VietNamNet Bridge - Investing in agriculture projects is a choice made by industrialists who have realized that the profits in their core business fields have dried up. 

“Hoa Phat Group makes trillions of dong worth of profit every year. But our shareholders don’t  want dividends. They want to see the money to be re-invested in other projects. And we have chosen agriculture projects,” said Tran Tuan Duong, CEO of Hoa Phat Group.

Duong said that he decided to inject money into the agriculture sector after he considered investment opportunities in many different business fields, including BOT (build, operation, transfer) transport and hydropower projects.

“The animal feed market is estimated to have the value of $7 billion a year. Meanwhile, the steel market is worth roughly $5.5 billion. You can see that the animal feed market is not as small as people think,” he said.

Doan Nguyen Duc, chair of Hoang Anh Gia Lai Group, a big real estate developer, has been praised as “being abreast of the times” when he decided to quit the real estate market five years ago and began making money in the agriculture sector.

It is sugar production, not real estate projects, which is the “bread earner” for Hoang Anh Gia Lai now. Sugarcane, rubber and corn were estimated to make up 53 percent of its total revenue and 69 percent of profit in 2014.

“They (investors) have realized that they can expect huge profits which are in no way inferior to the profits they can expect from industrial projects, if they can make heavy and reasonable investment in agriculture,” an analyst commented.

As for the big real estate “big names” like Vingroup and Hoang Anh Gia Lai, or big steel manufacturer like Hoa Phat, it is within their reach to pour not only hundreds of billions, but trillions of dong into agriculture.

Vingroup, for example, has contributed VND1.4 trillion, or 70 percent of the chartered capital, to Vineco, a company specializing in making farm produce. Vineco’s products would be distributed at Vinmart, a retail chain owned by Vingroup.

Hoa Phat, which has a large distribution network and experience in industrial production management, has decided to build a chain of five animal feed factories, which are expected to bring turnover of VND3 trillion in the next three years.

A branding expert commented that the “big guys” have taken a wise move by putting their money into agricultural production.

“They have taken a turn at the end of the road,” he said, explaining that with the free trade agreements signed with other trade partners, the profits the businesses can expect in their core business fields would no longer be attractive.

TBKTSG