And with the global economic downturn slowing orders, the industry is not expected to meet its furniture export target this year.

Do Nhu Dinh, chairman of the Vietnam Handicrafts Export Association (Vietcrafts), said the handicrafts industry, which has witnessed strong production and export growth in recent years, would struggle to find raw materials over the next 10 years.

There are 2,017 traditional villages with small handicraft units that provide jobs to hundreds of thousands of artisans and other workers.

They are involved mainly in rattan and bamboo, cloth, embroidery and wood processing.

Hoa Binh, Thanh Hoa, Yen Bai, Phu Tho, Cao Bang and Tay Ninh provinces are the major sources of the raw materials in Vietnam.

Dinh said in many countries plantations were not exploited in a sustainable manner and would be exhausted sooner rather than later.

Linen, popular in Ha Giang, Yen Bai and Hoa Binh provinces in the north, is bought by producers to make expensive clothes. The fabric has become so rare around the world that international fashion firm Victoria’s Secret sent buyers to Vietnam last April.

Dinh said the buyers didn’t find any suppliers in the country.

Nguyen Chien Thang, chairman of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA), said processors mainly depend on imports for timber.

With about 80 percent of materials for production imported, mostly from Malaysia, Laos, the US and Brazil, Vietnamese furniture makers may face unstable supply as many suppliers are closing down because of the global economic recession, he said.

“They will have to pay more,” he said.

Dinh asked the government to step in, warning that otherwise traditional handicrafts villages would disappear due to the raw material shortage and people would lose jobs.

He also appealed to scientists and researchers to work towards sustainable exploitation of forests.

Vietnamese businesses exported handicrafts worth US$824 million and furniture worth $2.4 billion last year.

However, this year’s target of exporting $3 billion worth of furniture is unlikely to be met, Thang said.

Credit crisis

Vietnam shipped wooden products worth $2.6 billion in the first 11 months of 2008, so overseas sales will only be about $2.7 billion, Thang said.

The government is asking companies to expand exports as it battles a slowing economy and widening trade deficit. It has cut this year’s economic growth forecast to 6.7 percent from 7 percent predicted in June.

The central bank on November 20 lowered the benchmark interest rate for the third time in a month to allow commercial banks to have more money available for loans, and to lend to companies at lower rates.

“Money is available now but borrowing costs are still high and there are not many new orders so we don’t take loans now,” Thang said.

Furniture makers expect the situation to get worse in early 2009 after they deliver orders signed earlier this year, according to Thang.

“With the current lending rate, it is very difficult to have a competitive production cost to keep clients who plan to switch their orders from China to Vietnam,” Thang said.

About half of Vietnam’s 2,000 furniture makers are based in HCMC and their shipments account to about 70 percent of Vietnam’s total furniture exports, according to Thang.

A fifth of the companies are in serious difficulty due to the lack of orders, increases in production costs and workers’ demand for a wage raise after inflation increased, he said.

Source: TN, Bloomberg