REPORT ON VIETNAM PLASTIC INDUSTRY

Transcription

1 REPORT ON VIETNAM PLASTIC INDUSTRY Hanoi, August 2013

2 TABLE OF CONTENTS LIST OF TABLES INTRODUCTION CURRENT SITUATION OF VIETNAM PLASTIC INDUSTRY Arrangement and distribution of Vietnamese plastic enterprises Output Market and Export capacity Material sources Machinery and technology Machinery Technology Labor Development orientation and policy for plastic industry to Development orientation Gross output targets of plastic industry Value added targets of plastic industry Production targets of plastic products Plastic industry products proportions targets Plastic industry products export targets Development master plan to PP import tax SURVEY ABOUT PLASTIC PROCESSING TECHNOLOGIES IN VIETNAM Introduction Survey objectives Survey objects Survey tools Survey process The survey s main results Type of ownership Activity area Type of business Activity scope Staff Turnover

3 Export Capacity Current situation of processing technologies Plans for purchasing, equipment in next two years CONCLUSION

4 LIST OF TABLES Table 1. Distribution of companies by geographical area... 7 Table 2. Distribution of companies by product category... 8 Table 3. Plastic output and consumption index... 9 Table 4. Output of plastic products by main categories... 9 Table 5. Export turnover during the period Table 6. Export turnover by region (thousand USD) Table 7. Export turnover by (thousand USD) Table 8. Quantity and turnover of imported material in Table 9. Production capacities of some big domestic companies Table 10. Plastic materials imported into Vietnam Table 11. Plastic ry market size Table 12. Rubber and plastic ry (HS 8477). World exports to Vietnam Table 13. Imported s for plastic manufacturing Table 14. Labor of plastic industry Table 15. Gross output targets of plastic industry Table 16. Added value targets of plastic industry Table 17. Production targets of plastic products Table 18. Plastic industry products proportions targets (unit: %) Table 19. Plastic industry products export targets Table 20. Development master plan in period Table 21. Development master plan in period Table 22. PP import tax Table 23. Distribution of surveyed enterprises by type of ownership Table 24. Distribution of surveyed enterprises by region Table 25. Surveyed companies by form of ownership Table 26. Survey companies by type of plastic products manufactured Table 27. Surveyed companies by employees categories and form of ownership Table 28. Survey companies by turnover in the last three years (2010, 2011, 2012) Table 29. The ratio of exported product on total year production Table 30. Ratio of plastic technologies being used in surveyed companies Table 31. Surveyed companies by exporters Table 32. Surveyed companies by turnover category and new s purchased Table 33. Surveyed companies by form of ownership and new s purchased Table 34. Plans for purchasing, equipment in the next two years

5 1. INTRODUCTION The plastic industry commenced almost half a century ago in Vietnam; however, the production remained limited in compared to that of other countries in the region like Malaysia, Singapore, Thailand and China. In the 1990 s the output was on average equal to 380,000 tons and consumption hovered around 3.8 kg/person. With the economic reforms of the mid-90 s, plastic production boomed growing 20-25% each year while diversifying in quality and range. One of main reasons attributed to the plastic industry growth is a still low starting point, an average consumption per capita lower than of the region and the world. This is expressed by an average growth of over 20% in value and over 18.75% in production from 2006 until now. Plastic industry size is accounting for 4.48% of local whole industry and playing a role of an essential supplementary industry that needs development in state economy plans. Vietnam plastic industry is one of ten industries that are favored by the government for development priority due to its excellent and stable growth as above-mentioned, performing quite strong in exports activities and having good competitiveness over other regional countries. Vietnam s production output of plastics per capita kept on growing strongly, from 23.2 kg of plastic per person in 2005 to 42 kg per capita in At present, most of household plastics sold in supermarkets are local products and account for around 20% of the industry's total output. Another product category that has achieved strong growth and made up the largest production ratio (around 40%) is plastic packaging, nearly all of which is also locally made. Meanwhile, state owned enterprises typically produce also technical and construction items. In basic sectors such as daily-use household plastic products, domestic enterprises, especially small and medium sized ones (SMEs), are the major producers. Competition in the Vietnamese market is currently quite vigorous. Many companies are in the hands of Chinese-Vietnamese who procure supplies from family contacts living around the world. The Vietnamese government is encouraging their merger to cope with the increased competition after WTO entry. Vietnamese plastic products have been sold in 151 countries all over the world such as Japan, USA, The Netherlands, Germany, Cambodia, UK, Indonesia, and Malaysia, and so on. Last year, Vietnam s plastic export revenue reached nearly USD 2 billion, making an increase of 25% year on year. In addition to those already mentioned, some shortcomings of and challenges for the Vietnamese plastics industry can be identified as follows. The industry must import 80% of its materials and currently produces few high-technology products. Because raw materials, chemicals and additives represent between 60-70% of the production cost, the reliance on imports leaves the industry with only a marginal added value. The major plastic exporters to Vietnam are countries in the region, including Taiwan, Japan, China, South Korea and some Europe countries (Germany, Belguim, Italy and Austria). In 2006, the total imported of plastic materials was 1,747 thousand tons, worth nearly USD 3 billion and rising to USD 4 billion in

6 Furthermore, the plastic industry is facing difficulty, especially firms using PP as raw material for the production. Because plastics enterprises will bear import duty for plastic material Polypropylene (PP) from 2014, when the import tariff shall be increased from the current level of 0% to 1% in 2014, up to 2% in 2015 and 3% from 2016 onwards 1. Other challenges include the high ratio of unskilled workers, at 70-80% of the workforce and of SMEs which account for 80% of the total and lack capital to improve production. 1 Circular No.107/2013/TT-BTC of August 12, 2013, amending preferential import tax rates applicable to some commodities of headings 2707, 2902 and 3902 in the preferential import tariff 6

7 2. CURRENT SITUATION OF VIETNAM PLASTIC INDUSTRY 2.1. Arrangement and distribution of Vietnamese plastic enterprises The number of plastic corporations in Vietnam reduced sharply from 2,700 in 2006 to 1,400 in There are some main reasons led to this situation: - The development of the plastic industry led to strong investment in large enterprises. Small businesses do not have enough capacity so have to cooperate/merge together to be strong enough to compete with big business. - Due to economic crisis during last time also led to the situation that small businesses face with difficulties in accessing capital for development investment - The cost of production (including factors: price of input materials - technology, production costs) rise is also another cause of the reducing of the number of plastic firms. Due to the above reasons, in plastic industry there existed a conflict between a large numbers of companies with real capacity. Among plastic firms, only 6% are state-owned, but they represent about 25% of the total capital invested in the industry. State-owned companies tend to be larger, employing more workers and having greater total investments than their small or medium sized private competitors. The rest are foreign invested enterprises, which account for about 15% total number of plastic firms but having 40% of overall investments. As for private enterprise, some business having right investment for technology and the skills of the workforce have a noticeable development, but the number of these firms is very limited. In fact, private firms account for over 70% total number of plastic firms but having only 35% of overall investments. According to VPA report 2012 and Statistical Yearbook of Vietnam 2012, there are 1,400 firms operating in plastic industry. Most enterprises are located in the South of Vietnam. HCMC and the southern provinces contribute 83% to the total plastics production. Hanoi and the northern provinces account for 13% and the central region covers the remaining 4%. Table 1. Distribution of companies by geographical area Region Companies Share The North of Vietnam % The Middle of Vietnam 56 4% The South of Vietnam 1,162 83% Total 1, % Source: VPA, GSO 7

8 In the present structure of the plastics industry, packaging firms account for the largest proportion (39%) and they also represent the largest export ratio (accounting for 66%). Consumer group accounted for 22%, this group narrowed most compared to 2007 period. Construction group had strong growth in the years due to huge demand for construction at that time; however, this segment is facing many difficulties due to the freezing of the real estate market in the past few years. Technical plastics group accounted for 19%. Table 2. Distribution of companies by product category Companies Share Product category Packaging % 39% Consumer % 22% Construction % 20% Technical % 19% Total % 100% *Note: Packaging products include soft, stiff products such as shopping bags, cosmetic pots. Consumer products include chairs, tables, other furniture. Construction products include water pipes, water tanks, decoration, sheet, roof shelter. Technical products include high quality produces such as pressure pipes, cover of TV Source: VPA report 8

9 Number of companies by product category Packaging Consumer Construction Technical Product category 2.2. Output During period , Vietnamese plastic industry has grown at an average rate of 20% a year. The output raised from 1,880 million tons in 2007 to 4,500 million tons in 2012, consumption has grown steadily over the years, from 23,2 kilograms per person in 2006 to 42 kilograms per person in Table 3. Plastic output and consumption index Year (*) Output (thousand tons) 1,880 2,294 3,200 3,800 4,120 4,500 Output growth rate (%) Consumption index (kg/person/year) Note: * Estimated Source: Ministry of Industry and Trade In recent years, the output of Vietnam plastic industry has continued to grow, although at a slower pace, given the difficulties brought about by rising prices of petrol and materials. Table 4. Output of plastic products by main categories Year (*) Kind of products Volume (tons) Rate (%) Volume (tons) Rate (%) Volume (tons) Rate (%) Volume (tons) Rate (%) Volume (tons) Rate (%) Volume (tons) Rate (%) Packaging 714,400 38% 917,600 40% 1,328,000 41,5% 1,482,000 39% 1,627,400 39,5% 1,800,000 40% Consumer 488,800 26% 619,380 27% 896,000 28% 1,140,000 30,% 1,277,200 31% 1,440,000 32% 9

10 Construction 413,600 22% 481,740 21% 576,000 18% 646,000 17% 618,000 15% 652, % Technical 150,400 8% 160,580 7% 272,000 8,5% 342,000 9% 370,800 9% 382, % Others 112,800 6% 114,700 5% 128,000 4% 190,000 5% 226,600 5,5% 225,000 5% Total 1,880, % 2,294, % 3,200, % 3,800, % 4.120, % 4,500, % Note: * Estimated Source: Ministry of Industry and Trade and GSO Of the total plastic output in 2012, plastic packaging accounts for 40% while plastic consumer, construction materials, and technical account for 32%, 15% and 9% respectively Market and Export capacity Vietnam plastic exports has enjoyed a noticable growth since was a milestone of Vietnam plastic exports with the turnover of over USD 1.2 billion for the first time. Since then, export revenue kept on strongly growing to nearly USD 2 billion in This is considerable growth by Vietnam plastic industry, showing a strong recovery of plastic industry after the 2008 financial crisis, a positive sign of development for Vietnam plastic industry. Table 5. Export turnover during the period Year Export turnover (million USD) ,268 1,599 1,995 The growth rate (%) - 56% 23% 4.90% 31% 26% 25% Source: Ministry of Industry and Trade, Vietnam Custom 10

11 Vietnamese plastic products have been sold in 151 countries all over the world such as Japan, USA, The Netherlands, Germany, Cambodia, UK, Indonesia, and Malaysia, and so on. During last five years, Pacific Asia has still been the biggest market of Vietnam (nearly 60% in 2012). Europe market kept a stable ratio (around 28%). Table 6. Export turnover by region (thousand USD) Markets Export value Ratio (%) Export value Ratio (%) Export value Ratio (%) Export value Ratio (%) Export value Ratio (%) Pacific Asia 478, , , , ,167, Europe 260, , , , , America 172, , , , , Africa 10, , , , , Source: Ministry of Industry and Trade 11

12 Vietnam plastic export turnover to Italy is quite stable (around million USD). The export turnover to China has reduced significantly (from 247 million USD in 2008 to 26 million USD in 2012). Japan is still top-three importer for Vietnam plastic products. However, the export turnover has decreased sharply from 321 million USD to 143 million USD. This situation is the same with Thailand. The total turnover of Vietnam plastic products to Thailand declined from 137 million USD to 27 million USD. Table 7. Export turnover by (thousand USD) Countries United States of America 161, , , , ,357 Japan 321, , , , ,688 Netherlands 98,942 86,463 66,591 47,200 63,838 Germany 140, ,769 71,588 55,970 35,682 France 70,002 42,536 32,941 30,248 32,610 Thailand 137,903 79,457 46,139 30,061 27,156 Italy 22,693 28,618 23,728 32,751 27,079 China 247,608 97,514 55,584 34,670 26,010 Malaysia 58,536 48,139 34,144 23,997 24,719 Indonesia 140,836 84,710 44,525 19,259 13,191 United Kingdom 73,000 85,914 53,990 41,993 6, Material sources Source: Ministry of Industry and Trade Scarcity of locally produced raw materials poses itself as one of the main barriers to the stable development of the Vietnamese plastic industry in the long term, causing a heavy dependency on imports. As reported, domestic supply of raw materials can meet only 15-20% of the s demand (see more data at table 8). Therefore to feed this fast-growing sector, Vietnam has to import a huge quantity of raw materials and auxiliary chemicals. In 2012, import value of plastic materials reached USD 4 billion, twice as much as its export turnover. Because local petrochemical capacities could not meet fully domestic enterprises demand, domestic raw materials 12

13 can meet only 15-20% percent of the s demand and in fact 80% - 85% of raw materials should be imported from abroad. Table 8. Quantity and turnover of imported material in Year The quantity of imported material in VN (tons) Import value (thousand USD) 1,747,845 2,195,645 2,390,162 2,555,997 2,233,999 2,952,671 2,814,182 3,784,117 4,763,144 4,000,701 Source: Ministry of Industry and Trade Table 9. Production capacities of some big domestic companies Item Raw materials Producers Capacities Remarks 1 PVC Phu My Chemicals & Plastics Co. Ltd. TPC Vina Chemicals & Plastics Co. Ltd. 2 PP Vietnam Petro Chemicals Group 3 PET Formosa Taiwan - Hung Nghiep Co., Ltd. 4 EPS Việt Nam Polystyrene Co., Ltd 5 DOP LG VINA Chemicals JV Co. 6 BOPP film Youl Chon Vina Plastic JS Co. Formosa Taiwan - Hung Nghiep Co., Ltd. Total capacities of the two companies: tons/ year tons/ year 20% for export 80% for local suply tons/ year 30% for export tons/ year tons/ year tons/ year tons/ year Source: VPA 13

14 At present, Vietnam has imported over 30 categories of plastic materials served for production, in which PE and PP are the most imported ones. In 2012, PE was imported from 25 countries in the world with total imported quantity 544 thousand tons, worth 775 million USD. In which, Saudi Arabia is the biggest PE exporter to Vietnam, counted 33% of total PE imported. PP is the second largest imported material in plastic industry with 472 thousand tons, worth 701 million USD. Saudi Arabia still kept the position of top PE exporter to Vietnam, counted 22% of total PE imported. Table 10. Plastic materials imported into Vietnam Year Product label Imported quantity (Tons) Value (Thousand USD) Imported quantity (Tons) Value (Thousand USD) Imported quantity (Tons) Value (Thousand USD) Imported quantity (Tons) Value (Thousand USD) Imported quantity (Tons) Value (Thousand USD) PE 547, , , , ,775 1,016, ,182 1,218, , ,030 PP 495, , , , , , ,057 1,021, , ,170 Polyester 68, ,810 67,357 96,786 72, ,834 65, , , ,704 PET 61,225 85, , , , , , , , ,321 PVC 98, , , , , , , , , ,871 PS 80, ,470 77, ,688 90, , , , , ,987 ABS 48,178 96,997 63, ,415 69, ,359 78, ,994 87, ,670 EVA 45,495 90,909 48,746 73,576 56, ,489 57, ,889 66, ,816 Acrylic 32,732 59,483 40,369 71,343 55, ,730 53, ,792 60, ,397 Polyether 32,028 74,180 42,998 86,312 52, ,506 61, ,912 58, ,342 PC 18,282 51,914 19,875 44,364 30,050 84,833 35, ,249 40, ,493 PA 10,947 34,927 15,930 40,661 20,603 69,544 42, ,783 39, ,691 PU 37, ,414 38, ,608 49, ,146 47, ,441 34, ,066 Alkyd 25,951 45,627 30,294 45,376 32,643 52,448 32,277 61,166 33,918 66,614 EPS 28,011 44,007 36,467 44,256 46,863 69,838 40,656 67,698 30,516 48,064 Lacticacid PP 5,040 10,505 10,337 14,308 10,854 19,277 8,845 22,014 27,441 46,872 Amino 5,453 9,115 5,630 9,597 5,585 9,962 8,061 18,782 13,953 30,430 Silicone 6,457 30,013 5,567 27,128 8,255 42,454 9,545 50,984 13,653 75,768 Epoxide 12,679 32,248 11,677 25,163 13,395 37,753 14,873 52,873 12,727 48,980 Xenlulo & DX Styreneacrylonitrile (SAN) copolymers 9,183 29,448 9,957 31,404 12,292 40,469 11,753 52,990 12,437 49,302 6,915 12,430 6,746 8,768 7,318 14,163 7,966 17,490 11,888 22,586 PVAC 3,899 8,710 3,807 8,498 5,457 11,957 5,881 13,589 11,736 25,087 PVA 7,027 17,999 6,772 15,812 7,856 19,697 7,058 20,551 9,196 22,138 Melamine 6,536 10,314 6,998 9,881 12,362 15,862 13,526 17,096 8,199 10,953 Phenolic 5,481 10,494 7,164 12,186 7,454 15,116 8,027 17,696 8,008 17,966 14

15 Urea 11,107 12,452 9,532 10,420 5,205 6,503 3,602 5,879 7,121 8,549 Cumaron indene 4,205 7,009 5,009 6,678 5,414 8,143 5,770 11,063 6,110 12,300 VCM 1,128 3,425 2,117 6,997 3,580 12,551 3,358 13,539 4,436 13,605 PMMA 6,945 16,369 7,601 16,801 5,671 15,827 6,505 19,879 3,821 10,973 Natural Polymer Ionexchange resin 1,452 5,708 1,702 7,216 1,395 10,176 1,893 9,865 1,614 9,060 1,296 3,645 1,402 2,492 1,330 3,764 1,010 3,426 1,190 3,899 PTFE 479 5,055 2,271 4, , , ,929 Fluoropolymers nes 1,065 15, ,765 1,425 22,869 1,215 23, ,549 Other 20,221 41,507 15,037 27,653 21,582 46,335 24,398 58,254 20,957 49, Machinery and technology Machinery Source: Ministry of Industry and Trade/ Vietnam Customs Most of the capital equipment in the plastic industry is imported (from about 60 countries in the world). The majority of imported ry is from Asia countries (including Taiwan, Japan, China, South Korea) and Europe countries (Germany, Belgium, Italy and Austria). However, more than half of imported are out-of-date equipment. The total market for plastic ry in 2012 was approximately US$ 450 million, increasing from US$ 148 million in 2005 (3 times). Table 11. Plastic ry market size Year Imported plastic ry (USD) 148,625, ,177, ,994, ,130, ,223, ,687, ,452,630 Growth rate (%) - 119% 14% -34% 52% 16.50% 3.90% Source: Ministry of Industry and Trade 15

16 During the period , China has kept this 1st position in rubber and plastic ry exporters to Vietnam (nearly 30% of total imported value). Top-five exporters to Vietnam in 2012 are China, Japan, Taiwan, Korean (Republic) and Italy (from rank 7 th in 2007 to 5 th in 2012). Total exported value of this five countries to Vietnam in 2012 counted nearly 90% total imported value of Vietnam. Notingly, Slovakia (Slovak Rep.) imported rubber and plastic ry to Vietnam boosted from rank 45 th (588 USD) to top-ten exporter to Vietnam (3 million USD). Table 12. Rubber and plastic ry (HS 8477). World exports to Vietnam Unit: Thousand USD Country China 83, , , , , , Japan 54, , , , , , Taiwan 72, , , , , , Korea (Republic) 71, , , , , , Italy 5, , , , , , Malaysia 5, , , , , , Austria 1, , , , , , Germany 13, , , , , , Canada 2, , , , , , Slovakia (Slovak Rep.) , , United States of America 2, , , , , , Thailand 5, , , , , , India 1, , , , Singapore 1, , Switzerland , , , Mexico 1,

17 Others 3, , , , , , Total 325, , , , , , Technology Source: Ministry of Industry and Trade, Vietnam Customs In the period , along with the fast growth of the plastic industry, plastic firms have invested much to upgrade technology and ry. However, the percentage of modern technology is still simple and concentrated in the major enterprises only. Since 2005, many plastic processors in Vietnam have invested considerable money in upgrading their manufacturing equipment and ry to improve their products in terms of quality and design, thus being able to compete successfully in domestic and international markets. For instance, a few large firms are manufacturing high-quality and hi-tech plastic products by using advanced equipment and s imported from Germany, Italy and Japan. In average (during the period ), Vietnam imported 100 injection s, over 500 injection blow molding s and 200 extrusion s per year. Around 30% of imported s are new s and the rest (70%) are second-hand ones. Up to now, according to data from Ministry of Industry and Trade, there are about 10,000 injection s, extrusion s and injection blow molding s, including nearly 6,000 injection molding s, more than 3,000 blow molding s and nearly 1,000 extrusion s. Injection technology This technology is used to make plastic components and parts for the electronics, electrical power, motorbike and automobile industries. Among 6,000 injection molding s, 75% of them are the second hand used out-of-date technology (made from 2005). Around 1,000 injection molding s of them are of new generation. The total imported value of injection molding s of Vietnam increased from 50 million USD in 2007 to 76 million USD in Some main brands are currently present in the Vietnam market: Europe: Engel (Austria); Demag Battenfeld Boy- Krauss maffei, Arburg (Germany) America: Husky (Canada) Asia Mitsubishi, Niigata, Toshiba, Kawaguchi, Sumitomo, Nissei, Kurabe (Japan) Chen De, Chuan Tian, Hai Tian, Yue Hong, Jwell, Keewa, Dakelianshun (China) LG, Dongshin, Woo Jin, Jinhwa (Korea) Chuan Lihfa, Fu chu sin, Lien yu, Yanghing, Jonwai, Han Chang (Taiwan) Injection blow molding technology A large number of plastic product manufacturers in Vietnam are using injection blow molding s to produce plastic packaging products, including PET bottles and kegs. The total 17

18 imported value of blowing s decreased from 26 million USD in 2007 to 14 million USD in The main brands identified in Vietnam market include: Europe: Sipa (Italy); Sidel (France) America: Husky (Canada) Asia: Nissei - Placo (Japan), Kaimei - Parker (Taiwan), Sinco (Thailand); Hongzhen (China) Extrusion Technology In Vietnam, this technology is used for making such products as water drainage PVC pipes, water supply PE pipes, aluminum-plastic pipes, optic cables, PVC doors, frames, roofing, and wall coverings. This is a pellicle-blowing technology to make plastic packaging materials from pellicles. This technology is used for blowing polyethylene (PE), polypropylene (PP) bags and PVC pellicles. The total imported value of extruders increased slightly from 40 million USD in 2007 to 46 million USD in The main brands include: Europe: Amut SP (Italy); Battenfelf Kraussmaffei (Germany); Cincinati (Austria) America: PTI Plastic technical International GmbH, SMS Plastic Technology, Tecnomatic (US) Asia: Shin Kwang Engineering Co., (SK), Yarn Bang Electrical Machinery Co., ltd., SM Platek (Korea); Ka lien, Wuhan, Sen fa Machine Co., ltd (Taiwan); Koei Industrial Co., Ltd, Nissei, Sumittomo, Mitsubishi (Japan), Zhangjiagang (China). Table 13. Imported s for plastic manufacturing Unit: Thousand USD Imported s Injection-molding s 50,036 55,384 40,203 66,250 68,155 76,060 Extruders 40,769 54,977 26,457 34,325 51,708 46,794 Blowing s 26,016 10,197 12,983 15,360 16,474 14,091 Vacuum molding s and other thermoforming s Others s for rubber and plastic manufacturing 2.6. Labor 55,751 36,507 7,843 28,378 23,822 40, , , , , , ,578 Source: Ministry of Industry and Trade, Vietnam Customs In 2012, there are 1,400 plastic firms with around 130,000 labor, working in plastic industry, counted 1.8% of total labor working in manufacturing, 0.25% of total labor in Vietnam. Labor in private plastic firms counted 55.5%. Labor in foreign direct investment companies counted 42%. Labor in state owned enterprises counted 2.5%. During last time, although the plastic industry is considered having high growth, the plastic 18

19 firms are facing with a scarcity in labor supply, especially skilled labor that are able to using new generation equipments. In 2012, there are about 130,000 labors working in plastic industry but that 70% of plastic industry workers were unskilled, low professional skill, unable to operate modern equipments. This percentage is somewhat higher than the combined average of unskilled workers in other industrial sectors such as textiles, footwear Workers and engineers working in the plastic industry in Vietnam are trained from different mechanical engineering branches of universities and vocational school, there are no training institutions for this sector 2. Table 14. Labor of plastic industry Labor Total 107, , ,000 Skilled 22% 24.8% 27.17% Unskilled 78% 74.2% 72.83% SOEs 3.50% 3% 2.50% Skilled 27% 31% 33% Unskilled 73% 69% 77% Private 56.50% 55% 55.50% Skilled 17% 19% 21% Unskilled 83% 81% 79% FDIs 40% 42% 42% Skilled 29% 32.00% 35% Unskilled 71% 58% 65% Source: Ministry of Industry and Trade According to Human resource development planning of Hochiminh city (HCMC), there are four major economic sectors for the period , orientation for the period : electronics, information technology, food processing, chemicals rubber plastic and mechanics. HCMC needs 45,900 jobs. In which chemicals rubber plastic sector needs 10,800 employees. According to Ministry of Trade and Industry, the development orientation in the future for labor of plastic industry: Along with the focus training in the professional schools, plastic firms need to spend rational cost for retraining staff and technical employees, abroad if necessary. It is essential to effectively use advanced equipment, technology for high product quality and low production costs. Develop comprehensive strategic programs and plans in training managers and skilled employees. The training must be conducted in a wide scope to meet the immediate requirements, but also has plans to train for higher-skilled workers for the development in the future 2 In fact, recently, there are some training centers, colleges provide training courses relating: plastic chemical petrochemical but it is very few, and their number of students/trainees are small. 19

20 Capacity building for universities, colleges and vocational training to train good managers and skilled workers, meeting the growing needs for labor force in plastic industry. Develop training centers, vocational training for plastic industry. These centers operate with the support of enterprises and organizations at home and abroad. These centers are responsible for coordinating with professional units to formulate long term, short term, and thematic training programs to update knowledge and disseminate the latest domestic and international information for trainees Development orientation and policy for plastic industry to 2020 Production and consumption of plastic enterprises in the industry next time will be affected significantly from tightening monetary policy, decreasing public investment spending, as well as the grim situation of the construction industry and real estate. Under this curriculum, on 17 June 2011, the Ministry of Industry and Trade issued Decision no 2992/QD-BCT approving the planning on development of Vietnam's plastic branch until 2020, with orientation to According to this plan, Plastics export revenue is expected to reach US $2.15 billion and US $4.3 billion by 2015 and 2020, respectively; the growth rate is expected approximately 17.56% per year in the period , and, gradually reducing plastic packaging products and plastic consumer, increasing proportion of construction and technical plastics Development orientation Development of plastic industry shall be oriented to modernization, intensifying automation, gradually eliminating old equipment and technologies to substitute with world state-of-the-art equipment, new materials usage to ensure quality, safety, hygiene norms, meeting environmental criteria requested by Vietnam and the world. Plastic industry investment should go straight into modern technologies to create high quality products with low costs that could compete on domestic and world markets, ensuring ecological environment To mobilize all resources at home and abroad to focus on investment in plants producing materials, semi-finished products, chemicals, additives for plastic industry. Besides, to encourage investment in mold manufacturing, parts and the plastic industry; to encourage the development of waste and scrap plastic processing industry Gross output targets of plastic industry Table 15. Gross output targets of plastic industry Gross output of plastic industry at constant 1994 prices ,500 billion dong 3.74 billion USD 181,577 billion dong 8.65 billion USD 390,000 billion dong billion USD

21 Growth rate 17.56% 18.26% 16.52% Value added targets of plastic industry Table 16. Added value targets of plastic industry Added value of plastic industry at constant 1994 prices ,908 billion dong 0.52 billion USD 19,319 billion dong 0.92 billion USD 32,274 billion dong 1.54 billion USD Growth rate 12.75% 12.11% 10.81% Production targets of plastic products Table 17. Production targets of plastic products Production of plastic products Ratio of plastic in structure of the whole industry million tons 12.5 million tons 5.0% 5.5% 6.0% Plastic industry products proportions targets Table 18. Plastic industry products proportions targets (unit: %) Total in plastic industry Plastic packaging Construction plastics Household plastics Technical plastics Plastic industry products export targets Table 19. Plastic industry products export targets Export turnover (billion USD) Growth rate (%/year)

22 Development master plan to 2020 Table 20. Development master plan in period Targeted production capacity Total investment capital Plastic packaging 1,218 thousand tons 13,885 billion dong 0.66 billion USD Construction plastics 927 thousand tons 7,898 billion dong 0.38 billion USD Household plastics 702 thousand tons 6,571 billion dong 0.31 billion USD Technical plastics 853 thousand tons 15,354 billion dong 0.73 billion USD Table 21. Development master plan in period Targeted production capacity Total investment capital Plastic packaging 1,550 thousand tons 15,810 billion dong 0.75 billion USD Construction plastics 1,400 thousand tons 10,752 billion dong 0.51 billion USD Household plastics 750 thousand tons 6,480 billion dong 0.31 billion USD Technical plastics 1,300 thousand tons 20,280 billion dong 0.97 billion USD PP import tax Table 22. PP import tax onwards Import tax 1% 2% 3% Based on this plan, Ministry of Industry and Trade also offer appropriate solutions for each stage of development of the industry. And, the solutions for capital are the most important. Besides equity capital, joint-venture capital, plastics companies will be given priority to borrow loans from Government credit sources. The total investment for plastic industry in the period is estimated VND 241,066 billion. These funds focus for investment and expansion manufacturing, technological innovation and human resources. This is an opportunity for plastic firms to capacity building, increasing competitiveness. In order to remove difficulties for materials issues in plastic sector, the Government encourages foreign investors to participate in the production of plastic materials in Vietnam on the basis of domestic oil resource, creating favorable conditions for the cooperation for investors in petrochemical, chemical, plastics industry. The Government also creates favorable conditions for domestic enterprises to participate in the materials project for the plastic industry. Besides, the Government provides credit priority policies for the project in plastic pattern (borrowing 85% of the capital of the Bank for Investment and Development, providing guarantees to each specific project while borrowing foreign capital ). To encourage plastic 22

23 enterprises to develop, the State will provide tax priority policies, creating favorable conditions for the import plastic materials, innovation and science and technology transfer, human resource training, market expansion... According to the plan, in order to achieve the above objectives, capital accumulation from enterprises is expected about 28-30% of capital requirements for the industry development, credit loans counts 12-14% and FDI counts 30-32%. 23

24 3. SURVEY ABOUT PLASTIC PROCESSING TECHNOLOGIES IN VIETNAM 3.1. Introduction Survey objectives The same to the research in 2007, the 2013 survey aims at the following purposes: To define the reality of equipment and technology application in Vietnam plastic industry nowadays. To determine demand of equipment use of plastic enterprises in Vietnam in the coming future. To update records of 200 plastic enterprises in Vietnam for the purpose of market survey and analysis, sales and marketing strategy Survey objects Survey subjects are 200 plastic enterprises of all economic sectors in Vietnam, including stateowned, private and foreign-invested enterprises. Based on the experiences from the previous survey and current situation, the survey team sorted out the list of interviewed subjects according to the following requirements: Prefer enterprises ever participated in 2007 survey Enterprise established by Enterprise Law of Vietnam Having factory/plants meeting national standard Applying the following technologies: injection molding, blow molding, extrusion Belonging to one of the 4 main sub-sectors applying the above-mentioned technologies, i.e. packaging materials, consumer, technical and construction plastic production Survey tools Desk study This method helps collect and analyse current situation of plastic industry in Vietnam, general information of plastic enterprises from secondary data/information, existing researches, surveys or articles. Telephone interview The telephone interviews are intended to check the existing/validity of plastic enterprises and collect some general information. The plastic enterprise list was provided by ICE (from the 2007 research). On that basis, the first, the survey teams checked address of SMEs through directly telephone or . About 50% of these 200 plastic enterprises in the list has changed address or dissolved or do not want to attend the interview. The interviewers had to search for exact address or alternative enterprises. 24

25 Survey and directly interview based on questionnaire A questionnaire is built to collect information on plastic enterprises in Vietnam with specific eyes on their (i) general information of enterprises (Name, address, telephone, establishment year, number of staff, enterprise type, turnover, plastic consuming rate, output capacity, etc...); (ii) Plastic production technology of plastic enterprises; (iii) their equipment/ry (see attached sample). This questionnaire is the same to questionnaire in 2007 survey. Sample questionnaire is provided in Annex - Questionnaire Survey process Desk study Literature findings Survey preparation Logistic for the survey Provide training for interviewers Check enterprise list Adjusted list Conduct field survey in HCMC, Binh Duong, Long An, Dong Nai, Soc Trang, Tay Ninh, Ba Ria, Vung Tau, Hai Phong, Hanoi, Bac Ninh, Quang Nam Survey teams 200 questionnaires collected Data entry and analysis Report Interviewers were divided into survey teams in 3 corresponding regions. Each team was trained to clearly understand the survey content. The questionnaire was collected and checked the validity twice. Providing that there was any missing, unclear, illogical information in the questionnaire, interviewers were requested to re-interview. Total 200 plastic firms were interviewed. Collected data was entry by Excel and processed using statistical software SPSS The survey s main results With the preferred list of about 300 enterprises, the interview team has directly interviewed 25

26 200 ones. The majority outcome performed in this part has been based on the data taken from these 200 questionnaires Type of ownership In order to collect general information about the plastic industry of Vietnam, selected plastic firms in the survey were divided by type, sector and scale. Though this is the survey, efforts have been made to represent the key features of plastic firm community in Vietnam, thus showing the business views about plastics development relatively accurately with a sample of 200 hundred enterprises. Regionally, the survey respondents corroborate the overall picture of plastic firms in Vietnam. Table 1 showed that the survey covers 71 percent private firms, 18.5 percent foreign direct investment companies (FDI) and 10.5 percent state-owned enterprises (SOE). This pattern is relatively similar to the data from Ministry of Industry and Trade on the plastic sector. This has reflected the current development tendency of the Vietnamese economy during last decade: that is the strongly participation of the private and the foreigner business in the economic growth of Vietnam. Table 23. Distribution of surveyed enterprises by type of ownership Type of ownership Number of companies Ratio FDI % SOEs % Private % Total % Source: CONCETTI Plastic Companies survey in Activity area As mentioned, about 83% of plastic enterprises are located in Southern provinces. Therefore, this survey has also concentrated in this region with 86% units in the South of Vietnam. Table 24. Distribution of surveyed enterprises by region Region Surveyed enterprises Ratio % Southern provinces % Northern provinces % 26

27 Central provinces 3 1.5% Total % Source: CONCETTI Plastic Companies survey in Type of business The survey data also revealed that 73 percent in the sample firms are limited liability companies. Joint stock companies have occupied the portion of 25 percent, while private companies only achieved a ratio of 2 percent. Table 25. Surveyed companies by form of ownership Type of business Number of companies Ratio % Limited liability % Joint stock 50 25% Private 4 2% Total % Source: CONCETTI Plastic Companies survey in Activity scope More than 47 percent of the survey respondents are engaged in the plastic packaging sub-sector, key product of Vietnamese plastic industry (nearly 40 percent of total plastic firms in Vietnam 27

28 operate in this packaging). More than 23 percent are involved in consumer/household plastic, while 16.5 percent of 200 firms operate in industrial plastic, and 12.5 percent in pipe. Table 26. Survey companies by type of plastic products manufactured Types of plastic products Number of companies Ratio % Packaging % Consumer % Industrial % Pipe % Total % Source: CONCETTI Plastic Companies survey in Staff The surveyed plastic enterprises are concentrated in the labor force categories of medium (from staff) and small (under 200 staff) sizes 3. The survey data also revealed that nearly half of responding enterprises can be considered small enterprises with less than 200 employees (43.5%). 24 percent of firms can be considered medium enterprises with 200 to 300 employees. 32.5% firms are large firm more than 300 employees. Meanwhile, the labor rate of the 37 foreign direct investment (FDI) enterprises belong mostly to the groups of staff, staff, and 500-1,000 staff equivalent with the ratio of 35.1%, 16.2% and 18.9%. The same to FDI, the state owned enterprises (SOEs) enterprises are concentrated in the group staff with 35.1%. Firms with 500 to 1000 employees counted 24%. Firms with 300 to 500 employees and over 1,000 employees equally distributed with 19 percent of the sample. Private companies are slightly more concentrated medium labor force scale category (under 200 employees) which accounts for 53.5% of the total of 142 private companies surveyed enterprises. Surprisingly, 3.5% of private companies have over 1,000 staff. 3 Decree No. 56/2009/ND-CP of June 30, 2009, on assistance to the development of small and medium-sized enterprises 28

29 Table 27. Surveyed companies by employees categories and form of ownership Type of company Private company Under 100 staffs staffs staffs Number of employees Staffs staffs over 1000 staffs Total 25.4% 28.2% 19.7% 12.0% 11.3% 3.5% 100.0% FDI 10.8% 16.2% 35.1% 16.2% 18.9% 2.7% 100.0% SOE 0.0% 4.8% 33.3% 19.0% 23.8% 19.0% 100.0% Source: CONCETTI Plastic Companies survey in Turnover Table 27 shows turnover in the last three years ( ) of a firm in the survey. An average firm has around 36 million USD of turnover for the period As mentioned in the first part of this report, only 6% of plastic firms in Vietnam are stateowned, but they represent about 25% of the total capital invested in the industry. Nearly 95% of surveyed SOEs have three years turn over more than 1 million USD, and 30% have three years turn over more than 100 million USD. More than half of surveyed FDI firms have three years turn over from 1-30 million USD, 43% of them have three years turn over from 30 to 100 million USD. More than 70% private companies have three years turn over from 1 to 30 million USD. Surprisingly, 6.3% of surveyed private companies SOEs have three years turn over more than 100 million USD. 29

30 Table 28. Survey companies by turnover in the last three years (2010, 2011, 2012) Type of company Private company Under 100 thousand USD thousand USD Turnover in the last three years thousand USD 1-30 million USD million USD million USD over 100 million USD Total FDI SOE Total Source: CONCETTI Plastic Companies survey in Export Capacity Not very different to the survey in 2007, 46% sell their products only in the domestic market, 38% enterprises export under 50% of their annual quantity of products, 12% enterprises export more than 50% of their annual quantity of products and only 4% of enterprises have exported all their products. Table 29. The ratio of exported product on total year production Export Share on total year production Number of companies Ratio % 100% domestic % <50% % >50% % 100% export 8 4.0% Total % Source: CONCETTI Plastic Companies survey in

31 Current situation of processing technologies More than half of 200 surveyed plastic firms used multi-technologies (56.5%). They applied injection molding, blow molding, extrusion at the same time. 23% of surveyed firms used only extrusion technology. This figure is 15% with injection molding and 5.5% with blow molding. Table 30. Ratio of plastic technologies being used in surveyed companies Technologies Number of companies Ratio % Blow Molding % Extrusion % Injection molding % Other (use both Injection molding and/or Blow Molding and/or Extrusion ) % Total % Source: CONCETTI Plastic Companies survey in 2013 Currently, most of companies used s from various countries. The main foreign suppliers of the plastic processing ry to the surveyed firms are from the regional countries such as Taiwan (160/200 companies are using s from Taiwan), China (106/200), Japan (65/200). There are 20 companies among 200 surveyed companies used s from Italy and 9/200 companies used s from Vietnam. Table 31. Surveyed companies by exporters Countries Number of companies Taiwan 160 China 106 Japan 65 South Korea 43 Italia 20 31

32 Germany 20 Vietnam 9 Others (America, Austria, Australia, Canada, Denmark, France, Hongkong, India, Malaysia, Swiss, Thailand) Source: CONCETTI Plastic Companies survey in 2013 There is a relationship between the company turnover with the percentage of new s purchased. Nearly 70% of firms have over 100 million USD of three years turnover have 100% new s. This figure decreased gradually with each group: 63% of the group having million USD of turn over, 50% million USD, 32% million USD. Only group having turnover under 1 million USD have 100% second-hand s with 10% of surveyed companies. 36 Table 32. Surveyed companies by turnover category and new s purchased Turnover in the last three years Under 1 million USD 100% new s New s purchases > 50% new s <50% new s 100% secondhand s Total million USD million USD million USD Over 100 million USD Total Source: CONCETTI Plastic Companies survey in

33 Disaggregating by type of ownership shows a wide discrepancy. 86.9% of surveyed FDIs have 100% new s purchased. Interestingly, more than 90% of private companies have more than 50% new technology new s purchased, of which 30% of private companies have 100% new s purchased. None of surveyed SOEs have 100% second-hand s. Table 33. Surveyed companies by form of ownership and new s purchased Type of company 100% new s New s purchases > 50% new s <50% new s 100% secondhand s Total Private company 30.3% 62.7% 6.3% 0.7% 100.0% FDI 86.5% 10.8% 0.0% 2.7% 100.0% SOE 28.6% 71.4% 0.0% 0.0% 100.0% Source: CONCETTI Plastic Companies survey in

34 Plans for purchasing, equipment in next two years One of the top issues for this survey is plan for purchasing, equipment in , whether they intend to undertake any activities to renovate and develop technology/equipment. As Table 32 displays, firms appeared to have different plans to different activities. One third of respondents (32%) planned to buy /equipment in the next two years. Not surprisingly, two thirds of respondents (68%) did not plan to purchase /equipment in the next two years. It is reasonable in the context of difficulties currently. Of which, 43% of surveyed SOEs intended to buy s/equipment, follow by private company with 35% of them planned to buy /equipment. Few FDIs planned for purchasing equipments with 16.2%. Table 34. Plans for purchasing, equipment in the next two years Type of companies Having plans on buying equipments Not having plans on buying equipments Total Private company FDI SOE Total Source: CONCETTI Plastic Companies survey in