2002). Forestry households through linkages can overcome the disadvantages of small-scale production, ensure GNL output markets, thereby improving and increasing income from forests; be provided with necessary inputs for production; access to credit and information, and more broadly, can connect with international markets (Curtis & Race, 1998).
- The linkage between GNL production and consumption will increase market opportunities for actors participating in the linkage. Market trends show that the demand for GNL from planted forests to produce wooden products for export to markets with strict requirements on the legality of input GNL sources such as the United States and the EU is increasing. This means that GNL from planted forests is increasingly popular and is one of the important sources of supply for the wood processing industry. Therefore, when linking with forest growers, businesses will ensure input materials for production, stabilize raw material areas and easily trace the origin of wood, thereby having the basis to expand the market and access demanding markets, more importantly, to build a national strategy on product quality and Vietnamese wood brands.
On the part of forest growers, due to lack of knowledge, information and connection with the market regarding the demand for raw wood and prices, they are limited in assessing the value of their wood products as well as in finding markets for their products (Anyonge & Roshetko, 2003). As a result, forest growers are easily disadvantaged in negotiating with timber traders or selling products at low prices. Therefore, through connections with wood processing companies and cooperation among forest growers, GNL growers will create a common voice, avoid price pressure, be provided with stable input and output consumption at reasonable prices, be supported with capital, technology and be provided with markets without having to pay fees, so they can feel secure in production, stick with the forestry profession, create high quality products at low prices, and have access to technical advances in the process of planting and creating forests.
- The link between production and consumption of raw wood will create added value for forest products. Through the link, GNL is not only processed into products of higher value but also increases productivity and quality right from the stage of forest planting. That is because of the guidance and management of forest planting and care techniques by enterprises for the people, so not only productivity increases but more importantly, the quality of GNL increases. Therefore, if a long-term connection is created between
Wood processing enterprises and forest growers will increase the added value of forest products due to timely harvesting, contributing to improving the lives of forest growers and increasing the competitiveness of the wood processing industry.
- Linking will help save investment resources in production , because the raw wood of the wood processing industry is mostly perennial trees, forest growers have to spend a lot of labor, time and money in the process of producing GNL. The cost of producing GNL includes: the cost of creating forests and the cost of exploiting, transporting and transporting wood to the company's wood delivery yard. Because of such high investment requirements while capital recovery is slow and after at least 4-5 years, in economically difficult areas, low-income forest growers really need support in terms of seeds and advance investment capital from wood processing companies. This investment will be repaid by raw wood growers with GNL products produced. This creates a long-term relationship in the production and supply of raw materials between GNL growers and wood processing companies.
- Minimizing and sharing risks in the process of wood production and raw wood processing. Risk sharing in linkage is both a principle and an effect that demonstrates the superiority of economic linkage compared to market relations (Gatto, 2000). In the linkage of GNL production and consumption, forest growers are the most affected parties when risks occur. Because most of them are small producers, while production conditions depend largely on nature and the market is always fluctuating. Therefore, linkage will help share risks in the process of GNL production for forest growers, minimizing the risk of lack of input materials for businesses. From there, companies can establish long-term, stable production and business plans to develop sustainable production. Forest growers can feel secure in production and stick with the forestry profession for a long time.
- Through the activities of the association and support from businesses such as: training on technical advances, guidance on scientific forest planting methods, the association will help raise awareness and change traditional forest planting methods, improve intensive farming efficiency for households. Change farming thinking in a progressive direction, abandon unsustainable traditional farming habits, gradually improve professionalism in the process of planting, caring for and protecting forests, thereby improving the quantity and quality of GNL.
In short, the link between GNL production and consumption is necessary. Because the link will
Solves the basic problems in the wood processing industry: helps avoid spreading investment; improves the quality and output of planted forest wood; balances supply and demand of the GNL market. In particular, members participating in the association will have the same voice and responsibility for the final product. Parties can easily share information, contributing to improving the competitiveness of the industry, increasing market opportunities in meeting large order requirements, while increasing labor productivity due to specialization, helping the industry develop effectively and sustainably. This association is an inevitable trend in the forestry production sector in the world and in Vietnam, especially in the context of free trade agreements such as VPA/FLEGT taking effect between Vietnam and the European Union countries.
2.2.5. Economic and technical characteristics of raw wood production and consumption In Vietnam, forests are divided into 3 types according to the purpose of use: protection forests, special-use forests and production forests. In which, production forests are forests used mainly for growing timber and non-timber forest products for the purpose of exploitation and forestry business (Ministry of Agriculture and Rural Development, 2009). Since 2014, the Vietnamese Government has implemented a policy of closing natural forests, according to which the domestic supply of raw wood is used from 2 main sources: wood exploited from production forests and imported wood (Government, 2014). Therefore, forest development
Production planting plays a very important role in the wood processing industry.
Sustainable forest management is understood as a forest management method that ensures the achievement of forest protection and development goals, does not reduce values and enhances forest values, improves livelihoods, protects the environment, and contributes to maintaining national defense and security. Planting and developing forests according to FSC international standards is a global trend and an effective direction to achieve the goal of sustainable forest management (Bui Thi Van, 2020).
FSC stands for Forest Stewardship Council - this is an international organization that sets certain standards to ensure that forestry products are produced in an environmentally responsible and economically and socially beneficial manner. Accordingly , FSC-certified wood means that the wood has been certified by the International Forest Stewardship Council as meeting the standards, ensuring the requirements set by the Council, and the origin of the wood can be traced. To achieve FSC certification, during the forest planting process, farmers must comply with strict requirements such as: not burning the ground cover after harvesting, not using herbicides, cleaning the planted forest, collecting seedling bags and pesticide packaging for disposal.
Thus, FSC Certification is considered the “gold standard” for wood harvested from forests that are responsibly managed, socially beneficial, environmentally conscious and economically viable.
In the wood processing industry, the demand for raw wood is grouped according to output products. Domestically grown wood is used to produce wood chips, pulp, various types of artificial boards and to produce wooden furniture. Imported wood is used to produce various types of exported wood products and construction wood products for domestic consumption. Home garden wood such as mango, jackfruit, longan, cashew, etc. and scattered planted wood such as: xoan, acacia, rubber wood, etc. are used to produce finger jointed boards, outdoor furniture for export and various types of artificial boards (Tran Van Hung, 2016).
Wood is a perennial crop, so in order to effectively implement linkage activities, it is necessary to pay attention to some technical characteristics in the production and consumption of raw wood as follows:
- Process of planting raw timber forests: Depending on the site conditions, climate, and weather of each region, there are specific instructions on planting and caring for forests. In Tuyen Quang, the process and techniques of planting Acacia are encouraged to be applied in the forest planting cycle as follows:
Table 2.1. Silvicultural processes and techniques in planting forests for raw wood production
STT
Job | Technical measures | |
1 | Epidermal treatment | Is the activity of clearing, collecting grass, trees, vines, and cutting unnecessary branches in the forest. Clear the entire vegetation in strips or patches suitable to the site conditions. After processing the vegetation, it must be collected in strips, and burning of the vegetation should be avoided. In case of burning the vegetation, it must be burned in strips. or in patches and controlled burning. |
2 | Tilling, digging holes, fertilizing | Manually prepare the land, dig holes along the contour lines with staggered arrangement. Dig and fill the holes 15 - 30 days before planting or you can dig holes and plant at the same time depending on the type of soil. The holes are 20-30 cm in size. Apply NPK 5:10:3 fertilizer about 200g - 300g/hole, add 50g of lime powder/hole if the soil is acidic. Fertilize and fill the holes 5 to 7 days before planting. |
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STT
Job | Technical measures | |
3 | Plant a tree | - Tree types and density: mainly Acacia hybrid, Acacia mangium: 1,660 trees/ha; in some places 2000 - 2500 - 3000 trees/ha (tree to tree 2.5m, row to row 3m); Eucalyptus: 1660 trees/ha (tree to tree 2.5m, row to row 2.5m). - Planting method: mainly pure planting and planting with seedlings in pots. - Planting season: Spring - Summer or Summer - Fall, when it rains. Usually starts at the end of March to the end of August every year. |
4 | Care, protection | Primary care in the first 3 years: - Year 1: weed, hoe, replant if the tree dies. Care twice a year. - Year 2: weed, clear land, hill up, prune secondary stems and leave main stems; fertilize; care twice a year. - Year 3: clear the ground cover, thin out poorly growing trees, crooked trees, trees with broken tops, trees with pests and diseases...; take care once a year. Apply measures to manage and protect planted forests such as: not allowing people or livestock to damage, making fire barriers, preventing Avoid forest fires and pests. |
5 | Exploit | Exploitation is encouraged when the forest is 6-7 years old. Before exploitation, the forest owner must make a list of exploitation and send it to the competent authority for report. If clear-cutting is done, the forest must be replanted immediately in the next crop. |
Source: Department of Agriculture and Rural Development of Tuyen Quang (2019)
Total investment costs for Acacia plantations include: costs for the first year of planting; costs for care and protection in the following years; and costs in the year of exploitation, which is also the year when households clear-cut and recover capital for forest planting. To determine the total investment for 1 hectare of plantation, based on the technical and economic standards for forest planting, forest regeneration promotion and forest protection in Regulation No. 38/2005/QD-BNN of the Ministry of Agriculture and Rural Development issued on July 6, 2005; actual labor standards applied locally. Accordingly:
- In the first year, the initial investment cost for afforestation includes: costs for fertilizers and seedlings (including new planting and replanting); labor costs including family labor and hired labor (clearing vegetation before planting, digging holes, planting and weeding); costs for caring for and protecting planted forests (Ministry of Agriculture and Rural Development, 2005).
- Second year: mainly labor costs (pruning and clearing); fertilization; management and protection of planted forests.
- From the third year onwards to the year of exploitation: costs for inspection, management and protection of planted forests (guarding to prevent cattle from destroying, clearing vines, trees that die due to pests and diseases, and preventing forest fires.
- Forest exploitation costs: due to the growth characteristics of Acacia trees, the older the tree, the more biomass it has and the larger the wood yield. Therefore, the exploitation fee also increases, depending on the wood yield.
- Wood consumption process : wood is a product with non-seasonal characteristics and has a time delay, wood products can be harvested this year or delayed in the following years depending on the purpose of the forest owner, thus avoiding the situation of price pressure during the harvest season like other agricultural products (Nguyen Van Song, 2009). When exploited, wood is bulky and often transported in relatively large quantities, so if transported far away, forest growers will have to spend more on transportation, loading and unloading, not to mention exploitation costs. Therefore, to minimize transportation costs and create convenience in purchasing raw materials, companies often arrange satellite purchasing factories near the raw material area. In addition, forest growers often choose to sell wood to nearby purchasing factories or to traders who purchase whole trees right in the forest instead of choosing to transport wood far away for consumption. Therefore, the process of consuming round wood after exploitation is often gathered at the yard of satellite purchasing factories, then pre-processed into chips or wood bars, or kept in its original form depending on the company's raw material needs, and then transported to the company for processing.
Raw wood exploited from domestic planted forests is consumed through the following three main market channels (Nguyen Manh Dung & Duong Tien Duc, 2014):
- Channel 1: After exploitation, households sell wood to local carpentry workshops (retail) to produce household carpentry products, home furniture such as beds, cabinets, tables, chairs, etc. and construction products such as columns, formwork, purlins, etc. This channel is local and self-sufficient. Forestry companies and small-scale forest plantation enterprises rarely participate in this channel.
- Channel 2: Forest planting households, cooperatives, and small-scale forest planting enterprises exploit and sell wood to collectors (wholesalers). Collectors transport and resell to wood processing facilities and enterprises.
- Channel 3: Households, cooperatives, and large-scale forest plantation enterprises exploit wood and sell it to businesses, facilities, and wood processing companies according to contracts signed between the parties. Units with large volumes of wood, certified wood, and forestry companies often organize consumption through this channel.
From the above characteristics of the production and consumption of raw wood, the main activities in the linkage between wood processing companies and households often focus on activities such as: the company supports households in planting and developing forests to create a stable raw material area through providing and supporting inputs such as production materials, capital, and technical guidance for households. Households carry out forest planting according to the correct process and harvest on time as required by the enterprise. The enterprise commits to buying back all of the household's wood after harvesting.
2.2.6. Research content on the link between production and consumption of raw wood
In this study, the linkage between GNL production and consumption is recognized and considered with the following contents: linkage mechanism, results and effectiveness of linkage implementation, benefits from linkage and linkage sustainability.
2.2.6.1. Characteristics of the form of association and the association mechanism
Each form of association has its own characteristics and characteristics. This difference depends largely on the characteristics of each enterprise. Enterprises that produce and process different wood products have different needs for raw materials for processing. For example, enterprises that process paper and pulp use wood chips and round wood as raw materials; enterprises that produce furniture need wood bars and sawn wood as raw materials; or enterprises that produce products for export require input materials to have clear origins and meet international requirements and standards. From these characteristics, the content of the association, the object of association and the association mechanism will be formed.
Understanding the linkage mechanism is to consider how the parties cooperate with each other, what form of contract is signed between the parties, what are the conditions for participating in the linkage, the obligations and rights that each party must perform and enjoy. To create a successful cooperative relationship in forestry, the basic factors that need to be achieved are: the linkage mechanism must be clear and feasible; the terms must be agreed upon by both parties, achieving the benefits and common expectations of both parties when cooperating (The World Bank, 2009); The linkage contract must be legal, requiring the participation of state management agencies to ensure the rights and obligations of the parties.
(Khosa, 2000); The parties involved must be democratic, equal in the decisions of the association, and trust each other. The responsibilities and powers of the parties involved in the association must be specific, and the distribution of benefits must be fair, transparent, and harmonious among the parties involved (Mayers, 2000). However, while wood processing companies often prefer a long-term contract to ensure a stable source of raw materials for production and expected investments, forest growers often do not like this because they believe that a long-term contract will lock them out from other options they may pursue in the future (Nawir et al., 2003).
2.2.6.2. Results and effectiveness of the link
The results of the implementation of the forms of linkage are reflected through the quantity and quality of the linkage, or in other words, it directly reflects the status of the linkage implementation of the parties (Ho Que Hau, 2012). In this study, the quantity of linkage implementation is reflected through the scope and scale of the organization implementing the linkage. The quality of linkage implementation reflects the results in depth, including: the level of implementation of the obligations of the parties according to the commitments in the linkage contract; investment results, technical support; forest productivity, quality and GNL output obtained.
The effectiveness of the linkage is an important factor that determines the existence of the linkage (Simo & cs., 2020). The effectiveness of the linkage includes: economic efficiency, socio-economic efficiency (KT-XH). Within the scope of this thesis, due to limited resources and material resources, the thesis only focuses on evaluating the economic efficiency from the forms of linkage in the production and consumption of GNL for households participating in the linkage. This criterion reflects the purely economic efficiency of the linkage or the production and business results from the afforestation of households when participating in the linkage with the company. The indicators to evaluate the economic efficiency of the afforestation with linkage include: forest productivity and GNL output, costs and income from planted forests. Because afforestation is an activity that takes many years to produce a harvest, it can be considered a form of investment and we can use financial efficiency to analyze through indicators such as NPV, IRR, BCR. To see more clearly the economic efficiency from participating in the association, the study compared the increased income between households planting forests that participate in the association and those that do not participate in the association.