BURMA: 40 PERCENT PRODUCTION CUT REDUCES FISHERIES

C O N F I D E N T I A L SECTION 01 OF 04 RANGOON 000591

SIPDIS

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E.O. 12958: DECL: 07/24/2018
TAGS: EAID BM SENV ECON PGOV ETRD EFIS
SUBJECT: BURMA: 40 PERCENT PRODUCTION CUT REDUCES FISHERIES
EXPORTS

REF: A. RANGOON 118

B. RANGOON 579

C. RANGOON 572

Classified By: Economic Officer Samantha A. Carl-Yoder for Reasons 1.4
(b) & (d)


1. (SBU) Summary. Cyclone Nargis severely damaged Burma,s
fisheries sector, destroying the livelihoods of small-scale
fishermen and aquaculture. Despite widespread damage, there
are no indications that there will be a domestic shortage of
freshwater fish and fish products, critical elements of the
Burmese diet. However, marine product exports, accounting
for approximately six percent of total exports annually and
nine percent of GDP, will be adversely affected. With our
sources anticipating 40 percent less fisheries production for
FY 2008-09, the impact of Cyclone Nargis on Burma,s economy
will likely be significant. End Summary.


2. (SBU) Burma,s fishing industry has accounted for
approximately six percent of Burma,s exports annually since
2005 (Reftel A),and approximately nine percent of Burma,s
annual GDP (according to the FAO). In FY 2007-08, Burma
fishing production amounted to $650 million, of which $366
million was exported. Myanmar Fisheries Federation (MFF)
First Secretary Hniu Oo reported that the GOB raised its
fisheries production target for FY 2008-09 to $850 million.
The Irrawaddy Delta region (including Rangoon and Irrawaddy
Divisions) produces close to 50 percent of both freshwater
and marine products in Burma. However, the damage Cyclone
Nargis has wrought on the fishing sector will result in an
estimated 40 percent shortfall of this target, with exported
products more heavily affected than domestically consumed
products.

Small-scale Fishing Hurt, but Domestic Markets OK
-------------- --------------


3. (SBU) Burmese prefer to eat freshwater fish, leaving
large quantities of marine products free for export. While
some sources report less variety and reduced availability of
fish in Rangoon,s markets, there is no evidence of a pending
domestic fish shortage. In addition to local consumption
preferences, Burmese have been reluctant to eat fish from the
Irrawaddy delta,s waterways, where so many people died.
This weakened demand and the abundance of inland fisheries in
other regions of Burma have helped maintain a stable domestic
fish market. According to officials at the Fisheries
Department of the Ministry of Livestock and Fisheries, the
MFF, and private companies, the storm will not have long-term
affects on the domestic fish market. Fisheries Department
Deputy Director General Khin Kolay explained that with four
main river systems with a combined distance of nearly 6,000
kilometers, and 2,832 kilometers of coastline, Burma would be
able to produce enough fish to meet domestic demand.


4. (SBU) Nonetheless, officials told us the GOB is assisting
small-scale fishermen,s recovery. Khin Kolay said that the
GOB planned to construct 9,000 small fishing boats for
Irrawaddy fishermen. However, Hniu Oo told us that only ten
percent of the promised 9,000 boats have been built so far.
Despite newspaper articles trumpeting the construction of
fiberglass boats by the Naval Engineering Corp, only 30
prototypes have been built, he said. The other boats,
averaging 21 feet in length, were made of wood. MFF Deputy
Director General Han Tun said about half of the boats would
have Chinese-made engines. However, the wood for these boats
required up to three months drying time, which was causing
delays, he noted. On June 28, the GOB provided boats to

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fishermen in highly publicized hand-over ceremonies in
Labutta, Bogalay, and Hainggyi. During a four-day trip to
ten villages in Labutta and Ngapudaw Townships (Reftel B),we
only saw one new boat, and no fishermen reported receiving
new boats or gear.

Aquaculture Damage Hurts Exports
--------------


5. (SBU) The commercial fishing industry survived the storm
with the loss of only four irreparable commercial trawlers
(Reftel C). However, the loss of 36,000 acres of shrimp
production, Burma,s leading exportable marine product,
caused Khin Kolay to anticipate significant reductions to
Burma,s marine product exports for FY 2008-09. Additional
conversations with the MFF officers and private businessmen
emphasized that the long-term recovery of the fisheries
sector depended on the recovery of the aquaculture sector.
Having suffered significant damage to shrimp and fish
hatcheries and farms (Reftel C),most officials and
businessmen surveyed expected marine product exports to be
significantly lower for FY 2008-09.


6. (SBU) In an effort to help rebuild hatcheries, the
semi-private Myanmar Livestock, Breeding and Fisheries
Development Bank is providing 50,000 kyat loans
(approximately $42) per acre to commercial hatcheries and
fish and shrimp farms at 17 percent interest. Since most
hatcheries are still repaying their first loans, the need to
repurchase stock and repair facilities means that many now
face the prospect of a double mortgage. While this will
burden commercial enterprises, they will recover more quickly
than the small-scale fish and shrimp farms that do not have
the same options. Hniu Oo said that he expected aquaculture
to recover within one and a half years. Absent assistance,
small-scale fish and prawn farmers fear that they may need as
much as five years to fully recover their aquaculture farms
(Reftel C).

The Official View
--------------


7. (C) Given the cyclone,s impact on fisheries, Hniu Oo
opined that fisheries production for FY 2008-09 would be 40
percent below the FY 2008-09 target, amounting to
approximately $500 million, or a 20 percent reduction from FY
2007-08 production. Han Tun privately agreed with this
estimate, saying that two months of lost production plus the
time needed to recover would result in a 20 percent reduction
in fisheries production this year versus last year. Khin
Kolay told us that FY 2008-09 marine product exports would be
significantly reduced, by as much as 50 percent, specifically
due to severe losses in the saltwater shrimp industry.


8. (C) To help gain a clearer picture of Nargis-related
damage to the fisheries sector, the MFF conducted a
fisheries-specific survey covering six to eight townships in
Irrawaddy Division and two to five townships in Rangoon
Division. Meeting with over 3,000 fishermen, volunteers
catalogued quantities and types of boats and equipment lost
in each village. While the MFF has collected and is now
analyzing the information, Hniu Oo told us that before the
assessment can be publicized, the conclusions will need to be
&approved by the authorities.8 Although media reports
indicated that the assessment results would be released
shortly, Han Tun told us that it would be at least two weeks
before the assessment is published. Less optimistically,
Hniu Oo opined that a public version of the assessment would
be available sometime within the next three months.

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A View from the Private Side
--------------


9. (C) During a visit to Advanced Seafood Industries Company
in the Dagon Seikken Industrial Zone in Rangoon, Executive
Director Chia Wing Huat estimated that the supply of
exportable marine products from Irrawaddy Division this year
would be much as 60 percent below last year,s levels. He
told us that the biggest problems were the loss of fishermen
and the two and a half month fishing hiatus that followed the
cyclone. Mr. Chia anticipated an additional four to five
months of reduced catches before the industry would begin to
recover in October and November. Declining to reveal
precisely how badly this would hurt Advanced Seafood
Industries Company,s profits, Mr. Chia anticipated that this
year the Irrawaddy region would produce 60 percent less
marine exports than in FY 2007-08, and that Burma,s total
fisheries exports would be 20 percent lower than in FY
2007-08. Mr. Chia did note one positive development, saying
that his company, which also imports fishing equipment, was
importing and selling more equipment to meet the demand of
fisheries rehabilitation efforts.


10. (C) During a July 23 visit to the Khoo and Associates
shrimp hatchery near Insein, workers told us that while the
freshwater shrimp hatcheries were damaged during the cyclone,
they expected to be back up and running in time for the
February/March season. Freshwater shrimp are produced
primarily for domestic consumption; Myanmar Shrimp
Association official Khin Maung Than told us he had no doubt
that there would be enough freshwater shrimp to meet domestic
demand. However, the saltwater shrimp sector, produced
primarily for export, suffers from higher costs and lower
prices. Khin Maung Than told us that the GOB,s 10 percent
export tax had negatively affected saltwater shrimp
production. Furthermore, the 50,000 kyat loans to hatcheries
and farms did not cover the costs of saltwater shrimp
hatcheries, which were approximately 200,000 kyat per acre
($170) due to higher prices for spawning stocks and imported
feed. Khin Maung Than opined that, unless the government
exempted saltwater shrimp from export taxes, the saltwater
shrimp export industry may not recover at all as the
additional costs associated with post-Nargis reconstruction
removed any chance of making a profit.


11. (SBU) Ref A noted that many fishermen in the
cyclone-affected areas have resorted to crabbing as a way to
survive. However, the increase in crab supply has driven
down the cost of crabs domestically, from between 2,000 to
3,000 kyat ($1.65 to $2.50) per viss to 1,300 kyat ($1.10)
per viss. (Note. A &viss8 is a local unit of measure
equivalent to 3.6 lbs. End Note.) Villagers in Ngapudaw
Township indicated that the price for one viss of crabs in
Chaung Wa was even lower, with earnings just covering
households, daily rice costs. Local media sources reported
that the price of crabs in cross border trade with China has
fallen from $2,100-$2,400 per ton to $1,410. These market
adjustments put further pressure on fishermen trying to
recover their livelihoods. This is especially true in the
Burmese fishing sector where domestic prices are set on a
monthly basis by the Fisheries Department regardless of world
prices.

Comment
--------------


12. (C) While domestic fish and shrimp supplies continue to
stabilize, this year,s expected 40 percent shortfall in

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fisheries production will severely hurt marine product
exports and shrink government revenues for FY 2008-09. The
government,s power to set domestic marine product prices,
plus the imposition of a 10 percent export tax, prevents
Burmese fishermen from benefiting from price fluctuations in
the global market. In yet another example of the Than Shwe
regime,s economic short-sightedness, artificially fixed
prices and high export taxes are undermining fishermen,s
attempts to rebuild their livelihoods.
VILLAROSA