August 25, 2010

Shrimp industry in Myanmar faces challenges


As once-booming shrimp farms continue to decline in Myanmar, shrimp exporters are increasingly relying on uncertain wild catch.

Buffeted by sanctions, the lingering after-effects of Cyclone Nargis and the global recession, shrimp farms began to go downhill in 2004, after several years of good business, exporters said.

"Starting from 1998, shrimp farms boomed until 2003. But now, shrimp exporters rely on wild catch," said U Hla Maung Shwe, chairman of the Myanmar Shrimp Entrepreneurs Association.

"At its peak, from 1999-2003, Myanmar was the fourth largest exporter to the US market after Vietnam, Thailand and the Philippines," he said. "At that time, 95% of farmed shrimp went for export. Now, only 20% is exported, and what is left is consumed locally," said U Hla Maung Shwe.

"The US market accounts for 50% of global shrimp consumption. We lost a big market in 2003 because of sanctions," he added. Myanmar still exports to China and the EU.

Unfortunately, the stiff competition Myanmar faces from other players like Thailand and Bangladesh is compounded by high taxes. "The EU imposes 13.7% tax on Myanmar and Thailand, but Bangladesh is untaxed. The Thai government refunds 7% to its exporters if they export to the EU. In contrast, Myanmar exporters pay 13.7% to the EU and another 10% to the Myanmar government," said U Hla Maung Shwe.

"My factory rarely gets shrimp from farms. We have to use wild catch, and it amounts to about 60% of our exports," said U Tun Aye, managing director of Shwe Yamone fish processing company.

Shwe Yamone is one of eight fish processing factories in Myanmar that meets EU standards.

"Shrimp farming is riskier than fish farming because the shrimp are less resistant to disease, which means losses can be very high if there is a major problem," said U Tun Aye. "At the same time, the initial investment is much higher than for a comparable fish farm. At a time like this, when the market is quite slow, shrimp farmers cannot make much of a profit."

"When exporters don't get enough stock to run their factories at full capacity, it increases our production costs. And then, when we've finished processing the shrimp we still have to pay 23.7% tax," said U Tun Aye.

While the situation now is less than perfect, U Tun Aye said that happier days are not faraway. The potential for Myanmar's shrimp is high because its product is free from chemical contamination, which makes it highly attractive to selective markets.

"We have great demand from Japan, where consumers are very aware of the risk of chemical contamination and they have confidence in our products. Our buyers there say they will not source their shrimp from Thailand and Vietnam if we're able to meet their demand," U Tun Aye said.

Nonetheless, U Hla Maung Shwe said the industry needed some help from the government to reach its full potential.