Export Capacity Assessment for the Vietnam Craft Sector
Aid to Artisans & Handicraft Research & Promotion CentreVietnam’s growing craft sector offers opportunities for traditional artisans across the nation to build livelihoods and preserve their cultures. It represents one of the top ten industries for export revenues in Vietnam, providing thousands of artisans with incomes and opportunities. In recent years, the Vietnamese Ministry of Industry and Trade has recognized the earning potential of handcrafts and set targets of US$1.5 billion in annual craft exports by 2010, with the US market being a major target market to reach this goal. This trend differs from just six years ago when Europe remained the largest source of export sales for Vietnamese handcrafts accounting for 44% of the market.1 However with the series of US-Vietnam Textile Agreements initiated in 2003, sales of Vietnamese handcrafts to the United States have increased making it “the number one importer for Vietnamese home decorations and handicrafts for the last three years [2003-07].”2 Although sales to the US have allowed Vietnamese craft exports to improve, artisans continue to face strong competition from China and Thailand. In addition, the declining U.S. economy has the potential to weaken craft exports to the United States eroding Vietnam’s current main export market.
Despite the Vietnamese craft sector’s sophistication and supportive government polices there is a continuous need to improve access to market information, product development services, production capacity and market linkages. In order to understand the necessary inputs to assist the Vietnamese craft exporters in reaching these targets, Aid to Artisans partnered with the Handicrafts Research and Promotion Center to conduct a study of the current Vietnamese craft export sector. With support from the Ford Foundation in Vietnam, an Aid to Artisans consultant conducted a marketing assessment of the Vietnamese craft export sector. This assessment was implemented in collaboration with the Handicrafts Research and Promotion Center and with the invaluable assistant of Le Bang Ngoc, HRPC Project Manager and Senior Craft Expert.Aid to Artisans (ATA), a non-profit organization, offers practical assistance to artisan groups worldwide, working in partnerships to foster economic development, improved livelihoods, cultural vitality and community well-being. Through collaboration in product development, business skills training and linkages to new markets, ATA provides sustainable economic and social benefits for craftspeople in an environmentally sensitive and culturally respectful manner. ATA’s uniqueness lies in its multi-faceted and holistic approach to artisan enterprise development, which is designed to provide sustainable economic and social benefits to artisans and their communities. ATA works with artisans across the globe and currently has 20 projects across four continents. ATA benefits 20-25,000 artisans per year through projects and grants (with 2/3 being women), and in FY07 leveraged more than $15 million in new sales for artisan businesses.The Handicrafts Research and Promotion Center (HRPC) is a Vietnamese non-profit organization which works in partnership with disadvantaged artisans and marginalized groups. HRPC focuses its efforts on developing the Vietnamese crafts sector to improve livelihoods and foster community development. HRPC promotes handcraft villages and works with disadvantaged people by providing development services such as product design, business skills training and market linkages.
The assessment was primarily done through interviews and stakeholder meetings with select exporters and craft development agencies. The focus of the interviews was on logistical infrastructure for local and export market access, products, artisan groups, input suppliers, such as raw material and packaging supplies, and potential partnerships. In conducting this research, the ATA consultant traveled to Hanoi for one week to conduct interviews with craft exporters and development organizations about the future of craft exports from Vietnam. The goal of this trip was to better understand the current needs and the challenges Vietnamese craft exporters and development workers face, particularly when working with poor, rural and minority artisans.
The environment in Vietnam is ripe for expanding craft marketing both on local and international levels. The country has a mix of traditional skills and factory production, as well as a blend of producers with production capacities to meet a variety of needs. Local programs and government sponsorships are targeting growth and are prepared to offer assistance to developmental organizations interested in developing the craft sector. The government is currently addressing long term sustainability issues and the international market is ready for more products and production from the range of producers that Vietnam has to offer.
Vietnam has a long tradition of creating beautiful and complex handcrafted items. The majority of these skills have lasted through the centuries in traditional village production and through incorporating them into modern, commercial production. Current handcraft production in Vietnam is not only a way for rural and ethnic minority artisans to generate income but it also serves as a form of cultural revitalization, safeguarding traditions and ancient ways of life. Vietnam hosts over 2,000 craft villages spread throughout the nation with the majority of these being in the northern region of the country. Artisans from these villages create traditional handcrafts in a range of media including ceramics, lacquer ware, silk, cotton and hemp weaving, embroidery, wood carving, bamboo, natural fibers and rattan products. The resulting products display the variety of skills and traditions that Vietnamese artisans possess and illustrate the deep and rich culture heritage of the nation.3
Vietnam has three primary types of producer groups that include the traditional craft village, factory production and ethnic minority artisans. Each group consists of a range of organizations which vary in size, corporate structure and production capacity. The consultant conducted interviews with a spectrum of businesses and developmental groups, both governmental and non-governmental. All of these groups from the most rural micro-enterprise artisan businesses to the large, sophisticated factory production units fall within the Vietnamese Government’s classifications of handcrafts.
The ethnic minority producer groups are comprised of artisans that use traditional skills to create products primarily for use within their own communities. These groups are mainly based in the northern region of Vietnam and are the most difficult to reach directly due to poor infrastructure. While no interviews were conducted directly with individual artisans from these groups, interviews were held with several Hanoi partners, including Craft Link4 and governmental development offices, who work with ethnic minority artisan groups.
Ethnic minority artisans have high skill levels and low production capacity. Language barriers, remote geography, lack of capital investment and inadequate business skills are significant issues with these groups. Several development and cultural revitalization programs are targeting these groups in an effort to preserve the traditional skills and culture of the region.
Craft Link has worked with groups of ethnic minorities for more than 20 years and has built their business employing these producers. Seventy percent of Craft Link’s production is fulfilled by ethnic minority groups and they have created a skills training program to continue to develop these artisans. Craft Link works with more than 56 producer groups employing over 5,600 artisans throughout Vietnam. They have been able to successfully link rural producers to export markets as well as maintaining several local stores and consignment venues in luxury hotels. Craft Link’s business structure contains two arms including both marketing and artisans/business development. Originally the organization began with external funding and support but is now able to support both the marketing and craft development arms of the business with incomes from sales of handcraft products.
The ethnic minority artisans, also known as hill tribes, are also being targeted for cultural revitalization through programs such as SNV’s (Netherlands Development Organization) pro-poor tourism development.5 These programs offer experiential travel in unique remote areas to visit indigenous groups. By providing commercial outlets for artisan made products and cultural experiences, SNV’s program hopes to create income for ethnic minority villages and revitalize their cultures. With the exception of a few buying groups such as Craft Link, most of the products from these tribes are for local and tourist consumption. Product development and external market access are limited to non-existent.
Traditional Craft Villages:
The traditional craft villages are a network of craft producing villages that were created to increase efficiency in the supply lines of handcrafts. The villages increase incomes in rural areas without a dependency on agriculture and decrease rural-urban migration. Each village was created based on the need for specific skills and/or products. There are approximately 3,000 of these villages which represent a wide range of products, skills and raw materials from silk to ceramics to woven natural fibers.
The villages that the ATA consultant visited in and around Hanoi are quite developed with tremendous production capacity. For example, Van Phuc Silk Village produces more than 2 million meters of silk annually. About 1,300 families in this village generate 90% of their income from the annual $6 million in regional sales. Most of the production done in these villages is sold to local and regional buyers, with some villages providing piecework employment for local factories. Product development support and innovation is limited within the villages and few of the groups have outside marketing programs. Most villages rely heavily on buyers looking for high volume production opportunities. The network of these villages is extensive and government export programs target them for international production. Many of these villages have good infrastructure for and experience with international packing and shipping requirements.
Factory production of handcraft is a growing sector in Vietnam. Large production facilities are being built in and around many traditional craft villages to further increase efficiency. The factories are coordinating production exclusively for export to western markets in the US and Europe and many are shipping hundreds, if not thousands, of containers annually to retailers such as IKEA, Pier 1, Wal-Mart, Williams Sonoma, Pottery Barn and Cost Plus.
The factories are using the traditional skills of the artisans within the villages to produce piece-work components for goods which are finished in the factory setting. Several of the groups the consultant visited had in-factory staff of more than 1,000 and village producers numbering 30,000 or more. All of the product and production falls within the governmental definition of handcraft creating stiffer competition for rural and traditional producers.
The factory production groups are the most sophisticated of all the producers and often exhibit products in international marketing venues and tradeshows. Since export markets remain their primary focus, local sales are an insignificant and sometimes non-existent factor in their business. Product development is primarily client driven and sophisticated. Additional product development implemented by the business itself is only conducted for showcasing skill sets at international venues.
The existing network of craft exporters is fairly extensive in Vietnam with the majority of “handcraft” export coming from the factory coordinated production of the traditional craft villages. Overall, all of the three producer group types require product development and improved market access in order to increase export sales. However, the specific training, product development and marketing needs of each group require immensely different inputs.
The ethnic minority groups require domestically based partners to successfully export due to barriers in communication and infrastructure. In this situation it would be best to work through and with a domestically based partner to provide basic skills and business development training as well as product development geared specifically toward the export market. These groups need assistance in developing marketing linkages and local distribution to the domestic retail market and regional distribution groups which would then export products. Although some national level organizations, such as Craft Link, are successfully exporting goods from ethnic minority artisan groups, the main markets for expansions include the tourist market and the domestic Vietnamese market.
The traditional craft villages and the factory producers offer the greatest opportunities for increased export sales. The Vietnamese Government has set targets for handcraft exports sales to increase in the next 5 years, reaching over $1.5 billion USD. These two groups have the capacity and business skills to work in an international environment. They are capable of timely and clear communication and possess computer, banking and business skills, although some groups lack full English language skills.
In order to increase export sales from traditional craft villages and factor production groups, they need high volume sales through exposure to the large international retailers and other high volume buyers. A plan for their expansion should include securing raw material supply lines through regional markets since resources in Vietnam are limited. Much of the current volume production involves raw materials that either have restrictions on procurement or sustainability issues. Wicker, rattan, bamboo and wood are in limited supply in Vietnam and their harvest is currently under government regulation. However, many of these restricted raw materials are now being imported from neighboring countries including Burma, China, Thailand and Cambodia where land restrictions are fewer and managed crops are available.
The traditional craft villages and factory product units can increase their market presence through improving their network of buyers and through direct selling opportunities such as tradeshows. There are regional tradeshow in Vietnam, Thailand and Hong Kong which focus on export sales and the Vietnamese Government even sponsors buyer participation from the US and Europe. In order for these organizations to increase their export sales they need to have a larger presence in international markets and increase their networks of buyers.