Thursday, July 03, 2008

Thailand's CP puts on hold $1.2bn plans in Vietnam

PHUSADEE ARUNMAS

Concerns over Vietnam's steep inflation and unfavourable economic prospects have prompted Charoen Pokphand Group, the country's largest agribusiness concern, to put on hold its investment plans worth US$1.2 billion, particularly in real estate and retailing. The group would delay until next year the planned property projects and Lotus superstores in Ho Chi Minh City, Sooksunt Jiumjaiswanglerg, executive vice-president for agro-industry and food business group in Vietnam, said yesterday.

''We want to see first a clearer picture of Vietnam's foreign exchange and inflation rate,'' said Mr Sooksunt.

Inflation of Vietnam skyrocketed to 17% in the first five months of this year and shot up to 25% in May alone, resulting higher production costs and expenses.

Bank lending rates, for instance, jumped to 21%, while long-term land lease costs have surged 10 times to about one million baht per square metre or 1.6 billion baht per rai. The price hikes affect development projects that need huge space, such as department stores.

However, Mr Sooksunt insisted CP remained committed to investment plans next year, particularly in retailing.

The group plans to develop six Lotus superstores in Vietnam nationwide to capitalise on its growing population and commitment to the World Trade Organisation to liberalise its retail business in 2009.

Vietnam's population is expected to increase to 100 million within 10 years from 85 million currently.

In addition, according to Mr Sooksunt, CP has also set its sights on ventures in department stores and housing projects in Thu Tiem, the new city planned over the next five years by the Vietnamese government in the northeastern area of Ho Chin Minh City.

CP also remains committed to going ahead this year with investment plans worth over US$100 million in agribusinesses such as an animal-feed plant in Binh Duong in the South, an aquatic animal feed plant and a shrimp hatchery factory in the lower North and the central region.

One of its subsidiaries, CP Fresh Mart, has also vowed to move ahead with its investment plans.

Currently, CP Fresh Mart operates about 120 outlets in Ho Chi Minh City and a handful of outlets in neighbouring provinces. It plans to add 200 more each year.

The Vietnam operations are expected to achieve their 25% revenue growth target this year to 26 billion baht, with exports making up 4%.

CP ruled out any impact on its operations in Vietnam, as the majority of the company's products are food, which always sells regardless of economic conditions.

In addition, the Vietnamese authorities have no policy to control product prices, and raised recently civil-service salaries by 2%.