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
Furniture, Vietnam, export, Embassy of Denmark, bamboo, wood, craftmanship
Vietnam has traditionally been an agrarian society, but since the turn of the
century, it has been steady in its commitment to economic liberalization and
industrialization. A major beneficiary of this policy is the furniture industry. In the
last decade, Vietnamese furniture has gained significant grounds not only in the
Asian market but also far beyond the region. Vietnam has succeeded in leveraging
its highly skilled labour, cultural heritage of craftsmanship, low labour wages,
political stability and its advantageous geographical location to develop strong
competencies in furniture production. The furniture sector has also played an
important role in Vietnam’s social and economic development, especially within
job creation. The Vietnamese government sees the furniture sector as a key sector
for employment and export earnings, and the sector will receive an increased focus
in the future. This provides great potential for Danish companies.
This sector report gives an overview of the furniture sector in Vietnam throughout
the recent years, and it aims to provide an insight into the current situation of the
sector as well as its development trends. Also, the report provides strengths and
weaknesses of the Vietnamese furniture industry in order for Danish investors to
see the opportunities by entering this sector.
Over the last 20 years, Vietnam has become a preferable location to set up
furniture factories and a major base for furniture exports. The furniture industry is
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one of the country’s largest export contributors. Furniture from Vietnam is now
exported to over 120 countries, of which the main markets in 2013 were the
United States, England, Canada, Australia and Japan. Vietnamese furniture is even
to be found in China, which is traditionally regarded as the ‘heaven’ of low cost
furniture production. Vietnamese consumers use a wide range of furniture
products with wooden furniture being the most common.
Growth rates
Registering significant growth in recent years – 6.2% in 2015 and an estimated
6.4% in 2016 according to Standard and Poor’s Rating Services (2015) - Vietnam’s
indoor and outdoor furniture industry continues to stay strong and is expected to
remain such in the coming years. According to the International Trade Centre,
Vietnam records total revenue for furniture in 2013 at $3.5 billion. Compared to
other large furniture exporters in the world, Vietnam’s furniture industry holds
production advantages in terms of potential to expand its global market share from
1.5 percent to 5 percent, equivalent of USD 15 billion, within 5-7 years.
This growth has been driven by greater demand from North America, the EU and
the Asia-Pacific region, though with a deterioration after the financial slump.
Customers in the Middle East and India are particularly helping propel the sector’s
development. Further, along with the increasing urbanization and construction of
houses, apartments and buildings, Vietnam continuously increases the market itself
for furniture.
Competition
More than 80% of the market share of Vietnamese furniture is occupied by
multinational and foreign-invested companies. Accordingly, only 20% of
furniture products are produced by locally-owned enterprises.
Vietnam’s main competitors within this industry are China, Germany and Italy
and competitors from the region are Thailand, Indonesia, Malaysia and the
Philippines.
Infrastructure
To meet the export and domestic demands, about 3.900 Vietnamese furniture
manufacturers are present, employing approximately 300.000 workers. There are 3
main centres for wooden furniture production, respectively: the Red Delta river
(Bac Ninh province), the Central Highlands (Gia Lai and Dak Lak) and the
Southern Vietnam (Binh Duong, Hochiminh City, and Dong Nai).
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Despite availability and low price of raw materials in Vietnam, a big amount of
wood has been imported from neighbouring countries, of which Laos recently
became the largest timber exporter to Vietnam. Remarkably, wood imported from
the EU is an increasing trend.
Exports and the domestic market
The furniture industry is one of the country’s largest export contributors. Export
accounts for more than 80% of the total furniture output in 2013, leaving the
domestic market to account for only about 20% of the furniture products. Hence,
Vietnam has become one of the largest furniture exporters of the ASEAN
countries, now ranking second in all of South East Asia and sixth in the world.
Vietnamese furniture products have been bought purchased in more than 120
countries, with the US, China, the EU and Japan importing the most.
Export value of wood and timber products in the first two months of 2014
increased 8.4%, i.e. to US$796 million, according to the Ministry of Agriculture
and Rural Development. Major wood and timber products exported to the US
market are chairs, fir beds, tables and wardrobes.
Six years subsequent to joining the World Trade Organization (WTO), Vietnam’s
timber processing and furniture exporting industry has developed admirably,
showing average growth during 2007-2012 of 16% a year.
Key strengths of the sector:
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High level of workmanship and workers with the ability to acquire
knowledge and new technology quickly and effectively.
Low production costs, particularly low labour costs.
Political stability.
A growing and increasingly good reputation for being a convenient
destination for investment in furniture production. Vietnam is highly cost
competitive with China and even demonstrates a lower exposure to risk
parameters.
A large number of purchasing offices as many international exporters have
established themselves in Vietnam with agents.
Beside a Free Trade Agreement (FTA) with the EEU, more are expected
to be implemented in the coming years (2015/2016). This includes FTAs
with the EU and the US.
Key weaknesses of the sector:
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Materials supply shortage.
Weak design capacity, little design expertise.
Small size businesses and a lack of capital for investment.
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Lack of management skills and human resources with enough professional
skills to undertake management or sales positions.
Lack of professional training for both workers and managers.
High transportation costs.
Lack of information of market needs, export trends, opportunities,
regulations, and pricing.
Wood Processing & Supportive Industry
Wooden products are the largest contributor to furniture export revenue, at about
US$3 billion in 2013. Vietnam’s wood-processing has had much progress over the
past 10 years, with foreign sales increasing at an average rate of 15% every year.
However, only 10% of the total volume of materials for the wood-processing
segment can be domestically produced, the remainder has to be imported at around
US$700 million every year, which means the supportive industry has not yet been
developed enough. This, on the other hand, opens more doors for investments.
Seeing the potential of this area, the Ministry of Agriculture and Rural Development
promises to promote the restructuring of the wood-processing sector by developing
more domestic production of wood and setting up a system of preferential policies
for investment in this sector.
Government policy/Regulations
The Vietnamese Government has issued a number of regulations to support the
development of the furniture sector, from the development of the raw material
supply and location to investment and trade encouragement. The reduction in
corporate income tax and the positive progress in FTA-negotiations are the two
clearest supports from the Government.
Market prospects & Opportunities for Danish companies
Vietnam’s entry into the World Trade Organization (WTO) in 2007 opened its
market to foreign investment in various sectors including furniture. High demands
of import to the USA, the EU, and Asian countries - as well as the good reputation
that Vietnamese furniture has gained for its good quality and low production costs
- makes the sector highly attractive for Danish investors. The Vietnamese
government continues to see the sector as important and has established
comprehensive support for companies operating in this industry. Although the
furniture sector still faces several difficulties and has various weaknesses (see
above), it still provides great potentials for Danish companies which makes it
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worth looking into, especially when the FTA negotiation with EU and US are
concluded.
How the Embassy can be of assistance
The Embassy of Denmark in Vietnam can assist Danish furniture enterprises in
tailor-made solutions to your specific needs. Common assignments are:
Researching the current Vietnamese furniture sector, arrange high level meetings
with Vietnamese leaders and decision makers, and analysing the advantages and
disadvantages that Danish parties might face when entering the sector in Vietnam.
Danish companies can also approach potential partners and ask for company
check-ups in Vietnam with the assistance of the Embassy. The Embassy believes
the collaboration in the furniture 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