proefschrift voorgedragen tot het behalen van de graad van doctor in de toepepaste economische wetenschappen

FACULTEIT TOEGEPASTE ECONOMISCHE WETENSCHAPPEN Analysis of Vietnam’s Pangasius Industry in Transition (1995-2007) Tu Van Binh November 2008 Promotor: Prof Dr Ludo Cuyvers Proefschrift voorgedragen tot het behalen van de graad van Doctor in de Toepepaste Economische Wetenschappen Declaration I hereby declare that the dissertation, submitted in partial fulfilment of the requirements for the degree of Doctorate of Philosophy and entitled “Analysis of Vietnam’s Pangasius Industry in Transition”, represents my own work and has not been previously submitted to this or any other institution for any degree, diploma or other qualification The members of the doctoral committee: Promotor: Prof Dr Ludo Cuyvers Chair:Prof Dr Evrard Claessens Third member or co-promotor:Prof Dr Luc D’Haese Fourth member:Dr Michel Dumont PhD Student: Tu Van Binh November 2008 Abstract This dissertation sets out to investigate related central issues Firstly, it presents the process and the performance of Vietnam’s transition economy from the centrally planned economy to the free market Changes in the approach policies, e.g the market-oriented approach replacing the production-oriented approach, Vietnam’s aquaculture industry has been gradually improved, particularly at farming level Because of the trade dispute between Vietnam and the USA, the farmer pays more attention to invest in species of pangasius which give higher profit, while the Vietnamese exporters have expanded and diversified their export markets after the trade dispute Additionally, the marketing contracts between the company and the fish farmer, particularly for the large scale farmers, are developed There are some notable changes in the market chain, particularly for the marketing system after the trade dispute between Vietnam and the USA Empirical models as the Cobb-Douglas and the Translog function are used and tested, to analyze the production and the cost structures The result of testing the model based on Coelli et al (1998) proves that the Translog cost model is preferred in both periods (e.g before and after the trade dispute), where the Allen partial elasticity and the price elasticity of demand are calculated In addition, the return to scale and the technical efficiency is derived As found, the fish farmer has more improvements in the farming characteristics after the trade dispute The return to scale and the technical efficiency after the trade dispute are significantly higher than before the trade i dispute The farmer’s response to the input market is careful, because of the increases in the input prices and of the farmer’s consideration on the quality improvement Two different models, such as Generalized Autoregressive Conditional Heteroskedasticity (GARCH) and Vector Auto-Regressive Model (VAR), are used to investigate the volatility of the freshwater fish products and the relationships between the freshwater fish products and the potential substitute products It is evident that the pangasius price is very sensitive to the market shocks, and the pangasius fish is not influenced by the potential substitute products such as chicken, beef and pork Based on quantity models, the estimate results show that there is a significant negative impact of the anti-dumping duty on the export volume and the export value of the Vietnamese pangasius to the USA Also the error correction model (ECM) presents that there is the evidence of a positive price transmission from the farm price to its export price for the EU and for the USA The export price for the EU is leading the export price for the USA, while the farm price is leading the export price for both the EU and the USA The trade dispute between the USA and Vietnam is an historical event for the Vietnamese pangasius industry just starting up the business into the world market Many aquaculture policies are concerned by the Vietnamese government to abate the trade dispute Policies concerned to reinforce the pangasius industry development are derived from the empirical results of the quantitative analysis Besides, the SWOT analysis is used as a supporting tool to draw the strategy development ii Preface I would like to thank my promotor, Prof dr Ludo Cuyvers, for the support and advice I appreciate his time, inputs and kindness to guide me in such a skillful way I would like to acknowledge and express my sincere thanks to my co-promotor Prof dr Luc D’ Haese for his advice It is an honor to have his part of this study Many thanks to Prof dr Evrard Claessens (University of Antwerp), Prof dr Plasmans Joseph (University of Antwerp) and Prof dr Marijke D’ Haese (Ghent University) for their comments and advice Also I am grateful to Dr Michel Dumont (University of Antwerp) and Dr Abay Mulatu (University of Manchester), who are very enthusiastic to lead me toward the econometric method approaches I express my deep appreciation to Lieve Van Hoye and Armand Van Hoye for their friendship, time, consideration and support with respect to idea and text correction of this study I express a special thanks to Tanya Haegemans and Vesna Stavrevska as friends for their help, time and support, also thanks to the Department of International Economics, International Management and Diplomacy of the Faculty of Applied Economics (University of Antwerp) gave me a good condition and environment to study and work My parents who gave me the opportunity to study and their consideration is invaluable I would like to thank them for their love, encouragement and support throughout my life and for all the sacrifices they made I therefore dedicate this study to my father and mother In addition, I also thank my lovely brother and sisters, who gave strong confidence and mind during the time doing my study I am grateful for my wonderful wife, Ngo Giang Thy, beautiful daughter Tu Ngo Dan Thu, and new born daughter Tu Ngo Thu Minh, for their love, support and patience Finally, many thanks to the Vietnamese government gave me a good chance to reach the doctoral fellow in the framework of Vietnamese Overseas Scholarship Program (VOSP) Also thanks to authorities of provinces and organizations in the Mekong Delta, Vietnam facilitated and supported me to collect data as well Antwerp, November 2008 Tu Van Binh iii TABLE OF CONTENTS Pages Declaration i Abstract i Preface iii Table of contents iv List of tables x List of figures xii PART I Chapter 1: Introduction 1.1 Introduction 1.2 Scope and objectives 1.2.1 Scope 1.2.2 Research objectives 1.2.2.1 General objectives 1.2.2.2 Specific objectives Data 1.2.3.1 Location 1.2.3.2 Survey method 1.2.3.3 Secondary data Hypotheses Plan of dissertation 1.2.3 1.2.4 1.3 Chapter 2: Transition economy and fishery in Vietnam 2.1 Introduction 11 2.2 Defining the transition economy 12 2.3 General approach 14 2.4 Development policies in farming aquaculture 16 2.5 Transition economy in Vietnam 21 2.5.1 Transition economy and development stages 21 2.5.2 Performance of transition economy 25 iv 2.6 2.5.2.1 General performance 25 2.5.2.2 Performance in aquaculture 27 Conclusion 29 Chapter 3: Aquaculture development in Vietnam and the changing environment 3.1 Introduction 31 3.2 Process of fishery development policy toward integration 33 3.2.1 The fishery policy development process 33 3.2.1.1 Period 1995-2000: Open to the international trade 33 3.2.1.2 Period 2001-2006: Trade dispute and market oriented approach 3.3 Vietnam’s fishery sector and the development process towards the integration 3.3.1 35 What has the Vietnamese government done to integrate into the world economy 3.3.2 35 Problems of Vietnam’s fishery sector with respect to Integration in the world economy 3.4 34 39 Conclusion 40 Appendix 3A: VAVESP 42 Appendix 3B: NAFIQAVED 43 Chapter 4: Actual situation of pangasius production and consumption in the Mekong Delta 4.1 Introduction 45 4.2 Overview of the catfish war situation 46 4.3 Vietnam – USA bilateral trade agreement 48 4.4 Growth of the Vietnamese pangasius industry and its changes 50 4.5 Market analysis of pangasius before and after the catfish war 56 4.5.1 Before the catfish war 56 4.5.1.1 Production situation 56 4.5.1.2 Consumption situation 61 After the catfish war 65 4.5.2.1 Production situation 65 4.5.2 v 4.5.2.2 Consumption situation 4.6 69 Discussion and conclusion 71 4.6.1 Discussion 71 4.6.2 Conclusion 74 Chapter 5: Market chain of pangasius in the Mekong Delta 5.1 Introduction 76 5.2 Defining the market chain 76 5.2.1 What are stakeholders? 77 5.2.2 Market chain of pangasius 78 5.3 Market channel of pangasius and its change 85 5.4 Conclusion 89 PART II Chapter 6: Influence of a trade dispute on the economic production characteristics of Pangasius farming in the Mekong Delta 6.1 Introduction 92 6.2 Background on the farming pangasius 93 6.3 Materials and methods 94 6.3.1 Data 94 6.3.2 Model 94 6.4 6.5 Estimation procedure and results 99 6.4.1 Estimation of the cost function 99 6.4.2 Returns to scale and elasticity 102 6.4.3 Technical efficiency 104 Conclusion 105 Appendix 6A:Partial elasticities of substitution 106 Chapter 7: Market volatility and price substitutes for Vietnamese freshwater fish 7.1 Introduction 113 7.2 Methodology 114 vi 7.2.1 7.2.2 Price volatility 114 7.2.1.1 GARCH 115 7.2.1.2 EGARCH 115 7.2.1.3 TARCH 116 Price substitutes 117 7.3 Data 118 7.4 Empirical results 120 7.4.1 Results of GARCH model 120 7.4.2 The results of VAR model 128 7.5 Conclusion 138 Appendix 7A: Testing and adjusting for outliers 139 Chapter 8: The impact of U.S anti-dumping measures during the “catfish war” on Vietnamese pangasius exports 8.1 Introduction 141 8.2 The USA anti-dumping on Vietnamese pangasiu 142 8.3 Econometric analysis 145 8.3.1 Data 145 8.3.2 Model and estimation results 145 8.4 Conclusion 150 Chapter 9: Examing relationships between farming price and export price of pangasius 9.1 Introduction 151 9.2 Method 152 9.3 Data 154 9.4 Stationarity tests, causality tests and estimation results 155 9.5 Conclusion 162 Chapter 10: Policy and strategy of pangasius development 10.1 Introduction 164 vii 10.2 Function of the department involved in the policy framework 165 10.3 Findings and considerable policies 168 10.3.1 168 10.4 Production characteristics at the farming level 10.3.2 Export market and its impact by anti-dumping 168 10.3.3 Volatility and dynamics of market 169 Evaluating performance of policies implemented 170 10.4.1 Master plan 170 10.4.1.1 Positive responses 170 10.4.1.2 Risks and challenges 171 10.4.2 Environmental management and control 172 10.4.2.1 Positive responses 172 10.4.2.2 Risks and challenges 173 10.4.3 Food safety and hygiene policy 174 10.4.3.1 Positive responses 174 10.4.3.2 Risks and challenges 177 10.4.4 Aquaculture extension and capacity building 179 10.4.4.1 Positive responses 179 10.4.4.2 Risks and challenges 181 10.4.5 Market and marketing policy 182 10.4.5.1 Positive responses 182 10.4.5.2 Risks and challenges 185 10.5 SWOT analysis 186 10.5.1 Strengths (S) 187 10.5.2 Weaknesses (W) 189 10.5.3 Opportunities (O) 190 10.5.4 Threats (T) 191 10.6 Development strategy 192 Chapter 11: Conclusions and recommendations 11.1 General conclusions 198 11.1.1 Overview 198 11.1.2 Conclusions 201 11.1.2.1 The Vietnamese pangasius industry improved by the changing environment 11.1.2.2 Farmer’s response to the market shocks 201 202 viii 11.2 11.1.2.3 Market volatility and price substitutes 201 11.1.2.4 Impact of the trade dispute on exports 203 11.1.2.5 Market diversification and dynamics 203 11.1.2.6 Policy lessons derived by the trade dispute 204 Recommendations 205 11.2.1 Farming surveillance and sustainable income generation 205 11.2.2 Intensifying sustainable production development 206 11.2.3 Institutions and policies 207 Reference 210 ix Establishment of suitable raw fish production area must be set up by the practical survey, also be based on the information channel from the farmer’s idea The live fish production area not only meets the balance between the demand and supply, but also ensures the principle of the environmental protection, and the sustainable development 11.2.2 Intensifying sustainable production development The linkages between the fish farmers and their markets should be advanced by strengthening the enabling environment for rural commercial enterprises This will be achieved through main initiatives: - improving the business development services and the output markets - increasing the competition among the stakeholders in the supply chains for farm inputs and outputs; - further developing of the farmer organizations; - improving the supply of market information; - developing market opportunities for strategic products Improving the business development services and the output markets: Appealing and facilitating the economic sectors to invest on industrial feed manufactories, particularly in the Mekong Delta If so, the transportation cost of the feed is reduced, because currently a large number of the industrial feed must be shipped from other regions, such as Ho Chi Minh City, due to the fact that the capacity of the feed enterprises in the MD has not yet met the farmer’s demand For the output market, the contract farming should be concentrated more To this, the law of the contract farming needs more specific regulations to prove a strong legitimacy and to tie down the responsibility of members joining the contract Increasing competition in supply chains will focus on the SME development so that farmers will have more choices of the procurement of inputs and in sale of their products This will involve the provision of short training courses for the SME entrepreneurs in business management, commercial law, quality assurance and market information These services will be provided by the DARD and relevant provincial agencies as the An Giang University and the Can Tho University Farmer organizations will be developed in a way which improves their ability to deal with the input enterprises and the EPCs in the process of marketing their products The first step will be a study of opportunities for the farming organization between the farmer associations and the input suppliers in the marketing chain The second step will be the farming organization model turning 205 to a practical operation based on supports by the DARD, together with institutes and universities A successful farming organization needs propagation for the whole regions in the MD The collection, analysis and distribution of the market information will improve the commercial environment, so that buyers and sellers can make better decisions in a fair and equitable manner This will be undertaken by upgrading the existing DARD and DOR market information system through: - assessing the market information needs of the target population; - systematizing the sources of market information - the staff or the Market Information Unit of the DARD and the DOT will be trained in the methods of collection, storing and analyzing data, preparing market forecasts and disseminating market information; - Upgrading the equipment and communication facilities of the market information unit of the DARD and the DOT; - coordinating the DARD with the DOT and with Universities (e.g the Can Tho University) to assess the domestic and the export market demand Strategic products are items for which the local authority has an identifiable comparative advantage, where a more commercial orientation has the potential to improve the price and to reduce the market volatility The development of market opportunities for the pangasius will involve an assessment of demand and product quality standards, establishing marketing associations and conducting the product commercialization This will enable the fish farmers to ensure that their product meets end-user quality specifications and that they achieve the best possible prices It is proposed that marketing associations have to be formed for the pangasius and that consideration has to be given to the establishing brand names for their products These activities will be undertaken by the DARD, related to other departments (e.g the DOT) with support from relevant research institutes and universities 11.2.3 Institutions and Policies In order to facilitate recommendations for diversification, market development, finance and investment, further institutional and policy strengthening is required There are opportunities to this through: (i) improvements on the aquaculture extension system; (ii) market and commercial development; (iii) product safety policies; and (iv) environmental development and infrastructure 206 Extension System: currently the An Giang province has a model of agricultural extension based on roughly equal financial contributions from the Provincial Extension Centre, the District, companies, input enterprises This model will be further strengthened through: - Improving the capacity of the agricultural extension network and strengthening of grassroots extension activities The Provincial Extension Centre should link with the research institutes and the universities to develop new technologies and new extension methods, using the participatory technology development approach, to ensure that the process of technology development and transfer is consistent with actual needs - Further developing of information management and dissemination techniques, including computers and internet, market information, public speakers, information brochures and other local mass information means Market and Commercial Development will be important in bringing farmers into closer and more direct contact with local, regional, national and global markets This will include the following initiatives: - More supports from the local government for the rural SMEs engaged in processing and marketing including provision of land, tax breaks and business opportunities - Standardization and quality control of the inputs and the outputs 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and changes in technology Technical advance,... essential condition for saving, investment and sustained growth 2.3 General Approach Supply chain management (SCM) The supply chain management (SCM) is as the task of integrating organizational units along a supply chain and coordinating materials, information and financial flows in order to fulfil (ultimate) customer demands with the aim of improving competitiveness of a supply chain as a whole (Stadtler... the nutritious demand and also the population have been increasing In order to cope with the increasing demand, many countries develop aquaculture, particularly the countries have a comparative advantage of natural resources, for example, Vietnam In fact, the aquaculture development has become the fastest-growing foodproducing sector in the world Aquaculture has expanded, diversified, intensified and... the use of more input items Competition for such inputs has the effect of pushing up their prices and so reducing the income benefit to farmers In circumstances, in which a rise in prices persuades some farmers to add considerably to output and in which the relevant input items are fairly fixed in supply, a farmer who is unable to increase his own production may find, paradoxically, that despite higher... rather than to displace existing resources Especially on small farm units there exist few opportunities for reducing costs by cutting the labour force or selling obsolescent capital equipment (Marsh and Ristson, 1971) Instead farmers find themselves under substantial pressure to increase output in order either to increase or maintain income Individually their contribution to total supply is so small that... Service, from materials input enterprises and from exporting and processing companies - An expert evaluation was conducted in 2006 in the three provinces that were mentioned above: 21 respondents (the leaders in the state organizations of the province and the district level) from the Department of Agriculture and Rural Development, the Department of Trade, the State Fingerling Hatchery Center, the... may be defined as “the provision to farm people of informal education, including technical advice and information, to help them solve their problems It aims to improve the efficiency of the farm business, increase farm incomes and raise levels of living” (O.E.C.D., 1966) In order to permit the choice of the right approach, the extension service must also have clearly defined objectives in line with... after the trade dispute of Vietnam with the USA, together with the marketing margins of actors in the market channel The chapter is largely based on Cuyvers and Binh (2008a) and shows significant changes in the value chain of pangasius in the Mekong Delta after the catfish war, together with changes in the business of the stakeholders In chapter 6, we are using a stochastic cost frontier model to analyze... improved in many ways, e.g by reducing costs, increasing flexibility with respect to changes in customer demands or by providing superior quality of products and services The roof rests on two pillars representing the two main components of SCM, namely integration of a network of organizations and coordination of information, materials and financial flows The figure shows that there are many disciplines involved... agricultural prices, introducing competition among agricultural trading companies, granting families and individuals long-term rights to land use, and removing internal barriers to trade (International Monetary Fund, 1996) 13 government revenues, while providing for a satisfactory level of public investment in basic infrastructure and human capital and a well-targeted social safety net − Finally, for the