What is the attraction of Vietnam’s plastic industry to foreign investors?

Vietnam’s plastic industry is increasingly attractive to foreign investors, especially investors from Thailand. Prominent is Siam Cement Group (SCG) when this group has ambitions to build a value chain in the plastic industry in Vietnam.

On March 9, the State Capital Investment Corporation (SCIC) will offer to sell all 24.1 million shares of Binh Minh Plastics Joint Stock Company (MCK: BMP) and these shares have been sold by Thai shareholders. Lan – The Nawaplastic Industries – register to buy all.

The Nawaplastic Industries is currently a major shareholder of BMP holding more than 16.7 million BMP shares, equivalent to 20.4%. Thus, if the transaction is successful, Nawaplastic Industries will increase its ownership rate in BMP to 49.91%.

Nawaplastic is a company specializing in the production and distribution of PVC pipes, 100% owned by Thai Plastic and Chemicals PCL (TPC). TPC currently holds 50% market share in the Thai plastic market and owns many other Vietnamese plastic companies such as Chemteck Co (Production of XLPE polyethylene – TPC holds 100% of the equity); Viet-Thai Plastchem (Production of plastic and packaging – TPC holds 72.49% share capital); TPC Vina Plastic and Chemicals (Producing PVC – TPC holds 70% of the share capital).

Behind TPC is the parent company Siam Cement Group (SCG), SCG has the ambition to build a value chain in the plastic industry in Vietnam. Currently, SCG owns a plastic resin manufacturing company (TPC Vietnam) and has long wanted to have another plastic product manufacturing business with a good distribution network in Vietnam.

So what has caused Thai investors to increase M&A deals in the plastic industry in Vietnam?

According to Vietcombank Securities Company (VCBS), the potential of Vietnam’s plastic industry is still very large, the average plastic consumption index in Vietnam is currently 41 kg/person/year (lower than the average level of 48 kg/person/year). /year in Asia and the average level of 70 kg / person / year in the world). According to BMI Research, the food industry will grow by 10.9% in the period 2015-2019, the bottled beverage industry will grow by 17-25%.

In the future, when the Vietnam – Europe Free Trade Agreement (VEFTA) is signed, the export market of plastic products to Europe will be promoted. Mr. Ho Duc Lam, Chairman of the Vietnam Plastics Association, said that the demand for importing plastic products in the EU market is still considered high, and Vietnamese enterprises have good penetration ability, especially the demand for plastic products. Plastic Pipe.

Notably, in this market, Vietnam’s plastic products are not subject to anti-dumping tax like other Asian countries (the average tax rate is from 8-30%).

However, the potential market is like that, but at present, domestic enterprises themselves have not yet mastered the source of input materials. The Ho Chi Minh City Rubber and Plastic Association forecasts that by 2020, raw materials for plastic production will be up to 5 million tons. Having to import 70-80% of plastic materials has significantly reduced competitiveness and it is difficult for exporters to take advantage of tax incentives because of regulations on goods origin.

Returning to Thai investors, SCG recently officially launched a petrochemical project in Long Son with a scale of 5.4 billion USD with the goal of completing its value chain, and thus the end will be products of BMP.

SCG’s investments in recent years have shown quite positive results. Typically, the investment in Tien Phong Plastic through The Nawaplastic Industries. With the divestment of Tien Phong Plastic, The Nawaplastic Industries earned about VND 1,460 billion, 3 times the initial investment value. In addition, according to calculations, in more than 5 years of investment, The Nawaplastic Industries also received about VND 173 billion in cash dividends from Tien Phong Plastic.