This week the company signed a contract with the Lao government to assume a land concession of 10,000 hectares for a cane plantation in Chumphon in the country's Suvannakhet province.

The project will cost US$22.5 million (Bt882 million).

Mitr Phol's president, Isara Vongkusolkit, said the company was expanding into Laos to take advantage of the available land suitable for sugar-cane growing. Stringent controls on the sugar industry in Thailand are also encouraging local sugar manufacturers to move to other countries.

"By the end of 2008, Mitr Phol expects to be producing about 200,000 tonnes of sugar in Laos. This means the company will have more surplus sugar to export to third countries," Isara said.

Mitr Phol is considering funding two-thirds of the $22.5 million with loans from the Export-Import Bank of Thailand and Siam Commercial Bank. Of the total investment, $5 million will be spent on land and irrigation development, $17.5 million on plant and facilities construction, and the rest to register the company in Laos, under the name Mitr Laos.

The Laos Committee for Planning and Investment (CPI) has granted the company tax-free status for the first five years of Mitr Phol's operation, after which it will pay only half the normal taxation rate for a further three years. The corporate tax rate in Laos is 15 per cent.

CPI vice president Thongmy Phomvisay said the factory and plantation would create more jobs and more income for Laos. He said the minimum wage in Laos is Bt77 per a day, more than half of Thailand's wage.

Thongmy said Laos would also gain from technology transfer from the operation.

Mitr Phol plans to employ more than 800 local labourers on its sugar-cane farms and factory. It will also enter into contracts for cane growing with about 1,000 local farming families.

Isara said the company's operations in Laos could help alleviate sugar shortages in Thailand. However, the company will be obliged to supply Laos first.

Sugar prices on the world market are about Bt30 per kilo, compared to Bt15 in Thailand, where the government strictly controls the price.

Each year, Laos will demand about 50,000 tonnes of sugar, sold for about Bt25 or Bt26 per kilo. Laos imports most of its sugar.

The Lao project is the company's second foreign venture, following a sugar factory and cane farm operation in Guang-xi, China.

China, Indonesia, Vietnam, Cambodia, South Korea and Japan all have high demand for sugar and producing it in Laos will reduce the distance to export markets, he said.

Mitr Phol generated income of Bt1.4 billion in revenue in Thailand last year in addition to Bt1.8 billion in China, where sugar costs Bt25 per kg and the retail price is about Bt30 per kg.

Petchanet Pratruangkrai

The Nation

Vientiane