In advance of the free-trade agreements on Vietnam’s horizon, foreign companies are looking for strong investment opportunities-like those found in the country’s packaging industry.

According to Nguyen Ngoc Sang, chairman of the Vietnam Packaging Association, packaging is among the fastest-growing industries in Vietnam. The average annual growth for packaging and labelling stands between 15%-20%, especially in baby food and processed food packaging.

‘Since opening up its economy three decades ago, Vietnam has seen a drastic rise in consumerism and modern trade channels, such as supermarkets and convenience stores. This leads to the impressive growth rate of the packaging industry, and foreign investors have clearly noticed this’, Sang told VIR at a conference last week.

Sang added that investors from Thailand, the Republic of Korea, and Taiwan are excited about Vietnam’s free trade agreements, including the Trans-Pacific Partnership and the ASEAN Economic Community. These investors either set up their own factories in Vietnam, or go the fast route via takeovers of Vietnamese firms.

Indeed, the Vietnamese packaging industry has witnessed an investment wave from overseas in recent years, much of it coming via mergers and acquisitions (M&As). The most notable example is Thailand’s SCG, which spent almost US$44 million last year to acquire an 80% stake in Tin Thanh Packaging JSC. Tin Thanh is among Vietnam’s five major packaging companies, generating US$41 million in revenue each year.

In August, Srihai Superware, also from Thailand, announced its plant to conduct-M&As with Vietnamese plastic firms. The Thai melamine producer aims to expand business quickly in Vietnam, which it regards as a strategic market with increasing global integration.

In 2015, the Republic of Korea’s Dongwon Systems Corporation bought Minh Vietnam Packaging JSC at US$21.86 million, and spent US$38.81 million to take over Tan Tien Packaging JSC. MeiwaPax Group from Japan also purchased a controlling stake in Saigon Trading and Packaging JSC.

According to Vietcombank Securities’ market report for the second half of 2016, the packaging industry in Vietnam, will benefit from fast-growing consumer goods, textile and garment, and chemical industries, which are in need of sophisticated wrappings and labels. In the near future, more foreign investors are set to launch large-scale packaging factories in Vietnam, strengthening competition in the market.

‘Plastic and paper packaging are the highest potential sectors for growth. Overseas firms like SCG (Vina Kraft), Lee&Man, and Cheng Yang have recently expanded their mills, which can stiffen competition in the Vietnamese market for 2017 and 2018’, noted the analysts.

Germany, one of the world’s major producers for packaging and labelling, is also a big player in the Vietnamese packaging scene. Together with Tetra Pak from Switzerland, the German packaging giant Combibloc currently dominates the milk packaging sector in Vietnam.

Bjoern Koslowski, deputy head of the German Industry& Commerce Vietnam, told VIR that up till now, German companies in Vietnam have invested US$1.4 billion in supporting industries, including packaging and labelling.

‘Germany has been a renowned supplier for high-quality materials in Vietnam. In 2015, Vietnam imported close to EUR80 million (US$89.2 million) of production materials from Germany, second to China only,’ noted Koslowski.

VIR