Key Drivers of Foreign Direct Investment in Vietnam’s Plastics Industry

Introduction: Vietnam's Growing Plastic Industry

The plastic industry is a dynamic and rapidly growing sector within the Vietnamese economy. Although relatively young compared to established industries such as mechanical engineering, electronics, chemicals, and textiles, it has seen remarkable growth in recent years. Between 2010 and 2023, the industry maintained an annual growth rate of 16–18%(Dai A Industry, 2023; VIR, 2016), making it one of Vietnam’s fastest-growing sectors, second only to telecommunications and textiles.?

In 2024, Vietnam’s plastics industry continued its stable growth. According to the Vietnam Plastics Association, currently, there are 4,000 plastic enterprises operating in the country, with 90% classified as small and medium-sized businesses (SMEs). The industry’s 2024 revenue reached $31.1 billion, marking an impressive 23.9% increase compared to 2023. Additionally, Vietnamese plastic products are exported to over 170 markets worldwide, with the U.S. as the largest export destination, followed by Japan, Europe, China, and other emerging markets. The Vietnam Plastics Association has also stated that the export turnover for 2024 will see a 26.79% increase from 2023 reaching 6.57 billion USD (Vietnam Plastics Association, n.d.). Looking ahead, Vietnam’s plastic production is projected to reach 16.36 million tons by 2029, maintaining a steady annual growth rate of 8.44% (Y, 2024).?

Plastic products, especially packaging materials, play an integral role in the daily lives of Vietnamese consumers, further fueling the sector’s expansion. However, the industry still faces challenges, particularly in securing raw materials, as the majority of input materials are imported. Despite these hurdles, Vietnam’s plastics industry has emerged as a strategic focus for foreign investors, driven by a favorable investment climate, strong domestic demand, and competitive advantages.

This article explores the key drivers behind foreign direct investment (FDI) in Vietnam’s plastics industry and examines its growing importance in the global market.

Supportive Economic Policies

Vietnam’s pro-investment landscape, including tax incentives, reduced import duties, and streamlined administrative procedures, is a significant draw for foreign investors. Participation in major trade agreements like CPTPP, EVFTA, and RCEP has further bolstered export opportunities.

Explosive Market Growth

Vietnam’s plastics industry has achieved steady annual growth rates of 16-18% over the past five years, making it the third most profitable sector after telecommunications and textiles. The industry’s prominence has not gone unnoticed, particularly by investors from Thailand and South Korea.

• Domestic Demand Drivers: Rapid urbanization and a burgeoning middle class have increased the need for plastics in packaging, construction, and consumer goods. The growing e-commerce industry further amplifies demand for plastic packaging solutions.
• Export Growth: Trade agreements such as the TPP open doors for Vietnamese manufacturers to export to high-value markets like the U.S. and Japan.

Strategic Geographical and Infrastructure Advantage

Vietnam’s position as a Southeast Asian trade hub provides unparalleled access to regional markets like China and ASEAN countries. Coupled with well-developed logistics and proximity to major ports, this makes Vietnam a pivotal manufacturing and export hub.

Competitive Labor Costs

Vietnam offers a cost-effective labor pool compared to countries like China. Additionally, government initiatives in vocational training ensure the availability of skilled workers tailored for industrial needs.

Access to Resources and Sustainability Focus

• Raw Material Supply: Vietnam’s strong trade ties ensure a consistent flow of imported raw materials such as polyethylene and polypropylene, essential for plastics production.
• Recycling and Green Initiatives: With increasing investments in eco-friendly plastics and recycling technologies, Vietnam is aligning with global sustainability trends, further appealing to environmentally conscious investors.

Rising Concerns Among Local Manufacturers

Despite the benefits of FDI, local plastics manufacturers face challenges:

• Increased Competition: Foreign conglomerates, with access to lower interest rates and greater financial resources, are acquiring shares in established Vietnamese brands like Binh Minh Plastics and Tan Tien.
• Equity Concerns: Industry leaders worry about the loss of local ownership and control, as seen with Thai SCG Group’s acquisition of a significant stake in Binh Minh Plastics.

Regional Diversification and Industrial Clusters

The relocation of production bases from China to Vietnam, driven by trade tensions and rising costs, has accelerated investment in Vietnam’s plastics industry. Emerging industrial zones provide state-of-the-art facilities, tax incentives, and dedicated support for manufacturers.

Plastic Industry Trends and Prospects in 2025

Vietnam’s plastics industry is evolving with a focus on sustainability, innovation, and global expansion. Key trends shaping its future include:

1. Growth in Recycled and Bioplastics

Driven by environmental concerns and global regulations, manufacturers are increasing the use of recycled plastics and biodegradable materials, aligning with Vietnam’s circular economy goals and strengthening market access to the EU, U.S., and Japan.

2. Advanced Technology in Production

Investments in automation, AI-driven manufacturing, and smart production are enhancing efficiency, precision, and sustainability. Industry 4.0 applications are helping reduce costs and improve competitiveness in automotive, electronics, and medical plastics.

3. Development of Smart amp; Multifunctional Plastics

Companies are producing self-healing, antimicrobial, and temperature-sensitive plastics, catering to automotive, healthcare, and consumer markets. Lightweight, durable materials are also gaining traction for fuel-efficient vehicles.

4. Expanding Exports amp; Global Partnerships

With exports to over 170 countries, Vietnam’s plastics sector is leveraging free trade agreements (FTAs) like CPTPP and EVFTA to strengthen its presence in the U.S., EU, Japan, and China, while attracting foreign direct investment (FDI) for technological collaboration.

Conclusion

Vietnam’s plastics industry presents a compelling case for foreign investment, combining robust market demand, favorable policies, and a strategic geographical advantage. However, as foreign conglomerates increasingly dominate, local manufacturers must address competitiveness and equity concerns to ensure sustainable growth.

Partner with Viettonkin Consulting to navigate Vietnam's dynamic industrial landscape and unlock strategic opportunities in the plastics industry. Our expertise ensures a seamless entry into the market and paves the way for long-term success in Asia’s rapidly expanding economy.

References:?

Dai A Industry. (2023, August 14). Major obstacles to the sustainable growth of Vietnam’s plastic industry. Dai A Industry. https://daiaplastic.com/major-obstacles-to-the-sustainable-growth-of-vietnams-plastic-industry/

Vietnam Plastics Association. (n.d.). H?p m?t h?i viên Hi?p h?i Nh?a Vi?t Nam 2024—Hi?p h?i nh?a Vi?t Nam. Retrieved 25 February 2025, from https://vpas.vn/su-kien/hoat-dong-hiep-hoi/hop-mat-hoi-vien-hiep-hoi-nhua-viet-nam-2024.html

VIR, V. I. R.-. (2016, April 21). Vietnam’s plastics industry becomes the ‘aiming point’ of foreign investors. Vietnam Investment Review - VIR. https://vir.com.vn/vietnams-plastics-industry-becomes-the-aiming-point-of-foreign-investors-41518.html

Y N. (2024, December 6). C? c?u ngành nh?a Vi?t Nam ?ang ph? thu?c vào m?t s? th? tr??ng l?n. doanhnhansaigon.vn. https://doanhnhansaigon.vn/co-cau-nganh-nhua-viet-nam-dang-phu-thuoc-vao-mot-so-thi-truong-lon-314983.html