CASH-POOR VINAPLAST SEEKING TECH PARTNERS

Comments Email Print

HO CHI MINH CITY, VIETNAM — It's rare for a senior official from a state-owned enterprise in Vietnam to admit having cash-flow problems.

But Truong Xuan Vu, managing director of Vietnam National Plastics Corp., the country's largest plastics processor, tells it like it is.

``We are still poor,'' Vu said in a recent interview at his firm's headquarters in Ho Chi Minh City. ``Most of our technology and machines are about 30-40 years old.''

Before the Vietnam War, Vinaplast, as the firm widely is known, imported most of its molding equipment from Eastern Europe and China, according to the 54-year-old plastics engineer. After 1975, the company turned to low-cost suppliers in South Korea and Taiwan.

In July, Vinaplast bought its largest injection molding machine, with a clamping force of 2,200 tons, from Taiwan's Chuan Lih Fa Machinery Works Co. Ltd. at a cost of $700,000.

Today, Vinaplast employs 4,500 in 13 associated companies and four joint ventures. It posted sales last year of $80 million.

Vu expects to import more processing equipment later this year, but advises hopeful suppliers to be realistic.

``A shortage of capital means that we cannot afford high technology,'' he said.

Vinaplast now runs 70 injection presses, with clamping forces of 660-2,200 tons.

Vinaplast and other home-grown processors badly need more sophisticated machines and modern expertise to supply high-quality plastic parts for the country's booming auto, electronics and pharmaceutical industries. There also is a desperate need for good-quality molds.

In 10 years' time, 60 percent of plastic parts in locally made automobiles will have to be produced in Vietnam, according to a decree by the Communist Party.

``Presently, none of our machines can produce high-quality products for cars,'' Vu said, adding he may have to rent the equipment from Germany once the business is thrust upon him.

Like Vinaplast, Vietnam's plastics industry is in an awkward position of enjoying fast-growing demand for its products but being unable to tap the opportunities.

Statistics in Vietnam can be inconsistent and notoriously unreliable. Still, data published recently by the Vietnam Plastics Manufacturers Association indicate the country's production of finished plastics goods was expected to rise by about 25 percent last year from the 573 million pounds consumed in 1995.

VPMA predicts similar strong annual growth through 2000, when national plastics consumption should total closer to 1.76 billion pounds, or about 19 pounds per person, per year. It projects demand upwards of 3.3 billion pounds, or per-capita consumption of 33 pounds, in 2005.

Currently, plastics demand in Ho Chi Minh City and its neighboring industrial provinces accounts for three-quarters of national demand, said Vu. Central Vietnam's share of demand is 15 percent, while North Vietnam accounts for 10 percent, he said. The packaging and construction sectors provide the biggest boost to plastics demand, Vu said.

Meanwhile, Vinaplast processed about 132 million pounds of plastic in 1996, half of which was for construction materials such as PVC pipes, roofing, flooring and plastic bricks.

A third of the output was sheets for packaging perishable items such as rice, instant noodles and canned drinks. The rest of the products were household items such as baskets.

Like most of his compatriots, Vu would like to see Vinaplast producing value-added items such as multilayer shrink wrap for modern food packaging.

In five years' time, ``Vinaplast will focus on high-tech projects to serve makers of electric appliances, motorcycles and cars,'' he said.

But with limited cash and a low priority in the country's current growth plans, Vu is betting on joint ventures with foreign partners to reach his goal.

``We are looking for joint venture partners ... to promote high-tech projects and produce export products,'' Vu said.

He is pitching his country's low labor costs to foreign processors with a disclaimer.

``We have the cheapest labor in the region,'' he said. ``But foreign companies should pay attention to high-tech projects which are capital-intensive, not so much labor-intensive.''