VN: VPA to facilitate wood exports to EU18/01/2019 130
With the EU being among the largest importers of Vietnam’s wood products, the upcoming adoption of the Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreement between Vietnam and the European Union will help Vietnam both attract more European investment and boost its wood product exports to not only the EU, but also many other markets.
Heidi Hautala, Vice President of the European Parliament, told VIR during her working visit to Vietnam last week that the Forest Law Enforcement, Governance and Trade Voluntary Partnership Agreement (FLEGT-VPA) will turn Vietnam into a more attractive investment spot for European investment.
“The VPA process and implementation will increase the confidence of European investors in Vietnam’s business environment. This will help Vietnam attract more investment from the EU, which is already increasing now,” she said.
“Currently, European consumers and enterprises have a growing demand for imported wood products whose production and origins are transparent,” she said. “This will further prompt European investors to come to Vietnam to implement projects directly and co-operate with local partners in exports. I see many European businesses plan to expand business and investment into Vietnam.”
Figures from Vietnam’s Ministry of Planning and Investment show that as of December 20, 2018, European investors had 2,194 valid projects worth $24.3 billion in Vietnam.
Hautala’s visit to Vietnam was aimed to discuss the country’s preparation for the implementation of the VPA (see box for details) which is focused on fighting illegal logging and associated trade. The proper implementation of the VPA, the second that the EU concluded with an Asian partner after Indonesia, will also facilitate discussions on the EU-Vietnam Free Trade Agreement (EVFTA).
“The VPA will help improve forest governance, address illegal logging and promote trade in verified legal timber products from Vietnam to the EU and other markets,” Hautala said.
Preventing illegal logging
" The VPA will help Vietnam export its wood products directly to European markets without any intermediary markets. " – Ha Cong Tuan Deputy Minister of Agriculture and Rural Development
After six years of negotiation, the FLEGT-VPA was signed by the EU and Vietnam on October 19, 2018 in Brussels. Before it can come into force, each side is required to ratify it in line with their internal procedures. In the EU, the VPA needs to get the consent of the European Parliament before it is submitted to the Council of the European Union for approval. In Vietnam, the VPA is an international treaty that will be signed on behalf of the government.
Vietnam has approved an action plan for the implementation of the VPA, including the development of legal documents and the strengthening of independent monitoring by non-governmental organisations, industry associations, and relevant stakeholders in the VPA implementation process.
Once the VPA is fully operational, all timber and timber products arriving to the EU from Vietnam will carry a FLEGT licence issued by Vietnam.
To help the FLEGT-VPA become effective immediately after it takes effect, Vietnam has created mechanisms and policies in conformity with the pact. Notably, the Forestry Law, which will come into effect on January 1, 2019, includes commitments under the FLEGT-VPA, according to deputy director of the Vietnam Administration of Forestry Pham Van Dien.
Products covered by the VPA include all products named by the EU regulation establishing the FLEGT licensing scheme which outlines the minimum requirements for VPAs, such as logs, sawn timber, railway sleepers, plywood, and veneer.
In addition to the minimum requirements of the product scope of a VPA, the VPA will also cover other timber products such as wood chips or particles, parquet flooring, particle board, and wooden furniture.
Ha Cong Tuan, Deputy Minister of Agriculture and Rural Development, told VIR that Vietnam exports indoor and outdoor products to 28 European nations, 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 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 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.
From January 2019, to implement the VPA, Vietnam and the EU will also begin to implement 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.
Enforcing the VPA
According to Hautala, Vietnam is a promising partner for the EU to boost co-operation in wood exports. “The two sides have reached great consensus about the VPA. What is important now is how to implement the deal.”
According to her, this 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 VPA,” she said. “Vietnam should make all efforts to ensure that the due diligence obligations are not reduced to a ‘tick the box’ exercise. The European Parliament follows preparatory work regarding the implementation of the VPA in Vietnam. The country also made commitments in this area in the framework of the EVFTA. Proper implementation of the VPA will therefore facilitate fruitful discussions on the EVFTA.”
According to Nguyen Xuan Cuong, Minister of Agriculture and Rural Development, Vietnam affirms “the highest efforts and determination of the government and timber processing and exporting enterprises to fulfil commitments outlined in the 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 Southeast Asian timber sector. Vietnam imports timber from 80 countries, with the main suppliers including Cambodia, Laos, China, the US, and Malaysia. Timber from local plantations is increasingly used in producing timber products and for exporting woodchip. Vietnam’s wooden furniture exports mainly target environmentally-conscious markets in the EU, the US, and Japan.
Key points of the Vietnam-EU Voluntary Partnership Agreement
The VPA is a legally-binding bilateral trade agreement that aims to improve forest governance and promote the trade of legal timber from Vietnam to the EU.
- VPAs are among the key tools of the EU Forest Law Enforcement, Government and Trade (FLEGT) Action Plan of 2003. Vietnam is one of 15 countries negotiating or implementing VPAs with the EU.
- Vietnam and the EU began negotiating the VPA in 2010. They agreed in principle on the content of the VPA in November 2016 and signed the VPA in October 2018.
- Before the VPA can enter into force, each party must sign and ratify it in line with their internal procedures.
- Under the VPA, both parties commit to trading only in legal timber products.
- Among other things, the VPA describes a timber legality assurance system capable of verifying the legality of timber products. When fully operational, the timber legality assurance system will issue FLEGT licences to accompany Vietnam’s exports of verified legal timber products to the EU.
- Vietnam will then only export FLEGT-licensed timber products to the EU. The EU will only allow Vietnam’s timber exports to enter the EU if they are accompanied by a valid FLEGT licence. FLEGT-licensed timber is considered as meeting the requirements of the EU Timber Regulation, which prohibits EU importers and domestic producers from placing illegally harvested timber and timber products on the EU market.
- The VPA also includes a framework for overseeing, monitoring, and evaluating the implementation of the VPA and its economic, social, and environmental impacts.