Fish exporters decry capital shortages despite high exports
By Trung Chanh - The Saigon Times Daily
CANTHO - Tra fish exporters are always whingeing about financial constraints, blaming their undercutting one another on matured bank loans with sky-high lending rates. However, export performance of the whole industry in the first few months of the year indicates extremely high growth. So is it true that tra fish exporters are lacking capital shortages as severely as they claim?
Enterprises in undercutting race
Duong Ngoc Minh, vice chairman of the Vietnam Association of Seafood Exporters and Producers (VASEP), attributes industry insiders’ undercutting to the pressure of bank loans.
“The operation mechanism of the banking system from lending rates to credit lines is increasingly stringent, causing capital shortages among tra fish exporters and processors, prompting them to sell their products at any cost to repay loans to the banks,” Minh told the Daily on the sidelines of a seminar on the tra fish industry in Dong Thap Province on June 26.
Truong Dinh Hoe, general secretary of VASEP, also admits that many local exporters are vying with each other for export contracts by offering low prices to foreign buyers. A representative of a processor in An Giang Province, who declined to be named, said: “I didn’t want to lower prices of products but I am forced to do so as I need money to repay bank loans on schedule.”
The fact that local companies are undercutting one another affects not only their own benefits but also the benefits of the local tra fish industry as well. The root cause lies in weak financial capability of small firms with poor working capital.
Vo Hung Dung, director of the Can Tho branch of the Vietnam Chamber of Commerce and Industry (VCCI), explains: “Small and weak companies are burdened with the highest pressure to sell products and they have no choice but to compete with other rivals by lowering prices.”
According to a report by VASEP, Vietnam’s tra fish exports to foreign markets are spiraling into a downtrend, especially shipment volumes for the EU.
At a press conference on the 2012 Vietfish fair in HCMC last month, Hoe revealed that the export volume for the EU market sharply shrank, at up to 12% in the first five months, despite the fact that it had consumed 40% of the total export volume of Vietnam in previous years. It is noteworthy that the volumes shipped to Germany in the period plummeted by up to 25%.
Speaking at the seminar in Dong Thap, Minh of VASEP asserted that the tra fish industry in the year’s first months had difficulties due to slowing demands from major markets such as the EU. He noticed that only the U.S. market posted a positive growth rate of tra fish imports.
At the same seminar, Minister of Agriculture and Rural Development Cao Duc Phat said tra fish exports in the first few months didn’t grow in value and volume from the same period last year. For instance, the report by Vietnam’s General Directorate of Fisheries showed that the average tra fish export price in the first few months experienced a mild contraction of US$0.3 a kilo from US$3.4 to US$3.1
VASEP leaders always complain about the bad performance of local tra fish exporters in the first months given falling demands and prices. However, the result in the VASEP report is in complete contrast to those claims, showing tra fish products in the Jan-May period continued to excel with export revenues amounting to over US$700 million, up 9.4% year-on-year, accounting for more than 31% of the total export value of the whole seafood industry.
Industry players posted good performances while VASEP leaders and its members keep bemoaning business hardship. So what is the nature of the problem?
Which companies lack capital?
Several experts wondered if tra fish exporters and processors wanted to enjoy incentives whilst pretending that their business results are bad and that they are cash-strapped. These experts found it hard to believe the sob stories of local exporters in the backdrop of their profits rising annually.
In fact, An Giang Fisheries Import and Export Joint Stock Company (Agifish) made a strong impression among industry insiders when it became one of the top three exporters in the tra fish sector in 2011 and was named as an outstanding exporter by the Ministry of Industry and Trade in the same year.
In 2011, Agifish ranked third after Vinh Hoan and Hung Vuong companies when its export earnings reached US$93.6 million from 30,653 tons of tra fish products in the year.
The firm fetched VND2.66 trillion in total sales last year and VND85.4 billion in pre-tax profits with an earning per share (EPS) of VND5,270, up 161% against 2010. The year 2011 was also the first year the business had obtained the highest export value since it came into existence at home.
Similarly, Hung Vuong Corporation took the lead in the industry from 2003 to 2011 in tra fish exports, with its export earnings shooting up to US$231 million in 2011 from a mere US$8 million in 2003.
Which enterprises are lacking capital? Is it true that all members in the industry are short of capital?
“The Government in the near future will support capital for the tra fish sector to save troubled companies. But if the fund is not used properly, those cash-strapped businesses will be unable to access capital while stronger firms will have the chance to fish in troubled waters,” said an agricultural official in the Mekong Delta.
According to Nguyen Viet Thang, chairman of the Vietnam Fisheries Society, the agriculture ministry has just proposed the Government to provide a financial package of VND7 trillion to save the tra fish sector. Some VND4 trillion of the package will be set aside to support companies while the remaining VND3 trillion will be used to help farmers.