Surge in foreign investment from China in Vietnam’s wood products industry

The surge in the number of new FDI projects into Vietnam’s wood processing sector continues. Most of the investment is in woodchip production, processing industry services, wooden pallet production and composite panel products.

Xuan Phuc,(Forest Trends) has reported that most of the incoming investment is from China. In the first 5 months of 2019 there was a total investment of over US$50 million from China, 1.7 times the amount in the same period in 2018.

Tran Quoc Khanh, Deputy Minister, in the Ministry of Industry and Trade has called for a registration system so the ministry can track investment and exports in critical sectors such as panel products as there is a need to effectively manage the export supply chain. This he said would aid Customs in eliminating fake labelling and prevent fraud.

Vietnam’s exports of wood products to the US are around about US$3-4 billion annually and Vietnam is the second largest supplier to the US after China .In the first 7 months of 2019, China’s market share of the US furniture market fell sharply while Vietnam gained market share. Tran Quoc Khanh said this is an opportunity for Vietnamese firms to fill the gap in US imports but will require companies to address their productivity, marketing and procurement policies.

Dien Quang Hiep, Chairman of Binh Duong Wood Processing Association (BIFA) has pointed out that one of the biggest drawbacks at present is that there are no production clusters and networks among Vietnamese companies which is allowing new entrants in the sector to gain an advantage.

In related news, Le Trieu Dung, Director of the Chamber of Commerce and Industry, said that it is necessary for the authorities to be on the lookout for signs of fake relabeling of exports especially in the plywood sector.

In 2018 and the first 6 months of 2019, the Vietnam Chamber of Commerce and Industry (VCCI), in conjunction with the Customs Department, Vietnam Chamber of Commerce and Industry (VCCI), inspected a number of the Vietnam based enterprises from which there was a sudden and sharp increase in export volumes. The survey was intended to uncover fake export labelling.

The US Customs service also had a team in Vietnam to investigate the sudden rise in wood product exports seemingly originating in Vietnam which raised suspicions of cross-border trade between Vietnam and China for reexport.

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