Surprised by the export growth of the plastic industry!

Vietnam’s plastic industry, despite the challenges posed by the Covid-19 pandemic in 2020, demonstrated remarkable resilience and growth. The industry’s export of plastic materials and plastic products brought in an impressive $5 billion USD in export turnover. This performance underscores the vital role of the plastic industry in Vietnam’s economy, reflecting its potential and the strategic importance of its products in the global market.

The plastic industry in Vietnam encompasses the production and export of both plastic materials and finished plastic products. In 2020, the industry achieved significant milestones, with exports reaching $5 billion USD. Specifically, the export of plastic materials reached 1.45 million tons, valued at $1.35 billion USD, marking a 24.3% increase in volume and a 6.5% increase in value compared to 2019. Meanwhile, the export of plastic products generated over $3.65 billion USD, representing a 6.35% increase from the previous year.

This impressive growth in the plastic industry’s export revenue highlights the sector’s robustness, even amidst global economic disruptions. However, it also brings to light the dominance of foreign direct investment (FDI) enterprises in this industry. Despite the $5 billion USD in revenue, a significant portion of this, particularly in the export of plastic products and materials, is controlled by foreign investors.

For example, of the $3.65 billion USD generated from the export of plastic products, FDI enterprises accounted for 66% of this total export turnover. Similarly, in the realm of plastic materials, FDI enterprises exported 889 thousand tons, valued at $883 million USD, reflecting a 21.8% increase in volume and a 2.8% increase in value compared to 2019. This export volume accounted for 65.5% of the total export value for this commodity group, emphasizing the strong influence of FDI in the plastic industry.

The 2020 Import-Export Report revealed that Vietnam’s plastic products were predominantly exported to key markets such as the United States, Japan, and the European Union (EU). The United States emerged as the largest market for Vietnam’s plastic industry exports, with products valued at $1.1 billion USD, a substantial increase of 58.9% compared to 2019. This accounted for nearly 30% of the total export turnover of plastic products. The Japanese market followed, where exports of plastic products amounted to $672.9 million USD, although this represented a 7.3% decrease from 2019, accounting for about 18.4% of the total plastic export turnover. The EU market, another significant destination, saw exports valued at $458.1 million USD, marking a 3.6% decline from the previous year.

Japan’s annual import demand for plastic products exceeds $10 billion USD, positioning it as a potential growth market for Vietnam’s plastic industry. Given the substantial demand, Vietnam’s plastic industry is well-placed to expand its market share in Japan, provided it can navigate the challenges and leverage opportunities within this competitive market.

A notable aspect of Vietnam’s plastic industry is the significant involvement of FDI enterprises, particularly from Thailand. These investors have made substantial inroads into the industry through mergers and acquisitions (M&A). For instance, Siam Cement Group (SCG) from Thailand has been steadily increasing its control over both the upstream and downstream sectors of Vietnam’s plastic manufacturing industry. SCG has achieved this through strategic share purchases in prominent Vietnamese plastic companies, such as Duy Tan Plastics, Bien Hoa Packaging, and Binh Minh Plastics.

One of the most prominent deals in recent years was SCG’s acquisition of a 70% stake in Duy Tan Plastics, one of Vietnam’s leading enterprises in the rigid plastic packaging market. Duy Tan Plastics serves major multinational corporations as well as domestic fast-moving consumer goods (FMCG) businesses. In 2020, Duy Tan Plastics reported revenue of 4,700 billion VND (equivalent to 6.1 billion baht), with total assets amounting to 5,000 billion VND (6.5 billion baht) by the end of the year. The company boasts an annual production capacity of 116,000 tons of rigid plastic packaging and household plastic products.

The acquisition of Duy Tan Plastics significantly bolstered SCG’s presence in the Vietnamese plastic industry. With this addition, SCG’s packaging segment expanded to include eight companies, with total revenue for this business segment surpassing the 10,000 billion VND mark. This expansion underscores the growing influence of FDI enterprises in Vietnam’s plastic industry, particularly in the high-value packaging sector.

The dominance of foreign enterprises, especially through strategic acquisitions and mergers, reflects a broader trend within Vietnam’s plastic industry. While this influx of foreign investment brings advanced technologies, management expertise, and access to global markets, it also highlights the challenges facing domestic enterprises in maintaining competitiveness and market share.

In conclusion, Vietnam’s plastic industry has demonstrated robust growth and resilience, with a notable export turnover of $5 billion USD in 2020. However, the industry is heavily influenced by foreign investors, particularly in the export of plastic products and materials. The involvement of FDI enterprises, especially through M&A activities, has significantly shaped the industry, bringing both opportunities and challenges. As Vietnam’s plastic industry continues to grow, it will be crucial for domestic enterprises to innovate and adapt to maintain their competitiveness in the face of increasing foreign dominance. Additionally, exploring and expanding into potential markets, such as Japan, will be key to sustaining growth and ensuring the long-term success of Vietnam’s plastic industry.