PAPER INDUSTRY: EXPANSION CHALLENGES AS DEMAND FOR PACKAGING PAPER INCREASES

China's restriction of paper packaging production and the closure of a series of paper factories also helped paper packaging businesses in Vietnam benefit.

Packaging Paper: Heat from Domestic Market

In 2019, Vietnam's export activities grew highly, the total import and export turnover exceeded 500 billion USD for the first time and reached 516 billion USD. The bright spot of Vietnam's economy is a great driving force for Vietnam's paper market to achieve impressive numbers in the past year: paper exports reached 1.0 million tons, growth of 23.6%, paper consumption of the whole industry was estimated at 5.432 million tons, growth of 9.8%. With the strong export growth trend in the past and future, the demand for paper will always be high.

On the other hand, the booming trend of e-commerce and digital media will also lead to a strong growth in the demand for packaging packaging. Besides, environmentally friendly products from paper are trending to the throne, promising significant development potential for the industry, especially food packaging paper as an alternative to disposable plastic products. This is also in line with the orientation to improve the system of mechanisms and policies on environmental protection, promoting the collection, classification, recycling and launch by the Ministry of Natural Resources and Environment during the past time. At the same time, free trade agreements also provide opportunities to export Vietnam's packaging paper and packaging to the tax incentive market.

However, Vietnam's paper industry also faces many challenges. Currently, there are more than 300 paper enterprises participating in production in the country. However, most of them are small-scale enterprises with outdated technology. On the other hand, not many domestic enterprises are capable of producing high-end packaging. In order to be able to meet the increasing demand for packaging paper, the paper industry is forced to have a solution to expand its scale, starting from the enterprises that have the strength to produce this item.

The solution to the growth problem of packaging paper

Currently, factories with strengths in packaging production are often FDI enterprises. Typically, Lee & Man Vietnam (420,000 tons/year), Vina Kraft (500,000 tons/year), Chanh Duong (550,000 tons/year), contributing nearly 50% of domestic packaging paper production.

In particular, Lee & Man has the strength to produce packaging paper such as Krafliner, Whitetopliner to meet export standards. In particular, Whitetopliner paper is a product produced on a high-tech line, using high-end surface coating technology, in the Vietnamese market today this is the only enterprise that can produce this type of paper.

It can be said that in order to meet the increasing demand for packaging, factories with strengths need to focus on exploiting full production capacity or can consider a plan to increase capacity. On the other hand, in Decision No. 10508/QD-BCT dated 18/11/2014 on approving the planning for the development of Vietnam's paper industry to 2020, the Ministry of Industry and Trade set a target of 6,035 million tons of packaging paper output in 2025 – double that of 2019.

In fact, the expansion of production was initially implemented by some paper mills. In 2017, Vina Kraft inaugurated its second paper and packaging factory in Binh Duong, increasing Vina Kraft's paper production capacity at two factories in Binh Duong to 500,000 tons/year. In addition to technical advances, Vina Kraft's second factory also uses green, environmentally friendly technologies, which can minimize water use and energy consumption. However, not all paper enterprises are able to mobilize capital to invest in paper mills with such a large capacity. If the ability to expand production scale is taken into account, FDI enterprises with strengths in capital and modern technology will have more advantages.

Like Lee & Man, since the construction of the factory in Hau Giang, this enterprise has invested more than 650 million US dollars in a high-tech packaging paper production line (imported from Europe – USA) from recycled paper raw materials. Lee & Man Vietnam also received financial backing from its parent group Lee & Man Hongkong. Therefore, in terms of financial resources, the potential to expand production of enterprises is huge. If the capacity is increased, in the short term, Lee & Man can contribute to solving the shortage of domestic packaging paper; at the same time, contributing to increasing the export turnover of the entire paper industry thanks to export activities being promoted in parallel.

In addition, the expansion of production will also be a positive signal showing the long-term commitment of enterprises, contributing to promoting regional economic growth and creating jobs for workers.

However, to ensure a balance between production and environmental safety, paper enterprises must invest properly in waste treatment. The assessment of the environmental impact report needs to be taken seriously when businesses take into account the plan to increase factory capacity. Mr. Patrick Chung - General Director of Lee & Man said: "Every year, the company invests millions of dollars in waste treatment. The company also put into use a 24/24 monitoring system and invested 20 billion VND in noise and odor treatment activities and ensuring the quality of wastewater in accordance with regulations. That shows the company's seriousness in ensuring wastewater quality and controlling environmental impacts."

In the face of the increase in demand for packaging paper in the domestic and world markets, when the investment potential of enterprises in packaging production is still lacking, the fact that "leader" enterprises can expand production scale is a positive signal to solve the problem supply and demand math. At the same time, this is also in line with the policy and policy of developing Vietnam's paper industry in the direction of increasing modernization, encouraging factories with large capacity, ensuring production and business efficiency.

A.D