Fisheries and Aquaculture Case study Synopsis Series

2. Vietnam

From catfish to shrimp Despite recently suffering the ravages of major wars Vietnam has become one of the world’s

growth powerhouses. Aquaculture is an important part of this, both for local consumption and

export. Murdoch Mactaggart reports.

If a relatively small country, desiring to remain independent and retain its own culture, defeats among others China, France and the United States in the course of its history that suggests a degree of initiative and determination. So it is with Vietnam. The ending of the war in 1975 left a deeply damaged and economically fragile country yet for the past decade its economic growth has been among the highest in the world, tying in second place with India on the Global Growth Generators index. GDP is, of course, a flawed and dubious metric in respect of genuine development but as a crude index it has some value and Vietnam’s shift over the past quarter century has been impressive.

Part of this change is due to its government’s decision to establish good international and trading relations and so grow its economy, in marked contrast to another SE Asian country, North Korea, which has cut itself off from the world and is in dire economic straits in consequence. In 1986 the Vietnamese communist government enacted its renovation policy, ‘doi moi’, introducing structural reforms to support private business activity and to open up the economy to increased competition.

Part of the country’s economic development has included a focus on fishing and on aquaculture. Fish and fish products like fish sauce have always been important in the region although primarily for local consumption. However in 2009, for instance, Vietnam exported around $4.6 billion worth of seafood of various kinds. About 40% of this was shrimp followed by pangasius (see sidebars) at 30% and with some tuna and molluscs. According to a World Bank report of 2005 the fisheries sector employs up to four million people and accounts for some 3% of Vietnam’s GDP.

Sustainable aquaculture important Around 90% of the world’s aquaculture is Asian with 70% of the world’s total from China alone. Given the forecasts of food security problems with a rising world population, the dire warnings about marine fishing collapsing entirely by 2050 unless significant conservation measures are introduced rapidly, and the poor conversion factor of feeding carbohydrates to animals such as cattle, it makes sense to develop well a sustainable aquaculture industry. In Vietnam both the capture fisheries and aquaculture sectors have developed rapidly over the past couple of decades.

Vietnam is also noted for its biodiversity, being ranked 16th in the world in this regard. It’s also one of the world’s twelve original cultivar centres for agricultural material with the Vietnam National Cultivar Gene Bank assiduously preserving numerous cultivars of over a hundred species as well as establishing conservation areas and national parks.

Perhaps because aquaculture has expanded rapidly as an industry and, as in Vietnam, is often practised by family or community groups or small firms who may not necessarily be technically very knowledgeable, it risks having serious environmental consequences.

The world’s biodiversity is under serious threat, with not only consequences for quality of life but also attendant major impact on the world economy and particularly on the developing world countries. It’s very important, therefore, that any expansion of aquaculture is sustainable and this appears to be being recognised by the Vietnam authorities and others working in the country.

Vietnam used to have dense mangrove groves but many were destroyed through illegal logging, opening up the coastal areas to flooding and other risk. Low income shrimp farmers, desperate to take advantage of available local resources, then compounded the damage through both fishing and building rudimentary ponds for shrimp culture. However, in a project between Oxfam and Can Tho University, farmers were shown how to build more inland ponds designed to capture at high tides water which brought with it shrimp and crab which could be duly caught or grown further. Initially hostile, the local communities involved eventually changed their practice and in doing so significantly increased their incomes.

Getting credit can be tricky

Since 1986 the banking industry and finance sector generally has been opened up somewhat yet still remains tightly controlled. At the same time, although the SME sector is recognised as the engine for economic growth and is the market segment most intensively supported by donor agencies, the most widespread complaint of small aquatic farmers is that they cannot easily get access to credit, whether for addressing cash flow issues around running costs or for capital projects such as expanding or improving infrastructure. As in other countries the main problem appears to be the dual one of the banks lacking good understanding of the aquaculture sector coupled with their insistence on forms of collateral which SMEs find difficult to provide. A lack of good record keeping compounds this problem.

In Vietnam four main state-owned commercial banks and one smaller bank dominate the financial sector. Of course public ownership does not of itself imply an ossified financial sector and credit access problems are widespread in the smaller private financial sector as well. Further, although the global aquaculture insurance market has grown considerably in Vietnam the market is still small despite a clear need, given the somewhat risky nature of the aquaculture business. Shrimp farms are particularly at risk as their stock can suddenly and rapidly be wiped out from disease.

farmers are generally not very good at keeping records and developing compelling business proposals, the six dominant commercial firms perhaps excepted.

There’s said also to be problems in terms of good quality seed stock and species choice, with related technical issues like veterinary support and to perhaps cap the sector’s limitations, marketing services are poor leading in turn to poor marketing and selling structure and poor market penetration.

However, small farmers are generally not familiar with the concept of insurance and as many work at the margins can see paying premiums as an extra and undesirable expense. It’s also the case that many insurance companies, like banks, don’t properly understand the sector and so don’t offer suitable products.

The world’s biodiversity is under serious threat, with not only consequences for quality of life but also attendant major impact on the world economy and particularly on the developing world countries.

For instance, although the government provides social insurance and financial support schemes no one appears to offer specialised micro insurance. This isn’t simply a subset of ordinary insurance but a group of specialised products designed to provide financial protection to the poor in ways which reflect their particular cash constraints and the coverage that they need.

Lucrative business

Shrimp production is a lucrative business, though with disease-associated risk, and has been expanding while pangasius farming has slipped in terms of production and export so that profits are meagre

Some farmers may well be losing money. In 2009, for instance, around 210,000 tonnes of shrimp was exported, an improvement of 9.4% on the 2008 weight. This was valued at $1.675 billion which was also an increase but at 3.04% a much lower one. The pangasius export industry suffered both declining prices and reduced exports, however, the value of $1.343 billion being a 7.6 drop on that of 2008.

Most shrimp production is small scale using extensive or semi-intensive systems, using relatively low stocking densities of up to perhaps 10 animals per square metre, but intensive production where up to 40 shrimp per square metre are housed is increasing. Construction costs will be up to around $10,000 per hectare for a semi-intensive system capable of producing around 1.5 to 2.5 tonnes per hectare each season. Intensive production units will cost perhaps four times as much but will produce five to six tonnes per hectare.

Shrimp

Shrimp, like prawns, are small crustaceans which are both caught through fishing and reared very widely in farms, most of them in a marine or semi-marine environment. Asia produces about 75% of farmed shrimp with most of the remainder coming from Latin America. Indonesian shrimp farming can be traced back at least to the 15th century and it’s also been widely practised elsewhere. About 80% of farmed shrimp are either the Pacific white shrimp, Penaeus vannamei, or the giant tiger prawn, Penaeus monodon.

Shrimp farming is generally very profitable and although it used to be a small scale business it’s now grown to industrial proportions in Vietnam and elsewhere. A major problem, however, is susceptibility to disease which can wipe out a farmer’s complete stock. There are also concerns about ecological damage: smaller scale shrimp farming in areas like the Mekong Delta earlier often caused severe damage to mangrove swamps. Mangroves are very important as a protection against coastal erosion and as a natural barrier against damaging wave surges. However, there’s been a number of protection initiatives undertaken and matters are improving. The EU and other markets for shrimp now demand traceability – ‘from farm to fork’ – and that’s also helped improve farming practice.

Flexible pricing Pangasius export prices vary by destination. US market prices are high but because import barriers are in place – an interesting comment on the much-vaunted freedom of trade which the WTO supposedly ensures – exports to the US are low. Prices to Russia and Ukraine are around half that to the US, partly because the great bulk of exports there are plain packets of sliced fish rather than fillets which have been turned into curious products like fish sticks or breaded units and which attract higher prices. The EU, which is a large market, pays somewhere in between these two extremes and increasingly insists on certification, GlobalGAP for example. However, Africa is developing as an increasing market with Egypt importing most by a large margin, namely nearly 30,000 tonnes valued at $60.4 million in 2009. There’s some evidence that pangasius export are again beginning to increase, however, with total exports approaching 660,000 tonnes in 2010, according to an article by Steven Hedlund, editor of SeafoodSource.com, on 5 May 2011.

SeafoodSource.com also mentioned that towards the end of 2010 there was some dispute about the environmental sustainability of pangasius production. As a result Vietnamese pangasius was placed on a ‘red list’ by the WWF,affecting overseas sales. However, it’s expected that certification of pangasius production by the WWF-backed Aquaculture Stewardship Council (ASC) will start later in 2011.

There’s some evidence that pangasius production is consolidating, either through larger processing companies setting up their own installations or buying out small producers although in other cases they’re working with small producers to provide credit and other support against obligations to deliver fish when they’re harvested. Traders and processors may provide loans, perhaps for buying feed or for restocking ponds, but these can be at high rates of interest of perhaps 3-5% per month.

Where working capital can be got through bank loans the interest costs are much lower, perhaps about 1-1.5% per month, rates that compare reasonably well with the interest rates paid on savings of around 11% annually. However, bank funding is not necessarily easily obtained, whether for shrimp or pangasius businesses and the almost certain need to provide some form of collateral is often a major barrier.

Feed suppliers also operate a system of giving credit to pangasius farmers. At the beginning of the season feed bought has to be paid in cash but later on the farmer can get some feed on credit, particularly near the harvest date, provided he can show that production is going according to plan. This is funded by the feed supplier charging a premium for credit, perhaps of the order of 1.2% to 6% on the price, depending on the type of feed and the duration of credit.

As with shrimp farming feed costs are high, amounting to perhaps 80% of total operating costs for a pangasius farmer. Construction costs are roughly comparable to those for shrimp farms at perhaps $20,000 per hectare but running costs are dramatically higher at perhaps $260,000 per hectare. The yield is, of course, also significantly higher at around 300 tonnes of fish per hectare per season but the margins are small, around 5% nett profit, and can be wiped out by reduced returns if fish have problems or if market prices drop.

Growth industry, but changing Having grown rapidly and perhaps somewhat chaotically the Vietnam aquaculture industry is changing. It’s increasingly recognised as being an important sector both to address poverty and food security issues within the country but also for its value in exports. The government recently announced a ten year fund of $200 million to support the industry and enable it to grow to produce some 4.5 million tonnes annually for local consumption and for export with an export value of $5 to $5.5 billion. This export growth mainly focuses on shrimp and pangasius but will also include molluscs, lobsters and other crustaceans.

Vietnam is also cooperating with Mozambique and with Egypt in sharing information about specialist technologies and in providing training. Tilapia is a freshwater fish widely farmed in China and in Egypt but which hardly features in Vietnamese aquaculture. Egypt, despite its arid landscape is the world’s second largest producer of tilapia, after China, even rearing the fish in the Sahara or Libyan deserts. Water availability is less of a problem for Vietnam but it would like to extend its fresh water aquaculture range by, for instance, adding tilapia farming to its already successful pangasius aquaculture and may be able to learn from Egypt in this regard. Egypt in turn can benefit from making better use of its marine areas for aquaculture and it’s here that Vietnam’s knowledge of the sector could be very usefully transferred.

Pangasius

Pangasius is a genus of catfishes found natively in the Mekong, where it’s one of the major fish species. The Mekong, with a length of nearly 5,000km, rises in Tibet, flows through China, Burma and other countries to Vietnam where it shortly divides into channels to become the Mekong Delta and duly flows into the South China Sea. Pangasius is highly migratory in the wild, going several hundred kilometres upstream to spawn, which it does prolifically, typically twice a year, a mature 10kg female being capable of producing a million or more eggs. Pangasius is air-breathing and omnivorous, feeding on algae, higher plants, insects and, in the case of larger fish, fruit, crustaceans or small fish. Mature wild fish can reach over 40kg in weight and 130cm in length but farmed fish are harvested when much younger and smaller. The Mekong giant catfish, Pangasianodon gigas, is thought to be the world’s largest recorded bony fish, specimens of 3.2 metres in length and 300kg in weight having been noted, but it’s now become rare.

The two species commonly farmed are P. bocourti, known in Vietnam as basa, and Pangasianodon hypophthalmus, known as tra. There’s a substantial world-wide trade in the fish, typically in the form of prepared, frozen fillets rather than whole fish, and it’s marketed variously as tra, basa, panga, swai, striped (or other) catfish, cobbler and more. It’s a white fleshed fish, the fillets not unlike cod or haddock in appearance but with far less taste and consequently well suited to be turned into whatever large retailers might choose. The major market used to be the United States, which took 80% of Vietnam’s output, but US catfish (a different genus entirely) and other fish farmers, supported by the heavily subsidised maize farmers, persuaded the government to apply very high tariffs and the US import share plunged to around 4%. Now around a third of pangasius exports are to the EU, particularly to Spain and Poland. About 90% of the world’s supply of farmed pangasius is from Vietnam although other countries are starting to farm it more seriously.

This case study synopsis has been produced by Murdoch Mactaggart and is based on a case study undertaken by Ulrich Kleih

and Tran Cong Ich.

The full report is available at www.africanfisheriesinvestment.org and www.africanfisheries.org.

Produced by

The Natural Resources Institute,

The University of Greenwich Chatham Maritime, Kent, ME4 4TB United Kingdom

Produced for

The Partnership for African Fisheries

A DFID funded project, managed by

The NEPAD Agency

P.O. Box 1234 Halfway House Midrand 1685 Johannesburg South Africa

The production of this, and other reports in this series was made possible through the financial support of The Deutsche Gesellschaft für

Internationale Zusammenarbeit (GIZ) GmbH.