Bottlenecks block the growth

About US$10 billion of investment capital, nearly US$8 billion worth of the output, an average growth rate of 25% over the past 20 years, a large number of orders, expanding markets and high consumption demand are factors that bring a bright future for Vietnam’s plastics industry. However, bottlenecks that hinder its development are still a big problem to deal with.

Bottlenecks

Materials are the first bottleneck, which has been accompanying the plastics industry during the process of its establishment and development. So far, Vietnam has yet to have the plastic materials production industry. More than 80% of the materials for the plastics sector must be imported while their prices depend on the oil price, which is unpredictable.

The domestic materials industry construction project remains at a snail’s pace. Among the three plastic-chemical complexes in Nghi Son (Thanh Hoa Province), Dung Quat (Quang Ngai Province) and Vung Tau (Ba Ria-Vung Tau Province), only the Dung Quat Polypropylene Plant, with a designed capacity of 150,000 tons per year, has come on stream since August last year. The Dung Quat Economic Zone Authority is also inviting plastics businesses to invest in building a plastics industry complex to exploit advantages in transport and production materials.

While the country waits for the appearance of a plastic-chemical industry, a long story of the next five to seven years, Tran Cong Hoang Quoc Trang, chairman of the Vietnam Saigon Plastics Association (VSPA), said materials for the plastics industry will still be imported. Last year, more than 1.6 million tons of materials were imported in return for the 120,000 tons of exported products.

Meanwhile, the plastics recycling industry, which can meet 20-30% of the demand for materials, has operated scatteringly. To date, no statistic of the number of plastics recyclers is available.

Vietnam Plastic Corporation has two plastics recycling projects, one in the north and the other in the south. These projects have, however, not yet been realized due to many reasons, mainly the shortage of clean materials. The scrap treatment and recycling complex in Long An Province, a project of Saigon Plastic Company, remains on the paper.

The second bottleneck is that investment capital and loan interest rate are too high. In addition, the shortage of electricity for production, increasing foreign exchange rates and U.S. dollar shortages cause difficulties for businesses.

Le Quang Doan, general director of Minh Dieu Production and Trading Co., said businesses will operate temporarily instead of investment for development if these difficulties are not removed soon. This is a taboo in production as “businesses will lag behind and lose markets if they don’t invest for development continuously,” he said.

Businesses are afraid that these short-term difficulties, if not being timely handled, will become long-term difficulties, obstructing their production.

Another bottleneck is the imbalance of the plastics sector. While developed countries focus on technical plastics production, Vietnamese businesses mainly produce household plastic utensils and packages. Among more than 2,000 plastics businesses in Vietnam, more than 700 specialize in packaging, some 900 in household plactic utensils and nearly 300, mainly foreign-invested, in technical plastics.

The future of plastics industry

VSPA has submitted to the HCM City People’s Committee a petition for dropping the loan interest rates for production to under 12% per year. “If the loan interest rate cannot be timely improved, the city government should proceed with the 2% interest rate support as in 2010 to maintain production,” says the petition.

In the domestic market, according to a survey conducted by VSPA, the public demand increases by 20% per year and the plastics industry is capable of supplying products as substitutes for imports.

To the foreign markets, plans to penetrate such markets as Laos, Cambodia, Australia, Thailand and Malaysia are being mapped out aside from expanding traditional markets—Europe, the U.S. and Japan.

In the plastics industry, there have been more and more alliances among businesses. More importantly, according to Trang, the second generation of leaders have been mature and are running companies with modern, professional management models.

The plastics industry is also boosting cooperation with the Japan External Trade Organization (JETRO) in its plans to take part in supporting industries. “These [supporting industries] are both a major market and the future of the plastics industry,” Trang said. – SGT

Tags: Vietnam Plastics, Vietnam plastics industry