New agreement creates opportunities and challenges for timber export sector

Tuesday, 2018-11-27 16:54:26
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Wooden furniture production for export at Woodsland JSC on Tuyen Quang province
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NDO - Vietnam and the European Union (EU) signed the Voluntary Partnership Agreement on Forest Law Enforcement, Governance and Trade (VPA/FLEGT) in October 2018. This is a legally binding trade agreement with the aim of improving forest governance and promoting the export of legal timber and timber products from Vietnam to the EU market. Besides many opportunities, the agreement also poses challenges for Vietnamese timber and forest product exporters.

Considerable opportunities provided

The main content of the VPA/FLEGT is that Vietnam is committed to developing its timber legality assurance system (VNTLAS) in accordance with EU regulations as a basis for the Vietnamese authorities to issue permits for shipments of Vietnamese timber and timber products exported to the EU. In return, licensed Vietnamese timber and timber products will not have to explain their legality for entering the EU.

The agreement has created positive impacts on enterprises, contributing to promoting the export of Vietnamese timber and timber products amid the tightened timber import policies from foreign markets, including the US Lacey Act, Japanese Clean Wood Act; the Republic of Korea Act on the Sustainable Use of Timbers, and others.

The VPA/FLEGT will also help Vietnam to build a clean, legal and transparent timber foundation, while improving its institutions for forest governance and combating illegal logging and timber trade, thus contributing to the sustainable development of the timber processing industry.

Minister of Agriculture and Rural Development, Nguyen Xuan Cuong, said that the VPA/FLEGT agreement is an opportunity to bring about positive impacts to Vietnam in terms of economic, social and environment areas, particularly economic benefits.

The agreement will help to enhance the prestige and position of the Vietnamese timber processing industry throughout the world in order to expand Vietnam's timber exports to non-EU countries, such as the US, Japan, the Republic of Korea, Australia and others, towards the goal of increasing the export turnover of timber and timber products to US$12-13 billion by 2020 to rank fourth in the world, Cuong noted. However, there remain tremendous difficulties and challenges to timber businesses in Vietnam, he said.

Joint efforts required

According to the Ministry of Agriculture and Rural Development (MARD), the export revenue of key forest products in the first 10 months of this year was estimated at US$7.61 billion, equivalent to 84% of the year's plan and up 16.12% over the same period in 2017, and accounted for 23.37% of the total export turnover of the whole agricultural sector. Of which, the export revenue of timber and timber products posted at US$7.23 billion, up 16.12% over the corresponding period last year. Vietnam also enjoyed a trade surplus of US$5.72 billion in key forest products in the first 10 months of 2018.

Vietnam's main export markets were the US, Japan, China, the Republic of Korea and the EU, accounting for 87% of Vietnam's total timber export turnover.

During the 10-month period, Vietnam imported US$1.88 billion worth of timber and timber products, up 5.23% over the same period in 2017. The main import markets of Vietnam include China, the US, Cambodia, Thailand, Malaysia, Chile, Germany, Brazil, France and New Zealand, making up 60% of Vietnam's timber import value.

Deputy Director General of the Vietnam Administration of Forestry, Pham Van Dien, said that the implementation of the VPA/FLEGT agreement requires the joint efforts of State management agencies, enterprises and forest owners. In addition, it is necessary to effectively control the source of imported timber, while complying with the regulations on the transparency of origin and source of timber products for export.

The commitments in the VPA/FLEGT agreement require Vietnam to amend and supplement several legal documents. The agreement requests that the people and enterprises participating in the timber supply chain fully implement the self-declaration, self-assessment and archival of dossiers and papers in the process of production and trading in accordance with the provisions of law.

Furthermore, the agreement requires regular high-level dialogue between Vietnam and the EU with the participation of industry associations and local non-governmental organisations in monitoring the implementation of the agreement in a transparent manner.

Therefore, the Government should hastily develop a decree to institutionalise the main commitments of the agreement with the focus on controlling the legal import of timber, building a legality insurance system for Vietnamese timber, and enhancing the capacity of the relevant parties to effectively implement the agreement.

The authorised agencies should promote the dissemination of information on the agreement to the business community and forest plantation households so that they will actively realise their commitments. The related agencies also need to develop software and databases to classify enterprises and issue FLEGT license to effectively implement the agreement.

The commitments of the VPA/FLEGT agreement have been stipulated in the Vietnam Forestry Law which will take effect in early 2019. To implement the commitments, the State must continue to perfect its policies and legal documents with the top priorities to be given to controlling the legal import of timber and the establishment of the Vietnamese timber legality guarantee system.

In addition, the people and enterprises have to participate in a complete supply chain. Forest plantations should have certificates to prove the transparency and legality of the source of timber, while enterprises have to review and renew their business process to be named in the list of transparent businesses.