Urgent Need for Fisheries Sector Restructuring

According to VASEP, in the first six months of 2012, Vietnam's fisheries sector fell into a vulnerable place with a number of mounting problems. Hoe said in the first quarter of 2012 alone, nearly 330 out of 800 seafood companies closed down or shifted to other businesses. Among tra fish exporters, only 20 percent are growing while many of the remaining 80 percent face the risk of bankruptcy.

 

He added that although lending interest rates fell to 14.5 percent at the very beginning of the year, only a select few could access credit sources at this rate. Currently, most have to borrow at interest rates of 15 - 19 percent per annum. Meanwhile, hardly any businesses can afford to take out loans of 19 - 20 percent per annum in the current tough time.

 

Even the best-performing enterprises are reportedly earning only enough to pay interest rates and other expenses, with no money for continued development investment. Not only having difficulty accessing credit, they are also urged to pay back old loans by banks. Without capital for production and business operations, many had to dump tra fish, thus sending prices to just VND22,000 per kilo, 10 percent decline from mid-May. Farmers almost make no profit on this price. Besides, banks are anxious because many companies have reportedly not used the loans as recorded in borrowing documents.

 

Worse, shrimp, another key seafood export, is facing the possible loss of its most important market, Japan, as the country has raised the rate of testing for Ethoxyquin antibiotics. VASEP said it learned that Japan is testing for the forbidden ethoxyquin in 30 percent of shrimp shipments imported from Vietnam. If one or two shipments are found to contain this substance, the rate of testing will be increased to 50 percent and it will be 100 percent if more infections are detected.

 

Giving explanations to the causes of decline, VASEP Vice President Duong Ngoc Minh said the growth of the seafood industry is driven by extensive investment, not intensive investment, which gives rise to a serial collapse of the industry when it faces external blizzards. Remarking on export prospects in the remaining months of 2012, he forecast a tough time ahead because of narrowing market and more trade barriers erected to strangle Vietnamese tra fish. He added that tra fish importers are quite cautious with products from Vietnam.

 

However, even in the context of falling numbers of seafood exporters, Nguyen Thi Hong Minh, Former Deputy Minister of Fisheries (equivalent to current Deputy Minister of Agriculture and Rural Development) and Honorary Chairwoman of VASEP, expressed her optimism toward the future. She explained that hardships will force the seafood industry to review its weaknesses and loopholes in the development process to reshuffle and modernise management to suit the new situation, in the end enhancing productivity, quality, efficiency and competitiveness.

 

Industry and Trade Deputy Minister Nguyen Thanh Bien added that the current challenges will take out weak and opportunist businesses, leaving more room for those capable of making intensive investment and withstanding market volatility.

 

The restructuring of the fisheries sector is entirely reasonable and necessary in the current context. According to VASEP, most of the 330 bankruptcies in the sector in the first quarter were small and poorly organized, and their collapse has little impact on the industry. In contrast, the top 10 large firms held larger market shares than a year ago, rising from 18.5 percent to 20.5 percent. Hoe said: "This shows growing classification in the scale and corporate capacity of seafood companies.”

 

To restructure, VASEP is categorising seafood enterprises into three groups. Accordingly, Group 1 consists of profit-making companies, accounting for 20 percent. Group 2 comprises heavily indebted companies, accounting for 50 percent. Group 3 includes companies almost entirely relying on loans. VASEP proposed banks accept losses to sell pledged factories of the last group to Group 1 enterprises, as this helps maintain stable operations of the industry.

 

To power up the fisheries sector, Deputy Minister Nguyen Thanh Bien asked relevant organs and businesses to support VASEP in successfully restructuring the sector, to gradually form a powerful business community capable of withstanding market volatility and competing with global rivals.