Norway and Vietnam: similarities and differences
Similarities: Size (length and area), Coastal area, Fishing and aquaculture nations
Differences: Population, Economy, GDP, Natural resources, Location – N in the North and Vn in the South - and this consequently creates different climate and weather conditions
HDI: N (0.944) – ranked 1st, Vn (0.638) ranked 121st
Transparency: N - 3rd in the world, Vn ranked 107th
Disputed sea areas and fishing rights?
Norway has settled, according to the Law of the sea, all EEZ disputes, including with Russia and EU.
Annual negotiations and share agreements on Total allowable catches (TACs) and other fishing issues.
The South of China Sea disputes are still unsettled? This creates competition between nations and de facto open access fisheries.
Fisheries Management and Governance
Vietnam: Open access, Small scale, Some high-liner/intra-marginal rent (IMR), but no resource rent
Norway: Regulated, Large scale, Some resource rent and IMR in capture fishing, and very high economic rent in aquaculture (ERA)
What is a (fishery) subsidy?
WTO: ”…(i) financial contributions (ii) by a government or public body (iii) that confer a benefit”, all three conditions must be met
Why harmful in fisheries?
- Incentives for increased output, endangering fish stocks and reducing potential long term resource rent and profit
- Trade distortion through provision of advantages for one exporting country (if underdeveloped stocks)
Fuel subsidies and environmental tax exemptions
Governmental financial transfers to the fishery sector are not necessarily subsidies, nor necessarily harmful – FAO/WTO/OECD reports (Example: Research versus Trawler)
Sumaila et al. (2010): Good, bad or ambiguous (ugly) subsidies
Fishery subsidies and profitability effects
Short run (2 years) effects fuel subsidies:
Profitability when the Government’s subsidy action takes place is greater than profitability without this action.
The increased profitability of the vessels is a result of both revenue-enhancing and cost-reducing subsidy schemes
More benefits for the owners than for the crewmembers.
Positive impacts on the OCF of large vessels but negative effects on their IMR, while the positive effects on the rent of small vessels.
Key findings of Thuy et al., 2018
In Vietnam, offshore vessels are profitable even without subsidies
Higher education, more experience and type of fishing gear decide the likelihood of vessel owners taking part in the subsidy program
Remaining questions outside the scope of this project: What are the long term effects for fish stocks and harvest?
Subsidies and politics
Finley (2017) argues that much of the overcapacity that built up in the decades after World War II came about because of government subsidies, and that these subsidies largely were instruments in Cold War politics.
On high seas fishing subsidies:
Our results suggest that fishing at the current scale is enabled by large government subsidies, without which as much as 54% of the present high-seas fishing grounds would be unprofitable at current fishing rates (Sala et al., 2018).
Dear participants, do you think such arguments play a role today for countries like China in the South of China Sea?
The world total fish production increases due to aquaculture
Aquaculture production 2015, in quantity (thousand tonnes) and value (million USD), as well as the average annual change in the period 1985–2015. 74 countries ranked according to value
(Sources: see Flaaten 2018 Ch.11)
Rank |
Country |
Production |
Average annual change (%) |
||
Quantity |
Value |
iqty |
ival |
||
1 |
China |
60166.82 |
77412.90 |
8.87 |
10.42 |
2 |
India |
5061.02 |
10612.68 |
7.09 |
10.05 |
3 |
Indonesia |
15012.30 |
9670.64 |
12.58 |
11.29 |
4 |
Chile |
1142.55 |
8586.29 |
16.52 |
22.86 |
5 |
Viet Nam |
3402.27 |
8207.86 |
11.03 |
12.72 |
6 |
Norway |
1356.69 |
6441.34 |
12.70 |
12.44 |
Cost structure of three aquaculture industries, at farm gate
Cost item |
Pangasius, Vietnam3, 2016 |
White leg shrimp Vietnam3, 2014 |
Salmon Norway, 2016 |
Cost shares % |
Cost shares % |
Cost shares % |
|
Smolt/seed |
10.4 |
11.88 |
9.39 |
Feed |
81.84 |
41.17 |
42.97 |
Labour1 |
1.08 |
4.91 |
6.73 |
Insurance |
0.38 |
||
Pond rental |
1.05 |
||
Power |
11.68 |
||
Other operating cost |
3.474 |
13.065 |
25.722 |
Depreciation |
0.45 |
17.306 |
5.32 |
Net financial cost |
1.16 |
-7 |
-0.12 |
Operating cost, all |
99.44 |
100 |
90.4 |
Slaughter |
0.56 |
-8 |
9.63 |
Total cost |
100 |
100 |
100 |
Additional info on Cost structure of three aquaculture industries. Cost and revenue per kg fish at farm gate
Table notes:
May include some management cost
Includes repair, maintenance, administration, fish health, energy, and environmental measures
Dong Thap province and South Central Vietnam for pangasius and shrimp, respectively
Includes Chemicals/pharmacy, power, pond regeneration and materials
Pond regeneration is partly included in Labour
Includes maintenance and other fixed cost
Net financial cost is very small. Some may have been included in Other
The buyer usually harvest the shrimp and carry the cost (some cost to the farmer could be included in Labour)
Three aquaculture industries, cost and revenue per kg fish at farm gate (Sources: see Flaaten, 2018 Ch.11)
Items |
Pangasius, Vietnam3, 2016 |
White leg shrimp Vietnam3, 2014 |
Salmon Norway, 2016 |
Total cost, national currency |
21 440.00 |
108 832.40 |
33.86 |
Revenue, national currency |
22 600.00 |
120 336.06 |
50.59 |
Profit |
1 160.00 |
11503.66 |
16.73 |
Exchange rate, per USD |
22 368.25 |
21 193.08 |
8.4 |
Total cost, USD |
0.96 |
5.14 |
4.03 |
Revenue, USD |
1.01 |
5.68 |
6.02 |
Profit margin |
5.1 |
9.5 |
33.1 |
Pangasius production and export, Vietnam 2000-2017
Atlantic salmon export, Norway 1981-2016
Antibiotics used in Norwegian aquaculture and the production of salmonids, 1975-2016
The tradeoff between wild and farmed salmon
Wild salmon: Used to be additional income for small scale fishermen; Now, mainly recreational fishing. Use and non-use values
Aquaculture production: Huge export value; Salmon lice, surplus feed, feces and escapees are the main externalities, including effects on wild fish
Economic rent in aquaculture (ERA)
Economic rent in aquaculture (ERA) is any payment to a farm and site owner, on land or sea, in excess of the costs needed to bring that farm into production. For analytic and policy purposes it may be useful to distinguish among different types of ERA, including oligopoly rent from access regulation (licensing) and hampered output
Atlantic salmon (Salmo salar) in Norway and white leg shrimp (Litopenaeus vannamei) in Vietnam, two successful aquaculture cases.
Analyses indicate very high profit and ERA rates in the Norwegian salmon industry and positive, but lower rates in the Vietnamese white leg shrimp farming.
Aquaculture rent (ERA) can be calculated from costs and earnings data. Concepts, and Norway 2016
Concept |
Explanation |
ERA for salmon and trout in Norway, 2016 Million NOK (million USD) |
Revenue |
Farm gate value of sale of fish. |
50,072.31 (5,961.0) |
- Total operating expenses |
Including depreciation of farm, license and permit. |
32,035.0 |
= Operating profit (EBIT) |
Earnings before interest and tax. |
18,037.3 |
+ Total financial revenue |
Financial income and currency gains. |
530.7 |
- Total financial expenses |
Financial cost and currency rate losses. |
495.4 |
= Profit on ordinary activities before tax (EBT) |
18,072.6 |
|
+ Depreciation on intangible capital |
Intangible capital includes licenses and permits. |
-12.52 |
+ Financial cost of intangible capital |
Financial cost (interests, fees) of license and permit purchases. |
226.53 |
- Calculated interest on equity |
Equal to what is paid on long term loans, or government bonds (opportunity cost). |
917.63 |
= Economic rent in aquaculture (ERA) unadjusted |
The residual for the aquaculture industry owners, without deduction of environmental and management cost. |
17,369.0 (2,067.7) |
Economic rent per kg |
ERA divided by quantity sold at farm gate – per kg |
18.22 (2.17) |
Operating margin |
EBIT in percent of revenue |
36.0 |
Profit margin4 |
EBT in percent of revenue |
36.1 |
Economic rent margin |
ERA in percent of revenue |
34.7 |
Aquaculture rent (ERA) can be calculated from costs and earnings data. Concepts.
Concept |
Explanation |
Revenue |
Farm gate value of sale of fish. |
- Total operating expenses |
Including depreciation of farm, license and permit. |
= Operating profit (EBIT) |
Earnings before interest and tax. |
+ Total financial revenue |
Financial income and currency gains. |
- Total financial expenses |
Financial cost and currency rate losses. |
= Profit on ordinary activities before tax (EBT) |
|
+ Depreciation on intangible capital |
Intangible capital includes licenses and permits. |
+ Financial cost of intangible capital |
Financial cost (interests, fees) of license and permit purchases. |
- Calculated interest on equity |
Equal to what is paid on long term loans, or government bonds (opportunity cost). |
Aquaculture rent (ERA) can be calculated from costs and earnings data. Concepts and Norway 2016
= Economic rent in aquaculture (ERA) unadjusted (USD) |
The residual for the aquaculture industry owners, without deduction of environmental and management cost. |
17,369.0 (2,067.7) |
Economic rent per kg (USD) |
ERA divided by quantity sold at farm gate – per kg |
18.22 (2.17) |
Operating margin |
EBIT in percent of revenue |
36.0 |
Profit margin4 |
EBT in percent of revenue |
36.1 |
Economic rent margin |
ERA in percent of revenue |
34.7 |
Aquaculture rent (ERA) for salmon in Norway and white leg shrimp in Vietnam
|
|
Norway-salmon, 2016 |
Vietnam-white leg shrimp 2014 (4 provinc) |
= Economic rent in aquaculture (ERA) unadjusted |
The residual for the aquaculture industry owners, without deduction of environmental and management cost. |
mill. NOK 17,369.0 (mill. USD) (2,067.7) |
mill. VND 1,492,106.3 (mill. USD) (69.8) |
Profit margin4 |
EBT in percent of revenue |
36.1 |
9.6 |
Economic rent margin |
ERA in percent of revenue |
34.7 |
7.2 |
Lessons learned (fisheries and aquaculture)
From the Law of the Sea – establish internationally agreed national rights and obligations in previous disputed seas, and then avoid domestic rent dissipating competition.
Get rid of national capacity and effort expanding government financial transfers (GFT) (Bad subsidies)
GFT to for example infrastructure, safety measures, social security, as well as to monitoring, control and surveillance can be Good subsidies
User and property rights in aquaculture
Environmental control (feed and medicine remains, disease, escapee…)
Food safety
Utilise branding (VASEP, Norwegian Seafood Council) and market power
The presentation of Prof. Ola Flateen (Tromso University, Norway) in the framework of Vietfish 2018
(seafood.vasep.com.vn) According to statistics from Vietnam Customs, Vietnam's crab export value in March 2024 reached more than 18 million USD, an increase of 66% over the same period last year. Cumulatively, in the first 3 months of the year, export turnover reached more than 52 million USD, up 75% over the same period.
Vietnam's pangasius exports to Brazil reached nearly USD 28 million in the first quarter of 2024, surging by 44% compared to the same period in 2023.
(vasep.com.vn) According to Vinh Long Statistics Department, the whole province currently has 2,119 hectares of aquaculture area, an increase of 1.03% (equivalent to an increase of 21.62 hectares) over the same period last year; Of which the industrial pangasius farming area is 370.8 hectares, an increase of 0.12% or an increase of 0.42 hectares.
(seafood.vasep.com.vn) 2023 was an unsuccessful year not only for Vietnamese but also for Thailand tuna exporters in the Middle East market. Thailand's tuna exports to this market decreased by 21% in value and 27% in volume compared to 2022. Therefore, the Middle East dropped to second position among Thailand's export markets after the US, accounting for 22% of total export turnover in 2023.
Competent ministries, sectors and localities should continue efforts to lift the European Commission’s “yellow card” against the Vietnamese seafood products for illegal, unreported and unregulated (IUU) fishing, as an inspection team of the commission will visit Vietnam soon, Minister of Agriculture and Rural Development Le Minh Hoan.
(seafood.vasep.com.vn) According to data from Vietnam Customs, in March 2024, Vietnamese pangasius export turnover to markets reached 156 million USD, down 14% over the same period. Vietnam pangasius export value in QI/2024 reached 411 million USD, down 3% compared to QI/2023.
(vasep.com.vn) According to data from the Department of Fisheries, as of March 20, 2024, the shrimp farming area reached about 348,670 hectares, including 334,799 hectares of black tiger prawn farming area and 13,871 hectares of white leg shrimp farming area.
(seafood.vasep.com.vn) Vietnam's tuna exports reached around $84 million in March 2024, a 17% rise. Vietnam's total tuna export revenue for the first three months of 2024 was $215 million, up 19% from the same time in 2023 but down 17% from 2022. It is anticipated that tuna exports may miss the billion-dollar mark as in 2022 at this rate and the difficulties the business faces.
Vietnam raked in over US$200 million from exporting tuna to 86 markets worldwide during the first quarter of the year, representing a rise of 19% against the same period from last year.
Vietnam’s pangasius export to the United Arab Emirates (UAE) reached more than 7 million USD in the first quarter of this year, a rise of 67% against the same period last year. UAE mainly imported frozen fillets from Vietnam.
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