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Business

Fields beckon Vietnam's richest executives

HO CHI MINH CITY -- One after another, the three wealthiest executives of listed companies in Vietnam have announced major investments in agriculture.

A Vietnamese farmer collects vegetables in a field in Van Don district, Quang Ninh Province.

     Vingroup, the nation's largest property developer, on March 23 launched a unit called VinEco. The subsidiary will handle organic crop production, aiming to tap the domestic and foreign markets. Vingroup Chairman Pham Nhat Vuong -- who owns a nearly 30% stake in the group and total assets of nearly 21 trillion dong ($975 million) as of mid-March -- expressed his ambition to boost the country's farming sector. This, he suggested, would be done by providing clean, affordable produce to consumers who demand high quality.

     Vuong is set to launch a major project to grow vegetables in the northern province of Quang Ninh. Details have yet to emerge, but local media reports say the group is waiting for approval to develop a large tract of farmland. VinEco is expected to employ advanced agricultural techniques from Israel, the Netherlands and Japan.

     Another executive leading his company out into the fields is Doan Nguyen Duc, chairman of Hoang Anh Gia Lai group. His assets add up to more than 7.6 trillion dong.

     Hoang Anh Gia Lai used to be a property-centric conglomerate, but has been diversifying into farming since 2008. It has set up rubber, sugar cane, palm oil and corn plantations in Laos and Cambodia. Agriculture-related operations now account for 40% of group sales.

     The group has, so far, invested 18 trillion dong into agriculture. It owns 44,500 hectares of rubber, 8,000 hectares of sugar cane, 17,300 hectares of palm oil and 5,000 hectares of corn fields. Revenue from rubber and sugar production reached 1.2 billion dong last year, an 18% increase on the year.

     Also last year, Hoang Anh Gia Lai entered the dairy farming business. It started raising 100,000 cows with Ho Chi Minh City-based milk producer Nutifood. The partners recently struck a deal with authorities in the northern province of Ha Nam and central highland province of Gia Lai, to build a chain of dairy farms and a milk processing plant, importing young cows from Australia.

Feed frenzy

Vietnam's third-richest executive is Tran Dinh Long, chairman of Hoa Phat Group, one of the country's biggest players in steel production and real estate. His assets are valued at more than 5.4 billion dong.

     Last year, Hoa Phat set up a company that focuses on long-term strategic investment in agriculture.

     Initially, the group put down about 300 billion dong to establish an animal feed plant in the northern province of Hung Yen, with an annual production capacity of 300,000 tons. The plant is scheduled to make its first batches in June. The group expects to generate about $141 million in sales a year during the next three years.

     According to the Ministry of Agriculture and Rural Development, Vietnam's animal feed market is worth about $6 billion annually. However, the market is dominated by joint ventures and 100% foreign-funded companies; together they accounted for more than 60% of total feed production in 2014.

     Vietnam's feed production capacity is expected to rise 6.1% this year, to 15.6 million tons, compared with 14.7 million tons last year. However, total supply still will not be enough to meet demand.

     Officials project demand will reach about 20 million tons by the end of this year and 25 million tons by 2020. Domestic livestock companies have spent billions of dollars importing animal feed. The tally was estimated at $3.3 billion in 2014.

     Given Vietnam's population of more than 90 million, favorable climate and fertile land, the farming business clearly has potential. The only missing ingredient has been capital to implement advanced techniques and create a more efficient production base. But, now that the country's top three executives are betting on it, other investors may be more likely to do the same. The Trans-Pacific Partnership free trade talks, in which Vietnam is a participant, could serve as an additional carrot.

(Nikkei)

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