Process Management

News last update:6 Aug 2012

Delta seafood firms, farmers in chain of debts

The business cooperation between some seafood processing companies in the Mekong Delta provinces and catfish farmers have turned into a chain of debts, with the processors unable to pay farmers, who in turn also fail to repay the feed suppliers, and so on.

The chain can collapse at any time, burdening farmers’ with pressure to clear bank loans, while sending the businesses to bankruptcy.
In Can Tho city’s Thot Not District, for instance, a large number of catfish farms have been left deserted, while local farmers, who used to be billionaires (in Vietnamese dong) from selling the fish, are now seeking buyers for their land plots.
What happens is that local farmers sell their fish to a processor, who does not fully pay the negotiated price, leaving the farmers with a debt and unable to pay their suppliers.
Duong Ngoc Minh, deputy chairman of the Vietnam Association of Seafood Exporters and Processors (VASEP), said seafood companies used to need only the fish buying contract to be eligible for bank loans.
“But they are no longer able to do so under the current credit policy,” said Minh.
“VASEP figures show that less than 10% of businesses have cleared their payments with farmers on time.”
As many as 80% of the seafood processing plants have had to cut production, and some even had to shut down operations, confirmed Minh of VASEP.
Fish feed also hit
The fish processing plants’ shutdown has also lead to the closure of many seafood feed processing plants, he added.
“More than 70% of the fish feed manufacturing plants are in trouble, 40% of which have had to stop operation,” elaborated Minh.
High interest
Governor Nguyen Van Binh in a press conference in Hanoi announced a decision that will force all banks to adhere to a new deposit interest rate ceiling of 13% a year instead of 14% that had been in place for months.
The governor also unveiled a road map to pull down the interest rate by one percentage point each quarter so as to bring the ceiling deposit rate to around 10% next year.
But the problem persists. According to local media, access to lower-cost capital for most enterprises remains extremely difficult.
Business people complain that most of them had to borrow funds at annual rates of 20% a year or higher, rather than the soft rate of 15 – 16% as announced by banks.
Nguyen Trong Hanh, deputy director of the HCMC Tax Department, said that banks only cared about lending each other via the inter-bank market rather than granting credit to enterprises, adding that “recent announcements of rate cuts by banks are just lip services.”
Given the road map on reducing interest rates the preventively high capital cost will remain until this year’s end and into next year, meaning the struggle with the high capital costs will be a long-lasting ordeal for enterprises

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