Good growth speed and potential
Paper packaging is the main product of Vietnam’s paper industry, accounting for nearly 70% of total industry consumption and 45% of total paper import turnover in 2015.
Due to the large population and great growth potential of the consumer industry in the country along with export prospects boosted by TPP, the paper packaging industry is expected to have tremendous growth prospects in the upcoming years.
Competition among these enterprises is quite fierce, especially between domestic enterprises versus the FDI ones. However, competition in the industrial paper segment (input for paper packaging is relatively low due to the small number of enterprises and the insufficient supply. At the moment, Vietnam still imports approximately 40% of industrial paper demand.
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Capital is the main barrier for the paper packaging industry’s entries
Paper packaging is an auxiliary product for the processing industry with no typical characteristics or major differences. The product also does not need to build a distribution channel and faces no obstacle with government policies.
The barrier to entry into the industry is capital given that the investment capital of a packaging factory is big, requiring businesses to have a good financial base.
This is also the reason why foreign-invested enterprises are dominating the Vietnam paper packaging market.
Import and export tax rates
The current import tax of scrap paper for industrial paper production is mainly at 0%. The import-export tax on kraft paper is currently around 15% and another paperboard at 10%. However, import paper from ASEAN countries, ACFTA, ASEAN – Korea, ASEAN – Australia – New Zealand under FTAs will be taxed at 0% while from ASEAN – India at 5%.
In addition, after Vietnam joins the TPP, the import tax of industrial paper from Japan (a highly developed country in the paper industry) is planned to be tariff-free.
Paper packaging is a key product of the paper industry
Vietnam paper packaging is currently the main product, accounting for nearly 70% of total paper consumption and also the most imported, accounting for 45% of total paper import turnover in 2015.
The demand for paper packaging depends chiefly on the processing industry, which mainly includes foods, cosmetics, consumer goods, electronics, footwear, seafood, etc.
According to the international statistics, the food packaging industry accounts for about 30-50% of the total consumption of paper packaging, while electricity – electronics accounting for 5-20% and pharmaceutical chemicals take up to 10%.
Considering the general paper consumption demand, Vietnam’s paper consumption per capita is still quite low, only 33 kg/person (2013) while the figure in Japan and Europe is 130 kg. /people.
With the large population size and strong growth potential of the domestic consumer industry along with the export prospect boosted by the Trans-Pacific Strategic Economic Partnership Agreement (TPP), the industry has developed vigorously. Growth prospects are supposed to be great in the coming years.
The average consumption of packaging paper in the period of 2010 – 2013 will also reach 10.5% / year and in the Vietnam Paper Industry Development Plan to 2020, with a vision to 2025, packaging paper is estimated to maintain the average growth rate of 9% / year for the next 10 years.
In addition, it is worth noticing the growing competition in the production of finished packaging products along with the obvious shortage of supply in packaging paper (industrial paper). Paper packaging production process is divided into two main stages:
(1) From input materials to industrial paper production:
Medium paper: used as the corrugated layer of paper box
Kraft paper (testliner): used to make the outer layer of the carton
(2) From industrial paper to paper packaging production:
Cartons: 3 types (3-layer, 5-layer, 7-layer cartons)
Paper box and paper bag account for nearly 80% of the industry’s total output (in 2010) of which the Southeast region accounts for 60% of the packaging production (2010).
Many large projects registered to invest in the industry can help meet the demand of industrial paper. Currently, instead of plastic packaging as in previous years, the paper packaging industry is attracting a lot of attention from foreign investors, as there are continuous FDI projects registered to invest to meet the growing demand of the processing industry after Vietnam joined the TPP as well as take advantage of opportunities when industrial paper products are still in short supply.
In addition, with good financial potential, advantages in technology, and production experience (FDI packaging enterprises mainly come from countries with developed packaging industry), the paper packaging industry witnesses the leading businesses from Thailand and Taiwan.
Khang Thanh – The packaging company in Vietnam specializes in producing paper bags, rigid box, labels, hangtag, books, calendar, POSM and so on. Contact us to support your brand with the right packaging:
KHANG THANH CO., LTD – HOUSE OF PACKAGING
Tel: (+84) 77 8878 222
Email: info@khangthanh.com