Vietnam to face challenges in wood export once joining TPP

The Trans-Pacific Partnership (TPP) agreement, once reached, is expected to bring opportunities to many sectors of Vietnamese economy. However, the country's wood export will face challenges as it fails to meet TPP's requirement for regional value content, assessed local experts.
Pham Minh Duc, a senior economist from World Bank, was quoted by local Bao Cong Thuong (Industry and Trade News), an online newspaper of Vietnam's Ministry of Industry and Trade (MoIT), on Friday as saying that under TPP's regulations on regional value content, a product must have a localization rate of at least 55 percent of the total value.
This means a producer is allowed to import a maximum of 45 percent of materials from non-TPP members to make the product, including processing costs.
"This can pose an obstacle to Vietnamese wood products as they currently fail to meet the requirement of localization rate," said Duc.
On average, Vietnam imports nearly 3.5 million cubic meters of wood annually, 65 percent of which are lumber for the local wood processing industry, reported Bao Cong Thuong.
Moreover, Vietnamese wood, ahead of TPP, faces another challenge of labor skill.
The skill and productivity of Vietnamese labors are now limited. Average productivity of one Vietnamese worker is 1.9 chair items per day, much lower than that of 4.5 chair items per day for a worker in China, said Duc.
In order to increase the quality of wood products following TPP standards, Vietnam needs to develop a skilled workforce, said Duc.
Despite these challenges, the economist maintained an optimistic view over the future of Vietnam's wood processing, exporting sector and believed that the Vietnamese government plays an important role in developing the sector.
Phan Chi Dung, head of MoIT's Light Industry Department, said that the Vietnamese government should quickly build a development plan for the wood processing industry and material areas, create favorable conditions for companies and household businesses to approach loans, and seek measures to reduce costs for companies during producing, export-import processes.
Vietnam is currently among the top 10 largest exporters of wood furniture and handicrafts. Statistics from MoIT showed that in 2013, Vietnam's wood export revenue hit 5.7 billion U.S. dollars, up 19 percent year on year.
According to a report by Vietnam's Ministry of Agriculture and Rural Development (MARD) in late July, export revenue of forestry products in the first seven months of 2014 reached 3.52 billion U. S. dollars, up 13.2 percent year on year.
Most of Vietnam's wood markets, including the United States and Japan --- the two biggest importers, witnessed increases, while exports to China fell by 1.38 percent year on year, said MARD.
In 2014, Vietnam's revenue from exports of wood and related products is forecast to reach 6.5 billion U.S. dollars, said Dung.