Difficulties surround most firms in the wood processing and export industry not completing the received orders or having to extend the delivery time. If the situation does not improve, businesses may face the risk of losing customers and losing large markets.

Difficulties surround wood businesses. Photo: Nguyen Thanh

More than 50% of firms stopped production

At a briefing on wood and forest product processing organised by the Ministry of Agriculture and Rural Development on September 7, Do Xuan Lap, Chairman of the Vietnam Timber and Forest Products Association, said the results of a quick survey of local associations in mid-August 2021 for 360 firms in Binh Duong, HCM City, Dong Nai and Binh Dinh showed that on average, over 50% of firms stopped production.

These enterprises are facing the risk of bankruptcy because they still have to pay the cost of space rental, taxes, fees, bank interest, etc. Businesses that are still in operation can only maintain about 50-60% of the employees, with capacity reduced from 30-50% compared to normal conditions.

The cost to maintain production under the "three on-site", "two on-site" method has increased by about 20-30%. In addition, firms also have to pay social insurance, health insurance, unemployment insurance, and trade union fees, which account for about 15% of production and business costs. This is really a burden for businesses.

Although banks have announced a reduction in interest from 0.3-1.5% and other preferential credit packages, but this reduction is considered by firms in the wood processing and exporting industry to be insignificant compared to the damage.

Le Xuan Quan, Chairman of Dong Nai Wood and Handicraft Association (Dowa), emphasised: "It is extremely difficult, but so far, businesses have not enjoyed any incentives, have not been reduced interest rates. I suggest the Ministry of Agriculture and Rural Development have recommendations to the State Bank, but it cannot be said forever.”

According to Lap, the cost of renting containers and sea freight rates is too high (from 2-4 times). Typically, freight rates to ports on the East Coast of the United States are up to US$18,000 - 20,000 per container. With this freight rate, some importers of wood products from Vietnam have to find other sources with lower freight rates.

With such difficulties, most businesses do not complete the orders received, or have to extend delivery time.

In the short term as well as in the medium and long term, if the situation does not improve, wood industry firms may face the risk of losing customers, losing strategic markets and losing the ability to participate effectively into the wood product supply chains that have been reputable in the world for many years.

Upgrading vaccination priority

Nguyen Quoc Khanh, Chairman of the HCM City Handicraft and Woodworking Association (HAWA), added that in the past 2-3 months, large factories have stopped supplying goods to partners. Some suppliers are considering whether to continue buying from Vietnam or not, thinking about shifting the supply chain.

"This is a very important thing that has a long-term impact on the wood industry," said Khanh.

He said the response strategy in the coming time must clearly define the impact, try to retain customers and revenue for the business.

According to Dien Quang Hiep, Chairman of Binh Duong Woodworking Association (BIFA), vaccination is a top priority. Vaccination for new workers can achieve the "dual goals" set by the Government.

To support businesses to maintain and restore production and business, Do Xuan Lap stated he proposed to raise the priority of vaccination for wood industry workers from 13/16 to 8/16 in the ranking of the Ministry of Health.

Localities create the fastest conditions and ensure vaccination demand for wood workers, giving priority to 100% of workers in pandemic-hit areas and factories that are maintaining production both inside and outside industrial parks.

At the same time, it is suggested that localities allow firms to choose to apply the "three on-site" or "two on-site" method depending on the actual situation.

Credit is an issue many businesses were particularly interested in at the conference. The Chairman of the Vietnam Timber and Forest Products Association suggested the banking industry reduce interest rates on existing loans and new loans, with the interest rate reduced to 4-4.5% per year instead of the interest rate is too high as it is now.

At the same time, delay the principal and interest payment from 6 to 12 months so that the firm has enough time to stabilise production; support for businesses to access capital for production and business, loan to pay salary for job stoppage, salary to restore production for 3-6 months, applicable to commercial banks, with low interest rates from 2-3%.

For shipping charges, wood industry firms request the Government to direct the Ministry of Transport and relevant agencies to work with large shipping lines to request a roadmap to reduce sea freight charges; have solutions to encourage the development of domestic fleets or transport by other forms such as intermodal railways.

Speaking at the conclusion of the conference, Deputy Minister of Agriculture and Rural Development Le Quoc Doanh said even in difficulties, advantages and disadvantages must still be seen. Vietnam's wood industry has an open market and the whole industry has also built a reputation and brand.

“I suggest each business to think and build a very methodical script. Each business has its own resources, building a recovery scenario accordingly, with feasibility, and a clear schedule. The issue of labor, capital, market connection. The Ministry of Agriculture and Rural Development is committed to accompanying the business community to overcome difficulties," said Deputy Minister Le Quoc Doanh.