Economic data from Vietnam speaks volumes for this countrys potential as an industrial production base to complement China.
Two motorcycles per second is an average non-rush hour traffic flow rate in Ho Chi Minh City
Drive-in, Vietnam style. Motorcycles dominate transportation in Ho Chi Minh City.
Vietnams plastics sector is wired for impressive growth
Vietnams GDP rose more than 8% in 2006, and industrial production was up by an impressive 17%, while Vietnam attracted a record level of foreign investmentâvalued at $9.9 billion. The country also won prized WTO status in January 2007 and this should further enhance its attractiveness as an investment destination and its role as an export base.
Multinationals such as Canon and Intel are already committing to significant export-oriented manufacturing facilities in Vietnam, home to 84 million. Many view the country as a hedge to avoid over-concentration of investment in China. Canon is already there, manufacturing printers in Hanoi, where investors enjoy various incentives, while the likes of Brother and Panasonic have also made more recent investments. Electronics and computer parts exports are forecast to grow 35.6% in 2007.
For its part, Intel plans to funnel $1 billion into a chip manufacturing and testing facility at the Saigon Hi-Tech Park with completion scheduled for 2009. This should function as a catalyst for further projects in the electronics field and flow over to include plastics processing.
Visitors to the industrial and commercial capital of Ho Chi Minh City are often struck by the number of motorcycles on the road, with some estimating the city of 8 million people is home to around 3 million motorcycles.
Japanese motorcycle makers already have a significant presence in Vietnam, but before the country can make the step into large-volume manufacturing of four-wheeled vehicles, something needs to be done about transport infrastructure. Government plans are in place to invest in highways, as well as mass transit systems, national rail links, airports, and port facilities, and this will boost demand for plastics materials in the construction sector.
A budding plastics sector
Vietnam is home to about 2700 companies involved directly with the plastics industry, with the vast majority of these privately owned or listed. As recently as 2000, 40% of Vietnams plastics processing sector was still in state hands and accounted for 60% of output. A wave of privatization, however, means that as of 2007, 95% of the industry is now in private hands.
With new private funding in hand, the processing sector is set for heady growth. Between $2.5 billion and $3 billion in investment in plastics processing equipment is estimated to be required between 2005 and 2010 (by comparison, about $1 billion worth of equipment was purchased in the U.S. in 2006).
Sectors growing particularly rapidly are headed by flexible packaging, which accounts for approximately 60% of resin processed, and there is scope for continued growth given Vietnams aspirations to become a major processed food exporter.
While the processing sector is still in its developmental stage, some early adopters are investing in advanced processing machinery to gain a competitive edge. Catthai Plastic (Ho Chi Minh City), for example, recently invested in a 48-cavity tool and Krauss Maffei injection press for closure molding. Business development manager Cao Ngoc Minh says that despite the large up-front investment cost, a 6.6-second cycle time using 48 cavities is much more cost effective than utilizing lower performance Asian machines that might only manage 14-16-second cycle times with 8-16 cavities.
The plastics industry does face challenges, among them sourcing raw materials. Except for PVC, Vietnam must import all its resin requirements. Ho Duc Lam, general director of Rang Dong Plastics Joint-Stock Co. (Ho Chi Minh City) says, We want to attract investment in polyolefins production and engineering plastics compounding. Projects for PE and PP have been approved and now all we need is foreign investors. We want to meet 50% of local demand by 2010. Lam also wants to see a large recycling facility set up to process industrial plastic waste locally.
Training also requires urgent attention to further the development of the plastics sector. A 2004 industry survey revealed that 70% of plastics industry workers were unskilled. Vietnams current five-year plan calls for the percentage of trained workers in all industries in Vietnam to be raised from the current 25% (2006) to 40% by 2010.