Vietnam, EU negotiate pact to boost furniture exports

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Vietnamese and European senior officials will meet next week in Hanoi for the first round of talks on voluntary partnership agreements that focus on production and trade of processed wood products.

The agreements are the means of putting the EU Forest Law Enforcement, Governance and Trade (FLEGT) licensing scheme into effect. At the heart of the FLEGT initiative is an attempt to exclude illegally logged timber products from the European market.

Tran Kim Long, deputy general director of the International Cooperation Department under the Ministry of Agriculture and Rural Development, said the pact would open the door wider for timber products from Vietnam into the EU market, which already accounts for 30 percent of the country's exports of processed timber, mainly outdoor and indoor furniture.

The agreements will identify a series of key factors in implementing the licensing system.

Long told Thanh Nien Weekly at the first round of talks, due November 29-30, European officials would discuss management of timber production and trade introduced by their Vietnamese counterparts through their negotiations. The goal is to assure legality for timber products and compliance with the FLEGT agreement, said Long.

The negotiations are expected to be concluded by mid-2012 and official enforcement of the agreements will begin in 2013 when FLEGT comes into force throughout the EU.

Derek Charter, consultancy service manager of UK-based solutions firm Helveta, said import of timber or timber products into the bloc from a partner country would be prohibited unless it is covered by a valid FLEGT license.

FLEGT is an important marketing tool for timber producers as it allows them to boost sales in the bloc and also gives a quality label for producers that will be useful for them in the global market.

The pact is expected to not only offer export opportunities for local firms but to create an environment for firms to develop forests through policies issued by the government, said Long.

Long said the government plans to increase the nation's plantation area to become the main source of timber for local wood processing factories.

He said the government aims to have forests developed by the state and private businesses to provide up to 70 to 80 percent of raw materials for factories in 2020, up from the current 20-30 percent.

The country has 4.48 million hectares of plantations, of which 2.5 million hectares are managed by smallholders, most of them poor rural households, according to the World Wildlife Fund in Vietnam.

The EU has signed similar agreements with other timber producing and exporting countries including Ghana, Congo, and Cameroon.

Vietnam tops in the world's exporting countries of processed wood. It exported US$2.74 billion worth of the products in the first ten months of this year, an increase of 34.7 percent, according to the Vietnam Timber and Forest Products Association.

The association said the EU bloc bought $763.7 million and $791.8 million worth of products from Vietnam respectively in 2009 and 2008. As a developing country, Vietnam enjoys the benefits of the Generalized System of Preferences, a system of exemption that levies 0 to 2.1 percent import tax on processed wood products.

Italy supports SMEs

In separate news, the Italian government is supporting a three-year scheme to help improve the capacity and competitiveness of Vietnamese small- and medium-sized enterprises (SMEs) in the wood processing industry.

Vietnamese SMEs are far behind in export markets at present, said To Hoai Nam, national project manager of SME Cluster Development Scheme implemented with technical support from the United Nations Industrial Development Organization.

Nam said the three million-euro scheme introduced last year would have Italian and other international experts share their experiences and skills in production and design with local businesses in Ho Chi Minh City and Binh Duong Province, the country's wood product manufacturing hubs.

Nam told Thanh Nien Weekly most local SMEs produced the same products without differences as they had no long-term business vision. He said the scheme also had a mission to help them change their attitudes to business and develop a model of clusters that groups producers on the basis of their own competitive advantages.

Italy has a smaller number of wooden producers than Vietnam, but is one of the strongest countries in the world market as its producers developed the clusters model, and Vietnamese SMEs should learn from it, Nam said.

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