Agricultural engineering awaits big investment wave

Vietnam’s use of machinery for agriculture remains low, just 1.6 horse power per cultivated hectare, much lower than Thailand’s 4HP, China’s 4HP and South Korea’s 10 HP.

Ninety five percent of the rice husking machine market is controlled by private companies in Mekong Delta. But the figure does not show the power of Vietnam’s agricultural engineering. 

Vietnam still has to import 70 percent of machines needed for agricultural production. 

In late 2016, Tran Ba Duong, president of Thaco, an automobile manufacturer, announced that Thaco would join the agricultural engineering sector, revealing that he may start with a large-scale rice farming project in which all production phases are mechanized. However, in early 2017, Duong stated he will start with an mechanical engineering project.

While many other Vietnamese privately-run large conglomerates have jumped into the agricultural sector with fish farming and clean vegetable projects, Thaco eyes agricultural machines.

Vietnam’s use of machinery for agriculture remains low, just 1.6 horse power per cultivated hectare, much lower than Thailand’s 4HP, China’s 4HP and South Korea’s 10 HP.

Duong said Vietnam’s agriculture, which is entering a new development stage with higher mechanization level, will need more modern machines and equipment.

Thaco has decided to cooperate with a foreign group to assemble and distribute products exclusively in Vietnam. Thaco has gained big successes in the automobile sector. 

A cooperation agreement was signed between Thaco and LS Mtron from South Korea, under which a factory making agricultural machines will be set up in Chu Lai Open Economic Zone in Quang Nam province, which is also where Thaco’s head office is located.

Thaco is not the only factor helping change the face of Vietnam’s agricultural engineering. VEAM Corporation, the largest engine and agricultural machinery enterprise, was equitized in 2016 after selling nearly a 90 percent stake at its IPO. Thirty million shares were sold to foreign investors, while domestic investors bought 80 million. 

It is still unclear who VEAM’s domestic strategy partner will be. However, Motor N.A Vietnam, a company which has relations with BRG Group, expressed its willingness to buy a 36 percent stake.

VEAM owns many subsidiaries and joint ventures with mechanical engineering manufacturers throughout Vietnam. It makes a wide range of products used in many different phases of agricultural production.

Private mechanical engineering companies are also an important force in the market. Meanwhile, some major players in the agricultural machinery sector are farmers. They are mostly tractor and plow repairmen, who upgrade used machine imports, mostly from Japan, and sell refurbished products to the market.

However, analysts believe that the market is large enough for all investors because of the current low mechanization level.