28 | FORBES ASIA MAY 2018
were diferent for the founders. “We had our bare hands as capital,”
he recalls. “Each of us had a motorbike. We started with some
small sums borrowed from family and friends, borrowed from the
banks, and a lot of business transactions were done through state-
owned companies used as proxy. Business was lowing, because
everyone was doing business, and the whole country literally
started from zero!”
Once Hoa Phat’s manufacturing of piping for furniture as well
as scafolding began, the borrowing got serious—90% leverage
through a letter of credit to import a production line from Italy in
- hat took the company to what would be $100 million in
capital today.
Most other companies in Vietnam at the time were using out-
dated factory tools imported from Taiwan or China. Tran saw the
latest technology as a crucial factor to increase competitiveness.
“hinking back, it was a diicult decision. I don’t know how we
overcame that challenge. Maybe we were blessed,” he says.
here were stumbles. Hoa Phat tried making copper pipes
and cement, even growing sugarcane. he experience made Tran
philosophical. “We strictly follow objective laws,” he describes his
current approach to business. “We don’t push our subjective will
against objective reality.”
But one backer likes the entrepreneurial urge: “Don’t consider
Hoa Phat [founders] as industrialists. hey should be seen as busi-
nessmen who always seek new opportunities and are willing to
take risks,” says Vu Quang hinh, managing director of Vietnam
Holdings, an investment fund that’s a longtime shareholder.
Steel is the mainstay, no doubt, accounting for 85% of Hoa
Phat’s total revenue and 90% of its proit. In the country’s oices
and homes, its frames dominate furnishing. And there’s room
for domestic growth: According to a report by FPT Securities,
Vietnam’s steel sector is still in early development, with an average
growth rate near 17.5% between 2012 and 2016. Steel consump-
tion per capita in Vietnam is about 190 kilos (420 pounds), lower
than Asia’s average of 260.
Integrated production, such as looms at Dung Quat, has been
key to Hoa Phat’s emergence as Vietnam’s steel leader, beginning
with a smaller plant in Hai Duong province near Hanoi eight
years ago. Hoa Phat has created a closed system from iron ore to
inished, specialized steel products using basic-oxygen furnace
technology, known as BOF. Analysts say this process not only
helps maintain quality but also is price competitive. Many smaller
rivals are still doing electric-arc furnace steelmaking, which uses
scrap metal and consumes too much energy.
Tran’s operation has surpassed domestic rivals such as Po-
mima, Tisco (the former state-owned company) and Vina Kyoei (a
joint venture with Japan), as well as producers backed by invest-
ments from India, Malaysia and Taiwan ater the 2007 WTO ac-
cession. (he big Dung Quat complex is actually a buildout from
the earlier Taiwanese venture.)
And then there’s China. “Standing next to a giant neighbor,
you would always need to renovate and innovate to survive,” Tran
says. Government policy of late has helped. Starting from 2015,
Vietnam applied a tarif on steel products, as well as tightening up
regulations on exporting iron ore. Hoa Phat particularly beneits
as it builds its integrated capacity.
If steelmaking in Vietnam is an ever widening and state-backed
opportunity, it remains competitive and otherwise treacherous.
A diferent Taiwanese investment, by an arm of the Formosa
Plastics conglomerate, led to a massive discharge from a coastal
semiinished-steel casting plant in 2016 that killed millions of ish
and outraged the Vietnamese public. he company was ined but
allowed to continue work.
Tran was watching and vows Hoa Phat will spend what’s need-
ed to skirt environmental damage. “We know that the government
can love us,” he says, “but the people won’t.”MAI KY/FORBES VIETNAMFORBES ASIA
TRAN DINH LONG
Tran Ba Duong, the reclusive chairman of automaker Thaco Corp., is an-
other new billionaire this year. Now 58, he started on the technical staf of
a car-repair operation in the 1980s and worked his way up management
positions. Tran founded his own company, Truong Hai (now Thaco), in 1997,
initially to sell vehicles and later to assemble them for foreign brands such
as Kia, Mazda and Peugeot. His company hit a turning point in 2008 as
Jardine Cycle & Carriage, an arm of Jardine Matheson, invested $77 million
to buy 20% (the stake was later increased to 32%). By 2016, Thaco was
leading Vietnam’s auto sector, with a 32% market share. At a 650-hectare
complex in Quang Ngai province, it runs five factories for foreign brands
and manufactures buses and trucks under its own name. It also owns 15
auto parts factories. In March, Thaco opened a factory costing over $300
million to strengthen its capacity even as auto-import tarifs disappear in
Vietnam this year.
Aside from automobiles, Tran’s Thaco owns a 150-hectare real estate
development in Thu Thiem, a prominent new area in Ho Chi Minh City. He is
known for paying minute attention to details and often requests meetings
with management on weekends and in evenings. —L.A.N.
AUTO PILOT
Tran Ba Duong, another member of the billionaire quartet.F