Dec 06, 2005. /Lesprom Network/. Vietnamese paper-making enterprises have suffered a loss of VND 32.8 billion ($2.1 million) so far this year, chiefly due to supplies exceeding demands, lack of investment and a shortage of input materials, the Vietnam Paper Association (VPA) reports. Although the new academic year has just begun, writing and printing paper is being consumed at a slower than expected rate. The enterprises are losing an average of VND 500 000 ($31.5) for each tonne of paper sold, says the VPA. The country presently has 35 000 tonnes of writing and printing paper in stock, 30 000 tonnes of which produced by state-owned companies. Despite the paper industry having a production volume of 260 000 tonnes per year, annual consumption stands at a level of 150 000 tonnes. Last year, 10 new paper factories with a combined capacity of around 100 000 tonnes per year came into operation, producing different kinds of paper such as writing and printing paper, packaging paper and tissue paper. The Vietnam Paper Corporation alone has produced 227 000 tonnes of paper so far this year, a year-on-year increase of 23.6%. Vietnamese paper production still depends on foreign pulp sources, making its price less competitive. Vietnam expects to need more than 400 000 tonnes of pulp this year, including 300 000 tonnes of white pulp for production. Meanwhile, paper enterprises estimate a production of only 65 000 tonnes of white pulp. Last year, local manufacturers supplied only 218 000 tonnes of pulp and had to import 140 000 tonnes of white pulp to meet production needs. Bai Bang Paper and Viet Tri Paper are the country's two companies presently producing pulp with respective annual capacities of 61 000 tonnes and 3 000 tonnes. By the end of this year, the paper industry will be able to meet only 40% of the country's pulp demands, the rest must be imported. In the first nine months of this year, Vietnam imported 350 000 tonnes of pulp, a rise of 32% from the same period last year even though the imported pulp price climbed $0.1-0.25. Paper importation also increased by 53%, triggering a stiff competition between domestic and foreign paper products. The VPA's general secretary Vu Ngoc Bao asserted that between now and 2010, the country will undergo a severe shortage of paper producing materials. Currently, the construction of the Thanh Hoa Paper Factory, which will have an annual capacity of 50 000 tonnes of pulp and 60 000 tonnes of paper, is facing financial difficulties. Commercial banks are hesitant to deliver loans to projects they deem risky investments. To date only the Bank of agriculture and rural development has offered a loan of $10 million, but the project still needs an additional capital of VND 2 trillion ($126 million). A proposal to expand the production capacity of the Bai Bang Paper Company to 250 000 tonnes of pulp per year is awaiting government approval. The Kon Tum Pulp Factory promised an annual supply of 130 000 tonnes of pulp when the project would be completed, however this project has since been shelved due to a lack of funding. When tariffs imposed on import paper are cut from 20% to 5% under the AFTA agreement at the beginning of 2006, the domestic paper will likely face harsh rivalry from imports. Lack of investment means a continued pulp shortage. The domestic paper industry is now desperately seeking foreign investors willing to risk their investment capital in pulp and paper production. If foreign investment is found, the potential industry will have enough input material to boost its production. This might help the paper industry improve product quality and lower production costs, sharpening Vietnam's competitiveness given its current international economic integration.