Vietnamese firms turning to Laos for new market

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Many Vietnamese companies are expanding their business to Laos, which they describe as a market that is underdeveloped but offers big time payoffs for risk takers.

Doan Nguyen Duc, chairman of Hoang Anh Gia Lai Group, said the company had invested up to US$450 millions to various projects in Laos.

Apart from a rubber area of 16,000 hectares, the Vietnamese firm also invests in mining, real estate and power sectors.

"Hoang Anh Gia Lai sent home a profit of VND100 billion ($5.26 million) from Laos in 2008," Duc said. "The two largest markets at home, Ho Chi Minh City and Hanoi, have become really crowded. By expanding abroad, to underdeveloped areas in Cambodia and Laos, we have found big fish."

The company is about to sell its first 100,000 tons of iron ore from a project in Laos and mining costs account for only 20 percent of the prices that ore can fetch, he said.

According to the Department for Planning and Investment of Laos, the country is encouraging Vietnamese firms to invest in infrastructure, tourism and agricultural projects.

Lao Deputy Prime Minister Somsavat Lengsavat said Hoang Anh Gia Lai success can motivate other Vietnamese companies to expand their business to his country, "not only for the sake of Laos but also for their own benefits."

The company is in fact not alone in the trend.

Ta Minh Chau, Vietnamese Ambassador to Laos, said Vietnam ranks third, following only China and Thailand, in terms of investment into Laos with around 200 projects worth a combined $2.1 billion.

Dang Thanh Tam, head of Saigon Investment Corp, said his company is building two power plants with a cost of $800 million and a $5 million hotel in Laos. Power produced in Laos will also be sold back to Vietnam, Tam said.

Meanwhile, Long Thanh Golf Investment and Business Joint Stock Company has recently started construction at a $1 billion  golf and hotel project in the capital city of Vientiane.

Duc said there are still many opportunities in Laos but if Vietnamese firms do not seize the chance they will be surpassed by Chinese, Thai and Russian investors.

"Investment needs to be long term," he said, noting that it takes a lot of time to complete investment procedures and retrain workers.

Laos posted a 7.6 percent economic growth in the 2008-09 fiscal year, official statistics showed. The World Bank in March forecast that Laos' economy will expand 7.7 percent this year, the second highest rate in East Asia after China.

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