US Firm to Invest in US$1Bln Paper Project in Vietnam

US Firm to Invest in US$1Bln Paper Project in Vietnam

Leading US paper firm IP will invest the large sum of US$1 billion in a forest plantation and pulp production project in Vietnam - a move marking the giant's expansion plans in the country and Asia in general.

Brian McDonald, IP's Asia region president, last week met with the Ministry of Industry (MoI) and the Vietnam Paper Manufacturers' Association, and confirmed that the project, similar to the one IP has implemented in Brazil, would become feasible once the firm finds conditions in Vietnam suiting its overseas investment strategy.

"Paper markets in Asia will further develop in the next 10 to 20 years. In this context, we are seeking investment opportunities and wish to include Vietnam in IP's ambitious plans to become stronger in the region," Mr Brian said.

He said that Vietnam's production capacity of nearly 300,000 tons of pulp and 800,000 tons of finished paper per year did not satisfy the growing domestic demand for products and there is clearly a need for investment in the country's paper industry.

IP is currently recognized as the world's leading paper producer with annual revenues of US$26 billion. IP has already built factories in China, Japan and the Republic of Korea, but it does not have any factories in Southeast Asia.

Vice Minister of Industry Bui Xuan Khu welcomed IP's intention to invest in Vietnam, particularly due to the firm's high profile, which is expected to boost Vietnam's foundering pulp production industry.

The country remains heavily reliant on foreign pulp, with imports representing 80 per cent of actual consumption every year, he admitted. Vietnam’s biggest and most modern pulp factory, Bai Bang, is only able to produce 100,000 tons of pulp per year, compared to the normal production capacity of between 500,000 and one million tons elsewhere in the world, he added.

"We highly appreciate the experience of foreign investors in pulp production. Companies, including IP, can set up either a wholly foreign-owned entity or a joint venture with Vietnamese partners to build pulp factories. We are also happy if they provide loans and technology transfers to domestic paper producers," Mr Khu said.

According to industry figures, Vietnam is currently able to produce 270,000-280,000 tons of pulp and has to import 600,000-700,000 tons of foreign products per year.

MoI aims to produce one million tons of pulp by 2010, but industrial experts are doubtful of this ambitious plan due to the fact that most pulp production projects in Vietnam are stalling due to financial difficulties.

Pulp-making projects normally require huge investment but have low returns, said Mr Khu. This situation is even more difficult when domestic investors build pulp factories with bank loans at high interest rates. Vietnam, has several pulp production projects in the pipeline, including Bac Can, and Tuyen Quang and two other projects, Phuong Nam and Thanh Hoa, which are already under construction.

VIR