THE FREE MARKET PHENOMENON OF ONE VIETNAMESE

UNCLAS SECTION 01 OF 02 HO CHI MINH CITY 000785

SIPDIS

DEPARTMENT ALSO FOR USTR
DEPTTREAS FOR OASIA
USDOC FOR 4431/MAC/AP/OKSA/HPPHO
USDA FOR FAS/FAA

SENSITIVE

UNCLASSIFIED

PAGE 02 HO CHI 00785 01 OF 02 010759Z
E.O. 12958: N/A
TAGS: EFIS EAGR ETRD ECON VM
SUBJECT: THE FREE MARKET PHENOMENON OF ONE VIETNAMESE
TRA AND BASA ("CATFISH") FARMER



1. (U) SUMMARY: FOR ONE VIETNAMESE FARMER IN THE
MEKONG DELTA, PRODUCTION OF "TRA" AND "BASA" -- THE
FISH FORMERLY KNOWN AS "CATFISH" -- IS A STUNNING
EXAMPLE OF THE SUCCESS OF PRIVATE ENTERPRISE AND THE
UNFETTERED APPLICATION OF FREE MARKET PRINCIPLES.
FIERCE COMPETITION AND SELF-TAUGHT MARKET SAVVY SEEM TO
BE CREATING A NEW BREED OF FARMER. END SUMMARY.

NGUYEN VAN THO, "THE CATFISH KING"
--------------


2. (U) ON JULY 18, AMBASSADOR BURGHARDT AND AN
EMBASSY/CONSULATE GENERAL TEAM (DPO, ECONOFF, FSN
POL/ECON ASSISTANT, AND INTERPRETER) VISITED A
FINGERLING FARM AND FLOATING CAGE OWNED BY NGUYEN VAN
THO, KNOWN LOCALLY AS THE "KING OF CATFISH.", HE IS
THE BIGGEST PRIVATE "TRA" AND "BASA" PRODUCER IN AN
GIANG PROVINCE. TRAINED BY HIS FATHER AND A VIETNAMESE
PH.D. FISHERIES ADVISOR, THO WAS A POOR FARMER WITH NO
FORMAL EDUCATION WHO TOOK A CHANCE ON THE GROWING TRA
AND BASA MARKET.


3. (U) THO LITERALLY BUILT HIS BUSINESS FROM THE GROUND
UP. IN 1995, THO BEGAN BUYING LAND FROM NEIGHBORS,
PAYING APPROXIMATELY VND 200 MILLION (USD 1300) PER
HECTARE. TO FINANCE THESE PURCHASES, THO OBTAINED
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LOANS FROM FRIENDS AND VIETNAMESE PRIVATE BANKS. HE
SAID STATE-OWNED BANKS WERE RELUCTANT TO LEND MONEY TO
PRIVATE BUSINESSMEN, AND THE GOVERNMENT GAVE HIM NO
LOANS OR SUBSIDIES. WHEN HE HAD ACQUIRED 14 HECTARES,
THO INVESTED VND 400 MILLION (USD 2670) TO DEVELOP 80
PONDS ON THE LAND. THO PLANS TO DEVELOP ANOTHER 20
HECTARES IF AMERICAN CONSUMERS CONTINUE TO SNAP UP HIS
FISH. IN ADDITION, THO ANCHORS 40 FLOATING CAGES IN
THE RIVER, EACH WEIGHING 25 TO 50 METRIC TONS.

A FORTUNE IN FISH
--------------


4. (U) THO'S HOMEGROWN FISH BUSINESS TURNS OVER
APPROXIMATELY VND 24 BILLION (USD 1,600,000),WITH A
NET PROFIT OF VND 4 BILLION (USD 267,000) ANNUALLY. HE
OPERATES FAIRLY CLOSE TO HIS BOTTOM LINE, HOWEVER. IF
THE PRICE REMAINS AT VND 12,000 (USD 0.80) PER
KILOGRAM, THO MAKES A PROFIT. BUT HE LOSES MONEY IF
THE PRICE DECLINES BY AS LITTLE AS USD 0.05, TO VND
9,000 (USD 0.75) PER KILOGRAM. THO SELLS HIS FISH TO
THE HIGHEST BIDDER, USUALLY FISH PROCESSING FACTORIES
LINING THE RIVER WHO RECEIVE THE LIVE FISH DIRECTLY
FROM A TRANSPORT SHIP. AFTER THE FISH IS PROCESSED AND
FROZEN, IT IS EXPORTED TO THE UNITED STATES' EAST
COAST, WHERE THO'S TRA FILLET SELLS FOR USD 1.71-
1.75/POUND (USD 3.76-3.85/KILOGRAM). BASA SELLS FOR
USD 2.00-2.03/POUND (USD 4.40-4.47/KILOGRAM).


5. (U) IN ADDITION TO HIS "WHOLE FISH" OPERATION
DESCRIBED ABOVE, THO PRODUCES 10 MILLION FISH
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"FINGERLINGS" ANNUALLY, WHICH HE SELLS TO OTHER MEKONG
DELTA FARMERS FOR VND 10 BILLION (USD 670,000),FOR A
NET PROFIT OF VND 2 BILLION (USD 133,000). THE
FINGERLINGS SELL FROM VND 300-1200 (USD 0.02-0.08) EACH
AT 30-85 DAYS OLD. THUS ALTOGETHER, THO'S FISH
BUSINESS NETS A PROFIT OF USD 400,000 PER YEAR. THO
HAS BEEN SO SUCCESSFUL THAT, IN ADDITION TO HIS
IMMEDIATE FAMILY, THE BUSINESS NOW SUPPORTS THE
FAMILIES OF 16 RELATIVES. THO HIMSELF HAS BEEN ABLE TO
SEND ALL FOUR OF HIS CHILDREN TO STUDY ABROAD.

LOW TECH BUT HIGH PRODUCTION
--------------


6. (U) THO AND HIS DAUGHTER, WHO STUDIED ENGLISH FOR
SIX MONTHS IN AUSTRALIA, ESCORTED THE AMBASSADOR AND
CONGEN TEAM THROUGH THE 14-HECTARE FINGERLING FARM, A
SERIES OF EARTHEN PONDS LINKED BY WOODEN GANGPLANKS,
WITH A LONG, OPEN SHED HOUSING THE RUDIMENTARY BREEDING
EQUIPMENT. ALTHOUGH THE FACILITIES ARE BASIC, THE
PONDS ARE DRAINED AND CLEANED EVERY 15 DAYS AND PH
TESTS ARE USED TO ENSURE WATER QUALITY. THO EITHER
SELLS THE FINGERLINGS OR TRANSFERS THEM TO HIS OWN
CAGES. THE FISH SPEND SEVEN TO TWELVE MONTHS IN A CAGE

UNCLASSIFIED

UNCLASSIFIED PTQ7859

PAGE 01 HO CHI 00785 02 OF 02 010759Z
ACTION EAP-00

INFO LOG-00 AGRE-00 AID-00 CEA-01 CIAE-00 CTME-00 DINT-00
DODE-00 ITCE-00 DOTE-00 SRPP-00 EB-00 EXME-00 E-00
FAAE-00 FBIE-00 UTED-00 VC-00 FRB-00 H-01 TEDE-00
INR-00 ITC-01 JUSE-00 L-00 VCE-00 MOFM-05 MOF-01
AC-01 NSAE-00 NSCE-00 OES-01 OMB-01 OPIC-01 PER-00
ACE-00 SP-00 SSO-00 SS-00 STR-00 TEST-00 USIE-00
EPAE-00 DRL-02 G-00 NFAT-00 SAS-00 /015W
-------------- D312CE 010759Z /38
P 010645Z AUG 02
FM AMCONSUL HO CHI MINH CITY
TO SECSTATE WASHDC PRIORITY 6595
INFO AMEMBASSY HANOI PRIORITY
ASEAN COLLECTIVE
USDOC WASHDC
USDA FAS WASHDC
DEPTTREAS WASHDC
ASEAN COLLECTIVE

UNCLAS SECTION 02 OF 02 HO CHI MINH CITY 000785

SIPDIS

DEPARTMENT ALSO FOR USTR
DEPTTREAS FOR OASIA
USDOC FOR 4431/MAC/AP/OKSA/HPPHO
USDA FOR FAS/FAA

SENSITIVE

UNCLASSIFIED

PAGE 02 HO CHI 00785 02 OF 02 010759Z


(REACHING A WEIGHT OF 1-2 KILOGRAMS) BEFORE THEY ARE
SOLD TO PROCESSORS.


7. (SBU) FURTHER DOWN THE RIVER, THE AMBASSADOR BOARDED
THO'S HOME, A HOUSEBOAT WITH A GIANT FISH CAGE
UNDERNEATH. VARIOUS FLOATING FISH PENS WERE ATTACHED
TO THE SIDES, AND THE ENTIRE STRUCTURE WAS TIED
TOGETHER BY ROPES AND ANCHORED TO THE RIVER BOTTOM.
FEEDING THE FISH WAS SIMPLE. WORKERS OPENED A TRAP
DOOR IN THE CENTER OF THE HOUSE AND DUMPED A SACK OF
FISHFOOD INTO THE WATER BELOW. THE SUBSEQUENT FEEDING
FRENZY SHOWED LARGE FISH ROILING IN THE MURKY WATER.
THO SAID HE ONCE USED AMERICAN CARGILL FISHFOOD FOR
FISH WEIGHING OVER 600 GRAMS, AS WELL AS PROCONCO AND
UNI-PRESIDENT FEED. BUT HE HAD STOPPED BUYING FROM
CARGILL BECAUSE OF WHAT HE TERMED "QUALITY" CONCERNS
AND A LACK OF RESPONSIVENESS TO HIS SUGGESTIONS.
(NOTE: POST WILL FOLLOW UP ON THIS WITH CARGILL, WHEN
THEIR LOCAL EXECUTIVES RETURN FROM VACATION.)

ROARING CAPITALISM IN THE PLACID DELTA
--------------


8. (U) THO OWES HIS SUCCESS TO HIS INGENUITY, SMART
INVESTMENT DECISIONS, AND SHEER CHUTZPAH. HE ALSO
BENEFITS FROM VIETNAM'S CHEAP LABOR, HUGE AMOUNTS OF
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PAGE 03 HO CHI 00785 02 OF 02 010759Z
FREE, RELATIVELY CLEAN WATER, AND CREATIVE CONCEPTS,
SUCH AS GIANT PORTABLE CAGES. WHILE THE OTHER 5000
FISH FARMERS IN AN GIANG PROVINCE ARE NOT AS SUCCESSFUL
AS THO, TOGETHER THEY PRODUCE HALF OF VIETNAM'S ENTIRE
TRA AND BASA HARVEST, ESTIMATED AT 120,000 METRIC TONS.
FURTHERMORE, THE VAST MAJORITY OF THE FISH FARMS ARE
PRIVATELY-OWNED BUSINESSES WITH FAMILY SAVINGS (OR
DEBT) INVESTED. ONLY ONE FULLY-OWNED STATE-OWNED
ENTERPRISE (SOE) CONTINUES TO PRODUCE TRA AND BASA IN
AN GIANG (IT ONLY HAS 40 CAGES),ALTHOUGH THO SAID THE
STATE OWNS A SHARE OF ONE LARGE PRIVATIZED PRODUCER AND
THE PROCESSING INDUSTRY ITSELF IS A MIX OF SOES AND
PRIVATE BUSINESSES.


9. (U) COMMENT: NGUYEN VAN THO CREATED A MILLION-
DOLLAR BUSINESS, USING ONLY PRIVATE FUNDS AND ELBOW
GREASE. HIS FUTURE SUCCESS AND THAT OF OTHER PRIVATE
ENTREPRENEURS WILL DEPEND ON THE GVN'S WILLINGNESS TO
LET THEM OUTPERFORM THE SOES AND BECOME MAJOR MARKET
FORCES IN THEIR OWN RIGHT. THESE NEW ENTREPRENEURS
WILL BE THE ONES WHO DEAL WITH THE FIERCE COMPETITION
IN WORLD MARKETS. ALTHOUGH THE ANTI-DUMPING CASE WAS
ONLY DISCUSSED BRIEFLY, THO (AND OTHER SCRAPPY
ENTREPRENEURS) MAY LEARN THE HARD WAY THAT BEING TOO
SUCCESSFUL CAN TRIGGER UNEXPECTED REACTIONS -- AND
LEAVE HIM WONDERING HOW HIS COMPETITIVE EDGE WORKED
AGAINST HIM.
YAMAUCHI

UNCLASSIFIED