CP Group: Cafta opening investment doors
The Nation | 20 January 2010
CHAROEN POKPHAND GROUP
Cafta opening investment doors
By ACHARA PONGVUTITHAM,
SIRIVISH TOOMGUM
Asean’s zero-tariff implementation this year has created great investment opportunities between the country’s biggest agro-conglomerate, the Charoen Pokphand Group, and Chinese investors with billions of US dollars to be spent on a range of projects.
CP plans to set up a one-stop industrial park in Rayong province that will draw mainly Chinese investors. The investment could come in any form, such as a joint venture wholly owned by the group or Chinese investors.
CP is negotiating with potential Chinese investors.
Its retail arm will soon be granted a licence in China for 7-Eleven convenience stores.
The Asean-China Free-Trade Agreement (CAFTA) will open up a free flow of trade in goods and investment between the two sides.
CORE BUSINESSES
Revenue from CP’s four core businesses — Charoen Pokphand Foods, CP All (the operator of 7-Eleven), the CP International Trading Group and True Corp — reached Bt346 billion last year.
Chairman and CEO Dhanin Chearavanont yesterday said the group had set a capital-expenditure budget of Bt40 billion for this year that would focus on Thailand. Local investment will take up Bt30 billion at most, with the rest used abroad.
"Thailand still has plenty of room for expansion, thanks to record-high foreign reserves and a rebounding economy," he said.
CP will focus its investment on Thailand for a few years before looking abroad.
Its investment in China will be higher than in Thailand, because the economy there is growing and the purchasing power of its people rising. The focus in China will be on food and retail operations.
CAFTA will create opportunities for CP. A special industrial estate for Chinese investors will be set up, with all facilities included as a one-stop service.
"We’ll select good Chinese companies to invest in the industrial estate. Particularly, their business should be environmentally sound and their manufacturing hi-tech," Dhanin said.
Sunthorn Arunanondchai, president and CEO of CP’s Real Estate and Land Development Business Group, said the property arm’s |land bank had more than 4,000 rai, both in Bangkok and upcountry, including in Rayong, Surat Thani, Khon Kaen and Nakhon Si Thammarat.
Rayong controls the lion’s share with 3,800 rai, of which 600 rai have been set aside for a petrochemical and plastics plant. The property arm is conducting a study into setting up the special industrial estate in the remaining area. The project’s investment needs have not yet been finalised.
As well, the CP Land Group plans to develop some property projects, including residential condominiums, office buildings and single-family homes, for a combined cost of between Bt2 billion and Bt5 billion.
CP is the exclusive licensee of 7-Eleven in Thailand, and CP All hopes to clinch a territorial licence in China in the near future.
Korsak Chairasmisak, CEO of both CP All and the Marketing and Distribution Business Group, said Tokyo-based Ito Yokado, owner of the 7-Eleven franchise in Japan, had to divide the Chinese market into territories for chain-licensing management.
Since the market is so huge, it has been split up into three territories with three operators. Beijing is handled by Japan, Guangdong by Hong Kong and Shanghai by Taiwan.
"The Japanese owner is considering setting up a new territory, and Thailand is at the head of the queue to be granted the licence," he said.
The company also plans to spend Bt1 billion to build two distribution centres this year in preparation for the expansion of 7-Eleven to 7,000 stores in three years.
Dhanin said CP still saw a bright future for the farm sector — not only food for human consumption, but also fuel crops. The group is studying the energy business, particularly ethanol manufacturing using sugar cane as the feedstock, rather than cassava.
Crop prices are rising for both food and fuel, due to limited land area, a growing economy and declining natural resources, he added.
Prasit Damrongchietanon, CEO of CP’s International Trading Business Group, said the trading group planned to double its revenue to Bt50 billion this year, thanks to rising commodity prices.
The trading group reported sales of Bt28 billion last year, of which rice trading accounted for Bt25 billion and service businesses and other foods the rest.
"We hope rice sales will double this year. Rice production in other exporting countries, such as India, has been damaged by natural disasters, so that will increase global rice trading," he said.
A marketing budget of Bt200 million has been set for this year.
