Plastics industry may not be as durable as its product

Despite high export growth in recent years, the plastics industry faces a number of difficulties including the need to import 80-85 per cent of raw materials and additives for production.

High interest rates on loans, technical barriers set by import countries, and a labour shortage are also slowing down export growth.

Speaking at a conference on the future of the plastics industry, Ho Duc Lam, deputy chairman and general secretary of the Viet Nam Plastics Association (VPA), said the industry from 2005-2010 experienced an annual growth rate of 20-25 per cent, making it one of the fastest-growing industries in Viet Nam.

However, high interest rates on loans and a rise in input costs have led to problems for many companies, especially small – and medium-sized firms, Lam said.

Nearly 20 per cent of the members of the association has stopped operating because of financial difficulties, he said.

More than half of enterprises involved in the plastics industry are small, with investment capital under VND1 billion (US$48,050).

As a result, they are often short of capital to expand production, trading, and import of raw materials.

In addition to trade barriers and high interest rates, a labour shortage has created an unhealthy market in which local firms are competing to attract workers.

Lam said the number of exports to the US and EU, the two largest markets for Vietnamese plastic products, had fallen in recent times because of economic uncertainty in both regions, as well as the US’s high anti-dumping tax levied on Vietnamese plastics bags and shopping bags.

Despite difficulties in the first half of the year, the industry still achieved 10-12 per cent growth in the period, Lam said, adding that Vietnamese plastic products are exported to more than 55 countries and territories.

He said export growth for the remainder of the year was not expected to be robust since many importing countries would impose technical barriers to protect local production amid global economic difficulties.

Speaking at the conference, Leon Chee, director of Dun&Bradstreet for the Asia-Pacific region, said the US was still an important market for Vietnamese plastics products, but that new export markets were needed to ensure sustainable exports.

The Middle East and Africa, for instance, have less strict standards and fewer trade barriers for exports.

Chee also promoted the use of IT tools with databases that companies can use to find more customers and suppliers and assess the credit risks of other companies worldwide.

Le Dang Doanh, former director of the Central Institute for Economic Management, said current difficulties in the industry presented an opportunity for companies to restructure, save costs, and change their products to raise operational efficiency.

At the conference, Le Quang Thang, deputy general director of Techcombank, announced that the bank would provide specific financial solutions for plastic companies to reduce their financial pressure.

It also promised to create the best conditions for plastic companies to access foreign currency sources to serve their trading, he said.

Last year, the country earned $1.49 billion from plastic exports. The figure is expected to reach more than $1.5 million, Lam said.

There are 2,000 firms involved in the plastics industry, employing more than 118,900 workers in the country.

The conference was jointly organised by the VPA, Dun&Bradstreet – a global business information provider and Techcombank. — VNS

Tags: Vietnam plastics industry