Ken Research announced its latest publication on, Vietnam Chemicals Report 2015 offer insights on the changing trends and key issues within the Vietnam Chemical Industry. The publication includes an insightful analysis of production-consumption behavior, export-import & technological scenario, leading players and regulatory framework & related trade agreements within Vietnam Chemical Industry. The analysis of the aforementioned trends has been done across eight product categories within the industry: Fertilizer and Nitrogen, Detergent, Pants and Printing Ink, Synthetic Rubber and Polymer, Plant Protection Chemical, Basic Chemical, Synthetic Fibres and Other.
Economic Environment of Vietnam
Vietnam is one of the most outperforming economies in the Southeast Asia. As per the World Bank, “Vietnam is a development success story”. Gradually the economy of Vietnam has transformed into a more liberalized and market-oriented one, while boosting its integration with the global economy by entering into FTA with EEU & EU, among other steps taken. Under the environment of communist dictatorship, the economic liberalization started in 1986 with the ‘doi moi’ reforms which included privatization & reduction of state control enterprises, opening up of the trade and easing of investment policies, along with rejuvenation of the financial sector. Vietnam is also a party in the Trans-Pacific Partnership, which will lead to further economic liberalization.
Looking at the current macroeconomic scenario in Vietnam, in 2016, the country is home to 90.6 million people. Its GDP has been one of the fastest growing one since 1990. With 6% GDP growth rate and USD 510.7 Billion GDP (PPP), it has a global ranking of 131st and regional ranking of 27th in the Asia-Pacific region.Agriculture, Tourism industry and exports are the main contributors to the GDP growth. Domestic consumption and investment has expanded with increasing rates over the last two years. Looking at the foreign investment, the influx is limited since the economic activities are largely state-owned where govt. shields foreign investment, even restricting it in some sectors of the economy. Currently FDI inflows amount to 9.2 billion USD.Persistent inflation is also a disincentive to long-term investment. Exports and imports have performed miraculously with both amounting to approx. 160 billion USD in 2015. Despite this success story of liberalization, lack of democratic governance and state-owned enterprises continues to be a major challenge to the economic growth of the country.
Brief Overview of the Vietnam Chemical Industry
Chemical industry, globally, is considered as one of the most crucial economic sector, important to the development and expansion of other industries and hence for the growth of the overall economy. Recognizing the industry as key contributor to the economic growth, the govt. of Vietnam, as a most recent step towards it, has also planned for developmental strategies and objectives for the emerging Vietnam Chemical Industry via Decision 207/2005/QD-TTg, with a look towards 2020.Under this decision, special attention is given to the main domains such as fertilizer, common and special-use rubber, base chemicals (including both organic and inorganic chemicals), petro-chemistry, pure chemicals, pharmaceutical chemistry, and consumer chemicals to meet global and domestic demand. The plan also aims at the development and use of advanced technology for producing better quality chemicals at low costs and to reduce its adverse impacts on the environment.
Looking at the current landscape, the Vietnam Chemical Industry is in its infancy stage. Although it is exhibiting strong growth performance with 19.25% growth rate in 2010-14, still, being an infant industry, the domestic demand is not met and hence heavy chemical imports have to be made. Among various imports made to the country, Chemicals are ranked 11th with a revenue of 1.94 billion US dollars.A categorical look at the product market implies: Fertilizers & Nitrogen contributes the highest (30%) in the industry’s revenue, followed by Detergents, while synthetic fibres contribute little to it. Fertilizers and Detergents are high growth rates category while Plant Protection Chemicals have shown slowdown in both volume & value terms. The growth of the industry can be accounted to the increased demand and govt. priority to it. Also, the industry suffers from weaknesses such as inability to supply input materials and inferior technology machinery systems, among others.Sector-specific risks, especially risk of safety in use and risk of environmental pollution also challenges the growth of the industry. This ultimately leads to increased investment due to increased spending on labor protection, fire prevention as well as water treatment systems, creating barriers to entry and hence medium level of competitiveness in the industry. Despite these challenges, the industry faces full opportunities to growth on account of govt. development plan, increasing integration with the global chemical market, urbanization and population growth leading to increased demand for chemicals.
Major Market Players in the Vietnam Chemical Industry
High investment cost has kept the competitiveness at medium level in the Vietnam Chemical Industry. Domestic producers run small and medium scale operation; and faces intense competition from multinational corporations having financial strength, advance technological as well as better marketing strategies. In product categories such as Detergents, Plant Protection Chemical and etc., multinational corporations almost dominate the domestic market. Domestic producers mainly process for multinational corporations and find niche markets to survive.
Some of the leading market players include: PetroVietnam Ca Mau Fertilizer JSC (DCM), Petrovietnam Fertilzer and Chemicals Corporation (DPM), Lam Thao Superphosphate Fertilizer and Chemicals JSC (LAS), Southern Basic Chemicals JSC, LIX Detergent JSC (LIX), Dry Cell & Storage Battery Joint Stock Company (PAC), Saigon Plan Protection JSC (SPC), Duc Giang Chemical and Detergent JSC (DGC), Vietnam Fumigation Groups (VFG), Binh Dien Fertilizer JSC (BFC). Foreign-invested companies such as Lever Vietnam and P&G also have presence in the industry. In 2014, Petro Vietnam Fertilizer and Chemicals Corporation (DPM) overtook other market players in terms of gross profit margin (25%), followed by Petro Vietnam Ca Mau Fertilizer JSC (DCM); however, from shareholders’ point of view, the market was dominated by Binh Dien Fertilizer JSC (BFC) with 38% Return of Equity (ROE).
Vietnam Chemical Industry Prospects
Although the Vietnam Chemical Industry is in its infant stage, the strong growth performance of the industry in recent years, paints a promising picture for the future of the industry. The industry is expected to witness substantial growth in coming years as well, even ahead of the GDP growth rates. With more and more liberalization of the economy and lowering of investment cost on account of advance technology, the industry is expected to see more foreign as well as domestic producers entering the chemical industry. Key factors driving future growth of Vietnam Chemical Industry:
- government development plan
- increasing integration with the global chemical market
- urbanization and population growth leading to increased demand for chemicals
- WTO membership & FTA with several regions including EU
- Cooperation with Japan & UNDP
Hence, through strategically dealing with the challenges and weaknesses of the industry along with exploiting potential growth opportunities, the Vietnam Chemical Industry can contribute to sustainable economic development of the country.
Key Topics Covered in the Report
- Detailed profile Global, Regional & Vietnam Chemical Industry
- Overall and category wise production & consumption analysis of Vietnam Chemical Industry
- Export-Import scenario and technology analysis within each product category
- Comprehensive overview of the current business environment
- Competitive landscape of the Vietnam Chemical Industry
- Regulatory framework applicable to the Vietnam Chemical Industry
- Forecasts about global and domestic chemical industry.
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