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Thai companies upbeat on expanding investments in Vietnam

Publication Date : 11-09-2012

 

Despite the current economic slowdown and high inflation in Vietnam, large Thai corporations remain confident about expanding their investment in the country in view of its market size and expected stronger purchasing power.

Sooksan Jiumjaiswanglert, executive vice president of CP Vietnam Corp., said that although many foreign investors were eyeing up Myanmar for investment, his company expected Vietnam to experience stronger economic growth and be better placed to serve as a springboard for expanding investment to Laos, Cambodia and southern China.

"Because of its closer connection with other countries, the Vietnamese market is in effect larger than just its 90 million-strong population. Inves-tors there could have a better opportunity to expand their businesses to neighbouring countries of Vietnam," he said.

He acknowledged, however, that there were some limitations to investment because of the country's laws and regulations, which the government is always changing.

CP Vietnam plans to expand the production capacity of its processed-food plant, where 80-90 per cent of the output is currently allocated to feed meal. A capacity increase will also increase the opportunity for Charoen Pokphand to build up its CP brand in the local market, he added.

Over the past five years, CP Vietnam's revenue has increased by an average of 29 per cent annually, a level that Sooksan expects to exceed this year.

He said the Vietnamese economy had fluctuated considerably during the past five years. For example, inflation stood at 19.9 per cent in 2008, but then dropped to 6.5 per cent because the government accelerated economic-growth policies. The local currency, the dong, has also been devalued several times over the past few years.

Chalokeporn Phalajivin, general director of Vina Kraft Paper, part of SCG Group, said Vietnam offered strong demand for many products. The group now has an integrated business in the country covering paper, petrochemicals, cement/construction materials trading and distribution.

SCG has 17 companies registered in Vietnam, with total assets of 11 billion baht (US$353 million).

Paper business represents the SCG Group's largest operation in the country.

Over the past five years, demand for paper in Vietnam has increased by an annual average of 10 per cent, while the country's gross domestic product has grown by 7 per cent per year, leading to strong demand for corrugated paper, he said.

This year, demand for corrugated paper will rise to 1 million tonnes, but the overall production capacity in Vietnam is only 900,000 tonnes. The need for the country to import paper to make up for the shortfall shows there is room for businesses to expand their investment, he said.

However, neither local investors nor foreigners have announced plans to expand investment in the paper industry because of economic fluctuations in the country, he added.

SCG currently has no plan to set up a second paper plant in Vietnam. Because of high demand, Vina Kraft recently allocated 600 million baht to increase production capacity from 220,000 tonnes to 250,000 tonnes a year. The development plan is expected to be completed in the middle of next year.

Mongkol Banthrarungroj, vice chairman and managing director of Thai Corp International (Vietnam), said the company planned to establish a modern retail outlet in Vietnam within the next five months in order to increase the distribution channels for Thai products in the market, as well as help Thai small and medium-sized enterprises to explore opportunities in the country.

About 70 per cent of the products in the department store will be Thai-made.

Thai Corp International (Vietnam) is a joint venture between Berli Jucker and Mongkol Group, with the former holding a 75-per-cent stake.

The company is also interested in convenience-store operations, Mong-kol said, adding that his firm is conducting a market study for expanding its business in Vietnam.

Over the past five years, the company has achieved accumulated revenue of Bt5 billion. It targets income of Bt2 billion this year.

Jirapong Dharaphop, vice president of the Vietnam JV assets international asset division of PTT Ex-ploration and Production (PTTEP), said the company planned to explore for oil and invest in Vietnam via four projects involving upstream to downstream investment.

Vietnam intends to allow more foreign firms to explore for petroleum reserves to serve local fuel demand, which averages some 400,000 barrels of oil a year.

With the country offering a greater opportunity for fuel exploration and operations, PTTEP is negotiating an exploration deal of the northeast coast, Jirapong said.

However, the Vietnamese government will hold 40-50 per cent of any business established by foreign investors in the industry, he added.

US$1 = 31 baht

 

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