Government Prioritization to Enhance the Vietnam Chemical Industry Outlook : Ken Research

Ken Research announced its latest publication on, Vietnam ChemicalsReport 2015 offer insights on the changing trends and key issues within theVietnam Chemical Industry. The publication includes an insightful analysis ofproduction-consumption behavior, export-import & technological scenario,leading players and regulatory framework & related trade agreements withinVietnam Chemical Industry. The analysis of the aforementioned trends hasbeen done across eight product categories within the industry: Fertilizer andNitrogen, Detergent, Pants and Printing Ink, Synthetic Rubber and Polymer,Plant Protection Chemical, Basic Chemical, Synthetic Fibres and Other.

Economic Environment of VietnamVietnam is one of the most outperforming economies in the Southeast Asia.As per the World Bank, “Vietnam is a development success story”. Graduallythe economy of Vietnam has transformed into a more liberalized and market-oriented one, while boosting its integration with the global economy byentering into FTA with EEU & EU, among other steps taken. Under theenvironment of communist dictatorship, the economic liberalization startedin 1986 with the ‘doi moi’ reforms which included privatization & reduction ofstate control enterprises, opening up of the trade and easing of investmentpolicies, along with rejuvenation of the financial sector. Vietnam is also aparty in the Trans-Pacific Partnership, which will lead to further economicliberalization.

Looking at the current macroeconomic scenario in Vietnam, in 2016, thecountry is home to 90.6 million people. Its GDP has been one of the fastestgrowing 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 tothe GDP growth. Domestic consumption and investment has expandedwith increasing rates over the last two years. Looking at the foreigninvestment, the influx is limited since the economic activities are largelystate-owned where govt. shields foreign investment, even restricting it insome sectors of the economy. Currently FDI inflows amount to 9.2 billionUSD.Persistent inflation is also a disincentive to long-term investment.Exports and imports have performed miraculously with both amountingto approx. 160 billion USD in 2015. Despite this success story ofliberalization, lack of democratic governance and state-ownedenterprises continues to be a major challenge to the economic growth ofthe country.

Brief Overview of the Vietnam Chemical IndustryChemical industry, globally, is considered as one of the most crucialeconomic sector, important to the development and expansion of otherindustries and hence for the growth of the overall economy.

Recognizing the industry as key contributor to the economic growth, thegovt. of Vietnam, as a most recent step towards it, has also planned fordevelopmental strategies and objectives for the emerging Vietnam ChemicalIndustry via Decision 207/2005/QD-TTg, with a look towards 2020.Underthis decision, special attention is given to the main domains such asfertilizer, common and special-use rubber, base chemicals (including bothorganic and inorganic chemicals), petro-chemistry, pure chemicals,pharmaceutical chemistry, and consumer chemicals to meet global anddomestic demand. The plan also aims at the development and use ofadvanced technology for producing better quality chemicals at low costs andto reduce its adverse impacts on the environment.Looking at the current landscape, the Vietnam Chemical Industry is in itsinfancy stage. Although it is exhibiting strong growth performance with19.25% growth rate in 2010-14, still, being an infant industry, the domesticdemand is not met and hence heavy chemical imports have to be made.Among various imports made to the country, Chemicals are ranked 11thwith a revenue of 1.94 billion US dollars.

A categorical look at the product market implies: Fertilizers & Nitrogencontributes the highest (30%) in the industry’s revenue, followed byDetergents, while synthetic fibres contribute little to it. Fertilizers andDetergents are high growth rates category while Plant Protection Chemicalshave shown slowdown in both volume & value terms. The growth of theindustry can be accounted to the increased demand and govt. priority to it.Also, the industry suffers from weaknesses such as inability to supply inputmaterials and inferior technology machinery systems, among others.Sector-specific risks, especially risk of safety in use and risk of environmentalpollution also challenges the growth of the industry. This ultimately leads toincreased investment due to increased spending on labor protection, fireprevention as well as water treatment systems, creating barriers to entryand hence medium level of competitiveness in the industry. Despite thesechallenges, the industry faces full opportunities to growth on account ofgovt. development plan, increasing integration with the global chemicalmarket, urbanization and population growth leading to increased demandfor chemicals.

Major Market Players in the Vietnam Chemical IndustryHigh investment cost has kept the competitiveness at medium level in theVietnam Chemical Industry. Domestic producers run small and medium scaleoperation; and faces intense competition from multinational corporationshaving financial strength, advance technological as well as better marketingstrategies. In product categories such as Detergents, Plant Protection Chemicaland etc., multinational corporations almost dominate the domestic market.Domestic producers mainly process for multinational corporations and findniche markets to survive.

Some of the leading market players include: PetroVietnam Ca Mau FertilizerJSC (DCM), Petrovietnam Fertilzer and Chemicals Corporation (DPM), LamThao Superphosphate Fertilizer and Chemicals JSC (LAS), Southern BasicChemicals JSC, LIX Detergent JSC (LIX), Dry Cell & Storage Battery Joint StockCompany (PAC), Saigon Plan Protection JSC (SPC), Duc Giang Chemical andDetergent JSC (DGC), Vietnam Fumigation Groups (VFG), Binh Dien FertilizerJSC (BFC).

Foreign-invested companies such as Lever Vietnam and P&G also havepresence in the industry. In 2014, Petro Vietnam Fertilizer and ChemicalsCorporation (DPM) overtook other market players in terms of gross profitmargin (25%), followed by Petro Vietnam Ca Mau Fertilizer JSC (DCM);however, from shareholders’ point of view, the market was dominated byBinh Dien Fertilizer JSC (BFC) with 38% Return of Equity (ROE).

Vietnam Chemical Industry ProspectsAlthough the Vietnam Chemical Industry is in its infant stage, the stronggrowth performance of the industry in recent years, paints a promisingpicture for the future of the industry. The industry is expected to witnesssubstantial growth in coming years as well, even ahead of the GDP growthrates. With more and more liberalization of the economy and lowering ofinvestment cost on account of advance technology, the industry is expectedto see more foreign as well as domestic producers entering the chemicalindustry.

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 forchemicals

•WTO membership & FTA with several regions including EU

•Cooperation with Japan & UNDP

Hence, through strategically dealing with the challenges and weaknesses ofthe industry along with exploiting potential growth opportunities, theVietnam Chemical Industry can contribute to sustainable economicdevelopment of the country.

Key Topics Covered in the Report

•Detailed profile Global, Regional & Vietnam Chemical Industry

•Overall and category wise production & consumption analysis of VietnamChemical Industry

•Export-Import scenario and technology analysis within each productcategory

•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.

To know more on coverage, click on the link below:https://www.kenresearch.com/metal-mining-and-chemicals/chemicals/vietnam-chemicals-report/31966-101.html

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