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Overview of Vietnam's Fishing Industry

Friday 12, 06 2020
Vietnam Credit Rating JSC (VietnamCredit) has just released the Vietnam Fishing Industry Report 2019, providing general information about the macro-economic situation, overview of the industry, what happened in Vietnam’s fishing industry in 2019 as well as opportunities, challenges and forecasts for the industry development.
Overview of Vietnam's Fishing Industry

Highlights of Vietnam’s fishing industry in 2019

Over the past 10 years, Vietnam's fishing industry has gradually become one of the major economic drivers, helping to protect food security and enhance international economic integration. The industry is also an important factor that contributes to asserting sovereignty and preserving national security and defense on the sea and islands. 

In addition to the fast and stable development, Vietnam's fishing industry has also experienced difficulties and challenges. The value chain of this industry lacks sustainable linkages. However, large enterprises within the industry are gradually creating a closed value chain in order to ensure raw materials for production and outputs of aquatic products.

The seafood consumption market has been increasingly expanded and Vietnam’s seafood has gained an important position in such major markets as the US, Japan, EU, China, which account for about 60% of Vietnam's total export value.

Facing unpredictable developments of the US – China trade war, strict requirements on quality and origin as well as market difficulties, seafood export turnover of Vietnam witnessed a sharp decrease in 2019.

Requirements on the system of monitoring and locating fishing vessels have not been met, which also negatively affects Vietnam's seafood export. After the warning of the EC, Vietnam has implemented the certification of fishing origin, the control of fishing vessels in and out of the port as well as the enforcement of laws against fishing activities. In fact, however, these activities have not been done seriously.

A positive happening in Vietnam’s fishing industry in 2019 that should be mentioned is that the food safety control system for catfish exported to the United States was acknowledged to be equivalent to that of the US. This was a favorable condition for catfish export in the last months of 2019 and paved the way for development for 2020.

In 2020, the system of legal documents related to the fisheries sector, especially the Fisheries Law will be completed and implemented uniformly.

Under the influence of the Covid-19 epidemic, many orders have been canceled, leading to an increase in inventories and other costs incurred by businesses, affecting the overall export of seafood. Due to fear of the negative impacts caused by Covid-19, drought and saltwater intrusion, farmers tend to postpone cultivation of fish, leading to material shortages in the second half of 2020, especially after the outbreak of Covid-19 is controlled.

Value chain of Vietnam’s fishing industry 

Value chain of Vietnam’s fishing industry

The current operating model shows a deep reliance on merchants for purchasing and supplying seafood. The amount of raw materials supplied directly to processing enterprises by farmers accounts for a very small proportion, about 10%.

Due to dependence on merchants, fishermen and farmers are more vulnerable to price pressures during the peak season, and the price of products sold to businesses is also higher, affecting the production and processing of aquatic products. Relying on through merchants also makes it difficult for businesses to trace product origins, and control food hygiene and safety as well as quality of input materials.

Opportunities, challenges and industry forecasts 

Opportunities

Catfish import tax will be exempted after the EU-Vietnam Free Trade Agreement comes into effect. This will be a huge competitive advantage for Vietnam compared to rivals Thailand, India, and is expected to help catfish export to the EU market increase sharply in the near future. In addition, the Covid-19 epidemic has basically been controlled in the Chinese market, and enterprises have gradually returned to operation, creating opportunities for recovery of Vietnam's seafood exports.

In addition, Vietnam’s effective anti-epidemic measures have strengthened investors' confidence, helping Vietnam’s market recover sooner than competitors such as India’s, Ecuado’s, Indonesia’s, etc. After the US-China trade war and Covid -19 epidemic, major manufacturers tend to shift their production to Vietnam, which is a great opportunity for the fishery industry.

Challenges

According to VietnamCredit’s experts, products provided by Vietnam have not created a distinctive value nor have been developed into a national brand. Therefore, seafood products are under great pressure from unfair competition, passive in the market changes and constantly subject to price pressures.

The cost of input materials from feed, raw material for processing to electricity, water, logistics and labor costs is increasing rapidly, which is a challenge for seafood production.

Besides, the requirements on food hygiene and safety as well as the origin of seafood products are increasingly strict to create technical barriers to protect consumers as well as producers in import markets, resulting in challenges for Vietnam's fishing and aquaculture production.

In terms of human resources, the number of employees in the industry is huge but most of them have not yet been properly trained. The shortage in skillful laborforce affects the development efficiency of the industry.
On top of that, due to the effects of the Covid-19 epidemic, the purchasing power and consumer demand has decreased.

Industry forecasts

VietnamCredit's industry analysts predict that, in 2020, due to the impact of the pandemic on the global economy, Vietnam's fishing industry will not be exempt from negative effects. Seafood exports are expected to continue to decline in the next few months. Fishery businesses should have a plan to use their financial and other resources appropriately to overcome the difficult period (which is expected to last at least until the end of the third quarter of 2020).

Because of the influence of abnormal drought, factories and farmers have reduced the size of new crops, which will make the prices of raw material increase. It is predicted that catfish export will recover completely from Quarter III / 2020. 

Shrimp prices in the second half of 2020 are expected to increase due to a sharp drop in supply. However, farmers are still unconfident, leading to a shortage of raw shrimp that can occur after the epidemic is under control. Therefore, farmers and businesses should coordinate to maintain and ensure a stable source of raw materials for processing and export until market demand recovers (which is expected to be in the last months of 2020.)

Vietnam's domestic market is believed to have great consumption power. It needs to be paid more attention to increase the efficiency of the industry as well as reduce the pressure on export markets by 10-20%.

>> 
Overview of Vietnam’s fishery industry 2019

Source: Vietnam’s Fishing industry 2019 - VietnamCredit

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