Pouring money into agriculture: a gamble for Vietnamese tycoons

Though they followed methodical production methods, many Vietnamese tycoons, who have succeeded in their core business fields, have harvested bitter fruit in the agricultural industry.

pouring money into agriculture: a gamble for vietnamese tycoons hinh 0
In 2015, Vingroup, Hoang Anh Gia Lai and Hoa Phat Groups, the three richest Vietnamese stock millionaires, surprised the public when announcing plans to pour money into agricultural production. 

Hoang Anh Gia Lai’s owner decided to develop cow farms, while Hoa Phat’s owner makes animal feed and Vingroup is growing clean vegetables.

Other large conglomerates, including TH, Vinamilk (dairy producers) and T&T Group also have injected money into agriculture projects. Local newspapers commented that a new wave of investment in agriculture had started.

However, the movement seems to be fading. This is attributed to the huge debt of VND3 trillion incurred by Hoang Anh Gia Lai, which decided to give up real estate projects to focus on agriculture.

The group’s H1 finance report showed that its payable accounts had reached VND32.995 trillion, which included VND26.683 trillion in loans.

Hoang Anh Gia Lai is not alone. Nguyen Kim, a home appliance distribution chain, after pouring money into food companies in Mekong River Delta, has seen unsatisfactory business results.

Duc Long Gia Lai, another powerful conglomerate, stated that once the maize growing project brings high profit, it would join forces with Vinamilk to develop a project on breeding 80,000 milk cows and 45,000 meat cows. However, the project has remained on paper over the last two years.

Only Vingroup still works with with farmers in many projects. On September 1, Vingroup kicked off a program on supporting agriculture production under which it would invest VND300 billion a year to support 1,000 cooperatives and households to grow clean vegetables, distribute products and develop brands.

The need for high investment because of dependence on weather and the world’s price fluctuations partially explain the unsatisfactory business results of the projects.

This is also why investment capital into agriculture only accounts for one percent of the total investment in the national economy, according to the Ministry of Agriculture and Rural Development (MARD).

Meanwhile, according to the deputy director of MARD’s Planning Department Nguyen Thi Hong, there are two other problems: the small agricultural land fund and outdated technologies.

She said that Vietnam needs to change its thinking about production, especially in the context of influences from nature and climate change. Ninety percent of agricultural enterprises are ‘small’ or ‘tiny’.

There are 16.3 million farming households in Vietnam. It is estimated that each farmer has 1,150 square meters of land for cultivation.  

Vietnamnet

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