Two Vietnamese conglomerates team up to boost growth in Mekong region

Strategic partnership has already earmarked regional investments, such as in Myanmar, which are a harbinger of future cross-border commercial integration

In a groundbreaking deal, two of Vietnam's major conglomerates, Thaco and Hoang Anh Gia Lai, join forces to launch a strategic partnership with strong regional aspirations. Ultimately, the coming together aspires to increase their competitiveness in the fast-developing Cambodia, Laos, Myanmar and Vietnam (CLMV) market.

Thaco (stands for Truong Hai Auto Corporation) is a leading Vietnamese manufacturer and distributor of cars, buses, trucks and specialised vehicles. The enterprise has also expanded into other fields, such as real estate, urban infrastructure development, agricultural machines, tourism, trading and services.

HAGL (short for Hoang Anh Gia Lai) is a conglomerate that operates mainly in the property and commercial agriculture sectors.

The two conglomerates announced their strategic partnership on August 8 2018. Highlighting the political significance of the arrangement across the region, the ceremony cementing the deal was attended by the Vietnamese Prime Minister, Nguyen Xuan Phuc, Cambodia's Permanent Deputy Prime Minister, Men Sam An and high-ranking leaders from the Lao government.

The two companies are convinced that by collaborating this will strengthen both enterprises in CLMV, and are already uniting on projects in agriculture and real estate/property development in the four regional countries, working together in a win-win link-up.

In agriculture, Thaco invested around US$172 million into HAGL Agrico, the conglomerate's agriculture arm, through purchases of its convertible bonds and shares, according to Doan Nguyen Duc, chairman of HAGL. The total investment equates to 35% of HAGL Agrico.

Turning to property development, Duc highlights a scheme that symbolises the Vietnamese business community's growing interest and investment in Myanmar. The first development stage for the multi-purpose Hoang Anh Gia Lai Myanmar Centre in downtown Yangon, has now been completed. This complex will include a five-star hotel with business and recreation facilities, retail space and restaurants, and offices and apartments for lease.

According to Duc, Thaco will be in charge for the second stage of the project, and he also reveals that his partners intend to invest about US$163.5 million, enabling Thaco to speed up construction pace for a faster completion of the whole project.

The second development stage marks the overseas debut of Dai Quang Minh Corporation, Thaco's real estate arm. Duc says Thaco will continue to make more financial investments in HAGL.

"The total investment will be equal to US$900 million, a very large amount for an investment deal. It is one of the biggest deals among two Vietnamese companies on the Vietnamese stock market so far," explains Duc.

HAGL Agrico owns over 80,000 hectares of farm land in Cambodia, Laos and Vietnam, supported by thousands of agricultural engineers, trained in Vietnam and elsewhere. The company grows banana, chili, dragon fruit and other fruits, and these fruits are sold on to China, India, South Korea and ASEAN countries.

The fruits are transported overland to port facilities in Vietnam, then loaded onto container ships bound for overseas buyers. The new partnership with Thaco now means the fruits will be transported to Chu Lai Port, situated on Vietnam's central coast, a port which is owned by Thaco.

On a wider level, Thaco seeks to make inroads into Cambodia, Laos, Myanmar and other regional markets by harnessing its competitively priced agricultural products. This comes against a backdrop where many farmers in CLMV still rely on manual labor for such tasks as planting rice seedlings and harvesting. Often the only available modern farming equipment is second-hand machinery from Japan and China.

With this in mind, Thaco develops products designed for farming utilising know-how from South Korean farm equipment maker LS Mtron, a company with which Thaco made a technical cooperation deal in 2017. About half of the components in these agricultural products are competitively sourced from within Vietnam.

Thaco also assembles cars for foreign automakers, including Mazda Motor, Kia Motors and Peugeot. The company produces its own trucks and buses; the buses are sold in Vietnam and neighboring markets.

Date

10 Aug 2018

Channel

Treasury

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