Wooden trays produced at the Hiep Long Fine Furniture Company in Binh Duong's Thuan An District. — VNA/VNS Photo Thanh Vu

HA NOI (Biz Hub) — Final negotiations to complete a Forest Law Enforcement, Governance and Trade (FLEGT) and Voluntary Partnership Agreement (VPA) between the European Union (EU) and Viet Nam is expected to be completed by late 2015.

Enactment of the agreements is expected to offer additional opportunities for Viet Nam timber exports, while stopping the sale of illegal timber.

The agreements aim to ensure the legality of timber and timber products entering 28 countries in the EU market, while helping to maintain and expand the export of timber and timber products from Vietnamese enterprises, which is subject to changing EU market requirements as of March 2013.

Nguyen Tuong Van, director of the steering committee of VPA/FLEGT, said that following negotiations, she expected that timber exports to the EU market would considerably increase, reported Thoi Bao Tai Chinh online.

Van added that the great challenges in the negotiations included following the TLAS - Timber Legality Assurance System to ensure Vietnamese timber products meet international standards on the origin of timber.

She said that apart from efforts made by authorized bodies, timber processors and exporters needed to join this "play-ground" by focusing on their product quality and conducting business in compliance with the law.

They also needed to have certain knowledge about VPA and to consider it to be a "visa" for Vietnamese timber products to enter the EU market, while understanding that this is an opportunity to eliminate illegal timber trading and unregulated timber companies from doing business in Viet Nam.

Export volume

According to a report on the negotiations between Viet Nam and the EU of the Ministry of Agriculture and Rural Development, Viet Nam now has more than 3,500 companies in the timber business. Of note, timber volume and exporting of timber products to the EU accounted for 20 per cent of the total volume of all exports from Viet Nam.

Last year, the country earned $6.2 billion from the export of wood and wood products, a year-on-year increase of 11.5 per cent compared with $ 5.4 billion in 2013, and ranked second among countries exporting furniture in Asia. According to the forecast, this year wood and timber product exports are to grow by 15 per cent, reaching at least $7.2 billion.

Over the years, the export of timber has seen significant improvements in its quality, especially as domestic enterprises have increased their market share to match those of FDI enterprises, according to the vice chairman of the Handicrafts and Wood Industry Association of HCM City (Hawa), Huynh Van Hanh.

He noted that wood and timber exporters still faced difficult times, especially due to "barriers" from strict requirements in major markets, including the EU.

Van said under the State's regulation on forest management, in compliance with FLEGT, it is required that any timber products exported to the EU must receive chain of custody certification. Further, no illegal timber products or unverified products are allowed to be added to exported timber products.

As the fact that local raw materials can now meet about 40 to 50 per cent of input materials for export processing, while the remainder still relies on imported raw materials. Therefore, local processors have difficulties in determining whether imported timber is reliable, she said.

According to Van, most of the wood processing enterprises in Viet Nam are small and medium-sized enterprises. No record of wood procurement is kept by processors, as they just hand over hand written notes to verify their purchases. This has been recognized as a major problem that must be quickly solved.

Nguyen Ton Quyen, General Secretary of the Viet Nam Timber and Forest Products Association (Vietfores), has said that the General Administration of Customs statistics showed that, last year, Viet Nam imported raw wood materials valued at $1.639 billion. Clearly, as the importation of raw materials and shipping costs were increasing, Vietnamese wood processing companies will find it difficult to compete with companies, such as those in China or Malaysia. — VNS