Vietnam targets US$7bn fisheries exports

16 Jun 2016
Vietnamese fishing boat. Credit: Lucas Jans/CC BY-SA 2.0, via Wikimedia Commons

Vietnamese fishing boat. Credit: Lucas Jans/CC BY-SA 2.0, via Wikimedia Commons

David Hayes looks at how Vietnam is planning to boost its fisheries exports.

Vietnam is looking for a 4.5% increase in fisheries exports this year after sales to overseas markets fell by US$1.2 billion in 2015. Foreign exchange fluctuations were partly responsible for the drop in exports along with decreased demand in several important markets, including the EU and the United States.

Last year’s fall in exports marks the start of a challenging period for Vietnam’s fisheries industry which, until recently, reported almost continuous growth in fisheries production and export earnings for the past 20 years.

Fisheries exports are Vietnam’s largest source of foreign exchange. Although production is growing, seafood safety and quality issues along with competition from other major shrimp exporting countries is affecting Vietnam’s fisheries export earnings.

Antibiotic residues 
Worryingly for the Vietnamese government, there was an increase in the number of shipments being rejected by importing countries due to antibiotic residues and other contaminants being detected during routine testing.

Vietnam’s fishery exports totalled $6.7 billion in 2015, according to Vietnam Association of Seafood Exporters and Processors (VASEP), registering a 15% decrease compared with exports worth $7.9 billion the previous year.

Aquaculture production accounts for about 65% of Vietnam’s total fisheries exports in value. Frozen shrimp, mainly black tiger prawn, is the fisheries sector’s largest product, accounting for about half of the total export value, followed by Pangasius (catfish) which accounts for about half of remaining exports.

“We are one of the biggest seafood processing countries – for Pangasius catfish we are No 1, while for shrimp exports we are No 5; for tuna exports we also are in the Top Ten,” commented a VASEP source in Ho Chi Minh City.

“Foreign seafood importers come here because of our seafood quality and price.”

Fisheries are Vietnam’s fifth largest export item after garments, electronics, crude oil and footwear. However, the nation’s seafood exporters faced markedly different global market conditions last year compared with 2014 when fisheries exports experienced a double digit surge in value.

“Our fisheries exports increased about 16% in value in 2014. Shrimp exports increased as Thai and Ecuadorean shrimp farmers decreased their production volume due to EMS, so there was more chance for Vietnamese producers,” the source remarked.

Competition
Strong competition from prawn farmers in India, Southeast Asia and South America was an important contributor to Vietnam’s reduced export performance last year.

Frozen shrimp shipments to the United States, one of Vietnam’s key overseas markets, fell by almost half for most of 2015. Shrimp exports to the EU, another key customer, decreased by 20% in value to US$549 million due to lower demand caused by the economic downtown and the weaker Euro.

Among EU buyers, only the United Kingdom increased imports of frozen shrimp from Vietnam last year, while Germany and the Netherlands both reduced their orders.

Although EU customers are expected to increase their orders this year to restock their inventories, VASEP is forecasting increased competition from Ecuadorean shrimp farmers due to the recent signing of the Free Trade Agreement (FTA) between the EU and Ecuador which is expected to come into force by October 2016.

The EU’s Generalised System of Preference has been extended until December 31, 2016 or until the trade deal with Ecuador comes into effect, whichever is sooner.

As a result, Ecuador’s shrimp exporters will enjoy a 3.6% tariff on frozen uncooked shrimp exports to the EU after their present zero rated 20,000 metric ton (mt) quota is exceeded, instead of the usual 12% tariff..

The new EU-Ecuador FTA will increase duty free access for Ecuador’s shrimp exports as the agreement includes raising Ecuador’s zero rated uncooked shrimp import quota to 40,000 mt.

Vietnamese Pangasius producers also are facing reduced demand for their products, according to VASEP. This is largely due to lower demand from major markets including the United States, Brazil, Mexico, the EU and Southeast Asia.

Although overseas demand is lower than previously, local newspapers are reporting intensified price competition among the three Vietnamese companies approved to export Pangasius to the United States at zero rated anti-dumping prices. However, even the lower prices offered have failed to increase the volume of orders placed.

Production
After registering a small increase in 2015, fisheries production continues to grow this year. Vietnam’s Ministry of Agriculture and Rural Development (MARD) recently announced that total fisheries production reached 720,000 tons during the first quarter of 2016, up 3.4% from the same period last year.

Marine fisheries production reached 683,000 tons during the January to March period, registering a 3.8% increase year-on-year. Aquaculture production during Q1 2016 rose to 548,000 tons, up 1.8% compared with the same quarter last year.

Seafood exports also have grown during the first quarter of 2016 with products worth $1.45 billion being shipped to overseas buyers, according to Vietnam Customs department, representing a 6.4% increase in value compared with the same quarter last year.

Shrimp exports rose 8% in value in Q1 2016, according to VASEP, while Pangasius shipments increased by 2.4% from January to March, raising hopes among exporters that foreign demand may rebound this year.

In spite of the recent upturn in foreign demand, increased competition from shrimp farmers in India, Indonesia, Ecuador and China, is proving problematic for Vietnamese exporters after the countries devalued their currencies against the US dollar to increase their export competitiveness.

Saline intrusion 
Shrimp farmers rearing brackish water shrimp in some regions have another problem to contend with as saline intrusion is reported to have entered up to 70km inland on rivers in many areas in the Mekong Delta region.

Many farmers have reduced their shrimp farming activities temporarily as Vietnam’s shrimp species grow slowly in highly saline water.

According to MARD, many affected shrimp farmers have reduced the area used to raise shrimp by about 50% due to high salinity.

As part of efforts to assist affected farmers, MARD has instructed provincial governments to increase environmental surveillance activities and promptly warn farmers about major changes in salinity and other environmental factors affecting their aquaculture activities.

Food safety is another issue that Vietnam’s fisheries exporters still have to tackle effectively. Exporters have received an increase in food safety warnings from overseas markets over the past 18 months about contamination of seafood products, which also is creating problems for exporters looking to increase their sales.

According to Vietnam’s Department of Animal Health, during January to September 2015 some 181 warnings on seafood safety were received from important export markets including Japan, South Korea, the US, the EU and the Eurasian Economic Union.

In addition, the department announced recently that Vietnamese seafood exporters have had shipments totalling 32,000 mt of various fisheries products rejected by importing countries during the past two years after these were found to contain banned antibiotic residues.

Fisheries is firmly established as one of Vietnam’s key economic sectors, accounting for 4% to 5% of GDP and currently employs more than four million people.

Processing
The fall in fisheries exports has affected Vietnam’s fish processing plants with many forced to lay off workers due to the drop in overseas demand.

Fish processing for export has grown rapidly over the past decade as foreign buyers take advantage of Vietnam’s competitive labour costs and have their products processed locally prior to export.

“The majority of fish processing plants are located in southern Vietnam,” explained a VASEP source in Ho Chi Minh City. “Joint stock companies are doing processing, they do aquaculture and fish processing.

“New fish processing factories are being built – some are joint venture companies with Japanese partners. These companies are interested in shrimp as some of the most important shrimp exports are to Japan.”

About 570 seafood processing plants were in operation at the start of 2014, according to VASEP. Of these, 447 plants were approved to export to the EU, compared with just 17 plants in 2000.

The proportion of value added processed products produced reached about 45% of total output as fish processors and exporters continue to expand their fisheries product range.

“Seafood processing is still growing here. Vietnam is the biggest seafood processor in the Association of Southeast Asian Nations (ASEAN) region,” the VASEP source said. “Thailand and Indonesia are strong in the supply of fisheries materials, but we are strong in fish processing.

“The marine fishing industry here has decreased here as we are lacking in raw fisheries materials like tuna and shrimp. But aquaculture is growing. Pangasius is our biggest farmed fish species as the production capacity is higher than for farmed shrimp.

“Catfish are farmed in the Mekong Delta region while shrimp are farmed in central Vietnam and the Mekong Delta region.”

Meanwhile, Vietnamese government concerns over the United States proposed new catfish shipment inspection programme appear to have been resolved recently when the US Senate voted in late May to shut down the proposed new catfish inspection programme that would have inspected both locally produced as well as imported catfish products.

Closure of the catfish inspection programme which is run by the United States Department of Agriculture is expected to result in responsibility for monitoring catfish reverting back to the US Food and Drug Administration (FDA). However, due to budget constraints it is alleged the FDA to inspect only 2% to 3% of seafood import packages.

Meanwhile, following last year’s drop in overseas sales, VASEP has set an export target of $7 billion for fishery shipments in 2016, representing a 12.5% decrease compared with last year’s missed export target of $8 billion.

The association is urging members to increase their competitiveness and to avoid illegal use of antibiotics to rear shrimp and other seafood products. The discovery of antibiotic residues and other contaminants is threatening Vietnam’s access to major overseas seafood markets if the presence of residues continues to be detected.

VASEP is concerned that food safety authorities in EU countries, Australia and South Korea reportedly have threatened to apply stronger measures including halting the import of seafood from Vietnam if the number of violations of laws banning antibiotic residues and other types of contaminants continues to rise.

Tuna
Tuna is one seafood category which VASEP expects to grow this year. Vietnam’s tuna processors are expected to see an 8% growth to reach almost $510 million in overseas shipment value in 2016.

Tuna exports were worth almost US$470 million in 2015, according to VASEP, with fresh and frozen tuna accounting for 54% of the total tuna product export value.

Vietnam exports tuna products to 105 countries. The largest market is the United States which bought tuna products worth an estimated $190 million in 2015, representing an 8.6% increase compared with cargos delivered the previous year.

Tuna exports to Southeast Asian countries rose 24% last year while tuna exports to Japan fell almost 10%. Shipments of fresh and frozen tuna to Japan decreased last year while exports of processed tuna to Japanese customers enjoyed good growth, VASEP said.

Currently Vietnam’s tuna processing companies are looking for improved exports following the signing of free trade agreements with South Korea and the Eurasian Economic Community which will lead to lower import tariffs on tuna products shipped to those markets.

Tilapia
Meanwhile, MARD is encouraging further expansion of aquaculture in future by supporting development of tilapia farming.

Launched in 2015, MARD’s Development Scheme on Tilapia Cultivation has a target of raising tilapia production to 300,000 tons per year by 2020 of which 50% to 60% would be available for export.

Plans call for some 33,000 hectares of water surface, primarily rivers and reservoirs, to be used for tilapia rearing by 2020, along with farming cages totalling 1.5 million square metres in area.

Phase 1 of the scheme is expected to create jobs for 54,000 people and will include establishing facilities to supply tilapia fry for breeding, along with a disease control scheme to protect tilapia stocks.

Phase 2 of the scheme is due for completion in 2030 and will raise tilapia production to 400,000 tons annually. From 45% to 50% of total tilapia production will be exported, MARD forecasts, with the proportion of tilapia consumed in Vietnam expected to grow as overall production rises.

By 2030 the total water surface area in use for raising tilapia is due to expand to 40,000 hectares while the area of farming cages in use will increase to 1.8 million square metres.

Employment opportunities will increase as tilapia production grows. By 2030 some 67,000 people will be directly employed in tilapia production, according to MARD, while a further 8,000 indirect job opportunities also will be created.

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