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Business

Japan consortium to cultivate veggie factory business in Mideast

TOKYO -- A group of Japanese companies is gearing up to market vegetable factories in the Middle East, with an eye toward landing roughly 50 billion yen ($469 billion) in construction contracts in three years.

Showa Denko, Marubeni and Chiyoda are moving toward signing a contract with United Arab Emirates conglomerate Al Ghurair as early as this month. A demonstration factory will be built by year-end if all goes smoothly.

The roughly 100-sq.-meter hydroponic vegetable factory will use light-emitting diodes instead of the sun to produce 12.5kg of leafy greens a day. It will use a tenth as much water as a greenhouse or a conventional farm in the UAE, since it will not lose water to evaporation or soil absorption.

Al Ghurair plans to sell output from the factory through a supermarket unit, targeting the wealthy. It will consider constructing a full-scale facility later.

A vegetable factory capable of producing 1 ton a day is estimated to cost between 1 billion yen and 2 billion yen to build. Showa Denko will provide LEDs and other equipment, while Chiyoda will procure materials needed for construction. Marubeni will handle marketing. The Japanese companies hope to secure 20 to 25 contracts in the region in three years.

Most leafy vegetables sold in the water-poor UAE are imported from the U.S., France and elsewhere, resulting in stale offerings that can sell for a whopping $6 or more per 100 grams for lettuce.

Still, 25-30% of the population in such UAE cities as Dubai and Abu Dhabi earns the equivalent of more than 10 million yen a year. So the Japanese consortium sees a decent business opportunity, believing that its factories should be able to provide competitively priced fresh offerings.

As of February, 191 vegetable factories were operating in Japan, according to the Japan Greenhouse Horticulture Association -- roughly three times the count of five years earlier. But in a survey by the association from late last year to early this year, 55.9% of 34 operators polled were incurring losses.

A Showa Denko system has been employed at 35 vegetable factories in Japan so far. It uses proprietary red LEDs and enjoys a reputation as an efficient system that helps factory operators turn a profit more easily.

(Nikkei)

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