No outlet for products

Nguyen Van Thang, Deputy Director of Vimex, complained that seafood companies have been struggling with difficulties for the last one year, but the difficulties in the last months of the year seem to become bigger.

Thang said that the importers from the US, Middle East and Australia have placed small-size shrimp orders only, while asking to lower the price by 30%.

Thang said that consumers of the import countries have shifted to eat small-size shrimp in order to save money. However, it is very difficult to find small-size shrimp at this moment. Therefore, Vimax has cut down their production capacity by 40% and stopped collecting shrimp materials.

All 30 seafood processing companies in Bac Lieu province are facing the same problems. Thang said that he knows some companies having cut down the production capacity by 50%, since the import demand has been decreasing dramatically from loyal markets. A lot of US and European partners, who signed contracts before, have announced the cancellation of the contracts.

The seafood export to the US, one of the three biggest markets for Vietnam, has been suffering as US banks have been tightening credit, while the purchasing power of the market has been decreasing. A Unilever’s survey on 47,000 consumers showed that the majority of US consumers have cut down the consumption of seafood and some other frozen products.

Nguyen Huu Dung, Deputy Chairman of the Vietnam Association of Seafood Exporters and Producers (VASEP), said that the seafood export turnover in 2008 would reach 4.4 billion only, not 4.5 billion as previously targeted. Dung also said that in 2009, the growth rate of seafood exports will not be higher than 10%.

Capital shortage and high interest rates the eternal problems

In the first half of 2008, the VND lending interest rates were at 18-21% on average, which was really a heavy burden on businesses, which got the profit rate of 13-15% only. Though the lending interest rates have been slashed recently, a lot of companies are still bearing high interest rates as their contracts have remained valid.

In fact, the big difficulties of seafood companies have prompted banks to keep cautious when providing capital.

According to local newspaper Thoi bao Kinh te Vietnam, by September 30, 2008, there had been 210 seafood companies having credit relations with banks, while the total outstanding loans had reached VND 1.8 billion. The debts of 5^th category (overdue by more than 360 days) had reached VND 32.3 billion (2% of total outstanding loans to seafood industry), the debts of 4^th category (overdue by 181-360 days) had reached nearly VND 61 billion (3%).

Source: TBKTVN