The Philippine plastic industry is relatively young which grew only in mid-1960’s with the arrival of technology for injection, extrusion, and blow molding. Plastic pipe production began in 1970s with increased demand for the product as inputs for the government’s waterworks projects. Two companies set up the first two plants in the Philippines, these are Mabuhay Vinyl Corporation , put up the first synthetic thermoplastic and resin plant in Mindanao. Vinyl Consortium established a plant with an annual capacity of 18,000 metric tons for the production of Vinyl Chloride Monomer (VCM). Both of these companies supplied inputs to other manufacturers for the manufacture of plastic pipes, footwear, packaging and calendaring items.
JG Summit, the sole midstream firm of the Philippines has an annual capacity of 300,000 tons of synthetic resins per year.
The industry lacks an upstream sector to provide the midstream with ethylene and propylene. The midstream which manufactures synthetic resins (polyvinyl chloride (PVC), polystyrene (PS), polypropylene (PP) and polyethylene (PE) for the downstream sector, had to import and are vulnerable to foreign exchange fluctuations and tariff rates. This part of the industry has not grown very large due to its backward link to the upstream sector.
The current shape of the industry is central to the downstream industry. There are 1,600 companies in the downstream industry. Some of the companies particularly the small ones, have encountered problems that force them to close and sell their business to larger plastic manufacturing companies.
Polymer Percent Consumption of the downstream industry
Polyethylene 50%
Polypropylene 25%
Polyvinylchloride 20%
Polystyrene 5%
Only polyvinylchloride and polystyrene are produced locally. The remaining 75% of inputs are imported. Meanwhile, the main products for the plastic industry includes Polybags (woven sacks, regular film bags, PVC pipes, Industrial crates, bottles and housewares). Hence, the main markets of plastics include the manufacturers and producers of sugar and rice, millers and supermarkets, contractors, hardwares, restaurants, fish dealers, bakeries, soft drink manufactures, cosmetics, health care, food and pharmaceutical industries and consumers, wholesalers and retailers.
The demand determinants vary depending on the market. Industrial clients mainly look for quality rather than price. For the mass consumer market, price is a critical factor.
Competition starts in the midstream and downstream sectors since no Philippine firm operates in the upstream industry. Only JG Summit Petrochemical Corporation exists in the midstream industry, and it faces severe competition from Thailand, Vietnam and Sri Lanka in the supply of synthetic resins.
Companies in the downstream industry compete very stiffly when it come to price. Pirating staff from competitors is being done. When a company is unable to meet the requirements of its clients, enterprises engage in “coopetition.”. Big companies sometimes outsource smaller companies and small companies group together to deliver the output required by big companies.
On the other hand, even with the decreased tariff rates, the Philippines will have a difficult time competing with its ASEAN neighbors. Variable costs are too high especially when it comes to electricity. In other countries such as Vietnam and China, a 50%discount is given for electricity use when operations are continued in the evening. In the Philippines, none of these incentives are available. In terms of wages, the Philippines can provide cheap labor. Wages in the Philippines are lower compared to wages in Malaysia, South Korea, and Singapore.
The Philippines may have a competitive edge in labor cost but its production costs are higher than those of ASEAN countries. Thus local business people find it difficult to match international prices.
Philippine Trade Statistics of Plastic Products
Value — Millions of US$
H.S. Code Product Description/Top 5 Countries 2009 2008
3901 Ethylene, Primary form 126.167 173.66
Singapore 42.818 37.944
Korea 16.994 20.247
Thailand 12.881 21.386
Japan 11.821 14.047
Malaysia 10.342 15.83
Others 31.31 64.206
3907 Polyether, Expoxide 104.379 155.903
Singapore 22.709 34.41
Taiwan 21.198 34.282
Indonesia 14.961 11.383
Thailand 14.515 12.237
Japan 10.641 24.907
Others 20.355 38.684
3923 Box, Bag, Closures, etc. 89.979 87.975
Thailand 16.542 12.493
China 14.901 13.217
Japan 11.678 7.123
Malaysia 7.832 11.397
Hongkong 7.712 10.27
Others 31.314 33.475
3920 Plate, Sheet and Cell 83.645 101.515
Korea 13.081 12.149
Malaysia 12.607 10.745
Japan 10.006 10.935
Indonesia 9.493 13.072
USA 8.704 9.615
Others 29.754 44.999
3902 Other Olefin Primary 74.492 167.81
Singapore 22.245 40.155
Korea 16.401 25.579
Thailand 9.008 17.084
Japan 7.929 11.817
Taiwan 4.172 26.541
Others 14.737 46.634
3921 Other Plate and Sheets 69.394 76.763
Japan 18.11 15.659
Malaysia 17.811 19.085
USA 11.878 11.874
Thailand 3.492 3.276
Indonesia 3.272 6.339
Others 14.831 20.53
3910 Silicone, Primary form 66.701 102.195
Korea 34.294 46.236
Japan 12.536 38.913
Norway 5.361 0.527
USA 3.877 4.11
Thailand 3.232 2.78
Others 7.401 9.63
3919 Self Adhesive Materials 56.431 68.692
Japan 19.731 21.922
Korea 6.847 6.711
China 5.159 5.813
Malaysia 4.347 5.579
Singapore 3.823 6.666
Thailand* 2.806 2.991
Other 13.718 19.09
3926 Other articles of Plastics 52.826 69.988
China 10.076 11.405
Hongkong 7.836 16.778
Japan 6.584 6.554
Thailand 5.438 6.482
USA 3.897 4.098
Others 18.995 24.671
3917 Tube, pipe, hoses and fit 38.808 44.03
Spain 12.763 21.346
USA 9.331 5.646
Japan 7.815 7.062
China 2.69 2.906
Germany 1.24 1.721
Thailand* 0.284 0.301
Others 4.685 5.048
3906 Acrylic Polymers 29.55 27.857
Japan 7.948 4.877
Taiwan 6.628 5.838
Singapore 5.304 4.436
Thailand 2.207 2.633
Indonesia 1.75 2.168
Others 5.173 7.455
3903 Styrene, Primary Forms 29.652 52.861
Korea 9.131 15.453
Taiwan 4.949 8.899
Malaysia 3.735 9.315
Japan 2.455 6.164
Thailand 1.635 3.112
Others 7.747 9.918
3909 Amino-Resin, Primary Form 25.25 38.945
Singapore 9.406 13.804
Malaysia 3.507 4.518
Japan 2.403 4.79
Thailand 2.077 2.513
India 1.192 2.62
Others 6.665 10.7
3924 Tableware and household of plastics 20.925 18.896
China 12.1 9.615
USA 1.469 1.526
Korea 1.461 0.841
Malaysia 1.374 1.331
Thailand 1.324 1.7
Others 31.97 3.883
3912 Cellulose of chemicals 19.389 15.702
USA 11.638 7.345
Germany 1.39 1.653
China 1.126 0.976
Netherlands 0.922 0.997
Sweden 0.707 1.316
Thailand* 0.33 0.175
Others 3.276 3.24
3908 Polyamides 9.588 11.485
Korea 2.899 3.064
Thailand 1.627 1.652
Singapore 1.225 2.782
Japan 1.224 0.852
Taiwan 1.118 0.915
Others 1.495 2.22
3911 Petro Resins, primary form 9.428 16.084
Japan 3.038 4.869
China 1.564 1.158
USA 1.135 3.894
Korea 0.852 1.14
Singapore 0.79 1.633
Thailand* 0.075 0.244
Others 1.974 3.146
Note : Thailand* excluding in the top 5 countries
Source : National Statistics Office and World Atlas
Based on the Philippine Trade Statistics, the country imported a total amount of Plastic products amounting to US$948.386 million in 2009 a decreased of 35.40% compared in 2008 which totaled to US$1,284.097 million. The country imported mostly raw materials of plastics since there are no domestic factories of such products. Top imported raw materials of plastics in 2009 which include ethylene which amounts to US$126.166 million, polyether, expoxide at US$ 104.379 million, other olefin primary at US74.492 million , silicone, primary form at US$66.701 million, self adhesive materials at US$56.431 million. On the other hand, the finished plastic materials that the Philippines imported were box, bag, closures at US$89.979 million, plate and sheets at US$83.645 million, tube, pipes and hoses at US$38.808 million and tableware and houseware at US$20.925 million.
Meanwhile, top exporting countries include Singapore, Thailand, Korea, Japan, USA and China. However, the major factors affecting supply include the oil prices increases of ethylene and propylene which becomes expensive and since these raw materials are imported from abroad and prices are subject to currency changes, fluctuating currency has a negative effect on the downstream industry because of the limited purchasing power of their market., most multinational such as Procter & Gamble and Colgate now outsource manufacturing operations to Thailand, Vietnam and other countries with a cheaper cost of production. Wholesale clients are diminishing. As for the consumer market, the downstream firms are having difficulty in managing their costs due to the limited budget of consumers.
Philippine Top Exports of Plastic Products Corresponding Top 5 Countries
Value — Millions of US$
H.S.Code Product Description/Top 5 Countries 2009 2008
3923 Box, Bag, Closures, etc. 73.057 101.251
Japan 19.17 25.312
Thailand 9.947 9.078
China 7.534 6.063
Indonesia 7.431 3.713
United States 7.228 9.012
Others 21.747 48.073
3901 Ethylene, Primary Form 66.956 54.149
China 53.98 17.378
Vietnam 4.483 9.856
Pakistan 1.257 0.965
India 1.122 0.222
Indonesia 1.08 3.057
Others 5.034 22.671
3926 Other Articles of Plastics 56.778 54.496
Japan 19.205 16.616
United States 6.397 9.306
Indonesia 5.219 3.848
Singapore 4.616 2.121
Thailand 3.798 3.596
Others 17.543 19.009
3920 Plate, Sheet and Cell 27.819 55.328
Japan 6.937 8.848
Indonesia 4.07 5.53
Taiwan 3.924 7.867
Malaysia 3.399 7.502
China 2.695 1.274
Others 67.94 24.307
3915 Waste, Parings, scrap 25.581 50.917
China 14.452 16.313
Vietnam 3.656 12.436
Taiwan 2.6 4.343
Hongkong 2.268 7.018
Malaysia 1.318 2.498
Others 1.287 8.309
3919 Self Adhesive Material 15.246 15.435
Japan 4.869 5.738
Taiwan 1.553 0.7
China 1.482 1.154
United States 1.288 1.661
Singapore 1.13 1.965
Others 4.924 4.217
3902 Other Olefin Primary 14.509 8.699
Indonesia 13.647 1.16
China 0.678 2.21
Vietnam 0.078 1.353
Sri Lanka 0.038 0
Malaysia 0.032 1.297
Others 0.036 2.679
3904 Vinyl Chloride 11.318 11.168
China 3.813 3.865
Vietnam 2.199 1.745
Bangladesh 2.119 2.068
Turkey 0.855 0
Japan 0.817 1.306
Others 1.515 2.184
3924 Tableware and Household 10.5 5.27
USA 3.301 1.418
Singapore 3.104 0.601
Australia 1.155 1.341
Japan 1.04 0.429
Hongkong 0.378 0.066
Others 1.522 1.415
3907 Polyether, Expoxide 8.949 14.849
Japan 4.303 7.991
Hongkong 0.884 1.822
Vietnam 0.649 0.387
Thailand 0.54 0.845
Sri Lanka 0.44 0.468
Others 2.133 3.336
Source : National Statistics Office and World Atlas
The total Philippine of Plastics amounted to US$322.294 million a decreased of 20.95% from 2008’s US$389.823 million. The top export plastic products include finished product such as box, bag , closure, etc. amounting to US$73.057 million, plate, sheet, etc. at US$ 27.819 million, waste, parings, scrap at US$ 25.581, raw materials such as ethylene, primary form at US$ 66.956 million, other articles of plastic at US$56.777 million and self adhesive materials at US$ 25.581 million.
Top importing countries include Japan, China, Indonesia, Taiwan and Vietnam. The country also exported to Thailand box, bag, closures, etc. and other articles of plastics.
The Philippines still can not compete with other exporting countries because 75% of raw materials of plastics are imported from other countries. Likewise, the cost of production in the Philippines is high due to the cost of electricity, cost of labor and the fluctuation of foreign exchange.
Tariff Rates of Plastics (H.S. 39) 2010-2015
ASEAN CEPT — 0%
(Within ASEAN Countries)
Most Favored Nation (MFN) — 1%, 3%, 5%, 7%, 10% and 15%
(Outside ASEAN Countries)
OPPORTUNITIES OF THAI COMPANIES TO EXPAND AND PENETRATE INTO THE PHILIPPINE MARKET OF PLASTICS :
Based on the previous data, Thailand has already penetrated the Philippine market of plastics specifically on raw materials such as ethylene, primary form, polyether, expoxide, other olefin primary, silicone primary, etc. Hence, finished products that the country imported from Thailand are box, bag, closure, other plate and sheets, tubes, pipe, hoses and fit. Philippines has a greater advantage to import from Thailand because the country can avail of the ASEAN CEPT rate which is “0%” and the cost of transportation will be cheaper.
Meanwhile, Thai Companies can invest in the Philippines particularly the “upstream and midstream industries” for the Plastic Industry since they can avail of the Foreign Investments Incentives from the Board of Investments in the Philippines. Likewise, there are no government regulations for this kind of industry. Thai companies deciding to invest in the Philippines should consider the naphtha crackling plant which supply ethylene and propylene, to set up a synthetic resin manufacturing plant, and to act as one group in the international market to be able to capture transactions that require bigger volumes.
Source : http://www.depthai.go.th