“Most of furniture exporters borrow money from banks as furniture business requires large sources of capital,” said general director Huynh Quang Thanh of the furniture maker Hiep Long.
Higher interest rates and increasing material prices have raised his firm’s input costs. As a result, he’s considering raising the prices, which weakened local exporters’ competitiveness on the global market, Thanh said.
Despite the central bank’s efforts to curb inflation and stabilize foreign exchange rate, interest rates continued to rise, putting more pressures on local businesses.
Commercial banks are now offering deposit interest rates of 12-13 per cent, up from 11 percent earlier this month according to a number of lenders’ websites. Borrowers can now expect to pay 16-18 per cent interest on loans.
Thanh added that local furniture makers were also anxious about prices of material for production, which kept rising so far this year. “Rubber wood price jumped sharply to VND5.4 million ($270) per cubic meter from VND3.4 million per cubic meter as China is strongly buying Vietnam’s raw wood, which has low export taxes,” he said.
“The Ho Chi Minh City Handicraft and Wood Industry Association asked relevant units to raise the raw wood taxes, but they haven’t replied,” said Ngo Hong Thu, deputy general director of the Truong Thanh Furniture Corporation.
Demand for Vietnam’s furniture in the Euro market is slumping this year because of the economic recession. Thu said Truong Thanh’s sales in Euro declined to 35 percent from 55 percent this year. Many local exporters expect the amount of orders from European customers will drop further in 2011.
Growing local market
“Vietnam’s furniture products hit store sheaves in 120 countries around the world with a turnover of $3 billion per annum. Sales of imported furniture products meanwhile make 80 per cent of importers’ revenue,” said Vo Quang Ha, general director of the furniture maker Tan Vinh Cuu.
“Therefore, some furniture makers including us switch our sales to the local market. We earned more than 300 orders at the Vietbuild and Vifa furniture exhibitions at Ho Chi Minh City this year,” Ha said.
Furniture maker 4P director Nguyen Van Luat said his firm rebound to the local market as the furniture demand at offices was increasing sharply this year. “The competitiveness at foreign markets is pretty high now as exporters have to verify wood origins and submit many kinds of certificates,” Luat said.
Duong Quoc Nam, director of Hoang Nam Joint Stock Company, said the firm’s sales from the local market grew 20 per cent annually since 2008.
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