Linkage is the best development direction
Although the wood industry has achieved high growth rates for recent years, it still has many potential for developing if it is created in the manufacturing chain linkage. That is one of the important comments at the seminar on the topic named Linkage between Company and forest plantation households: Increasing opportunities, reducing risks for sustainable development.
According to experts, currently in the timber industry, the linkage between the companies and the forest plantation households is still desultory, mainly formed spontaneously. It has been considered as one of the causes leading to a slowdown in the export turnover of the woodworking industry for recent two years.
Nguyen Ton Quyen, Secretary General of Vietnam Timber and Forest Products Association said “One of the primary reasons for the restricted linkage in the woodworking industry is due to the lack of core values which establish the linkage, which is the trust and fair sharing system among participants”.
According to experts, although the export turnover of the wood industry is very large and continues to increase, the wood industry still has some logic problems, such as using cheap labor, using input materials account for a high proportion in price structure (40- 50%) with low value added products. This makes the labor productivity of the sector be much lower the labor one in the processing industries in the other countries such as Thailand and Malaysia. One of the main reasons for this low productivity is the lack of linkage in the wood industry.
According to To Xuan Phuc, a representative of Forest Trends, the linking shortage makes wasted resources in investment, especially in the storage of timber materials in processing enterprises. Most businesses in the currently processing industry must do this. This requires businesses to focus on great financial resources.
Nguyen Duc Hieu - Deputy General Director of Nam Dinh Forest Products JSC (Nafoco), one of the current companies is linking with afforestation households in the Northern provinces to create sustainable raw material area with the FSC certificate and to meet the demands of the market, there are many difficulties which involve in linking with afforestation households, for example, many forestry companies have the large forest area in documents, but the actual area is less. As making the certificate, the expenses of consultancy, assessment and maintenance are very expensive, the small forest area (1.5000 hectares or less) will not have no guarantee of economic efficiency. And the people are still afraid of the linkage model because they are not guaranteed about the finance and policy.
The linkage makes many benefits such as using efficient resources, increasing the specialization, reducing risks, expanding market access and improving benefits. Up to now, the linkage in the woodworking industry is still restricted by the fundamental reason that the timber industry is the lack of the core values in building up the linkage, the systems of belief and sharing benefits fairly among participates.
To seek appropriate linkage model
The experts said that to promote the linkages in the timber industry, the State institution is one of the preconditions for social changes, including the changes in the woodworking industry.
The information from some other companies showed that about 60-70% of the capital of processing enterprises is reserved for the storage of timber materials. Approximately 30-40% of the remaining ones are concentrated in the stage from putting timber into processing to making wood products. The reason is that it has not had the enterprises specializing in stock timber materials in the wood industry and there is no linkage among enterprises and those in the processing industry.
According to Hoang Lien Son, Director of the Forestry Economic Institute, Vietnamese Academy of Forest Sciences, theoretically there are two forms of linkage, horizontal linkage: creating material areas of sufficient scale to provide materials for different types of production. And from horizontal linkage, it will form a vertical linkage, the growers will go into the value chain of that link, the linkage between the company and the grower without outside support such as establishing the focal point, businesses can spend their money to create this clue.
Mr Son also said that horizontal linkage is a very important form of creating value chain of Vietnamese wood products as this chain has not been completed. And in Vietnam, according to the survey, there are about 15 different models in the 11 provinces, including the IKEA’s linkage model in Quang Tri. However, if there is no technical support, then this linkage will no longer exist, which could be a weakness to overcome if replicating this model.
To strengthen the linkage in the timber industry, To Xuan Phuc said that the institution are one of the preconditions for social change, including the changes in the woodworking industry. The institution/institutional change can inhibit or encourage the formation and development of linkages. Three models of linkage in the woodworking industry have the potential to bring about positive changes for the woodworking industry, including: the linkage between the timber material suppliers (including the export company of timber materials) and woodworking companies; the linkage between woodworking companies and craft villages; the linkage between woodworking companies and forest plantation households. Changing the institutional environment can make motivation for these models to develop.
Origin: No. VIETNAM TIMBER & FOREST PRODUCT ASSOCIATION.