International Journal of Social Science Research (IJSSR) eISSN: 2710-6276 | Vol. 3 No. 1 [March 2021]
Journal website: http://myjms.mohe.gov.my/index.php/ijssr
POST COVID-19: OPPORTUNITIES AND CHALLENGES FOR THE FISHERY SUPPLY CHAIN IN VIETNAM
Duong Ngoc Hong1*
1 School of International Business and Marketing, UEH, HCMC, VIETNAM
*Corresponding author: hongdn@ueh.edu.vn
Article Information:
Article history:
Received date : 28 February 2021 Revised date : 23 March 2021 Accepted date : 28 March 2021 Published date : 31 March 2021
To cite this document:
Duong, N. (2021). POST COVID-19:
OPPORTUNITIES AND CHALLENGES FOR THE FISHERY SUPPLY CHAIN IN VIETNAM. International Journal of Social Science Research, 3(1), 116-124.
Abstract: The Covid-19 pandemic will create new trends for the fishery supply chain in the world, which is also a good signal for the fishery sector of Vietnam. This pandemic lasted for the whole of 2020, disrupting global trade in seafood, changing the trend of consumption of fishery products. Accordingly, Vietnam’s main export products also fluctuate according to market trends, leading to an increase in exports of white leg shrimp, marine shrimp, variable fish, crabs and bivalve mollusks, while pangasius exports have deeply decreased and cephalopod tuna, squid and octopus’s exports decreased slightly. In addition, the main seafood competitors with Vietnam such as India and Ecuador must often lock down and quarantine the society to fight the epidemic, leading to a significant reduction in production and exports of fishery products.
Similarly, neighboring countries such as Indonesia, Philippines and Thailand also decreased about 30% of seafood export due to Covid-19 outbreaks continuously.
Therefore, these countries will have significantly more lag than Vietnam in production recovery to maintain in the supply chain. As a result, this will be a great opportunity for Vietnamese fishery sector. This article focuses on analyzing the current status of fishery exports in Vietnam, at the same time pointing out the challenges and opportunities in the fishery supply chain post Covid-19.
Keywords: Post Covid-19, Supply chain, Fishery industry.
1. Introduction
In 2020, the country’s seafood production has reached 8.4 million tons, a slight increase of 3%
compared to 2019, of which aquaculture accounted for 54% with nearly 4.6 million tons, capture output accounting for 46% with over 3.8 million tons. Seafood exports reached 8.4 billion USD, down 1.9% compared to 2019, of which aquaculture (shrimp, pangasius) accounted for 62% with 5.2 billion USD, captured seafood accounted for 38% with 3.2 billion USD. The Covid-19 epidemic lasted for the whole of 2020, disrupting global trade in seafood, changing the trend of consumption of fishery products. Accordingly, Vietnam’s main export products also fluctuate according to market trends, leading to an increase in exports of white-leg shrimp, marine shrimp, variable fish, crabs and bivalve mollusks, while pangasius have sharply decreased, tuna and cephalopod exports decreased slightly.
COVID-19 has reduced the demand for seafood imports in the markets, but the main importers of Vietnamese seafood such as the EU, China, South Korea, and Japan only slightly decreased their imports from Vietnam (down 3-6%). Meanwhile, the US, the largest market still significantly increased (+ 10%) of Vietnam’s seafood imports. In addition, other markets such as Russia, UK, Australia, and Canada still increased strongly (10-32%) of seafood imports from Vietnam.
Figure 1: Vietnam seafood exports by month, 2018 – 2020
In 2020, due to the impact of COVID-19, export of some seafood products of Vietnam have been drastically reduced such as frozen Pangasius fillet, frozen tiger shrimp, tuna fillet, other marine fish fillet. However, there are also many products that have had the opportunity to increase market share in markets such as frozen and processed white-leg shrimp and marine shrimp, canned and processed fish, dried fish, dried shrimp, and processed pangasius, processed crabs, fish sauce... thus, Covid’s influence on the overall export results was also more limited.
Figure 2: Structure of Vietnam seafood products for exports in 2019 - 2020 (US. mil.)
2. Main Export Markets
In 2020, the COVID-19 epidemic has affected Vietnam’s seafood trade with all markets. However, some markets still increased imports of seafood from Vietnam, accordingly, the US increased nearly 10%, the UK increased 23%, Canada increased 14%, Russia increased 32% and Australia increased 10%. The stability of supply and product diversity has met the changing tastes of consumers in the COVID-19 context.
Figure 3: Main import markets of Vietnam seafood in 2020
2.1 The US Market
In 2020, Vietnam seafood exports to the US increased the most positively among markets because they only decreased slightly by 1.3% in the second quarter, in the remaining quarters, they increased sharply, of which 20% in the third quarter and 15% in the fourth quarter reached 450 million USD.
Seafood export to this market for the whole year reached over 1.6 billion USD, up 10% compared to 2019, mainly thanks to a sharp increase of 33% in shrimp exports. In particular, processed white- leg shrimp brought in the highest export turnover with 521 million USD, up 51% and accounting for 33% of total seafood export. Meanwhile, the frozen white shrimp had the most spectacular growth:
an increase of nearly 13 times over the previous year with 268 million USD, accounting for 17%.
In addition, exports of other marine fish (excluding tuna) also increased by 19% to 157 million USD, focusing on canned products, processed fish, dried fish and surimi (up 211%, 64%, 155% and 50%
respectively). In contrast, the export of pangasius, tuna, cephalopod, crab to the US decreased in the past year, mainly drop in the frozen segment: frozen pangasius fillets fell 15%, frozen tuna fillets down 32%, frozen crabs declined 50%, frozen octopus lessened 47%, squid decreased 7.5%...
Meanwhile, products in the segment of dried, processed and canned goods still recorded an increase growth compared to the previous year: canned tuna up 16%, processed tuna by 30%, and dried squid by 133%...
2.2 Japan Market
After a decline in the second and third quarter, Vietnam’s seafood exports to Japan in the fourth quarter recovered slightly with a 1.5% increase to over $400 million, bringing the whole year results to over $1.4 billion, down nearly 3% compared to 2019. In which, Japan mainly imports shrimp and other marine fish from Vietnam (except tuna), accounting for 41% and 43% of the total seafood imports from Vietnam. Only squid and octopus exported to Japan decreased by more than 13%
compared to the previous year, while the remaining species decreased slightly.
However, unlike the US, in the context of the COVID-19 epidemic, Japan increased imports of fresh frozen tuna (+ 264%), dried squid (+ 140%), processed pangasius (+ 761%), and fish sauce (+ 100%) frozen squid (+ 13%) while reducing import of tuna fillets, processed shrimp, processed squid, fish fillet...
2.3 China Market
Vietnam’s seafood exports to China fell sharply in the first quarter due to a strong outbreak of Covid in this market, from the second quarter to the third quarter, the epidemic had subsided, and the export flourished again with growth of 15% and 2%, respectively. However, since the end of the third quarter, China repeatedly announced the discovery of corona virus on the packaging of frozen seafood imported from some countries into this market, so the authorities have tightened the inspection of frozen food. Importing into this market, even temporarily suspending imports from some foreign companies whose shipments were detected corona virus on packaging. This move led to a slowdown in Vietnam’s seafood exports to China in the last quarter of the year, resulting in a decrease of 8.5%
over the same period in 2019, reaching US$405 million.
With US$1.37 billion worth of seafood imports from Vietnam, last year, China surpassed the EU to become the third largest import market, accounting for 15% of Vietnam’s seafood export turnover.
In which, China imported the most shrimp with 526 million USD, down slightly by 3%, followed by pangasius with 515 million USD, down 22%. The two species account for 76% of seafood exports to China.
2.4 EU Market
In 2020, the EU dropped to the fourth market in terms of importing Vietnamese seafood, only accounting for 11% of Vietnam’s exports. Vietnam’s seafood exports to the EU were double affected by the Covid pandemic and the IUU yellow card, making the turnover only 959 million USD, down 5.7% compared to 2019. Brexit event (UK leaving the EU) from February 2020 also caused a disturbance in the EU seafood market, and demand decreased compared to the previous year.
However, EVFTA leverage has brought positive results for Vietnamese seafood to the EU in the second half of the year, after falling 16% in the first quarter and 20% in the second quarter. In 2020, seafood is one of the export industries that will benefit significantly when the Vietnam - EU Free Trade Agreement (EVFTA) comes into effect because 50% of the tariff lines will be 0% by 2020, including major commodities such as shrimp, tuna, squid, and octopus. In addition to the flexibility and adaptability of the market trend of the seafood business community, EVFTA has a significant impact, because the EU is an important market with orientation to the world markets.
3. Challenges
3.1 Covid Epidemic Affects World and Vietnamese Fishery Trade
In 2020, world seafood production and trade were hit hard by the Covid pandemic. The Covid-19 outbreak in key import markets of Vietnam such as the EU, USA, China, South Korea and Japan has significantly impacted Vietnam’s seafood trade with other countries. Vietnam’s seafood exports in the first and second quarters of 2020 decreased by 10% and 7% over the same period in 2019, too. In particular, exports fell the deepest in March and May (down 48% and 16%, respectively, over the same period in 2019). These are the peak months of the Covid epidemic in Europe and the US.
However, from July, exports began to recover and increased in the third quarter (with growths of 10%
to 13%), which shows that seafood companies in Vietnam have adapted, overcome challenges and grasp opportunities in the context of the COVID-19 epidemic still breaking out in the world. In the fourth quarter, although the demand of import markets was still good, seafood trade was deadlocked because of the lack of empty containers for export to other countries while freight increased many times, causing export activities to stall and decline.
3.2 Consumption Trends in Major Markets Change
In addition, Covid has changed the trend of consumption in the markets: consumption decreased in service channels, restaurants, hotels, increased in supermarkets, retail channels. Vietnamese pangasius exported to the main markets are consumed mainly in the service segment. Meanwhile, shrimp with different species and sizes and forms of products and processing methods are still suitable for consumption in supermarkets and retail segments, suitable for home processing in times of social distancing.
The trend of consumption of some marine products is similar. Therefore, many seafood products of Vietnam still have good opportunities such as frozen and processed white leg shrimp and marine shrimp, canned tuna and sea fish, fish sauce, dried seafood such as dried fish, octopus, squid, other processed products, instant products, preserved products with long shelf life.
However, the above result is just the general situation. In fact, the Covid epidemic has disrupted the global supply chain of goods, including seafood. Aquaculture and fishing are both affected. There are periods (such as from March to May), farmed products such as shrimp and pangasius have not been exported, inventories increased but the cold storage system in Vietnam is not enough, renting warehouses was expensive. Fishing in the sea was difficult, production dropped. In recent years, Vietnamese seafood companies have to import marine products from neighbouring countries, but last year they have to reduce imports because the Covid epidemic affected the output and transport of the countries.
3.3 The IUU Yellow Card has Reduced Vietnam’s Exports of Marine Products to the EU The EU’s IUU yellow card has caused Vietnam’s exports of marine products to this market to decline continuously since 2018 until now. In 2020, exports to the EU were double affected by the Covid -19 pandemic, IUU yellow card and Brexit event, causing the export value of marine products to this market decreased by nearly 13% over the previous year.
Seafood exports to the EU continued to decline and since 2019, this market has dropped to the 4th place in the seafood import markets of Vietnam, after the US, Japan and China. However, the EU is still a large oriented and dominant market, an important partner of Vietnamese seafood.
Although the EVFTA agreement has brought a tariff advantage from August 1, 2020, when demand recovers at the end of the year, Vietnam’s export of marine products to the EU for the whole 2020 is still down 9% compared to 2019, reaching 314. million USD, and compared to 2017, the sales decreased by 28%.
3.4 China Tightens Food Safety Inspection and Covid Epidemic Control Procedures of Seafood Exporting Companies
Since the third quarter of 2020, China has repeatedly reported detecting corona virus on the packaging of frozen seafood imported from some countries such as India, Ecuador, Russia, Argentina into this country... so China Customs declared will intensify inspection and examination of imported frozen seafood to prevent outbreaks of corona virus.
China Customs said that 1.3 million imported cold-chain products were sampled to check for corona virus, with 47 samples showing positive results; 39 foreign food manufacturers have been suspended from declaring imports for 1-4 weeks after detecting corona virus on packaging.
China suspended imports from 124 cold-chain food manufacturers from 21 countries after their employees became infected with the corona virus. Of these, 107 companies have stopped exporting to China by themselves since the outbreak. Vietnamese seafood export enterprises need to pay attention to grasp new requirements from China, because the competent authority of this country is proposing to supplement the content of certification of effective application of anti Covid-19 as well as online inspection of food safety conditions and measures against Covid-19 of some seafood processing enterprises exporting to China, including Vietnamese enterprises.
With the moves and stricter inspection regulations, Vietnam’s seafood exports to China in 2021 are unlikely to recover strongly, especially in the first half of the year, when the Covid epidemic has not shown signs of reduction.
4. Opportunities
4.1 COVID Epidemic Control in Vietnam
When an epidemic broke out, the Government of Vietnam took drastic, determined and timely anti- epidemic decisions to prevent the spread of COVID-19. This is the first advantage. In Vietnam, although the COVID epidemic is not as serious as in other countries in the world, it also causes a turmoil in the labour market. Labour in the seafood processing factory is unique, working in lines, so when the epidemic is high, the factories have to let workers rest, but when the epidemic settles down, the business is in short of labour. In addition, costs in the production chain increased, especially freight. In such a situation, despite great efforts and flexibility in adjusting product and market structure, many businesses, including large enterprises, have financial difficulties, small businesses are in real difficulties due to lack of capital, bank debt.
In 2021, the seafood trade situation will still be strongly affected by this pandemic, even this is still the main factor that dominates the trend of importing and exporting seafood’s of Vietnam. However, in 2020, while major producing countries such as India, China and some Asian and American countries are heavily affected by COVID epidemic, production of Vietnam Men are still up. In 2021, we hope that Vietnam will maintain its competitive advantage in raw material supply compared to other countries.
4.2 FTA with the European Union in General and the UK in Particular
Free trade agreements (FTAs) come into effect and put into effect in 2020, creating favourable conditions for our country's exports. After falling continuously in the first half of the year due to the impact of COVID-19 epidemic, Vietnam's seafood exports started to recover from July. In particular, the Vietnam - EU Free Trade Agreement (EVFTA) has Effective from 8-2020 has helped seafood have continuous double-digit growth since September.
The EU market has strongly recovered from September with an increase of 19-30%. Seafood export to EU (excluding UK) in 2020 will reach 958 million USD. Although this figure has decreased slightly compared to 2019, it is a relatively positive result in a year the economy in general and export activities in particular were heavily affected by COVID-19.
In 2020, COVID translation reduces exports to many markets, but seafood exports to the UK in 2020 will still grow 23% high with a turnover of 345 million USD. This will be a potential market for Vietnam seafood in the coming years, after the UK leaves the EU and signed a free trade agreement with Vietnam in December 2020. With an associated economic and trade area, linked to 17 free trade agreements and 3 remaining under negotiation... Vietnam still has plenty of room to increase seafood exports in the coming time. Competitive advantage of import tax on EU compared to other producing countries.
4.3 CP-TPP Agreement Came into Effect
For markets of CP-TPP countries, since the Agreement took effect, export turnover to CP-TPP member markets has achieved good growth. In 2020, only seafood export to CP-TPP member countries will reach over 2.21 billion USD, accounting for 26% of total seafood export of Vietnam.
In particular, exports to Canada increased 14% to reach 263 million USD, exports to Chile increased 20% to 19 million USD. These are the two most beneficial export markets in the CP-TPP agreement because they have not participated in any FTA with Vietnam before.
4.4 Diversifying Products and Improving Quality
Vietnamese enterprises need to focus on restructuring the industry, improving product quality, building image and branding and focusing on developing markets for Vietnam's seafood industry to break through in the coming time. To make a breakthrough, pangasius farmers and exporters need to focus on building high-quality pangasius fillets, diversifying products and developing value-added products. Creating added value for pangasius products differentiating from other white fish products will increase competitiveness and lead consumers to choose pangasius products over other products.
Along with that, the improvement of seed quality, investment of resources for research, selection and breeding capable of growing and developing well in all conditions and expanding the market are also problems experts note.
5. Conclusion
Covid-19 pandemic lasted for the whole year 2020, disrupting global trade in aquatic products, changing the trend of consumption of aquatic products. Vietnam's main export products therefore fluctuate in accordance with market trends leading to an increase in exports of white leg shrimp, marine shrimp, sea fish, and crab, while exports of pangasius have declined deeply, tuna and squid, Slightly reduced octopus. In addition, the Covid-19 translation reduces the need to import seafood in markets, but the main importers of Vietnamese seafood such as the EU, China, Korea, and Japan only slightly reduce imports from Vietnam (down 3.6%), while the largest market is the US still significantly increased (10%) seafood imports from Vietnam. In addition, other markets such as Russia, UK, Australia, and Canada have even increased strongly (10 - 32%) imported from Vietnam.
In 2021, the seafood trade situation will still be strongly affected by the Covid-19 pandemic, even this is still the main factor that dominates Vietnam's trend of seafood import and export. However, Vietnam is still able to maintain its competitive advantage in raw material supply compared to other countries. In addition, free trade agreements will continue to be a lever for Vietnam's seafood exports to recover in some markets. After one year, Vietnamese seafood enterprises will have more experience and flexibility in adapting to fluctuations and changing market needs and tastes. VASEP forecasts that seafood export in 2021 will have better results than 2020, estimated at 8.8 billion USD, up by nearly 5%.
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