INTRODUCTION
In February 2020, the Prime Minister of Vietnam directed government agencies to develop a public procurement policy setting out preferences for all timber products purchased under government contracts, from construction timber to high-value timber and architectural decorations. This built upon previous directions from the Prime Minister’s office, such as the March 2019 request that the Ministry of Finance work with government agencies to focus on the formation of a public procurement policy in a way that priorities the use of legal timber products made from the country’s own plantation timber. Forest Trends’ Phuc Xuan To summarizes some of the progress that Vietnam has made to date, and offers some guidance for next steps.
BACKGROUND ON VIETNAM’S FLEGT VPA: A COMMITMENT TO ENSURING ALL TIMBER IS LEGAL
In 2019, Vietnam became Asia’s second largest wood product exporter, after China, and the fifth largest in the world. Among its biggest export markets are the United States (US) and the European Union (EU). Last year, wood product exports added more than US$10 billion to Vietnam’s economy.
Vietnam bans logging in its own natural forests, and while plantation timber of acacia and rubberwood is widely available, 80 percent is small-diameter and mainly used to produce wood chips. As international demand for Vietnamese manufactured products has grown, companies have increasingly started to rely on imported timber. Given the lack of domestic timber, Vietnamese companies now import 4-5 million cubic meters (m3) of timber from more than 100 countries and territories every year. About 30-40 percent of these imports are sourced from countries considered “high-risk” for illegal logging and associated trade (based on governance and harvest-risk indicators).
To ensure that Vietnamese exporters can meet the increasing international market demands for verified legal timber, the Vietnamese government entered into Forest Law Enforcement Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA) negotiations with the European Union in 2012. The resulting VPA came into effect on 1 June 2019.
At the heart of this VPA is a commitment by the government to ensure that all timber within Vietnam’s borders will be legal – whether grown domestically or imported and regardless of whether the wood is destined for export or domestic markets. To achieve this, Vietnam is developing a Timber Legality Assurance System (VNTLAS). Once in operation, the VNTLAS will hold all actors within timber supply chains accountable to comply with strict legality requirements and will be overseen by Vietnam’s enforcement authorities.
THE ROLE OF A TIMBER PUBLIC PROCUREMENT POLICY TO COMPLEMENT THE VIETNAM FLEGT VPA
To help jump-start demand for verified legal timber, the Vietnamese government is now scoping how to implement policies which will ensure that all wood products used by the public sector meet all legality requirements.
Public procurement is estimated to account for between 20 and 30 percent of all public spending in Vietnam. The percentage of government spending on wood products for construction and public works, as well as office furniture and paper products, is not publicly known. Experts estimate that this spending is likely significant, possibly hundreds of millions of dollars per year. This suggests significant leverage to create local and global incentives for trade in legal and sustainable timber given the country’s significant reliance on imported timber.
Forest Trends’ Marigold Norman discusses the recent rise in emerging economies’ interest in public procurement policies in an accompanying blog and the role they play when implemented in conjunction with a FLEGT VPA process. Effective implementation in VPA countries can present broader opportunities for economic benefits for responsible industry while also supporting national and global forest governance and climate objectives.
The Vietnamese government has begun to see that more was needed to ensure that its own purchasing decisions could bolster implementation of the FLEGT VPA commitments, and garner a strong reputation for the Vietnamese wood products industry. We have already seen support from the very highest levels of government for a public procurement policy:
- In August 2018, the Ministry of Agriculture and Rural Development (MARD) – the agency responsible for the development of VNTLAS — organized a national conference on the timber industry. The Prime Minister attended and, at the meeting’s conclusion, specifically recommended that “Party and state agencies should be pioneering in using legal timber products made from the country’s plantation timber.”
- In its 2018 annual report, MARD referenced the potential of a public procurement policy on timber products. It was the first time the term appeared in a government report.
- In March 2019, the Prime Minister requested that the Ministry of Finance “lead and collaborate with relevant government agencies to study the possibility for a formation of a public procurement policy in a way that priorities the use of legal timber products made from the country’s plantation timber.”
DEVELOPMENTS IN THE VIETNAMESE PROCESS
Seeing this early ambition from the very highest levels of government in 2018, my team at Forest Trends started to collaborate with the Vietnam Chamber of Commerce and Industry (VCCI)[1] on a research study to answer a key question: What are the current public procurement policies and government practices when purchasing wood products in Vietnam? What percentage of government purchases of wood products could be considered at high-risk of having been illegally sourced?
The answer, our study found is that, as of 2018, there were no government policies or regulations with specific requirements for the government to purchase legal timber. Furthermore, in reviewing individual online government tenders for wood products between 2016 and 2018, we found that more than three quarters (77 percent) also did not specify that the timber should be from legal sources.
Of the many calls for tropical timber, 11 percent required high-value tropical timber species — typically categorized as “precious” and banned by the Vietnamese government for commercial use. Calls particularly for formal furniture and marine uses stated requirements for these high-value, precious tropical wood species such as go do (Afzelia xylocarpa) or Cam Lai (Dalbergia spp) which are protected under Vietnamese law. Of the 33 operators that supplied timber products to Vietnamese government agencies over the period, 74 percent supplied these “precious” species, with the operators claiming that these had been requested by the government buyer. With all harvesting banned in Vietnam’s own natural forests, these tropical species needed to be imported from countries that are often considered high-risk for illegal logging and trade.
Following our collaborative research findings, in July 2019, VCCI President Dr. Vu Tien Loc (who is also a member of parliament) wrote to Prime Minister Nguyen Xuan Phuc, outlining some specific recommendations for next steps. A copy of the letter was also sent to MARD and to the Ministry of Planning and Investment (MPI), the agency in charge of budget allocation for public spending.
Understanding how important this would be in supporting successful implementation of the FLEGT VPA, in February 2020, the Prime Minister responded positively to the recommendations and directed MARD to collaborate with MPI and other relevant government agencies on the development of a public procurement policy for all timber products.
The Vietnam Administration of Forestry (VNFOREST), a MARD agency, is currently charged with creating that policy. To support them in this process, Forest Trends and VCCI are now working together on three key areas:
- Defining key legality requirements in line with the Vietnam Timber Legality Assurance System (VTLAS) that VNFOREST can consider for inclusion in a public procurement policy on timber products;
- Developing guidelines and training materials which an MPI training center can use to support central and provincial government buyers with the new bidding procedures, including, for example, how to evaluate bids;
- Training Vietnamese environmental journalists about the legal requirements for timber products.
In addition, Forest Trends and VCCI hope to inform the development of the policy through a municipal-level pilot study which can highlight likely challenges before a nationwide rollout of the policy.
CONCLUSION AND RECOMMENDATIONS
The Vietnamese government has committed to ensuring that all timber within its borders will be legal – whether destined for export or domestic markets. Recent developments over the last few years further highlight how government purchasing can support delivery of the VPA.
Clearly, Vietnam is still in the initial stages of developing the public procurement policy. To incentivize a shift towards legal and sustainable timber not only within Vietnam, but also in the countries providing it with raw materials, we recommend that the policy must:
- Be ambitious. Though legality requirements should be at the core of the policy and will be aligned with the VNTLAS, sustainability should be its long-term goal.
- Mandate that all products listed in the VPA Annex and procured by state agencies, at both national and local levels, are legal.
- Prioritize the highest-risk products. If implementation of a policy is rolled out in phases, the priority should be to start with logs and sawnwood which tend to be sourced from countries considered high-risk for illegal logging.
Alongside the recommendations for a policy, it will also be critical for the government to develop clear guidance on implementation of the policy, ideally after a local level pilot.
This is a real opportunity for Vietnam to incentivize change both in Vietnam and across the world in the countries it sources from, many of which are not engaged in VPA processes.
[1] VCCI is a national organization that represents the Vietnamese business community and industry associations with the aim of assisting enterprises while contributing to national socioeconomic development goals. With significant policy influence and research capacity, the VCCI is an ideal partner for this work.
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