Developing forest for large-sized timber faces insurance-related barriers

Many businesses in the central province of Binh Dinh are looking to expand areas for growing large-sized timber to ensure wood supplies for processing, but are facing difficulties related to agricultural insurance.

According to Mr. Le Minh Thien, Chairman of Binh Dinh Timber and Forest Products Association (FPA), the province has more than 100 large and small enterprises operating in the wood-processing industry. 

Due to not being proactive in domestic raw materials their importation of raw wood are now up to 80%, adding pressure on production costs, not to mention many countries around the world are implementing forest closure policies, making the supply of material wood more scarce.

Another shortcoming of raw wood importation is that businesses have to accept risks concerning timber quality and origin certification. Moreover, wood exporting countries have recently been subject to many constraints by regulations on environmental protection. The price of wood is therefore constantly increasing while its supply is decreasing.

“The wood processing industry is defined by a need for raw wood to be prepared for three months in advance to ensure good quality production. However, in the current context, the price of raw wood has increased by 10-30% and the supply chain is once again broken. This will affect the production of the wood industry in the first months of 2022. 

"It’s necessary to solve the problem of the shortage of raw materials for the wood processing industry in the coming time. Locally-planted forest wood could be a solution. Binh Dinh is a province with strong afforestation. If large timber forests are developed the problem of raw wood will have a solution," said Mr. Thien.

Binh Dinh currently has nearly 120,000 ha of planted forests. Nearly 10,000 ha of new trees are logged and planted every year. This is the foundation for the province to develop large-sized timber forests.

Realizing the urgent need for the expansion of large timber forests to meet the raw material demand, Binh Dinh has devised a scheme to develop large timber plantations. 

It is expected to meet half of the demand for raw materials for the wood processing industry in the province by 2025 and in effect meet the entire demand for raw wood by 2035. 

“Binh Dinh will strive to increase the productivity of planted forests to an average of 25-30m³/ha/year for large timber trees. It also wants to improve the quality and productivity of planted forests to achieve large timber reserves of 190-240m³/ha for 12-year plantations and 100-120m³/ha for 7-year plantations. The average volume of large timber is 50-60%,” said Mr. Ngo Van Tong, Director of Binh Dinh province’s Department of Industry and Trade.

According to the province’s Department of Agriculture and Rural Development, three units in the province are planting large-sized timber forests and have their forests converted into large timber plantations. They are Quy Nhon, Ha Thanh, and Song Kon Forestry Company Limited with a combined area of ​​nearly 2,700 ha.

Under the project of developing large timber forests in the area with an orientation towards 2035, Binh Dinh will have 30,000 ha of large timber forests granted certificates of sustainable forest management (FSC). 

At the moment in Binh Dinh Province, Quy Nhon Forestry Co., Ltd has 4,183.6 ha of forest certified by GFA (a German organization) and Ha Thanh Forestry Co., Ltd has 1,500 ha of planted forests that are implementing FSC.

Once large timber forests have been developed with tree growth of up to 10 years, forest owners are most afraid that the trees will be damaged by storms and wildfires. Therefore, to protect the planted forests, most of the large timber plantation businesses and households are now eager to buy plantation insurance under agricultural insurance policies.

Mr. Nguyen Ngoc Dao, Chairman of Song Kon Forestry Co., Ltd in Binh Thanh District said that the company planned to plant 700 ha of new large timber forest, and so far has grown 200 ha. 

"Large timber forests need long-term investment, so the company needed capital, when they mortgaged the forest to the bank for a loan, the forest needs to have insurance.

"However, insurers did not agree to pay compensation for forests that are damaged by storms, only for forests that are damaged due to pests and diseases," he said.

Regarding forest fires, if the forest is burned by humans, agriculture insurance will not cover it. Only forests burned by lightning strikes will receive insurance.