Wood processing industry seeks sustainable growth opportunities

Over the first 6 months of 2023, the country's export of timber furniture reached $6.5 billion, down 28.8% over the same period in 2022. In Binh Duong, the export turnover of wood industry in 6 months is estimated at nearly $2.8 billion, down 15.3% year-on-year. The global situation is still volatile, in order to maintain and heighten the position of a leading country in terms of furniture export, wood processing industry needs a new strategy to be able to conquer higher and more sustainable goals.

To actively overcome difficulties

According to Nguyen Liem, Chairman of Binh Duong Furniture Association (BIFA), although it was forecasted from the end of 2022, the lack of orders caused factories to reduce capacity, reduce labor, and many investors even to return lands and factories... Currently, businesses members of BIFA make every effort to retain workers by dividing working shifts. A good signal is that orders have increased again from the end of the second quarter of 2023, although not much. Wood processing enterprises are also reorganizing their production, streamlining business model to reduce costs. On the other hand, businesses try to take advantage of support from trade promotion agencies to find new markets.

With the return of orders from the end of the second quarter of 2023 and the internal strength of the whole industry, export target of wood processing industry in 2023 is completely feasible. In photo:  Production activities at RK Resources Co., Ltd in Bau Bang Industrial Park. 

Recently, at Vietnamese Wood & Furniture Industry Forum with the theme "Keeping the position - Taking the opportunity", Le Hoang Tai, Deputy Director of Trade Promotion Department under Ministry of Industry and Trade, said that export in the first 6 months of this year faced some challenges, thus wood processing industry looking back at its intrinsic values and finding new development directions is an urgent job.

In terms of internal resources, according to economist Pham Phu Ngoc Trai, the current reduction in orders of wood processing industry is only temporary. Vietnam's furniture industry has enough room to develop in the next 5 to 10 years. “Compared to the average global GDP growth rate of 3%, the compound growth rate of the glbal furniture industry is 4.5%, Vietnam's wood processing industry grows at an average of 15.4% per year. This figure proves its position and great potential,” said Pham Phu Ngoc Trai.

Sharing the same opinion, Nguyen Quoc Khanh, Chairman of Handicraft and Woodworking Association of Ho Chi Minh City (HAWA), also said that in addition to the impressive growth rate, wood enterprises are also affirming their dynamism in integration. When the market declines, businesses are not passive but try to adapt, believing that the industry's development prospects are still very high. According to Mr. Nguyen Quoc Khanh, in the solutions to cope with the current situation, wood processing industry witnessed a new shift, which can be called the expansion of business margin. Specifically, Vietnam's big furniture brands are expanding their presence in potential export markets, especially the market of super-rich countries in the Middle East to access supply opportunities for new large real estate project. With internal strengths of this industry, Mr. Khanh said that the export target of 2023 can be achieved because orders have started to increase recently.

Transformation, competitiveness improvement

"Greening" production is a global trend that businesses must implement to achieve sustainable development goals. The wood processing industry is not beyond the game, when the market is urgently demanding sustainability in furniture products. This is no longer a voluntary requirement but has become a mandatory condition if you want to participate in the market.

"Green transformation right now is the way to have the opportunity to improve competitiveness", said Mr. Pham Phu Ngoc Trai. In addition to the current regulations, Vietnamese enterprises will face new requirements such as the Carbon Border Adjustment Mechanism (CBAM) proposed by the European Commission (EC), effective from October 2023.  Products imported into the European market will incur additional costs, switching to a lower-emission production for carbon credits. With the current status of Vietnam's wood industry having a significant reserve of planted forests, Mr. Trai said that if it is re-established and well-connected, the carbon credit market is an opportunity for Vietnamese furniture enterprises to increase their advantages. This expert advises that Vietnam's wood processing industry needs to reposition its goals and vision to become a global green and sustainable furniture center.

Production activities at Thuan An Wood Processing Joint Stock Company

Chad Ovel, General Director of Mekong Capital, also commented: “With big examples such as AA Corporation, An Cuong, Truong Thanh... Vietnam's furniture industry is quite impressive in the eyes of investors. I believe that Vietnam's furniture industry has the opportunity to receive the investment inflow and post-inflation growth wave. The problem is how to adapt to the current difficulties and how the industry's sustainable development strategy is implemented."

Binh Duong is considered the "capital" of the wood processing industry when accounting for nearly half of the national total export turnover. Binh Duong currently has more than 1,200 wood processing and exporting enterprises. In which, there are more than 900 domestic enterprises and more than 300 FDI enterprises. Wood processing industry is also the main export industry of Binh Duong, accounting for the largest proportion of exports in the province.

According to Nguyen Liem, President of BIFA, many enterprises in Binh Duong have been taking "green" production as a strategy and competitive advantage. Accordingly, businesses have continuously innovated, accelerated business model transformation, combined this with sustainable and environmentally friendly development. New market challenges related to green production will also help the province's wood processing industry develop in a more positive and sustainable direction.

From August 9 to 12, International Wood Materials and Machinery Fair 2023 - BIFA Wood Vietnam 2023" will take place at Binh Duong WTC Exhibition Center. The fair will gather more than 700 booths of more than 100 leading domestic and international enterprises, displaying and introducing products, machinery and equipment, advanced technology with three main product groups: Industrial machinery and equipment of wood processing; accessories and materials for wood industry, imported wood materials; wood manufacture, processing…

Reported by Ngoc Thanh - Translated by Ngoc Huynh