3. FISHERY PRODUCTS
The fishery sector continues to be one of the front-line economic sectors of the developing Vietnamese economy. In 2002 the seafood sector became the highest net export earner of Vietnam as nearly all seafood products are based on raw materials produced in Vietnam. The Vietnamese fishery sector constitutes a prominent part of the economy and thus commands sustained government attention and investment. The fast track development of the seafood export and growth is depicted below.
Source: Ministry of Fisheries – 2002 figures are preliminary
Seafood exports continue to rise as demand particularly in the USA and the Asian markets continue to increase. However investment in the fishery sector is still lagging behind and problems related to over-exploitation of the marine resources still need to be solved. In general, the seafood enterprises are facing an increased focus on environmental and quality issues. A number of seafood consignments to EU were retained in the port of entry during 2002, because they failed to comply with EU standards on antibiotic residues. The zero tolerance imposed on seafood products with regard to antibiotic residues have become increasingly difficult for the seafood producers in Vietnam to comply with as the equipment for detecting such substances now are able to detect extremely low quantities. The Vietnamese processing industry have to a large extent succeeded in bringing an end to the use of antibiotics in the factories, but problems remain with regard to use of antibiotics by the suppliers of raw materials (aquaculture farmers, fishing vessels and handling agents between suppliers and the processing factories)
Vietnam has 3.260 km of coastline with over 3.000 islands and a wealth of inland lakes and interior waterways. This combined gives the country one million square km of exclusive economic sea zone and 1.4 mill. Ha of interior fishing water, resulting in very favourable conditions for the country's fishery sector. Out of 2030 marine fish species, Vietnam's water contains approximately 100 commercially viable species with a total official marine catch in 2002 of 1.4 million tons.
A new data collection system is being introduced to ensure that marine catches are reported in line with international recognized standards, as the current system understates the annual catches. The data collection system has been reviewed by FAO in 2002 and was found to comply with international best practices, however, with a few improvements recommended. In order to rely on the new data collection system a national vessels and licensing system will be established and from 2004 it is expected that reliable marine catch estimates are available.
The country has experienced almost exponential growth in total output production especially in the last 10 years. The growth rates are likely to continue as the aquaculture sector and other sub sectors continue to grow, thereby increasing the raw material supply to the processing factories. Likewise the export value of the seafood production continues to see an upward trend. The latest figures show an increase in seafood export from USD 1.48m in 2000 to USD 1.78m in 2001 and USD 2.01m in 2002. During the 10-year period 1993-2002 the annual growth rate in seafood export has exceeded 18%, which is rather unique in a global context.
This overall expansion is due to an increased investment in added value fish processing, an increase in primary production, and a higher degree of market diversification. According to the latest figures 68 out of 260 companies have been approved for export to the EU, and even more companies have been approved for export to the US market. Moreover, the upgrading of the seafood sector is leading to an increased focus on mechanisation and industrialisation, which will add to the need for import of western processing and freezing equipment.
However, the growth rates have in some areas led to over exploitation of natural resources and environmental problems. The government has acknowledged these problems and aim to ensure improved environmental standards and more sustainable fishing practices.
Inshore fishing (at a depth of less than 20 m) is Vietnam’s traditional form of fishing and has seen extremely high growth over the past 20 years. The majority of the country's fishing fleet, which consists of small to medium sized boats, are occupied in this form of fishing and have in the past been the primary source of the country's fish production and exports. Unfortunately, this has led to a serious depletion of the fish stock. The output from some rivers has dropped by as much as 50-80%. Inshore fish reserves, near the seabed, have been reduced by 30-60%. The depletion is due to uncontrolled fishing often with the use of indiscriminate and unsustainable fishing methods, including the use of dynamite fishing.
The government is aware of the over fishing problem and has embarked on a program to shift focus from inshore to offshore fishing by increasing incentives, such as loans and grants, to enable fishermen to shift their production away from inshore fishing. So far the preliminary data indicate slow progress in the attempt to change the production pattern.
Offshore fishing is still in its infancy in Vietnam. At present less than 8% of the fishing vessels are so called offshore vessels. The government has been very keen to support investment and the move into offshore fishery, especially due to the perceived export potential of offshore fish but also to assist in recuperating inshore stocks. The national programme for development of the offshore fleet has contributed during 2002 and a total of 75 offshore vessels came into operation in 2002. However, more than half of the fishing vessels in the offshore fleet report difficulties with repaying loans. Surveys carried out in 2002 indicate that some vessels owners have decided not to continue fishing, because the earnings barely cover the operational expenses of the vessel and crew. The reasons for the lack of financial viability have not been clearly identified but are thought to be a combination of lack of modern equipment for finding and catching the fish as well as lack of commercial quantities of fish, i.e. only larger quantities of low value species.
With the country's wealth of inland lakes and water ways Vietnam is an ideal location for the lucrative aquaculture industry. The total area utilised for aquaculture increased to 955,000 ha, an increase of 7.6% compared to 2001.
The total aquaculture output increased by 9.5% to 976,100 tons in 2002, with 450,000 tons being produced in fresh water and 526,000 tons in brackish and marine waters. The production of black tiger shrimp - the most important of the cultured species - increased by 20% to 180,000 tons in 2002. The total aquaculture output therefore now holds 41% of the total fisheries production.
The government has yet to whole-heartedly address the issue of waste production and the environmental impact of the aquaculture industry. In the long run Vietnam cannot afford to ignore the increase in waste production discharged in the effluent water from the aquaculture sites or farms. A need for more suitable methods and improved technology soon will be in demand as will companies who specialise in the know-how, production and installation of such technology and solutions.
The government clearly favours aquaculture production with plans to rapidly increase production over the next few years. Apart from meeting many development goals, such as improved food security, the industry in general offers quick returns on investment (especially compared to offshore fishing).
Failing to ensure that the development of the aquaculture industry in Vietnam is based on sustainable strategies and technologies could severely hamper the ambitious plans laid down for the sector. History has shown in many other countries that fast development of the aquaculture sector can lead to serious environmental problems. Significant fluctuations in production output could be a likely outcome of the expansion, especially with regard to cultured shrimp in Vietnam. Development in world farmed shrimp production shows a strong increase during the late 1980s. During the 1990s production has stabilized around 800,000 tons . The first major outbreak of diseases and subsequent fall in production was recorded in China in 1993, Thailand in 1996-1997, Ecuador in 1999 and more recently in other central and Southern American countries. It would be advisable for Vietnam to draw lessons from the experience of other countries in this respect.
5. Seafood processing
Seafood processing has a long history in Vietnam, especially within the traditional products such as fish sauce and dried fish and more recently frozen fish items. The country has now more than 260 processing plants of which the majority are located in the south and owned by the state or local government. However, an increasing number of enterprises are being privatised. By the end of 2002 some 50 enterprises were converted into Joint Stock Companies or in other ways changed ownership structure. In addition to that, more than 20 enterprises have been registered as private companies. At the beginning of 2003, 68 enterprises have been approved for export to the EU, and an even higher number is now complying with the quality standards for exporting to the US. Especially cold storage and other technology inputs are still needed to ensure that the industry can sustain the fast track development. It is also in this area that several international companies have successfully entered into Vietnam in the past. A survey is planned for 2003 to address the current status and capacity and future needs of the sector.
The industry is divided into semi-processed and value added products of which almost all is exported. When comparing the compositions of exported seafood commodities during the period 1998-2001 it is clear that the seafood industry is diversifying their production both horizontally (i.e. introducing more value added shrimp products) and vertically by introducing new products. The proportion of ready-to-eat and value-added products has increased from 17.5% to 35% during the period in review. This trend continued in 2002. Value added products are the most lucrative form of processing both in terms of job creation, but also overall profitability. Presently sashimi grade cuttlefish, cooked and peeled shrimp and some crab products are the main value added products. Semi-processed, essentially raw materials that are processed and sent on to be further processed and packaged, still constitutes a rather large part of the export. A number of newly upgraded plants are likely to enter in to full fledged value added productions in the future. Although the industry has upgraded over the last couple of years there is still a large demand for new technology and equipment as well as strengthened management. Moreover, the enterprises that are spearheading the sector have adopted a more industrialised approach and the upgrading increasingly includes more advanced equipment and automated processes that were earlier undertaken solely by workers such as shrimp grading etc.
During 2002 the seafood producers met with a number of difficulties in international markets of which mainly two will continue to challenge the industry into 2003 and beyond.
The Vietnamese seafood industry seems set to continue its fast development. However price fluctuation and future anti-dumping cases similar to the one on catfish may hamper the sector to continue to fulfil its annually increasing targets. Especially if an anti-dumping case on shrimp is filed by the US this could severely impact in the medium term growth rate of the sector.
Vietnam is above all an agricultural society, 75% of the population are farmers, responsible for about a quarter of Vietnam’s GDP. In the past ten years during which Vietnam has undergone fundamental economic changes, Vietnam’s agriculture has changed likewise. Agricultural products now represent about a quarter of Vietnam’s total exports. Nevertheless, growth of the agricultural output over the last decade did not match overall growth in services and industry, thereby increasing the differences between Vietnam’s rural areas and the urban centres of Ho Chi Minh City and Hanoi. During the last ten years only some 5% of foreign direct investment went to agriculture. In 2002, agriculture and forestry shared 5.5% of foreign direct investment. The percentage of rural unemployment is still estimated at three times the unemployment figure in the cities. Not surprisingly, Vietnam has made the development and diversification of agriculture into a government priority. In 2002 the agricultural growth rate, according to the General Department of Statistics’ report, is 4% which is not as high as targeted at 5% in 2001.
Vietnamese agriculture can be divided into three main sectors: food crops, industrial crops and animal husbandry. The first sector, which includes rice production, represents nearly two–thirds of all agricultural production.
In 2002 (as in 2000 and 2001) rice is still the single biggest agricultural export product of Vietnam, with about 3.3 million tons, down 13% against 2001. However, the export value increased by some 16% due to the price being around USD 10 per ton higher.
Within the livestock sector, pork and poultry are the main products. Livestock production in Vietnam, however, remains highly underdeveloped and is mainly based on traditional household farms operating on a very small scale.
Cotton, coffee, sugarcane, and rubber represent the main industrial crops for export such as coffee (95%), cashew (90%), rubber (80-85%), pepper (90%) and tea (50%). However, the coffee area seems to be reduced by 30,000 hectares in 2002 because of the prospect of low profit while the areas of cashew-nut, rubber, pepper and tea widened to 34,000 hectares. In fact, the export of coffee decreased by 19% in terms of value while the export of rubber, pepper, cashew-nut, tea and peanut increased noticeably.
In 2002 there was a movement in changing the agricultural structures in many provinces. The area of rice culture has been reduced of 1% in total to accommodate other crops such as cotton, sugarcane, soya bean, vegetables and flowers. The number of cattle has increased of 4.2% (by 16,000 heads) compared to 2001 thanks to the national strategy of dairy cow and Sind breed development.
Some statistics on the export of agricultural products in 2002
Source: General Department of Statistics
Table 4.1 – Agricultural Products Exports 2002
2. Trends and potential
Next to further diversification of its agricultural output, Vietnam will (have to) continue to invest substantially in improving its processing techniques, its post - harvest conservation and its agricultural infrastructure. However Vietnam should not neglect the products’ quality control from the primary sector if it wants to increase its export of agricultural products. Vietnamese exported agricultural products are always in the lower price range because of the inconsistency of quality or because of the use of old varieties.
Likewise the expected development of animal husbandry and the production of dairy products hold many possibilities for foreign companies. The current productivity of livestock is very low. This has partly to do with the genetic quality of the animals. Import of high – quality livestock sperm is a necessary step for further development of this sector. Another part of raising the productivity is improving animal feed supply. The demand for modern animal feed machinery, therefore, is high.
Horticulture is also a very fast developing sector. Many small rice farmers move to growing vegetables and flowers that bring back much bigger returns. There, consequently, are business opportunities for foreign companies.
Companies from different EU countries have the expertise and equipment to be part of this development especially when Vietnam becomes a member of WTO and implements the Intellectual Property Rights protection system.
Notwithstanding Vietnam’s huge agricultural potential, it is clear that Vietnam still has a long way to go. The agricultural output in comparison to the number of people involved is extremely low.
One of the main problems Vietnam’s agricultural production faces is its highly inadequate capacity for food processing. It is estimated that up to nearly 20% of all agricultural production is lost because of the lack of modern post-harvest and food – processing technology and equipment as well as the underdeveloped distribution network. It is a fact that Vietnam’s agricultural sector mainly consists of millions of small-scale household – run businesses, which cannot afford the cost of modern processing techniques and modern post – harvest conservation. Financing the necessary investments in agriculture remains a big, if not the biggest, obstacle. Despite the introduction of private sector development, most of the financially strong players in the field of agriculture are still mainly state-owned enterprises. Especially, their near to monopoly status in the wholesale of agricultural products does not favor the overall agricultural development.
Another major obstacle to further development is the absence of an adequate distribution chain. Even when, for example, a modern slaughterhouse has been set up, the further chain of transportation, refrigeration and, eventually, export is still missing.
Added to the list of obstacles can be the near to complete absence of a system of quality control, especially of importance given the frequent overuse of pesticides and fertilizers. In the livestock sector the lack of centrally controlled veterinary standards (on disease and meat hygiene) will have to be overcome if Vietnam is to become an exporter of meat products.
EU companies should be aware of the huge potential of the agriculture sector, and should approach the market accordingly. Companies from EU countries can play a role in the Vietnamese agro-industry for instance in the field of assisting in the organisation of specialised agricultural exhibitions. Nowadays only the agricultural fair in Can Tho is a professional organised exhibition. Fairs can create platforms where European and Vietnamese companies can meet and discuss the future joint business opportunities. In order to be able to target the right sectors, it is important to execute a very short and practical study on the actual interest of the Vietnamese companies.