Investing in Aquaculture in Vietnam

Vietnam wants to turn aquaculture into the ‘spearhead’ of its fishing industry. If it is successful, this may produce more opportunities for foreign firms to participate in this field than ever before. Read on to discover where these opportunities lie.

VN Express has reported that Vietnam expects to rake in between US$800,000 and US$1 billion worth of aquaculture exports by 2025.

By some estimates, this industry may also contribute more than 25 percent of the total output of fisheries in Vietnam and exceed US$4 billion worth of exports by 2045.

These are ambitious goals and reaching them will take huge amounts of investment, including from foreign firms.

Currently, foreign direct investment (FDI) in this space is primarily in animal feed and the supply of seeds. As Vietnam’s aquaculture industry grows, it is expected that demand for these key materials will as well, giving foreign firms further room to expand.

Vietnam’s aquaculture background

Not only does Vietnam have excellent natural sea conditions for aquaculture, but also freshwater aquatic resources in the basins of the Red River and the Mekong Delta. In these locations, aquafarming is practiced all year round.

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Vietnam’s seafood production and exports are divided into six key regions: the North Central Coast, the Central Coast, the South Central Coast, the Southeast, the Mekong Delta, and the inland provinces.

According to VASEP, the bulk of Vietnam’s aquaculture exports come from the Mekong Delta. In particular, this region accounts for about 95 percent of total pangasius production and 80 percent of shrimp production. As of 2021, the Mekong Delta was home to about 70 percent of a total of 1.1 million hectares of aquaculture in Vietnam.

Vietnam’s key aquaculture outputs by year

Source: General Headquarters of Fisheries, General Statistics Office

Due to the sharp increase in key exports, such as pangasius, black tiger shrimp, and whiteleg shrimp, Vietnam’s aquaculture output in 2022 reached an estimated 5.1 million tons, up 6.3 percent over 2021. As a result, Vietnam’s total seafood export hit a new record with turnover worth US$11 billion for the year.

Shrimp and pangasius were Vietnam’s two biggest seafood exports, reaching US$4.3 billion and US$2.4 billion, respectively. These two aquacultural products accounted for more than half of Vietnam’s total seafood exports, in 2022.

Vietnam’s top seafood export markets in 2022

(Source: VASEP)

Challenges posed by illegal, unreported, and unregulated fishing (IUU)

Despite a large increase in seafood exports to the European Union in 2021, Vietnam’s aquaculture sector is facing a key challenge from the bloc. Namely, a yellow card was issued in October of 2017 to the Southeast Asian nation.

Yellow cards are part of a two-step process, whereby countries issued with a yellow card must take steps to remedy IUU fishing. Failure to comply with the EU’s requirements may see a country issued with a red card, which effectively means their fish products will be banned for sale in the EU.

Though Vietnam’s yellow card is still in effect, as recently as October of 2022, EU inspectors in Vietnam determined that sufficient progress had been made to avoid issuing a red card. Monitoring is set to continue, however, and a failure to continue to remedy IUU challenges could see a red card on the table – which would be detrimental to Vietnam’s aquaculture exports.

FDI in aquaculture in Vietnam

In the fisheries industry, raw materials include seed, feed, and aquatic pharmaceuticals. In Vietnam, there has historically been a shortage of these materials, and this has given rise to huge investments by foreign firms.

Fish food

Instead of directly competing in the breeding and processing stages of fish farming, FDI enterprises are mostly focused on the aqua feed market. Though there are some domestic producers of fish food, the lion’s share of the market belongs to a handful of big foreign suppliers.

Specifically, in pangasius feed, 70 percent of fish farmers use food supplied by foreign enterprises like Cargill (US), Green Feed (Thailand), Proconco (France-Vietnam), or Anova (USA). Meanwhile, in shrimp feed, there are big names like Uni-President (Taiwan), CP (Thailand), and Tomboy (France).

Seed

Foreign companies not only have a dominant presence in the aqua feed market, thanks to their low prices and high production standards, but they also exert control over the supply of seed for species, such as black tiger shrimp and vannamei shrimp.

Seafood processing

FDI firms also participate in aquatic processing activities where they have an advantage with respect to access to capital and better production quality compared to domestic enterprises. Foreign corporations, such as C.P., Japfa, New Hope, and Emivest, have in recent years invested a large amount of capital in production and processing of marine products in Vietnam.

Resistance to FDI in aquaculture

Despite foreign capital playing a pivotal role in supplying Vietnam’s aquaculture market, domestic firms have resented the concentration of their market share.

An article from Vietnam Fisheries Magazine in 2020 reported that experts in the field believed excessive dependence on a few foreign companies producing and supplying aqua feed has led to a situation where farmers are forced to accept high prices due to a lack of competition.

There is even some suggestion that there should be greater state management of the sector – though nothing official has come of it yet.

That said, with 15 trade agreements signed, Vietnam has the potential to increase seafood exports to major markets, such as the EU, China, and South Korea, substantially. Thus, the demand for aqua feed is likely to rise proportionally and therefore limiting foreign investment in the sector could have negative consequences.

The future of aquaculture in Vietnam

In August 2022, the Prime Minister issued Decision No. 985/QD-TTg on the ‘National Program on Aquaculture Development for the period 2021-2030’. This broadly outlines a development plan for the fisheries sector and aquaculture, including targets for two five-year periods.

Vietnam’s Aquaculture Development Targets for 2021-2030

Total production of aquatic animals is expected to reach 202 million tons in 2030. The biggest increase is expected to come from aquaculture, which should contribute 106 million tons in 2030, according to the plan.

To achieve these goals, the government is encouraging domestic firms to mobilize funds from foreign donors and international organizations. FDI investments in building and upgrading aquaculture infrastructure should be prioritized. This, it is believed will help the sector to meet the requirement of environmental protection, sustainable production, and food safety.

Key foreign investors in aquaculture in Vietnam

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Uni-President (Taiwan)

Uni-President Vietnam was established in 1999. The company started building the first aqua feed factory in Binh Duong in 2001. The company’s products focus on feed for shrimp, fish, frogs, and other marine animals. Uni-President also provides shrimp seed for Vietnamese enterprises. Currently, Uni-President has six facilities in Tien Giang, Ninh Thuan, and Quang Nam.

Green Feed (Thailand)

Green Feed Vietnam is one of the leading companies in the field of animal feed and breeding stock with its first animal feed factory built in 2003. It currently owns 10 feed mills with production processes and quality control according to ISO 22000, HACCP, GLOBAL G.A.P standards. Green Feed Vietnam has also invested heavily in producing high quality aquatic breeds to supply the Vietnamese market.

C.P Cooperation (Thailand)

With the strength of its parent corporation in food production behind it, C.P. Vietnam has quickly built a reputation in the market and has become one of the leading enterprises in breeding and processing cattle, poultry, and seafood. Currently, the company has a system of eight feed mills in Vietnam. C.P is also involved in the production of shrimp and fish for export to international markets.

Vietnam’s aquaculture sector moving forward

The aquaculture industry in Vietnam has shown promising growth figures, positioning itself to capitalize on the rising global demand for aquaculture products. Moreover, the recently approved aquaculture development plan provides a conducive environment for new opportunities in this sector.

However, foreign investors should exercise caution and take into account the sector’s sustainability challenges and the EU’s investigations into illegal, unreported, and unregulated fishing. By doing so, they can target their investments prudently.

See also: Vietnam’s Agricultural Sector: Rising Star in Food Production

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