Date: July 2015

Date:
July 2015
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Keywords ..................................................................................................................... 2
Abstract ........................................................................................................................ 2
Introduction ................................................................................................................. 2
Sector Overview .......................................................................................................... 2
Specific for the Sector ................................................................................................ 3
Sub-sector overview.................................................................................................... 5
Handicraft, Vietnam, export, Embassy of Denmark, textile, rattan, bamboo, lacquer,
pottery.
The handicraft sector has a long history in Vietnam and has also played an
important role in Vietnam’s social and economic development, especially in
poverty reduction and economic development in the rural areas. It is one of the
country’s largest and most stable export revenue generators even though recent
years have started seeing a little decrease in selling to overseas, and there is a
potential for an increase in local supply. The Vietnamese government sees the
sector as a key sector for employment and we will experience an increased focus in
the future.
This sector report gives an overview of the handicraft sector in Vietnam
throughout the past years, showing the current situation of the sector as well as its
development trends. The Report also shows the strengths and weaknesses of the
Vietnamese handicraft industry for Danish investors, in order for them to see the
opportunities in entering this sector.
Vietnam’s handicrafts sector involves more than 2.000 villages producing
handicrafts with around 13 million labours, 1.4 million families and about 1.000
companies. Only 10% of the supplier base is state-owned and foreign-invested
companies; the rest are private SMEs.
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The handicraft sector has had a considerable impact on social and economic
changes in Vietnam, especially for poverty reduction and economic development
in rural areas, creating jobs and increasing incomes in these areas. The sector has
also contributed to the establishment and development of thousands of producers,
businessmen, exporters and service supply companies in the country. In addition,
it is recognized as a non-smoke industry that can bring increased added values with
real revenues up to 95%.
Growth rates
The growth of Vietnam’s handicraft sector slowed to 7% in the first half year of
2013, due to the global economic crisis. However, total overseas sales still
exceeded US$2.5 billion by the end of the year 2013. Revenues from the sector
have had an average increase of about 13-15% per year.
The Ministry of Agriculture and Rural Development has approved the plan for
exporting handicrafts for the period 2010-2015, aiming to reach US$1.6 billion in
export volumes by the end of 2015.
Competition
Since 2007 when Vietnam joined the World Trade Organization (WTO), Vietnam
has faced increased competition from other WTO members especially within the
local market. Vietnam’s domestic handicraft products now increasingly compete
with those from China and India, two leading handicraft producers. Besides China
and India, Vietnam’s closest competitors in handicrafts come from Thailand,
Philippines and Indonesia.
Vietnam has a strong competitive capacity due to its ability to supply large orders,
its lower labour costs, and the country’s good reputation for high quality products.
An increasing number of Chinese companies are now investing and setting up
manufacturing operations in Vietnam. Others have transferred manufacturing
activities from Thailand, Indonesia and the Philippines to Vietnam due to political
issues and because of Vietnam’s low labour cost and high productivity.
Today, Vietnam has increased competiveness in producing and exporting products
made from wood, bamboo/rattan/sedge/leaf and pottery.
Infrastructure
Most of the handicraft manufacturers in Vietnam are small and medium sized
enterprises (SMEs) and there are very few manufacturers currently operating at a
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mass production level. Vietnamese exporters face high transportation costs for
both air-freight and waterborne-freight and according to a report by the
Georgetown University, USA, transportation of 50 containers from Vietnam to
other countries by waterborne-freight costs US$322.000 over 17-35 days.
Exports and the domestic market
Today, local handicraft manufacturers have shifted their attention from exporting
to foreign markets to supplying to domestic market, as they have faced higher
production cost and accordingly decreasing orders from overseas. Along with the
recent increase in tourism (the building of resorts, hotels, etc.), handicraft
producers believe that there is a large potential for earning a higher profit by
targeting these consumers.
Nevertheless, the majority of handicraft products are still exported, accounting for
an export sales volume of more than $2.5 billion in 2013. Today, the three main
export markets are the US, Japan and the EU, of which the US is the biggest
importer of Vietnamese handicrafts.
Key strengths of the sector
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A skilled labour force that has the ability to acquire knowledge and new
technology quickly and effectively.
Low labour costs. The labour cost for a Vietnamese worker is US$0.2 - 0.6
per hour (compared to the cost for an Indonesian workers being US$0.3 0.4 per hour, for a Chinese worker US$0.5 - 0.75 per hour, for a Malaysian
worker US$1.25 - 1.40 per hour, for a Thai worker above US$1.5, and for a
Taiwanese worker above US$5.)
Many villages with diversified cultures produce a variety of handicrafts.
Good reputation for good customized product specifications and
supplying quality products.
The handicraft sector is subject to large growth due to supporting policies
from the Vietnamese Government.
Key weaknesses of the sector
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Raw materials are dependent on imports from overseas.
Limited innovation in design, which could constrain future growth.
Lack of management skills and human resources with enough professional
skills to undertake management or sales missions.
Lack of professional training for both workers and managers.
High transportation costs.
Lack or limited information on market needs, export trends, opportunities,
regulations and pricing.
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Bamboo / Rattan / Sedge / Leaf
These sub-sectors have the highest export turnover in handicrafts. They are
produced in many provinces in Vietnam, but mostly in Ha Tay, Ha Nam, Thai
Binh, Thanh Hoa, Khanh Hoa and Tien Giang. Vietnam has a good reputation for
rattan production, falling behind only Indonesia and Malaysia in respect of rattan
resources. Vietnam is also recognized to be very good at producing rattan
products. Rattan chairs, tables and drawers made in Vietnam have become very
popular in Germany, Italy and the USA, and exports continue to increase. In
addition, in recent years the export of products made from water hyacinth has been
increasing. More villages in the South, such as Tien Giang, Dong Thap, Dong Nai
and Ho Chi Minh City, are specialized in manufacturing such products from this
material.
Pottery
Pottery manufacturing has been present in Vietnam for ten thousand years with
production located throughout the country. Larger production centres are located
in Hanoi (Bat Trang village), Dong Nai and Binh Duong provinces. The recent
development of glazed terra-cotta products in Dong Nai, Vinh Long, Ha Nam and
Bac Ninh provinces has gained considerable attention from global importers.
Wood
In the wood sub-sector, indoor devices are the product group that have more
advantages and they account for more than 70% of export turnover. Most indoor
device production occurs in Hanoi, Hai Duong, Bac Ninh, Nam Dinh and Ha Tay
provinces. Industrial wood production is mainly concentrated in the South- and
Centre of Vietnam.
Lacquer
Lacquer products, such as vases, bowls and trays, are very typical Vietnamese
handicraft exports. Most of these are made of wood or bamboo, which is a small
product group of Wood or Bamboo / Rattan / Sedge / Leaf sector.
Art manipulation of Stone / Bone / Horn / Glass
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Nationally, there are 45 villages specializing in stone carving with 90% located in
the North of Vietnam. However, the most famous producers are located in the
Centre of Vietnam (Da Nang City). Stone products are mostly statues and garden
decorations for export to the EU, USA and Canada. In addition to stone, ox horns
and shells are also used to make handbags, bowls, spoons and other products.
Embroidery & Lace
Embroidery and lace products, such as tablecloths, clothes, skirts, bags and other
items, are produced mostly in villages in Ha Tay, Thai Binh, Ninh Binh and Ha
Nam provinces. Previously these products were exported mainly to Eastern Europe,
but the export market has now been widened to many other countries, including
Korea, Japan, France and Italy. Vietnamese embroidery and lace products face
considerable competition from products manufactured in China.
Textiles
432 villages throughout Vietnam produce textiles, with the majority made by ethnic
minorities. Raw materials include silk, cotton, wool and linen. Almost 90% of textile
villages are located in the North and the Red River delta areas. Handkerchiefs made
in cotton are produced in Thai Binh, Ha Tay, Nam Dinh provinces and other
bathroom and kitchen textiles come from Ninh Binh and Ha Tay provinces and
have some of the highest export potentials.
Government policy/Regulations
The Vietnamese Government has issued a number of regulations to support the
development of the handicraft sector – ranging from the development of the raw
material supply and location to investment and trade encouragement.
According to Decree 66/2006/NĐ-CP dated 07/07/2006 on handicraft
development; Decision 910 QĐ/BNN-CB dated 31/03/2006 of the Ministry of
Agriculture and Rural Development about the development plan of the handicraft
sector until 2010; Circular 84/2002/TT-BTC dated 26/09/2002 of the Ministry of
Finance guiding financial support methods for the development of handicraft
sector; and Circular 65/2004/TTLT/BTC-BLDTBXH dated 02/07/2004 of the
Ministry of Labour, Invalids and Social Affairs guiding technical training for
labours in the handicraft sector:
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The Government will provide capital assistance for infrastructure
investment (road building, water and electricity supply, environment
guarantee) and factories to those residents who want to join in handicrafts
production in rural areas.
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Handicraft producers can rent land with the lowest rate, and they are also
exempt from land rental fees for 3 years if they move their factories out of
the area.
The Ministry of Trade and Industry directly manages overseas Trade
Councils to explore local markets and introduce them to Vietnamese
handicraft producers.
The Ministry of Science, Technology and Environment is responsible for
holding, guiding and providing funds for the study and for innovation of
technology, design ability improvement, and the use of domestic raw
materials.
Training centres of the Government give their priority to the training
activities of the handicraft sector. The Government also assists participants
with VND 200.000 per person per month for attending any handicrafttraining course.
Handicraft companies can receive investment incentives. There are also
support activities to assist handicraft exporters. Handicraft exports can
benefit from several investment incentives (reduction or exemption) in
respect of land rents, land use taxes, income tax ratios, personal income tax
and import taxes on imported machines.
Local exporters and manufacturers can receive financial incentives from
the Development Assistance Fund and the National Export Assistance
Fund for investment and export activities.
The Ministry of Labour, Invalids and Social Affairs provides training
courses for workers to improve their skills and professional- and design
abilities.
Market prospects & Opportunities for Danish companies
Vietnam’s entry into the World Trade Organization (WTO) in 2007 opened its
market to foreign investment in different sectors including handicraft. High export
demand to the USA, the EU, and Asian countries - as well as the good reputation
Vietnamese handicraft have gained for good quality with low production costs makes the sector attractive for Danish investors. The government continues to see
the sector as important and has developed comprehensive support for companies
operating in the sector for the future. Although the sector is currently facing some
difficulties and has several weaknesses, it is still a potential sector for Danish
companies to look into, especially when the FTA negotiation with EU is going to
be concluded in 2015/2016.
How the Embassy can be of assistance
The Embassy of Denmark in Vietnam can assist Danish enterprises in researching
the current Vietnamese handicraft sector, arrange high level meetings with
Vietnamese leaders and decision makers and analyze the advantages and
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disadvantages Danish parties might have when entering the sector. Danish
companies can also approach potential partners in Vietnam with the assistance of
the Embassy. The Embassy believes the collaboration in the handicraft sector
between Vietnam and Denmark will bring mutual benefits to both countries.
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The Trade Council is a part of the Ministry of Foreign Affairs and is the official export and
investment promotion agency of Denmark. The Trade Council benefits from around ninety
Danish Embassies, Consulates General and Trade Commissions abroad. The Trade Council
advises and assists Danish companies in their export activities and internationalisation
process according to the vision: Creating Value All the Way. The work in the Trade Council
follows specific procedures and quality guidelines. In this way our customers are secured the
best possible quality under the varying working and market conditions at any given point of
time.
Ministry of Foreign Affairs of Denmark
Embassy of Denmark in Vietnam
7th Floor, BIDV Tower
194 Tran Quang Khai, Hoan Kiem, Hanoi
(84 4) 3823 1888
(84 4) 3823 1999
[email protected]
www.vietnam.um.dk