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Vietnam’s timber industry: wood exporters suffering heavy loss

Vietnam’s timber industry: wood exporters suffering heavy loss

Thursday 09, 04 2020
Vietnam’s major import markets of wood products have been "frozen" due to Covid-19, seriously affecting wood and wood products export enterprises.

Loss of thousands of billion dongs

Most of wooden products of Minh Phat 2 Indoor Furniture and sofa Co. Ltd (Mifaco) located in Binh Duong are exported to the US market. According to Mr. Dien Quang Hiep, General Director of the company, since this country ordered restrictions on travel and gathering in crowded places to prevent the spread of the Covid-19 virus, partners in the US market have also requested to reschedule most orders that they had placed previously.

Mr. Hiep worried and said that the company's operating situation is facing difficulties due to 95% of its products is exported to the US market. Mr. Hiep informed that most of the members of the Binh Duong Furniture Association (BIFA) are experiencing the same hard time. The outbreak of Covid-19 in key markets has led to a sharp decline in the turnover and growth of the industry.

The epidemic is and will certainly have a direct impact on the production and business activities of wood and wooden manufacturers. So far, some businesses have had to stop production while many have narrowed their business scale and several workers have to quit their jobs.

Currently, the Covid-19 epidemic is booming in most major importers of Vietnam's wooden furniture, including the US (accounting for 50% of the total export value of Vietnam's timber industry) and the EU (accounting for 10%).

The epidemic is showing signs of breaking out again in Japan, which consumes about 13% of Vietnam's exported wood products. Although the epidemic seems to be under control in China, the third largest market of Vietnam’s exported wood with 12% of the total annual export turnover, it will take a long time for the market to recover its purchasing power and it is unknown when the purchasing power will return to its original state.

Vietnam’s timber industry: wood exporters suffering heavy loss

​Currently, there are about 5,000 enterprises operating in the industry, including about 2,000 exporters. To assess the impact of the Covid-19 pandemic on the timber industry, the Vietnam Timber and Forest Product Association ( VIFORES), HAWA, BIFA, Forest Products Association of Binh Dinh (FPA Binhdinh) have just conducted a quick survey with 124 enterprises in the industry which conduct export activities to understand the impact of the epidemic on enterprises in terms of economic losses, production activities, labor, finances, etc.

The survey was conducted in late March with some initial results on the impact of the Covid-19 pandemic on the timber industry. Although the survey was conducted on a small scale, and the impact of the epidemic is only at an initial level, the negative impact on the business and export of wooden furniture can obviously be seen.

Specifically, businesses are suffering enormous loss with 100% of businesses reporting that they have been heavily affected by Covid-19; 76% of enterprises responded that the initial loss was estimated at VND 3,066 billion while 24% of businesses have not yet recorded losses.

Over half (51%) of the respondents said they had narrowed down production scale; 35% said that although they are still operating normally, they will have to temporarily stop production in the near future. Only 7% of businesses are still operating normally, but this can change at any time, depending on the epidemic.

Manage to exist

According to the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), the current situation of the epidemic in import markets of Vietnam woods is having a great impact on Vietnam's timber industry, a manufacturing industry with a very deep and wide level of integration.

The size of labor force in timber enterprises has decreased significantly. About 45% of the staff in these enterprises have lost their jobs due to the epidemic. Specifically, among 105 enterprises providing labor information, before the outbreak of Covid-19, the total number of employees working in these enterprises was 47,506, but so far, 21,410 have had to stop working.

Pressure of loans, social insurance, taxes and fees on businesses in the timber industry is currently very large. Specifically, for social insurance, 83 enterprises responded that the monthly social insurance payable is VND178.6 billion, equivalent to VND2.15 billion / enterprise.

Regarding VAT, 50 enterprises responded that they have to pay accumulated VND 174.6 billion of VAT, equivalent to VND 3.49 billion / enterprise. As for corporate income tax, information from 69 enterprises showed that they have to pay nearly VND 212.9 billion, equivalent to VND 3.1 billion / enterprise.

In addition, 61 enterprises responded that the amount of land rent that they have to pay to date is nearly VND 44 billion; 96 enterprises responded that the total outstanding loans so far is VND 6,207 trillion, equivalent to VND 64.7 billion / enterprise.

​>> VIETNAM BEVERAGE INDUSTRY REPORT 2020 - FREE DOWNLOAD

Source: thesaigontimes

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