Farm deal signals co-operation among VN firms

VNS

The latest co-operative agreement between farming and agricultural firm Hoang Anh Gia Lai (HAGL) and Truong Hai Auto Corporation (Thaco) has suggested that Vietnamese firms are willing to work together to improve their competitiveness as pressure from foreign businesses mounts.

The deal, signed on August 8, allows Thaco to buy convertible bonds worth VND3.8 trillion (US$163.1 million) issued by HAGL’s sub-unit HAGL Agrico, purchase VND4 trillion worth of 51 percent ownership of HAGL Myanmar Co Ltd, and help HAGL restructure its VND14 trillion worth of debts.

According to HAGL chairman Doan Nguyen Duc, Thaco’s total investment in HAGL’s sub-units and Myanmar projects is estimated at more than VND22 trillion.

The deal aims to assist HAGL resolve its problems with rubber farms in Vietnam, Laos and Cambodia, which have made the group unable to re-pay loans due to the sharp decline of rubber price.

The cost has fallen to around $1,300 per ton compared to $5,000 per ton when its farms were first developed.

Total loans of HAGL are estimated at VND23 trillion, leading to high annual interest rate for the company.

Despite efforts to switch its business focus to fruit and other products, the company has still encountered troubles, seeing its shares fall sharply from around VND40,000 per share in February 2011 to VND7,000 per share at the close of August 15.

Prime Minister Nguyen Xuan Phuc said at the signing ceremony of the HAGL-Thaco agreement that the deal is a good way to help large-cap companies boost their performances together, and make great contributions to the development of a high-tech agriculture sector.

“The deal also motivates Vietnamese companies to achieve a win-win situation, in which there will be not only big farms but also smart production, automated production chain and higher productivity,” the PM said.

Prior to HAGL-Thaco deal, the largest dairy producer Vietnam Dairy Products Joint Stock Company (Vinamilk) and the national flag carrier Vietnam Airlines on August 6 signed a five-year strategic deal that allows Vinamilk-made products to be consumed on Vietnam Airlines’ flights departing from Việt Nam.

The deal is expected to raise Vinamilk’s output consumption on flights by 10 percent per year and help promote the best Vietnamese brands to the world.

According to Vietnam Airlines general director Duong Tri Thanh, the deal will help improve the supply chain that connects Vietnamese brands to international markets.

Experts say those deals between domestic giant businesses must be spread wide among the business community to push them to co-operate given the rising pressure of foreign firms.

There should be new forms to connect local companies with each other to form allies such as co-operative, franchising and associating firms, they say.

According to Zulkifli Bin Baharudin, executive chairman of the logistics and supply chain company Indo-Trans Corporation, Vietnamese firms will remain weak if they try to go their own way to conquer other markets.

Therefore, Vietnamese firms should group together to be stronger and faster in order to participate in the global supply chain, he said.

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