Vietnam: Local manufacturers edged out by foreign-owned companies

Vietnam’s local timber and wood processing sector is losing domestic and export market share by at least 60% to foreign-owned companies—mostly from Malaysia, China, Taiwan and Thailand—that set up shop in Vietnam. This figure could be higher since many Chinese set up ‘straw companies’ in Vietnam and hire local hands to run the business on behalf of the true owners, said Mr Huynh Van Hanh, general director of the Handicraft and Wood Industry Association of Ho Chi Minh City (HAWA).

Mr Hanh stressed that domestic companies must commit to research and development as well as investments in technologies to improve competitiveness.

“They should also channel more public spending towards universities and market research. [Otherwise they will be] out of touch with understanding customer needs and preferences,” Mr Hanh said.

However 93% of Vietnamese companies are small enterprises that lack funds to invest in modern equipment, research and development, marketing, and establishing a distribution network. They have also neglected training their workforce to improve productivity. 

In the seven months leading up to August, total revenues for the forestry sector climbed 0.8% YoY to US$3.8 billion, with over 60% of this amount going to the foreign-owned companies.

Mr Nguyen Ton Quyen, vice president of the Vietnam Timber and Forest Product Association, believes that foreigners control as much as 80% of the export market.

To address the problem, the Ministry of Agriculture and Rural Development is working on a legislation that will support these smallholders by providing financing for developing domestic distribution networks and marketing to boost competitiveness.