Assessment of the key actors influencing the

links of pangasius supply chain for Small and

Medium Size Enterprises (SMEs)

Activity Code: VN097601

January, 2015

1 | P a g e

Assessment of the key actors

influencing the links of pangasius

supply chain for Small and

Medium Size Enterprises (SMEs)

Vo Nam Son (Ph.D.) and Dang Minh Man (M.Sc.)

Vo Nam Son, ph.D, lecturer

Coastal Aquaculture Dept. - College of Aquaculture & Fisheries

Can Tho University, Vietnam

Dang Minh Man, M.S.c, program officer

Rural Development Research Center

An Giang University, Vietnam

2 | P a g e

3 | P a g e

Table of Contents

Table of Contents ....................................................................................................................... 3

List of Abbreviations and Acronyms ........................................................................................... 4

1. Background ......................................................................................................................... 6

1.1 Overview --------------------------------------------------------------------------------------------------- 6

1.2 Problem statement--------------------------------------------------------------------------------------- 7

1.3 Objectives------------------------------------------------------------------------------------------------ 10

2. Methodology ......................................................................................................................11

2.1 Desk Study: --------------------------------------------------------------------------------------------- 11

2.2 In-depth interview -------------------------------------------------------------------------------------- 12

2.3 Focus Group Meeting --------------------------------------------------------------------------------- 13

3. Findings .............................................................................................................................15

3.1 Pangasius Supply chain ------------------------------------------------------------------------------ 15

3.2 Key actors ----------------------------------------------------------------------------------------------- 23

3.3 Roles & Influences ------------------------------------------------------------------------------------- 30

3.4 Links and cooperation -------------------------------------------------------------------------------- 36

3.5 Gaps and difficulties ----------------------------------------------------------------------------------- 37

3.6 Challenges----------------------------------------------------------------------------------------------- 40

3.7 Solutions ------------------------------------------------------------------------------------------------- 45

4. Conclusion ............................................................................... Error! Bookmark not defined.

References ...............................................................................................................................49

Annex 1. Interview Questionnaire .............................................................................................51

Annex 2. Presentation at Focus Group Meeting ........................................................................56

Annex 3. List of Interviewers .....................................................................................................69

4 | P a g e

List of Abbreviations and Acronyms

ASC Aquaculture Stewardship Council

BAP Better Aquaculture Practice

BV Bureau Veritas

CITES Convention on International Trade in Endangered Species

CTU Can Tho University

CFA Catfish Farmers of America

DANIDA Danish International Development Agency

DARD Departments of Agriculture and Rural Development

D-Fish Directorate of Fisheries

EDF Environmental Defense Fund

eFCR Economic Feed Conversion Ratio

EU European Union

FAO Food and Agriculture Organization of the United Nations

FDA Food and Drug Administration

MOH Ministry of Health

EFSA European Food Safety Authority

FCR Feed Conversion Ratio

FDI Foreign Direct Investment

FFER Fish Feed Equivalence Ratio

FMI Food Marketing Institute

GAA Global Aquaculture Alliance

GMO Genetically Modified Organism

ICAFIS International Collaborating Centre for Aquaculture and Fisheries

Sustainability IDH Dutch Sustainable Trade Initiative

IFFO International Fishmeal and Fish Oil Organization

IMO Institute of Marketecology

5 | P a g e

ISEAL International Social and Environmental Accreditation and Labeling

Alliance IUCN International Union for Conservation of Nature

LCA Life Cycle Assessment

MARD Ministry of Agriculture and Rural Development

MSC Marine Stewardship Council

MT Metric Tonne

NAFIQAD National Agro‐forestry‐Fisheries Quality Assurance Department

NGO Non-Governmental Organization

PAD Pangasius Aquaculture Dialogue

PPC Provincial People’s Committee

PPP Public Private Partnership

PPT Parts Per Thousand

P-SIA Participatory Social Impact Assessment

R&D Research and Development

RIA-2 Research Institute of Aquaculture No. 2

US United States

USD United States Dollar

VASEP Vietnam Association of Seafood Exporters and Producers

VINAFIS

Vietnam Fishery Society

VND Vietnam Dong

WWF World Wildlife Fund

6 | P a g e

1. Background

1.1 Overview

Vietnamese pangasius industry is a unique successful story of aquaculture. Over

decades, the production has expanded fifty folds (WWF, 2012). Vietnam

currently accounts 90% of global pangasius export, and is exporting to 145

countries and territories worldwide. Back in the past, pangasius bocourti (called

“basa” in Vietnamese) was caught from the wild and consumed domestically only.

In the 60’s, it was initiated to be farmed in cages. This practice was later replaced

by the more tolerant air-breathing pangasianodon hypophthalmus (called “tra” in

Vietnames), which is primarily farmed in pond. Tra’s ability to cope with high

stocking densities and the higher economic efficiency of ponds versus cages,

and less fat than basa made it increasingly the fish of reference. The artificial

breeding technology, which was developed in the 90s led to the proliferation of

hatcheries and to the development of the industry. Moreover, in 1986, Vietnam

launched a political and economic renewal campaign (called “Doi-Moi” in

Vietnamese) that introduces reforms intended to facilitate the transition from a

centrally planned economy to form of market socialism. This is a turning point

that led to the impressive economic development of Vietnam in later decades.

Many seafood processors have been established. The industry has shifted from

7 | P a g e

small scale to medium and large scale. The structure, cooperation and influences

of actors involved in the supply chain have become more complicated than ever.

1.2 Problem statement

In the past five years, the industry has been experiencing decline of production.

The reasons are given to high production cost, low profit margin per kg

pangasius produced, technical barrier from imported market, and reduced loans

available to farmers. However there are still several unclear reasons related to

supply chain management. Production comes from independent pangasius

producers has decreased rapidly. At present, apparently, there are very few

small-scale and independent pangasius producers still operating (Le Chi Binh,

chairman of An Giang Fisheries Association, pers.comm. 2014). With regard to

Small and Medium Size Enterprises (SMEs), they are facing many difficulties.

The links between SMEs and other players in the value chain are weak. And

there have few efforts in identifying key actors that have influences to the value

chain. Therefore it is important to identify, analysis and assess these actors. And,

based on that, to figure out and propose a set of solutions to strengthen the

supply chain.

Though the production chain of Pangasius is quite clear, but there are still some

obstacles in the links among actors in the supply chain. Pangasius producers in

Vietnam are mainly divided into two types: 1) independent (small scale) farms

8 | P a g e

which are run by family holders; and 2) large scale farms run by legalized

companies and cooperatives.

However, there will be different actors who play different roles to support the final

products. The pangasius supply chain can simply be defined as bellows:

Figure 1: Pangasius Supply Chain – SUPA project, 2013

Supply chain is one of the very important process to better manage and promote

the products, for the pangasius sector, the links in the supply chain are very

much dependent on the cooperation and relationship, the factors that may result

the decisions of business operation. Generally, supply chain in Pangasius sector

is complicated and different cooperation among the actors, therefore, in order to

understand its issues, and to propose solutions to strengthen it, the team focuses

on the assessments:

9 | P a g e

1. Complexity of supply chain: Serving many different customers with a

wide variety of products and services may result in a complex, global,

network of suppliers, producers, warehouses, transporters, services,

customers and others. The complexity of such a network is hard to unravel

and makes it difficult to find where and why problems occur.

2. Cooperation among supply chain: Different actors will have different

view in working towards their needs and customers, therefore, the

cooperation among the actors is sometimes a problem when each will

focus on their benefits and priority.

3. Who are the key actors in the supply chain? The full supply chain will

include many different actors whose roles are different as well, it is very

crucial to identify the key actors who can play very important role in

influence of the supply chain.

4. How supply chain is managed? The supply chain management is an all-

encompassing process as it undertakes the management of availability of

raw materials, their processing into finished products and the distributions

of these products to the customers. The aim of all this is to provide the

highest level of satisfaction to the customer, thus increasing the business

of the company. So how it is managed that is always a question to address,

then the assessment will have to focus on this issue.

10 | P a g e

1.3 Objectives

The objective of this study is to conduct an assessment of the key-actors

influencing the links of pangasius supply chain for Small and Medium Size

Enterprises (SMEs) in Mekong delta, Vietnam. In order to answer the following

research questions:

1. Who are the key actors in the supply chain? This question is

answered through the analysis and meetings with different stakeholders

to identify their roles in each chain of production and services and how

they influence the whole supply chain, which allow to identify who are

the key actors.

2. What are the gaps in the supply chain? This question is answered by

review and analysis on the strength and weakness of each actor in the

chain.

3. Which competencies and capabilities are required for supply chain

integration in order to increase supply chain performance? This is

answered in two steps: 1) identify and structure competencies and

capabilities; 2) assess the structure and influence that pangasius supply

chain framework towards an adequate integration.

4. What are the solutions for better integration of a sustainable supply

11 | P a g e

chain? This question is answered throughout a whole connection of

analysis to the final report, which will provide an assessment of key

actors in the supply chain.

2. Methodology

2.1 Desk Study:

Many studies and research on the pangasius value chain have been conducted.

Each of them has different objectives and view from different angles. The team

reviewed existing literature papers, reports, and statistic data (Reference), in

order to examine past history, and to describe the current pangasius supply

chain more comprehensively, updated, and further, to identify its actors and

cooperation among them. Subsequently, based on the finding to outline work

plan of the assessment (Table 1). Next to that, a set of questionnaires (Annex 1)

and meeting’s contents (including objectives, expected findings, discussion

methods, etc.) were developed. This preliminary outcome was consulted with

12 | P a g e

WWF aquaculture team. The outcome of desk study is presented in following

parts of this report.

Table 1. Work-plan

No. Activity NOV DEC JAN

W3 W4 W1 W2 W3 W4 W1 W2 W3 W4

1 Desk study

2 Consulting with WWF

aquaculture team

3 Data collection/ interview

4 Meeting with stakeholders

5 Data analysis/draft report

6 Finalize reporting

2.2 In-depth interview

In-depth interview is a qualitative method of analysis, which proceeds as a

confidential and secure conversation between an interviewer and a respondent.

By means of a thorough composed interview guide, which is approved by the

interviewee, the interviewer ensures that the conversation encompasses the

topics that are crucial to ask for the sake of the purpose and the issue of the

survey.

In-depth interview is an effective method to investigate issues of the supply chain,

because it helps to gain an insight into individual evaluations of specific materials

or matters. The team, in consultation with WWF-VN aquaculture team identified

key actors to conduct in-depth interview (Annex 3). The work were carried out

13 | P a g e

from November, 2014 to January, 2015. In each interview, member of the team,

based on the questionnaire, gave the respondent open-ended question, semi-

instructed question and directed explanation. The outcome of this work was

analyzed and consolidated, and presented at the consultation meeting.

2.3 Focus Group Meeting

The objective of this focus group meeting is to investigate and assess the

common issues among the stakeholders, and their common understanding on

those issues. The meeting was hold with the participation of key actors in the

supply chain (Annex 2) to identify their influences and how they contribute to

strengthen their cooperation. At this meeting, stakeholders are facilitated to raise

the issues and understanding about key actors and influencers in the pangasius

supply chain. A preliminary outcome of the work was presented.

The outcome of this meeting was later consolidated with the preliminary outcome

of the team.

Figure 1. Presentation of Group I

14 | P a g e

Figure 2. Presentation of Group II

15 | P a g e

3. Findings

3.1 Pangasius Supply chain

The Mekong Delta region is the hub of Pangasius farming (Fig. 2), of which Dong

Thap and An Giang are the two provinces that have highest volume (AFA, 2015).

At the beginning, it was farmed only in freshwater areas, although at present,

pangasius aquaculture has expanded also to low salinity brackish water areas,

and provinces such as Ben Tre (famous also for the farming of shrimp) are

becoming major players in Pangasius production.

Figure 3. The Mekong Delta Region

16 | P a g e

In view of the dynamic nature of the sector, the stakeholders involved have

changed considerably over the years. There are more stakeholders involved

such as feed manufactures, materials suppliers, traders and media. From a

sector dominated by cage farmers, Pangasius farming is now almost entirely

conducted in ponds. Similarly, the sector has seen a shift from being driven by

small-scale independent farmers to being largely dominated by large scale

companies. The value chain is therefore is seen differently throughout the time.

For example, figure 4 presents the value chain in view of supply chain

management, whereas the author outlined almost actors engaged. However,

17 | P a g e

actors such as media, international donors which are recently active in the

industry are not included. On the other hand, figure 5 presents the value chain in

view of the physical flow of products throughout process of production, with the

facilitating actors. Actors that have strong influence such as international buyers,

traders, retailers in export market are not included.

In order to describe all the actors engaged in the supply chain, and to be able to

identify the cooperation among them, the team has outlined the Pangasius

supply chain whereas actors are viewed in the context of social-economic

environment, and import-export environment (Figure 6). Thus, it is able to

visualize several issues of the industry such as technical barrier, trade barrier,

multi & bilateral trade agreement, and media in this context.

Figure 4. Pangasius Value Chain in the Mekong River Delta, Vietnam (Le, 2007)

18 | P a g e

Figure 5. Pangasius Value Chain in Vietnam (Loc, 2009)

19 | P a g e

Actors in the supply chain:

IS: Inputs suppliers PM: Policy Maker

T/D: Traders/Distributors BSO: Business Support Organization

G: Grow-outers A: Associations

P: Processors R/C: Research/ Consultant

T/B: Traders/ Buyers M-VN: Vietnamese Media

AO: Administrative

organizations

NGO: NGOs & Donors

C: Consumers Tech: Technical influence groups

AG: Affected groups I-R/C: International Research/

Consultant

I-M: International media

There are three key drivers that strongly affect the Pangasius industry,

namely economics, social, and environment. In the paragraphs below

outline some of the issues that the Pangasius industry is currently

facing.

Economics

The economics of Vietnam in the last few years has not been as

strong as it was in the last decades. Growth rate is fluctuated from 4-

6% while inflation is from 5-6% (The World Bank, 2015). Weak currency is

considered as an advantage for exportation, but in the meantime, Vietnam

Fig

ure

6. T

he V

ietn

am

Pan

gasiu

s S

upply

chain

20 | P a g e

imports almost ingredients for feed production. Local enterprises are facing many

difficulties such as lack of available financial resource, complicated administrative

procedures, weak management skills, etc., meanwhile there is a raising

competitiveness from FDI enterprises, foreigner enterprises and other countries.

In view of the industry, from backyard ponds and cages to pens, then into ponds,

the farming practices has changed rapidly. The investment for reproduction is

very different, it is much higher than before. Meanwhile available loans for

Pangasius producers is arguably limited. Subsequently, only large scale

producers which have strong financial capacity are able maintain and stabilize

their production, while small scale producers could not reach financial resource

to reproduction. It leads to the industry is now dominated by large size producers.

Besides, the low profits is one of the driver lead to further restructuring, with

vertically integrated enterprises. Individual small scale Pangasius producers are

now accounting less than 10% of total production (Le Chi Binh, chairman of An

Giang Fisheries Association, pers.comm. 2014), and surviving only through the

establishment of cooperatives and establishing long-term contractual

arrangements with processing plants.

In view of trade and exportation, marketwise the sector moved from domestic

consumption to exporting primarily to the U.S. to having an extremely diverse

market portfolio. There is a raising demand from export markets on technical and

21 | P a g e

social issues, and also trade barrier such as tax, anti-dumping law, etc., which

subsequently resulted in increasing costs of production. The global economics

also affects considerably on the industry, for example the weak growth of E.U

economics leads to the weak demand of products from that region.

As a result, actors that associated with economics aspect in the supply chain will

have impacts on it. In following parts of this report, the role and influence, as well

as cooperation among them will be presented.

Social

There are several concerns of social issues of the industry that gained attention

from NGOs, media such as low paid labor, child labor, negative impacts to

people, agriculture farmers living around Pangasius ponds, etc. In fact, the

average wage of employee who works in Pangasius farms in the Mekong Delta is

considerable higher than the minimum wage, regulated by the government.

There are six seafood companies certified to the Social Accountability

International SA-8000 standards as following Bien Dong Seafood Co., Ltd., Can

Tho Import Export Seafood Joint Stock Company, Hoang Long Seafood

Processing, NTSF Seafood Joint Stock Company, Vietnam Fish – One Co., Ltd.,

Vinh Quang Fisheries Corporation (Social Accountability Accreditation Service,

2015). These are hazardous jobs and more can be done to improve health and

safety, but things are gradually improving. Relations between farmers and local

22 | P a g e

communities have been poorly investigated. Some local communities have

sometimes expressed concerns about the negative impact of Pangasius farms

on aquatic resources. These however seem to be relatively less important.

The actors that want to address social issues are raising their influence on the

supply chain towards sustainability. For example, strengthening corporate social

responsibility and community development.

Environment

From an environmental point of view, pangasius production has gradually

improved; however there are still environmental issues associated with the

industry such as sludge disposal, water use, feed and feeding efficiency, habitat

conversion, etc. Aquaculture standards, such as GlobalGAP, ASC, BAP,

VietGAP have been applied widely, as a demand from buyers and traders, target

to address those issues. This led to the raising influence of associated

organizations on the industry such as local NGOs, certified bodies, standards

management organization etc. In order to be certified, producers have to upgrade

their farming practices, infrastructures, and invest for community development,

this is resulted in increasing cost of production.

The government will likely mandate the national standard VietGAP for all

pangasius producers in coming years. This will be a challenge for small scale

farmers, who are lack of technical capacity.

23 | P a g e

A part from state management organizations, NGOs such as IUCN, WWF, SNV,

Oxfam, etc. are also playing an active role in supporting the industry towards

sustainability through development programs, public private partnership

programs.

3.2 Key actors

The Pangasius supply chain is complicated because of number of the

stakeholders engaged and the cooperation among them. The stakeholders in the

supply chain is grouped and listed as bellows, of which the team describe briefly

about their function and role. The roles and influences of key actors are outlined

in details in following part of this report.

I. Inputs suppliers and pre-production producers

Feed manufactures

Seed production establishments

Medicine, veterinary chemicals manufactures

Farming equipment manufactures

Inputs suppliers provide materials for main producers such as feed, seed,

medicine, chemicals, equipment, etc. They either supply directly to main

producers or indirectly through distributors. While feed and seed are produced

locally, medicine and chemicals are mostly imported. Regarding feed, many

ingredients such as soya bean, corn, and bone and meat powder are imported.

24 | P a g e

The quality of products, as well as performance of farming, depend a lot on

quality of inputs.

II. Main producers

A. Independent producers

Individual small scale farmers

Medium and large size grow-outers

Processing plants

By-products processing plants (fish oil, fish meal)

In this report, main producers are classified into two group, independent

producers and producers with vertical integrate system. At the beginning,

independent producers were dominant in the industry. However, recently,

producers with vertical integrated system are becoming dominant.

B. Producers with vertical integrated system

Processing plants own grow-out ponds

Processing plants own grow-out ponds and involved in producing

seed or feed

Processing plants own grow-out ponds and involved in producing

seed or feed, and trading

At present, there are many processors who have their own grow-out ponds. It is

firstly to reduce production cost, but more importantly to ensure their supply

demand (normally over 50% of their processing capacity). However they are still

buying Pangasius from independent grow-outers to meet their demand. There

25 | P a g e

are also some processing plants that also producing feed, seed and involved in

trading activities.

III. Traders, Suppliers

A. Domestic market

Ingredients and commodities trading companies for feed

manufactures

Seed distributors/ suppliers

Feed distributors/ suppliers

Medicine, veterinary chemicals, farming equipment distributors/

suppliers

By-products traders/ collectors

Fish collectors

Domestic retailers

Domestic markets and supper-markets

Traders and suppliers in domestic market distribute inputs of inputs producers

and collect products for pre-production producers and main producers. They are

not directly involved in production. Traders and suppliers also provide inputs for

main producers with flexible payment time. Meanwhile they can accept more

strictly payment time from inputs producers. Pangasius products are either

exported or consumed domestically. At present, domestic market accounts less

than 10% of total production; however domestic retailers and supper-markets are

raising their demand. The consumers are more interested in Pangasius products.

B. Export market

26 | P a g e

Vietnamese/ international buyers and traders

Distributors/ Retailers

Supper-markets

Almost processing plants are exporting to global market through international

traders and buyers. The products then distributed in export markets through

distributors, retailers and supper markets. Due to the weak capability in

marketing and distribution in export markets, the price of the products are usually

set by international traders and buyers.

IV. Consumers

Domestic consumers

Consumers in export markets

At present, the awareness of both domestic consumers and consumers at export

markets are raised, thanks to the media, NGOs. Consumers are advised to

choose products with labels, and certified.

V. Media and communication

Vietnamese media and communication channels

International media and communication channels

Both of international media and Vietnamese media are influencing strongly on

the industry. It gives to end-consumers image of the industry and its development

throughout the years. There is no denying that the media has played a key role in

the “ca tra” war into US market then later EU market. The industry then later

shifted towards certification.

27 | P a g e

VI. Stakeholders affected by Pangasius production

Agriculture farmers, farming around Pangasius ponds

People living around Pangasius ponds

Workers in processing plants

Catfish producers in export markets

Along with other actors, stakeholders which are affected by Pangasius

production such as agriculture farmers, catfish producers in export markets claim

that they have conflicts with Pangasius producers. For example, the Catfish

Farmers of America (CFA) are lobbying to increase tax on Vietnamese catfish

products. This leads to the difficulty in exportation of Vietnamese Pangasius

producers (The Seafood Source, 2010).

VII. Administrative bodies, management institutions and policy makers

Ministry of Rural and Agriculture Development

Ministry of Industry and Trade

Ministry of Natural Resources and Environment

Ministry of Science and Technology

Directorate of Fisheries

Institute of Policy and Strategy for Agriculture and Rural

Development

Public-Private Partnership Programs, Bi-lateral, Multi-lateral Trade

Agreement

National Agro-Forestry-Fisheries Quality Assurance Department

28 | P a g e

Quality Assurance Institution at export markets (Food and Drug

Administration, Ministry of Health, European Food Safety Authority,

etc.)

There are several state organizations involved in managing pangasius farming,

on the aspects such as natural resource management, environmental protection,

and trade and investment management, etc. In export market, actors such as

Food and Drug Administration (FDA), Ministry of Health, and European Food

Safety Authority (EFSA) are strongly affecting on food security regulations. For

example, there are several pangasius producers were reported by MOH of Japan,

that the residue of antibiotic (e.g. Enrofloxacin) was exceed accepted level. As

result, there are more inspections on products before being exported.

VIII. Supporting service providers

Banks

Financial institutions (investment firms, insurance)

Logistic firms

Supporting service providers such as banks, financial institutions provide

financial services for many actors in the supply chain. However, there are only

few services that meet expectation and needs of producers. Producers claim that

the procedure to get loan is complicated and interest rate is not supportive.

IX. Research institutions and consultants

Universities

Aquaculture Research Institutes

29 | P a g e

Market Research firms

Independent consultant/ consultant firms

Independent researchers

X. Organizations that have influence on technical issues

Standards Management Organizations (GlobalGAP, AAC, ASC)

Certificate Bodies

Inspection companies

XI. Associations and Supporting Organizations

Vietnam Association of Seafood Exporters and Producers

Vietnamese Fisheries Society

Vietnam Pangasius Association

Vietnam Farmers’ Union

Vietnam Women’s Union

Local Fisheries Associations

Agifish Pure Pangasius Union

Vietnam Chamber of Commerce and Industry (VCCI)

XII. NGOs, NPOs, international donors

Environmental NGOs (IUCN, WWF, SFP…)

Market Access supported NGOs (SNV, GIZ, IDH…)

Millennium Development Goals supported NGOs (Oxfam, Care,

FAO…)

International donors (EU, World Bank, IFAD, USAID, DANIDA….)

Among above actors, the key actors are identified as follows 1) Feed

manufactures; 2) Producers with vertical integrated system; 3) media; 4) traders

and suppliers;. And 5) Administrative bodies. Those are who hold strong

influences on other actors and the whole supply chain.

30 | P a g e

3.3 Roles & Influences

Feed Manufacture

Traditionally fed using trash fish or (sinking) farm‐made feed, pangasius is now

largely fed with floating commercial feed produced by at least 30 feed

manufacturers. 100% of feed is produced domestically but 80% of raw materials

are imported, the foreign feed manufacturers account 60 – 70% of total

production volume, according to the statistics of MARD (MARD, 2010). Although

relatively more expensive, commercial feed is associated with better feeding

efficiency, better survival and shorter crops. Main feed ingredients are rice

products (bran and broken rice), soybean meal and fish products (oil and meal),

in addition to minerals and vitamins.

Producers with vertical integrated system

Currently there are 290 companies engaged in the processing of pangasius in

Vietnam. Although until few years ago processing capacity was lower than what

the industry required, the steep growth in the number of processing plants has

rapidly led to an over‐capacity situation, with processors often complaining for

operating at half capacity. VASEP, whose members are responsible for

approximately 80% of the seafood exports of Vietnam, has been advocating for

compensating the shortfall with seafood imports, which are now taxed, making

this strategy for the time being uneconomical. Increasingly processing plants

31 | P a g e

have been establishing their own farming operations, benefiting from the fact that

limited amounts of areas are required to produce extremely high volumes of fish.

These farms, which are in average 8-10ha in size with companies having in

some cases tens of farms, however, most often supply only part of the

processing capacity. This process of vertical integration also makes traceability

from farm to plate feasible, as so far this has been hampered largely by the lack

of registration of farming units and the still large number of small‐scale producers.

Media

In the last few years, i.e. after the recent export explosion, pangasius received a

great deal of attention from the media. With the exception of few positive reports

criticizing primarily the US’s attempts to (unethically) keep pangasius products off

the US shelves, most media coverage were “unkind” to the fish and Vietnam to

say the least. Leveraging on consumer’s lack of knowledge on pangasius, most

often the media accused this form of farming of being unsafe and of poor quality.

The relatively poorer hygienic conditions in the Mekong delta region in addition to

a great deal of misleading or inaccurate information were disseminated in an

attempt to discourage consumers from purchasing a fish that, because of its

lower price, was competing with local seafood products. Starting from the US

under pressure from the channel catfish industry and then involving Australia,

several European countries and more recently Germany, these denigrating

32 | P a g e

campaigns had sometime considerable effects on public opinion and pangasius

consumption. It should be pointed out that attacks are almost uniquely towards

“conventional” pangasius aquaculture and, to date, never towards certified

pangasius farming.

Traders and suppliers

Buyers play an incredibly important role in addressing the above sustainability

issues. As the standards developed through the PAD/ASC are the only ones to

be compliant with the International Social and Environmental Accreditation and

Labeling (ISEAL) Alliance, they are arguably the only set of standards that truly

approaches sustainability in a multi-stakeholder manner and not unilaterally. At

present, seafood buyers are increasingly supporting the implementation of

PAD/ASC standards at the farm level. By setting up supply chain “consortia”

buyers work with processing plants and farmers to ensure that farmers comply

with the standards and, based on needs, are assisted (both technically and

financially) by other players in the supply chain to do so.

What the PAD/ASC does not tackle directly is food safety. A decision was taken

not to do so although food safety is indirectly addressed throughout the

standards. Buyers/retailers ensure food safety through the application of their

own standards and quality controls or relying on compliance to bilateral

(government to government) requirements. European buyers have also been

33 | P a g e

requesting their suppliers for GlobalGAP compliant products. Compliance with

GlobalGAP has been estimated to cost approximately an additional USD 10

cents/kg. If the supply chain is willing to pay for the additional cost (even if

GlobalGAP compliance is generally not associated with premium prices),

GlobalGAP compliance can also be sought as part of the consortia arrangements

mentioned above.

Buyers should promote more pangasius‐friendly practices, especially

post‐harvest. In addition, buyers should also initiate efforts to build consumer

awareness of the fish to prevent future media attacks. Particularly in countries

where (whole) fish are often purchased in markets, showing the consumers how

the fish looks like would be a start.

Administrative organization

The government of Vietnam has been playing a very active role in the

development of the Pangasius sector. MARD and the Ministry of Fisheries (MOFI)

before its merging into MARD in 2007, is the government organization in charge

of regulating the production and export of Pangasius. MARD incorporates several

departments/directorates with relevance to Pangasius aquaculture such as the

Directorate of Fisheries (D-Fish) which is in charge of most activities related to

the production of Pangasius production and a range of other departments which

will operate in a cross‐cutting manner within MARD, such as the Department of

34 | P a g e

Animal Health, responsible also for Pangasius health, Department of Science

and Technology, in charge of research on Pangasius, National

Agro‐forestry‐Fisheries Quality Assurance Department (NAFIQAD), in charge of

pangasius exports etc. The frequent restructuring of MOFI first (in 2003) and now

MARD (in 2007 and 2009) have hampered the government efforts to promote

Pangasius aquaculture sustainability.

MARD operates at the provincial level through its Departments of Agriculture and

Rural Development (DARD), one for each province. Because of the relatively

decentralized structure of the Vietnamese provinces, with the chairperson of the

Provincial People’s Committee (PPC) having the same ranking as a Minister, the

DARD’s are quite powerful institutions, being responsible for the development of

aquaculture plans and other regulations and activities aimed at implementing

national level decisions.

A strong competent authority, the NAFIQAD, formerly NAFIQAVED and

NAFIQACEN, has led to strong credibility in the safety of seafood products

exported by Vietnam. This has been witnessed by the relative promptness with

which Vietnam addressed issues like chloramphenicol, nitrofurans and malachite

green contamination of products. However, NAFIQAD ability to “control” the

sector appears to have decreased in recent years, allegedly because of weaker

leadership.

35 | P a g e

Other departments within MARD have had mixed degrees of effectiveness at

assisting the sector’s development. Although the new D-Fish is showing

considerable leadership and proactivity, legislation related for example to water

effluents and planning has been average at best. Several stakeholders have

been consulting with legal firms and still struggle to understand what laws are

applicable to the sector. Aquaculture development plans, largely developed at

the provincial level, have been scarce, poorly implemented and in most cases

developed without a thorough analysis of the issues affecting the environmental,

social and economical sustainability of the sector.

In the past extension services in Pangasius aquaculture were primarily in the

hands of government staff employed largely at the provincial and district level

and academia. At present however, several private sector “advisors” from private

consulting companies, feed producers etc. are playing an increasingly important

role in the sector. Some processing plants also offer technical advice to some of

their suppliers as part of contract farming arrangements.

The government is currently playing an important role also in addressing the

price volatility of Pangasius products. In fact, in a new decree on the production

and consumption of Pangasius, which deals also with seed quality issues, floor

prices are to be set for both raw materials (the fish entering the processing plant)

and exported products. The decree, which targets primarily the economic

36 | P a g e

sustainability of the sector (rather than environmental or social issues), will be

submitted to government at the end of December 2011.

3.4 Links and cooperation

The links and cooperation among actors has been poorly investigated. It is often

seen as vertical direction i.e. following products flow and horizontal direction i.e.

following administrative structure. In this study, the links and cooperation among

them are classified by the common interest and interactions among each group

of actors. Of which, main producers is put in the center of the cooperation.

Figure 8. Cooperation among actors

There are following key links and cooperation among key actors:

Main

producer

Inputs supplier

Administrative

organizations

Traders &

distributorsConsumers

Media

37 | P a g e

Main producers - Inputs suppliers

Producers - Administrative organizations

Producers - Consumers

Producers - Trader distributors

Producers - Media

Media - Consumers

3.5 Gaps and difficulties

Lack of integration and cooperation in the value chain

Although the role of middlemen in the Pangasius subsector is limited and there is

a higher level of vertical integration and cooperation, the vast majority of farmers

still operate on a spot market and do not have sustainable long-term

relationships with their buyers. There are two main reasons for the lack of

sustainable long term relationships in the Pangasius sector. One is the

fluctuation of raw material prices which makes it difficult for farmers as well as

processors to make pre-harvest arrangements about the price. Most farmers

experience the opportunity to fetch high prices as more important than the risk of

low prices. For exporters the opposite is the case as the risk of paying more than

the market price is experienced as too high compared to the opportunity of

securing supply Moreover, signing a contract is often a high barrier for farmers as

well as exporters as there is a lack of experience in how to formulate contracts in

order to protect the benefits of both farmers and processors.

Lack of quality fingerlings

38 | P a g e

A main complaint is that there is a lack of quality fingerlings. The quality of

fingerlings has a great effect on the productivity of Pangasius farms and the

profitability of the sector. It is generally noted that public hatcheries are better

equipped and produce better quality fingerlings but cannot meet the local

demand. Therefore many farmers depend on private hatcheries that provide

lower quality seeds and imported seeds from for example China.

Complexity and diversity of international buyer requirements

Pangasius exporters are confronted with a wide diversity of standards required

by international buyers that supply to different countries and markets. The most

common standards confronted with at the moment are Aquaculture Certification

Council (ACC) for the US retail market, Global Good Aquaculture Practices for

the EU retail market, ASC for EU retail market and increasingly also bio

standards such as Naturland and Kraft. Although exporters that have their own

farms are currently increasingly investing in the farm infrastructure to meet these

international standards, for most exporters it is impossible to comply with all.

There- with, international buyers’ requirements force exporters to focus on a

limited numbers of markets. Moreover, exporters that do not have integrated

farms depend on the supply of certified products from independent farmers. The

supply volume of certified Pangasius from independent farms is currently still

close to zero. One of the major challenges faced by the sector is how to create a

competent base of Pangasius farmers that can comply with the highest

international standards and supply certified Pangasius to the export companies.

Lack of cooperation between stakeholders in the value chain and BSOs

39 | P a g e

Most actors in the supply chain have no complete overview of which BSOs are

active in the fisheries and aquaculture sector. There is a lack of information about

support programs, grant and subsidy schemes and also about NGO programs

that aim to support the sector in optimizing sustainability in the sector. Also, it is

argued that the dissemination of technical knowledge from research programs is

not reaching a large part of the sector. This should be improved.

An overview of all BSOs that are active in the Pangasius sector and what specific

services they offer needs to be created. This has to include services of both

public and private bodies as well as research institutes and NGOs.

Lack of investments in infrastructure

Currently, the development of the Pangasius sector has been largely unplanned

and largely uncontrolled. The unorganized character of the sector does not

attract a lot of investment. The lack of investment relates both to the physical

infrastructure of the sector as well as to required investments in a digital

infrastructure and regulatory framework that needs to enable the government to

monitor and control the Pangasius sector.

The most important challenge to increase the availability of capital for investment

in the Pangasius sector from the point of view of the private sector is to convince

banks and insurance companies that the risk of investing in the Pangasius sector

is limited and controlled. This can be achieved by exposing successful business

models such as the model of APPU as discussed in the previous section or other

examples from companies in Thailand and India. All successful business models

where banks and insurance companies are providing their services to

40 | P a g e

aquaculture farmers include very strict contact farming agreements where

exporters guarantee quality input supplies to farmers and where exporters are

willing to be responsible if farmers cannot repay their debts.

3.6 Challenges

Market and price volatility

Price volatility is considerable for Pangasius. Prices and margins for Pangasius

have always been low. This can be a good thing if it allows a product to enter and

expand in the market. However, sometimes margins have been so low, even

going below costs, leading to financial losses by farmers. The reasons blamed

for driving margins below zero have been many and included the economic

downturn, cash flow problems, competition between processing plants and of

course a negative perception of Pangasius in some markets. The reality is that,

although prices are now higher than what they have been in the past, over the

years several thousands of farmers have abandoned Pangasius farming and the

sector has shifted from being dominated by small-scale farmers to large-scale

companies being responsible for the majority of Pangasius production. The

current situation will most likely lead to a decrease in production for 2011 and to

further restructuring of the sector, with large-scale producers playing an

increasingly important role. The good news is that such a sector is somehow

‘easier to handle’, from a traceability and quality point of view.

41 | P a g e

Impact of price volatility of inputs

Feed prices have been increasing gradually over the years. As feed accounts for

the greatest majority of production cost (in pangasius about 85-90%), this has

had huge impacts on the cost of production and margins. Fish meal prices have

been fluctuating greatly although an overall increasing trend can be detected,

with Peruvian fishmeal prices having more than doubled over the past 5 years

(from USD800/mt to USD1,900/mt).

Finance and access to credit

Access to credit is still one of the major constrains in the pangasius industry.

According to two major Banks in Vietnam, loans are available for farmers and

processing plants for both initial investment (building, equipment, etc.), and

running cost. A brief overview of financial needs for pangasius farmers and

processing plants follows.

Pangasius farmers

Pangasius farmers need about VND7.6-8.8 billion/ha/crop (USD370,000-

429,000/ha/crop) as running capital to produce about 400 mt/ha/crop in 6-8

months. Feed accounts for 85-90% of the cost of a farming operation. Fingerling

producers and chemicals suppliers are paid in cash. Until recently feed suppliers

used to give feed to farmers on credit, and delay payment for large farms e.g. CP

and Cargill. Presently, feed suppliers prefer selling feed to the processing plants

42 | P a g e

who sell it to farmers. This would guarantee feed companies to get paid back.

Some plant provides feed on credit to farmers at the end of the production cycle

(about 1/3 of total feed) as a part of the contract. The latter ties the processing

plant and farmers including the selling price. Sometime Banks are involved in

guaranteeing contracts and a deposit is given to the Bank to ensure that the

contract will be honored. Processing plants pay farmers for the fish about one

month after the deal whilst may pay the harvesting team on the spot. This is not

the case now as there is lack of raw material, but it is the case during normal

production years.

Pangasius farmers can request a loan for both investment in fixed assets or

running capital for farming operations. The term of a loan is usually 1 year but

farmers must repay the Bank within 6 months and thus be able to get a new loan

for remaining 6 months but a smaller amount e.g. 90% may be given. For the

past 2.5-3 years Pangasius farmers have lost money and consequently there is

no confidence in the sector and it is more difficult to get loans now. The National

Vietnamese Bank encourages all Banks to reduce the size of loans and currently

a farmer can get a loan worth 70% of the collateral. Some Banks consider fish

crop as collateral but not government Banks or Banks with a share held by

government. The farm can be used as collateral and market value varies

between VND1.5-3.0 billion/ha (USD75,000-150,000/ha), based on its location

43 | P a g e

and distance from a given processing plant, however loan is calculated on

national regulated value of VND0.6 billion/ha (USD30,000/ha). Beside collateral,

Bank needs evidence of farming and paying back capacity and will prepare its

own business plan. Interest rate used to be 14-15% but now is 21.5%. In case of

insolvent farmers, the Bank would take the land/collateral and sell it. The above

conditions result in many farmers stopping farming as they either cannot get the

loan from the Bank or the loan size is not enough.

Processing plants

Processing plants can ask loans for new investments e.g. a new factory. A new

Pangasius factory 3 years ago cost USD3.5 million and now probably USD4.5

million with 800 workers and 21,000 mt of raw material processing capacity.

Banks requires business plan and a risk assessment. Land can be used as

collateral and need negotiation with the Bank. For insolvent companies, the Bank

will take the collateral. A loan can also be asked using containers as guarantee:

for shipped containers 90% of product value; whilst 50-60% for those to be

shipped. No collateral is needed. Condition: the amount has to be transferred to

the Bank giving the loan. 1-1.5 month validity and interest rate is as stated above.

Having the collateral is the major issue in getting a loan for processing farms.

Insurance

44 | P a g e

At present there is no insurance for any loss due to natural calamity although

farmers may potentially rely on ad hoc compensation e.g. avian influenza.

Processing factories have insurance. The scheme can have a VND10 million

(about USD500) excess of loss. Insurance companies audit the value of the plant

and need to provide invoice for insured assets. Containers can also be insured

(e.g. Cost Insurance Freight by Maritime Insurance and similar), and processing

plant ask for this.

Diseases

All aquatic animals can suffer from health problems. Arguably with the exception

of Bacillary Necrosis of Pangasius (BNP), a bacterial disease often recognized

by white spots on the internal organs, Pangasius has not yet been affected by

any major epidemics which for example have devastated in the past the industry

of other aquaculture species such as salmon, shrimp and many others. The

absence of an effective surveillance system capable of detecting in a timely and

accurate manner outbreaks, the practice of stocking different ‘age classes’ into

the same farm, the almost complete absence of bio-security and the high density

of farms located without epidemiologically sound planning means that any

disease outbreak caused by a contagious agent (especially viruses) would

spread quickly between farms and affect in a very short time most, if not all, the

industry. This is a disaster waiting to happen, the importance of which is not fully

45 | P a g e

understood by the greatest majority of stakeholders. Indeed there have been

increasing efforts towards the development of vaccines, although these can

never replace the advantages of setting up more inclusive preventive measures

and health management strategies.

3.7 Conclusion and Recommendation

3.7.1. Conclusion

The main producers in chain of Pangasius production are:

Individual small scale farmers

Medium and large size grow-outers

Processing plants

By-products processing plants (fish oil, fish meal)

Processing plants own grow-out ponds

Processing plants own grow-out ponds and involved in producing

seed or feed

Processing plants own grow-out ponds and involved in producing

seed or feed, and trading

The main linkages of these parties following as:

Main producers - Inputs suppliers

Producers - Administrative organizations

Producers - Consumers

Producers - Trader distributors

Producers - Media

Media - Consumers

46 | P a g e

3.7.2 Recommendation

Strengthening media and communication in domestic market and export

market about the industry and Pangasius products

Improving technology to increase productivity, lowering production costs

(e.g. fingerlings’ quality, FCR, EFFC meat quality, etc.)

Improving planning of production areas, forecast of market demand (e.g.

grow-out area, forecast of market demand etc.)

Expanding export market, and diversifying products, trade promotion (e.g.

study and evaluate market demand, taste of consumers, etc.)

Develop domestic market (research and develop new products that match

with taste of Vietnamese, develop distribution system and retailer)

Strictly executing violence of regulations, unfair competition (e.g. sanction,

independent monitoring parties, improving transparency in execution of

regulation)

Restructuring structure of industry associated with financial services

(prolong payment time, reduce interest rates, increase liquidity)

Flexible in loans, available credits for producers (reduce complicated

process to get loan)

Improving product quality such as moisture content, omega 3 & omega 6

content, ROS, less conservative additives)

47 | P a g e

Transparency, accountability in management (multi-stakeholders

engagement in forming policies, strategy, regulations, etc.)

48 | P a g e

4. Summary

There is a movement of the pangasius industry, farming practice was initiated in

cages then shifted into ponds, from domestic market to exportation. Next to that,

there are more actors involved in the supply chain. For example, in order to

increase productivity, producers used commercial feed instead of farm-made

feed, subsequently feed manufactures becomes key actor, and their influence

can generate impact to the whole industry, particularly on production cost. In

view of marketing, media and trader at export market have strong influence on

processing plants in Vietnam. Their requests on certifications, food safety and

welfare are increasing.

Having understanding on the complexicity of the Pangasius value chain, through

the assessment on key actors and their influences, the team suggest:

Create a platform for discussion and sharing information among Pangasius

SMEs;

Develop a framework for a set of solution that was developed through the

assessment and focus group meeting;

Study a mechanism/platform that helps to control market power of key

actors that are affecting the industry;

Assist pangasius SMEs to access new markets through media and

communication

49 | P a g e

References

CFA launches new attack on pangasius. July 2010. Accessed online at:

http://www.seafoodsource.com/news/supply-trade/18858-cfa-launches-

new-attack-on-pangasius

Corsin. F (October 2009). Pangasius farming in Vietnam.

L. Cuyvers., T. Van Binh (January 2008). Aquaculture export development in

Vietnam and the changing environment: the case of Pangasius in the

Mekong Delta. CAS Discussion paper No. 59.

Lam T. Phan, Tam M. Bui, Thuy T.T. Nguyen, Geoff J. Gooley, Brett A. Ingram,

Hao V. Nguyen, Phuong T. Nguyen, Sena S. De Silva. (2008). Current

status of farming practices of striped catfish, Pangasianodon

hypophthalmus in the Mekong Delta, Vietnam.

Le. N. D.K (October 2007). Description of the Pangasius value chain in Vietnam.

CAS Discussion paper No.56.

LEI Wageningen UR (March 2012). The Vietnamese Seafood Sector – A value

chain analysis.

Loc. V.T.T, Bush. S, Sinh. L.X, Navy. H, Khiem. N.T. (February 2009). Value

chains for sustainable Mekong Fisheries: the case of Pangasius

hypopthalmus and Henicorhynchus/Labiobarbus spp. in Vietnam and

Cambodia. (Draft Document).

SA8000 Certified Facilities. Jan 2015. Accessed online at:

http://www.saasaccreditation.org/certfacilitieslist

WWF. (November 2012). Factsheet. Aquaculture. Farmed Pangasius.

50 | P a g e

51 | P a g e

Annex 1. Interview Questionnaire

52 | P a g e

53 | P a g e

54 | P a g e

55 | P a g e

56 | P a g e

Annex 2. Presentation at Focus Group Meeting

57 | P a g e

58 | P a g e

59 | P a g e

60 | P a g e

61 | P a g e

62 | P a g e

63 | P a g e

64 | P a g e

65 | P a g e

66 | P a g e

67 | P a g e

68 | P a g e

69 | P a g e

Annex 3. List of Interviewers

No. Name Affiliation

1. Dinh Cong Manh Worker, Hoa Phat Import and Export,

Seafood Processing Company

2. Do Van Thong Reporter, VASEP

3. Doan Tri Thuc Farm manager, Viet An Company

4. Duong Thi Thuy Oanh Officer, Nha Trang Seafood Company

5. Hua Thai Nhan PhD, Lecture at CTU

6. Huynh Van Hien Lecture at CTU

7. Lam Hoang Khuong Chief of HACCP board, Golden Quality

Seafood Company

8. Le Chi Binh Chairman of An Giang Fisheries

Association

9. Le Cong Quyen Staff, Hoa Phat Import and Export,

Seafood Processing Company

10. Le Hong Duc Ba Duc Feed & Chemical branch

11. Nguyen Ai Quoc Seed producers

12. Nguyen Duc Vinh Officer, Viet Capital Bank

13. Nguyen Trong Quyen Officer, DARD Can Tho

14. Nguyen Tuan Anh Officer, Viet Thang Feed Manufacture

15. Nguyen Van Hong Independent pangasius producer

16. Nguyen Van Huu Seed producers

17. Nguyen Van Lanh Commercial Director Carido

18. Pham Hai Buu Pangasius producers, VietNam

Pangasius Association

70 | P a g e

19. Pham Thu Hong Chef of Dept. Aquaculture and Fisheries

Dept., DARD of Vinh Long

20. Pham Truong Yen Officer, DARD Can Tho

21. Tran Duy Binh Officer, Golden Quality Seafood

Company

22. Tran Phung Hoang Tuan Officer, An Giang Hatchery Center

23. Tran Thi Kim Phuong Officer, Nha Trang Seafood Company

24. Tran Van Tao Officer, Long Phu Company

25. Vo Hong Dao Independent pangasius producer

26. Vo Van Hoai Auditor, SGS Vietnam

27. Vuong Phuc Loi Officer, 5 Vang Company