IV. Challenges of Vietnam's Chemical Industry
The chemical industry, a cornerstone of industrial development, faces numerous significant challenges at both global and domestic levels. These obstacles stem not only from fluctuations in international markets but also from internal limitations within Vietnam's economic system and investment environment.
1. Global Overcapacity
Overcapacity is a pressing issue for the global chemical industry, particularly in China, which accounts for 23% of the world's ethylene production capacity. In 2024, the surplus of basic petrochemical products, such as ethylene, propylene, and benzene, is projected to reach 222 million tons, the highest level in nearly half a century. This surplus intensifies competition and exerts downward pressure on prices, making it difficult for producers to maintain profitability.
The slowdown in China's economy—which represents nearly 50% of global chemical demand—has exacerbated the situation. China's chemical exports, particularly polypropylene (PP), surged from 0.5 million tons in 2020 to 1.3 million tons in 2023, while net imports more than halved. This export growth has restructured the global supply chain, forcing international suppliers to contend with increasingly fierce competition.
Amid this context, Vietnamese chemical enterprises are under significant pressure on two fronts: rising production costs and declining market demand. Reduced demand for products like electronics and semiconductors has led to decreased consumption of yellow phosphorus, a critical input for semiconductor production. This, combined with global inflation and economic recession, has stalled chemical exports and negatively impacted revenue and profitability.
2. Domestic Barriers
Challenges in Attracting Investment
The chemical industry requires large-scale investments and advanced technology. However, many private Vietnamese enterprises face difficulties in securing capital and mastering technology, resulting in hesitancy to undertake major projects.
High Production Costs and Dependence on Imports
Chemical production is one of the most energy-intensive industries, with electricity costs accounting for 20-30% of total expenses. In the context of expected electricity price hikes, this burden will weigh heavily on businesses. Furthermore, Vietnam remains heavily reliant on imported raw materials. In the first half of 2023, the import value of chemicals and chemical products reached USD 3.81 billion, posing significant challenges for enterprises as the cost of imported materials continues to rise.
Environmental Concerns and Public Perception
The chemical industry is often perceived as posing environmental risks. Many localities in Vietnam reject chemical projects due to concerns over public health and safety. For instance, the Caustic Soda and Other Chemical Products Manufacturing Plant project at the Viet Hung Industrial Park in Ha Long City, Quang Ninh Province, initially received approval and began construction with groundwork and piling. However, following several chemical-related incidents at other facilities, the local government reassessed the risks and requested the investor halt the project. This example highlights the societal and local acceptance challenges facing the chemical industry.
Regulatory and Policy Constraints
The Chemical Administration has reported that, during the management process, many investors express a desire to implement projects, but when they approach local authorities, they often receive a rejection. Some projects, even after initial approval, have had to be suspended or canceled because local governments changed their stance on environmental safety concerns. This creates a significant "bottleneck" that hinders the chemical industry's development to its full potential.
These challenges not only slow down the process of attracting investment but also pose obstacles to the sustainable growth of the chemical industry in Vietnam. To address this, specific supportive policies from the government are needed to remove barriers related to capital, technology, and the environment. At the same time, raising public and local awareness about safety standards and environmental protection in chemical production is essential for the industry to develop in harmony with social benefits.
V. Strategies for Sustainable Development in Vietnam’s Chemical Industry
The chemical industry is a critical pillar of Vietnam’s economy, playing an indispensable role in the industrial and manufacturing value chain. To guide sustainable development and enhance competitiveness, Decision No. 726/QD-TTg in 2022 approved the Development Strategy for Vietnam’s Chemical Industry to 2030 with a vision to 2040. This strategy serves as a compass for the transformation of the chemical sector amidst increasingly fierce global competition.
With the strategic goals set for 2030 and a vision to 2040, the chemical industry aims for an average annual growth rate of 10–11%, contributing 4–5% of the national industrial output value. Key targets include strong development of core product groups such as petrochemicals, pharmaceuticals, technical rubber, basic chemicals, and export-oriented products. Notably, the industry aspires to achieve supply self-sufficiency by meeting 100% of domestic demand for fertilizers, tires, industrial gases, and detergents while increasing the localization rate of petrochemicals to 40% and basic chemicals to 70%.
By 2040, the chemical industry is expected to achieve significant advancements, including adopting internationally standardized production technologies and increasing the localization rate for basic chemicals and petrochemicals to 60–80%. Sustainable export growth, with an annual increase of 7.5–9%, is also targeted to drive the national industrial sector. To realize these objectives, the chemical industry will focus on developing a circular economy model, promoting green transformation through advanced technologies to reduce greenhouse gas emissions, conserve energy, and enhance global competitiveness.
Strategic Solutions:
Establishment of Centralized Chemical Industrial ParksThe strategy emphasizes building large-scale chemical industrial complexes in areas with transportation and infrastructure advantages, particularly near deep-water ports. These hubs are expected to attract investment, drive production and services, and ensure safety and environmental standards.
Promoting Green TransitionThe industry will adopt clean energy and cutting-edge technologies to reduce emissions and conserve resources. This includes transitioning from fossil fuels to clean energy sources and implementing advanced processes.
Institutional ReformsRevising the Chemical Law and introducing mechanisms to support priority projects in petrochemicals, pharmaceuticals, and basic chemicals are critical. Establishing a comprehensive chemical industry database and leveraging digital technology will improve transparency and management efficiency.
With clear directives and synchronized solutions, Vietnam’s chemical industry is poised not only to strengthen its position in the global supply chain but also to make a significant contribution to sustainable economic development. This presents a substantial opportunity for the chemical industry to become a major driver of growth, building a self-reliant, sustainable, and environmentally friendly economy for the future.
Vietnam’s chemical industry is at a critical juncture with the potential to achieve breakthrough progress and become a powerful engine for economic growth. However, achieving these objectives requires close cooperation between the government and enterprises, particularly in policy formulation, infrastructure development, and technological innovation.
With a well-defined development strategy and comprehensive measures, the chemical industry will not only contribute to building an independent, self-reliant economy but also affirm Vietnam's position in the global supply chain. This foundation will enable the industry to contribute significantly to national sustainable development, ensuring harmony between economic growth and environmental protection.
Source: Báo Đại Đoàn Kết, Báo Kiểm Toán Nhà Nước, Tạp chí Kinh tế và Dự báo, Tạp chí Công Thương, Vinachem, Cục Hải quan Việt Nam, Báo Công Thương, Bộ Công Thương, Viện Công nghiệp Hóa chất Việt Nam
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