Wood exporting blocks chopped down by VPA

The FLEGT-VPA will help Vietnam boost its wood exports to the EU market where the demand keeps growing strongly

Heidi Hautala, Vice President of the European Parliament, told VIR during her recent working visit to Vietnam that the Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreement (FLEGT-VPA), which took effect from June 1, 2019 will turn Vietnam into a more attractive location for European investment.

“The FLEGT-VPA process and implementation will add to the confidence of European businesses in Vietnam’s business environment,” Hautala said. “This will help Vietnam attract more investment from the EU, which is tending to increase now.”

“Currently, European consumers and enterprises have a growing demand for imported wood products whose production and origins are quite transparent,” she added. “This will further prompt European investors to come to Vietnam to both implement projects directly and co-operate with local partners in exports. I am seeing many European businesses plan to expand business and investment into Vietnam.”

Figures from Vietnam’s Ministry of Planning and Investment show that as of June 20, 2019, businesses from 28 European nations have registered more than $54.8 billion in nearly 3,400 projects in Vietnam.

Hautala’s visit to Vietnam was aimed to discuss the country’s implementation of the FLEGT-VPA (see box) which is focused on fighting illegal logging and associated trade. Proper implementation of the FLEGT-VPA, which is the second the EU has concluded with an Asian partner after Indonesia, will also facilitate fruitful implementation of the EU-Vietnam Free Trade Agreement (EVFTA) which was signed in Hanoi on June 30, 2019.

“The FLEGT-VPA will help improve forest governance, address illegal logging, and promote trade in verified legal timber products from Vietnam to the EU as well as other markets,” Hautala said.

Preventer of illegal logging

After six years of negotiation, the FLEGT-VPA was signed by both the EU and Vietnam in last October in Brussels. Vietnam is now working on the regulations needed to implement the country’s timber legality assurance system.

The country has approved an action plan for the FLEGT-VPA implementation, including development of legal documents and strengthening of independent monitoring by non-governmental organisations, industry associations, and relevant stakeholders in the FLEGT-VPA implementation process.

Since the FLEGT-VPA entered into force, all timber and timber products arriving in the EU from Vietnam have been carrying a FLEGT licence issued by Vietnam.

To help the FLEGT-VPA prove effective immediately after it takes effect, Vietnam has created mechanisms and policies in conformity with the pact. Notably the Law on Forestry, which came into effect in January 1, 2019, includes commitments under the FLEGT-VPA, according to Pham Van Dien, deputy director general of the Vietnam Administration of Forestry under the Vietnamese Ministry of Agriculture and Rural Development (MARD).

Products covered by the FLEGT-VPA include all those required by the EU regulation establishing a FLEGT licensing scheme, which are a minimum requirement for VPAs, such as logs, sawn timber, railway sleepers, plywood, and veneer.

In addition to the minimum requirements of the product scope of a FLEGT-VPA, the agreement also covers other timber products such as wood in chips or particles, parquet flooring, particle board, and wooden furniture.

Deputy Minister of Agriculture and Rural Development Ha Cong Tuan told VIR that currently Vietnam is exporting to 28 European nations indoor and outdoor products, and not timber materials. “All these products are closely controlled in terms of quality and origin. They are not produced from lumber exploited from natural or tropical forests,” he said. “The FLEGT-VPA will help Vietnam export its wood products directly to European markets without any intermediary markets.”

Nguyen Ton Quyen, vice chairman of the Vietnam Timber and Forest Product Association, told VIR that the FLEGT-VPA will enable Vietnam to raise its export turnover from the EU to more than $1 billion a year, from about $800 million in 2018.

Since January 2019, in order to implement the FLEGT-VPA, Vietnam and the EU have also been creating a roadmap to reduce import tariffs on their respective wood products.

Vietnam is one of the world’s leading wood processing and exporting countries with an export turnover of $8 billion in 2017, and more than $9 billion in 2018. The figure hit $4.8 billion in the first six months of 2019, up 19 per cent on-year.

Put into practice

According to Hautala, Vietnam is a big partner full of potential for the EU to boost co-operation in wood exports. “Both sides have reached great consensus about the FLEGT-VPA. What is important now is how to implement the deal,” she said.

Hautala said that the FLEGT-VPA is a very important building block in the EU’s wider strategy to promote biodiversity and sustainable development in Asia and to fight illegal logging and associated trade.

“Vietnam has committed to adopting legislation to ensure only legally-produced timber is imported to its market. This system, based on a due diligence for importers, can be considered a major achievement of the FLEGT-VPA,” she said. “Vietnam should make all efforts to ensure that the due diligence obligations are not reduced to a box-ticking exercise. Therefore, the European Parliament is in particular following preparatory work regarding the implementation of the FLEGT-VPA with Vietnam. The country took also commitments in this area in the framework of the EVFTA. Proper implementation of the FLEGT-VPA will therefore facilitate fruitful discussions on the EVFTA.”

Minister of Agriculture and Rural Development Nguyen Xuan Cuong stressed that Vietnam pledges “the highest efforts and determination of the government and the timber processing and exporting enterprises in fulfilling commitments outlined in the FLEGT-VPA in order to develop a timber processing industry using legal and sustainable timber materials.”

About 45 per cent of Vietnam’s land area is forested, and the country has a key role in processing in the timber sector in Southeast Asia. Vietnam imports timber from some 80 countries – in recent years, main suppliers have included Cambodia, Laos, China, the United States, and Malaysia. Domestic plantation timber is increasingly used in the production of timber products and for the export of woodchip.

Vietnam’s wooden furniture exports mainly target environmentally conscious markets in the EU, the United States, and Japan.