Domestic firms target agribusiness
Domestic firms target agribusiness
Vietnam’s massive agricultural potential has encouraged local private investors to make huge investments into the sector. Thanh Dat reports.
Leaders of 28 top Vietnamese agricultural businesses committed themselves to multi-billion dollar investment projects into the agriculture sector at a meeting in late March held with the Ministry of Agriculture and Rural Development.
The enterprises include T&T, Hoa Phat, BAC A BANK, Tonkin Investment, Otran Vietnam, Trung Thanh, Quang Minh, Nafoods, FLC, Minh Phu, Viettel, Vingroup, Vinamit and Bui Van Ngo.
Bui Van Ngo’s investment consultant, The Ha, said this company would implement a $1 billion project to process high-quality rice in the southern province of Long An.
The project will include four clusters of factories able to dry 4,000 tonnes of rice per day and husk 800,000 tonnes of rice per year. It will need around $52 million for constructing the project’s infrastructure, including roads, warehouses and drying grounds, and $48.55 million for machinery and equipment. Rice inputs would be sourced from the province.
The project will bring in revenue of nearly $200 million in the second year of operations, nearly $250 million in the fifth year and $331 million a decade later. The plant is predicated to deliver profits of $2.537 billion, including the net profit of $209.88 million by the end of the first decade of operations.
Minister of Agriculture and Rural Development Cao Duc Phat said this project was one of many big agricultural projects expected to be implemented by local private investors in 2015.
The local agricultural sector was said to be mainly dominated by foreign giants like CP, Cargill, Japfa Comfeed, GreenFeed, De Heus, Uni-President and New Hope.
“However, things will change. Many big local firms are planning a new wave of huge investments into this lucrative sector, because they see the potential with the domestic rising demand for high-quality produce, that will provide new competitiveness,” Phat said.
Great potential
Ha said Bui Van Ngo saw that “Vietnam is a big rice maker in critical need of high-quality rice processing factories. We also want Vietnamese rice to be more competitive in the world’s market economy.”
Agricultural attache of the Japanese Embassy to Vietnam Atsuki Tomoyose cited many reasons behind a surge in agricultural investments in Vietnam. Vietnam has a diverse environment, providing ideal conditions for the development of its agriculture and fishery products. Vietnam’s geographical position means it is ideally connected to ASEAN and China and this means it would be economically strategic for enterprises to invest in Vietnam’s agricultural sector and export products, particularly given the relatively improved infrastructure seen in recent years.
Additionally, with economic development, Vietnam’s demand for high-quality food is increasing among Vietnamese consumers, providing a big chance for enterprises to apply more modern technologies and techniques to meet those demands.
A new wave of investments
Vietnam’s largest real estate developer Vingroup, opened its new VinEco unit to produce organic agricultural products for export and domestic consumption in March.With the chartered capital of $93.45 million, VinEco will initially concentrate on using technology from Israel, Holland and Japan for domestic products. Later, VinEco will conduct research and development of agricultural specialties for export.
Nguyen Nhu So, chairman and general director of animal feed maker Dabaco Vietnam, last week said his company would invest over $9.34 million into building a project to developing high-quality chicken breeds, in addition to its current five animal feed processing factories with the total annual capacity of 800,000 tonnes.
Tran Tuan Duong, general director of Hoa Phat Group, one of Vietnam’s leaders in steel production and property, also said the group would focus on producing animal feed through a $467.28 million investment project over the next five years. Hoa Phat expects to occupy about 10 per cent of the domestic animal feed market share over the next 10 years.
In February 2015, the group established an animal feed company with the chartered capital of $14 million and the annual capacity of 300,000 tonnes in the northern province of Hung Yen. Other four similar factories are expected to be built over the next ten years.
According to senior agricultural expert Pham Hoang Ngan, besides Vietnam’s potential, one of the main reasons behind these large-scale investments is that investors want to benefit from tariff cuts under the coming free trade agreements expected to be signed this year between Vietnam and the EU, South Korea, the Customs Union (Russia, Belarus and Kazakhstan), and especially the Trans-Pacific Partnership Agreement.
“Actually some investors like Hoang Anh Gia Lai and BAC A BANK have been investing in the agricultural sector for years and they are doing this job very well,” she added.
Since 2009, BAC A BANK has acted as an investment consultant for TH Group’s $1.2 billion hi-tech dairy and fresh milk processing complex in the central province of Nghe An.
Established in October 2009, the Asian record-breaking project has 45,000 dairy cows, 22,000 of which are milked, and the processing capacity of 400 tonnes of fresh milk a day. The number of cattle will rise to 137,000 in 2017 and about 203,000 by 2020.
Before the project was implemented, 92 per cent of Vietnam’s milk was imported from abroad. Now the rate has been reduced to 72 per cent, thanks partially to TH’s contribution.
Meanwhile, Hoang Anh Gia Lai, which previously focused on property, has invested VND18 trillion ($841.12 million) into hi-tech agriculture so far. It shifted to agricultural projects in Vietnam, Laos and Cambodia in 2008 after recognising that the local property sector embraced potential risks.
Currently, this group has over 45,000 hectares of rubber, 8,000ha of sugarcane, 17,300ha of palm oil and 5,000ha of maize. Revenues from rubber and sugar production hit VND1.2 billion ($56 million) last year, up 18 per cent on-year. It has also begun a plan to raise 100,000 cows in Vietnam with milk producer Nutifood.
Last October, Vietnam’s leading sofeware group FPT began its agricultural investment by signing a deal with Japanese-backed IT developer Fujitsu on deploying Fujitsu’s Akisai Cloud, which is used to support agricultural management via cloud computing, during 2015-2016.
Challenges remain
Vietnam Association of Advanced Technology Enterprise in Agriculture representing over 30 hi-tech agricultural enterprises claimed that hi-tech agricultural enterprises were still hurt by land, tax and capital problems.
Da Lat Flower Biotechnology Joint Stock Company’s general director Nguyen Dinh Son said the company found it hard to access medium-term loans. Currently, only short-term loans could be accessed but only with considerable difficulties.
“While import tariffs for equipment and machines are exempted under the law, we still face a 25 per cent tax rate for our imports in these kinds of investments,” he said.
Dutch-backed Dalat Hasfarm Company’s vice general director Nguyen Van Bao also lamented that his company was forced to pay duties for its modern imported greenhouses, which were exempt from import taxes as they could not be produced locally.
Minister Phat told the 28 enterprises at the meeting that the MARD would work with other ministries and localities to directly support their projects in terms of land, tax and administrative procedures.
“We have established an independent task group with offices nationwide exclusively in charge of attracting agricultural investment projects. Investors will be provided with consultancy, information on input materials, outputs and distribution channels and even merger and acquisition activities,” he stressed.
