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Sweet and sour shrimp

Vietnam's shrimp industry is breeding both profits and misery. Should the government promote this risky business to reduce poverty?

HANOI & QUANG NAM - Stories of massive debt and disease don't scare Dinh Duc Huu. The Vietnamese-American entrepreneur knows that many shrimp producers across Asia have been wiped out by sudden epidemics in their ponds. But Huu believes he will see a healthy return on his initial $5 million investment in a sprawling, new shrimp farm on the outskirts of Vietnam's northern city of Haiphong. At an August launch, local officials welcomed the prospect of 1,500 new jobs and, more important, Huu's promise to teach local farmers the intricacies of breeding black tiger shrimp.

It is a delicate business. "Raising shrimp is more difficult than raising a baby," says Huu, an engineer who is drawing on expertise culled from American universities and a California bio-tech firm. "A shrimp doesn't cry when it's sick." But plenty of people are crying down in southern Vietnam, the hub of the nation's shrimp trade. In southern Ca Mau town, disease struck 63,000 hectares of shrimp from January to March. In central Quang Nam province, unusually hot July weather put some shrimp off their food, stunting growth. Even during seasons that are generally profitable, rewards are spread unequally among neighbours. "There are winners and losers," sighs Quang Nam farmer Nguyen Thi Hoa, who can't repay her debts because she has lost 80% of her shrimp to disease since 2000.

Despite the risks, Vietnam is determined to emerge as a big winner in aquaculture. The nation is counting on shrimp becoming one of its few star exports as more traditional commodities such as rice, coffee and pepper remain cursed by low world prices. The seafood sector has already become Vietnam's third-largest earner of foreign exchange, with shrimp exports alone reaching $780 million last year. In 2001 the number of hectares devoted to shrimp nearly doubled to 446,000. The Ministry of Fisheries hopes to expand that to half a million hectares by 2005.

The shrimp industry "has the potential to be an effective way of leveraging people out of poverty. Rather than achieve incremental gains, they could leapfrog," says one Western development specialist in Hanoi. To reduce financial risk, some local communities are pooling resources and developing ponds without abandoning their other crops. Some inland communities are also being encouraged to raise freshwater shrimp, which are cheaper to produce.

But some community activists and aquaculture specialists worry that the shrimp industry could leave rural folk more disadvantaged than ever. "This export-led development is really unsustainable. It is pushing people into this gamble and making them more addicted to it," warns a Vietnamese development officer at Oxfam Great Britain.

"If we involve the poor directly in shrimp-farming activities, it's not good for the poor. It's still high-risk for them, " says Tran Van Nhuong, who is managing a United Nations Development Programme shrimp project based in central Nghe An province. Rather than advocating that the poor try to "leapfrog" out of poverty, only to end up staggering under the heavy loans needed to finance big ponds, they can work as shrimp-pond labourers, help produce feed, or work as small traders, he says.

The risks are real. The country's shrimp exports grew 10.7% year on year in the first six months of 2002, but grew just 4.4% in dollar value. And stable prices in its major export markets, namely the United States, Japan, and the European Union, are not guaranteed. Indeed, the price of Vietnam's favoured species--black tiger shrimp--has declined by roughly $3 per kilogram over the last three years. Recent disclosures of chloramphenicol traces found in select containers of Vietnamese shrimp add to the uncertainty.

"They've got a false sense of security at the moment," says one analyst in Ho Chi Minh City. "There will be an oversupply. The efficient countries will survive." Vietnam hopes to enhance efficiency, but it's hampered by the disorganized sprawl of hundreds of thousands of household producers and limited government resources for educating small producers. They must be taught proper feeding, pond-clearing and pollution-prevention methods, yet the task is enormous. In Quang Nam province, for example, there are only four government outreach workers helping some 10,000 families who produce shrimp.

For now, such outreach workers lack the technical equipment to test the quality of the baby shrimp produced at the country's estimated 6,000 household hatcheries. Controlling the quality of feed is also a big problem, since many cash-strapped farmers opt for the cheaper feeds rather than the more pricey brands. Then there's the huge investment that will be required to install wastewater-treatment facilities to preserve the environment and prevent disease from effluent that now washes back into many ponds.

Debt trap

In light of these problems, some local industry leaders argue that Vietnam should scale back its shrimp targets. "The government better not push production too much, but conduct better planning and ensure sustainable development," says Nguyen Huu Dung, general secretary of the Vietnam Association of Seafood Exporters and Producers. Rather than encourage farmers to stock their ponds more densely, Dung believes it would be preferable to promote low-density, low-cost organic farming. Such organically-raised shrimp fetch prices 20% higher than ordinary shrimp on the world market. Another solution lies in further diversification into oysters, clams, mussels, and scallops, which are cheaper and less risky to produce.

Many farmers are caught in a debt trap. "Having already invested in pond construction, and lacking alternatives, many shrimp farmers feel compelled to continue with the gamble," says a new report from the Environmental Justice Foundation, a London-based advocacy group. "When unable to get credit from banks, many resort to private moneylenders' 'hot loans,'" which reportedly incur monthly interest rates as high as 10%-20%.

Take Le Van Bay, a 34-year old shrimp farmer from Cam Chau village in Quang Nam province. A poor rice farmer with a wife and two children, he supplemented the family income by working occasionally in construction for 30,000 dong ($2) a day. In 2000, he decided to wade into shrimp. He managed to get a 50-million-dong bank loan and borrowed roughly 130 million dong from relatives. But he hasn't made any profit on his 8,500-square-metre pond, because of diseased and undersized shrimp. Today, he's keeping his family afloat with loans from relatives, still hoping that he'll strike it rich. "I can't switch from shrimp. I already borrowed from the bank," says Bay.

Quang Nam is a typical example of a poor province that sees shrimp as the best solution to its own economic woes. It is a coastal province dominated by rice farming, with a per-capita GDP of $300 and virtually no industry other than some tourism. Authorities remain confident that they can reduce the 20% disease rate among local shrimp and raise family income to anywhere between 20 million and 100 million dong per hectare, per crop. So the local government is targeting an increase from 2,200 hectares to 6,000 hectares of shrimp over the next several years, and gearing up to invest 23 billion dong in the province's first frozen-shrimp processing factory.

From afar, analysts are watching to see whether such expansion throughout the country will truly prove sustainable. If Vietnam overstocks its shrimp ponds in the hopes of short-term profits, the country could be faced with a long-term problem of so-called "shrimp graveyards" where land is abandoned because of unsustainable intensive cultivation. And when greed overtakes need, it may be too late to shift course.

By Margot Cohen - The Far Eastern Economic Review - August 29, 2002.