April 11, 2012

 

Vietnamese seafood firms face insufficient capital for operations

The Viet Nam Association of Seafood Exporters and Producers (VASEP) said that since early this year, seafood enterprises have faced a serious lack of production and business capital.

 

In the second quarter this year, 92.3% of seafood firms need working capital of between VND10 billion (US$476,190) and VND500 billion (US$23.81 million), said Nguyen Minh Tam, a VASEP representative.

 

Around 90% of companies expected credit line to increase to VND10 billion (US$476,190) in minimum and VND1.4 trillion (US$66.67 million) in maximum, Tam said, while 53.85% need between VND2 billion (US$95,238) and VND300 billion (US$14.29 million) for developing investment activities such as upgrading equipment and factories in regions rearing fish and shrimp.

 

Difficulties in accessing capital have kept enterprises from purchasing fish and shrimp for export while farmers refrain from selling on credit, she said. Farmers have avoided losses despite firms being unable to pay their debts, such as in the case of Binh An Seafood Company.

 

As a result, enterprises have been forced to import seafood for processing export products, she added. Additionally, firms have faced high freight and quarantine fees and increasing production costs amidst a lack of capital.

 

VASEP said Viet Nam's ocean freight costs had increased by US$240-800 per foreign port since early this month. The hikes would continue in the next two months as shipping companies announced that from April 1, they would begin charging containers shipped to European ports with a general rate increase (GRI) of US$400 per 20-foot container. On May 1, the same GRI will be applied on goods shipped to the US.

 

Therefore, ocean freight costs will skyrocket by US$640-1,200 per 20-foot container in the three months from March to May, VASEP said. Shipping costs in Viet Nam are currently 10-15% higher than those in other regional countries including Thailand and the Philippines.

 

Last month, the association proposed the Ministry of Industry and Trade and relevant bodies reduce freight costs to ease the burden on seafood exporters. Earlier, the association also asked the ministries of Finance and Agriculture and Rural Development to reconsider the quarantine fee levels applied on imported seafood batches in order to help companies reduce costs and increase competitiveness.

 

Many seafood companies are saying that the quarantine fees stipulated in a new Ministry of Finance's circular, effectives starting this month, have increased too much from the levels regulated in the ministry's previous circular, issued in late 2010.

 

The Ministry of Agriculture and Rural Development estimated the total export value of seafood for the first quarter this year to have experienced an on-year increase of 9.1% to US$1.2 billion.

 

During the first two months, seafood exports declined by 7% to the EU while it increased 11.5% to the US and 25.3% to Japan. One year ago, Vietnam saw an increase of 30% in seafood exports for each of the three markets.

 

Therefore, the VASEP expected the country would struggle gaining its target of US$6.5 billion in seafood export value due to existing difficulties.