This report elaborates the function and effectiveness of domestic and regional fisheries product value-chains and identifies key policy interventions at local, national and regional scales to further improve:
1. Small-scale rural livelihoods;
2. The competitive advantages of fisheries products and their management
3. The responsible management of resources, which is important for the sustainability of the fishery and aquaculture resources.
4. Understanding of value chains of Pangasius hypothalamus, a high-value globally traded aquaculture species, and Henicorhynchus spp./Labiobarbus spp. (grouped as Ca Linh in Vietnamese and Trey Riel in Khmer), two low-value regionally traded capture species, in the Mekong Delta of Vietnam and Cambodia.
An interdisciplinary approach was taken to investigating value-chains and their contribution to rural livelihoods and sustainable fisheries development. First, A ‘value-chain’ theory from Kaplinsky & Morris (2000) was applied using mapping elements from the GTZ & M4P project ‘Better Market for the Poor’ were applied. Second, a livelihood analysis was carried out in parallel, focusing on various stakeholders who interact directly and indirectly with these chains. Third, a policy analysis was conducted to determine the effectiveness of government policy and the potential of value chain governance arrangements for Pangasius and Henicorhynchus spp./Labiobarbus spp. Research activities used included a survey of key chain actors, individual interviews with key informants during village visits and project workshops.
The results of the value chain analysis show the Pangasius value chain is oriented to export production with more than 90% of fish being sold internationally. Processing companies are the most powerful actors in the Pangasius chain,
providing the biggest input of labour and capturing nearly three quarters of the total net value added in the chain. Support is provided by the government through VASEP, NAFIQAVED and AFA. The role of AFA is currently ambiguous and further investment is needed to increase its capacity to support small-scale farmers.
The Henicorhynchus and Labiobarbus spp. chain is smaller and more diffuse in both Cambodia and Vietnam. Retailers capture the highest proportion of value in the chain, largely because of the poor transparency around transactions with fishers and the lack of preservation technologies available. There is nearly a complete absence of support to fishers and traders in this chain from government. Instead the chain is characterized by ‘informal’ support networks including quasicredit arrangements which are important in structuring the chain and limiting fisher’s ability to capture a higher share of the total value in the chain. These findings extend our understanding of middlemen-as-rent-seekers to actors who also provide an important source of short-term finance to fishers who have little or no collateral to access formal credit.
Henicorhynchus/Labiobarbus spp. is widely considered a low value fish. However the results of the survey found that it has a higher price than Pangasius in domestic markets. The higher value indicates a wider trend within the Mekong Delta to Henicorhynchus/Labiobarbus spp. becoming a more luxury consumer item, available more readily as a speciality dish in restaurants. The growing export market for the fish is also indicative of the potential pressure the fishery may come under in the years to come. Conversely, the rise in price means there is more potential for fishers to gain higher margins on the fish they sell. However, for this to happen they will have to improve their bargaining power vis-à-vis collectors and traders.
The results of the livelihoods analysis show that overall grow-out, hatchery and nursing farmers Pangasius farmers earn on average US$4751.61 per year - 14 times higher that the annual income of fishers. However, it is difficult to determine the capacity of farmers to secure these income levels on a continual basis because of the exposure of farmers to economic risk from fluctuations in export markets. The results indicate that Pangasius farmers are relatively less diversified than fishers, opting to specialise and maximise their income to overcome livelihood vulnerability. Pangasius farmers appear to deal with the higher cost of inputs and variable market prices for their fish by ‘vertically’ diversifying to nursing and hatchery farming. These vertical shifts are preferable to ‘horizontal’ diversification away from Pangasius due to their high investment in infrastructure. Vertical diversification appears to be a relatively successful strategy. Nevertheless, the movement of grow-out farmers in and out of production creates inconsistent supply to processing companies thereby affecting the economic stability of the industry.
Fishers are less exposed to these market fluctuations because traders absorb more risk in transporting the fish to market. The lower bargaining power may in fact insulate fishers from economic vulnerability. This means that they are also unable to diversify away from fishing. Fishers also appear to be far more vulnerable to environmental change given their dependency on water quality for fishery production. They are becoming more vulnerable because they are dependent on fish stocks which appear to be in decline or fully exploited. Unlike Pangasius farmers these fishers do not have as much collateral for loans, or capital to invest in other forms of production, including aquaculture. Those that attempt to shift to aquaculture are more often than not unsuccessful.
The results of the policy analysis also indicate that government intervention has not been effective in mitigating the impacts of environmental change, promoting alternative production technologies or reducing the exposure of fishers and farmers to market fluctuations. The success of the Pangasius industry has meant that policy, regulation, extension and enforcement have not been able to keep up with the innovation of farmers. The government has adopted a laizze-faire approach to the development of the Pangasius industry due to the lack of evidence that there are serious environmental concerns related to production, and the support this growth has given to economic reform at the national level. Fishers also regard policies as largely ineffective due to the lack of capacity of the government to monitor fishing activities and cross-border trade.
The results of the study indicate a series of challenges for extending value-chain governance to environmental and social objectives. Low compliance with international standards would mean more fish would be directed into unregulated markets, namely domestic markets. A shift to domestic markets with similar prices to export markets, means that grow out farmers may be able to cope with shifting between channels. However, the lower demand for fish in domestic markets might mean farmers are forced to diversify away from Pangasius. Farmers also note the need for improved enforcement of contracts, both in terms of providing protection for farmers who need assurance that investments made in complying with standards will be make a return. Value-chain approaches do not appear to hold much potential for governing the management of Henicorhynchus/Labiobarbus spp. in domestic markets. However, the shift in consumer perception, the increasing export of Henicorhynchus/Labiobarbus spp to foreign markets and the growing urban consumption may lead to calls for conservation of the resource.
The study concludes that for new value chain governance arrangements to successfully support farmers’ livelihoods as well as promote responsible use of resource management of fisheries resources the following should be undertaken:
- Certification schemes should focus on ensuring price premiums are paid to Pangasius farmers in order to promote further investment in compliance.
- The promotion of collective forms of control to reduce variable returns for Pangasius farmers which restrict their willingness to invest in key infrastructure.
- The government should increased regulation of contracts between chain actors for the provision of inputs, the sale of produce and compliance to private food quality and safety standards, including those related to socialand environmental processes of production.
- Research should be undertaken to investigate the impact of increased domestic trade of fish and the establishment of private sustainability criteria designed for Henicorhynchus/Labiobarbus spp.
- The Vietnamese government should foster improved cooperation to share experiences in improved production practices with the emerging industry in Cambodia.
- Private and state chain actors should improve the access of farmers to sustainable production technologies and promote policies and standards which foster farmer innovation in sustainable production.