential to create as many jobs as the

furniture industry itself and can lead to

many more exporting companies serving

the needs of manufacturers overseas and

in adjacent countries.

Innovation in the production of panel

materials from rice husk waste, bamboo

and other fibrous materials will help to

reduce the dependency on imports and

lead to product innovation as well.

Africa… when these countries go into

furniture production.

5. Vision and the Sector’s Future Value Chain

5.1 The Vision

At present the Vietnamese Furniture Industry is largely in two segments:

The FDI companies who have come to Vietnam to exploit the opportunities presented by

a people who are industrious, adaptable and conscientious at very low cost and whose

political and business environment is stable. By their nature they are potentially

transigent and need to be encouraged to take root and contribute solidly to long term

development.

The indigenous companies who seeing opportunity in the furniture industry have quickly

adapted to producing very large volumes of very low cost furniture with little forward

planning, other than growth for growth’s sake, guiding their direction. This growth, and

this energy going into this growth, must be captured and disciplined to yield sustainable

benefits for all stakeholders if Vietnam is to benefit from the furniture industry in the

long term.

The Vietnamese Furniture Industry's vision has to be to optimise the financial rewards

obtained from the manufacture and international marketing of Vietnamese furniture through

activities which are profitable and sustainable. It must strive to ensure that a fair share of the

selling price of their furniture is obtained for the producers. It should seek to secure a long

term and diversified global market accessible independent of the currently dominant

hegemonic retailers.

To achieve that vision, the Vietnamese Furniture Industry must be focused on serving the

needs of its customers and recognise its responsibility to protect the environment, which all

citizens share.

The industry must ensure that its participants are enabled to realise their aspirations and to

make full and effective use of their talents. Vietnam’s furniture industry should aspire to the

highest standards in the management and operation of its facilities. By the quality of the

products it markets it must ensure the confidence of its customers and present Vietnam as a

country with which it is good to do business.

In term of value, Ministry of Trade's overall export development strategy has set the target of

achieving US$5.56 billion worth of export value by 2010 and US$7 billion by 2020 for wood

furniture industry. This is an ambitious target and will be achieved only by foccused and

carefully managed inputs at all levels of industry but most particularly by strengthening the

supply side for raw materials and for qualified and skilled management and labour.

5.2 The Sector’s Future Value Chain

The vision for the sector’s future value chain is:

For the internal component of the value chain;

Develop a long term sustainable supply of timber from available indigenous forests

which are certified by an appropriate certification agency.

Develop the capability of the wood importers to purchase the necessary imported

wood at source rather than through intermediaries who are adding unnecessary cost to

imports.

In so far as is possible seek to replace the import of man made board materials by

innovative manufacture of man made boards from such raw materials as plantation

residue, rice husk residue, planted bamboo etc.

Develop and integrate into main stream manufacture such ‘crop’ materials as

bamboo and natural fibres .

Develop and encourage the development of an indigenous supply industry to meet the

needs of the furniture industry for sub contractors and for supply inputs such as

machinery, tooling, finishes, fillings, fabrics, coverings and packaging.

Develop the services supply side for presentation, promotion, logistics, software,

Strengthen, and where necessary create, the necessary education and training

institutions that will feed the industry’s need for skilled labour, reeducate ad improve

existing labour and train management at all levels to be internationally competitive.

For the external component of the value chain;

First and foremost establish the clear objective that Vietnamese companies will seek

to become marketers in their own right bringing in house ( in country ) the ability to

market, design and deliver the furniture produced as close as possible to the consumer,

the ultimate goal.

Develop the use of the ‘age of information’ to promote Vietnamese furniture as a quality

product in its own right, branded to be recognised for its quality and delivered efficiently

with minimum carbon footprint.

Understand that the objective is to maximize the profitability of the enterprise and further

understand that the largest share of the value chain is between the factory gate and the

end consumer, not between raw material and factory gate. This is where the real

opportunity is for Vietnamese enterprises to maximize the returns they achieve and

contribute most to the overall Vietnamese economy.

6 The Way Forward

6.1 The Development Perspective

Objectives Targets Indicators

Development

To raise employment as

a direct result of

increased export activity

in the sector

To achieve the Government’s goal of US$5.56

billion worth of export value by 2010 and US$7

billion by 2020 and thus contribute hugely to

the development of the rural workers, the

industrial infrastructure and the long term

industrial development of the country..

An incremental annual

increase in export sales

of 10% and an increase

in the productivity of

the workers measure as

value of output per

person employed.,

Development

To reduce poverty in

rural and urban areas as

a direct result of

increased export activity

in the sector

Wood products processing industry zones

should be developed and expanded in areas that

could sufficiently conveniently and stably

provide materials. Besides enhancing large-

scale processing industry modernization, due

attention should be paid to the development

and modernization of small-scale forest

product processing industries in rural areas

and traditional handicraft villages as potential

sub contractors of the decorative accents that

diffentiate the furniture in world markets.

Improve income,

contribute to poverty

alleviation and reduce

by 70% the number of

poor households in key

forest areas

Development

Sustainable

management, utilization

and development of

production forest

Planning of production forests is mainly

developed in the direction of intensive

cultivation, creation of centralized material

zones on medium- and large-scales in order

to ensure sufficient materials for processing,

and increase land-use efficiency focusing on

productivity and quality.

The processing of wood-based panels and

pulp should be enhanced, to reduce gradually

processing of woodchip for exports.

Utilization of products made from artificial

wood-based panels and timber from

plantation forest should be promoted.

Establish national standards for sustainable

forest management and Chain of Custody

(CoC)

Ensure a wider participation from various

economic sectors and social organizations in

forest development, to increase their

contributions to socioeconomic development,

environmental protection, biodiversity

conservation and environmental services

supply

8.4 million ha

production forest, to

include 4.15 million ha

plantation forests, both

concentrated industrial

plantations and NTFPs,

and 3.63 million ha

natural production

forest, should be

managed sustainably

and effectively.

1 million ha of new

plantation will be

established by 2010. 0.3

million ha/year will be

reforested after

harvesting.

Up to 2020, 30% of the

production forest areas

will get certification.

Complete allocation

and lease forests and

forest land to

organizations,

enterprises, households,

individuals, and

communities, before

2010.

6.2 The Competitiveness Perspective

Objectives Initiatives Resources Indicators

Capacity

development

Ensure access to

affordable and

appropriate raw

material

The government of Vietnam

should seek to make bilateral

agreements with the

governments of wood supply

countries to have long-term

contract on wood supply with

a competitive price. At the

same time, the government

should provide full

information on forestry

policies in different countries

so that Vietnamese investors

The Government of

Vietnam,

Ministry of Agriculture and

Rural Development,

Ministry of Natural

Resource and Environment,

Ministry of Planning and

Investment.

Reduce 50% of

artificial

wood

importation by

2010 and 70%

of wood will be

locally

supplied by

2020

Stabilize

domestic wood

production

can develop their own forest

concessions or plantations in

those countries

Focus on local sustainable

afforestation to have natural

certified wood for furniture

production and promote the

use of man made boards in

furniture design. Working

closely with wood producers to

select best species for

afforestation by specific

geographic locations.

Encourage Vietnamese

companies (with specific

incentives) to invest overseas/

cooperate with foreign partners

for afforestation, wood

processing and import into

Vietnam

Tighten regulations on forests

to prevent land use for

speculative purposes.

A link between forest farmers,

scientists, furniture producers

and the State should be formed

to ensure effective forest

growth and exploitation

Support companies to source

directly rather than through

large intermediaries and

encourage companies to invest

in volume wood storage

facilities, ideally with Kiln

Drying capability as well.

The government should allot

forest to wood processing

companies or forestry-based

businesses. Credit schemes and

Public Private Partnership

programs with exporters to

plant and exploit own

provincial raw material

sources. Afforestation projects

should be designed in close

coordination with furniture

Ministry of Planning and

Investment.

Ministry of Agriculture and

Rural Development grant of

subvention

Ministry of Trade.

Ministry of Agriculture and

Rural Development.

Ministry of Planning and

Investment.

with the targets

of reaching 9.7

million M3/

year by 2010

and 20 - 24

million M3/

year by 2020

(including 10

million M3

large timber).

Provide small

timber for pulp

processing: 3.4

million

M3/year by

2010, and 8.3

million

M3/year by

2020.

Existence of

incentive

programme

Existence of

such forum for

discussion.

exporters.

Invest in equipment to

modernize forest management

work; undertake forest

inventory periodically;

consolidate and update

databases of forest resources.

Setting-up wood material

forum with the participation of

the government, exporters and

growers’ representatives

Establish proper standards or a

grading system of raw

materials as the quality of final

products substantially relies on

raw material quality.

Implement seriously the

innovation of administrative

procedures in relation to

importation of wood materials

and exportation of wood

products

Capacity

development

Encourage the

development of

subcontracting

and supporting

industries

Working out the policies that

encourage the development of

supporting industries,

especially the production of

high quality stains, lacquers

and decorative finishing

materials, accessories and

hardware. Encourage the

investment of both foreign and

domestic companies on this

area.

New supply

companies

developing

Capacity

development

Support for the

renovation of

processing

technology

Provide incentives by way of

credits, grants, subventions for

the renovation of processing

equipment.

Setting-up functional units

within suitable training

institutions to provide

information on the latest

development in processing to

wood processing companies.

Through trade associations and

commercial activity close

Ministry of Planning and

Investment.

Ministry of Agriculture and

Rural Development

Trade Associations such as

HAWA, VIFOREST and

Commercial associations

Suitable Trade Magazines

cooperation with equipment

producers/traders/suppliers can

support financially and

technically for this unit.

A bulletin on processing

equipment needs to be

published. A website on the

development of wood

processing equipment, details

of suppliers, functions and

specifications of machines and

equipments needs to be

developed.

Capacity

development

Enhance

exporters

capacity with

regard to

knowledge,

production

technologies,

managerial skills,

marketing

Training programs for

production

managers/supervisors, sales

managers, accountants,

designers, marketing

specialists

Training of staff on export

logistics requirements, market

analysis, foreign languages,

negotiation skills etc.

Training programs on kiln

drying and wood treatment

Training programs on surface

finishing. Working in cloce

cooperation with materials/

accessories suppliers (PU,

gilding materials…) to have

technology transferred

VIETRADE (Export

Marketing Guidelines)

Colleges & Universities

Forestry universities,

vocational training

centers under MARD

Specialist trainers and

consultants

immediately and &

through colleges longer

term.

Ministry of Education

and Training

Ministry of Labour,

Invalids and Social

Affairs

Donor programs such

as GTZ, IFC, MPDF…

Materials/accessories

suppliers

750-1000 key

staffs of wood

processing

companies are

adequately

trained and a

core group of

trainers are

also trained.

Capacity

development

Vocational

training of

workers

Survey on the concrete

demand of skilled workers for

the sector (short and long-

term) to have appropriate

training strategy

Review training programs in

the vocational training schools

(more visual trainings, Internet

application…)

Encourage Public-Private

Partnership model in training

activities (model of GTZ

recently) Possible association

Ministry of Agriculture

and Rural Development

Ministry of Labor,

Invalids and Social

Affairs

Ministry of Education

and Training

Annual

training of

2,000-3,000

skilled

workers

with City & Guilds of London.

Work-out policies to

encourage wood manufacturers

to be the trainers

Capacity

development

Promote design

innovation and

product

development

Setting up of an international

design school or Product

Design Center. Improve the

training quality of Industrial

Arts College in designing .

Creating more opportunities

for designers to work in the

factories of furniture

manufacturers (Linking

designers to exporters,

Internship programs for

designers), to participate in

both domestic and

international furniture trade

fairs to grasp the trend of the

market

Designing division should be

set-up in the vocational school

of wood processing

Create opportunities for

foreign design students to

work with wood manufacturers

Hire foreign designers who are

also working as trade

promoters. Apply for volunteer

designers from various

programs / Development

organizations like JICA, GTZ..

Organization of design contest

on furniture on periodical

basic

Subscribe of home décor,

fashion magazines

VIETRADE

Ministry of Agriculture

and Rural Development

Ministry of Labour ,

Invalids and Social

Affairs

Industrial Art College

Vocational training

school

Wood processing

associations

(VIFOREST and Wood

Associations in

Hochiminh /HAWA,

Binh Dinh)

JICA, GTZ

Product

Design Center

/ Institute is

set-up

Capacity of a

local design

school built

up

100 local

designers

trained

60 companies

participated in

an design

internship

program

Capacity

development

Building capacity

of wood furniture

sector specialists

Increasing market intelligence

by providing sector-specific

information about main target

market structures

Market prospecting missions

to Japan, the EU, US and other

key wood furniture markets

VIETRADE (National

Trade promotion

program)

Wood Associations in

Hochiminh/HAWA,

Binh Dinh and

VIFOREST

10 -20 crafts

sector

specialists

trained

Capacity

development

Broaden the

product range of

exportable goods

Promote furniture to be made

by the combination of wood

and other available materials in

Vietnam like rattan, water

hyacinth, rush…(businesses

should take advantages of

other low-cost material sources

that are available in forests like

bamboos and rattan and other

sources of materials like

stainless steel or aluminum for

export wood processing to

create special products with

high added value)

Promote of furniture that can

best utilize the excellent

carving skills of Vietnamese

artisans (Develop a wide range

of products that can utilize the

high productivity of machine-

processing and uniqueness of

hand-making)

Ministry of Agriculture and

Rural Development,

Ministry of Natural

Resource and Environment,

VIETRADE

Ideally a specialist unit set

up to develop this unique

sector. Suggest this is done

under VIETRADE

Infrastructure

Ensure that the

physical

infrastructure in

the country is

conducive

Assessment of main

infrastructure bottlenecks

Increase competitiveness of

sea transport in the Central

provinces like Da Nang, Binh

Dinh…

Concentrate all possible

resources from the

government, companies and

other organizations to build up

qualified training centers for

wood processing industry.

Improve the working

environments to comply with

international standards for

labor (SA 8000 on child labor,

workplace, etc.),

environmental management

(ISO 14000 series), etc

Ministry of Agriculture

and Rural Development

Ministry of

Transportation

Ministry of Science and

Technology

Ministry of Labour,

Invalids and Social

Affairs

Freight costs

are reduced

by 10-20%

150 exporters

obtain ISO

and SA 8000

standards

Infrastructure

Promote private-

sector oriented

Business

Development

Build up more efficient private

sector-related service providers

offering design advice,

training, research, technology

know-how, packaging,

Services (BDS)

markets

sophisticated inputs etc.

Grant scheme for stimulating

use of BDS providers

Infrastructure

Export credit

facility for

furniture

manufacturers

Keep up finance-supporting

policies for wood processing

sector, specifically policies on

investment credit incentives

and export credit in the fact of

Vietnam is member of WTO;

policies to support inland and

ocean transportation...

.Effective use of Overseas

Development Assistance

(ODA) Set up an EXIM Bank.

Ministry of Industry

and Trade,

Ministry of Finance

Ministry of Agriculture

and Rural Development

Ministry of Planning

and Investment

The State Bank of

Vietnam

Infrastructure

Human resource

development

Training of Public Officials

Responsible for the wood

processing industry -

Establishment of Overseas

Exchange Programs

Enhance the role of

VIFOREST as well as other

local wood processing

associations. Improve the

linkage between companies,

step by step specialization in

production stages.

Ministry of Agriculture

and Rural Development

Ministry of Labour,

Invalids and Social

Affairs

International

Consultants

All public

officials

responsible

for wood

processing

down to

village levels

are trained

3 overseas

exchange

programs are

organized

yearly

Infrastructure

Establishment of

intellectual

property rights

system

Development of Intellectual

Property Rights Protection for

Vietnamese designers

Issue of Special Accreditation

Mark to Qualified products

Ministry of Science and

Technology, Ministry

of Industry and Trade

Intellectual

Property

Rights

Protection is

developed

Market access

Promote

exporters on

foreign markets

Reduce dependency on the few

very large clients as a priority

Support large Vietnamese

companies to set up their own

marketing and selling

enterprises in the markets that

they are selling to and

establish Brands.

Encourage companies to

establish wholesale operations

either individually or

collectively or purchase of

Trade fair programs of

VIETRADE and

Associations

VIETRADE (Export

Marketing Guidelines)

50 exporters

participate in

new

international

trade fairs

200 export

companies

use

VIETRADE’s

Export

Marketing

Guidelines

existing wholesalers who

already have access to

retailers. The manufacturer

now has a foothold in the

market and the opportunity to

make increased profit from the

greater value chain he is part

of.

Setting up of an incubator for

stimulating participation in

international trade fairs

Give priority to current

potential markets (Japan, EU,

US, Australia…) and promote

activities on other foreign

markets in addition (Canada,

Mexico, Russia, Middle

East…)

Use Vietnam‘s trade

representatives more

effectively

Dispatch of Specialists and

Exchange programs

Establishment of Matching

system for Producers and

Buyers

Organization of Vietnamese

Furniture shows in targeted

markets

and intensify

pro-active

marketing

activities

Export

turnover of

wood

furniture

keeps

increasing at a

rate of at least

15%/year

Market access

Attract foreign

clients to

Vietnam

Organization of internationally

recognized trade fairs for wood

furniture in both Hochiminh

City and Binh Dinh province

Setting up of an Information

Centre/One-stop shop for

foreign buyers

Organization of inward buyers

missions to Vietnam from

selected country markets.

VIETRADE

Wood processing

associations

(VIFOREST and Wood

Associations in

Hochiminh /HAWA,

Binh Dinh)

International

Furniture

trade fairs

will be

organized in

both

Hochiminh

and Binh

Dinh by 2010

Inward buyers

mission is

organized on

yearly basic

7 Weighting of the Stakeholder Perspectives

All the activities suggested above should be implemented if a balanced and comprehensive

value chain development is to be achieved. However, considering limitations in the

availability of resources, these activities can be prioritized according to the needs and

expectations of the actors in the value chain.

An assessment of the perspectives of domestic stakeholders reveals three areas that have a

particular impact on a further increase in furniture export growth:

Activities at the production and raw material levels preparing the ground for larger

furniture exports

Activities relating to capacity building of exporters

Activities relating to the support of the government.

These areas are closely interlinked. Issues at all levels need to be addressed for further sector

growth. Activities need to be coordinated.

An international assessment of stakeholder perspectives undertaken at major sector

related trade fairs in the EU (UK and Italy) provided insights such as:

Consumption patterns are changing. Cheap and simple mass products no longer hold

much potential for trade promotion even on mainstream markets. Markets require more

sophisticated, fashionable, diversified products. Styles were eclectic ranging from true

classic designs through ultra modern and lifestyle design to extravagant baroque ranges.

Remarkably Chinoserie, the classic style most found in Vietnam was almost completely

absent with the exception of some imported lacquer ware. This would indicate that this

area requires to adapt and redesign using its basis as the inspiration for considerable

redevelopment.

Design, Innovation & Product Development are the keys to profitable production.

Branding is vital. The development of a brand is a long term policy that cannot be

started too early. Brand recognition based on quality of product, design and service is a

highway to premiums on the selling price.

There is little information available about supply possibilities in Vietnam. Importers

much more regularly visit other Asian countries where they can, for instance, combine

supplier meetings with trade fair visits. The only Hochiminh International Furniture Fair

is not well internationally recognized.

Vietnam has a reputation for being a reliable supplier, but new product ideas or styles can

hardly be found. Vietnam does not respond to the need of continuous innovation with an

own identity and product development. Vietnamese products seen at trade fairs are not

new and attractive for buyers.

In summary, in the future, importers / clients will need to have well-organized Vietnamese

exporters, which are able to respond quickly to the needs of the international market,

underline the importance of product design and development and demonstrate the potential

and need for intensified export promotion.

8 Resource Mobilization

8.1 Long-term Strategic Priorities.

Communication between stakeholders is vital. Clear channels of communication are strongly

recommended.

The furniture industry of Vietnam is going through a period of extraordinary change

unparalleled in its history. From a modest base meeting the requirements of the home market

and with small regional exports of US$120,000,000 in 1999 mainly of traditional ethnic style

furniture it has suddenly blossomed into a burgeoning giant almost doubling exports year on

year achieving close to US$2 Billion in sales in 2006 and targeting for the turnover of $5.5

billion in 2010 with the annual growth rate of 29.8%. There are approximately 2,000

companies involved and growing.

To meet the challenges presented by such growth the industry needs clear and cohesive

leadership arising out of dialogue and shared purpose. It needs means of communication

between the differing elements of the industry. It needs representation at national level in the

development of policies that will put this phenomenal growth on a sustainable basis. It needs

an interface with government that will ensure that the industry gets the support it needs from

government while at the same time meeting governments targets for social development and

alleviation of poverty.

The creation of a Vietnam National Furniture Adaptation Association would be the

ideal solution to meet this need and guide the industry through this very vital stage of its

development.of policies that will put this phenomenal growth on a sustainable basis. It

needs an interface with government that will ensure that the industry gets the support it

needs from government while at the same time meeting governments targets for social

development and alleviation of poverty. ( see guidelines for this the set up and conduct of

this Association in Appendic No.1 )

Setting up Design, Innovation & Product Development through the establishment of a

Design Centre for the furniture industry

Marketing Training and school for Brand Development at National Level and

enterprise level incorporating the establishment of at least one National Exhibition centre

and supported by 2 or 3 regional exhibition centres and a programme for attendance at

international trade fairs.

Short- term action plan for VIETRADE. It is proposed that a 2 – 3 year action plan be

implemented to support a selected group of some 20 to 30 enterprises by way of

seminars, in factory training programmes in management, design, supervisory training,

technology training and incoming and outgoing marketing missions. This would be co-

financed by industry and VIETRADE of government and would embrace

Vocational Training. Here the emphasis would be on training of trainers rather than

direct inputs to trainees.

Management and Engineering Training. It is envisaged that this would be carried out

be selected experts in association with selected Universities and Polytechs.

Appendix No.1

Association Development & Purpose a Necessity for the Development of the

Vietnamese Furniture Industry

INTRODUCTION.

The furniture industry of Vietnam is going through a period of extraordinary change

unparalleled in its history. From a modest base meeting the requirements of the home market

and with small regional exports of US$120,000,000 in 1999 mainly of traditional ethnic style

furniture it has suddenly blossomed into a burgeoning giant almost doubling exports year on

year achieving close to US$2 Billion in sales in 2006 and targeting US$5.56 billion by 2010.

There are approximately 2,000 companies involved and growing.

To meet the challenges presented by such growth the industry needs clear and cohesive

leadership arising out of dialogue and shared purpose. It needs means of communication

between the differing elements of the industry. It needs representation at national level in the

development of policies that will put this phenomenal growth on a sustainable basis. It needs

an interface with government that will ensure that the industry gets the support it needs from

government while at the same time meeting governments targets for social development and

alleviation of poverty.

To achieve such representation the industry needs to form strong regional associations where

the specific needs and challenges of each region can be discussed and resolved for the

betterment of all participants. These associations of furniture manufacturers can in turn

delegate members to a National Association where policy can be hammered out and from

whence government can be addressed on behalf of the wood industry’s interests.

However it has to be recognised that the development of a furniture industry on the scale

underway in Vietnam at the moment has potential for development far beyond the specific

wood processing plants producing furniture.

The supply side by way of timber input, board materials such as particle board , MDF and

OSB board, lacquers, adhesives, fabrics, leathers, fittings, glass, plastics, fixings and fittings

has the potential to become as big or even bigger than the wood processing industry itself ( as

has been the case in Taiwan for example and is rapidly being repeated in China)

And then you have the service side which embraces everything from finance through

machinery supply, construction, management systems, training , design, marketing,

promotional materials, packaging, transport and shipping which again has major potential for

job creation and wealth production.

If furniture output is reaching some billions then the supply and service sides too will reach

billions and the combined industry becomes an engine for growth on a scale much larger than

just the wooden furniture industry alone and the value chains in which Vietnam can

participate become much longer and the wealth is spread much wider.

So where does one begin. ?

Approach and methodology.

Step 1.

Create a visiting ‘team’ comprised of a member of Vietrade, a member of a service industry9

and a technically competent consultant. The brief of the team is to lay the foundation for

industrial leaders taking ownership of their industry’s interests.

Step 2.

Target a given number of leaders of industry in each region. Personally visit them. During the

course of the visit which should involve confidence building measures by the visiting ‘team’

float the idea of a meaningful association or strengthening of an existing association.

Step 3.

With assistance from industry members met during the personal visits initiate a series of

meetings at regional level. The purposes of these meetings are to alert industry to the

opportunities and challenges it faces and encourage it to form meaningful associations or to

take hold of existing associations and turn them into meaningful associations.

The conduct of these meetings is critical and where possible members of industry should be

encouraged to initiate the meetings. The venue and speakers should be facilitated by

Vietrade. Ideally the meetings should have topics for discussion which are immediately

relevant to the audience and which can lead into the wider discussion of association

representation.

The format of such meetings should be such that they allow as many as possible of the

decision makers in industry to attend and they should be made attractive for them to attend.

Meetings which are held after working hours or meetings which involve a meal with after

dinner speaking inputs can often be best to initiate the dialogue that will lead to persons

taking local responsibility for forming of associations.

9 This can be someone from marketing, shipping or training etc.

Where possible a consensus should be reached that will lead to activation of an association

and again Vietrade should if possible facilitate the necessary secretarial work involved in

doing this initially.

Step 4.

Once associations have been formed then they should be affiliated to a National Association

which is representative of the regional associations.

This National Association should form a permanent secretariat which again might be initially

facilitated by Vietrade but which in time should have its own facilities. We would now have

a realistic basis for representation for the industry and focal point to which issues impacting

on industry could be addressed for dissemination down the line.

Step 5.

The foregoing 4 steps are often already in place for an industry the size of that in Vietnam

but in this case it is all to be done. To this stage we have been dealing with the wood

furniture sector in isolation but in practice it embraces a much greater constituency. There are

the:

The Furniture Manufacturer’s Association.

The Furniture Industry at large.

The Trade Unions.

The Co-operative Movement.

The National Forestry Institute

The Technical Training fraternity, state or private.

The Ministries relevant to the development of the industry. i.e. the Ministry of Industry

and Commerce, the Ministry responsible for training, the Ministry responsible for

development, the Ministry responsible for Taxation.

Suppliers of goods to the industry such as wood importers, board manufacturers,

machinery makers, adhesive makers, fabric makers etc

Suppliers of services such as marketing, design, promotion, packaging, shipping etc.

All of the foregoing have a vested interest in seeing the success of the furniture sector. The

are dependent on it and interdependent. They all need it to be a success ! It is here that a

further ‘layer’ of leadership is needed. ( step 5 )

To meet the challenges facing it these industries will benefit greatly from a holistic approach

to their development. Such approach needs visionary leadership unfettered by specific

partisan or commercial interests and it needs an environment facilitated by Government that

will give it space to develop.

This leadership needs to draw from all facets of the industry itself and from outside of the

industry too. It has been the experience of the writer that such leadership is best brought

through an instrument that is free of loyalty to any given group, but yet is constituent of all

groups.

This leadership can be brought through the formation of an instrument that might be known

as an Adaptation Association.

DEFINITION.

An Adaptation Association is the instrument through which industry and government

WORK TOGETHER to adapt to times of extreme change. It develops policies and initiates

strategies that impact positively on the development of a whole sector in a planned and non-

confrontational manner.

It works:

Through consultation with all players in the industry,

It addresses the strengths and difficulties of the industry,

Through the adoption of policies and development of strategies to address those

difficulties, and

Through dissemination of information and training that allow the strengths to be

exploited and the difficulties to be resolved.

An Adaptation Association represents the interests of the individual enterprise in it’s quest

for development towards maximum profitability whilst at the same time recognizing that to

develop successfully there are areas in which supplier compliance, government help and

employee cooperation are essential and constructive elements towards that goal.

It is essential that the Adaptation Association have at its head a Chairman who is

INDEPENDENT of commercial interest in the industry.

LEADERSHIP.

This chairman should be a successful business man/woman (not an academic). He/she must

have a proven track record in organizational skills; leadership and solid commercial

experience in either export market development or small to medium sized industry

development. He/she should be independent of the furniture industry.10

His/her position is part time and to a degree ‘honorary’ though he/she must be paid a salary

that is commensurate to the time he/she devotes to the post. The position is serviced by a

Ministry Department (n such as Vietrade ) and has delegated to its service a secretariat

funded by that Ministry and housed in the Ministry.

COMPOSITION.

The Chairman of the Adaptation Association is independent, nonetheless. His sole goal is

the development of the industry towards international competitiveness in a manner, which is

sustainable, and, is to the long-term benefit of the economy of Brazil

He advises both the Minister of Industry and Commerce and the Furniture Manufacturers

Association. He forms his “committee” (Association) from interested parties:

The Furniture Manufacturer’s Association.

The Furniture Industry at large.

The Trade Unions.

The Co-operative Movement.

The National Forestry Institute

The Technical Training fraternity, state or private.

The Ministries relevant to the development of the industry. i.e. the Ministry of Industry

and Commerce, the Ministry responsible for training, the Ministry responsible for

development, the Ministry responsible for Taxation.

Suppliers of goods to the industry such as wood importers, board manufacturers,

machinery makers, adhesive makers, fabric makers etc

Suppliers of services such as training, marketing, design, promotion, packaging, shipping

etc.

It is this group that forms the Vietnamese Furniture Adaptation Association-VFAA

WHY AN ADAPTATION ASSOCIATION?

In all industries there are many players. The owners of the companies, the workers in the

companies, the suppliers of the companies and the clients, are the primary ones. Then there

is society at large and the greater good. This is represented by Government. Government

must look at the long-term goals of society and how each individual segment of society

impacts on the greater good. The welfare of society as a whole is not necessarily in the

immediate interest of individual companies and pressure groups at any given time.

Individual Industry Associations will have the perspectives of what they see as immediately

impacting on their members. A few examples might be useful.

Timber prices impact directly on profitability. The furniture industry may seek to

continue subsidized timber supplies. Yet very cheap timber may lead to:

Profligate use of forest resources which in time denudes the forest resource, impacts

on water resources, impacts on the recreational environment and promotes

desertification of otherwise productive land

Poor utilization of timber as a material leading to low productivity and lower profits

Fall down in supplies due to uneconomic prices for conversion from log to lumber

Employees working in a high inflation environment will see their only hope of avoiding

deprivation is to seek ever increasing wage increases to meet their daily needs. The

Trade Unions will see their rôle as assisting their members to achieve this. Yet these

increases unless accompanied by improvements in productivity, quality or other

performance may lead to:

Reduced employment,

Reduction in profit leading to reduced investment, leading to the slow demise of the

enterprise,

Loss of competitiveness leading to loss of market share with all that it implies and so

on

Suppliers (timber and board stock suppliers, fabric suppliers etc) may find that in the

immediate short term profits are greater in trading rather than in supplying to

manufacturers and so they will avoid supply. However they also need to factor into their

calculations the effects that this might have on their long-term profitability, for example:

Export markets will in general seek first quality material and leave secondary

qualities on the hands of the supplier thus reducing his yield and his profitability.

In the event of trade recession in export markets a secure home market can be the

savior of an export oriented business,

The cost of servicing home markets is often much higher than those associated with

export markets and this needs to be factored in to the cost equation.

Government may seek to impose restrictive tariffs on the import of goods and services for

the development of industry in the immediate imperative of finding revenue, while at the

same time not providing those facilitation services that allow industry to grow such as

training, export development, infrastructural facilitation etc.

It is very easy to look at any particular problem from a single perspective and take actions

that appear to be correct at the time. It would be the rôle of the proposed VFAA to take an

overall perspective of the industry and promote policies and strategies that impact to the

greater good of the industry as a whole over a long-term perspective.

ARE THERE PRECEDENTS?

The answer is yes! It is relevant to say that such associations have a track record in Denmark

and in Ireland, to quote just two examples, both of which were successful.

In Denmark in the late fifties it was to meet the need of industry as it evolved from a cottage

industry to an industrialized machine based industry on the formation of the European Free

Trade Area (EFTA). In Ireland it was a little later in the middle sixties and into the seventies

when Ireland aspired to joining the European Common Market, now the EU. Both were

periods of extraordinary challenge. In both cases industry has successfully met the challenge.

In Vietnam’s case it too could meet the challenges it faces more successfully by using such

methodology.

The country is geographically very long with a diffused home market base and difficult or no

access to regional home markets but rather faced with the challenge of extra regional (export)

markets in South East Asia, Japan, North America, Europe and the Middle East.

WHAT ACTIONS IS THE ADAPTATION ASSOCIATION LIKELY TO DEVELOP.

It would be wrong to pre suppose what actions the VFAA might propose or develop in this

paper. This is for the VFAA itself to do.

The ‘modus operandi’ of the Association is to form action groups throughout the industry,

which both advise on the needs of industry and implement the advice of the VFAA.

This implementation can take many forms:

Promotion of local and national training through technical colleges, universities and

incoming specialists, funded by levy grant ( Training cannot be side tracked it is an

essential component of industrial development.)

Policy development nationally and regionally,

Market oriented actions such as specialized exhibitions, design promotion, incoming

buyer groups,

Direct guidance to industry through provision of mentors and information comparisons

within industry, benchmarking.

Tax and fiscal policy development, provision of grant aiding mechanisms, attraction of

soft loans access, comparative bench marking against which industry can measure its

performance,

Information provision…….. Technical information, management information, market

information, supplies information, etc.

Development of a subcontracting culture (clustering) and promotion of subcontracting

both at home and for export.

The VFAA’s rôle is to mobilise the resources of industry and government to JOINTLY

develop the industry. In this rôle it liases and negotiates with all parties that impact on the

industry. Government, Trade Unions, Suppliers, etc.

TENURE.

Typically the tenure of the Adaptation Association will be for the period of need of the

industry. It will disband at an appropriate time. It is likely to take 5 to 7 years for this to

happen and it could take up to ten years. Ideally the Chairman will be selected by an

independent ‘head-hunting’ (employment agency) agency of international repute.

REWARDS.

The Vietnames furniture industry is growing very rapidly. Based on output it would appear

to have in position many of the facilities and equipment of a developed industry but present

productivity does not appear to reflect this despite the rapid growth in exports

There are many underlying problems in material supply, training, marketing and capital

investment which could easily derail the development. The problem is how long will it take

to develop, will development of the industry be cost effective and how much pain will there

be in its development.

Co-operation at all levels of industry will speed the process. This will best be achieved by

having an industry wide association.

CONCLUSION.

It is the belief of the writer that such a proposed association would greatly assist development

in the present environment. It is up to the players in the industry as to whether or not they

want it. It needs promotion. It needs initiative. This initiative can come from Vietrade of

from industry or both. It must however be clear an Adaptation Association is not the

preserve of any particular group.

It is not the Ministry of Industry

It is not the Association of Furniture Manufacturers of Vietnam

It is not the Trade Union movement.

It is not only the very big companies.

It is not suppliers,

It is not Vietrade

Rather, it is the collective voice of all participants, working in a cohesive way for the

betterment of all and sharing in the rewards of a successful industry.

The Vietnamese Furniture Industry is fast becoming a major force in World furniture

manufacture. Can the present impetus be maintained ? It is vulnerable. It can fail. Adaptation

to a market economy environment under WTO rules in a way that is fair to all participants is

the responsibility of that industry.