Vietnam's Paper Industry: Hindered by Many Paradoxes

Prices of imported paper materials are on the rise despite of seeing a recovery after the economic recession, leading to the reduction of investment for production. In order to help paper makers to deal with the situation, at a working session on development plan of the paper sector in the 2010 – 2015 period with the Ministry of Industry and Trade, which took place in Hanoi in late August, 2009, the Vietnam Paper and Pulp Association reported business situation as well as proposed legitimate solutions to protect the paper makers from challenges.

While Vietnam has a huge potential to develop forest and always has a good rank among wood exporters, domestic enterprises must import between 10,000 tons and 15,000 tons of paper a year. The situation is blamed for unreasonable and unbalanced investment between pulp production and paper manufacture. On the other hand, the country slashed its paper import by only 12 percent while lowering paper export by up to 74 percent. Besides, a great deal of sluggish paper productions projects lost competitive opportunities of domestic paper products against those of other countries.

 

In the first half of this year, domestic paper consumption went down 9 percent from a year earlier while the country’s total paper output down 15 percent year-on-year despite of impacts by the economic recession, said Vu Ngoc Bao, general secretary of the Vietnam Paper Association. In July, the country estimated to produce 192,000 tons of paper, equal to only 97.4 percent of the figure in last July.

 

Paper production plants across the country run at 80 percent – 85 percent of their capacities while newsprint manufacture mills run at less than 40 percent of capacities. Hike material prices while paper producers are not able to raise their selling prices are attributed to the perfunctory production of the plants. Paper makers suffer a loss of nearly VND1.4 million to produce one ton of paper, the association estimated.

Incentive tax policies as well as loose management of customs officials resulted in the situation that paper makers only want to import paper for sale instead of producing paper for sale, Bao said. Newsprint production decreased by nearly 60 percent and writing paper production went down by 10 percent while newsprint paper and writing paper import rose by 8 percent and 20 percent, respectively. This paradox will lead to the waste of paper production lines.

Taking advantage of forest and lower labour prices against regional countries, paper makers is boosting exports of traditional products, including high-quality newsprint, writing paper, and studying aids for pupils, to regional countries, with an expect of exporting 120.5 tons of paper of various kinds by 2010 and 2,075 tons by 2015.

Due to negative impacts by the economic recession, many paper production plants all over the world went bankruptcy and sole all production lines at very cheap prices, said Vo Sy Dong, General Director of the Vietnam Paper Corporation. With investment guideline of waiting the recovery of the global economy in front as well as taking full advantage of the decrease in domestic and global material prices, the corporation is speeding up construction of its A-level projects, including a project to build a paper and pulp production plant in Thanh Hoa province, a project to expand the Bai Bang paper mill and two other projects to develop paper material growing areas.

 

The corporation is currently seeking to buy paper plants equipped with advanced technologies. The corporation is implementing a project to raise capacity of the Bai Bang paper plant to 250,000 tons a year. If succeeds, the plant that will cost between VND2,300 billion and VND3,000 billion will come into operation two years ahead schedule. As planned, as many as nine paper plants with capacity of between 40,000 tons and 330,000 tons a year each will come into service from now until 2011, Dong said.

 

Current difficulty is that paper makers must meet technical barriers of importers. Specifically, paper export to the U.S. needs awarding with certificates of wood origin, even paper with origin from waste materials needs awarding with its origin (Lacey law). Besides, borrowing loans for forest growing projects is causing difficulties for paper makers in completing their forest growing projects, Bao analysed.

 

At a working session with the Ministry of Industry and Trade, the Vietnam Paper and Pulp Association proposed the ministry to change the current paper import tariff in line with real situation in a bid to protect domestic paper makers; to exempt tax for collection and purchase of some paper kinds; to build a detailed policy on paper collection, recycling and usage; and to consider trees for paper materials as industrial plants and to have incentive policies to encourage the growing of these trees.