Project Financing Case: “Nghe An Tate & Lyle Sugar Company (Viet Nam)”
1062 WordsAug 24, 20145 Pages
SESSION 4: PROJECT FINANCING
Case: "Nghe An Tate & Lyle Sugar Company (Viet Nam)"
_Question 3: Are farmers likely to convert to sugar cane?_
The farmers who lived within 50 kilometers of the sugar mill are likely to convert to sugar cane in term of economic return and other benefits.
- Economic return: Net returns to farmers per Hectare from growing Sugar cane are high. From Exhibit 9 with nominal cash flow of a crop life cycle ( 4 years), the total return of one hectare is 6,900 (000'VND) and net present value is 3,841 (000'VND) with nominal discount rate 13.3%/year. Compare to coffee and rubber, sugar cane need only one year to revenue.
Compare with other crops (pineapple, coffee, rubber …), Sugar cane can get highest average…show more content…
Full capacity of the factory (900,000 tons) is expected to reach in 2003 so this domestic production could reduce trade import more than US$ 50 million every year (exhibit 8).
Net tax revenue: value-added tax's effects from NATL would likely very small because the VAT was due and collected up to retail level. From Exhibit 8, NATL will pay more than US$ 6 million profit income tax per year from 2006, the government would lose about US$ 11 million in tariff revenue: the net loss is US$ 5 million per year. This is due to 30% tariff rate but in the long term when Viet Nam integrate WTO, sugar tariff rate will have to be reduced ( 15%, 10%) and profit income tax from NATL will increase from year to year so the net loss in tax revenue of the project will reduces to very small.
Industrial development: during 1990s, there were mainly inefficient "handicraft" mills in the north. NATL with 42% shares of Tate&Lyle PLC (one of world's largest producers of white and raw sugar) would have advanced technology, modern planting techniques, well management skill. This could help to develop sugar industry in the north of Viet Nam.
Employment and poverty