Foreign investors to catch opportunities from FTAs
Vietnam is considered a potential market for foreign investment in packaging industry, with the estimated average growth from 15 - 20%/year (Amcham Vietnam).
Foreign companies are penetrating the Vietnamese packaging industry through investment for factory building, expanding production or M&A deals with local enterprises to catch the subsidies from Free Trade Agreements which will come to effect in the coming time.
By the end of December 2014, Inataba Corporation (Japan) has launched its new packaging and plastic factory in Danang, with the value of 10 million US Dollars. Vina Kraft Limited Company (Thailand - Japan joint venture) has announced to invest 130 million US Dollars to double the packaging capacity (the current capacity is 243,500 tons/year) by the end of first quarter 2015. At the beginning of June 2015, a new USD10 billion biodegradable plastic bags factory is started to build up, under a joint venture of Vietnam Plastics Company (Vietnam) and Biodegradable Plastics Guangzhou (China). Most recently, SCG (Thailand) has committed to pay 44 billion US Dollars to buy 80% shares of Tin Thanh Packaging Company - the largest complex flexible plastic packaging manufacturer in Vietnam.
Foreign companies invest not only in finished packaging production, but also in other production chain such as materials and equipment supply or recycling activities. In 2015, Nine Dragons Paper Corporation (China), who are specializing in recycling paper production, will increase the capacity for the factory in Vietnam from 100,000 tons/year to 500,000 tons/year. Reifenhauser (Germany) - an equipment supplier for multi layer plastics has formally joint the packaging equipment market in Vietnam.
Vietnamese enterprises with individual efforts for competition
The main reasons for low profit of Vietnamese enterprises are a large number of big companies, low integration barrier, duplicated products, and fluctuation price of imported materials.
To maintain the market
share, it is vital for local enterprises to renovate and increase the
competitiveness. The reality has shown that there a few companies starting to
renovate through increasing the efficiency of production lines and business, as
well as investing for technology for better competition with foreign companies,
who reserves advantages in capital, technology and input materials.
Tan Tien Plastics and Rang Dong Plastics are two examples for renovation in capital and business strategy. Rang Dong Plastics company has pushed the diversification and export products, with the target to increase export sales from 7% to 9% in 2015. The company is in the process of implementing new competitive competence in quality and waste control. Meanwhile, Tan Tien Plastics has delayed its listed position in stock exchange market for restructuring; focusing on long-term relationships with big clients; improving after sales and customer services to gain good reputation; adjusting price to maintain the market share and profit. Besides, the company has agreed to invest 2.2 million Euros and 1,24 million US Dollars for equipment purchase to meet the market demand.
An Phat Plastics and Green Environment company - a leading thin packaging manufacturer in Vietnam - has actively building up the No. 5 plant, which focusing on biodegradable plastic bags through a modern production line to meet requirements of big exporting markets such as Japan and EU.
Small businesses focus on diversification in business strategy to compensate with the difficulties in capital and input materials, while still keeping the customers. Price competition is popular but more clever, such as commitment of price stability with shorter credit period to increase capital cycle. Companies also ask clients for order plan for better input materials estimation.
Although there isn’t a big change, those efforts of increasing competitive competence from local packaging companies has shown a good sign for the integration process of Vietnam plastics industry.
