Work Plan Implementation (Working Paper)       SCS/76WP/39 SOUTH CHINA SEA FISHERIES DEVELOPMENT AND COORDINATING PROGRAMME Follow-up Programmes on Economics of Aquaculture in the South China Sea Region TABLE OF CONTENTS

Based on the work of Y.C. Shang, Consultant* July 1976

Project Document Identification

Work Plan Activity: 4(a)(i, iv and v
and (c)(ii, iii and iv)

1. Determination of the particular systems most likely to be profitable in each country

   1. Detailed descriptions and analysis of the existing aquaculture industry in each country - animals cultured, quantities produced, areas in use, numbers of farms, numbers of persons employed, etc.

   4. Examine market potentials for products of promising types of aquaculture

   5. Plan programmes of research and pilot scale operations for the promising types of aquaculture.

3. Examination of factors affecting productivity and profitability of existing and future aquaculture operations

   2. Examine cost and benefits of different sizes of farms, with special reference to supplies and uses of materials and labour.

   3. Evaluate effects of pollution on productivity and profitability of operations.

* Present address: Hawaii Institute of Marine Biology
University of Hawaii at Manoa
P.O. Box 1346, Kaneohe
Hawaii 96744, U.S.A.

(i)   Abstract

This paper contains suggestions for follow-up work on the economics of aquaculture in the South China Sea Region.

(ii)   Summary of recommendations

Support is recommended for carrying out the following aquaculture work programmes: socio-economic evaluation, economic feasibility, commodity demand, and economic losses due to pollution. Suggestions are made for conducting a workshop on the economics of aquaculture, collection of economic data from experimental and demonstration farms, and for strengthening fish farmers' cooperatives.

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TABLE OF CONTENTS

(i) Abstract

(ii) Summary of recommendations

1. Socio-economic survey

2. Economic feasibility study

3. Demand study

4. Regional workshop on economics of aquaculture

5. Improvement of collecting economics data from experiment or demonstration farms

6. Socio-economic feasibility of establishing (or strengthening) fish farmers' cooperatives

7. Economic loss of fish culture due to aquatic pollution

Appendixes

Appendix A Sample questionnaire for socio-economic survey

Appendix B Instruction for sampling in aquaculture socio-economic survey

Appendix C Method for final data analysis

Appendix D Major items to be included in the prospectus for a workshop on economics of aquaculture>

The following suggestions for follow-up action in aquaculture economics in countries of the South China Sea Region are based on observations made during a recent field trip to the Philippines and Indonesia; discussions with the government fishery officials and related specialists interested in fisheries economics; and desk reviews of reports and papers relating to aquaculture situation in this region.

1. Socio-economic survey

A basic constraint to the economic study in aquaculture in most of the countries in this region is the lack of reliable economic data for analysis. Therefore, a sound development policy cannot be formulated. A socio-economic survey of the aquaculture industry is considered of high priority. This survey should be designed to provide information for the following economic analyses:

1. To examine the economic status and practice of the aquaculture industry (by species) from fry gathering through pond rearing, harvesting, processing and marketing.

2. To analyze details of costs (fixed and operating costs) and returns of fish culture for different techniques (intensive and extensive) and systems (monoculture and polyculture); for various farm sizes; and in different locations.

3. To identify the major factors affecting the productivity (both land and labour) and profitability of aquaculture operation by species.

4. To examine the market structures and channels.

5. To identify the socio-economic constraints for development.

Questionnaire design, sampling, and final analysis can be done by aquaculture economist(s) with the cooperation of local economists and appropriate government employees. It is suggested that this survey be done in all the countries in this region. Thailand had one in 1972; a survey of this nature is now in progress in the Philippines. Likewise some data have also been collected in Indonesia for which analysis has yet to be made.

Appended to this report are: Type questionnaire (APPENDIX A), Instructions for sampling (APPENDIX B), and suggested Method for final analysis of data (APPENDIX C).

2. Economic feasibility study

1. The economic feasibility of a given aquaculture practice (or technology), or a given development policy, or a new species is dependent upon many social and economic factors that are peculiar to a country, even though culture is technically feasible. The blueprint of a profitable operation in one country is no guarantee of its successful application in another economy. A given practice or policy should be adopted only if it is more profitable than the alternative practices or policies, and a given species should be selected for development only if it could yield a reasonable return on the investment. An economics consultancy is needed to help each of the countries in this region evaluate and revise their recently drafted aquaculture development plan for the next ten years.

2. The demand for shrimps and prawns continues to outpace supply and boost prices. The economics of shrimp and prawn farming in the region should be evaluated in relation to the expected higher prices of shrimp. Such a study could have a bearing on the bank's willingness to loan money for developing shrimp farms.

3. Demand study

Estimates of market potential of a given species for domestic consumption or for export would be a preliminary step in planning for development. There are many factors affecting the demand for a given species, such as level of price, prices of competing products, level of income, consumers preferences, etc. Demand study will provide information on how much consumption changes as the price of a fishery product changes. If the policy is to expand output of a given fishery product, the increased output will result in some decrease in price. An evaluation on how much price will drop because of increased supply in the market has to be made. This is an important consideration in determining the rate at which a given fishery could best be developed. The availability of competing product and its price are also an important consideration in determining the market potential. The market potential for a given species in a given period could be estimated if the trend of increase in population and if the income elasticity were known, assuming all other elements remain unchanged. New developments in product form or in processing and distribution may expand the market potential.

The SCSP has made commodity studies of major species (shrimp, crab, lobster, tuna, mackerel, cephalopods) for the ADB.

Demand studies should also be done for other species with potential for aquaculture development. This could be done by an economics consultant with the cooperation of local economists (university staff) and appropriate government officials in each country of the region.

4. Regional workshop on economics of aquaculture

The primary objectives of the workshop will be:

1. To exchange views and pool experiences on current economic investigations related to aquaculture development in the different countries, attempts will be made to standardize sampling programmes and interviewing techniques;

2. To review economic factors affecting aquaculture development in each country;

3. To examine the constraints on aquaculture development specifically with respect to production, marketing, processing and distribution in each country; and

4. To formulate strategies to overcome the major constraints on aquaculture development and provide guidance for rapid growth of the industry.

The participants should have background in economics. Each participant will be required to write a paper on the economics of aquaculture in his own country, and these papers will be discussed during the workshop. The specific subject of the papers to be prepared should be assigned to each participant at least six months ahead of the workshop so that they will have to write a good report. An economics consultant should work as a coordinator of the workshop. Instructions for preparing the prospectus for such a workshop are included as APPENDIX D.

5. Improvement of collecting economic data from experimental or demonstration farms

The input-output data from experimental or demonstration farms for improved (or new) culture techniques or systems can be very valuable for practicable application and for economic analysis. This is especially true for new types of culture when there may be only a limited number of profitable operations which could be used by banks to evaluate loan proposals for new farms. Experiments should be carried out and detailed records should be kept to determine the optimum level of fertilizer input under different types of soil, stocking rates, and prices of fertilizer that would permit financial institutions to evaluate the profitability of the operation.

6. Socio-economic feasibility of establishing (or strengthening) fish farmers' cooperatives

Fish farmers are usually in a weak bargaining position in buying and selling. Improvement of market infrastructures are needed for increased production. Active fish farmers' cooperatives or associations can help in these areas. The socio-economic feasibility of establishing fish farmers' cooperatives should be evaluated.

7. Economic loss of fish culture due to aquatic pollution

Aquatic pollution may seriously affect aquaculture and should receive attention in development planning. A preliminary estimate of the economic loss of different types of fish culture due to water pollution is needed in order to formulate appropriate control measures.

APPENDIX A
Sample Questionnaire for Socio-Economic Survey¹

Date of Enumeration                

Enumerator                              

A. General information

Owned                               Area (ha)                              

Leased from (Private) (Government)         Area(ha)          annual rent          

Duration of lease (yrs)             renewable: Yes             No            
Percent of owners income from pond             ; Source of other income            

5. Experience:

   Years farm in operation             Years experience of operator                
   Where fishpond experience acquired                                                      

6. Species cultured:

   Major species                    
   Minor species                    
   Reason for choice of major species                    

7. Pond area:

   Nursery pond(s)             Area(ha)             Depth            
   Rearing pond(s)              Area(ha)             Depth            

8. Type of pond: Excavated             Ditch & Levee             Other            

B. Management

Growing period                     Frequency of water change                
How water supplied: Tide               Pump               Other                
Days per year without cultured organism in pond                             
Reason for inactivity (specify)                                                         
Is pond bottom dried?             Frequency             Duration              

¹ Questionnaire should be designed according to the type of fish culture (such as pond, pen, cage, etc.) and the species to be surveyed. This questionnaire includes the basic information needed for pond culture and can serve as a reference.

C. Stocking

1. Stocking rate of rearing pond/ha/crop

   Species

   Fry

   Fingerlings

   No. of crops/yr.

2. Factors influencing the quantity and frequency of purchase:

   Price of fry/fingerlings                  
   Availability of fry                        
   Anticipated supply of fry/fingerlings                           
   Anticipated demand for species at harvest                
   Weather conditions                   Others (sp.)                         

3. How is price of fry/fingerlings determined?

   revailing price                  bidding              
   dictated by seller             others                
   bargaining                        

4. Source of stock:

   Location                    pick-up                     delivered                    
   distance travelled                                

D. Fertilizer, pesticides, supplemental feed.

1. Fertilizer/ha

   	kg/ha/crop	cost/kg	frequency of application
   organic
   inorganic

2. Pesticides/ha

   Items

   kg/ha/crop

   cost/kg

3. Supplementary feeding/ha

   Items

   kg/ha

   cost/kg

4. Factors affecting the quantity of fertilizer, pesticide, and supplementary feed applied:

   Availability                       if not available, tell why                                

   Price of fertilizer                                                                    
   Stocking rate                                      
   Anticipated demand for crop at harvest                                
   Others (sp.)                                                                          

5. How knowledge of fertilization/feeding/pesticide technique acquired:

   self		extension agent
   neighbors		reading
   other

E. Labour

1. Labour required for pond area of                hectares/crop

   	Family	Caretaker	Hired	Others
   pond preparation
   stocking
   fertilization
   feeding
   weeding
   repairs and maintenance
   harvesting
   others (specify)

2. Payment

   	Rate/man/day	Food	Share of cropping	others
   caretaker
   hired
   others

F. Harvesting

1. production/ha/crop

   	SOLD
   	kg	price received/kg	Eaten	Given	Others
   major species
   minor species
   others (specify)

2. How do you crop your stock?
   Section                       Total                       Other                      

3. What cropping method do you use?
   Seining                       gill net                       pond draining                      
   Others (specify)

4. Number of harvests per crop                      

5. Reason for harvesting schedule To optimize production                      
   Marketing strategy to get highest price                            
   Availability of fry for restocking                                      
   Need for money                                          
   Other (specify)                                                              

G. Mortality rate

1. What is the mortality rate:

   	Average	Highest	Lowest
   From purchase to stocking
   From stocking to harvesting

2. What are the possible causes of mortality?
   Sudden change of weather                       lack of proper food                      
   Water condition (specify)                          overstocking                                
   typhoon                         others (specify)                      
   disease                          

H. Marketing

1. Selling arrangement

   	Pick-up or delivered	Marketing cost or commissions	Location of outlet
   			place	distance
   Direct sale
   Wholesale retail
   Cooperative sale
   contract
   consignment
   others (specify)

2. Method of payment

   Cash                        
   Credit                     for how long                     interest                    
   Installment                         How many                        
   Others (specify)                                    

I. Loans

1. Need loan for

   Expansion                         purchase of:	fry
   Repair/maintenance	supplies
   	food

2. Sources of loans

   	Amount	Annual interest	Maturity	Purpose
   Relatives
   Brokers
   Government
   Banks
   Others (specify)

3. What factors accounted for the choice of the particular source?

   Accessibility                         simple procedures                        
   Fast credit extention                         services offered                        
   Only source available                         others (specify)                        

4. What problems do you encounter in borrowing?
   Too much paper work                         Delayed release of loan                         High interest rate                         Others (specify)                         Lack of collateral                        

5. Does source of loan affect sale of product? If yes, how                           
                                                                                                                

J. Other farm expenses

1. Other farm expenses/crop for entire farm

   	Amount/crop	Annual expenses
   Taxes
   Insurance
   Permits
   Ice
   Electricity
   Water
   Fuel and oil
   Supplies
   Maintenance and repair
   Equipment and machinery
   Ponds and levees
   Others (specify)

K. Inventory of assets

K. Problems and other information

1. What problems are encountered in the industry?

   Unfavourable price structure                          Lack of proper
   infrastructure                              

   Unavailability of credit                              Shortage of fry                              
   Unavailability of supplies                      High price of supplies:
   Fuel                         Fertilizer                   Feed                       

   Unavailability of technical support                              
   Unavailability of skilled workers                              
   Others (specify)                                          

2. Can the government help to improve the industry? Yes                No                
   If yes, in what way                                                                                          
   If no, why not                                                                                                 

3. Can cooperation among fishpond operators help to improve the industry?
   Yes                 No                
   If yes, in what way                                                                                
   If no, why not                                                                                       

4. Have you been reached by extension worker? Yes                 No                
   If yes, what information was provided for                                                   

5. Do you attempt to improve your culture practices? Yes                 No                
   How                                                                                                                

6. What problems do you have in order to improve your culture practices?
                                                                                                                                                                                                                                                                                                                                      

7. Does your income from fish farming meet your needs? Yes               No          
   If no, how do you meet?                                                                                

8. Number of dependents supported by this farm                                                

APPENDIX B
Instruction for Sampling in Aquaculture Socio-economic Survey

Fish culture can be classified into brackishwater culture, freshwater culture, and shallow sea culture. It can be also classified by species cultured. Each type of culture can be grouped into several farm sizes. The percentage of sample should be taken from the population depending on the resources availability. The number of samples selected from each region for particular species in a particular farm size group should be proportional to its total acreage. Samples should be selected by random sampling method in each farm size group.

APPENDIX C
Method for Final Data Analysis

The data collected in each region can be analyzed and tabulated by farm sizes, types of operation (intensive vs. extensive), management systems (monoculture vs. polyculture), land ownership (owned vs. leased), pond ownership (owner-operator vs. caretaker-operator), etc. Data can be analyzed by computer.

APPENDIX D
Major items to be Included in the Prospectus for a Workshop on Economics of Aquaculture

1. Justification and objectives

2. Organization of the workshop

   1. Sponsors and location

   2. Financial obligations

   3. Participation

   4. Programme

      1. Overview paper on the economics of aquaculture

      2. Participant papers and discussions

      3. Discussion on regional research needs on economics of aquaculture

      4. Discussion on future research projects and coordination

      5. Conclusions and recommendations

   3. Instruction for preparing research papers

WORKING PAPERS OF THE SOUTH CHINA SEA FISHERIES DEVELOPMENT
AND COORDINATING PROGRAMME

NOTE: Copies of these papers can be obtained by writing to the Programme in Manila, Philippines.

COORDINATING COMMITTEE REPORTS

WORKSHOP REPORTS

PERIODIC PROGRESS REPORTS