The Trans-Pacific Partnership Agreement (TPP) is expected to bring opportunities for exports in many of Vietnam's sectors, but it is likely to post big challenges for it's timber processing, local Vietnam News quoted experts as saying Friday.
Expert Pham Minh Duc from the World Bank (WB) said that according to TPP regulations timber products have to achieve a localization rate of 55 percent, and Vietnamese enterprises are allowed to import a maximum of 45 percent of materials from outside the TPP bloc. Achieving this localization rate is a major obstacle for wood products to comply with.
Meanwhile, a report by the World Bank showed that over 80 percent of materials needed by Vietnamese wood processing firms are imported from foreign countries. On average, Vietnam has imported nearly 3.5 million cubic meters per year, of which, sawed timber imports serving the processing industry accounted for 65 percent, well over the allowed localization rate.
Phan Chi Dung, from the Ministry of Industry and Trade (MoIT) said profits from timber exports remained low due to a reliance on imported wood and low value addition. Small scale of production, high costs, and limited design capacity were among the reasons for the low value addition.
He suggested for creating more favorable conditions for Vietnamese enterprises to access loans to utilize as capital to develop the sector and implement other incentives.
Despite difficulties in the long term development, Vietnam's timber processing sector has a positive outlook, said the WB expert.
Over the past ten years, Vietnam's timber processing sector has enjoyed an average growth of between 15-25 percent, with exports increasing every year, reported MoIT.
In 2013, it earned 5.7 billion U.S. dollars from exports, a year-on-year increase of 19 percent.
Vietnam is among the world's ten largest wooden products exporters, but accounted for only 1.2 percent of the world's total consumption of 440 billion U.S. dollars last year.
Vietnam exports furniture to 120 countries and territories, with the U.S, China, Japan, South Korea, and the UK being the biggest buyers.
In its action plan for developing the wood market, the Ministry of Agriculture and Rural Development (MARD) set targets to earn from wood and timber product exports 10 billion U.S. dollars by 2020.