THE THEORETICAL FRAMEWORK ON THE
International trade centers around the exchange of goods, a practice that has prevailed since its inception Despite constant evolution, the trading of commodities remains the most prevalent and significant aspect of global commerce (Liên et al., 2011).
According to the Commercial Law No 36/2005/QH11 dated June 14, 2005 of the National Assembly of the Socialist Republic of Vietnam, the export of goods refers to the act of taking goods out of the territory of Vietnam or bringing them into a special zone located on the territory of Vietnam that is considered a separate customs area according to the law.
Another definition of exports is presented by Feenstra and Taylor (2010), which states that countries buy and sell goods and services from each other Exports are products sold from one country to another.
The concept of exports can be defined as the sale of goods and services (tangible or intangible) to another country on the basis of payment using currency The currency used can be either foreign currency for one country or for both countries
- The contribution of exports to economic growth
In the calculation of total demand, exports are considered as external demand The degree of dependence of an economy on exports is measured by the ratio of import value to gross national income For economies with weak domestic demand, exports are significant for economic growth Exporting is the largest way to bring foreign currency into the country, and it helps domestic businesses expand their consumption market and production scale, thereby promoting economic growth (Balassa, 1978)
Therefore, many developing countries are pursuing industrialization strategies aimed at exports However, Bird and Mosley (2004) state that because exports depend on external factors, to ensure stable and sustainable economic growth, the International Monetary Fund (IMF) often recommends that countries rely more on domestic demand.
- Export activities contribute to improving product quality
As countries integrate into the global and regional economies, their goods encounter formidable challenges Fierce competition arises from products of other nations, while customs duties and non-tariff barriers impose significant obstacles This intensifies the competitive landscape and demands strategic approaches to overcome these barriers and ensure market success in the interconnected global economy.
According to Hallak (2006), in order to survive, stand firm and develop, countries must constantly improve the quality of their products, reduce the cost of production to create strong competitiveness for their goods, in order to stand firm, develop in the market and counter the fierce competition from goods of other countries.
- Export helps shift the economic structure towards a more outward-oriented economy.
The shift in economic structure is influenced by many factors such as scientific and technological advancements and the speed of economic development McGregor (2021) believes that export activities are one of the factors that influence the shift in economic structure Since the Party and the State have developed the economy based on the model of export-oriented combined with the replacement of imports, it has positively shifted the economic structure of the country to be more in line with the development trend of the world and the region The impact of exports on production and the shift in Vietnamese economic structure can be viewed in the following ways:
Exporting products of Vietnam to foreign countries starting from the demand of the world market, organizing production and exporting the goods that other countries need, this has a positive impact on the shift in economic structure, promoting production development Exporting creates conditions for industries to develop favorably Exporting creates the ability to expand the consumption market, provide inputs for production, and maximize domestic production Exporting creates economic and technical prerequisites for regular innovation of production capacity in Vietnam In other words, export is the basis for bringing capital, advanced technology, and techniques from the world into Vietnam to modernize the country's economy Through exports, Vietnam's goods will participate in the competition in the world market in terms of price and quality Competition requires the reorganization of production to meet market demand Exporting also requires businesses to improve and innovate production and management activities to improve quality and reduce costs.
- Exporting provides job opportunities and improves people's livelihoods
Exports positively impact people's lives by generating employment and providing decent incomes for millions of workers These exports serve as a source of capital, enabling the importation of essential consumer goods to meet rising demand and enhance living standards.
Wood pellets are a type of biofuel produced from natural materials such as sawdust, wood chips or corn stalks These are all surplus materials that are reused after trees are cut for timber, household goods, and other agricultural products
Wood pellet production involves extracting moisture from wood fiber, grinding it into powder, and compressing it into small cylinders Heat activates lignin, a natural adhesive in wood, which binds the particles together during compression The resulting pellets are highly compressed and energy-rich, making them convenient for transportation and handling.
Source: Khôi, 2022 1.2.2 Benefits of wood pellets
This type of product is made from leftover wood, which means they are extremely safe to use, reducing the processing of waste from plants and utilizing existing resources for high efficiency.
Wood pellets are an excellent source of energy as they contain very little moisture, usually lower than 10% (Schlesinger,
2018) This feature allows for maximum energy utilization since minimal energy is expended in evaporating moisture.
With its compact size, wood pellets can be easily packaged and transported over long distances This type of fuel can also be stored anywhere as long as the place is dry While fossil fuels like fuel oil, gas, diesel fuel, and coal are highly combustible and emit unpleasant odors
Wood pellets have various useful and diverse applications in different fields Here are some key uses of wood pellets:
ANALYZING WOOD PELLETS EXPORT FROM
2.1.The current situation of wood pellets exports in Vietnam (2018-2022)
The export structure of wood and wood products in Vietnam has undergone significant changes over the past five years, with wood chips and compressed wood pellets gaining a larger share Notably, wood pellets, despite their relatively low value, have exhibited a consistent upward trend (MIT, 2022; General Department of Customs, 2023)
Total wood & wooden products export turnover Wood pellet export turnover m ill io n U SD
Figure 2.1: Export turnover of wood pellets compared to the whole industry of wood and wood products from 2018-2022 (million USD)
Specifically, in the past two years, 2021 and 2022, the wood pellets commodity reached $787.5 million, an increase of 83.6% compared to 2021 Its proportion accounted for 4.9%, which is a 2- percentage point increase from 2021.
Wooden furniture Wood, planks and flooring Woodchips Wood pellets Others
Figure 2.2: Structure of export value of wood and some wood products 2021 (%)
Wooden furniture Wood, planks and flooring Woodchips Wood pellets Others
Figure 2.3: Structure of export value of wood and some wood products 2022 (%)
2.1.2 Export volume and value of wood pellets
In recent years, the global wood pellets market has been continuously growing, and Vietnam is no exception The transition to clean energy sources in advanced countries and regions such as South Korea, Japan, and the EU has contributed to the sustained high growth of the wood pellets production industry According to the report by VIFOREST (2022), Vietnam has experienced consistent growth in the export volume of wood pellets over the past 10 years.
Quantity(thousand tons) Value (USD)
Figure 2.4: Export quantity and value of wood pellets in Vietnam from 2013 to 2022
The wood pellets export market in Vietnam has grown significantly in both volume and value over the last ten years according to Figure 2.4 The year 2018 in particular was regarded as one of compressed fuel wood's most rapid development This product's export volume and value were still increasing significantly as of the first quarter of 2022.
In particular, Vietnam exported 175.49 thousand tonnes of wood pellets in 2013, worth 22.98 million USD In 2014, these figures grew to 774.04 thousand tonnes, with a total value of 117.41 million USD, reflecting a 341% rise in volume and a 411% increase in value The export of this commodity increased significantly in 2015, with shipments topping 1,005 million tonnes, a 30% increase over the previous year, but an 11% decline in value, reaching 104.27 million USD In 2016 and 2017, the value and volume of this product's exports increased further, reaching 1.35 million tonnes (2016) and 1.58 million tonnes
(2017), respectively, contributing to an export turnover of around $150 million USD each year, accounting for more than 2% of total exports.
In 2018, wood pellet exports surged, marking a year of remarkable growth Export revenues reached 362.16 million USD, driven by a 67% increase in volume However, in 2019, despite a 6% rise in export volume, the value declined due to a drop in the export price The trend reversed in 2020, with both volume and value increasing significantly In 2021, exports continued to rise, reaching 352.04 million USD in value Notably, 2022 witnessed an unprecedented 91% surge in export value, reaching 787 million USD, indicating a record-breaking increase in wood pellet prices that year.
2.1.3 Wood pellets exporting and manufacturing enterprises in Vietnam
The wood pellet export industry has witnessed a surge in the establishment of exporting enterprises since 2021, highlighting its increasing allure The growth in the number of companies involved in the exportation of compressed wood reflects the expanding appeal and potential profitability of this sector.
Generally, the majority of companies have export volumes below 50,000 tonnes of compressed wood per year.
Figure 2.5: Number of wood pellets exporting enterprises in Vietnam from 2018-2022
Domestic production of compressed wood surpasses its export volume As of 2022 MIT statistics, Vietnam boasts around 80 manufacturing plants and 300+ production facilities, concentrated in the Southeast and Northeast regions While export companies often possess their manufacturing facilities, inadequate production capacity drives them to engage in both manufacturing and trading activities.
Table 2.1: Number of enterprises exporting wood pellets by size from 2018-2022
Firgure 2.1: Distribution of wood pellet manufacturing factories in Vietnam 2021
2.2 The current situation of wood pellets exports from Vietnam to Europe in the context of Russia-Ukraine war
Before 2022, the main export markets for Vietnamese wood pellets were South Korea and Japan, accounting for over 99% of the total volume of wood pellets exported from 2018 to 2021(Forest Trends, 2021) The proportion of wood pellets exported to the EU remains very modest, about 0.15% – 0.2% of the total volume
Figure 2 1: Export quantity of wood pellets to different markets in Vietnam from 2018 to 2022 (tonnes)
This is also understandable because the wood pellets market in the EU already has a stable supply from the top two countries in wood pellets exports, which are the United States and Russia, as mentioned in Chapter 1 In addition, some EU27 member countries also produce wood pellets for domestic use.
In 2022, with the Russia-Ukraine war event, Vietnam became the second-largest wood pellets exporter in the world, following the United States (MIT, 2023) The volume of wood pellets exported to the EU, although still relatively modest compared to Japan and South Korea, has significantly increased compared to
2021 Similarly, the export value has also seen a significant increase, as follows:
Table 2.2: Vietnam's main wood pellets export markets in 2022
From the table above, it can be observed that the volume and export value of wood pellets to the EU have experienced remarkable changes Although the proportion compared to South Korea and Japan remains relatively modest, the volume of wood pellets exported to the EU has increased by an astonishing 1991.8% compared to 2021, equivalent to approximately 20 times Meanwhile, the export value of wood pellets to the EU in
2022 has surged by 3018.5% compared to 2021, approximately
30 times higher These figures are truly remarkable.
The sudden growth can be attributed to the retaliatory sanctions imposed by NATO and Russia In the second half of
2022, the EU announced a ban on the import of certain key commodities from Russia, including timber and wood products, including wood pellets It should be noted that Russia is the largest supplier of wood pellets to the EU, accounting for about 19% of the imported wood pellets volume in recent years. Additionally, the gas supply from Russia was also disrupted in the latter half of 2022 due to retaliatory actions by Eastern European countries Both gas and wood pellets are commonly used for heating purposes during winter and are widely utilized in households across the EU With the sudden disruption in the stable supply, the EU had to seek alternative markets to ensure heating fuel for hundreds of millions of people in the region.Vietnam became one of the sought-after markets in Asia in2022.
Figure 2.7: Average export price of tablets by month from 01/2021 - 10/2022
The export value of wood pellets in the first 10 months of
In 2022, Vietnam's wood pellet exports surged by an impressive 81% year-over-year, reaching $602.7 million The export price has steadily increased since June 2021, peaking at $172 per tonne in October 2022, a 60% rise compared to May 2021 This price increase was not limited to Europe; Japan and South Korea also experienced significant increases due to disruptions in Russia's supply to the EU, which led the US to prioritize the EU market, reducing supply to these other countries.
2.3.Assessment the situation of exporting wood pellets from Vietnam to the EU in the context of the Russia- Ukraine war
Historically, Vietnam's wood pellet exports to the EU market have remained relatively modest, falling significantly short of the substantial volumes exported to South Korea and Japan This trend persisted in 2020, with Vietnam's exports to these key Asian markets dwarfing those destined for the EU.
2021, due to the impact of the Covid-19 pandemic, Vietnam's wood pellets exports also declined along with the general situation of global trade Although the volume of wood pellets exports has decreased in the past two years, the export value of wood pellets in 2022 is trending upward, mainly because the wood pellets exported during this period have higher prices. Overcoming the difficulties caused by the Covid-19 pandemic, as well as the challenges of container shortages and high logistics costs, the export value of wood pellets to the EU market in 2021 increased by 30 times compared to 2021.
POLICY IMPLICATIONS AND SOLUTIONS TO
3.1.Forecasting prospect of exporting wood pellets from Vietnam to EU in the context of Russia-Ukraine war
By the end of 2022, the European wood pellets market is currently valued at around US$ 10,867.5 million and is forecasted to grow at a CAGR of 9.0% between 2022 and 2032, reaching US$ 25,812.9 million by 2032 (World Bank, 2023).
The reason for this increase is attributed to the growing demand for clean energy Consumers in developed regions such as Europe are becoming more environmentally conscious, leading to an increased reliance on renewable sources. Developing countries are also showing interest in bio-based energy sources for electricity generation due to rising energy consumption and favorable government policies Furthermore, the impact of the Russia-Ukraine conflict has caused fuel prices such as natural gas to become expensive, disrupting energy supplies and prompting Western countries to seek more optimal solutions, such as wood pellets This creates an opportunity for seafood exporting countries, including Vietnam, to expand their market share in the EU and meet the consumption demands of this market of millions of people.
Vietnam's wood pellet industry has experienced remarkable growth, transitioning towards large-scale production and enhanced productivity The expansion of the domestic market for agricultural products is driving increased efficiency and market alignment Vietnamese wood pellets have gained prominence in international markets like South Korea and Japan, while the agricultural sector has witnessed advancements in production capacity The adoption of innovative production models has resulted in higher commodity value, increased income, and environmental sustainability.
However, according to VIFORES (2022) the development of Vietnamese enterprises in exploiting the wood pellets market in the EU is still modest compared to their potential advantages.
According to evaluation of chapter 2, at the end of 2022, Vietnam recorded a significant increase in wood pellets exports to the EU, with a volume nearly 20 times higher than in 2021 and a corresponding value 30 times higher than the same period last year Industry experts predict that in 2023, the wood pellets market will not be as vibrant as in 2022 Major import partners of Vietnamese wood pellets such as South Korea and Japan currently have abundant inventory to support their production, which may lead to a slowdown in the markets of these two countries However, experts also forecast that the EU will continue to seek more opportunities for cooperation in the wood pellets sector in Vietnam due to the current tension between Russia and Ukraine The European market still offers a lot of potential for wood pellets, and Vietnam will need to implement practical measures to balance production and export resources to serve the EU market if it wants to transform the wood pellets industry into a leading wood product contributing billions of dollars to export revenue.
3.2 Policy implications to promote Vietnam’s wood pellets exports to the EU in the context of Russia-Ukraine war
- Organizing the production of wood pellets according to the value chain to meet the quality requirements of wood pellets.
The MIT and the Forestry department need to coordinate to focus on promoting the implementation of Decision 327/QD-TTg on the Sustainable and Efficient Development of the Wood Processing Industry from 2021 to 2030 This includes encouraging forest planters to form cooperatives or associations to collaborate with businesses in the supply of raw materials, exchange of production techniques, and strengthening the coordination among four key groups: farmers, scientists, businesses, and the government in research, application, production, processing, export, and consumption of compressed wood products Additionally, The MIT should continue to review and supplement policies to support the restructuring of the wood industry, as some Vietnamese wood products have been facing difficulties in recent years due to saturation.
With experience supporting the expansion of processed wood exports to the EU, Vietnam's authorities can leverage their expertise to develop a robust Vietnamese wood pellets brand Amidst the Russia-Ukraine conflict, obtaining support from relevant agencies is crucial The straightforward production line for compressed wood presents a feasible opportunity for small and medium-sized enterprises to contribute to this initiative, ensuring the creation of a respected Vietnamese brand that aligns with EU consumer preferences.
Furthermore, MIT and General Department of Customs should focus on supporting companies involved in the production and export of compressed wood to obtain the FSC sustainable forest certification To achieve this certification, it is necessary to establish and operate a system ensuring Vietnam's legal timber is compliant with international commitments and agreements, thus ensuring that 100% of the wood used in the entire value chain is legal Meeting this requirement will require sufficient resources to develop and maintain information technology infrastructure and enhance the necessary capacities. Integrating digitalization tasks into the country's regular budget is a crucial step to ensure effective monitoring of timber trade and enforcement of laws.
- Implementing legal changes, guidelines, and assistance programs to help wood pellets producers adhere to EU technical requirements and rules of origin
The reason for this is that only a transparent and advantageous legislative environment can provide enterprises with the drive and a solid platform to increase exports To create a more favorable environment for attracting foreign investment and applying scientific and technological advancements to the production and export processes of wood pellets to the EU, TheMIT departments must review legal documents and adjust issues related to wood pellets, such as foreign investment laws and laws promoting domestic investment, and amend regulations that are no longer suitable, avoiding overlapping and conflicting laws and regulations Furthermore, specific restrictions on wood pellets packing and preservation, as well as environmental protection, should be systematized Furthermore, the Forestry Department must establish specific regulations and guidelines to instruct businesses on how to comply with import standards, such as procedures for self-certification of origin, guidance on phytosanitary inspection procedures, and the application of relevant standards, such as ENplus-A1 or ENplus-A2, for wood pellets exported to the EU Simultaneously, ministries and departments should work with local governments to create initiatives that assist wood pellets manufacturing enterprises in obtaining the certifications necessary by EU nations The origin of the items must be clearly and transparently traceable It is time for Vietnam to complete the set of criteria for "Made in Vietnam" products This is also an opportune moment to establish the criteria for Vietnamese goods The criteria should clearly define the principles for determining the origin of goods according to specific guidelines, as there has not been clear guidance on this matter until now.
- Providing accurate, complete, and timely market information to businesses
The lack of information is also a major challenge for businesses exporting wood pellets to the EU market, especially in the context of the Russia-Ukraine conflict Despite being in the era of the 4.0 industrial revolution, many businesses still fail to seek sufficient information about the European market,competitors, supply and demand, etc Meanwhile, according to experts, in order to establish a foothold in the EU market,businesses first need to address current issues, including improving industry knowledge and enhancing the ability to find suitable trading partners.
To foster export growth to the EU, government agencies must take initiative in market research and developing supportive mechanisms Comprehensive, accurate, and up-to-date information is crucial for businesses to make informed decisions, including data on political stability, trade policies, support programs, consumer trends, competition, protective measures, fraud risks, and payment options.
Information channels need to be updated regularly in term of the market and regularly report on changes such as political, economic, social, financial, customs, security, etc that may affect bilateral trade activities With geographical, time zone, and language differences, domestic businesses exporting wood pellets still face certain challenges in accessing the market and handling incidents and disputes that arise during export operations (fraud risks, payment procedures, customs declarations, enterprise appraisal, market information, etc.) In this context, the role of administrative agencies representing Vietnam in the EU region is essential in providing necessary and prompt assistance to businesses, thereby ensuring their interests and minimizing risks for wood pellets exporters to the
Relevant domestic functional agencies should proactively gather information, synthesize and analyze the market situation and prospects, and provide appropriate recommendations for the Vietnamese wood pellets industry.
It is necessary to strengthen direct and indirect communication efforts to enable businesses to access important, complete, accurate, and up-to-date information Communication methods should be diversified, such as publishing articles in the media, organizing specialized events, workshops, roundtable discussions, trade forums, distributing publications and brochures, and disseminating information through industry information groups, etc.
Trade promotion facilitates the purchase and sale of goods and services by improving the efficiency of the sales process, enabling businesses to reach wider markets It plays a crucial role in reducing costs and increasing revenue, fostering favorable conditions for business growth and market success.
According to Bộ Công thương (2022), within the framework of the National Trade Promotion Program, the Ministry allocates an average of 20% of the total budget of the Program for trade promotion activities in the EU market annually However, the effectiveness has not been as high as expected The TradePromotion Agency needs to directly support businesses participating or guide associations in the compressed wood product industry to select reputable and large trade fairs,exhibitions, and events specialized in trade promotion in theEuropean market From there, a national trade promotion plan should be developed, and businesses should be organized to participate.
MIT's proactive support is crucial for businesses seeking tangible outcomes from their participation in key European trade fairs Specifically, MIT should prioritize assistance at international trade fairs focused on the wood and wood processing industry This will empower businesses to capitalize on these events and achieve immediate results.