ASIA FOCUS : Nothing ventured, nothing gained

ASIA FOCUS : Nothing ventured, nothing gained

A CP executive reveals how a risky move to China nearly 30 years ago has paid off

UMESH PANDEY

The Charoen Pokphand Group, one of the country's largest agricultural conglomerates, may not be what it is today if it hadn't risked investing in developing nations that were just starting to open their economies.

Risks have been the name of the game for CP Group, which invested in a telecommunications network from Thailand to Indonesia and ventured into China some three decades ago.

"CP is an international company that was relatively aggressive in those days," says Thanakorn Seriburi, vice-chairman of CP Group and also the chairman of the Thailand-China Business Council. "Can you believe that we went into Indonesia way back in 1969, into Taiwan in 1971 and then to Malaysia, and other countries in the region?"

Mr Thanakorn, who has been instrumental in helping develop the CP Group's Chinese operations, says that it was only by luck that the conglomerate decided to move into a new business territory in Hong Kong, then part of Britain.

In the late 1970s, the Thai government banned the export of animal feed amid protests from local farmers who were complaining that domestic animal feed was getting too expensive because CP was exporting most of its product. But the ban failed to include exporting ingredients for feed products.

"We were having a large portion of the exports go to China, and thus we came to the decision to set up an operation in Hong Kong to cater to the Chinese market," Mr Thanakorn says.

Chia Ek Chor, the father of current chairman Dhanin Chearavanont, first came up with the idea to invest in China. As Mr Thanakorn recalls, everybody was "shocked".

"One day Mr Ek Chor came to us and said that it was time that we start to look at the Chinese market seriously, and we were all shocked, as during that time the market was not even open; there were just talks of opening up the market," recalls Mr Thanakorn.

"He was a real visionary, and in those days was using a greenhouse to produce grapes to be sold in the market all year round. The move to China was one of his masterpieces."

In 1978, when most Thai companies were still struggling to capture the domestic market, CP decided to venture into China again in the field of agriculture.

"Everywhere we went it was for agricultural reasons, and we were successful," Mr Thanakorn says. "Mr Ek Chor came and talked to us, especially the four brothers and me. We at CP were interested in markets that have market share and the raw material, so why not push for a move in China. There was no reason why we should not go there."

Although some were sceptical about the move and executives feared losing their shirts if things went south, the group made a unanimous decision to enter China after certain high level officials assured them that things were going to open up even more in the near future.

"It was a unanimous decision to move into China, but we all were thinking about going in a small way so as to avoid losing too much," he says.

In 1979, the group established a feed mill and poultry farm there, a move that was something very new to the market. Most of the poultry farming in China at that time was done in the backyards of houses.

Despite the doubts, CP Group - or Chia Tai Group as it is called in China - invested $15 million to set up its first plant even as investment conditions in China were still not ideal for any foreign investors.

CP Group was then granted the No. 1 business licence for foreign companies by the Shenzhen government. In 1982, CP again got the first business licences in both the cities of Zhuhai and Shantou.

Being the first investor in various parts of China had its perils, but the rewards made it worth the effort.

Since that uncertain time, CP in China has established more than 100 feed mills, 50 poultry farms and six integrated companies of feed, breeding, slaughtering and food processing.

Not only has the company's Chinese operations helped to develop China's feed and breeding industries, they have expanded into shopping malls, real estate, motorcycle production and much more.

Now foreigners of all stripes are heading into what is being dubbed as the next global economic powerhouse. China is the home to some of the world's largest multinationals, who are using its cheap labour and the 1.2 billion plus population to get rich.

"We were in the market before what the Chinese call 'the long nose foreigners' entered the market, and our belief still continues to remain that Thai people and the people of this region understand the Chinese market more than westerners do," says Mr Thanakorn, who has been granted numerous distinctions for his work by the Chinese government, including the Chinese version of a US 'Green Card'.

Mr Thanakorn, who was the first general manager for CP's operations in China, says that the company helped change the landscape of the country's poultry industry.

"We entered the market as the demand was rising," he says. "The government was looking for high protein content products and chicken was a good way. We used mass production to lower the cost and expanded the market for the products.

"Earlier the maximum size of any farm was 200 to 300 chickens; when we went in we started with more than 5,000. We changed the taste and chicken business flourished after 1982 and 1983, although we were faced with some problems, which is normal."

General News
Bangkok Post
Saturday January 20, 2007