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 UNCLASSIFIED PAGE 03 HO CHI 00785 01 OF 02 010759Z 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 UNCLASSIFIED PAGE 04 HO CHI 00785 01 OF 02 010759Z "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 UNCLASSIFIED 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