Foreign firms put foodstuffs on the menu

Food processing has proved to be increasingly popular with foreign investorsPhoto: Le Toan

Le Van Tu, vice director of investment consultants Japan-Vietnam Commercial Investment, told VIR that the company was helping Japan’s Ogawa to prepare a pre-feasibility study for a project to raise cows and process beef in Hanoi’s Ba Vi district.

“This project is expected to become operational by late 2014, providing beef for the Vietnamese market,” Tu said.

Tu added that another Vietnamese investment consultancy firm was also providing consultancy for another Japanese firm, Sanei to implement a similar project, also in Ba Vi, which would begin operating early next year.

“According to Japanese investors, Vietnam has big potential for beef production. While Vietnam has to import large volumes of beef annually at high prices, the Japanese projects here will provide beef at cheaper prices,” Tu said. “Vietnamese workers will be sent to Japan for training before they can officially work at the factories.”

According to Vietnam’s Institute of Policy and Strategy for Agricultural and Rural Development, the local husbandry and foodstuff sector has become a magnet to foreign investors, especially given the financial woes. Foreign investors are investing into the sectors via mergers and acquisitions (M&A) or direct investment.

“We think agriculture is still one of the sectors in Vietnam that has lots of potential. We have seen more interest in this sector, but overall, the interest and actual investment via M&As or direct investment still seem to be short of the market’s potential,” Nguyen Thuy Hang, special counsel of international law firm Baker & McKenzie, told VIR.

Baker & McKenzie has advised Minh Phu - Hau Giang Seafood Processing (MPHG) on a VND400 billion ($19 million) acquisition by Japanese company Mitsui.

The deal involved the purchase of more than 30 per cent of MPHG’s shares by Mitsui through a private placement, which also led to the conversion of the company’s corporate form. MPHG is Minh Phu Corporation’s (MPC) major processing subsidiary.

MPC’s exports make up approximately 15 per cent of Vietnam’s total seafood export volume, and it is the market leader in the sector.

“We have seen that Vietnamese companies not only need foreign capital, but more importantly, they need strategic foreign investors who can partner with the business for growth. They need expertise and access to international markets, and companies like Mitsui can provide this,” Hang said.

Nguyen Hoang Hung, chairman of the Japan-Vietnam IP Management Company, which engages in industrial park development, said that about 20 Japanese husbandry and foodstuff companies were eager to invest in the Mekong Delta, due to the low price of input materials.

Hanoi’s authorities in September  also allowed Japanese-Vietnamese joint venture Foodstuff Fuji-Vietnam to build a modern beef-processing facility in the city. This project is now underway.

Saigon Securities Incorporation’s (SSI) SSI Asset Management Company and Israel’s LR Group, which provides infrastructure consulting services, have also inked a memorandum of understanding on jointly raising capital to establish an eight-year span agricultural fund.

It is expected that about $50 million will be raised for the fund, which will invest into agricultural projects and companies, including those in the husbandry and foodstuff sector.

“Vietnam’s entrance to the Trans-Pacific Partnership Agreement, if possible, will foster the development of the agricultural sector with more tariff reductions. We expect to see more developments in term of interests and investment in the sector in the future,” Hang said.

According to the Ministry of Agriculture and Rural Development, the total foreign direct investment into Vietnam’s husbandry sector currently sits at $428.2 million, via 152 projects.