Domestic paper producers will face more challenges and the competition between domestically-made paper products and imported ones will become tougher than ever as import tax rate on paper products imported from ASEAN will continue to lower to 5 per cent-10 per cent this year. The tax rate has reduced from 20 per cent-30 per cent to 10-15 per cent

Many local manufactures in the fields are at risk of going bankrupt. The first disadvantages of paper producers in are unvaried and backward technologies, leading to high production costs. Meanwhile, the industry has been coping with a serious shortage of paper pulp for the last 4 years. Paper factories depend too much on imported paper pulp.

Despite abundance of materials for production of paper pulp at home, annually has to import more than 150,000 tons of paper pulp. Many manufacturers say that they have missed chances to invest in large paper pulp plants for the last 8 years because of poor investment policies and the unfeasibility of projects, and no access to bank loans.

For example, the Kon Tum paper pulp plant project which was expected to come into operation in 2003 with a production capacity of 150,000 tons per year or the Thanh Hoa paper plant project which had a designed annual capacity of 50,000 tons of pulp and 60,000 tons of paper (in the phase from 2003 to 2009) and 150,000 tons of pulp and 150,000 tons of paper (from 2010) are all not carried out.

 Director of the Sai Gon Paper Joint Stock Company, Mr. Cao Tien Vi, said many paper producers which are not able to lower prices to compete with imported products will be in danger. In addition to highly increasing prices of paper pulp (in 2005 and early 2006, paper pulp prices reached US$485-490 per ton), hikes in prices of chemicals, electricity, transport, etc have caused cost prices of paper to increase 15 per cent.

 Meanwhile, selling prices have not changed for years and many companies have even reduced selling prices to compete, causing a bad financial situation. This year, a large quantity of paper will be imported into so the first solution for domestic manufacturers is to reduce cost prices by 15 per cent - 20 per cent. Mr. Vi said his company has well prepared for competition by investing in modern production lines.

The Ministry of Industry plans to invest VND29.7 trillion ($1.88 billion) into the paper industry between now and 2010. Accordingly, the local paper industry will focus on new paper pulp projects with large capacity and high quality, which will be carried out in key material areas. The industry aims to balance paper making and paper pulp production in the coming time. The industry will also mobilize capital from all domestic sources and foreigners to implement the plan.

 It aims to produce 600,000 tons of pulp and 1.4 million tons of paper per year by 2010. At present, has almost 300 pulp and paper mills, eight of which are the Vietnam Paper Corporation’s affiliates.