Saudi JV by UFP unit is a first for Kingdom

Union Frozen Products (UFP) subsidiary PT Interfishery yesterday signed the first offshore joint-investment agreement between a Thai and a Saudi Arabian firm.

The subsidiary is one of many Thai companies that have expressed interest in investing abroad.

PT Interfishery signed an agreement with Shami al-Hasani and Sons yesterday to set up Siam and Shami Red Sea in Saudi Arabia, with registered capital of Bt10 million. With an initial investment of Bt400 million, both sides hold equal stakes in the new company.

UFP chief executive Thongchai Tavanapong said his group expected to gain 20 per cent, or at least Bt80 million, of benefits within the first year operation.

"We're hoping for a good outcome for this first offshore company, since Saudi Arabia is a strong potential market and an efficient gateway for exports to other countries in the Middle East," he said.

The deal was announced on the same day that Export Promotion Department deputy director-general Benjawan Ratanaprayul said more than 500 Thai companies were interested in investing abroad, with those in garment manufacturing, food production, restaurants, spas and hotel services having the greatest potential to do so. The investment will increase the value of Thai exports and supply low-cost raw materials to Thai investors.

Srawut Chankao, director of the Thai Trade Centre in Jeddah, Saudi Arabia, called the Middle East a potential market for Thai investors, since the markets there had high purchasing power and high demand for consumer goods and services.

The markets also offer low energy costs and flexibility in regulations although higher labour costs, he said, adding that Saudi investors in particular were interested, due to their affection for Thai hospitality.

He said the Saudi government had been promoting economic growth and would give its full support to businesses by providing 20-year interest-free loans.

Srawut said Saudi hotel operator the al-Hokair Group was seeking Thai enterprises to form joint-venture spa businesses in the country.

Under the PT Interfishery agreement, Siam and Shami Red Sea will focus on four business plans.

In the first phase, the focus will be on fisheries in territorial waters. The company will manage two fishing boats with a 300-tonne capacity each and six with a 60-tonne capacity each. At the beginning, total capacity is expected to reach 8,000 tonnes and forecast to generate Bt280 million in the first year of operation.

Second, the company will start building a seafood-processing plant in the fourth quarter. The products will supply the Saudi and other nearby markets.

Third, the firm will set up seafood restaurants for local customers.

Finally, the plan will focus on a coastal cultivation programme in the country by establishing hatchery aquaculture.

Thongchai said the projects would not only increase business opportunities for the company in the Middle East, but also re-export raw materials to Thailand.

Of Siam and Shami Red Sea's total production, 30 per cent will be sold in Saudi Arabia, 20 per cent in the Middle East region and the remainder re-exported to Thailand.

Last year, UFP achieved total sales revenues of Bt7.8 billion. It expects 10-per-cent growth this year. So far, about 90 per cent of the firm's income has been from exports.

Sheikh Shami al-Hussain Shami al-Hasani, president of Shami al-Hasani and Sons, said he saw a high potential in the fishery industry with Thai enterprises.

UFP will transfer technology, experience and marketing strategies to the business, while his company will provide labour and government contracts to facilitate the business growth, said al-Hasani.

In addition, he said his company was interested in joint ventures in the construction and hospital industries.

Petchanet Pratruangkrai

The Nation
Thu, February 1, 2007