VIETNAM PAINT MARKET

Frost & Sullivan report collated for APCJ December08/February09

Growth of Vietnam paint market

Vietnam is a booming market. It is considered one of the top destinations for global
investors in manufacturing. The country is resource rich and has a large and affordable
workforce.

The Vietnamese government is continuously amending and improving the Foreign Direct
Investment (FDI) Law of Vietnam to shape the economy into a more open and attractive
one for foreign investors. The key provinces of investments are in the Tier 1 type
provinces such as Ho Chi Minh, Hanoi, Danang, Vung Tau and Binh Duong.

The paint market for Vietnam in 2007 was valued at US$459M at a size of 247,000t.
Vietnam showed double digit growth for 2007 and this trend is set to continue through
2008 and 2009. With the FDI, comes the arrival of more international companies having
paint producing plants in the country.

Whilst things look good for Vietnam, the recent slowdown in major industrial economies
as well as surging oil prices have had an impact on the industry and this has resulted in a
more moderate growth for 2008 as compared with 2007. Major government projects have
been delayed and the credit squeeze is on, as banks start recalling loans given out. The
drop in US currency as well as reduced manufacturing demand has led to a fluctuation of
the Vietnam Dong as well as high inflation.

Despite this, the major paint companies are confident that growth will pick up in 2009
and in the years that follow. The policies set out by the Vietnamese government are
expected to help contain inflation and shape future growth.

• Vietnam GDP growth from 2003-2009

Year 2003 2004 2005 2006 2007 2008 2009 (f)
GDP-Real
7.2 7.7 8.5 7.8 8.0 7.0 8.1
Growth (%)

• Vietnam Paint Market growth from 2003-2009

 Growth of VN Paint Market (Value)

700.0 620.1
600.0
459.2
533.1
CAGR 2007-2009 = 16.21%
500.0
370.1
400.0 341.7
313.3
274.3
300.0

200.0

100.0

0.0
2003 2004 2005 2006 2007 2008 2009
Year

Growth of VN Paint Market (Volume)

350000
304969
300000 273435 CAGR 2007-2009 = 11.02%
247421
250000
205303
200000 173912
160255
145046
150000

100000

50000

0
2003 2004 2005 2006 2007 2008 2009
Year

* 2008 and 2009 are forecasted growth numbers.

• Paint market highlights and future trends

The 2007 paint consumption per capita in Vietnam averages 2.8kg/person. This is still
considered low and leaves more room for growth. In comparison, developed countries
like Australia and Japan, have a paint consumption per capita of 9-12kg/ person.

The decorative market, which makes up almost 45% of market share in value, is the
leading contributor to this industry. The top two players in this segment, 4 Oranges and
ICI Paints combined hold more than 60% of the market share. The balance of the market
is held by players like Nippon, Jotun, Toa, Kova (mainly in the north) and AkzoNobel (as
of January 2008, Akzo Nobel have taken over ICI Paints). Key factors of success for the
leading companies are to have a variety of product lines to cater for every consumer need
and a good distribution network. The decorative market is seeing a trend in migration of
product mix from low tier to mid tier and premium tier.

The second largest segment is the wood coatings market. This segment has seen a rapid
growth in recent years due to the influx of furniture makers from China and other Asean
countries. The reason for this being cheaper labour and lower manufacturing cost. Market
growth for 2007 was seen at approximately 50% as compared to the previous year.

Vietnam is also showing active growth in the shipbuilding industry. According to the
Vietnam Shipbuilding Industry Corporation, there is a three-phase plan from 2001-2010
to upgrade and improve the shipyards in order to have technology equal to the ASEAN
shipbuilding industry. This plan will clearly see a steady growth in the marine and
protective coatings industry in this country. Growth in this industry is expected to be at
approximately 25% and 10% respectively for 2008 and 2009.

_______________________________THE END________________________________

Contact:
Donna Jeremiah | Senior Manager- Corporate
Communications|Asia Pacific Aerospace &
Defense, Automation & Electronics, Energy
& Power Systems, Environment & Building
Technologies, Chemicals, Materials & Food,
Financial/Business Services| Frost &
Sullivan
djeremiah@frost.com | DID: 6.03.62045832 |
GL: 6.03.62045800 | F: 6.03.62017402 |
www.frost.com

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