Financing of production and marketing of fish and fish products in Viet Nam

Dr Uwe Tietze
Fishery Industry Officer
FAO Rome

1 GENERAL INFORMATION ON FINANCIAL INSTITUTIONS PROVIDING CREDIT TO THE FISHERY SECTOR IN VIET NAM^[12]

Credit for commercial fisheries and fish marketing in Viet Nam was mainly available through Government sponsored directed credit programmes. Credit for fishery related economic activities was also available to a lesser extend through private banks. Since the second half of the nineties, the directed fishery credit programmes focused mainly on developing offshore fisheries and to a lesser extend and more recently on export oriented fish processing and marketing as well as on coastal shrimp culture for export.

The financial institutions, which have provided the bulk of this form of credit, include the Viet Nam Bank for Agriculture and Rural Development (VBARD), the Development Assistance Fund (DAF), the Bank for Investment and Development of Viet Nam (BIDV), INCOMBANK, Marine Bank and other financial institutions. In addition, Provincial Governments and other Government bodies invest directly in Government owned fishery and fish processing enterprises. Generally, access to credit for the private sector seems to be sometimes more difficult than for Government owned fishery and fish processing enterprises.

As far as artisanal and small-scale fisheries, fish farming and fish marketing are concerned, the main institution catering to this sector was the Social Policy Bank (SPB). The SPB mainly provided loans for fishing craft and gear and on a very limited scale for inland fish culture but not for small-scale fish marketing and processing. In addition donor (UNDP, DANIDA) and NGO sponsored projects provide credit for inland fish farming in some Provinces of Viet Nam.

Informal sources of credit such as moneylenders, fish wholesalers and processors and suppliers of inputs seemed to play a certain role both with regard to providing loans for working capital needs and to a lesser extend for capital investments. As in other cases and countries, most of the key informants thought that the cost of this form of credit was high due to high interest rates and unfavourable conditions attached to loans such as pre-fixed low prices on fish and other raw material.

Loan repayment and loan use was not satisfactory under most institutional credit programmes. The reasons include unsatisfactory feasibility studies resulting in financing techno-economically inefficient fishing vessels with wrong or inadequate fishing gear and equipment, lack of trained crew on offshore fishing vessels, lack of qualified staff in lending institutions and poor appraisal of loan applications and selection of borrowers, lack of monitoring of loan use and proper efforts for loan recovery.

The economic efficiency of the existing offshore fleet and shrimp farms was also hampered by the lack of appropriate landing, fish handling, preservation and processing facilities and arrangements. Government and private sector are presently making considerable efforts to establish and develop fish landing, processing and marketing facilities and there is an urgent need to establish matching institutional credit facilities, which are demand rather than supply oriented as it has been the case in the past.

This is all the more necessary, as many Government owned fish processing and exporting enterprises are now being privatised and their employees and others are acquiring their shares. As a result, they will no longer be in a position to secure financial resources for investment and working capital from Government institutions and administrations but instead from financial institutions. This is particularly important for the development of domestic fish marketing, which was seen by many fishery and fish processing enterprises as a way of diversifying their businesses and making them more stable and profitable.

To develop institutional credit facilities in support of fish marketing and processing in Viet Nam, there is a need to improve the on-going fisheries credit programmes with the objective to enhance financial and economic efficiency.

2. CREDIT USE AND CREDIT NEEDS OF FISHERS

The following chapters draw on data collected during the household sample survey carried out by the project the southern, central and northern region of Viet Nam.

2.1 Demographic characteristics of fishers

In the following, some basic demographic characteristics of fishers included in the sample i.e. gender, age and educational attainment are described. It is interesting to note that about 17 percent of the fishers i.e. owners, operators and/or managers of fishing boats and enterprises included in the sample were women. This shows that women were actually participating in Viet Nam’s capture fisheries on a significant scale.

The most common age bracket of fisherfolk included in the sample, both women and men, was the age category 41 to 50 years. Other important age groups, both in the case of men and of women, were the age brackets 31-40 and 51-60 years. Gender specific differences regarding age do no seem to be significant.

Primary education was the most common educational level of both female and male fisherfolk. The second most common educational level was lower secondary education followed by upper secondary education. Illiteracy was rare among male fishers and less rare though among female fishers. When the educational level of both female and male fishers are compared, the educational level of female fishers was lower that that of their male counterparts.

TABLE 1
Gender of fishers

TABLE 2
Age of fisherfolk by gender

TABLE 3
Education of fisherfolk by gender (including all age groups)

These demographic findings on gender, age and educational levels of fishers suggest that fishers are probably sufficiently educated to read and understand loan contracts and conditions as well as loan disbursement and repayment schedules and have capacity to make use of institutional credit facilities and comply with application and documentation procedures. They should also be able to manage their fishing enterprises as far as the necessary reading; writing and basic arithmetic skills are concerned.

As far as gender is concerned, financial institutions should be aware when appraising loan applications that fishing in Viet Nam was not an exclusively male dominated activity and that there was a substantial number of women, who manage, own and/or operate fishing boats and enterprises. Thus, public and private financial institutions should ensure that women also benefit from credit programmes for capture fisheries in Viet Nam.

2.2 Occupational characteristics of fisherfolk

Fishing seems to be the most important source of income for fisherfolk households. Table 4 shows that 61.2 percent of all households derived their entire income from fishing. Only 4.5 percent earned less than 40 percent of their entire household income from fishing. These findings also suggest that with few exceptions the households covered by the study, are full-time or major-time fishing households.

TABLE 4
Contribution of fishing to household income

Another important occupational characteristic was the type of ownership of a particular enterprise. In the survey, five main types of ownership are distinguished, i.e. ownership by a private household, by a private enterprise, by a group, by a state-owned enterprise and ownership by a cooperative. The vast majority of fishing enterprises were owned by private households (Table 5).

TABLE 5
Ownership pattern of fishing vessels

Only six percent and five percent of the fishing enterprises are owned by private enterprises and groups, respectively. Less than two percent of the sample consists of fishing vessels owned by state-owned enterprises and cooperatives.

The use of credit by fishers and their credit needs thus relate mainly to private households and only in a limited way to private enterprises and joint liability groups. They might also not be directly applicable to state-owned enterprises and cooperatives.

Regarding the fishing fleet operating in Vietnamese waters their horsepower categories, as an indicator of fishing capacity (Table 6) and also of the scale of capital investment was investigated.

TABLE 6
Capacity of fishing vessels operated by fisherfolk

TABLE 7
Self-financing by fisherfolk of purchase/construction of fishing boats over last three years

The data suggest that about half of the fishers included in the sample owned and operated inshore fishing vessels of less than 80 horsepower. Thirty percent of the fishers owned fishing boats of less than 45 HP, which were the most common inshore vessel in Viet Nam and accounted for 85 percent of all motorized fishing vessels in Viet Nam, which in turn accounted for 67 percent of all fishing vessels, the remaining ones being non-motorized vessels.

The vessels of less than 45 HP also included some inland fishing vessels with 50-80 HP. These constituted the most catch efficient segment of Viet Nam’s inshore marine capture fisheries sector. Fishing boats with a capacity from 90-135 HP and 140-390 HP fall under the category of offshore fishing boats and nine percent and 34 percent, respectively, of the respondents are owners and operators of these types of vessels. Fishing vessels with more than 400 HP engine capacities are capable of deep sea fishing operations. Eight percent of the fishing vessels owned by the respondents fell under this category.

2.3 Present use of credit

Self financing of capital investment

The survey included fishing enterprises that invested their own capital resources. Investment levels seemed to be related to small and medium-size inshore fishing units as well as to offshore fishing vessels (Table 7).

The majority of fishers and fishing enterprises (80 percent) were relatively evenly distributed over an investment range, from below VND 6 million (US$400) to VND 500 million (US$33 333) over the previous three years, which suggests small to medium-scale inshore fishing activities. Another 10 percent of the sample had invested between VND 520 and 1000 million ($34 667-$ 66 667), which was sufficient for both, medium-scale inshore capture fishing and offshore fishing depending on other investment finance such as loans.

The remaining 10 percent of the sample invested between VND 1100-6000 million ($73 333-$ 400 000) of their own financial resources into fishing vessels over the last three years. These levels of investment seem to be appropriate for offshore fishing activities.

The investment patterns in the northern, central and southern regions were significantly different (Table 8). In the southern and central region, self-financing was considerably higher than in the northern region. In the northern region, almost all respondents (98 percent) invested less than VND 500 million in their fishing enterprises, while 20 percent of the respondents in the central region and 29 percent of the respondents in the northern region of Viet Nam invested between VND 520 and 6 000 million ($34 667-$400 000) over the last three years.

TABLE 8
Self-financing by fisherfolk of purchase/construction of fishing boats over last three years by region

¹ Cumulative percentage.

This picture was even more polarised in the highest investment range i.e. VND 1 100-6 000 million. Here only one respondent in the north can be found while 8 and 14 percent in the southern and central region, respectively, fell into this category. Higher self-financing investments in the southern and central regions of Viet Nam probably reflect the larger involvement in offshore fishing, which was more capital intensive and thus requires larger capital investments through self-financing or credit.

Credit financing of capital investments and sources of credit

The amount of loans taken over the last three years is shown in Table 9. Borrowing money to purchase and construct fishing vessels was very common among the fishermen interviewed. Sixty eight percent of the fishermen borrowed money during the last three years for the purchase and construction of fishing boats.

TABLE 9
Credit borrowed for capital investment of fishers by region

¹ Cumulative percentage.

Considerable differences were observed between the northern, southern and central region of Viet Nam. The northern region had the highest proportion of credit recipients with 92 percent, followed by the southern region with 65 percent and the central region with 55 percent.

In the southern region for example, the share of respondents, who borrowed more than VND 400 million over the last three years for the acquisition of fishing boats was as high as 36 percent. In the central region, the share was still as high as 29 percent while in the northern region, only 5 percent of the respondents received loans of 400 million VND and more during the last three years.

As far as the lending periods were concerned, 34 months was the average term of a loan. While most of the loans were thus medium-term loans with a repayment period of 3 years, a few respondents had also taken long-term loans of lending periods of up to 10 years while others had taken short-term loans.

The Viet Nam Bank for Agriculture and Rural Development (VBARD) was by far the most important main sources of credit accounting for 2/3 of the total credit supply followed by state-owned commercial banks and the Development Assistance Fund of Viet Nam (DAF) (Table 10). Informal sources such as moneylenders, business partners, friends and relatives only account for seven percent of the total credit supply for capital investment purposes.

TABLE 10
Sources of credit for capital investment purposes available to fisherfolk and their uptake

It is interesting to note that the Social Policy Bank hardly plays any role of providing credit for fishing boats as far as the sample covered by the survey was concerned.

Use of credit for working capital needs and sources of credit

While more than two-thirds of all respondents had taken a loan over the last three years to meet their capital investment needs, borrowing money for meeting working capital needs was much less common. Less than one-third of all respondents had taken a loan over the last three years to meet their working capital requirements.

When comparing the different regions of Viet Nam, the use of credit for working capital purposes was higher in the central part of Viet Nam (38 percent) and lower in the southern and northern regions with 25 percent and 26 percent, respectively.

The amount of funds borrowed by individual fishermen and fishing enterprises for meeting their working capital requirements ranged from VND 3 000 000 ($200) to as much as VND 400 000 000 ($ 26 667) (Table 11).

TABLE 11
Amount of credit for working capital borrowed by fisherfolk

Almost half of those, who took a working capital loans over the last three years borrowed an amount not exceeding VND 20 000 000 ($1 333). Thirty eight percent of the respondents borrowed between VND 22 000 000 and 75 000 000 ($1 467-5 000) while only 15 percent borrowed a larger amount ranging from VND 100 000 000 to 400 000 000 ($6 667- 26 667).

Regional variation in working capital credit requirements is shown in Table 12. More than half of the respondents in the southern region of Viet Nam took working capital loans exceeding VND 22 000 000 (US$1 467) over the last three years and in the south, 17 percent even borrowed amounts ranging from VND 100 000 000- 400 000 000 (US$6 667-26 667).

TABLE 12
Amount of credit for working capital borrowed by fisherfolk by region

When comparing the main sources of loans for working capital with the sources of loans for capital investment, informal sources such as moneylenders, business partners, friends and relatives were by far the most important source (Table 13). They accounted for more than half of the working capital finance. As in capital investment finance state-owned commercial banks also played an important role providing working capital credit for more than 20 percent of the respondents.

TABLE 13
Sources of credit for working capital purposes available to fisherfolk and their uptake

Loans in kind

In addition to cash credit, loans in kind also played an important role. One quarter of all fishermen interviewed had taken a loan in kind. It is interesting to note that borrowing in kind was less common in the northern region than in the southern and central region (Table 14).

TABLE 14
Credit in kind taken by fisherfolk by region

While in the northern region only slightly more than one-third of all respondents had taken a loan in kind, 77 percent of all respondents in the South had done so and 91 percent of the respondents in the central region.

It seems that possibly the larger share of small-scale traditional inshore fishermen in the sample in the central and southern region were responsible for a different pattern of credit use, which was characterised by less cash credit for capital investment and working capital needs and relatively more credit in kind. Fuel and ice were the primary reason for the credit in kind to fishermen while fishing equipment and supply of salt were secondary (Table 15). Wholesalers were the most important source, accounting for more than 85 percent of all fuel and ice supplies on credit. This overall picture strongly reflects the situation in the central and southern regions of Viet Nam where most of the credit was in kind.

TABLE 15
Items supplied on credit to fisherfolk

In the southern region, wholesalers and middlemen accounted for 88 and 86 percent, of the fuel and ice supply on credit in kind to the fishers, respectively. Similarly, in the northern region, 96 percent of all ice and fuel supplied on credit came from wholesalers and middlemen. In contrast, in the central region, processors played the most important role regarding the supply of fuel and ice on credit. They accounted for half of the supply of ice in kind while wholesalers and middlemen only account for one quarter of the supply of ice and for one third of the supply of fuel.

TABLE 16
Overdue loan repayment of fisherfolk by region

Overdue loans

Information provided by the respondents regarding overdue loans should be treated with caution. First of all, for obvious reasons, respondents might not want to disclose that they are not repaying loans on time. Secondly, they might not be fully aware as to when a loan was classified as overdue and thus their assessment might differ from the classification and assessment of the lender, who provided the loan.

With these precautions the following picture can be presented. More than one fifth of the respondents, i.e. 27 percent admit having had an overdue loan during the last three years.

There were considerable regional differences. The occurrence of overdue loan repayment was very high in the southern region, high in the central region and very low in the northern region.

With reference to the information presented earlier in this section, it is interesting to note, that the region with the highest use of credit in terms of volume and size of individual loans i.e. the southern region, also has the highest occurrence of overdue loans while the region with the lowest use of credit and individual loan sizes has by far the lowest occurrence of overdue loans.

The main reasons stated by the respondents for overdue loan repayment are given in Table 17.

TABLE 17
Main reasons for overdue loans offered by fisherfolk

Almost three-quarters of all respondents gave natural calamities as the main reason for overdue loan repayments. Twelve percent of the respondents gave too many fishermen (and therefore reduced catch and profits) as main reason for overdue loan repayments and that half of the 14 percent who cited other reasons cited a decline of fisheries resources.

Looking at regional differences, natural calamities are given as the main reason for overdue loan repayment in all three regions (Table 18). The argument of too many fishermen and too many producers competing with each other was mainly found in the south.

TABLE 18
Reasons for overdue loans offered by fisherfolk by region

2.4 Future credit needs and sources

Twenty-five percent of fishers interviewed, planned to buy more equipment and to expand fishing operations in the year of this the study. The number of fishers, who wanted to acquire more equipment for expanding their fishing operations, was higher in the central region (44 percent) than in the southern (17 percent) and northern region (19 percent). In terms of the volume of investment needed, the respondents asked for similar amounts as spent over the previous three years.

Around 28 percent planned to invest in the highest range, i.e. VND 300 000 to 1 400 000 ($20 000-93 333). Thirteen percent planned to invest between VND 130 000 and 250 000 ($8 667-16 667). The remaining 59 percent were relatively evenly distributed over an investment range of VND 1 000-127 000 ($67- 8 467).

The regional distribution of planned investments for the expansion of fishing operations is shown in Table 20.

The future demands for investment for the expansion of capture fisheries shows a similar regional pattern as the selffinancing and credit for capital investment discussed earlier in this section. The southern region has the highest demand, followed by the central regional.

TABLE 19
Future investment requirements of fisherfolk wishing to expand their fishing operations

TABLE 20
Future investment requirements of fisherfolk wishing to expand their fishing operations by region

2.5 Perception of accessibility of credit

When comparing the accessibility of the various sources of credit, the following picture emerges. Among the various sources of credit available, the ones judged most easily accessible were clearly informal sources such business partners, friends and relatives with the exception of moneylenders though, who were found difficult to access.

Financial institutions, cooperatives and NGOs were also found difficult to access. Among these, VBARD and the Social Policy Bank received the relatively best evaluations.

This overall trend was more pronounced in the northern and the central regions, while respondents in the south had a much more positive perception of the accessibility of financial institutions.

Regarding difficulties in obtaining and using credit, the following reasons were cited in the case of financial institutions: i) complicated lending procedures and certification requirements, ii) collateral requirements, iii) inflexible loan repayment schedules and short repayment intervals and periods, iv) lack of knowledge about lending procedures, and v) lack of opportunity to take a second loan. In the case of informal sources of credit, high rates of interest and small size of loans were seen as major drawbacks.

TABLE 21
Assessment of accessibility of credit sources to fisherfolk

2.6 Credit programmes in support of offshore fisheries in Viet Nam

In the context of the implementation of project MTF/VIE/025/MISC and as a followup to interviews of key informants reported in the first section, assistance was provided under FAO’s Regular Programme to the Development Assistance Fund of Viet Nam (DAF) for the review of the fund’s offshore fishery credit programme and to make recommendations for a reorientation of the programme towards more sustainable, responsible and economically efficient offshore fisheries.

After the mission, FAO sponsored a study tour for representatives of DAF to Malaysia to observe offshore and deep-sea fisheries development in Malaysia and supporting credit programmes and to draw conclusions for offshore fisheries development in Viet Nam.

The conclusions and recommendations of FAO’s mission for re-orientation of DAF’s credit programme in support of offshore fisheries are summarized below.

Background

In response to a request by the honourable Ngyuen Ngoc Hong, Vice Minister of Fisheries of Viet Nam, and Mr Nguyen Quang Dung, Deputy-Director General of DAF, to the Assistant Director-General of the Fisheries Department of FAO, FAO headquarters dispatched a mission to review the credit programme of the Development Assistance Fund (DAF) in support of off-shore fisheries in Viet Nam

The mission consisted of Dr Uwe Tietze, Fishery Industry Officer, FAO, Rome, and Mr Rolf Lasch, FAO consultant. During its fieldwork, the mission was supported by Mr Pham Duc Hoa, Deputy Director, Local Credit Department, DAF head office, and by Ms Le Hai Ha, Specialist-Interpreter from DAF head office.

The mission reviewed legal and regulatory documents and secondary information pertaining to the credit programme in support offshore fisheries in Viet Nam as well as recent fisheries statistics. The materials reviewed included:

i. Legal and regulatory documents such as Decision 393/TTg, dated 9 June 1997 of the Prime Minister of Viet Nam on Promulgation of Regulation of Credit Utilization and Management Invested in Projects to Renovate and Build New Offshore Fishing Vessels and Service Ships for Offshore Fishing.

ii. Decision 159/1998/QD-TTg, dated 3 September 1998 on Revision of Some Provisions of Decision 393/TTg, dated 9 June 1997 of the Prime Minister of Viet Nam on Promulgation of Regulation of Credit Utilization and Management Invested in Projects to Renovate and Build New Offshore Fishing Vessels and Service Ships for Off-shore Fishing.

iii. Decision 64/2000/QD-TTg dated 7 June 2000 on the Amendment of Lending Interest Rate, Loan Maturity and Recovery of Regulation of Credit Utilization and Management.

iv. Findings of the recent evaluation of the credit programme in support of offshore fisheries in Viet Nam by the Ministry of Fisheries and the Ministry of Finance including statistics on the number of offshore fishing vessels built under Decision No. 393/TTg from 1997 to June 2001.

v. The number of offshore fishing vessels built under Decision No. 393/TTg from 1997 to June 2001 by economic sector, fishing method, total catch, financial efficiency/profitability, loan repayment, type of engine, qualification of crew etc.

vi. A report on the performance of development investment credit in support of construction and renovation of offshore fishing vessels by DAF, prepared at DAF head office in April 2002.

vii. An assessment of the total marine catch in Viet Nam in 2000 by an advisory group of the Ministry of Fisheries estimating the total catch and catch value of the marine capture fisheries in Viet Nam for different fleet segments including those financed under the development investment credit programme of the Development Assistance Fund (DAF) in support of off-shore fisheries in Viet Nam,

The secondary information (in iv-vii above) was verified and supplemented through a field mission and discussions with DAF borrowers and operators/managers of fishing vessels and fishery enterprises, representatives of provincial fisheries departments, DAF branches and People’s Committees in Haiphong, Thua Thien-Hue, Da Nang, Ben Tre and Ho Chi Minh City as well as with DAF head office representatives.

Observations and findings

Lending policies and procedures

The findings and recommendations of the recent evaluation of the investment credit programme in support of developing offshore fisheries in Viet Nam by the Ministry of Fisheries and the Ministry of Finance and the findings and recommendations of the report on the performance of investment credit in support of construction and renovation of offshore fishing vessels by DAF prepared at the DAF head office in April 2002 were fully endorsed by the mission.

On the positive side, the credit programme in support of offshore fisheries had a positive impact on the expansion of offshore fisheries in Viet Nam. More specifically, it enabled coastal fisherfolk households, member of cooperatives and state-owned enterprises to participate in the process of diversification from inshore fisheries to offshore fishing. It thus contributed to the creation of employment and income. It also helped to supply raw materials for the rapidly expanding fish processing and export industry of Viet Nam. It addition, it enhanced food security of the population in Viet Nam by providing fish supplies for domestic consumption.

On the negative side, the present lending policies, procedures and institutional arrangements of the credit programme in support of offshore fisheries in Viet Nam seemed to have contributed to some undesirable results of the lending programme, which include economic inefficiency of fishing operations in many cases and overdue repayment of loan principal and interest.

While the question of the availability of commercially viable offshore fisheries resources cannot be satisfactorily answered due to a lack of adequate fisheries resources information (see also the following section), there seem to be a number of shortcomings in lending policies and procedures as well as in fishing and fish marketing operations, which had reduced the economic and financial efficiency of the programme.

These shortcomings included the following:

• Focus of programme on poverty reduction and employment generation and subsequent targeting of rural households and joint groups/cooperatives as beneficiaries of credit programme. While poverty reduction and employment generation was certainly a very important concern and issue, particularly for the local Government, the outcome of the credit programme in support of offshore fishing casts some doubts on whether offshore fishing was a sustainable and viable alternative for the majority of rural households, which have so far only been involved in inshore fishing.

• Focus of the programme on poverty reduction and employment generation together with subsidised interest rates and relaxed collateral requirements might have contributed to the perception and expectation of some borrowers that the credit programme was essentially a welfare programme and that ultimately the credit provided might be converted to a grant and thus does not need to be repaid.

• Limited technical advice and guidance and related training. Offshore fishing requires different technical and management skills to inshore fishing. The outcome of the credit programme in support of offshore fishing suggests that unless technical training and information was provided on commercial species to be targeted, fishing grounds and seasons, handling and marketing of catch, on compatible and complementary gear combinations to be used to enhance economic efficiency, on business management and accounting and unless training was provided for skippers, engineers/mechanics, master fishermen and fishing crew in above areas, it was difficult to carry out offshore fishing in an economic efficient manner.

• Provision of credit to cooperatives/joint group of fishermen. Under the programme, credit was provided to recently established groups of fishermen and cooperatives with no proven record of business operations and proper management and which, in many cases, did not comply with existing regulations.

• The use of multi-agency approach: A variety of agencies have been involved in identification of borrowers, technical and financial appraisal of loan applications, registration and licensing of fishing vessels and gears, monitoring of fishing vessel and loan use etc. These include local Government units, i.e. People’s Committees, provincial fisheries departments, DAF branches, fisheries resources protection departments, border defence forces etc. The multi-agency approach lacked the required co-ordination which seemed to have contributed to poor monitoring of loan use and follow-up action in cases of late loan repayment, lack of compliance with insurance requirements of fishing vessel and crew, etc.

• Unrealistic production plans, feasibility studies and appraisal of investment proposals and loan applications. In many cases, production plans prepared by investors with guidance of provincial fisheries departments were not realistic. The number of fishing days, volume, value of catch, species composition and share of exportable catch was over estimated and operation costs were under estimated. Recent increases in fuel price further deteriorated the profitability of fishing operations.

• Insufficient borrower’s equity and working capital. Borrowers who were selected, were unable to contribute to the stipulated equity contribution Instead they had to borrow money from informal lenders at high rates of interest and the resulting loan repayments rendered their fishing operations unprofitable resulting in defaults/overdue repayment of interest and principal to DAF. Furthermore, as working capital requirements were not included in many investment proposals, additional funds had to be borrowed informally, which further deteriorated the actual cash flow.

• Inadequate size of investment and scale and type of operation for offshore fishing. In many cases the type and size of fishing vessel financed seems to be inadequate for offshore fishing. The need for carrier/service vessels, which are needed, for example, for the operation of purse seine vessels and drift net vessels, was not considered when preparing and approving investment proposals. It was also not properly considered that offshore fishing was rarely carried out by single vessels; usually several vessels operate in the proximity of each other or by fleets of vessels.

• Inadequate consideration of fishing ports and landing sites. When preparing investment proposals and appraising loan applications, the question as to in which fishing port the catch would be landed and to whom it would be sold was not properly considered and indicated in the loan application.

• No regulatory and legal framework for liquidation of assets and transfer of ownership of vessel. A proper regulatory and legal framework for speedy liquidation of assets and transfer of ownership of vessel and related organizational arrangements as to who has to take action does not seem to be in place.

• Lack of guidance on sustainable level of fishing efforts in offshore fishing. The lack of information on the number of fishing vessels and fishing gear, which can be operated on Viet Nam’s offshore fishing grounds in a sustainable manner, hampers sound investment decisions. In order to prevent over investment in offshore fishing capacity and consequent damage to fishery resources, there is an urgent need to manage fishing capacity and establish ceilings for different categories of fishing vessels and fishing gear.

• Poor information and forecast on market demand and prices for commercially important species in domestic and export markets. Investment decisions and appraisal of loan applications are further hampered by the lack of information on present and future demand and prices of commercially important species.

• Subsidy elements in offshore fisheries credit programme. Subsidised interest rates and credit conditions such as relaxation of collateral requirements, writing-off loans and extending loan maturity periods, while temporarily supporting sector adjustments, may hamper export prospects in future, taking into consideration Viet Nam’s bid to join the WTO. Importing countries might take subsidy elements as reason to threaten to restrict imports of fish products from Viet Nam as it has happened in other countries in the past. Subsidized credit may also contribute to overcapitalization and to unsustainable levels of exploitation of fisheries resources. Furthermore, subsidised credit does not contribute to enhance economic efficiency of the Vietnamese fishery export sector and might, in the medium and long term weaken Viet Nam’s competitiveness in the global seafood market. Efficient use of capital and competitiveness becomes all the more important as other competitive advantages such as lower raw material prices and wages will gradually disappear as a result of overall improvements of the economy.

Status and economic performance of offshore fisheries

Current situation

Viet Nam has a coastline of more than 3 200 km, which extends from Mong (Quangh Ning) in the North to Ha Tien (Kein Giang), in the Southwest. The territorial waters of Viet Nam are about 226 000 km². The EEZ is approximately 1 million km². Four hydrologically defined coastal regions can be distinguished, which are also considered as fisheries management areas i.e. the Bac Bo (Tonkin) Gulf in the North, Central Viet Nam, South East Viet Nam and South West Viet Nam.

The three major areas for marine demersal fisheries are located in the Bac Bo Gulf off the Red River Delta in North Viet Nam, in the coastal waters off the Mekong Delta in South East Viet Nam and in the Gulf of Thailand off the South West coast of Viet Nam. Pelagic fisheries are operated predominantly along the steep continental shelf in Central Viet Nam as well as in Southeast Viet Nam.

Most marine species are tropical species with short life cycles and high reproduction speed. Besides, in offshore waters, there are several migratory species. Around 70 percent of the approximately 1 900 marine fish species, which have been identified are demersal species, inhabit inshore and coastal areas of less than 50 m deep. Around 130 fish species or about 6 percent are of economic importance. Crustacean (1 600 species) and mollusc (2 500 species) diversity is high as well, and many of these are of economic importance.

The total potential of fisheries resources was estimated at 4.2 million tonnes, the annual sustainable production was assessed at about 1.7 million tonnes. Surveys of deep-water pelagic resources carried out by Japanese semi-commercial vessels investigated mainly tuna stocks in distant waters off Central Viet Nam. These resources are highly migratory the fish staying in Vietnamese waters for only a short period.

Total marine catches reached about 1.3 million tonnes in 2001. Eighty two percent of the marine catch consisted of fish while the remainder consisted of shrimps, crabs, lobsters, squid, cuttlefish and other species. Over 60 percent were used for domestic consumption, 18 percent for export and around 20 percent for other purposes.

In 2000, Viet Nam had about 76 000 motorized fishing vessels with a total engine capacity of around 3.2 million hp as well as a large number of non-motorised artisanal boats. Among the motorised vessels, there were more than 6 000 units with an engine capacity of over 90 hp which are capable of offshore fishing. Only about 100 vessels were equipped with engines of 400-500 hp, the capacity required for deep-sea fishing operations. This fleet comprised trawlers and purse seiners. Trawlers were used in waters of 35 to 80 m depths mainly in south-eastern waters, whereas purse seiners fish pelagic species fished in deep waters, mainly off the central region.

In terms of fishing gear, trawl gear accounted for the biggest portion (31 percent) followed by drift gillnets (21 percent), longlines (19 percent), purse seines (8 percent) and other fishing gears such as lift nets, handlines etc., which are mainly used in coastal waters^[13]. Drift gillnets are widely used in the Northern provinces.

Marine fisheries account for 65 percent of the total fish production of Viet Nam. The remaining 35 percent come from aquaculture and fresh water fisheries. Fisheries resources in coastal waters below 50-m depth are considered to be fully exploited. In 2000, offshore catches accounted for up to 35 percent of total marine fish landings.

Observations and findings related to offshore fishing

According to Government regulations, offshore fishing is defined as fishing in waters deeper than 30 m in the Gulf of Tonkin, off Viet Nam’s South Eastern and South Western coast and in the Gulf of Thailand. Fishing off the central part of Viet Nam with its narrow continental shelf, is defined as offshore fishing since the waters are than deeper than 50 m. Fishing vessels with more than 90 hp are defined as offshore vessels.

Under the offshore lending programme, 1 204 new offshore vessels were built and 98 offshore vessels were renovated since 1997. Almost all vessels were introduced in the period 1997 to 1999, when 1 065 new offshore vessels were added to the fleet.

Among the vessels introduced with credit support, 583 operate with trawl nets, 325 units with purse seine nets, 175 vessels with lines and 138 boats with driftnets, while the remaining units use other gears. According to DAF statistics, the offshore vessels introduced with credit support landed about 25 000 tonnes in 1997, 50 000 tonnes in 1998, 95 000 tonnes in 1999 and 116 000 tonnes in 2000. In 2001, about 60 000 tonnes were caught in the first 6 month of the year so that it can be expected that the total catch by these offshore vessels will stabilize at 120 000 tonnes per year.

Unfortunately, the economic performance of the vessels were poor. Basing on DAF records, among the 1 302 vessels introduced/renovated, only 420 units were operating profitably at the end of 2000. Around 427 units just covered their cost of operations while 410 newly built units suffered operating losses.

Shortcomings

During field visits, a series of discussions were held with representatives of DAF Branches, representatives of provincial People’s Committees and Fisheries Agencies as well as with owners and operators of fishing vessels and fish processing plants from the private sector and state-owned enterprises (SOEs). The following main reasons for unsatisfactory economic efficiency of offshore vessels financed under the offshore fishery credit programme were identified.

• limited knowledge of fishing grounds, fishing seasons and available species in offshore waters,

• inappropriate fishing boats regarding engine capacity and quality, fishing and fish finding equipment and gears and preservation and fish handling facilities,

• lack of skills for off-shore fishing both on the part of the fishermen as well as other crew members,

• limited marketing facilities onshore.

It was found that there was limited knowledge of fishing opportunities with regard to suitable fishing grounds, fishing seasons and target species. This lack of knowledge was reflected in unrealistic feasibility studies relating to production (only 70-80 percent of the targeted catch was actually caught) and much lower revenues achieved (30-50 percent of the estimated amount) due to an unfavourable composition of catch containing a larger share of low-priced species as expected. An unexpectedly large share of offshore landings was sold on the domestic market instead of being exported and prices were consequently lower than expected.

This limited knowledge of fishing opportunities also resulted in the selection of inappropriate fishing boats particularly regarding to engine capacities and gears. Many fishermen plan to increase the engine capacity to about 350 hp and complement their fishing gear in order to be able to fish all year round and take advantage of two or three fishing seasons. In addition, low quality of locally built fishing boats and some types of imported engines as well as lack of modern navigation and fish finding equipment were also mentioned as reasons for not achieving the expected results.

There were also doubts as to whether the skills and training of crew members was sufficient to successfully practice offshore fishing methods as the fishermen presently operating offshore vessels come from in-shore fishing activities.

Profitable revenues (and prices) depend on the ability of producers to supply the markets at the right time with the required products. This includes, in particular, proper planning of fishing in order to be able to deliver the required products at the right time to the right market and also proper handling of fish caught onboard and ashore. In addition to having sufficient cold storage capacity and/or refrigeration equipment onboard, some successful examples have already shown the advantages of fleet formation with 6 to 8 boats of which one boat was operating as carrier and supply vessel between fishing grounds and the landing sites/fishing harbours.

Better cooperation of offshore vessels on fishing grounds and better coordination of fishing effort also helps in locating profitable fishing grounds. It also improves safety and secures help in case of emergencies for vessels and crews. It further reduces costs especially fuel costs. It enables fishermen to supply markets with high quality products at the right time resulting in more stable and higher prices. However, this requires simultaneously quality securing handling ashore and strengthening of the market power of fishermen.

2.7 Conclusions and recommendations on credit use and needs of marine capture fisheries

General findings

The sample on the use of credit by fishers and their credit needs focused on private households and covers in a limited way private enterprises and joint liability groups. The findings of the survey might thus not be directly applicable to state-owned enterprises and cooperatives.

Demographic characteristics of fishers

• Fisherfolk (across gender and age) had adequate educational levels to make use of institutional credit facilities and comply with application and documentation procedures, and understand loan contracts and conditions as well as loan disbursement and repayment schedules. They should also be able to manage their fishing enterprises as far as they had the necessary reading writing and basic arithmetic skills.

• As far as gender is concerned, financial institutions should be aware that fishing in Viet Nam was not an exclusively male activity and that there were a substantial number of women who managed, owned and/or operated fishing boats and enterprises. Thus, public and private financial institutions should make sure that women also benefit from credit programmes for capture fisheries in Viet Nam when appraising loan applications.

Self-financing of capital investment

• The majority of fishers and fishing enterprises covered by the study i.e. 80 percent are relatively evenly distributed over an investment range from below 6 million VND ($400) to VND 500 million ($33 333) over the previous 3 years. This indicates small to medium-scale inshore fishing activities. Another 10 percent of the sample had invested between VND 520 and 1000 million ($34 667- $66 667), which was sufficient for both, medium-scale inshore capture fishing and offshore fishing depending on other investment finance such as loans. The remaining 10 percent of the sample invested between VND 1 100-6 000 million ($73 333- $400 000) of their own financial resources into fishing vessels over the last three years. These levels of investment seemed to be appropriate for offshore fishing activities.

• When comparing the different regions covered by the study i.e. the northern, central and southern region, significant differences between the regions emerged. In the southern and central region, self-financing was considerably higher than in the northern region.

Credit financing of capital investments and sources of credit

• Borrowing money to purchase and construct fishing vessels was very common among the fishermen interviewed during the survey. Sixty eight percent of the fishermen, who respondent to the respective question had borrowed money during the last three years to purchase and construct fishing boats.

• Credit acquisition varied between the northern, southern and central regions of Viet Nam. The northern region had the highest proportion of credit recipients with 92 percent, followed by the southern region with 65 percent and the central region with 55 percent.

• In the southern region, the share of respondents, who received more than VND 400 million in credit for the acquisition of fishing boats over the last three years, was as high as 36 percent. In the central region, the share was 29 percent while in the northern region, it was only 5 percent.

• The Viet Nam Bank for Agriculture and Rural Development (VBARD) was by far the most important source of credit accounting for 2/3 of the total credit supply followed by state-owned commercial banks and the Development Assistance Fund of Viet Nam (DAF).

• Informal credit sources such as moneylenders, business partners, friends and relatives accounted for only 7 percent of the total credit supplied for capital investment purposes.

Use of credit for working capital needs and sources of credit

• While more than two-thirds of all respondents had taken a loan over the last three years to meet their capital investment needs, borrowing money for meeting working capital needs was much less common. Only 29 percent of all respondents, had taken a loan over the last three years to meet their working capital requirements.

• Regionally, the use of credit for working capital purposes was higher in the central part of Viet Nam (38 percent) and lower in the southern and northern regions (25 percent and 26 percent, respectively).

• The amount of funds borrowed by individual fishermen and fishing enterprises for meeting their working capital requirements range from VND 3 000 000 ($200) to VND 400 000 000 ($26 667).

• Informal sources such as moneylenders, business partners, friends and relatives were the main sources of loans for working capital, accounting for more than half of the working capital finance. State-owned commercial banks also played an important role providing working capital credit for more than one-fifth of the respondents.

Loans in kind

• In addition to cash credit, loans in kind also played an important role. One quarter of all fishermen interviewed had taken a loan in kind. It is interesting to note that borrowing in kind was more common in the northern region than in the southern and central region.

• Credit in kind was mainly used for fuel and ice. Wholesalers were the most important source of such credit, accounting for more than 85 percent of all fuel and ice supplies on credit.

• Credit in kind was common in the northern regions of Viet Nam and to a lesser extends in the southern region.

Overdue loans

• Twenty-seven percent of fishers admitted having had an overdue loan during the last three years.

• There were considerable regional differences. The occurrence of overdue loan repayment was very high in the southern region, high in the central region and very low in the northern region.

• Almost three-quarters of all respondents with overdue loan repayments attributed this to natural calamities. Twelve percent of the respondents gave too many fishermen and subsequent low catch profitability as the main reason for overdue loan repayment

Future credit needs and sources

• Around a quarter of fisherfolk interviewed during the survey, planned to buy more equipment and to expand fishing operations in the same year as the study was carried out. The number of fishers, who wanted to acquire more equipment for expanding their fishing operations, was higher in the central region (44 percent) than in the southern (17 percent) and northern region (19 percent).

• In terms of the volume of investment needed, the respondents asked for similar amounts as spent over the previous three years.

Perception of accessibility of credit

• Informal sources of credit such as moneylenders, business patterns, friends and relatives were judged as more easily accessible than the formal financial sector.

• In the case of formal financial institutions, cooperatives and NGOs, VBARD and Viet Nam Social Policy Bank (SPB). received the best evaluations from the respondents regarding their accessibility.

• Regionally this overall trend was even more pronounced in the northern and the central region, while respondents in the south have a much more positive perception of the accessibility of financial institutions.

Recommendations mainly for coastal and inshore fisheries

i. Credit plays an important role as far as financing of capital investments and working capital requirements in capture fisheries in Viet Nam are concerned and that there was a significant demand for credit for future investments.

ii. The survey clearly showed that there were regional imbalances and knowledge gaps between supply and demand of credit for capture fisheries. While the present use of credit by the surveyed respondents was by far the lowest in the central region of Viet Nam, future demand for credit was by far the highest in the same region. Financial institutions should reorientate their lending policies towards the central region of Viet Nam with a view to correct imbalances in the supply of credit and to adjust credit supply to the existing demand.

iii. While financial institutions play an important role in providing medium- and long-term credit for capital investments, their role in providing short-term credit for working capital needs was limited. The Social Policy Bank (SPB). presently plays only a minor role in providing credit for capture fisheries in Viet Nam. Keeping in mind that poverty in coastal and inland fishing communities is still a major concern, it is recommended that the Social Policy Bank (SPB) introduces a micro-finance programme for coastal and inland capture fisheries, which particularly aims at poverty alleviation through short-term credit, both for capital investment and working capital needs and which also enhances the economic and social role of women in fishing communities. Group lending, linking credit to savings mobilisation and supporting micro-enterprises outside the fisheries sector and fish farming should be an important element of such a micro-credit programme. FAO could provide technical support in the design and implementation of such micro-finance programmes.

iv. Lending procedures and loan documentation in lending for fisheries should be streamlined and simplified in order to make them more user-friendly and efficient and to reduce the transaction costs of financial institutions.

v. Financial institutions should prepare and provide easily readable leaflets for fishers in appropriate languages, which explain terms and conditions of loans and obligations and privileges of borrowers.

vi. Monitoring of loan use should be improved and clear criteria should be introduced for how to deal with overdue loans including rescheduling of loan repayment and additional lending with a view to reduce the percentage of overdue loans. Financial institutions might also want to introduce and share credit ratings of borrowers, which might facilitate the appraisal of loan applications and improve the quality of lending.

vii. Keeping in mind the high level of exploitation of coastal and inland water resources, prior to approving loan applications for in-shore fishing and fishing in inland water bodies, advice should be sought from the Ministry of Fisheries as to the level of exploitation of fisheries resources in order to avoid overcapitalization and overexploitation of fisheries resources and degradation of the natural environment. Advice should also be sought as to which fishing methods might be harmful in certain areas and should not receive credit support.

The above recommendations mainly relate to coastal fishing and inland fisheries and focus on poverty alleviation and conservation of fisheries and other natural resources. The recommendations for offshore fisheries are described in the following chapter.

Recommendations for offshore fisheries

The measures suggested below for consideration by the competent Government authorities and by DAF aim at re-orienting the offshore fisheries credit programme in Viet Nam so that its financial viability improves as well as its contribution to the development of economically and financially efficient marine offshore fisheries. At the same time, the recommendations try to take into consideration the concerns of provincial and local Government authorities and the need to safeguard the economic status and well-being of those investors, who belong to the low income categories and who are genuinely unable to carry out off-shore fishing operations in an economic and financially efficient manner and to repay their loans.

The recommendations are as follows:

Recommendations regarding the operation of DAF

i. Prior to continuing the credit programme, DAF, the Ministry of Fisheries and the concerned provincial and local Government authorities should tackle the problem of overdue loans and default. Each case of overdue loans should be reviewed with the concerned borrower. Overdue loans should be classified into possibly two categories i.e. loans where an improvement of the economic performance can be expected within the following year with or without an additional investment and loan disbursement and loans where improvements cannot be expected. The classification could draw on the classification of loans already made during the review of the offshore fisheries credit programme by the Ministry of Finance and the Ministry of Fisheries.

ii. The review of overdue loans should be jointly carried out by representatives of the concerned agencies, i.e. representatives of the concerned DAF branch, the Ministry of Fisheries and concerned provincial and local Government authorities. A special format should be devised by the DAF head office, which should be followed in the review and in which the findings are to be documented/reported. In cases where improvements are expected, a new cash flow projection should be prepared and a corresponding rescheduling of loan repayment. Working capital requirements and the ability to provide equity in case of additional credit needs should be fully taken into consideration as well as the capacity of the borrower and compliance with all regulations including insurance and crew certification requirements.

iii. In case of borrowers with no prospects of improving the economic efficiency of their fishing operations, transfer of ownership of the vessel should be initiated as recommended in the report on the performance of development investment credit in support of construction and renovation of offshore fishing vessels by DAF, prepared at DAF head office in April 2002.

iv. Transfer of the ownership of the vessel should also be considered in the cases were borrowers, are unwilling to cooperate in the review of their overdue loan. Regarding the repayment of overdue principal and interest by the original borrower, the recommendations contained of above DAF Report are generally endorsed.

v. In cases of genuine default and lack of capacity of borrowers to improve the economic performance of their enterprise and to repay the overdue principal and interest, the People’s Committee may suggest that after thorough examination, the overdue principal and interest be written off after the transfer of ownership to avoid economic hardship. The limiting of such action to borrower households, which are classified by their respective Commune as belonging to the poor income category should be considered.

vi. New credit to enhance the economic and financial efficiency of offshore fishing and related services such as fish handling, processing and marketing and on related shore based facilities should be considered. New lending should take into account detailed working capital requirements. Lending terms and conditions should be made more stringent and subsidy elements are to be reduced and ultimately eliminated. Credit for construction of new offshore vessels should be limited to the replacement of old vessels.

vii. New loans should only be given to applicants with good credit rating i.e. to those who have fully repaid loans taken previously from other financial institutions and banks.

viii. The prevailing market interest rates in Viet Nam should be applied. Interest rates should take into consideration the internal rate of return of the investment. The loan repayment periods, should not extend beyond those presently used. The shorter the repayment period provided in accordance with the activity related cash flow, the lower the cost of credit to the borrower and the sooner can the repaid principal be used again for further investment.

ix. As far as loan security requirements are concerned, these should include assets of the borrower such as land or houses as collateral in addition to the hypothecation of assets financed through credit, provided the borrower owns any such assets.

x. Regarding equity requirements, these should be expanded up to 50 percent of the investment requirements depending on the financial resources of the borrower.

xi. Prior to loan disbursement, supporting documentation that the borrower has met all requirements including the deposit of equity contribution, collateral, vessel and crew insurance, licence for fishing gear and vessel, certificates of skipper and engineer etc should be thoroughly reviewed. Only after it has been confirmed that all requirements and obligations have been met should the loan be disbursed.

xii. It is also recommended that DAF should play a more active role in the preparation of investment proposals and in the technical appraisal of investments. DAF should issue guidelines and devise a format as to how investment proposals should be prepared, integrating both technical and financial aspects. These guidelines and formats should then be used by investors and local Government authorities including provincial fisheries departments in the preparation of investment proposals for offshore fishing, another format should be prepared for the technical and financial appraisal of loan applications at DAF branch and/or head office level.

xiii. As far as the monitoring of loan use and repayments are concerned, guidelines should be prepared, which clearly specify the role of local government authorities, the provincial fisheries departments and DAF branches. A schedule should be devised, which clearly specifies what action is to be taken by whom and when in case of late repayment of loan interest and principal. It should also be specified when loan repayment were considered to be in default, so that assets can be liquidated and collateral can be claimed by the lending institution.

xiv. The strengthening of DAF’s capacity to carry out lending activities for offshore fisheries as well as aquaculture and fish processing and marketing, the employment of fisheries specialists at head office and some branches should be considered. Their officers could then provide training to staff of DAF branches in the preparation of feasibility studies and technical appraisal of fisheries, fish processing/marketing and aquaculture projects, design and update formats and guidelines for feasibility studies and technical appraisal, monitor the performance of fisheries credit operations and liase with the Ministry of Fisheries and provincial fisheries departments and other concerned Government agencies. In addition they could establish and maintain a database at DAF head office related to fisheries investment and credit. It is further recommended that selected DAF officers attend short-term training courses and conferences/workshop related to fisheries investment and credit to be better informed on pertinent issues in fisheries and aquaculture.

Recommendations regarding the Ministry of Fisheries and the Provincial Fisheries Departments

i. The Ministry of Fisheries and the Provincial Departments of Fisheries provide guidance to DAF and other financial institutions on sustainable level of fishing efforts in offshore fishing. Such guidance should include information on the number of fishing vessels and fishing gear, which can be operated on Viet Nam’s offshore fishing grounds in a sustainable manner and should be provided in the form of a an annual report in order to prevent over-investment in offshore fishing capacity and consequent damage to fishery resources. In addition, there is an urgent need to manage fishing capacity and establish ceilings for different categories of fishing vessels and fishing gear.

ii. Costs and earnings data of major commercial fishing fleets of Viet Nam should be made available to lending institutions. This information should be made available to DAF regularly for use in preparation and technical and financial appraisal of investment proposals. Presently such information is collected through a sample survey carried out by the Research Institute for Fish Production and analysed with assistance of the Institute for Fisheries Economics and Planning.

iii. Information and forecasts should also be provided by the Ministry of Fisheries to DAF and other financial institutions on market demand and prices for commercially important species in domestic and export markets as well as on fish imports and exports. This could be done in the form of quarterly reports to be compiled by the Fishery Information Centre of the Ministry.

iv. Short-term fiscal measures in case of rapidly increasing fuel prices may be considered. The price of fuel and lubricants is an important cost component in offshore fishing. Unpredicted and steep increases in fuel prices related to increases in world marketing prices could have a very negative impact on the profitability of fishing enterprises and on their economic survival. The Ministry of Finance and the Ministry of Fisheries might want to consider cushioning the impact of rapid fuel prices increases on the fishing industry through reimbursement of taxes. Measures should be limited for fixed periods of time. Fuel tax reimbursement could be invoked for example after fuel prices have increased beyond a certain percentage over a given period of time.

v. The procedures and institutions involved in the registration of fishing vessels and gear should be consolidated. At present fishing vessels and fishing gear are licensed by and registered with different agencies. The fisheries resource conservation departments of the Ministry of Fisheries licenses vessels longer than 20 metres while the local government authorities, i.e. provincial fisheries agencies/departments, license vessels shorter than 20 metres. On the other hand, the border police monitor operations and compliance with regulations. To improve coordination and cooperation of fisheries activities and inward investments the (a) control (b) monitoring and reporting of fishing fleets and effort, and (c) registration and licensing of fishing vessels and gear, these responsibilities should be unified under one agency.

Recommendations to improve the economic efficiency of offshore fisheries

In general, to improve the economic performance of the offshore fleet, objectives specific to production as well as on the marketing are required. The following recommendations are therefore divided into such, which should (a) improve fishing and fish handling onboard and ashore as well as (b) marketing. The recommended measures firstly focus on improving catch and secondly on the enhancement of quality. In this manner, the recommendations should have positive effects on cost reduction and/or price increases.

(a) Fishing and fish handling onboard and ashore

i. Fisheries research, especially the communication between fisheries research institutions, administrations and fishermen should be improved in order to provide the latter with more detailed information related to fishing grounds, species and seasons.

ii. Measures and incentives to promote cooperation and coordination of fishing vessels on offshore fishing grounds should be introduced.

iii. Introduce focused measures to increase the share of fish marketable for exports through scientific advice and improved selectivity of fishing methods.

iv. Financial support should be considered to improve the storage of fish onboard vessels (better-isolated fish holds, refrigeration equipment etc.).

v. Financial support should be considered for improving navigation and fish finding equipment in order to facilitate more selective fishing practices and achieve higher safety standards for vessels and crews.

vi. Training programmes for fishermen and crewmembers should be encouraged and accompanied by arrangements for compensation for loss of earnings of fishermen and crewmember that participate in such training.

vii. Financial support and technical advice for engine reinforcement and purchase of additional/complimentary fishing gear should only be given to well-experienced and qualified fishermen.

(b) Marketing

i. Measures to ensure steady and regular landings of high quality fish in order to achieve high first-hand sale prices for fishermen when landing their catches should be put in place. This also requires strengthening the market position of fishermen and cooperation among them particularly vis-à-vis wholesalers.

ii. Incentives and support should be provided to promote cooperation among fishermen on shore to better organize fish landings through improved production planning in order to avoid surplus landings and slashing prices. Fishermen sales organizations/associations should be promoted for this purpose. The establishment of organized fish marketing systems such as auctions requires regular supplies. Such supplies are possible for offshore vessels and if landings are concentrated in only few ports. On the demand side, it is necessary to have a large number of buyers for bargaining at the auction. An auction system is well suited when landings comprise a great number of species.

iii. Improvement of handling and refrigeration equipment at landing ports will facilitate quick offloading of catches and guarantees an uninterrupted refrigerated chain with positive effects on quality and prices.