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1 Date: July 2015

2 1. Keywords Abstract Introduction Sector Overview Specific for the Sector Sub-sector overview... 5 Handicraft, Vietnam, export, Embassy of Denmark, textile, rattan, bamboo, lacquer, pottery. The handicraft sector has a long history in Vietnam and has also played an important role in Vietnam s social and economic development, especially in poverty reduction and economic development in the rural areas. It is one of the country s largest and most stable export revenue generators even though recent years have started seeing a little decrease in selling to overseas, and there is a potential for an increase in local supply. The Vietnamese government sees the sector as a key sector for employment and we will experience an increased focus in the future. This sector report gives an overview of the handicraft sector in Vietnam throughout the past years, showing the current situation of the sector as well as its development trends. The Report also shows the strengths and weaknesses of the Vietnamese handicraft industry for Danish investors, in order for them to see the opportunities in entering this sector. Vietnam s handicrafts sector involves more than villages producing handicrafts with around 13 million labours, 1.4 million families and about companies. Only 10% of the supplier base is state-owned and foreign-invested companies; the rest are private SMEs. Embassy of Denmark in Vietnam 2 / 9

3 The handicraft sector has had a considerable impact on social and economic changes in Vietnam, especially for poverty reduction and economic development in rural areas, creating jobs and increasing incomes in these areas. The sector has also contributed to the establishment and development of thousands of producers, businessmen, exporters and service supply companies in the country. In addition, it is recognized as a non-smoke industry that can bring increased added values with real revenues up to 95%. Growth rates The growth of Vietnam s handicraft sector slowed to 7% in the first half year of 2013, due to the global economic crisis. However, total overseas sales still exceeded US$2.5 billion by the end of the year Revenues from the sector have had an average increase of about 13-15% per year. The Ministry of Agriculture and Rural Development has approved the plan for exporting handicrafts for the period , aiming to reach US$1.6 billion in export volumes by the end of Competition Since 2007 when Vietnam joined the World Trade Organization (WTO), Vietnam has faced increased competition from other WTO members especially within the local market. Vietnam s domestic handicraft products now increasingly compete with those from China and India, two leading handicraft producers. Besides China and India, Vietnam s closest competitors in handicrafts come from Thailand, Philippines and Indonesia. Vietnam has a strong competitive capacity due to its ability to supply large orders, its lower labour costs, and the country s good reputation for high quality products. An increasing number of Chinese companies are now investing and setting up manufacturing operations in Vietnam. Others have transferred manufacturing activities from Thailand, Indonesia and the Philippines to Vietnam due to political issues and because of Vietnam s low labour cost and high productivity. Today, Vietnam has increased competiveness in producing and exporting products made from wood, bamboo/rattan/sedge/leaf and pottery. Infrastructure Most of the handicraft manufacturers in Vietnam are small and medium sized enterprises (SMEs) and there are very few manufacturers currently operating at a Embassy of Denmark in Vietnam 3 / 9

4 mass production level. Vietnamese exporters face high transportation costs for both air-freight and waterborne-freight and according to a report by the Georgetown University, USA, transportation of 50 containers from Vietnam to other countries by waterborne-freight costs US$ over days. Exports and the domestic market Today, local handicraft manufacturers have shifted their attention from exporting to foreign markets to supplying to domestic market, as they have faced higher production cost and accordingly decreasing orders from overseas. Along with the recent increase in tourism (the building of resorts, hotels, etc.), handicraft producers believe that there is a large potential for earning a higher profit by targeting these consumers. Nevertheless, the majority of handicraft products are still exported, accounting for an export sales volume of more than $2.5 billion in Today, the three main export markets are the US, Japan and the EU, of which the US is the biggest importer of Vietnamese handicrafts. Key strengths of the sector A skilled labour force that has the ability to acquire knowledge and new technology quickly and effectively. Low labour costs. The labour cost for a Vietnamese worker is US$ per hour (compared to the cost for an Indonesian workers being US$ per hour, for a Chinese worker US$ per hour, for a Malaysian worker US$ per hour, for a Thai worker above US$1.5, and for a Taiwanese worker above US$5.) Many villages with diversified cultures produce a variety of handicrafts. Good reputation for good customized product specifications and supplying quality products. The handicraft sector is subject to large growth due to supporting policies from the Vietnamese Government. Key weaknesses of the sector Raw materials are dependent on imports from overseas. Limited innovation in design, which could constrain future growth. Lack of management skills and human resources with enough professional skills to undertake management or sales missions. Lack of professional training for both workers and managers. High transportation costs. Lack or limited information on market needs, export trends, opportunities, regulations and pricing. Embassy of Denmark in Vietnam 4 / 9

5 Bamboo / Rattan / Sedge / Leaf These sub-sectors have the highest export turnover in handicrafts. They are produced in many provinces in Vietnam, but mostly in Ha Tay, Ha Nam, Thai Binh, Thanh Hoa, Khanh Hoa and Tien Giang. Vietnam has a good reputation for rattan production, falling behind only Indonesia and Malaysia in respect of rattan resources. Vietnam is also recognized to be very good at producing rattan products. Rattan chairs, tables and drawers made in Vietnam have become very popular in Germany, Italy and the USA, and exports continue to increase. In addition, in recent years the export of products made from water hyacinth has been increasing. More villages in the South, such as Tien Giang, Dong Thap, Dong Nai and Ho Chi Minh City, are specialized in manufacturing such products from this material. Pottery Pottery manufacturing has been present in Vietnam for ten thousand years with production located throughout the country. Larger production centres are located in Hanoi (Bat Trang village), Dong Nai and Binh Duong provinces. The recent development of glazed terra-cotta products in Dong Nai, Vinh Long, Ha Nam and Bac Ninh provinces has gained considerable attention from global importers. Wood In the wood sub-sector, indoor devices are the product group that have more advantages and they account for more than 70% of export turnover. Most indoor device production occurs in Hanoi, Hai Duong, Bac Ninh, Nam Dinh and Ha Tay provinces. Industrial wood production is mainly concentrated in the South- and Centre of Vietnam. Lacquer Lacquer products, such as vases, bowls and trays, are very typical Vietnamese handicraft exports. Most of these are made of wood or bamboo, which is a small product group of Wood or Bamboo / Rattan / Sedge / Leaf sector. Art manipulation of Stone / Bone / Horn / Glass Embassy of Denmark in Vietnam 5 / 9

6 Nationally, there are 45 villages specializing in stone carving with 90% located in the North of Vietnam. However, the most famous producers are located in the Centre of Vietnam (Da Nang City). Stone products are mostly statues and garden decorations for export to the EU, USA and Canada. In addition to stone, ox horns and shells are also used to make handbags, bowls, spoons and other products. Embroidery & Lace Embroidery and lace products, such as tablecloths, clothes, skirts, bags and other items, are produced mostly in villages in Ha Tay, Thai Binh, Ninh Binh and Ha Nam provinces. Previously these products were exported mainly to Eastern Europe, but the export market has now been widened to many other countries, including Korea, Japan, France and Italy. Vietnamese embroidery and lace products face considerable competition from products manufactured in China. Textiles 432 villages throughout Vietnam produce textiles, with the majority made by ethnic minorities. Raw materials include silk, cotton, wool and linen. Almost 90% of textile villages are located in the North and the Red River delta areas. Handkerchiefs made in cotton are produced in Thai Binh, Ha Tay, Nam Dinh provinces and other bathroom and kitchen textiles come from Ninh Binh and Ha Tay provinces and have some of the highest export potentials. Government policy/regulations The Vietnamese Government has issued a number of regulations to support the development of the handicraft sector ranging from the development of the raw material supply and location to investment and trade encouragement. According to Decree 66/2006/NĐ-CP dated 07/07/2006 on handicraft development; Decision 910 QĐ/BNN-CB dated 31/03/2006 of the Ministry of Agriculture and Rural Development about the development plan of the handicraft sector until 2010; Circular 84/2002/TT-BTC dated 26/09/2002 of the Ministry of Finance guiding financial support methods for the development of handicraft sector; and Circular 65/2004/TTLT/BTC-BLDTBXH dated 02/07/2004 of the Ministry of Labour, Invalids and Social Affairs guiding technical training for labours in the handicraft sector: The Government will provide capital assistance for infrastructure investment (road building, water and electricity supply, environment guarantee) and factories to those residents who want to join in handicrafts production in rural areas. Embassy of Denmark in Vietnam 6 / 9

7 Handicraft producers can rent land with the lowest rate, and they are also exempt from land rental fees for 3 years if they move their factories out of the area. The Ministry of Trade and Industry directly manages overseas Trade Councils to explore local markets and introduce them to Vietnamese handicraft producers. The Ministry of Science, Technology and Environment is responsible for holding, guiding and providing funds for the study and for innovation of technology, design ability improvement, and the use of domestic raw materials. Training centres of the Government give their priority to the training activities of the handicraft sector. The Government also assists participants with VND per person per month for attending any handicrafttraining course. Handicraft companies can receive investment incentives. There are also support activities to assist handicraft exporters. Handicraft exports can benefit from several investment incentives (reduction or exemption) in respect of land rents, land use taxes, income tax ratios, personal income tax and import taxes on imported machines. Local exporters and manufacturers can receive financial incentives from the Development Assistance Fund and the National Export Assistance Fund for investment and export activities. The Ministry of Labour, Invalids and Social Affairs provides training courses for workers to improve their skills and professional- and design abilities. Market prospects & Opportunities for Danish companies Vietnam s entry into the World Trade Organization (WTO) in 2007 opened its market to foreign investment in different sectors including handicraft. High export demand to the USA, the EU, and Asian countries - as well as the good reputation Vietnamese handicraft have gained for good quality with low production costs - makes the sector attractive for Danish investors. The government continues to see the sector as important and has developed comprehensive support for companies operating in the sector for the future. Although the sector is currently facing some difficulties and has several weaknesses, it is still a potential sector for Danish companies to look into, especially when the FTA negotiation with EU is going to be concluded in 2015/2016. How the Embassy can be of assistance The Embassy of Denmark in Vietnam can assist Danish enterprises in researching the current Vietnamese handicraft sector, arrange high level meetings with Vietnamese leaders and decision makers and analyze the advantages and Embassy of Denmark in Vietnam 7 / 9

8 disadvantages Danish parties might have when entering the sector. Danish companies can also approach potential partners in Vietnam with the assistance of the Embassy. The Embassy believes the collaboration in the handicraft sector between Vietnam and Denmark will bring mutual benefits to both countries. Embassy of Denmark in Vietnam 8 / 9

9 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) (84 4)

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