The Long Son Petrochemical Complex

The 'most favoured nation' (MFN) tariff is the standard rate a country applies to imports from other World Trade Organisation members, also the highest rates a country can charge under its membership rules.

These products are basic raw materials for many other industries, such as packaging, agricultural production, electrical equipment, auto parts and many other fields. This proposal aims to protect Vietnam's young petrochemical industry and ensure long-term sustainability by reducing dependence on foreign suppliers.

In the document requesting comments on the draft amendment to Decree No.26/2023/ND-CP on import and export taxes, the Ministry of Finance (MoF) said that the tax rate for PP and PE plastic resins is 0-3 per cent and the ceiling tax rate committed to the WTO is 6-6.5 per cent.

Polypropylene (PP) plastic products had an import turnover of $1.5 billion in 2024. The portion subject to MFN tariff is $451 million, accounting for 30 per cent of total imports. Vietnam mainly imports PP products from South Korea, China, and Saudi Arabia.

Polyethylene (PE) plastic products had an import turnover of $2 billion in 2024. The portion subject to MFN tax is $1.7 billion, accounting for 86 per cent of total imports. Vietnam mainly imports PE products from South Korea, the US, Thailand, and Saudi Arabia.

Commenting on SCG's proposal, the MoF submitted to the government an increase in the preferential import tax rate for PP and PE plastic pellets from 0-2 per cent. State budget revenue could increase by VND924.6 billion ($37 million) under this plan.

However, the MoF also reminded the government that this plan had been raised in 2023 and did not receive consensus from the Ministry of Industry and Trade, the Vietnam Plastics Association, and other agencies at that time as the domestic production capacity of PP and PE plastic pellets was not enough to meet market demand.

In its first quarter report this year, SCG's revenue reached $3.8 billion, up 0.1 per cent on-year but down 5 per cent on-quarter. Thailand was its largest source of revenue, with $2 billion, accounting for 56 per cent of the total. Vietnam came in second with 8 per cent, equivalent to about $300 million. Some other major markets are Indonesia, China, and Cambodia.

SCG achieved a post-tax profit of $30 billion globally, but also said that if the results from the Long Son Petrochemical Complex (LSP) were not counted, this figure would increase to $120 million, meaning the LSP was responsible for a loss of $90 million.

LSP has a total designed capacity of 1.4 million tonnes of plastic pellets per year, along with many other plastic products. At maximum capacity, this complex is expected to bring in annual revenue of $1.5 billion and contribute about $150 million to the state budget.

However, the LSP, which came into operation in September last year, had to temporarily suspend operations after just 15 days due to market concerns. LSP said it would resume operations of the refinery if profit margins improved.

SCG announced in February that it would invest an additional $500 million to renovate the plant, using ethane as a new feedstock, simultaneously or replacing naphtha and propane. The undertaking is expected to take 2.5 years, completed by the end of 2027.