Seafood processors lack capital for operations

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VietStock FI English - 31 month(s) ago 2 readings

Seafood enterprises have faced a serious lack of production and business capital since early this year, according to the Viet Nam Association of Seafood Exporters and Producers (VASEP).

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

Ninety per cent of companies expected credit line to increase to VND10 billion ($476,190) in minium and VND1.4 trillion ($66.67 million) in maxium, Tam said, while 53.85 per cent need between VND2 billion ($95,238) and VND300 billion ($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 $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 $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 per cent 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 a year-on-year increase of 9.1 per cent to $1.2 billion.

During the first two months, seafood exports declined by 7 per cent to the European Union while it increased 11.5 per cent to the US and 25.3 per cent to Japan. One year ago, Viet Nam saw an increase of 30 per cent in seafood exports for each of the three markets.

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

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