February 26, 2020 04:24

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Cooperate with the ASEAN countries’ wood industry to enhance value

09:55 | 07/12/2019

VCN - Instead of competing with each other, the wood industries in ASEAN countries should work together to exploit the strengths of each country. This would create a much larger value for the ASEAN wood industry at large.  

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Cooperation will help the ASEAN wood industry exploit all four values of production, designs, brands and trade in the wood value chain. Photo: N.H.

Promote regional cooperation

The Handicraft and wood industry association of HCMC (HAWA) and members of the ASEAN Furniture Industries Council (AFIC) all agree ASEAN is a region with outstanding advantages in materials, production, distribution and market scale to develop the wood and furniture industries. Proving this statement, Emmanuel Padiernos, AFIC President, said the total number of ASEAN furniture exports in 2018 reached US$12.1 billion of the total $150 billion of global exports. This shows ASEAN is a major centre of furniture production.

Vietnam, Malaysia, Indonesia, Thailand and the Philippines are fast-growing Southeast Asian furniture suppliers with two-thirds of the production capacity prioritised for exports. The export/production ratio for this region is about 66 percent, doubling the world average (about 30 percent). It is estimated Southeast Asia's wood and furniture production capacity meets 5 percent of total furniture consumption in the US and 2 percent in Western Europe. In particular, Vietnam is a potential country and currently leads Southeast Asia in the export turnover of wood and wood products and ranks second in Asian market and fifth in the global market.

With such a large scale and potential, in order to maximise the value of the timber industry in the region, Nguyen Quoc Khanh, President of HAWA proposed a model of cooperation - association - alliance among Vietnamese businesses, among businesses and associations in ASEAN. Thereby, developing a new vision for the AFIC as "cooperation for the mutual prosperity of the region".

According to Khanh, Vietnam's wood industry is leading the region in terms of potential, but most businesses only focus on their own interests, own brands and products but have not yet seen the benefits of developing a common brand of the industry. ASEAN countries themselves compete with each other. Therefore, it needs a greater common goal to create cohesion and cooperation for mutual prosperity. If we combine the strengths of each other, alliances with regional partners, we will create a value chain of the wood industry with prestigious and quality products.

Tran Viet Tien, HAWA’s Standing Member, also said the total value of wood and furniture production in the world was $140 billion, but the value of goods, including four factors of production and design, brands and trade, was up to $450 billion. Therefore, the internal links will help the wood industry exploit all four above-mentioned factors of the wood industry, helping significantly increase its value in the region.

Covering the world brand map

Experts said strengthening the link in ASEAN can immediately bring benefits to businesses in exploiting the potential of the ASEAN market. Statistics show ASEAN countries import about $3.3 billion of furniture from around the world per year, showing this is a very large and potential market. However, currently Vietnamese enterprises only contribute less than $70 million per year, equivalent to 5 percent of the $3.3 billion. Intra-ASEAN exports also stopped at $730 million per year, equivalent to about 22 percent. These figures show the ASEAN wood industry has long forgotten the home market and this is also an opportunity for businesses to increase trade and replace imports. In addition to the large population size, in 2017-2030, the middle class in ASEAN is expected to increase, of which Vietnam and the Philippines will increase by 5.5 percent, Indonesia 5, 2 percent, Thailand 2.2 percent and Malaysia 2.9 percent. They will also be the main object of the wood and furniture industry.

Specifically, according to AFIC experts, intra-ASEAN trade is becoming easier than ever thanks to the development of e-commerce platforms. The expansion of distribution networks does not need as much infrastructure resources as before. Therefore, Vietnamese and ASEAN businesses can take advantage of this for digital transformation, developing digital producers and digital consumers promoting consumer markets.

According to Khanh, the links and cooperation in the ASEAN wood industry are based on the potential of each country and the strategy of each business. In particular, vertical links are the strong axis of production of Vietnam - Indonesia - Laos - Myanmar combined with the axis of trade - design - high development services of Thailand - Singapore - Malaysia - Philippines. Horizontal links are AFIC member associations in strategic orientation and alliance for the sustainable development of the industry. Therefore, the advantages of countries will be fully exploited to create greater common values.

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In a broader perspective, the impact of the US-China trade war is creating a shift in supply and demand for furniture from other regions to Southeast Asia. The data for seven months of 2019 shows that exports of Chinese wood and furniture to the US have decreased by 18.3 percent, equal to $14.3 billion. Accordingly, China only accounts for 50 percent of the market share in the US. The gap that China has left is worth more than $20 billion, ASEAN wood businesses can fill the gap. Most customers in the US and Europe want to find a supply outside China, this is a great opportunity for the AFIC to have a common vision and many activities to seize the opportunity and improve the position of the region for mutual benefits. The cooperation also helps supplement and enhance strengths to create a counterbalance to compete in other production markets such as China and the EU. With such a vision, HAWA expects that in the near future, the wood industry of Vietnam and ASEAN in general will cover the world brand map.

By Nguyen Hien/ Huyen Trang