Many large local players in the plastics sector are gradually falling into the hands of Thai, Korean and Japanese firms. (Photo: plo.vn)
Hanoi (VNA) - The massive increase in the number ofM&A deals involving foreign investors is putting pressure on Vietnam’splastics industry.
Many large local players in the plastics sector are graduallyfalling into the hands of Thai, Korean and Japanese firms.
According to the Vietnam Plastics Association, in 2017, thetotal value of plastics exports in Vietnam reached over 3 billion USD, up 17.6percent over 2016.
Thailand’s Nawaplastic Industries (Saraburi) Company, anaffiliate of Thailand’s SCG Group, has officially announced plans to increaseits stake in the Bình Minh Plastics Company (BMP), a leading firm in Vietnam’splastics industry, to 51.10 percent.
SCG Group also plans to invest up to 6 billion USD to strengthenits position in the Vietnamese plastics industry from now until 2020. Notably,SCG had also spent 121 million USD on shares in seven Vietnamese plasticcompanies.
Besides BMP, another leading player in the plastic industryis Tien Phong Plastic Joint Stock Company (NTP). Japan-based Sekisui ChemicalCompany has replaced SCG to become NTP’s major shareholder.
Ho Duc Lam, Chairman of the Vietnam Plastics Association(VPA), told Phap luat Thanh pho Ho Chi Minh (HCM City Law) newspaperthat Thailand is gradually penetrating the Vietnamese plastics market withprofessional distribution systems. For example, Thai plastic products aregiven priority of distribution at the wholesale centres of the Metrosupermarket system across Vietnam.
In addition to Thai firms, Korean players are also eyeing theVietnamese plastics market. After acquiring Minh Viet Packaging Companyfrom Masan Group, Dongwon Systems Corporation of the Republic of Korea hascollected shares of Tan Tien Plastic Company in the market.
Tan Tien is one of the leading units in the field ofcomposite packaging for the food industry, with an average annual turnover of 1.3-1.5trillion VND. Most of Tan Tien’s customers are big names such as Unilever,Ajinomoto, Acecook, Trung Nguyen and Vinamilk.
Korean Dongwon has become a major shareholder of Tan Tien,holding a 97.83 percent stake. After acquiring Tan Tien, key positions onthe company’s board of directors were replaced by Koreans.
Japanese firms are also showing their interest, with manyM&A deals made. Japan-based MeiwaPax Group spent 16.5 million USD buyingSai Gon Trading and Packaging JSC (Saigon Trapaco). Another Japanesecompany, Oji Holding Corporation, acquired United Packaging CompanyLimited in Vietnam. Sagasiki Vietnam bought Goldsun Printing and Packaging JSC.
The massive influx of investment from foreign investors intothe plastics industry, according to economist Dinh The Hien, is aimed at takingadvantage of investment incentives for land, taxes and materialprices, energy, as well as cheap labour to save costs and achieve the bestprofit.
Vietnam’s participation in a series of free trade agreementshad also brought advantages to foreign businesses, Hien said.
"With the strong capital injection into the plasticsindustry, foreign companies are taking advantage of the value chain from inputto output that they have built in Vietnam. For example, Thais have set upplastic factory systems and a wide distribution network in the country.
This puts high pressure on local companies, especially in thecontext that the majority of Vietnamese plastic enterprises are always short ofcapital, technology and qualified human resources.
The difficulties faced by local companies also come from adependence on imported raw materials. The plastics industry alwaysrequires high operating costs for production, therefore, if external factorssuch as exchange rates, interest rates and import tax policy suddenly change,the firms’ profits will immediately be hurt,” VPA Chairman Lam said.
To stand firm in the market, a representative of Rang Dong PlasticCompany said it was trying to change.
“Our current strategy is to identify the target product andtarget customers. In order to approach fastidious customers, we invest intechnology, machinery and equipment at each stage of production so that theproducts have high accuracy in terms of size and low price, thus enhancingcompetitiveness,” the representative said.
According to the VPA, consumption of plastic per capita willincrease to 45 kilograms per person per year by 2020, equivalent to a growthrate of 4 percent per year. The real estate and construction sectors willcontinue to recover in the coming years, promoting plastic products used inconstruction.
According to the Ministry of Industry and Trade, manyVietnamese plastic companies have imported the most advanced technologies inthe world to produce products that meet international standards so as toqualify their products for export to fastidious markets such as Europe, the USand Japan.-VNA
VNA
