As plastic sector booms, Vietnamese firms are easy prey
Release Date: July 6, 2018
Major Vietnamese plastics firms are being taken over in a big way by foreign firms from Thailand, Japan and South Korea.
In April, Thai business conglomerate Siam Cement Group (SCG) acquired over 50 percent of shares in Binh Minh Plastics (BMP), a big player in Vietnam’s plastics industry. Previously, SCG had already poured in $121 million to acquire seven other Vietnamese plastics firms, according to local media reports.
Japan is also gearing up to conquer Vietnam’s plastics sector. Japan-based Sekisui Chemical has become a strategic partner in Tien Phong Plastics, acquiring 25 percent of the company’s shares last year, and Japan’s Meiwa Pax Group has paid $16.5 million to buy HCMC-based packaging firm Sapaco.
South Korea firms have also jumped into the fray, with packaging firm Dongwon Systems acquiring over 97 percent of Tan Tien Plastics in 2016. Tan Tien is a frontrunner in Vietnam’s packaging industry, and a major partner for several big companies operating in Vietnam, such as Unilever, Ajinomoto, Trung Nguyen or Vinamilk.
Vietnam has become a ripe destination for foreign firms because the plastics industry has been booming. For the last 3 years, it has grown by 15-17 percent each year.
In 2016, Vietnam housed over 2,000 firms in the country. The annual per capita consumption of plastics in Vietnam is around 41 kilograms, according to Vietnamese securities firm Vietcombank Securities. That number is projected to increase to 45 kilograms per person in 2020, according to the Vietnam Plastics Association.
“Vietnam’s plastics sector has great potential to grow,” said Kubo Hajime, a management board member of Sekisui Chemicals.
Vietnam’s cheap labor and material costs is also an advantage, economist Dinh The Hien told local media. He said the fact that Vietnam is part of several trade agreements, most notably the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, helps.
Vietnamese plastics firms lack the necessary capital, technology and high-skilled labor required to compete in an increasingly tougher market, said Ho Duc Lam, President of Vietnam Plastics Association.
“Another problem for Vietnamese plastics firms would be high production costs, which leads to high prices,” he said.
Vietnam needs to focus more on targeting the right customers with the right products to compete, an unnamed representative of a Vietnamese plastics firm said.
“We would also need to invest more in technology and machinery to upgrade our assembly chains, thus increase our product quality and reduce production costs,” he said.
Last year, the plastic sector recorded an export value of over $3 billion, a year-on-year increase of 17.6 percent.
Read more: https://e.vnexpress.net/news/business/as-plastic-sector-booms-vietnamese-firms-are-easy-prey-3758024.html
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