작성일자: 2014.7.3

작성자: 하노이 무역관 유선아(monolah13@kotra.or.kr)

 

 

1. OVERVIEW OFVIETNAM PAINTS AND COATINGS MARKET

 

 ○ Since 2000, Vietnamese paints & coatings market has a significant development step. Despite the global economic downtown, over the last few years, Vietnam’s paint industry has continued to experience growth. More than 345 million liters of paint were produced in 2012 which valued US$ 994 million, according to Vietnam Paint and Printing Paint Association. Among them, decorative paints with the high growth rate, of approximately 25% per year, occupies the major share of 66%, following are industrial wood coating, protect coating & marine paint holding 16% and 7%, respectively; powder coating and coil paint share the same market share of 4%. Epoxy paint, whereas, belongs to other paints category (automotive paint, flooring paint, coating for plastic, etc.) that only account for 3%.

 

 

 ○ In addition, the paints market can be categorized as using puposes as follow:

  - Decorative paints: 4 oranges, Akzo (ICI), Nippon, Kova, Tison.

  - Marine coatings: Interpaints, HaiPhong Paint, Jotun, A Dong Paint, Hai Au Pain

  - Industrial Wood Coating: Akzo Nobel, Dai Hung, Valspa Sherwin, Dai Kieu, Xuan An.

  - Powder Paint: Akzo Nobel, Jotun, Dai Phu, Tan Nam Phat, A Dong, Dai Bang.

  - Coil Paint: A Dong, Akzo, PPG, Becker.

  - Others (Flooring paint, automative paint, coating for plastic, etc.): Dai Bang, Nippon, PPG, KOVA, HaiPhong Paint.

 

 ○ Especially, since 2000, prestige paint brand names start to pay attention to Vietnamese market and they penetrate the market by 100% foreign invested project or joint venture with Vietnamese paints manufacturers. Besides, local producers also invest and upgrade their production line in order to meet the customers’ requirement. Counting up till 2013, there are more than 600 paints and coatings manufacturers in Vietnam, of which 70% focus on architecture paints, the remaining 30% are paints used for industry and art. Notably, multinational companies (MNCs) are a real powerhouse in the industry, with less than 20 enterprises but accounting up about 60-65% and the Netherlands – based giant Akzo Nobel taking the top spot in sales with the annual ouput of 30,000 tons.

 

 

 ○ It is seen that there is dominance of foreign – branded paints in the market. Foreign trademarks like Dulux, Nippon, 4 Oranges and Jotun occupy a majority a space in most of paint agency. Currently, the paints market is divided into 4 segments. High-end segment icludes MNCs from Japa, USA, UK or North Eropean like Akzo Nobel, Jotun, Nippon. They are enterprises that set up factories in Vietnam with good distribution channels. The second group is medium brands from Asia such as 4 Oranges, TOA, SeaMaster, Aica, etc.; the lower-medium brands are domestic one: Joton, Kova, Tison, etc.; the rest are manufacturing facilitites scattered through the country that served low-end market. The besidechart will show the share of each segment in the paints & coatings market.

 

 ○ Domestic consumers tend to use only well known foreign wet paints because they are more durable and beautiful. In terms of durability, foreign made paints come in more categories and specifications such as anti-rust, waterproof, fireproof, heatproof, anti-moss, anti-dust and other features. In general, they completely protect the outer face of construction works. In term of beauty, there are thousands of colors of foreign paints for customers. In addition, rich experience and financial capacity enable foreign paint producers to seek strong foothold in Vietnam.

 

 ○ However, domestic consumers do not return their back on locally made wet paints. The list of Vietnamese paint producers is getting longer. Old names include Kova, Alphanam, Bach Tuyet Paintand newcomers are HaiPhong, Dong Tam and HoaBinh Paint. The increasing presence of paint manufacturers is resulted from the strong expansion of the real estate market. However, according to paint distributors, domestic producers only focus on internal and external wet paints but they do not have many types. They also do not know how to win the trust of consumers.

 

 ○ In terms of epoxy paint, according to Mr. Bui Do Hien – Technical from Nippon Paint Co., Ltd, all the paints & coatings companies in Vietnam can produce that kind of paint. However, the end-users recently tend to use the self-leveling epoxy, which couldn’t produced by Vietnamese companies. Therefore, epoxy paints mainly provided by MNCs or directly imported from foreign exporters. Some of epoxy brands used in Vietnam are: Sika, Rainbow, Nippon, Aica, KCC, Chokwang, Nanpao, etc.

 

 

2. DEMAND TRENDS

 

□ Characteristics of Epoxy Flooring ’s Demand in Vietnam market. The demand side of Epoxy Flooring in Vietnam has the following features:

 

 ○ Main Groups of Buyers in Vietnam

  - In Vietnam, the buyers of epoxy flooring are divided into two groups:

   · Organization buyers: construction companies which is in charge of commercial or civil constructions namely factories, office building, condominiums, shopping centers, tennis courts, etc.

   · Individual buyers: individuals whose main purpose is to repair the floor themselves.

  - However, epoxy flooring is more familiar to the first group of buyer as this material has been used in large constructions in Vietnam years ago. This can be attributed to two main reasons: Firstly, epoxy can protect concrete floor well, abrasion/oil/water resistance and high-pressure bearing. Secondly, such basement of commercial buildings as office buildings, shopping centers or high-end condominiums are highly directed at aesthetic factor which is an obvious advantage of epoxy flooring compared with traditional concrete flooring.

 

 ○ Usage rate of Epoxy Flooring in Vietnam. There is no data recording the usage rate of epoxy flooring but the general consumption of paints and coatings.

 

Per Capita Paints & Coatings Consumption, 2011

                         Source: IRL Press Release, Oct. 2012

 

  - Base on this chart and the market share of flooring paint mentioned above, Vietnam still has a very low usage rate of epoxy flooring. Specifically, the usage rate per capita of epoxy paint in Vietnam is only less than 0.12kg/head. It can be well understood that the overall low usage rate per capita is mainly attributed to the low usage rate in the second group of buyer. In addition, to big buildings like office building, hospitals or condominiums, epoxy flooring is just a very small part. Yet, it is still considered that Vietnam a very potential market for epoxy flooring as low rate of usage means the market still being in the starting phase and thus, having a lot of room for further growth.

 

□ Future Forecast for Epoxy Flooring’s Demand in Vietnam. Vietnam is considered a very potential market for Epoxy Flooring. In the future, epoxy flooring’s demand is expected to witness a constant upward trend. This forecast is backed up by two main drivers:

 

 ○ Positive outlook on the growth of construction industry

  - According to BMI report in Q3/2013, construction sector lasted well in 2013 and is in the recovery mode with real growth forecasts at around 5.3%. It is forecasted that the annual real growth for the construction and infrastructure sectors to average 6.1% and 4.8% between 2014 and 2017, respectively.

  - This optimistic outlook for this sector is primarily driven by Vietnamese conducive monetary conditions.

 

Vietnam Montetary Conditions Conducive

                                Source: General Statistics Office, State Bank of Vietnam

 

  - Looking at the chart, it is shown that the policy rate down to 8% in late March - the lowest rate since November 2010, which is a favorability for construction activity as Vietnam’s companies would benefit from a lower cost of capital-making them more inclined to take up new projects or carry out capital-intensive construction works.

  - Particularly, the future potential of Residential & Non-residential Building Industry in Vietnam is very promising with a constant upward trend of the industry’s value in US$ billion. Significantly, from 2013 to 2020, the industry value is estimated to 2.5 times from US$ 6.0 billion to US$ 15.7 billion, which can be considered really impressive. Regarding real growth, there would not be any dramatic changes with an average figure of nearly 7% year-on-year. Although, the trend is expected to be downward, the difference between consecutive years is not worth worrying about. Also, this trend can be explained by the fact that the industry will no longer be in the starting phase, thus, it cannot enjoy as significant growth as before and a gradual decline is understandable.

 

Future Forecast of Residential & Non-residential Building Industry (2013-2020)

                      Source: BMI’s Vietnam Infrastructure Report

 

  - BMI’s positive outlook for Vietnam’s residential and non-residential building industry is backed by local rapid urbanization which will generate a boost in housing demand. Although, currently, local construction is suffering from frozen real estate market, there has been a positive sign for future development. According to the latest report from the Overseas Investment Agency under the Ministry of Planning and Investment, by the end of 2013 more than 405 FDI projects remain in operation. The real estate sector is still attractive to foreign investors and in the first quarter of 2014, real estate came second with US$ 288 million in terms of FDI attraction. A surge in FDI in local real estate market has reflected positive expectation of foreign investors and this would be an important force to re-activate this market in Vietnam.

 

 ○ Rising in government focus on construction development

  - Vietnam has been making noteworthy efforts to attract investments, and the government has made construction and infrastructure a priority investment area. The urbanization pressures and the population figures, however, indicate that the pressure on urban infrastructure will increase in the coming years.

  - The Ministry of Planning and Investments of Vietnam released a list of urban infrastructure projects to be implemented untill 2016. The total estimated investment required for the projects is US$12bn. and will take place in 15 provinces around the country. Around 18 of the proposed projects on the list will be funded by official development assistance (ODA) from Europe, Japan and the Asian Development Bank, while the ministry said that the rest will come from the private sector, through public private partnerships (PPPs).

 

Vietnam Construction and Infrastructure Industry Data, 2011-2016

        Note: e/f = BMI estimate/forecast.

        Source: Vietnam General Statistics Office, BMI

 

  - From this table, Vietnam’s construction sector remains strong over the forecast period (2013-2016)due to the government’s expansionary economic policies. The government remains focused on upgrading Vietnam's construction & infrastructure and raising electricity production to support the country's economic growth, but rising inflation within the country is eroding real growth in industry value. As such, BMI is forecasting Vietnam’s construction industry to achieve real growth of 6.4% in 2014, reaching US$10.9bn.

 

 

4. COMPETITION TRENDS

 

□ Foreign Exporters. Averagely, Vietnam has to import approximately US$ 79,322 thousand in value of varnishes. The specific numbers and import trend can be observed as follows:

 

Imported Value of Varnishes (including lacquers) exceeding

100℃ heat resistance to Vietnam in the 2009-2013 period

                Unit: US$ Thousand

                 Source: www.trademap.org

 

 ○ As can be seen from the chart, the imported value of varnish to Vietnam market experienced a stable and gradual rise over the period with the average growth rate of 22% each year. However, after reaching the peak of USD 96,051 thousand in 2011, the importation faced the down trend at the rate of 7%. This decrease can be easily understood considering the frozen of real estate market since the late of 2012 and this situation repeated in 2012. The gloomy situation in real estate market together with poor economic conditions in Vietnam has caused a slowdown in the progress of many construction projects as well as discouraged construction demand of individuals and households, which affected this products’ market.

 

 ○ Vietnam imports Varnishes (including lacquers) from various countries, of those, Korea, Japan and Taipei-Chinese presents the three biggest partners. The below figure show the unstable rise of these products imported to Vietnam from each country during the 2010-2013 period. Korea with the average import value of USD 12,111 thousand has shown a significant surge in 2013 when overcome Japan and Taipei-Chinese to become the dominant exporter that reached USD 20,979 thousand.

 

Supplying markets for a product imported by Vietnam

                         Unit: USD thousand

          Source: www.trademap.com

 

 ○ Moreover, the chart illustrated market shares of the 6 biggest exporters in Vietnam below makes it easier to be noticed that the lion share belongs to Korea, which covers over nearly 26% of the market. Following are Malaysia (23%), China and Japan shared the same amount of 11%.

 

Market Share of biggest exporters of Varnishes

(including lacquers) exceeding 100℃ heat resistance to Vietnam

               Source: Vietnam Custom Year Book

 

 ○ Also, looking at the unit value column of each country, it can be seen that high imported value of Korea was not only due to the large quantity but also the high price. China, on contrary, providing the lowest unit price amont the exporters, which is 1.5 times lower than that of Korea, still ranked the 3rd. This figure can prove that Korean products has a better reputation on quality, at the same time, it also reflects the investment of Korea in construction field in Vietnam.

 

Trade indicator for product HS.Code 3208.90 imported by Vietnam in 2013

                Source: www.trademap.org

 

□ Foreign Exporters

 

 ○ According to some representatives from distributors/agencies providing industrial paints/construction chemicals or building material, almost all Korean constractors or projects owner require the epoxy paint from KCC or Chokwang Company. They are all Korean one and currtly being the brands that occupy about 70% of the import market share, following is Noroo - Nanpao (Korea-Taipei joint venture) and some other low-grade products from China.

 

 

5. RETAILING PRICE

 

□ Quotation of Kim Loan Costruction and Trading Co., Ltd - Rainbow Agency Level 1 (www.sonnuockimloan.com)

 

Quotation of RAINBOW EPOXY PAINT (Updated: January,2013)

Unit: VND (Exchange rate: US$ 1= VND 21,195)

 

□ Quotation of Hop ThanhPhat Investment JSC - KCC Agency Level 1 (www.sieuthison.vn)

 

Quotation of KCC EPOXY PAINT

Unit: VND (Exchange rate: US$ 1= VND 21,195)

 

□ Quotation of Hop ThanhPhat Investment JSC - Naroo-Nanpao Agency Level 1 (www.sieuthison.vn)

 

Quotation of Naroo-Nanpao Epoxy Paint(Updated: September, 2013)

      Unit: VND (Exchange rate: US$ 1= VND 21,195)

 

 

6. DISTRIBUTION CHANNEL

 

 ○ Besides marketing campaigns, distribution network is the critical factor to the any paint manufacturers’ success. All the key paint manufacturers have a broad distribution network in many Vietnamese cities and provinces. The wide distribution network is also an effective way to introduce and marketing to customers. End users always tend to ask the technical people in the agencies for recommendation. Therefore, distribution network plays a very significant role.

 

 ○ In Vietnam market, paints and coatings are sold and distributed through various channels, both direct and indirect ones. However, regarding to the particular case of epoxy paint for waterproof floor, due to the distinct nature of the business, the distribution structure is slightly different, of which contractors play a prominent role.

  - Contractors and project owners are those playing the utmost important role in the distribution system since they are the people who decide which paint brand to be used in each project. In other words, in this field, contractors and project owners act as end-users of the distribution tree. Depending on the regulation and terms within the contract, either contractors or project owners would have the right over the matter of supplying source. Normally, preference of choosing supplying source varies in accordance to the investment source. For example, domestic invested project would give priority to local manufactures such as KOVA, Alphanam, Dai Bang, HoaBinh or such multinational brands that are produced in Vietnam as Nippon, Akzo Nobel, Jotun, etc. while foreign invested projects will only recruit domestic brand names. For example, Korean invested projects only choose brands like KCC, Chokwang, Nanpao, etc.

 

 

 ○ There are about 2 or 3 intermediation steps among paint manufacturers and end users. The first important step is agency level 1.

  - The level 1 agency operates as a company. They get products directly from the manufacturers. Then, with the paint manufacturers’ support; they will build up the network of agency level 2.

  - Level 2 agencies normally are shops which will sell directly to end users. Sometimes, level 1 agency might sell directly paints to end users but with only big amount order; or manufacturer can sell directly to those customers who are construction companies which have big projects.Level 1 agencyis very important to paint producers; therefore; it is necessary for paint manufacturers to provide good policy and benefit such as priority and commission to level 1 agencies.

  - Local production is domestic factories that have been discussed above. Domestic manufacturers use their relationships and distribution networks to find contractors and projects owners.

  - Foreign source comes in various forms. It might be directly imported to Vietnam or manufactured in Vietnam by FDI factories. Yet, due to the advantage of international brands, procedures and price, products manufactured by FDI factories are much more widely used. Currently, there are many such factories in Industrial parks, especially in the Southern region. Most of them are Korean and Japan companies.

 

 ○ For foreign investors, it should be remarked that in contrast to common belief of Vietnam, contractors and investors in construction field are no more confined in some heavy state-owned corporations. As a part of the open policy and the market-oriented process that has been vigorously implemented in Vietnam during the recent years, those positions are now available for every company regardless to the nationality and types of operation with a fair basis. Since the cooperation between Vietnam and Korea has been greatly fostered over the past decade on every facets of the social-economic condition, Korea has grown to be the second biggest investors in Vietnam, especially in the construction field. The surge in Korean investment in the construction field promises highly potential opportunities for Korean construction material manufactures to enter Vietnamese market. In this realm, epoxy flooring should not be an exemption.

 

 

7. IMPORTATION

 

□ Import documents

 

 ○ It is required to present the following documents for customs clearance:

  - Certification of Origin – C/O

  - Certification of Quality – C/Q

  - Packing List – P/L

  - Commercial Invoice

  - Bill of Lading – B/L

  - Contract

 

□ Import tariff

 

 ○ The followings describe in details import tax for products HS code 320890:

 

     Note: MFN: Most Favored Nations (Korea belongs to this group of nations)

              CEPT: Common Effective Preferential Tariff (ASEAN 10 member countries)

              AKFTA: ASEAN- KOREA Free Trade Area.

     Source: Export–Import Tariff and VAT on Imports Book 2014 (Ministry of Finance)