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Communities Forests

Linking Smallholder Plantations to Global Markets

Lessons from the IKEA model in Vietnam

By Nguyen Vinh Quang, To Xuan Phuc, Nguyen Ton Quyen, Cao Thi Cam
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Export-oriented wood processing companies in Vietnam are increasingly entering into legally-binding contractual relationships with the small household producers that are the major source of domestically-grown plantation timber. This relationship maximizes the comparative advantage of each party: processing companies provide investment capital, technical capacity, technology, management ability, and a guarantee to buy all (qualified) harvested timber; households provide land and labor.

One of the best examples of this “linkage model” is the partnership between households in Vietnam’s mountainous areas and companies that specialize in processing wood products for the IKEA Group (hereinafter “IKEA”). This study assesses the IKEA linkage model, with a particular focus on its economic, social, and environmental impacts. From September 2016 to March 2017, report authors conducted interviews with (i) representatives of IKEA in Vietnam, (ii) wood processing companies responsible for manufacturing products (generally, furniture) for IKEA, (iii) Chain of Custody (CoC) sawmills processing FSC-certified material from households to the wood processing companies, and (iv) plantation households in Quang Tri, Yen Bai, and Tuyen Quang provinces that supply the FSC-certified timber. Information was also collected from local authorities providing administrative support, including the Forest Protection Departments, District Farmers’ Unions, and Commune People’s Committees in Phu Tho, Tuyen Quang, Yen Bai, and Quang Tri provinces.