Vietnam needs ‘FDI filter’ for woodwork industry
The US-China trade war has led toChinese wooden furniture manufacturers moving production to Vietnam, bringing risks to the domestic woodwork industry.
The US customs agency recently discovered that Finewood Vietnam imported plywood from China, labeled the products with Vietnamese origin and exported the products to the US. The enterprise was also found counterfeiting Vietnamese C/O.
The US-China trade war has brought new opportunities to FDI expansion in Vietnam’s woodwork industry in both the number of exporters and export value of foreign invested enterprises (FIEs).
In 2018, 529 FIEs exported wooden furniture products with export turnover of $3.96 billion, which accounted for 46.7 percent of total export turnover of $8.48 billion of the industry. Meanwhile, in the first nine months of 2019, the number of exporters rose to 565 with export turnover of $3.4 billion, which accounted for 46.6 percent of total export turnover of $7.3 billion of the industry.
China is the leading foreign investor in Vietnam’s woodwork industry in terms of number of newly registered projects, the additional investment capital for operational projects and capital contribution to Vietnam’s enterprises.
|China is the leading foreign investor in Vietnam’s woodwork industry in terms of number of newly registered projects, the additional investment capital for operational projects and capital contribution to Vietnam’s enterprises.|
A study by the Vietnam Timber and Forest Products Association, HCM City Handicraft and Wood Industry Association, Binh Duong Wood Processing Association, Binh Dinh Wood & Forest Products Association and Forest Trends found that in the first nine months of 2019, China registered 40 new investment projects in Vietnam, accounting for 60 percent of the total 67 projects licensed.
While the number of registered projects was high, the total investment capital of Chinese invested projects just accounted for 23.5 percent of total registered capital. This means that the projects have small scale.
Of the 15 projects which had investment capital of less than $1 million registered in the first nine months of the year, 10 were from China, or 67 percent. A project in Yen Bai province was registered with capital of $23,000 only.
Vietnam’s woodwork industry is at high risk, according to To Xuan Phuc, an expert from Forest Trends. In the latest report, Phuc and his research team showed signs of trade fraud that is becoming increasingly clearer.
Some woodwork products are imported from China to Vietnam for re-export to the US as Vietnamese products. In addition, foreign investors come to Vietnam, lease production workshops in Vietnam and make minor processing to the products imported from China and then re-exported with Vietnamese origin.
The conclusion of the research team coincides with the Ministry of Industry and Trade’s report that woodwork export turnover is on a sharp rise. The plywood exports to the US soared by 270 percent in 2018 compared with export turnover of $51.4 million in 2017.
Nguyen Phuong, sales director of Minh Thanh Co., Ltd, said his company plans to invest more than 50 billion VND (2.15 million USD) in a production chain for bedroom and living room furniture.