HO CHI MINH CITY, VIETNAM (Oct. 29, 1:10 p.m. ET) — Two Japanese firms are launching a Vietnamese factory to make wood-plastic composite building products and plastic pallets, hoping to use it as a low-cost export base for Japan and Southeast Asia.

The two companies, Koei Vietnam Co. Ltd. and Toda Industries Corp., are investing a total of $2.4 million in the factory, which will start operations later this year with one 3,000 ton JSW injection press and several extrusion lines for manufacturing finished products and raw materials, said Takahiro Matsumura, sales director of Koei Vietnam Co. Ltd.

“We already have a WPC order from a Japanese company and will export to Japan for that company,” said Matsumura, speaking in an interview at the VietnamPlas show, held Oct. 24-27 in Ho Chi Minh City.

The 4,500-square-meter factory in Binh Duong province, near Ho Chi Minh City, will start with 30 employees.

The company hopes to export both the WPC products, including decking and fencing, and its pallets to other Southeast Asian countries. It has orders from Japanese firms in Vietnam for the pallets as well.

Koei Vietnam, which is a wholly-owned subsidiary of Tokyo-based plastics material and equipment trading house Koei Industrial Co. Ltd., owns 51 percent of the joint venture. Toda, an investment company, owns the remaining 49 percent.

The companies chose Vietnam both for its low labor costs and because there’s a solid base of Japanese companies already operating there, Matsumura said.

They also noticed that Vietnamese companies were coming to Japan to buy used equipment, and that got them started thinking about the market, he said.

All of the plastics equipment in the new factory is second-hand machinery bought from Japanese firms and shipped to Vietnam, he said.

The country is not a major local market for WPC products but the company hopes to develop that business.

“WPC has not been used very widely in Vietnam but in the future we should focus on the Vietnam market,” said Matsumura.