Nautilus Consultants in collaboration with Vietnam Institute for Fisheries Economics and Planning and Hambrey Consulting

SUMA (Sustainable Marine Aquaculture) Vietnam – Comparative Advantage Study

Volume 5: Market opportunities and marketing strategy

September 2005

Contents

1 Production...............................................................................................................................................22 Key features of Vietnamese processing industry...................................................................................6

2.1 The formal, registered, processing sector...............................................................................................6

2.2 The informal export sector......................................................................................................................7

3 Exports...................................................................................................................................................103.1 Headline export figures........................................................................................................................10

3.2 Sector volatility and changes in international trade rules........................................................................12

4 Quality, logistics and other support services........................................................................................134.1 Product handling and product quality....................................................................................................13

4.2 Distribution and marketing costs...........................................................................................................15

Market intelligence.......................................................................................................................................17

4.4 Adaptability to new products and markets.............................................................................................18

5 Relevance to marine and brackishwater aquaculture planning............................................................215.1 Prioriitisation........................................................................................................................................21

5.2 Export categorisation by functional group..............................................................................................21

5.3 Distinguishing between commodity and added value production and export...........................................22

5.4 Functional product chain classification..................................................................................................23

6 International context and market descriptions by product group........................................................256.1 Frozen international commodity and added value products....................................................................25

6.2 Dried products.....................................................................................................................................29

6.3 Live products.......................................................................................................................................31

7 An overview of the domestic seafood market.......................................................................................358 Future information requirements..........................................................................................................36

8.1 Focusing on adaptable goal oriented research......................................................................................36

8.2 Data requirements for improved supply / demand analysis....................................................................37

Volume 5: Market opportunities and marketing strategy1 Production 22 Key features of Vietnamese processing industry 6

2.1 The formal, registered, processing sector 6

2.2 The informal export sector 7

3 Headline export figures 102.3 Sector volatility and changes in international trade rules 12

4 Quality, logistics and other support services 132.3 Product handling and product quality 13

4.8.1 15

4.8.2 Distribution and marketing costs 15

4.8.3 Market intelligence 17

4.8.4 Adaptability to new products and markets 18

1.1 Relevance to marine and brackishwater aquaculture planning 20

1.2 Export categorisation by functional group 21

1.3 Distinguishing between commodity and added value production and export 22

1.4 Functional product chain classification 22

2.8 Vietnam marine and brackishwater aquaculture production and export in an international trade context24

4.8.0 Frozen international commodity and added value products 24

4.8.1 24

4.8.1 Dried products 28

4.8.2 28

4.8.2 Live products 30

4.8.3 30

1 Production

To give some proportionality to the scale of capture and aquaculture production in Vietnam, Figure 1 presents production volume from each production method, by main groups of organism. Total fish and shellfish production in 2003 was 2.6 million tonnes, representing a doubling of production since 1994. A little under two-thirds of this was from capture fisheries, down slightly from 1994 when it contributed 75 per cent of the whole.

As can be readily seen from the graphic, the only substantial increases in the capture fisheries sector have been in marine finfish landings. By contrast, aquaculture has shown substantial gains in the production of finfish, shrimp and molluscs, with more modest gains in crab and seaweed. But whilst our current interest is in brackishwater and marine aquaculture production, we do need to retain some level of balance in how we deal with the different fisheries sub-sectors, so as to avoid over-emphasise the importance of one sector relative to others. Vietnam aquaculture production, by volume, represents a little over a third of all aquatic production. But brackishwater and marine aquaculture, excluding tilapia production (which we believe is recorded as brackishwater production) represents but 14 per cent of total production (though is somewhat more important in value terms).

We can see this more clearly when viewed on a species by species basis. Figures 2 and 3 show Vietnam aquaculture production by main species. By volume, cultivation of freshwater fish at 550,000 t, comprising predominantly catfish farming (and 600,000 t if we include tilapia production), outstrips all other aquaculture by some margin. But shrimp culture, including macrobrachium, comes a fair second at 240,000 t. This is followed by the general category of molluscs at 100,000 t, and seaweeds at 30,000 t.

But in value terms, fin fish and shrimp are more evenly matched at an estimated farm gate value of some US$900 M each. As of 2003, aquaculture of crab, lobster and marine fin fish species, categories of growing importance in the aquaculture mix, do not appear as separate items in the aquaculture figures submitted to FAO. We would suggest that for 2003, production in each of these categories could be reasonably represented as a 1,000 t.

Allocation of production volume to domestic or export market channels, based on broad knowledge of the industry, supplemented by information from field survey, produces the relationship shown in Figure 4. This emphasises the dominance of the export industry. But it is also estimated1 that a reasonable proportion of the

1 No dependable data exist on the volume of fish and shellfish distributed through domestic market channels

smaller sizes and lower value species of shrimp are channelled to the domestic market, and that a reasonable proportion of freshwater finfish production is consumed locally.

If we look in more detail at the nature of these exports, Figure 5 shows the story as told from official statistical sources. Bearing in mind that most fish are exported in fillet form (i.e. at least half of the live weight), these figures compare reasonably well, though mollusc, lobster, crab and live fish are under-represented in the export figures.

2 Key features of Vietnamese processing industry

2.1 The formal, registered, processing sectorGeographical distribution: The processing sector has expanded rapidly over the past few years, a particular feature of which has been the increase in the number of large modern and privately owned facilities. Concentrations of these are to be found in the south of the country in and around Ho Chi Minh City, in Khanh Hoa province (mainly around Na Trang) and across the Mekong delta provinces (see Fig 7). Of some 400 registered processing plants, some 80% are to be found in the south, 12% in the central region, and 8% in the north.

Certified standards: By 2003 100 of these enterprises and 8 shellfish production areas had been certified as conforming to EU market entry requirements. In addition, the 2003 major FAO study of the Vietnamese industry indicated that 74% of such processors operated certified HACCP systems (a requirement for export to the US and Europe, and increasingly to Japan), 54% were Good Management Practice certified, 24% had EU certification, and 16% were ISO certified. The most advanced elements of the formal processing sector have shown themselves to be equal to international market standards and working with trading partners to produce new products. These are also at the forefront of bringing about a year on year shift in the export mix in favour of value added products, placing Vietnam as very much a major player on the international seafood scene.

Licensed plants as gatekeepers of export trade: To secure exports to the main international markets – US, EU and Japan – plants must be licensed and/or certified to the requisite market standard. Clearly, most processing plants in Vietnam are not so certified (100 out of 400 plants meet the grade). In this case product from the un-certified, and typically smaller, plants is supplied to the larger companies that hold the necessary certification. In these instances the larger companies are required to uphold “due diligence” in ensuring that the supply chain practices and standards of these processing companies conform to the overall certified standard. This system works well, though there are of course opportunities for abuse of this system – an overall weakness in industry structure. But this system also further complicates supply chain arrangements, and arguably raises costs in an already very

competitive international market.

Raising the standard: Closer cooperation between smaller and larger plants and companies is leading to a tightening up of these systems – whether simply through a raising of standards to those of the

Fig 7 – Numbers of key processing plants

Source: adapted from a VASEP chart produced for Seafood International by La Tene Maps, 2003

larger plants through association, or investment by the larger companies in the smaller companies. This is particularly the case where companies in the south have sought to increase raw material supplies and smooth seasonality shortfalls by linking with companies in the central and northern regions, and vice versa, where companies in the south have sought to access more valuable export markets, but have also sought to improve their overall standards of operation, by courting southern operators.

Products: A majority of the plants process shrimp – predominently commodity packs, but also added value products. Other products handled include frozen finfish fillets and associated added value products, swimming crab products, snail, mud crab, oyster and scallops, and various cooked bivalve meat products.

Raw material supplies: Processing plants typically have established linkages with capture fisheries and aquaculture producers – either directly or through trade intermediaries. This is a complex and sometimes uncertain trade linkage, but does tend to ensure that processors have the core volume of raw material needed to operate. With increasing international focus on full supply chain traceability, a further flaw in the supply chain is that organisation amongst producers is weak, with little to no local or regional organisational structures. This makes linkage between processors and producers particularly difficult, but is further compounded by high transaction costs, poor economies of scale (even small-scale operators could reduce costs by buying inputs collectively), and poor local market and distribution infrastructures.

Building supply chain efficiences: Processors have sought to achieve efficiencies in those areas over which they have control, but still struggle both with ensuring that they each have the volume of raw material needed to operate most cost-effectively, but also to streamline their linkages with farmers. In the past, processing companies have typically operated at well below capacity, but in recent years re-sizing, together with some restructuring of supply channels (for example, setting up or linking with basic processing operations in other parts of the country), has meant that operations are now on a firmer footing.

Marketing: By comparison, whilst the Vietnamese export trade is generally buoyant, marketing is of a rather passive nature, over-reliant on receipt of orders for commodity products, with limited evidence of targeted sales effort. Vietnam is starting to achieve some differentiation from others through the public relations activities of its trade organisation, VASEP, but this cuts little ice when dealing in commodity-type products – block shrimp, block squid, block basa fillet.

2.2 The informal export sectorFor product that is not to be subjected to freezing or value addition utilising high technology equipment - and thus is to be sold live, fresh or dried - the distribution and marketing systems employed are generally distinct from those used by the more capital intensive and generally larger processing and exporting companies. For these, often more perishable, products, the linkages between the exporting companies and their sources of raw material tend to be shorter, and thus the exporting companies more likely to be located close to their producers. Despite this, moving product from producer to exporter may still involve a range of intermediaries, not least because of the generally small-scale of the producers and their wide distribution throughout the coastal areas.

Those companies exporting time-stable product (typically dried product) are able to supply an international clientele, though such products tend to serve a more Asian taste, and thus the focus of sales remains in the Asian region. For highly perishable live and fresh products, distance / time to market is critical, and most product is destined for consumption in neighbouring countries only. For example, in the trade in live seafood the trade is dominated by China. For more time-stable product, distance to market is less of a problem, and a wider range of Asian markets is served.

For the marine and brackishwater aquaculture sector in Vietnam, the market in China is particularly important. It is estimated that 62% of seafood consumption in China takes place in the five coastal provinces of Liaoning (NE of Beijing), Jiangsu (south central inland), Zhejiang (Shanghai and surrounds), Shandong (coastal to south of Beijing) and Guangdong (Hong Kong & Guangzhou) – both reflecting the local availability of supply, but also the burgeoning economic growth and industrialisation of the coastal zone (see Fig 8 – map of China shoing main regions, and cities). In a move to better organise the flow of product to these markets, the China Ministry of Agriculture has recently instigated establishment or upgrading of thirteen Central Seafood Markets along the coast – Weihai and Shidao in Shandong Province; Shanghai; Shengjiamen, Wenzhou and Ningbo in Zhegiang Province; Fuzhou in

Fig 8 – Sketch map of China

major cities

proposed new wholesale marketsHuangsalive fish market

BeijingTianjin

ChangchunHarbin

Shijiazhuang

ShanghaiQingdao

ChengduWuhan

ChongqingGuangzhou

Hong Kong

Hanoi

major cities

proposed new wholesale marketsHuangsalive fish market

major cities

proposed new wholesale marketsHuangsalive fish market

BeijingTianjin

ChangchunHarbin

Shijiazhuang

ShanghaiQingdao

ChengduWuhan

ChongqingGuangzhou

Hong Kong

Hanoi

Fujian Province; Guangzhou and Jiangmen in Guandong Province; Beihei in Guangxu Province; Nanjing and Qidong in Jiangsu Province; and Dongting in Human Province.

For lower value live products, such as cockles and other bivalves, marine snails and crabs, it is less the high-spenders of the growing economy that are being served, and more the general householder, with supplies going through local trade infrastructures to street markets, more formal retail outlets, street corner cafes and the catering trade. Vietnam’s land border with southern China provides an ideal low cost transport route into these markets, and thus much of this product is shipped by rail and road from all areas of Vietnam north into this region. But interestingly in the case of live mangrove crab - a middle value product - some product is air freighted from southern Vietnam to the north by scheduled air service, and then moved from Hanoi across the Chinese border by road. This contrasts with the routing of high value finfish and lobster product which tends to go by sea using specialist live product carriers and, for the future, improved air services linking the regions of Vietnam with coastal cities in China will undoubtedly play an increased role in this trade.

If we relate these transport routes to the case of the live trade, virtually all of the trade in live farmed and wild caught finfish, live snails, live cockles, and live lobster and crab is channeled to China, either across its southern border with Vietnam, or by sea into its ports of Hong Kong, Guangzhou, and Shanghai. High value live products such as grouper, snapper and lobster are shipped to the high spending conurbations of coastal China. Traditionally the two main centres of consumption have been Hong Kong and Shanghai, but the rapid growth of the coastal economy in mainland China is now such that a number of other coastal conurbations have joined the ranks of these two high-spending markets.

For dried product - products such as dried squid, dried sea cucumber, bivalve meats, and fish products - markets are located across both the Far East (China, Taiwan, South Korea, and Japan) and South East Asia (Thailand, Malaysia, Singapore, Indonesia). Dried squid finds particular demand in Japan and South Korea, as does dried sea cucumber in China (and Taiwan) and in other centres of ethnic Chinese (Malaysia, Singapore, Toronto, Vancouver).

3 Exports

3.1 Headline export figuresThe Vietnam seafood export industry has developed rapidly over the last ten to fifteen years, registering a greater than threefold increase in both volume and value over the last seven years (Table 1). Reflecting the main elements of Vietnamese export trade, export statistics are grouped into four main categories - frozen shrimp, frozen squid, finfish, dried squid. Together these categories were responsible for 54% of volume in 2001, and 70% of export value. The remainder is made up of a mixed bag of species and products, including fresh and frozen tuna, surimi, frozen octopus, live and frozen bivalve molluscs, fish meal and fermented fish sauce. The figures collated by Customs and Excise are a fair reflection of the exports of the formal processing sector, but are rather less accurate in terms of those live and fresh products by the more informal export sector.

Table 1 - Evolution of Vietnamese exports of seafood (1995 to 2001)

Q - volume ('000t); V - value ($ mil); AV – average value ($/kg)1995 1996 1997 1998 1999 2000 2001 2001

Frozen shrimp Q 66 72 66 65 61 67 87 23%V 360 382 390 449 482 654 778 44%

AV $5.50 $5.30 $5.90 $6.90 $7.90 $9.80 $8.90Frozen squid Q 7 10 24 20 22 21 21 6%

V 27 40 84 70 76 82 81 5%AV $3.80 $4.20 $3.50 $3.50 $3.40 $3.90 $3.80

Finfish Q 25 30 37 31 36 57 74 20%V 50 66 94 79 97 166 222 12%

AV $2.00 $2.20 $2.50 $2.60 $2.70 $2.90 $3.00Dried squid Q 6 6 11 8 10 26 18 5%

V 40 45 39 40 54 211 154 9%AV $7.20 $7.50 $3.70 $5.30 $5.40 $8.00 $8.50

Other products Q 0 0 69 77 100 121 175 47%V 73 118 155 180 230 365 543 31%

AV $2.30 $2.30 $2.30 $3.00 $3.10Total Q 104 118 206 201 230 292 376

V 550 650 762 818 939 1,479 1,778AV $5.30 $5.50 $3.70 $4.10 $4.10 $5.10 $4.70

Source: FICEN, MOFI

Note: the statistics reflect all forms of product, from lightly to highly processed, and from bulk to sophisticated retail packs. Volume is a measure of product weight, and should not be confused with live weight. As a consequence, the average value calculation is but a crude measure of where change has occurred, whether that is the result of changed international prices, or a change in the mix and quality of products incorporated in the category. Typically, it reflects a mix of these characteristics.

In terms of main markets, exports have been fairly evenly split between Japan, the US and Asia (excluding Japan), with the the European Union taking very much a back seat in this trade – as shown in Tables 2 & 3. But these bare statistics hide some important detail.

Table 2 Volume and Value of Exports by Market (2000)Volume (‘000s t) 1997 1998 1999 2000Japan 85 70 67 69 24%US 6 11 19 38 13%EU 20 23 22 20 7%Asian (except Japan) 87 85 100 11 37%Other markets 8 12 22 58 20%

Total 206 201 230 292 100%

Value ($ mil)Japan 383 358 383 470 32%US 39 80 130 301 20%EU 75 93 90 72 5%Asian (except Japan) 237 235 273 412 28%Other markets 28 52 63 2,247 15%Total 762 818 939 1,479 100%Source: IFEP

Table 3 – Destination of seafood exports, 2003

Markets Quantity (tons) Value (USD) AV (US$/kg)

Australasia 257,043 1,036,008,900 4.03 Japan 97,954 582,837,870 5.95

China (China, HK & Taiwan) 62,074 217,826,792 3.51 Korea 56,205 107,296,491 1.91

Asia (exclud. Japan & Korea) 28,473 73,156,259 2.57 Australia / NZ 12,337 54,891,488 4.45

The Americas 127,516 802,391,603 6.29 United States 122,163 777,656,159 6.37

Americas (exclud. USA) 5,353 24,735,444 4.62 Europe 72,067 135,673,365 1.88 other 52,736 225,502,938 4.28 509,362 2,199,576,806 4.32

Source: MOFI Fisheries Information Centre

Looking at the main export product groups, the dominant products by value are frozen shrimp, making up 44% of export value in 2001. In the past this trade category has been dominated by relatively basic products - whole or shell-on tails, block frozen. As reflected in the rising unit value of this trade, an increasing proportion of this business is now of processed value added product – everything from raw peeled tails (Nobashi) for the Japanese market, to cooked and coated products for international sale. The destination markets for these products have been dominated by Japan (a long-standing seafood trading partner) and the US, though the recent introduction of punitive tariff rates by the US against some Vietnamese processors has encouraged increased marketing effort in European and Asian (excluding Japan) markets.

Finfish products, representing 20% by volume and 12% by value, incorporate a range of marine capture and farmed fish species, with early trade dominated by species of particular interest to Japan and Chinese markets (Hong Kong, southern China and Singapore). But the rapid emergence of large scale fish farming industries based around basa (Pangasius pangasius – Mekong catfish) and tilapia has, in recent years, greatly altered the dynamics of this trade category. Today frozen basa fillets, and frozen whole or filleted tilapia are mainly destined for the US and western Europe. Product form remains dominated by boneless skinless fillets, as indicated in the relatively slow rate of increase in average value in this category.

For the frozen and dried squid categories, both tend to be directed at Asian markets, shipping to the likes of Japan, South Korea, Taiwan, Hong Kong, mainland China, and countries in South East Asia. The processing and trade in frozen product is necessarily undertaken at a larger industrial scale, but production of a significant proportion of the dried product is undertaken at a family / cottage industry scale.

The category of “other” products also tends to have an Eastern focus, with relatively low value live and frozen bivalve products (clams, oysters, mussels, snails) mainly destined for regional markets (though supporting an increasing trade in frozen in-shell products to the US and Europe), and live crustacean products (high unit value – lobster, Babylonia snail, and various crab species) dominated by Chinese markets. Live finfish – from inshore fisheries and cage culture – ship to Hong Kong and the Chinese mainland, as also do a wide range of low value dried and frozen products (from seaweed to dried shrimp, dried fish to dried sea cucumbers).

3.2 Sector volatility and changes in international trade rulesBut even these main trade characteristics are a gross simplification of affairs, and have been thrown into much dissarray within the last 12 to twenty-four months. On the one hand, Vietnam’s huge successes in farming and exporting large volumes (by international standards) of shrimp and catfish at prices that developed-country producers cannot compete with has raised the ire of US producers (remembering that the US is a key market for these two product categories), and higher than acceptible levels of banned antibiotic and pesticide residues have been found in farmed (and some wild) product from the likes of Vietnam and China. The first product group to be affected by increased US scrutiny was that of catfish. This is no longer as sensitive as it once was, and it is now shrimp that is the main product group affected by these bans (and subject to higher levels of scrutiny, particularly for exporting companies that have previously been found to be shipping product with high levels of antibiotic and pesticide residues).

The US has lead the charge in both these trade areas – on price and quality – with both the US and the EU banning for a while all imports of seafood from Vietnam, and then the US seperately raising an anti-dumping case against Vietnam on the basis that state support to the Vietnamese industry – whether through direct subsidy, endemic subsidy throughout the economy, or specific subsidy through state run enterprises – is contrary to acceptible international trade rules. The long and the short of it is that the US has tried to put up tariff and non-tariff barriers to the trade in frozen basa products and shrimp products between Vietnam and the US. In terms of the catfish trade, this is specifically aimed at Vietnam producers and exporters. In the case of shrimp, the US has imposed punitive anti-dumping tariffs on a range of countries and companies within those countries, including countries in South East Asia, China, South Asia and South and Central America.

4 Quality, logistics and other support services

4.1 Product handling and product qualityProduct handling and quality management differ across the spectrum of aquaculture species under cultivation and the varying distribution and process chains that they then form a part of. This can be best described separately in terms of production and processing.

In terms of production, much depends on:

the skill and knowledge of individual farmers,

their familiarity with the particular technologies associated with their particular circumstances,

the advice provided by provincial extension services,

the advice available from the relevant national research stations, and

the information provided by the traders, wholesalers, transporters and processors with whom they are in contact.

It also depends on the immediate environment in which production is practised (part of a large aquaculture scheme with well developed infrastructure; small-scale in combination with farming; an isolated venture with few others using the same technique or cultivating the same species), and on the scale of operation.

For shrimp, handling and quality systems are well developed in the south, and less so in the central and northern regions. Even so, the lack of any coherent organisation between small-scale producers, or on a local / regional basis, means that practices vary, much depends on whether the producer or trader utilises ice at the time of harvest, and much depends on the extent to which any financial incentive is sufficient to encourage producer and trader to look after the product. In such a competitive industry, matters can go both ways – for raw material destined for commodity product, particularly where smaller sized animals are concerned, it is easy to be slipshod. Where larger animals are concerned, all tend to be a little more careful. It is also generally the case that where the trader (or producer) is closely linked to one processor, greater care is taken over handling and quality.

With recent international trade concerns over the indiscriminate use of antibiotics and other medicines, the industry, and ultimately producers, has become more sensitive to quality issues. HACCP2 systems now reach more effectively back to the producer, industry standards are being developed and implemented, and in a new development in the south, over a thousand farms are now certified as producing to an international organic standard.

For products other than shrimp there is relatively less government intervention, with more reliance on the dictats of commercial realism. The government research laboratories provide a good source of support to the sector, but even this is probably more available to those farmers that can pay for relevant advice. For those farmers involved in the live seafood trade, the fact that product is patently alive is a good indicator of quality. Of rather greater impact on individual business and sector economics is concern over the control of disease – through control of environmental factors, feed, and appropriate use of medication. Another factor is the density at which cultivation is practised, where the tendency for new investors to crowd out successful pioneer developments needs to be balanced by sensible spatial and environmental planning controls. For most non-shrimp forms of aquaculture, management of disease and maintenance of development within sensible environmental boundaries remain weak. In addition, proximity to a research centre tends to offer substantial advantage to growers.2 HACCP – Hazard Analysis Critical Control Point – a quality management protocol tailored to the particular product and process chain and now mandatory if product is to be exported to the US or to Members of the European Union

In terms of post-harvest handling and quality, the licensing of processing plants, and certification of a fair proportion of the sector to HACCP standards acceptable to the EU and US regulators, is indicative of operating practices to international standards. The proportion of the industry meeting such standards is steadily increasing, year on year. But whilst all processing companies indicate that they have full traceability back to the grower, the fragmentation of the production sector, and the lack of success of efforts by processors to better organise producers into producer organisations, suggests that traceability could be tighter. In the absence of more streamlined organisation at producer level, the convoluted trader network used to move product from small producer to processor involves high transaction costs relative to competitor countries, and less than ideal control over the supply chain. In a move to better deal with this situation, processors are increasing the use of tied or salaried wholesale traders.

For the trade in live, fresh or dried product, there is little current benefit to be gained from the application of formal quality standards. But should the scale of such trade increase significantly, quality issues and standards will undoubtedly become more important, and substantial restructuring of these industries may be necessary. Such changes will not be welcomed by those who currently dominate these trades (because it is very likely to weaken their dominant position, by breaking their monopoly on information concerning trade practice and standards, and making the trade both more formal and more transparent), requiring that any policy move to support substantial increase in the scale of these trades be accompanied by effective

Figs 8 & 9 – Proximity to local markets, and transport infrastructure

Fig 10 – Population distribution

development, business management and technical support, together with investment in necessary organisational and physical infrastructures. Given the importance of the Chinese market in this trade, and the fact that most of the exports to China from Vietnam will simply augment the supply of the same or similar products produced within China, it will be important that Vietnam is several steps ahead of sector evolution in China.

4.2 Distribution and marketing costsEconomic development across the length of Vietnam is variable, with large concentration of activity around Ho Chi Minh City, and very much secondary concentrations around a small number of other cities – Hanoi, Ca Mau City, Nha Trang, Danang and Haiphong. The extent, scale and quality of physical infrastructure – roads, wholesale and retail markets, support services, shipping services, air services, etc. – very much reflect these differences (see Fig. 83). In the deep south – Mekong Delta and South East regions – distribution infrastructure is well developed, and despite drawbacks associated with the largely aquatic domain found in the Mekong Delta, together with its seasonal inundation, the scale of production and economic activity has ensured that distribution services operate effectively (Fig 9 indicates the distribution of markets across the country).

But not so in most other parts of the country, where the overall volume of product to be moved, and the greater peaks and troughs in demand for transport, necessarily mean that costs are higher, and transport efficiency more difficult to achieve. This can be readily observed in respect of the distribution of population (see Fig 10), and the distribution and scale of fish processing plants (see Fig 4). Vietnam remains largely an agrarian society, with population distributed relatively evenly across rural areas; slightly above average in the most productive areas – Mekong Delta and Red River Delta – and below average in less productive upland areas. There is very little concentration of infrastructure across these small communities.

Where there is concentration is around the conurbations, but these are few and far between. They are focused on the cities listed in the paragraph above – in order from south to north, Cau Mau City, HCMC, Nha Trang, Danang, Haiphong and Hanoi. But even here there is little evidence of concentrated wholesale infrastructure in facilitating the movement of product from growing areas to consumer. Distribution infrastructure in support of the domestic market appears fragmented, with the very few signs of concentration being through the fish processing companies, and associated with the emergence of supermarket chains (particularly in the south). But domestic market infrastructure is an area that has been poorly researched to date, and further work will be required in the future in order to inform policy with greater confidence.

What is known to be a major, if not the major, determinant of distribution and market infrastructure is the location and scale of fish processing plants. This reflects the dominance of the export industry in the commerce of the sector. Alongside this, however, it should be recognised that at least some of these processors are also packing fresh and frozen product for sale on the domestic market. Such product meets local consumer preferences and pricing profiles, and responds to a growing affluence and focus on convenience amongst the country’s urban households. These products also meet changing needs in the hotel and catering sector. Small though this emerging market segment is, from a policy perspective it will require closer scrutiny in the future.

3 Figs 1, 2, 3 & 6 are taken from Poverty and Inequality in Vietnam: spatial patterns and geographic determinants – April 2004 - http://www.ifpri.org/divs/mssd/dr/dr200312mapping.htm

Figure 11 shows the extreme polarisation of processing capacity between the north and south of the country. This undoubtedly reflects the substantially greater availability of export product in the south – from shrimp and catfish farming, and from capture fishery landings – but there are also other factors influencing this distribution that require deeper investigation. Entrepreneurship, investment capital and access to a skilled labour pool, plus easy access to raw material, are undoubtedly key determinants in location. Each and all of these factors can explain some of the disparities between north and south – and it is likely that some efforts will need to be made to strengthen conditions in the north and outside the Mekong Delta and Ho Chi Minh City. But other factors are also at play here.

Fish production in the central and northern regions is undoubtedly smaller in overall volume than in the south,

but it is also of species and products that lend themselves less to industrial scale processing and the production of frozen product. Crab, lobster, gastropods and bivalves lend themselves to live shipment. Certain types of fin-fish can be shipped live, and other fin fish, together with cephalopods and other molluscs, can form the basis of a range of durable dried products. Markedly different marketing and distribution channels and infrastructures are used in consolidating and exporting such product.

For example, the team scored the strength and diversity of the processing capacity in different provinces (Fig 12), showing significant advantages for the South and centre of the country. Figure 4 shows the actual turnover of processing companies by scale in the major regions, and reinforces this conclusion.

However, the lack of processing in the North is to some degree compensated by the strong trading networks built up over generations. Indeed it is suggested that this trade is dominated by Vietnamese Chinese (Viet Hoa) who share cultural, family and linguistic ties with traders the other side of the border.

Relatively little detail is known of the mechanics of this trade and again, from a policy perspective, further investigations of this sub-sector will need to be pursued in the near future. It should be stressed that this has particular relevance to marine and brackishwater aquaculture planning – most of the species involved in this trade can be cultivated. In addition, however, China is likely to become an ever more important export market for the Vietnamese seafood industry. It is far from clear to what extent the current trade can be scaled up utilising current market and distribution infrastructures, and to what extent new distribution routes and market channels need to be developed. This trade has a strong informal character, which contrasts with the frozen

Fig 11 – Distribution of main processing plant, by region of the country

seafood export sector. There will come a time when such informality may not be in the best interests of regional economic development in the northern and central regions

4.3 Market intelligenceFor many years now the majority of the formal seafood processing sector in Vietnam (essentially those processors engaged in the production of frozen product) has subscribed to, and been represented by, the Vietnam Association of Seafood Export Producers (VASEP). As an organisation VASEP has evolved quickly, focusing on its ability to inform export markets on Vietnam seafood quality and products, to actively promote the industry through regular statements to the international seafood press, but even more importantly to inform the Vietnam industry of international developments.

This latter activity is achieved through compilation and distribution of a daily email, a weekly synopsis, and a monthly magazine. To inform such publications it draws on the reports of a range of international seafood news organisations – web and paper based – as well as the interpretation of events by its own editorial staff. Key foundations of such information are the various divisions of the Ministry of Fisheries (notably the Fisheries Informatics Centre), and the trade information services of Infofish, a Kuala Lumpur based body, and FAO’s Globefish organisation, based in Rome, Italy.

In addition, VASEP heads up the organisation of Vietnam seafood presence at a range of international trade shows in the US, Europe and Japan, as well as the Vietfish Exposition held every other year in Ho Chi Minh City.

These efforts have been partly responsible for establishing the Vietnam seafood industry as a major international player, and as a source of high quality product. But this would be to no avail if not also supported by appropriate product from the country’s processors and exporters. But there is also a suspicion that the industry itself is something of a passive marketer – relying more on orders to come to it than on its own sales and marketing efforts. In this it is assessed that the industry makes rather less use of the market intelligence that comes its way than it could do, and that it fails to operate in a strategic manner. This situation is, however, on the change, as the industry is being actively encouraged to do rather more than simply display its wares at international trade shows.

But for the other parts of the seafood export industry VASEP is currently able to do rather less – for those engaged in the live, fresh and dried trade. In the first instance this is because few of the companies involved in

Fig 12 – Team scoring of the composite regional comparative advantage in processing plants

Processing capacity

0

20

40

60

80

100

120

Quang N

inh

Hai Pho

ng

Thai

Binh

Nam D

inh

Ninh B

inh

Than

h Hoa

Ngh A

n

Ha Tinh

Quang B

inh

Quang T

ri

TT. H

ue

Da Nan

g

Quang N

am

Quang N

gai

Binh Dinh

Phu Y

en

Khanh

Hoa

Ninh Th

uan

Binh Thua

n

BR.Vun

g Tau

TP. H

CM

Tien G

iang

Ben Tr

e

Tra V

inh

Soc Tra

ng

Bac Li

eu

Ca Mau

Kien Gian

g

scor

e

this trade are members of VASEP. In addition there is less scale and concentration to this trade, and therefore it is generally more difficult to identify and communicate with it. But, in contrast to the larger frozen food exporters, the businesses involved in these sub-sectors tend to be better informed of market conditions and prices, utilising strong trading networks and direct and long-standing contact with buyers. But once again this very direct access to market intelligence tends to leave exporters with a fairly narrow view of the market and its evolution, and thus unaware of change in the wider industry, or of the more strategic opportunities that may be opening up. A key example of this is the fundamental changes underway in the purchasing power, scale and organisation of the trade in China. The responses to these changes by the Vietnamese industry have been piecemeal and at such a small scale as to fail to capitalise on the long-term opportunities these changes herald. If Vietnam fails to respond at the appropriate scale and establish itself as a major seafood supplier to the Chinese market, exploiting its natural advantage of proximity to market, the others will undoubtedly fill the gap.

VASEP and MOFI have started to address these issues, both by commissioning market research (through the SEAQIP component of the FSPS), but also through the planned establishment of a VASEP regional office in Shanghai. But there is still much to do to ensure that businesses in the non-frozen seafood sectors become part of and party to these developments, and are given the support to respond to the challenges of scaling up.

One interesting recent development is the posting on the NACA web-site of wholesale market prices for live fish sold through the major wholesale clearing centre of Huangsha Live Seafood Wholesale Market in Guangzhou, Southern China. Similar prices are available for the Hong Kong markets through the website of the Hong Kong Fish Marketing Organisation. It is far from clear to what extent live fish producers and traders in Vietnam are aware of such corroborating price information.

At farmer level, market intelligence is distributed by word of mouth, typically from trader to farmer, and then between farmers. Unsubstantiated rumour is an all too common consequence of this type of information system, and provides a relatively poor basis for farmers to make investment decisions. This may be further complicated by the existence of financial ties between farmer and trader – where farmers are not free to negotiate prices with whom they please. In general, farmer access to reliable market intelligence is poor across the country, though the high level of competition for product between traders in the Mekong Delta Region tends to ensure that these farmers have a better idea of farm gate prices than most farmers elsewhere in Vietnam.

4.4 Adaptability to new products and marketsA corollary of the relatively limited use of market intelligence by the seafood sector in general, but by the formal frozen food producers in particular, means that the sector is generally poorly equipped to identify and respond to changes in market demand, or to innovate in response to identification of market opportunity. This is not a good situation to be in. But luckily importers make rather more use of market intelligence, and so are more pro-active in seeking changes in product form, and in stimulating innovation – putting through their specific product requests to the Vietnamese industry.

The Vietnamese frozen seafood sector has had a long-standing and fruitful partnership with the Japanese seafood industry. In line with Japanese industry tradition, its trading houses and associated technicians have taken very much a hands-on approach to such partnerships, and have worked closely with Vietnamese processors to produce product to the required quality and specification. This has involved a significant and beneficial transfer of technology and skills to the Vietnamese seafood processing sector.

The skills and techniques that have been acquired in this way have also been transferred to the development of products for the US and regional markets. Despite the imposition of tariff barriers on some Vietnamese shrimp product, Vietnam remains a trusted US trading partner, and companies have developed strong and stable trading relations with US importers. Such relations have also encouraged increasing trade in added value products, both building on the Japanese technologies, but also processing to US recipes and specifications.

As matters stand, the Vietnam frozen processor industry is poorly equipped to take the lead in developing products for international markets, or to stimulate innovation. In the first instance its companies have limited

laboratory and product development capacities, plus there is no equivalent support infrastructure in the public domain (government food laboratories, research centres, etc.). But in addition, the Vietnam frozen food industry undertakes no market research in its key markets of the US, Japan and the EU – a pre-requisite for

developing new products in response to identified market opportunities.

By contrast the industry has developed a wide range of frozen products for the domestic, and arguably regional (Asian) markets. These are based on comprehension of local tastes and preferences, and recognition of the growing purchasing power of urban householders. Few if any of these products would suit markets in Japan, the US or the EU, but they are well suited to more local tastes, and could find ready markets in China, Thailand, Malaysia, etc.. This suggests that some at least of these companies have the ability to innovate, but that the systems employed in innovation are relatively unsophisticated. This raises a concern. Many of these

Fig 13 – Distribution of local markets across the countryside, and thus relative access to markets (markets are show in dark blue; green moving to red shows increasingly poor access to markets)

Source: from Poverty and Inequality in Vietnam: spatial patterns and geographic determinants – April 2004 - http://www.ifpri.org/divs/mssd/dr/dr200312mapping.htm

types of product are displayed at international trade shows, but it would seem that these processors do not recognise that these products are not suitable for Japanese, US or European markets. And indeed the displaying of these products actually detracts from and undermines the strength of the very good and highly suited standard products that they already sell into these markets.For that part of the trade that engages in export of live product, standards and techniques are relatively well established. Nonetheless there may be areas where improvements can be made – in reducing mortalities, achieving economies of scale or simply reducing equipment and operating costs. The industry has no common infrastructure by which such opportunities could be identified or responded to.

For those engaged in the supply of dried goods, a similar situation exists, where the sector undertakes no market research, and where there is no local public or private infrastructure by which development opportunities may be identified and responded to. Key areas where innovation may be appropriate are in packaging and in the use of seasoning / taste additives.

For existing or future exporters of fresh fish products – fresh whole fish, fillets, and loins – again no market research is undertaken, despite this being a particularly risky sub-sector of the industry, with product air-freighted over many thousands of miles. In the context of marine and brackishwater aquaculture, this has particular relevance to shifts into the cultivation of new fin fish species, such as cobia, rabbitfish and the like. Being fully informed as to potential markets and market prices is critical to policy formation in this area, and at present is all but non-existent.

Overall, the Vietnam seafood industry needs to reinvest at least some of its US$750M export revenue in targeted market research and product development. Whilst it can piggy-back on the knowledge and product development skills of its trading partners in Japan, the US and Europe, it cannot do so in respect of more local, regional, markets. It needs to invest in market research closer to home – within Vietnam, and in neighbouring markets for frozen and dried products, in China for live, fresh and dried products, in South Korea for dried products, and in Australia and New Zealand for live, fresh, dried and frozen products. It also needs to explore the European and US markets for farmed fresh fin fish products – such as cobia, as well as for Tilapia and Pangasius.

At a farmer level, the absence of a more formal wholesale structure to the industry means that market and price information is not so easy to come by, and the veracity of that which is available cannot be relied upon. Those farmers closer to major markets (see Fig 13) will inevitably have better access to information and the market is likely to be more competitive, resulting in better prices for the farmers. To improve matters, the formation of farmer producer organisations is to be encouraged.

In addition, careful consideration should be given to some strengthening of trading infrastructure in the form of wholesale markets. Concentration of the sales process in particular locations can encourage competition and better market price disclosure, to the benefit of farmers. But on the down-side any such benefits can be confounded by the prevalence of financial linkage between grower and trader, and the preference of processors to buy direct from the farmer so as to maintain tight control on quality and traceability. At the extreme, provincial or town councils can find themselves with expensive but empty wholesale market facilities, and no significant change in how product is traded. But there are also circumstances where the simple provision of a wholesale facility pushes the industry into a beneficial restructuring of its trading systems, and though the wholesale facility may not used by the industry, the overall change that has occurred may actually outweigh the cost of this piece of infrastructure.

5 Relevance to marine and brackishwater aquaculture planning

5.1 PrioriitisationIn the context of mariculture products, it is the impact on the shrimp trade that most concerns us. For catfish (grown in freshwater), Vietnam has and continues to put up a robust defense of its production systems and costs, and the industry continues to have considerable on-going success in suppling frozen basa product to both the US and the European Union. But for shrimp, the international markets have been in turmoil as both producers and the trade try and resolve complex supply and demand issues.

Adding further complexity to this problem has been the past rise and fall of the Chinese shrimp farming industry (affected by disease, but now in recovery), the continuing poor state of the Japanese economy (impacting negatively on expenditure on seafood in Japan), and more recently a battle royale over what species of shrimp to cultivate and at what size to harvest (with P. monodon cultivation, indigenous to the region, pitched against P. vannemei cultivation, an introduced exotic). Into this mishmash of influences is now the near stampede of those affected by the higher US tariffs seeking to increase sales into the European Union. Seafood consumption and expenditure in the European Union has shown steady growth over the long-term, with heavy dependence on imports. Nonetheless, most in the trade have existing and often long-standing trading partnerships; supply-side pressure on traders to accept new product – not just from Asian producers, but also Central and South American producers – is simply helping to force prices down.

Making sense of the international shrimp markets under such volatile trade conditions, particularly where the main sources of quantitative data are necessarily historical and partial, is no easy matter. In the medium term, stability will return to this commodity sector, but not before many have suffered the consequences of low prices and high inventories.

5.2 Export categorisation by functional groupFrom the above it is clear that there is a range of functional product groupings that impact on the marine and brackishwater aquaculture sector, as well as on markets, distribution systems, and marketing systems. These may be summarised as:

Frozen international commodities: making up the largest element of the export trade; relatively high value frozen commodity products to international markets – block frozen shrimp and fish fillets in various guises; processed by registered processors, and marketed by those exporters holding the relevant certifications;

Frozen added value products: a small proportion of overall exports but high value and growing, with Japan a key trading partner in this development; added value frozen products, generally derived from the same raw material sources as the commodity category above – mainly coated consumer ready products for supply to the international supermarket, food service and catering trades, involving shrimp, fish, squid, crab, etc., some products with a clearly Asian format, and others with a more clearly western or international format; processed and marketed by the larger registered and quality certified processors;

Fresh whole and processed product: currently a very small element in the export trade, shipped by air out of HCMC; this category primarily involves the air freighting of fresh finfish product – such as tuna, basa fillets, whole or filleted tilapia, and whole reef-type fish (groupers and snappers), destined for markets within Japan, the European Union and North America; basa and tilapia produced from aquaculture, tuna and reef-type fish from capture fisheries, handled and processed by the large capital intensive processing and exporting companies holding the necessary quality certifications and able to efficiently manage the process of export by air;

Dried products: a large and significant element of the export mix, heavily dependent on raw material from capture fisheries, and processing by family units; time stable dried fish, shrimp and cephalopods, generally focused on supplying Asian consumers within the region, with dried cephalopods in strong demand in Japan and North Korea, and other dried products well received throughout the Far East and South East Asian regions; processed mainly by small processors –

family units or slightly larger – and marketed by wholesale distributors / exporters into markets and through distribution channels where quality certification is less an issue;

High value live product: a growing and significant export group, probably under-represented in formal statistics, with most traffic directed by road and sea into southern China; typically live finfish and lobster shipped to market using specialist sea transport, for sale in catering outlets in the economically wealthy coastal cities of China; produced by small units, consolidated by specialists, and marketed and exported - using specialist medium scale but capital intensive live hold vessels – by various combinations of consolidator, wholesale distributor and vessel owner; in future more of this trade will be distributed using air transport;

Lower value live product: a growing and significant export group, grossly under-represented in official export figures, with most traffic directed across the northern border into markets in southern China; primarily bivalves, snails and crabs, shipped overland to final and intermediary markets in southern China where they are generally indistinguishable from locally produced product; produced at a small scale, and consolidated and shipped by specialist wholesalers / distributors.

5.3 Distinguishing between commodity and added value production and export

In looking at these functional trade categories it becomes clear that it is important to distinguish what proportion of shrimp (and finfish) production is destined for sale as a commodity product, and what proportion as added value product. With shrimp making up 40% of the value of all fishery exports from Vietnam, distinguishing between these two functional trade groups becomes critical from both commercial and policy perspectives. As indicated in Table 4 the average price of shrimp exports has been rising year on year. This is less to do with changes in the species mix of production, or the size of animal at harvest (both factors that do indeed affect price), than with the proportions that are sold as commodity and as added value products. We would suggest that Vietnamese production has quickly shifted to a balance between primary processed (commodity) product and secondary (specialist cut, coated product) of something between 3:1 and 2:1.

In terms of the shrimp industry and its markets, we cannot overstress the importance of the need for finer breakdown of the production and trade information. Already in what we have termed the commodity functional trade group we include the following products - whole frozen shrimp; head-off shell-on frozen shrimp; peeled and deveined frozen shrimp (P&D), and peeled undeveined frozen shrimp (PUD) – each with quite different pricing. For the producer, little of this really matters, as he/she will be offered a relatively stable farm-gate or wholesale market price for a particular size and species of product. But in terms of the overall contribution of that product to the economy, how much further added value can be generated from use of the raw material is of some significance.

All but whole frozen shrimp may be technically described as value added products; all can be technically described as processed products. And each product form can be further divided into size categories – each with quite different pricing. It also matters whether the product is produced in block or IQF (individually quick frozen) form. But all these products only involve what is termed primary processing.

Further added value can be generated by exposing the raw material, or indeed these intermediary product forms, to secondary processing, processes that involve a combination of cutting, coating, and cooking in one form or another. This is the major growth area, both internationally and within Vietnam, as consumers demand convenience, ready prepared meal ingredients, and a wider choice of tastes displayed through coatings and seasoning. Further added value still can be provided by effective branding – but bearing in mind that it may be better to latch on to the image of an established brand in a particular market (by packing under contract to an existing brand owner) than trying to establish a new brand in a range of national markets, each with its own unique consumer characteristics.

5.4 Functional product chain classificationTo focus research, we have allocated priority to certain species, products and groups. At the head of this list is shrimp, with a particular focus on the species P. monodon and P. vannemei, and on both commodity and added value products. This is followed in priority by a range of live products – finfish and lobster by sea to China, Babylonia snail, crabs and various bivalves by land to China. Taking up the tail end are a combination

of lower value products – sea cucumber and seaweed – and higher value small market volume products – abalone and sea urchins.

But in trade terms the marketing of these species and the products derived from them can be more productively categorised according to a number of functional trade groups. These groups, and which species fit into which group, are summarised in Table 4. The functional groups are presented in rather more detail in Table 5.

Table 4: Functional trade groups and relevance to marine and brackishwater aquaculture species

functional group priority market research speciesfrozen international commodities shrimpfrozen added value products shrimp; crab; bivalve mollusc: oyster; mussel; cockle

fresh whole and processed product finfish

dried products seaweed; sea cucumber

high value live product finfish; Babylonia; crab; abalone; sea urchin

lower value live product miscellaneous clams & cockles

Table 5: Product range and supply chain makeup of main functional trade categories

functional group

product range supply chain makeup species

Frozen international commodities

relatively high value frozen commodity products to international markets – block frozen shrimp and fish fillets in various guises;

processed by registered processors, and marketed by those exporters holding the relevant certifications;

Shrimp, Crab, Bivalve mollusc: oyster; mussel; cockle

Frozen added value products

added value frozen products, generally derived from the same raw material sources as the commodity category above – mainly coated consumer ready products for supply to the international supermarket and catering trades, involving shrimp, fish, squid, crab, etc., some products with a clearly Asian format, and others with a more clearly western or international format;

processed and marketed by the larger registered and quality certified processors;

Shrimp, Crab, Bivalve mollusc: oyster; mussel; cockle, Abalone, Sea Urchin

Fresh whole and processed product:

this category primarily involves the air freighting of fresh finfish product – such as basa fillets, whole or filleted tilapia, and whole reef-type fish (groupers and snappers), destined for markets within the European Union and North America;

basa and tilapia produced from aquaculture, reef-type fish from capture fisheries, handled and processed by the large capital intensive processing and exporting companies holding the necessary quality certifications and able to efficiently manage the process of export by air;

Finfish, Abalone, Sea Urchin

Dried products:

time stable dried fish, shrimp and cephalopods, generally focused on supplying Asian consumers within the region, with dried cephalopods in strong demand in Japan and North Korea, and other dried products well received throughout the Far East and South East Asian regions;

processed mainly by small processors – family units or slightly larger – and marketed by wholesale distributors / exporters into markets and through distribution channels where quality certification is less an issue;

Seaweed, Sea cucumber, Abalone

High value live product:

typically live finfish and lobster shipped to market using specialist sea transport vessels, for sale in catering outlets in the economically wealthy coastal cities of China; by contract, crab and Babylonia tend to be shipped by road across Vietnam’s border with China

produced by small units, consolidated by specialists, and marketed and exported - using specialist medium scale but capital intensive live hold vessels – by various combinations of consolidator, wholesale distributor and vessel owner; similar arrangements exist for Babylonia and crab, but typically handled by Veitnamese-Chinese traders in the north of the country;

Crab, Finfish, Babylonia, Abalone, Sea Urchin

Lower value live product:

primarily bivalves, snails and crabs, shipped overland to final and intermediary markets in southern China where they are generally indistinguishable from locally produced product;

produced at a small scale, and consolidated and shipped by specialist wholesalers / distributors.

Bivalve mollusc: oyster; cockle, Sea cucumber, Miscellaneous clams

6 International context and market descriptions by product group

6.1 Frozen international commodity and added value products

6.1.1 Frozen shrimp

Vietnam shrimp production has grown dramatically over the last decade, and the Vietnam shrimp export sector is now clearly one of the big international players. But it has also come late to this market, following behind the likes of Thailand, Indonesia and India, the Philippines and Ecuador (see Figure 14). These early entrants have been able to trade up to the production of high value added products for direct supply to the main international markets. This has been possible as a result of the slow build up of trust with a relatively small number of foreign importers / processors / wholesalers who have felt confident enough of quality control standards to place orders for value added products. Prime examples of this are Thailand and Indonesia. The likes of Ecuador and Mexico have been less successful in this area, generally producing a smaller sized shrimp less amenable to added value processing.

Vietnam has only recently set out on this trail, but has already established its sound credentials in processing and quality, and each year the relative proportion of commodity versus added value products is shifting in favour of the latter. Nonetheless, these commodity products form the “bread and butter” business of most Vietnamese processors, and underpin the financial flows down through the supply chain to farmers and fishermen – important characteristics of this particular trade.

As Vietnamese shrimp farmers experiment with, and improve production of, an increasing range of shrimp species to better match environmental conditions with economic performance, so these raw material flows of generally medium to small sized shrimp will be channelled to the production of commodity products. At the same time, an increasing proportion of the larger sized shrimp, and particularly black tiger, will be channelled to higher added value products.

Despite the current volatility in international shrimp markets, which has particular impact on commodity products, North America, followed by Japan, remain the dominant markets for Vietnamese commodity shrimp. As a result of the current US anti-dumping action, which places a cost penalty on some Vietnamese commodity product (and also on product from many of Vietnam’s main competitors), exporters are seeking to establish new customers in the European market, the third of the main shrimp markets. Assuming they are successful in increasing trade with Europe, this will open the door to supply of high added value products to this increasingly valuable market.

In this commodity market, remaining internationally competitive is very dependent on price. In general there is very little difference, like for like, between product from one country and another. One relatively simple form of distinction is the production of IQF (individually quick frozen) rather than block product, and another is to offer own-brand and retail packing at source.

Once basic quality standards have been met, a buyer is only likely to be swayed to take product at the same or a higher price if product of a higher quality specification is offered for the same price. Another factor is if the buyer can have greater confidence in one supplier rather than another, or if the product of that country has a higher reputation than that of another (reflecting the status of the “national brand”). The Vietnamese industry is progressing well to deliver these “feel good” factors that can sway trade in its favour.

But against the three traditional market centres of the US, Europe and Japan should also be set Vietnam’s close neighbours, China (a net importer of shrimp despite being a major grower) and South Korea. With much reduced transport costs to these markets, and strong demand for commodity type products, these markets should be given serious attention.

All in all, demand for commodity type shrimp product will continue to grow. As a general principle, this market will remain capable of absorbing increased aquaculture production without bringing about any particular rise or fall in price. Periodically, however, mismatches between demand and supply, particularly as a result of disease outbreak, will tend to strengthen prices for a year or two at a time. Protectionist measures, as currently applied by the US, are likely to be few and far between as international trade rules and standards create greater stability, and as management of capture fisheries is brought more into line with catch opportunities and sustainable operating economics.

At the added value end of the product range the market is much more discerning, although once again most products are of standard form. Typical products include:

raw cooked coated

raw peeled tail on;

raw peeled deveined tail on;

raw peeled tail on butterfly;

nobashi ebi (artificially elongated peeled tails, tail on);

raw peeled tails on a skewer

cooked peeled tail on;

cooked peeled deveined tail on;

cooked peeled deveined tail on butterfly;

sushi ebi;

cooked peeled tails on a skewer

ebi fry;

coated butterfly shrimp;

coated peeled tail on shrimp;

coated peeled shrimp;

popcorn shrimp (lightly coated deep fried small shrimp peeled tails);

The key characteristic of most of these products is that they are made from medium to large shrimp, and most typically from black tiger. Wide product differentiation is possible in the use of coatings (ranging from breadcrumb through to tempura) and seasoning (to almost infinitely variable recipes). It should be noted that the “ebi” products are exclusively for the Japanese market, for which the Vietnam industry is an increasingly dominant supplier, alongside the Thai and Indonesian industries.

Product can be supplied in retail and catering / wholesale packs, in packaging to suit particular clients. Clearly it is better to supply to a particular final customer, where the processor will inevitably need to work in close partnership with both the importer and distributor, but this is not always the case. Where not possible, more generic packaging may be necessary. In this added value market there is little to no advantage in selling product branded by the (Vietnamese) processor, and marketing efforts should focus on the inherent properties of the product, and the quality of support services and reliability.

Vietnam has an excellent record in this product sector, particularly in Japan and the US. The industry does, however, need to increase its efforts in entering and developing the European added value market - which is considerable and where the Vietnamese industry has little presence. It also needs to look more critically at opportunities within the region – South Korea, China and the increasingly affluent urban markets of South East Asia.

Vietnam’s comparative advantage in this product group, as with so many others, is excellent cost versus productivity ratings, a well-educated and skilled workforce, and good concentration of production, processing and support services, most notably in the Mekong Delta, South East and South Central Regions. It suffers some disadvantages, however, particularly relative to Thailand. Notable are a fragmented and disorganised production sector, and high costs in a number of areas, all of which can be addressed through achievement of system efficiencies and economies of scale – for example in feed, seed, transport, traceability and shorter streamlined supply links. One of the industry’s major advantages is its ability to grow black tiger (and other species) to the sizes suited to added value processing. International prices for these products are likely to remain firm, but individual companies will need to become more sophisticated and strategic in their reading of market trends and marketing of their produce. The moves by VASEP, supported by government, to strengthen the generic national brand has worked well and needs to be continued, particularly in raising the standard across the industry.

And even in the shrimp area, Vietnam’s northern neighbour represents a major market development opportunity. This is an opportunity that should not be left to individual firms to exploit, but requires a national and coordinated sales effort. An equivalent example is that of Norway which, in the late 1980s, invested many millions of dollars into wooing the Japanese trade to recognise Norway as a source of top quality seafood product. From small beginnings, Norway grew its seafood export trade with Japan to many hundreds of millions of dollars. Vietnam needs to embark on the same journey in respect of China.

6.1.2 Frozen crab

Vietnam has substantial mangrove and blue crab resources, and the fattening of mangrove crab and the cultivation of swimming (blue) crab are two technologies that offer future development potential. Most frozen seafood processors produce a number of cooked and dressed frozen crab products for export. These find ready markets in the US and the Far East, and increasingly in South East Asia. In North America the market is used to the local blue or Chesapeake Bay crab, where demand far outstrips supply. Frozen product is imported from around the world – notably from South America and South East Asia (particularly the Philippines). Indications of price are presented in Table 6.

Closer to home, both swimming crab and mangrove crab are popular across the Far East and South East Asia, where whole and portioned cooked and frozen crab products are readily accepted. As the affluence of urban households across South East Asia grows, so too will demand for convenience products for use in the household and by caterers. This is a growth area, and one where frozen crab products can have a place, but where competition from home-grown producers will remain strong.

In addition to the above in-shell products, frozen picked meat is also a widely traded commodity, used in the catering industry, by other processors, and to a lesser degree by householders. The European and Far Eastern markets offer good opportunity for these products, with the former market more sensitive to price.

Table 6 - Indicative frozen swimming crab prices – 16th May 2005

Fish species Product formIndicative

price Origin

Trade names & grading In us$/kg & market areaWhole U/10 pc/kg 3.8 c&f Korea Chennai, India 11/15 pc/kg 3.8 Broken 1.9 Cut crabs 11/15 pc/kg 4.1 c&f Japan Vietnam 16/20 pc/kg 4 26/30 3.7 31/40 3.6 41/60 3.3 Half- cuts 8/12 pc/kg 3.3 Ex-warehouse NY, USABangladesh 17/20 pc/kg 2.65 21/24 pc/kg 2 25/32 pc/kg 1.75 33/40 pc/kg 1.3 Softshell crab, whole-cleaned 1 kg box c&f USA Vietnam 30/55 gr/pc 9 55/70 gr/pc 9.5 70/55 gr/pc 10 85/up gr/pc 10.5 Three-spotted crab 11/5-21/25 pc/kg 3.25 c&f Korea Chennai, India 26/30 pc/kg 3.15 31/40 pc/kg 2.95 41/50 pc/kg 2.4 51/60 pc/kg 1.8 Source: INFOFISH Trade News

For the future it is likely that most large processors in Vietnam will continue to produce frozen crab products, but their greatest problem is less likely to be market than access to raw material. With buoyant domestic and regional markets for live crab, getting supplies for processing, where high processing costs mean that raw material buyers cannot readily compete with the live market prices, this market will be more dependent on raw material from capture fisheries (notably for swimming crab) than from aquaculture. Nonetheless, with limited alternate sources of comparable frozen product (king crab and other, temperate to cold water, large hard-shell crabs serve a distinct and different market), prices are likely to remain firm.

6.1.3 Frozen bivalve and gastropod molluscs (oysters, mussels, cockles, whelks, snails)

As of now there is relatively limited Vietnamese originated trade in frozen bivalve mussels. Products currently on offer include frozen cooked meats of oysters, greenlip mussels, and various clams, plus similar products in the half-shell, and whole cooked mussel and clam products. Raw material is mainly sourced from wild fisheries, and processed volume is small – in the order of something like 1,000 t.

The market for frozen oyster meats is strong in the US, but mainly supplied from domestic production and that of South America. Oyster meat is widely accepted across the Far East and South East Asia, and this is likely to provide a more productive market area for Vietnamese production – particularly focused at the catering sector and high end retailers. Nonetheless, market volume is likely to be limited, unless a small number of companies specialise in this market, and brand product accordingly. At present, raw material sources tend to be fragmented across South East Asia, so that achieving cost-effective volume and retaining essential traceability and quality control can be problematic. For this reason, no-one in the region has a particular competitive edge. Focused aquaculture development could provide a way around this, but should only be followed up on where more focused market research suggests it might be viable.

Greenlip mussel can be readily cultivated along the Vietnamese coast. Cooked half-shell presentations of this species are now well accepted in North American and European markets, both through catering and retail

outlets. But – this market was developed from scratch by the New Zealand industry from the mid-1980s, and they continue to dominate production. The New Zealand industry employs scale and automotation to keep costs down, bearing in mind that it is supplying a top-end product that delivers small food weight to product weight to markets half way around the world. There are many other countries in South East Asia that can produce green lip mussel, and some, such as Singapore, Malaysia and Thailand have achieved some limited success in marketing processed product on regional markets, but at relatively low volume. If Vietnam were to seek to develop a reasonable international position in this product it would need to operate at substantial scale, and its farmers and processors would be coming to this market some ten to fifteen years after its regional competitors. If, however, it were to seek to establish a pioneering branded foothold at the top end of the Chinese supermarket and catering markets, there might be sense to developing this product area. In doing so it would need to keep at bay already established suppliers from New Zealand and South East Asia, where it would need to make the most of proximity, and close economic links with the Chinese trade.

For frozen clams and clam-meat, markets are focused around Mediterranean cuisine (with particular market centres in Italy and Spain), and the cuisines of the Far East (China, Taiwan, South Korea, Japan). Most demand is at the bulk low unit value end of the market, but there is a small but growing market for fancy packs of cooked meats. At the low end, frozen packs compete with pickled and canned product from around the globe. In this market, exporters need to focus on establishing long-term relations with importing wholesale distributors who themselves have established long-term relations with their customers. Strong branding, whether by the exporter or the importer, can assist in growing and holding market share. In-shell cooked frozen product of such species as yellow, white and vulgate clam offers a very attractive pack, all of which are well-received in southern European markets. These products compete with locally produced live product, but do offer convenience to busy housewives and middle market caterers.

For frozen cooked snail meats, the main markets are in the Far East and South East Asia. Prices tend to be rock bottom, with strong competition from pickled and canned product from around the globe. There is little product differentiation between species, though there may be niche opportunities at the upper end of the market.

6.2 Dried products

6.2.1 Dried products - seaweed

Vietnam has established a significant presence in the production and export of dried squid (to Japan and South Korea), supported by a wide range of dried finfish and shrimp products, exclusively produced from raw material from capture fisheries. To date there has been limited cultivation and harvesting of seaweed, primarily used for the production of gels, but with some harvested and exported as a food item. Some sea cucumber is harvested and dried from the wild stock, destined from both domestic and export markets. All quantities are very small.

For the future, seaweed aquaculture does offer some potential, with ever increasing international demand for gels in all sorts of industrial processes encouraging raised global aquaculture of a range of species. This is a commodity market, with only slightly better than marginal production economics favouring activity in economically peripheral areas. Post-harvest, product needs to be cleaned, dried and graded before shipment to a processing plant for extraction of its gel constituents. From here, this stock gel material is then further refined, and channelled to a wide variety of industrial uses within the foods, beverages, cosmetics and textile sectors.

But there are many sources of alginates and carrageenan from around the world, particularly from industries in the Asia / Pacific region. Vietnam could relatively easily capture the marginal benefits as a raw material producer, but of rather greater interest would be the capture of further economic benefits from the processing of raw material to milled seaweed or to refined gel. As a relative newcomer to this industry, Vietnam would struggle to gain the necessary foothold in this market to underpin the scale of handling and processing necessary to compete. So saying, others countries have achieved this in the past. Major hydrocolloid processors can be found in China, the US, Indonesia, Philippines (see http://www.cybercolloids.net/manufacturers/list.php)

The international market for industrial and food grade natural colloids, the main products derived from seaweeds, is huge, with use ranging from the stabilising of yoghurts and beer, to being a necessary constituent in the formulation of cosmetic creams, to wide use on the textile industry. The core property of these natural colloids is their gelling qualities, and a range of chemically distinct colloids can be extracted from different seaweeds, in different yields. The economics of the seaweed industry is based on the relative yield of high grade colloids from a particular source and species of seaweed, and the efficiencies utilised in consolidating, sorting and grading raw material for drying. Because the initial processes in this product chain involve large volumes of low value raw material produced in extensive cultivation systems by predominantly marginal communities, quality control and process management is difficult, complex, and open to great variation.

Dried material can then be bundled for supply to intermediate or final processors in neighbouring countries, or indeed in any location around the globe. But strategically, if Vietnam is to seek to step up cultivation to any appreciable extent it makes sense that efforts are made to encourage the establishment of at least an intermediate processor in Vietnam. As the Vietnam economy grows, diversifies and expands its manufacturing base, so it too will develop demand for industrial and food grade colloids. It makes sense to internalise as much of the colloid production process as economics allows, and to export such part-processed or finished product as may exceed local requirements.

To achieve a viable industry in cultivated seaweed requires efficient organisation of dried raw material, at scale. If the volume of such raw material is likely to be sufficient to support an in-country intermediate processor, then this is to be encouraged. If this is a strategic objective and/or likely practical outcome, then a feasibility study should be commissioned into the scale, technology and economics associated with setting up and operating such a business. If the scale of production is unlikely to develop to a level able to support such a business, then the focus should be on making the production of dried raw material as efficient as possible, and exporting this to processors in China, or other parts of South East Asia.

6.2.2 Dried products – sea cucumber

The market for sea cucumber is dominated by the eating preferences of ethnic Chinese around the globe – with the main focus being China, but with significant consumption in the likes of Hong Kong, Taiwan, Singapore, Malaysia, and even Vietnam. There are in the order of 28 species of commercial importance, almost all of which are traded in a dried form. For consumption, the dried sea cucumbers are re-hydrated and added as thin slices to a wide range of relatively common dishes. Though protein rich, sea cucumbers are viewed less as a food item than as a health tonic.

Hong Kong is the main entrepôt for dried sea cucumber, with the larger proportion of product imported from South Pacific island countries. Prices vary according to species, size and quality, with key determinants being the size increase achieved during re-hydration, texture, and taste. Some cold water species form the basis of a relatively small live trade serving demand in northern China, South Korea and Japan. Overall internationally traded volume amounts to some several thousand tonnes, dry weight.

In terms of sea cucumber aquaculture, the technology is being lead by the Chinese who can now manage seed production and culture of the Prickly fish, Apostichopus japonicus, which is cultured in the northern provinces of Liaoning and Shandong. This tends to be distributed live or fresh, is more of a temperate water species, and commands a premium price locally. It is considered by some, at least, that in the near future it will become feasible to culture other species. On this basis, it can be argued that product of farmed origin will play an increasingly important part in the market. But care needs to be taken about the economics of production relative to market value. Table 7 below, taken from the Infofish Trade News of May 2005, shows the spread of prices for fresh and dried sea cucumber. The price spread is broad. If availability of any one species were to be increased through aquaculture, the most likely consequence is that prices will fall.

Table 7 - indicative market prices for fresh and dried sea cucumber – 16th May 2005

Product formIndicative

price Price reference OriginTrade names / fish species & grading in us$/kg & market area Japanese prickly fish (cold water) fresh 190 wholesale China China

Chinese Liaofish (farmed) - Apostichopus japonicus fresh 100 wholesale China ChinaSandfish, Grade A - Holothuria scabra 10-30 pc/kg 66 c&f SE Asia Australia 15-40 pc/kg 60 c&f SE Asia IndonesiaWhite teatfish, skin-on - Thelenota ananas 3-5 pc/kg (A) 40 c&f SE Asia South Pacific 4-8 pc/kg (B) 30 Black teatfish - Holothuria nobilis 4-9 pc/kg (A) 28 c&f SE Asia South Pacific (B) 20 Greenfish - Stichopus chloronotus 50-200 pc/kg 28 c&f SE Asia South PacificPrickly Redfish - Thelenota ananas 6-20 pc/kg 25 c&f SE Asia South PacificStonefish 10-30 pc/kg 22 c&f SE Asia South PacificCurryfish - Stichopus variegates 20 c&f SE Asia South PacificSurf Redfish - Actinopyga mauritiana 15-35 pc/kg 16 c&f SE Asia South PacificTigerfish - Bohadschia argus 20-50 pc/kg 10 c&f SE Asia South PacificElephant Trunk 3-8 pc/kg 10 c&f SE Asia South PacificBrown Sandfish - Bohadschia marmorata 25-100 pc/kg 8 c&f SE Asia South PacificLollyfish 3 c&f SE Asia South PacificSource: Infofish Trade News

6.3 Live products

6.3.1 High value live product – finfish

Of the species cultivated in Vietnam, China is by far the most relevant and important market. FAO figures for imports of live fish into Hong Kong in 2003 suggest annual traffic of some 30,000 t, and that into Macao of a further 6,000 t. It can be assumed that other product enters directly into mainland China. A recent article4 in the magazine “Infofish International” indicated the following marine finfish aquaculture production for the four leading Asian producers:

China – 1,010,000 cages producing 519,157 t (2003);

Malaysia – 68,403 cages producing 7,759 t (2003) (though authors suggest this may be a third of actual production)

Thailand – 15,985 cages producing 9,018 t (2000)

Vietnam – 18,000 cages producing 2,626 t (2003)

Indonesia – 5,145 cages producing 1,286 t (2003)

A wide range of typically tropical reef species make up the bulk of this trade, with a predominance of groupers and snappers. Table * shows the range of species being traded, along with some indicative market prices. Hong Kong is a signficant entry point for live fish into China, and Huangsha, just up the Pearl River in Guangzhou, is the largest equivalent market place in mainland China. It is the prices from these two markets that are shown in Table 8.

Table 8 - Average live fish market prices, US$/kg – 11th to 17th May 2005, Huangsa & Kong Kong markets,

English Name : Scientific Name : Huangsha Hong KongHumphead wrasse; Napoleon wrasse; Humphead maori wrasse Cheilinus undulatus US$ 87.66Humpback grouper; Barramundi cod; Mouse grouper Cromileptes altivelis US$ 87.66Coral trout; Leopard coral grouper Plectropomus leopardus US$ 48.70 $31.05

4 Cage culture of marine finfish – better returns with formulated feeds – C Orachunwong, S Thammasart & C Lohawatanakul, INFOFISH Magazine 4/2005

Spotted coral grouper; Barred-cheek coral trout Plectropomus maculatus US$ 36.52Red grouper; Hong Kong grouper Epinephelus akaara US$ 31.65 $35.86Camouflage grouper Epinephelus polyphekadion US$ 30.44 $22.87Reef stonefish Synanceia verrucosa US$ 29.22Yellow grouper Epinephelus awoara US$ 21.91Squaretail coral grouper; Squaretail coral trout Plectropomus areolatus US$ 21.91Potato cod Epinephelus tukula US$ 19.48Sand bass; Glass-eyed perch Psammoperca waigiensis US$ 17.04Tiger grouper; Brawn marbled grouper; Flowery cod Epinephelus fuscoguttatus $16.50Blackspot tuskfish Choerodon schoenleinii US$ 14.61Giant grouper; Queensland grouper Epinephelus lanceolatus US$ 14.61Areolate grouper; Brown-spotted grouper Epinephelus areolatus $14.09Duskytail grouper Epinephelus bleekeri US$ 12.66Spotted silver scat Scatophagus argus US$ 12.17Orange-spotted grouper; Estuary cod Epinephelus coioides US$ 11.69 $12.52Yellowfin seabream Acanthopagrus latus $10.38White-blotched grouper Epinephelus multinotatus US$ 6.33Seabass; Barramundi Lates calcarifer US$ 5.36Pompano Trachinotus blochii $5.79Russell's snapper Lutjanus russellii $5.45Mangrove snapper Lutjanus argentimaculatus $5.39Painted sweetlip Diagramma pictum $5.28Gold-lined seabream Sparus sarba $5.19Red snapper; Malabar blood snapper Lutjanus malabaricus $4.96Head grunt; Grunter bream Pomadasys kaakan $4.91Emperor red snapper; Red emperor Lutjanus sebae US$ 4.87White spotted rabbit fish Siganus oramin $4.57

Fish is flown into Hong Kong on a daily basis from such locations as South Africa, Australia, Philippines, Indonesia and Malaysia. Additional supplies are delivered directly to the markets by live fish carrier vessels, transporting fish from SE Asian countries, including Vietnam, Taiwan, Malaysia, Indonesia, etc.. These join the flow of live fish from Chinese producers.

But live fish can be found for sale in markets, supermarkets and restaurants all along the Chinese seaboard, and further inland. This trade is supplied not just through Hong Kong and Huangsha, but through a network of other entry ports, wholesale markets and distribution networks right across China. This is big business, but operated by generally small and medium sized enterprises that have the skills, management systems and attention to detail needed to ensure that fish remain alive. Such enterprises handle all types of live seafood – live finfish, crabs, lobsters, shrimp, gastropods and bivalves. Because the industry is made up of predominantly small business units it can be difficult to fully guage the scale of this business, but it is no exageration that at least one in every two middle and upper level restaurants in China is able to offer customers the opportunity to chose their dish from a live display. And as the Chinese economy grows, so too does expenditure in restaurants, local produce markets, and supermarkets. Demand for product is likely to increase steadily in the years to come.

Vietnam is particularly well placed to supply this market, given its geographic proximity, and the wide range of parallels between the coastal conditions, aquaculture technologies, and trading systems between Vietnam and southern China. But if Vietnam is to successfully establish itself as a preferred trading partner in this particular business area, then it will have to develop trading and distribution infrastructures and standards that can consistently handle the volume of product that this market demands, and can accommodate significant year on year growth. This is an area where businesses need to work together, and where public support and facilitation will be needed. At present the industry is located more in the informal than the formal sector, and remains reliant on direct connections with the trade in the likes of Hong Kong. This is not a sufficient basis on which to grow future trade, particularly when it is likely that an increasing proportion of product will be shipped

directly into mainland China - by seaport and into regional airports. At present, many traders would prefer to take prime product flown in daily from Australia than product shipped periodically by live transporter from Vietnam. The Vietnam industry needs to build up the necessary organisational systems to reverse this type of preference.

6.3.2 High value live product – crab

Mangrove and swimming crab are well-established delicacies in Asian cuisine, forming the basis of a wide range of local dishes. Typically it is the live crab that is used as the core ingredient in such dishes, with the animal dispatched immediately prior to cooking.

Most local production in Asian countries finds its way to local consumers through the markets, supermarkets and restaurants. But there is also a lively regional trade in live crabs, with China being the largest regional importer. Vietnam already serves this market, with live mangrove and swimming crab shipped into southern China by road. Indeed some product is flown from HCMC to Hanoi for onward distribution by road.

The characteristics of demand in China are similar to those for live finfish, and the trade and distribution systems are much the same. As a less expensive product, however, live crab is accessible through corner cafes and street eateries, as well as through markets, supermarkets and higher priced restaurants.

6.3.3 High value live product – Babylonia

Babylonia, a marine snail with an attractive and distinctive mottled shell colouring (a little like leopard skin) is a popular food item in Vietnam and China, typically presented live – whether in street and fresh produce markets, supermarkets, small cafes, or low to middle ranking restaurants. It is sold alongside other live snails and bivalves, but commands a higher price than most of these other products (several dollars a kg ex farm). It can be reasonably argued that this product is positioned in the market at the upper end of the broad category of small live molluscs, and is popular as a special treat amongst low and middle income households. Accordingly, it is subject to strong demand pressure and reasonably stable prices, but the volume traded can be adversely affected by downturns in the economy (but as the economy strengthens, so too will the demand for this product).

At present Babylonia is shipped by road from Vietnam into southern China, with supplies originating from both capture and culture sources. Because of the wide popular appeal of this product, its trade is not as centralised as, say, lobster or live fish, but instead small volumes are dispersed to large and small towns across China. This distribution pattern lends itself well to the more informal trade structure typical of the seafood industry in northern Vietnam. Further, if Vietnam can cultivate Babylonia, so too can China. If Vietnam is to grow this trade, it will need to stay the right side of disease and water quality / marine environment management. But it is probable that this market can absorb steady increases in production from both Chinese and Vietnamese sources. What the Vietnam industry has to work on is ensuring that its current trade and transport structures continue to meet the requirements of the market at substantially higher volumes.

At present little attention is given to this valuable trade – with next to no information available on export volume and value, or on the key parameters of domestic or export markets. At the most conservative of estimates, every year several thousand tonnes of this product are shipped across the northern Vietnamese border into China. Even as a relatively minor trade, this product supports revenues of several million dollars a year – directed to relatively poor coastal producers. Accordingly, some more focused research should be undertaken into the production, distribution, marketing and characterictics of demand as a matter of urgency.

6.3.4 Lower value live product – miscellaneous clams & cockles

As with Babylonia, a range of live bivalves serve popular retail and catering markets, both within Vietnam and in neighbouring countries. Product is harvested from wild and husbanded sources, and shipped to market by road. Because of the preference for live product, shipment distances tend to be relatively short, and so non-domestic supply is mainly to Cambodia, Thailand and China. Most of this trade is managed by relatively small businesses – in line with the tight harvesting, trade and distribution management needed to ensure that product arrives at its destination alive and in good health.

Product from the harvesting grounds is supplied to local traders who then have the option to supply to the processors for production of frozen and cooked products for local and export sale, or to supply live product direct or through specialist wholesalers to domestic and export live produce markets. Whilst trade in frozen in-shell product is currently small, this is an attractive export product and sales could grown substantially in the short to medium terms. Cooked meat products tend to attract relatively low export prices, whether supplied to Asian or wider markets, and thus probably do not provide an attractive alternative to live and in-shell markets. For example, product that does not meet the high standards required for in-shell product is typically channelled to a cooked meat product, as is product that can be purchased under glut (rock bottom price) conditions.

7 An overview of the domestic seafood market

8 Future information requirements

8.1 Focusing on adaptable goal oriented research

The above assessment of the relative position of the Vietnamese marine and brackishwater aquaculture industry in relation to international and domestic market trends, competitive forces and identified market opportunities is instructive. The assessment provides a useful format for future assessment and compilation of information to allow for strategic analysis. But it has also demonstrated where necessary data is absent, and where available data is inadequate to the task of strategic planning. Further, it exposes areas where the level of detail at which information is collected needs to be improved.

Overall, provincial and national aquaculture / fisheries / food supply planners still apply a production and technology driven focus to information gathering, and display strong resistance to underaking serious study of post harvest and supply chain systems and examination of the commercial dimensions of the trade. At provincial level it is evident that rather more focused planning is undertaken in terms of extending aquaculture production planning along the supply chain to retail markets, processors and export – planning is rather more “joined up” than is evident at a national level. But it is because aquaculture planning issues – in matters of technology, scale and economics – extend well beyond provincial boundaries, and need to reflect an international context, that the national dimension is so important.

There is certainly a need to support and improve the strategic aquaculture planning skills of provincial authorities, but this can only be achieved by the greater competence and knowledge of national level institutions and infrastructures – a situation that is not currently evident. But it is also necessary for national level planning institutions to collate and utilise the considerable data sets that are already collected by provincial authorities, to understand the strengths and weaknesses of such data, and to undertake corrobarative work (where appropriate) in order to prove the strength of such data.

Undertaking periodic, short-duration, and formulaic field surveys is not the way to corroborate such data. Indeed it has been repeatedly demonstrated to present false images of the industry where the implications of the data being collected are not being concurrently checked against the hypothesis being examined in the field work. Collecting data by rote as a means of explaining how something works – for example, collating production parameters such as costs, growth rates, seed quality, etc., has little value unless it serves to firm up our understanding of the variability of the production systems being used, and to identify patterns and trends that investigators can have confidence in.

Far better to identify the key relationships in the production processes, and then to explore these relionships, focusing on those areas where our understanding is weakest, or where the implications of preliminary findings are at odds with the logic of how the system works. This requires a more knowledgeable, skilled and confident research approach, but provides a much more cost-effective means of informing planning – particularly at a high, national, planning level. It also requires there to be a real wish to know and understand how the systems work, to be inquisitive – an imperative that is not in geat evidence at present. This situation is not unusual – far easier to collect information against simple sets of checklists, than to take the risks associated with following lines of research that can only be determined by analysis of the last bit of information collected. But unfortunately most reports based on field work are of the former variety, and do little to improve our understanding of the systems and processes involved. In the area of markets and marketing, the surveys undertaken to support the 2003 FAO investigation of the Vietnamese domestic fish market is one such example. Another is work currently being undertaken into the marketing of freshwater fish and plants in the urban markets of HCMC and Hanoi. Whilst both studies do provide some, though not usually sufficient, quantitative information on the trade structure and throughputs, they fall short of explaining the underlying dynamics of the system, and the nature of its key drivers. And they fail to provide sufficient information to allow planners to predict how these systems might change in the near future.

During the course of this study workshops and in-field training have been held to attempt to re-orientate the nature of how such research work is undertaken and reported on. But these attempts have shown little positive take-up by SUMA and VIFEP researchers, with field work being conducted along "traditional" questionnaire or checklist lines, and failing to generate the increaesed knowledge of how these systems work that are both needed, and would otherwise be expected of such work. Researchers continue to be insufficiently inquisitive, insufficiently rigorous in testing the "sense" of the information that is being collected, and unable to assess the effectiveness of their work. Again, it should be stressed that the methods being employed by these researchers are those that have been hitherto promoted within the Vietnamese research community, and that what has been asked of these researchers within this study and by the international consultants is a departure from what would otherwise be considered normal. But, the outputs of such research fail to adequately inform the strategic planning process, are expensive, and can be substantially improved in quality without expending any further effort or costs, but by simply applying a revised methodology and developing more inquisitive skills. It is essential that continued effort is applied - through training, practice, and possibly practical attachment to strategic planning teams outside Vietnam - to bring about a fundamental shift in how this sort of planning research is undertaken.

8.2 Data requirements for improved supply / demand analysis

There remains some confusion as to what is meant by supply / demand analysis in the context of the strategic planning requirements in aquaculture production and domestic consumption - with some at least expecting such analysis to yield econometric models capable of predicting farm gate and market prices for a variety of species. This is unrealistic, and once again a reflection of a mind-set that assumes that the prediction of how highly complex and dynamic systems might develop in future can be reduced to some simple cause and effect relationships. Take for example the domestic consumption of shrimp.

On the basis of our relatively superficial knowledge of the domestic market for shrimp, we can say with some confidence that demand for shrimp will strengthen, that consumers will demand access to a quality of shrimp at least as good as that forming the core of the export industry, and that some elements of the market - and particularly the high-end restaurant and hotel trade - will be prepared to pay a price premium for consistent supplies of high grade fresh and frozen shrimp. In general the average price that the domestic market will be prepared to pay for fresh and frozen shrimp will move closer to international prices (which will typically mean an increase over present prices), but that international prices will, over time, tend to fall as large producers achieve further reduction in production costs. This is a lot of information, provides an excellent basis for strategic planning, and can be said with great confidence. But to extend this analysis in greater detail cannot currently be achieved, because we lack the most basic understanding of how the shrimp supply chain and market works - we neither have the information nor the understanding to exend this analysis further. In this regard we are years away from a time when we could develop any realistic econometric analysis of this sector - and it remains questionable if such analysis would actually assist planning at the current state of development of this market.

So below we focus on identifying the data that will allow us to undertake analysis of production, supply chains, market preferences, demand and price that will assist in strategic planning.