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Overcoming Challenges, Restructuring Seafood Businesses

Sustainability Economics Politics +5 more

VIET NAM - Debating solutions to overcome challenges and restructure seafood businesses was the main point in an annual conference of the Viet Nam Association of Seafood Exporters and Producers (VASEP) held recently in Ho Chi Minh City.

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VASEP Deputy Chairman Nguyen Huu Dung said that seafood businesses rapidly grew in the past. Therefore, when facing difficulties as now, they revealed weakness. Due to particular features, seafood businesses have inadequate financial capability and always lend capital from banks, whereas there are many inadequacies in capital management, reports VEP.

Many firms used short-term loans to invest in culture, real estate and other outside areas in the long-term. New firms did not focus on management, product diversification and market, while focused on exploiting the market with monotonous products. Therefore, when banks tightened credit and export market slowed, firms fell into trouble. Difficulties of businesses are the lack of raw materials and capital, the increase in input cost, the low export market and the weak competitiveness. VASEP Chairman Tran Thien Hai said that they are not new difficulties, but increasing. Statistics from VASEP show that 40 percent of seafood enterprises are halted; in the first quarter of 2012, the number of operating businesses declined from 800 to about 470.

However, there are many companies having efficient production and business due to restructuring operation, such as self-investing in farming areas, restructuring market strategy and products and changing management method. A half of Tra fish processing and exporting businesses built their own Tra fish farming. In addition, shrimp processing enterprises for export had their own shrimp farming area or linked to farmers to have many large farming areas of thousands of hectares. There were also businesses building their own input source through investment in offshore fishing vessels. VASEP said that due to timely restructuring, 20 large shrimp companies accounting for 67 percent of the total export shrimp in the country are in a stable condition. These brands effectively overcoming difficulties are Vinh Hoan and Hung Vuong. They are restructured due to their own sake. In the seafood survey in the Mekong Delta recently, VASEP Honorary Chairman Nguyen Thi Hong Minh also said that there are many seafood businesses in the region, that are in the process of restructuring to adapt new situation and stable operation.

To remove difficulties for businesses and bring them back to operation, the Ministry of Industry and Trade proposed many support solutions. Deputy Minister of Industry and Trade Nguyen Thanh Bien said the ministry with the Ministry of Agriculture and Rural Development worked with banks to remove capital for firms. VDB agreed to deploy many support solutions, such as building mechanisms of extending loan terms for businesses and raising capital for Tra fish farming. VASEP said the expected level of support for Tra fish is VND5 trillion. According to Deputy Minister Nguyen Thanh Bien, VASEP should also work with other banks to find additional financial sources for businesses because this support is also in support package of VND29 trillion of the Government under Resolution 13. Deputy Minister stressed the important role of VASEP in this issue, especially for member firms, firms that have market and output. In terms of solving difficulties of other unreasonable fees and taxes, Deputy Minister Nguyen Thanh Bien said the ministry reviewed the tax on nylon bags, not only for fishery industry but also for other export industries.

Regarding to the decline of the export companies recently, Deputy Minister Nguyen Thanh Bien said that the industry must accept this refinement to create the existence of businesses having the capacity and stable development. Regarding to export markets, the businesses should cooperate together to maintain and exploit the EU market since the price of Vietnam's seafood products are suitable with the purchasing power of this market and this kind of product is the favor of EU consumers. Seafood businesses should not leave the EU market and focus on the US market as the US is undertaking measures to tighten management of imported seafood. In terms of trade promotion funds, although the funds have been cut, the ministry still gives priority to VASEP. It is important for businesses to increase the percentage of added value in products, improve the image of Tra fish and shrimp in key markets.

At the conference, experts said that companies should restructure the sector's operation, especially from companies in order to have long-term stability. Restructuring is to form a new team of seafood businesses having high competitiveness, sustainable development and coping with the volatility of market.

Businesses must re-evaluate themselves honestly on qualifications, not based on temporary difficulties, to have better planning and longer-term vision. The most important thing is to restructure the governance method. Good governance will positively impact on all areas of businesses, such as raw materials, capital, products and markets. To have good governance, it is necessary to change the mind of business owners or transfer business to the younger generation having new awareness and trained to make the operation of businesses adapt to the new situation.

On the other hand, the banking sector should also restructure the relationship with seafood businesses and should not continue to implement the form of lending as now. VASEP would also have to restructure the activities of supporting member businesses in the future.