Removing the bottleneck of "greening" Vietnam paper industry

The Vietnam paper industry is now seeing a surge in demand for paper goods made from recycled resources, particularly packaging. This is the primary product of Vietnam's paper sector, as well as an auxiliary product in the value chain of several important export industries that are rapidly greening, including leather and footwear, wooden furniture, textiles, agricultural goods, electronics, components, and so on.

Barriers make it difficult for businesses

According to the Vietnam Pulp and Paper Association (VPPA), developing a circular economy and employing recycled materials to make paper goods will save a significant amount of resources and energy. Recycling one ton of discarded paper saves the lives of 17-24 trees that would otherwise be chopped down to produce pulp. At the same time, the paper production process saves almost 39 liters of water, approximately 4,000 kWh of electricity, and 605 liters of crude oil. Mr. Dang Van Son, Vice Chairman and General Secretary of the VPPA, stated that, in principle, practically all waste from the paper sector may be recycled and reused several times depending on the purpose and market need.

However, due to limitations in procedures and laws, the Vietnam paper sector has several problems in the green transformation process connected with the establishment of a circular economic model. Mr. Dang Van Son's main concern is the availability of raw materials for production. Currently, the local supply of pulp is limited, forcing businesses to import it in situations where they have few options, with the majority of them using bleached chemical pulp. Mechanical pulp, brown pulp, low-white pulp, and high-performance pulp are all extremely effective in reducing resource usage but are not generally employed.

The same holds true for recycled paper materials. Mr. Dang Van Son's analysis revealed that businesses in the paper industry and some industries with a high proportion of recycled materials, such as plastic, are "stuck" in a paradox: domestically, due to a lack of policies encouraging investment in recycling collection, the used paper collection system is fragmented and unprofessional, resulting in low efficiency. Some existing restrictions, such as the input VAT policy, are proving to be a hindrance to corporate operations. Businesses buy recycled materials for manufacture from people, small level 1 and level 2 collectors, and the majority of them do not have invoices.

To assist enterprises in overcoming problems, the General Department of Taxation has permitted the issuance of a list, but the maximum amount is limited to VND 100 million, which is insufficient in light of the requirement for centralized purchasing. According to VPPA calculations, with a medium-sized paper business producing 100,000 tons, there are insufficient collectors to compile such a list. This implies that exporters have no input and cannot claim tax refunds.

The aforesaid condition forces papermakers to rely on imported recycled materials, which is not straightforward. Mr. Dang Van Son went on to say that recycled material imports are heavily regulated since recycled paper is considered garbage, not raw materials for manufacture, and requires a variety of licenses as well as significant import deposits ranging from 18-20% of the shipment's value. Meanwhile, nations such as the United States, Japan, and Europe handle obsolete corrugated containers (OCC) using the same norms as regular raw materials, whereas nearby ASEAN countries such as Thailand manage much more freely, with more competitive scrap import costs.

A push from the right mechanism

According to the VPPA, under the present green transformation trend, the Vietnam paper sector has several chances to establish a circular economy. In addition to the industry's characteristics, market demand for paper products made from recycled materials is increasing; businesses' awareness of the circular economy is growing, and the industry is rapidly approaching scientific and technological advances, particularly in the production of packaging paper. In order to assist enterprises in greening manufacturing, Mr. Dang Van Son urged that the government complete legal papers linked to the circular economy in a consistent, synchronous, and detailed manner.

The circular economy guidelines for the industrial sector, including the paper industry, are particularly essential to ensure that firms understand the legislation governing what can and cannot be done in the circular supply chain.

Regarding VAT policy, companies recommended allowing them to pay VAT instead of people and scrap collectors and then refunding the tax to overcome issues with establishing provenance and enabling scrap buying and recycling. Along with that, a policy should be implemented to encourage firms to collect and recycle raw materials, and the quantity on the list should be increased to reflect current realities.

While waiting for the aforementioned policy to be completed, the VPPA advised that OCC should be removed from scrap management and imported as secondary materials so that firms have enough domestic raw materials, therefore boosting competitiveness. At the same time, papermakers must be allowed to self-treat common solid waste within the facility in order to reuse it more effectively. Furthermore, it is vital to complete the green credit policy and standards so that businesses may easily access financial resources and engage more in green transformation.