Siam Kubota Corporation Co Ltd is set to expand its business by opening subsidiaries in Cambodia and Laos as part of its preparation for the launch of the Asean Economic Community (AEC) in 2015.
Siam Kubota has invested a total of Bt68 million in the two subsidiaries and expects them to make Bt7 billion in revenue by 2015. Siam Kubota spent Bt38 million to open Kubota Cambodia Co Ltd and Bt30 million on Kubota Lao Sole Co Ltd. It expects them to generate revenue of Bt5 billion and Bt2 billion respectively.
The two companies will be responsible for marketing and after-sales service for customers in the two countries. Siam Kubota has sent Thai senior management to supervise and oversee the operations. Siam Kubota will be holding 100 per cent stakes in the two companies.
“On market penetration, the company has focused on expanding the networks of distributors, technical service centres and spare-parts distribution centres, as well as creating awareness and demand for farm machinery to develop the agriculture sectors in Cambodia and Laos,” said Hiroshi Kawakami, president of Siam Kubota Corporation.
Siam Kubota believes that the agricultural machinery business in Asean will continue to grow, particularly in Cambodia and Laos, because of shortage of labour, the farmers’ competition to reduce production costs and raise productivity, and their governments’ support for the expansion of the agriculture industry.
There are more than 9.4 million farmers in Cambodia (65 per cent of the total population) and Laos has |4.7 million (75 per cent of the population) people in |farming. The governments of both countries are supporting their agriculture sectors with policies to increase irrigation and farming. The majority of the farm areas in the two countries are for rice plantation.
“The increase of farming and irrigation areas will definitely increase the number of farmers and the demand for agriculture machinery since it will allow the farmers to grow rice up to three times per year,” said Weerapong Wirabutra, managing director of Kubota Cambodia.
The government of the two countries has also encouraged the farmers to use technology to increase export volumes and to tackle the problem of labour shortages by providing leasing and low interest loans for farmers who wish to buy machinery.
“The problem of labour shortage in Asean has pushed farmers in this region to seek technology as a means of production, resulting in an increase of demand for agricultural machinery and the rapid development of Asean’s agriculture sector,” said Opart Dhanvarjor, senior executive vice president of Siam Kubota.
Currently, exports account for 20 per cent ratio of Siam Kubota’s total sales (Bt49 billion in 2013) and sales in Cambodia and Laos account for 40 per cent and 15 per cent respectively. Opart said that from 2010 to 2013, Siam Kubota’s total exports to Cambodia, Laos and Myanmar grew by 2.5 times (Bt4.2 billion in 2013), 3 times (Bt1.3 billion in 2013) and 5 times (Bt978 million in 2013) respectively.
Opart expected the company’s export volume to increase by 20 per cent in 2014 and by 40 per cent in five years. He said Siam Kubota will have to invest more because of this anticipated export expansion, but did not reveal where their next ventures would be. However, he explained that Myanmar is one of their biggest prospects, since the country has just opened up economically.
Opart also revealed that the company does not have any plan to move its production base from Thailand, and it is planning to expand its production base here because of the country’s excellent supply chain and continuous sales growth. The firm plans to make the country a hub for exporting farm machinery to other Asean’s countries.