Both fish farms and exporters are facing difficulties due to a lack of capital, putting their export goals for 2012 at risk.

Fish farmers face the brunt of economic instability

This year, the country’s agricultural industry set a target to produce 1.2-1.5 million tonnes of tra fish (Vietnamese catfish') for export, worth between USD1.85 billion and USD2 billion.

The Mekong Delta region is key to realising this goal, with an estimated area of 5,500-6,000 hectares set aside for fish farms with a capacity of raising 2.6 billion fish.

But a lack of capital has created a situation where the farmers have yet to be paid, hindering production.

Capital shortfall

Duong Ngoc Minh, General Director of Hung Vuong Corporation, a fish exporter in the southern province of Tien Giang, said in order to realise the target of producing between 1.2 million and 1.5 million tonnes of catfish this year, the country will need around VND26 trillion (USD1.24 billion). However, large-scale producers are finding it hard to get bank loans.

Despite large demand, banks continue to keep credit tight.

Nguyen Huu Nguyen, a member of An Giang Fisheries Association (AFA), who has worked in the industry for years, said, “Traditionally farmers invest in their facilities, and traders buy their products at harvest for export. Recently, however, farmers have been facing difficulties in keeping their operations going. Many have had to halt production altogether. This has forced the exporters to invest in production. Still, banks are hesitant to give loans because of the high risks in the industry."

According to Nguyen, at recent press conference on tra fish in Can Tho showed that banks have been turning their back to tra fish production and trading.

State Bank of Vietnam (SBV) has pledged to heighten funds this year for the industry by 25% compared to last year. However, Duong Minh Ngoc said the amount pledged is modest in comparison with demand.

“In order to build a 5,000 square metre farm that could produce around 200 tonnes of fish, we would need approximately VND4 billion (USD191,846). But the banks are often only willing to lend VND200 million (USD9,592). As a result, exporters are scrambling to find capital for expansion,” Nguyen shared.

Consequences

While banks lend at modest amounts or even do not lend tra fish production, fish exporters find it increasingly difficult to invest in production. The result is that they have to continually extend their debts to farmers.

In early December 2011 Binh An SeaFood Joint Stock Company (BIANFISHCO), based in Can Tho City, was sued by two fish farmers for owing them over VND20 billion (USD959,232).

By the end March, dozens of other farms in Dong Thap and An Giang provinces, as well as Can Tho City, sent a petition to the Soc Trang Police Department asking for help in recovering money from a fish trading firm in the province.

“This year will be challenging for catfish processing and exporting companies,” Nguyen noted.

In the meantime, the Vietnam Association of Seafood Exporters and Processors (VASEP) estimated that around 20% of fisheries will have to halt operations in 2012 due to market instability.

Nguyen Minh Dien, a farmer in Tan Hong District, Dong Thap Province, said that traders are often at an advantage over farmers, as they demand fish delivery in advance while deferring payment for 15 days to a month.

Farmers in An Giang Province’s Chau Phu District said that the only time that traders pay cash on delivery is when they are in a hurry to fill orders. In these cases, some of the exporters are even willing to pay marginally higher prices than the market value.

The only way to deal with this problem is for the sales and payment methods to be changed, so that farmers are paid immediately upon delivery of their product, Nguyen added.