In the process of international economic integration, the competitive capacity of products in general and Vietnam wood products in EU market in particular is indispensable when Vietnam and EU sign Free Trade Agreement (FTA). Certainly, when the FTA is signed, the policies and business environment will be improved, which requires businesses in general and timber production businesses in particular must continuously enhance the competitiveness of Vietnam wood products in EU market.
Key words: Vietnam wood products, competitive capacity, EU market
1. The fact of competitiveness of Vietnam agricultural, forestry and fishery products
In the market economy, competition exists as an objective economic law. Therefore, enhancing the competitiveness of products in order to compete in the market is always a raised question with businesses, especially in the period of wide and deep economic integration today.
For competitive industries, we can see some products with high export levels in the region and the world, and play an important role for our country such as agriculture, forestry and fishery products (rice, seafood, plants, etc, occuping 30 % of export value and keep a high position in the world) and some of industrial commodities, mainly processing industry (70 % of export value). In addition, the proportion of export accounts for nearly 50 % of GDP, much higher than other countries of Northeast Asia except for only Singapore, Malaysia. However, for the information technology and telecommunications sector, ICT is which ASEAN countries have more competitive advantages than China. ASEAN's export value reaches $150 billion (25 % of the export value of the block) meanwhile Vietnam exports only the ICT products under $1 billion (about 5 % of Vietnam's export value). However, when evaluating the competitiveness in the micro-level, international comparisons both recognize average achievements of Vietnam in the top 3 in quintile (ranked 38/80 countries). Especially, they highly appreciate the strong deployment of FDI projects together with technology transfer and the implementation of the Enterprise Law which creates favorable conditions for the equal development of non-state sector for the development of the country. However, in many areas, the performance indicator of Vietnam is very poor (ICOR capitalization indicator rate of the whole economy at an average 7 years from 1996 to 2002 reached approximately 5, including transportation taking up to 20, electricity 10, agriculture, forestry and fishing — even as the sectors we have the strength — the average accounting for 4.5, which was the highest level meanwhile the luxury service sectors running effectively was still at the beginning) [1].
The competition in the market is getting fiercer and fiercer when more foreign competitors with strong financial resources, technology, management and market power appear. Thus, enhancing product competitiveness is a very urgent requirement for enterprises to compete in a healthy and legal way not only in the domestic market but also in overseas one.
Moreover, with the globalization of the world economy, product competitiveness enhancement becomes extremely important and fatal to business survival. Because after all, the ultimate purpose of business of the enterprise is to bring more profit, while enhancing competitive capactiy of the product is seen as an integral strategy in the development and it contributes to the fulfillment of business objectives. Enhancing the competitiveness of products aims not only to bring benefits to business in general and timber businesses in particular, but also to contribute to the growth of industry and the nation. Then legal framework reforms will be removed, for example, the legal documents and other policies which the State can assist to ensure benefits.
2. The fact of Vietnam’s timber export turnover to EU market
Trade relations between Vietnam and EU has constantly evolved and expanded. Since the Framework Agreement was signed in 1995, economic and trade relations between the two sides have prospered. This is consistent with the commercial interests of both parties, consistent with the trend of integration, opening today of the world's national development strategy as well as external economic relations of Vietnam and the EU.
In the past year, exports of goods from Vietnam to the EU market rose sharply. Some of these items have large exports to the EU are timber products. The EU is one of the leading furniture importers in the world. Vietnam's timber exports to the EU are considered to be of high quality, innovative designs, competitive price, thus creating high credibility with a variety consumers. Vietnam’s timber export turnover to the EU market in recent years has dramatically grown, reaching 168 million US dollars in 2000, rising to 608 million US dollars in 2003 (3.6 times higher than the turnover in 2000) [1].
However, the EU is a demanding and meticulous market when it comes to the quality of products in general and items of furniture in particular. Therefore, furniture exporters in Vietnam in recent years but has achieved some initial results encouraging, but still not a good value for their potential. Products of Vietnam furniture is not really meet the demand of technical barriers to the US market. The causes of this phenomenon, on the one hand Vietnam wood products are competing fiercely with goods from Chinese, Indonesia, Philippines, Malaysia, Myama, Eastern Europe, etc. On the other hand, Vietnam wood products also have some disadvantages which influence our competitiveness on EU market such as basic materials imported from abroad, small and fragmented production facilities, lack of investment in manufacturing from design to quality; low and less efficient trade promotion and market research; unsynchronous and much less even conceived material supply and distribution, etc. Furthermore, Vietnam enterprises in general and timber industry in particular do not know how to cooperate when they are not strong enough, or are already strong but to become stronger to compete with foreign rivals. Therefore, Vietnam wants to export successfully to the EU market, the need to have effective measures to improve the competitiveness of wood products in the EU market.
While many export industries have difficulties, the wood processing industry has significant growth because the demand from the markets is gradually recovering; the export target of $5.5 billion in 2013 is capable of achieving [2].
Table 1
Total Vietnam wood products exporting to EU market and others Unit: billion USD
|
Countries |
Time |
|||
|
2011 |
2012 |
2013 |
2014 |
|
|
USA |
1.44 |
1.79 |
2 |
0.48 |
|
EU |
0.59 |
0.63 |
0.61 |
0.19 |
|
Others |
1.62 |
1.85 |
2.47 |
0.64 |
In recent years, Vietnam's wood industry has had impressive growth both in terms of markets and timber export value. Besides the traditional wood export markets such as the U. S., Japan, EU, Ministry of Information Industry and Commerce has recently informed that Canada becomes a potential furniture import market with products that Vietnam enterprises can explore, for instance, wood frame chairs, furniture used in bedrooms, living room and dining room [3]. According to the department, with a positive economic growth compared to other countries, consumption demand for furniture of this country should be concerned. Currently, Canada is the top importer of bedroom furniture from Vietnam. Mr. Quyen Ton Nguyen, General Secretary of Association of Vietnam Timber and Forest Products (Vietfores) said, usually from September to December was the main timber export season but this year there is a difference [3].
EU is the second largest export market of Vietnam wood products after the U. S. The export turnover of Vietnam wood products to the EU market always attained high growth rates, particularly after Vietnam joined the WTO in 2007; the proportion of export of Vietnam wood products to the EU always achieves an average growth of 15 % in one year. In 2013, the proportion of export of Vietnam wood products to the EU reached a record $700 million, accounting for approximately 20 % of total wood exports. However, comparing with the total volume of import and consumption of EU, Vietnam’s export level is still modest and it does not reflect the true potential, especially, Vietnam’s wood exporting products [4].
3. Steps of Vietnam’s wood products to EU market after signing FTA
Vietnam and EU is completing the negotiation of free trade agreements (FTA), which will greatly impact the competitiveness of key export items of Vietnam to the EU including wood products. The FTA will accordingly bring many opportunities as well as challenges to the competitiveness of timber products exported from Vietnam to the EU market, such as the gradual removal of trade barriers, creating a favorable environment for increased investment.
EU is the top trading partner of Vietnam. That’s why the negotiation and anticipation of signing FTA Free Trade Agreement between Vietnam and EU in September, 2015 will have a great impact to the competitive capacity of Vietnam key products to EU market, wood products included. Free Trade Agreement (FTA) between Vietnam and EU will bring lots of chances as well as challenges to the competitive capacity of Vietnam wood products exported to EU such as: the diminishing of commercial barrier or the favorable environment to increase the investment.
About tax, when FTA between Vietnam and EU is signed, there may be a tax-free of 0 % for all the wood products. Besides, when the tax barrier is put down, EU products imported in Vietnam will increase, especially the machinery equipment to produce wood with high technology will have a more reasonable price. This will improve the labor productivity and the production efficiency of Vietnam wood enterprises.
The increase of EU investors’ investment in wood industry will help raise the value of Vietnam exported wood. However, according to the viewpoints of the author, FTA not only decrease tax, reduce tariff or remove the trade barrier but also has the effect on existing problems and disadvantages of Vietnam — a developing country which is still low-qualified in many aspects such as productive machinery resource, qualified human recourse, skilled planners for the development policies of wood markets or the capital for export products, especially wood. Together with tax reduction is the attraction of foreign investors in the area to strongly invest in Vietnam with the intention of avert the tax policy of the host country. The wave of FDI will surely compete with the local wood enterprises. On the other hand, Vietnam is also forced to change the legal framework to effectively protect the intellectual property rights, tax policy for antidumping, geographical indication for the local products, and enforcement of labor environment and law, etc. This will attract the EU investors in Vietnam, but also put the burden of cost and responsibility on the local enterprises and therefore decrease the competitive capacity of exported wood products in Vietnam.
Therefore, after FTA is signed, Vietnam enterprises of exported wood products will have to self-increase their competitive capacity of their products as well as complete their managing apparatus to take advantage of the opportunities and challenges that FTA brings.
References:
1. Associate Prof., M.Sc. Thai Quang Nguyen — Vietnam Competitive Capacity in International Relations.
2. http://xttm.mard.gov.vn/Site/vi-vn/69/58/237/76102/Default.aspx
3. http://www.baohaiquan.vn/thongke/2011/2011-t12t-19b(vn-sb).pdf
4. http://baocongthuong.com.vn/xuat-nhap-khau/41688/tin-hieu-tot-cho-xuat-khau-do-go.htm#.U4v5Dfl_tw8.
