Chemical Market Conundrum: Vietnam’s Pursuit of Sustainable Industry Growth

Vietnam’s chemical industry has witnessed steady growth over the years, driven by the country’s rapid industrialization, urbanization, and expanding population. This thriving industry is expected to reach a market value of US$3.72 billion in 2024, boasting a projected compound annual growth rate (CAGR) of 8.73% over the next five years.

The Vietnamese chemical landscape is remarkably diverse, encompassing various segments including fertilizers, plant protection products, pharmaceuticals, petrochemicals, basic chemicals (including precursor explosives and industrial explosives), rubber products, electrochemistry, detergents, paints and inks, and industrial gases. This industry is a melting pot of domestic and international players, with prominent Vietnamese companies like PetroVietnam, Vinachem, Binh Son Refining and Petrochemical Company Limited, and Dung Quat Refinery leading the charge.

However, amid this remarkable progress lies a critical challenge: the environmental impact of chemical production. While the industry flourishes, a concerning issue arises – the improper treatment of chemical waste. The irresponsible disposal by some factories leads to air, soil, and water pollution, posing a significant threat to public health and increasing the difficulty of obtaining licensing and approval. Additionally, the lack of safety equipment in certain production lines exposes workers to hazardous conditions.

In June 2022, the Vietnamese Government approved a strategy for the development of the country’s chemical industry until 2030, with a vision extending to 2040. The goal is to create a chemical industry that is not only fast-growing but also sustainable, technologically advanced, environmentally friendly, and aligned with principles of green growth and a circular economy.

The strategy emphasizes the development of key sub-sectors within the chemical industry, including basic chemicals, petrochemicals, technical rubber, pharmaceuticals, and fertilizers.

Key targets set by the strategy include achieving an average annual growth rate of 10-11% for the chemical industry sector by 2030, with the sector accounting for around 4-5% of the total industrial sector. By 2040, the average annual growth rate is expected to be around 7-8%, with the sector maintaining its share of 4-5% of the total industrial sector.

Specific targets for product groups include a growth rate of 10-12% per year for petroleum, pharmaceuticals, technical rubber, and basic chemicals from 2021 to 2030, and an average growth rate of 8-11% per year from 2032 to 2040. Meanwhile, fertilizers, plant protection chemicals, electrochemical power products, cleaning products, industrial gases, tire raw materials, and ink and paint products are expected to achieve a growth rate of 3-5% per year from 2021 to 2030, and an average growth rate of 4-6% per year from 2031 to 2040.
The strategy also aims to meet domestic demand for various products by 2030, including urea, phosphate, NPK fertilizers, plant protection products, tires, industrial gases, common paints and inks, detergents, washing machines, and common batteries. By 2040, the goal is to partially meet domestic demand for basic organic chemical products, special paints, and high-tech batteries.
Export growth is also a focus, with a target of 9-11% per year from 2021 to 2030, and an average growth rate of 7.5-9% per year from 2030 to 2040.

To ensure the plan’s successful implementation, collaboration is required from various government entities. This includes the Ministry of Industry and Trade, People’s Committees of Provinces and Centrals, and others. Each department will play a crucial role in specific aspects:

Investment & Regulations: The Ministry of Planning and Investment spearheads attracting capital. They develop policies (short-term & long-term) and propose amendments to investment regulations, prioritizing specific chemical sub-sectors and encouraging specialized industrial zones.
Financial Support: The Ministry of Finance aligns financial policies with international integration, specifically targeting priority sectors within the chemical industry.
Technological Advancement: The Ministry of Science and Technology focuses on increasing the high-tech content of Vietnamese chemical products. This includes implementing technology solutions, developing innovation policies, evaluating technology advancements, and promoting research aligned with green growth and circular economy principles. Additionally, they establish national standards and regulations for the chemical sector.
Workforce Development: The Ministry of Education and Training, along with the Ministry of Labor, War Invalids, and Social Affairs, collaborate to plan and implement human resource training programs. This combined effort focuses on building a skilled workforce specifically tailored to the needs of Vietnam’s growing chemical industry.

Vietnam’s chemical industry presents a promising path forward, driven by consistent growth and a diversified landscape. However, addressing the critical issues of environmental impact and worker safety remains paramount. The recently approved government strategy (including the 2022-2030 plan for sustainable development) underscores a commitment to tackling these challenges. This comprehensive approach emphasizes sustainable practices, technological advancements, and coordinated efforts across various ministries, offering a clear roadmap for responsible industry development. As Vietnam strives to achieve its ambitious growth targets while prioritizing environmental well-being, implementing concrete actions and fostering a culture of responsible production will be essential for ensuring the industry’s long-term success.

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Authored by

Duyen (Olivia) Nguyen is a consultant based in Vietnam.