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Catfish Quandary - We're not fishermen, and we are not involved in this dispute, but haven't you wondered what all the fuss is about over the catfish wars?  In this space, for this issue only, we will take a close look at the beef about "catfish" in order to see if there are lessons and not just fish stories to learn.

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Dumping Laws - This seems to be more practical than legal, but due to substantial political ramifications we tread carefully on this potentially smelly topic.  Reports are that if Vietnam does not reduce its output of local "catfish" (call Basa and Tra fish for importing to America), there will be an overproduction. Not only will the farmers loose their investment in a large crop, but what should they do with it?  We can think of few things more smelly than an over supply of dumped "catfish."

But that's not the "dumping" challenge we intend to discuss. The US Department of Commerce recently issued a preliminary ruling (that may be sustained or not) holding that Vietnam sold it's "catfish" in America for less than its cost of production.  That is called dumping, and the adverse ruling resulted in tariffs being imposed on Vietnam's Basa and Tra fish (originally marketed to American buyers as "catfish").

Originally posted as high as 64 per cent above the American import price with harsh recriminations on both sides following, the tariffs were recently reduced to a range of from 31% to 38% based on the respective exporter's presumptive production costs.  However, even at these rates, still far above the nearly zero tariffs imposed for other agri products, Vietnam's fisheries are not able to competitively ship their products to America.

We won't touch the complex economic, legal, and political issues here.  But we will look at the facts as we've been able to discover and understand them.

When first introduced a few years ago, the Vietnamese fish were a smash hit for very good reasons: they are very good to cook and to eat,  and they sold at very reasonable prices.  However, for reasons that now escape attention and certainly our understanding, the first decision makers elected to call their product "catfish."  That raised the ire of the existing catfish sellers in America. Only after horrid IP litigation that Vietnam lost, Vietnam was compelled to change the name of its fish and started to market them as Basa and Tra.

However, the slippery things in frozen form are still referred to as "catfish" in Vietnam State controlled media, and we suspect world wide. Thus, even with a name change, the Basa and Tra are in direct competition with American catfish. If I were to pick a competitor, it would not be Mississippi fishermen and their strong lobby.

Basa fish is a better buy, as well as better cooking and even tasting, than many other fish sold in America. But Vietnam stubbornly persists in calling their product "catfish."  And American enterprise fought back as a result. Vietnam now says this is political foul ball, coming about 1 year after the BTA came into force but ..., well ..., rather than comment here, we will let you decide for yourselves.

Vietnamese Basa and Tra fish farmers are now being asked to take immediate and drastic steps to reduce the size of their projected 2003 production.  Due to the hefty added tariff,  Basa and Tra have become commercially uncompetitive in America, and Vietnam's market for these tasty fish is expected to be considerably smaller than projected and planned.

A prior history.  This scenario of poor or inadequate market knowledge, or outright poor planning or decision making, seems to have happened to Vietnam before, but in a slightly different setting.  A few years back, Vietnam resettled ethnic Kahn (majority) people in the traditional farmlands of ethnic minorities. The Kanh then tore up the farmland and planted -- no over planted -- coffee trees. High local production at a time of high world market prices encouraged Vietnam to export its entire coffee crop, perhaps not realizing the full impact that act would have.

Vietnam did become the world's second or third largest exporter of coffee, but it also flooded the market with excess product that drove the market price to the basement. With the market in a slump and prices down, the cost of coffee production quickly soared to exceed the market price. As a result, coffee trees in the Central Highlands became more intolerable then ripe coconuts in the southern delta province of Ben Tre.  

With the ethnic minorities in an uproar for having been displaced from their land, with the coffee market depressed, and faced with hectors of coffee trees needing costly care, the coffee growers uprooted and sold their tree stumps as... lamp stands. This is not a joke, but the coffee-tree lamp stands are extremely ugly, and even they don't sell well.

Recent news about Vietnam’s increased production and export of cashew nuts causes the informed observer to wonder if Vietnam can exercise greater control on its domestic and export policies in this sector?  Cashew tree stumps are huge when compared to coffee tree stumps.

Through its "market-style economy under Vietnam-style socialism," the State supports certain enterprises, encourages others, and in some cases dominates hand-picked industries.  Some good results are possible (to sellers but not buyers) in this background. Witness rice exports where Vietnam and Thailand have agreed to divide the markets and not compete.  

With increased productivity from China  pressing high against Vietnam's exports, and the re-emergence of its SEA neighbors from the 1997 economic down-turn, Vietnam enters the slippery slope of major world transactions at a time of increasing regional and world competition.  Yet many in Vietnam's leadership are still coming to grips with understanding and accepting domestic forms of capitalism.  

However, with Vietnam now working in international cartels (prohibited in the US) and going alone in other markets, Vietnam also runs the risk of harming if not destroying domestic markets when its actions adversely impact international markets.  Now that Vietnam is a player in the world's economy, there is a rapid need for and a practical concern about developing Vietnam’s awareness of proper marketing strategies and tactics.

Vietnam’s high rate of productivity, assisted or not by the State, shows Vietnam’s strength, while poor marketing practices work to destroy the very markets that before seemed so attractive to enter.

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Let's look at the fish.  Because a few readers asked us about the "catfish wars," thinking this a worthy topic of research, we found that effective April 1, 2002 the State of Mississippi amended its Mississippi Code § 69-7-605 to define “catfish” as any species within the family ictaluridae.  Having no idea what that meant, we did a short Goggle search for "catfish" and found everything and more than we could want to find on all fish at  http://www.fishbase.org

Looking further we found at http://www.fishbase.org/identification/specieslist.cfm?famcode=129&areacode=  that there are 47 species in this family, 12 of which grow in America. Without going too deeply into biology or Latin words, we see that each and every one of the ugly suckers has whiskers. That's why they're called "catfish." See the full web page for yourself, or a few samples shown below, but take care.  When you open the middle photo it seems to come forward as if to bite you!

Ictalurus  punctatus channel catfish grows to 132 cm and 26.3 kg	Ameiurus melas black bullhead, grows to 66 cm and 3.6 kg	Ameiurus catus white catfish grows to 95 cm and 9.75 kg

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Now, that's one ugly group of big fish, OK? On that we can all agree.

Then we did a search on Basa and Tra fish.  We could not find a thing on Tra but just take a peak at a Basa fish and see what we saw.  Click on the following images for enlargements. These don't bite.

592Vietnam Investment Review13; Feb17-23 story headlined: "Catfish may also have 9 lives"	pencil drawing of Basa	on line photo of Basa

See http://www.fishbase.org/Summary/SpeciesSummary.cfm?genusname=Lactarius&speciesname=lactarius  These are from the family Lactariidae (False trevallies) and species Lactarius lactarius , grow to 40 cm long and 1.6 kg in weight, and guess what? As one of our readers wrote to us:  

This fish got no whiskers!  It certainly ain't no catfish the way we know 'em. When we was kids out fishing, I was bothered by them suckers always taking our bate. We thought them was useless. "All bone and no meat" said the boneheads   What did we know, so we tossed 'em.  But look here at the Basa.  It sure ain't catfish-looking.  And the meat cooks, looks, smells, and tastes better than catfish.  So why, the smart shopper --  my wife -- asks, did the stupid marketing manager choose to call Basa anything like catfish?

To our eyes, with its large belly, stubby nose, and smooth skin, the sucker looks like a pig. Surely no one would buy a fish named "pig" fish or a "porker" fish.  But with a bit of effort at real marking and using the Basa name in the first place -- rather then underhanded tricks by trying to fool buyers that their whiskerless fish are catfish -- Basa Fish could have been the number one seller of all fresh water fish in America. Now they're more rare than hen's teeth. (sic)

Basa Quality Fish.  Funny thing about Basa fish is that they really don’t have whiskers, don't look like catfish, are smaller than and don't cook like catfish, and don't taste like catfish. The Basa is a premium freshwater table fish with snowy white, firm textured flesh, sweet flavor with an average weight of the whole fish of 1.60 kg or a comparatively mighty small 3.5 pounds vs. a range of 8 to 58 pounds for American catfish. 

 Another writer comments on Basa Fish:

On the subject of  eating Basa..., for those of you who vow to eat more fish but can't stand the way your house smells like a cannery for days after, Basa is the way to go. It's a white fish like cod or sole but there is zero odor. None. Zilch. It's great. I have seen it available at Safeway but it must get bought up right away because it's very rarely in the fish department, although this might just be the Safeway near our house. However, it is readily available at fish markets and it's cheaper than everything else too. Added bonus.

For a super fast after work dinner, spread butter on one side of the fillet and then cover it in spices. I use Italian seasoning, dill, garlic powder and parsley but I think anything will work. Put this butter side down into a hot frying pan and cover the other side of the fillet with the same ingredients. It's only a few minutes a side and it's done. Everyone knows anything cooked in butter can't be bad. :)

And did I mention no smelly house? Try it. Tell me I'm wrong.

All published reports are that Vietnamese farm-raised Basa (i) are not bottom feeders (catfish reportedly are) as they are grown in cages, (ii) don’t have a “fishy” or "muddy" odor, and (iii) their fillets when boiled or fried don’t brake into smaller pieces even when NOT breaded or floured.  

They are smaller than catfish, more tasty, and comparable in taste to cod and sole, as well as catfish.

So why did the Vietnamese try to market these wonderful products as "catfish" in the first instance, and continue to push that expensive point even today?  Sharp traders we imagine, who now feel a need to protect their early advise to the decision makers. Perhaps they thought they knew better, went in on the cheap, and failed to do appropriate and cost-effective market research. What ever their original reasoning, the Vietnamese export fish industry fell into the ugly jaws of American catfishermen and their powerful lobby.

Imagine the results today if the Vietnamese decision makers had only called on us to help them market their new product?  (OK, so this is a crass promotion: see our offices.) We've been telling our clients for decades to be keenly aware of the problems that come from making false claims. We would have shown the decision makers a cost-effective way of understanding the American market. After all, this is what we've been doing now for ten years here and 24 years before in America. We also help foreign investors understand the Vietnamese market.

But as false claims and other sharp trading practices are still often found in Vietnamese commerce, the decision makers and marketing managers no doubt felt it was better to call their fish by a popular name without seeing the need for, or trying to go on the cheap without, a careful look into alternatives and the  probable consequences now being effected and projected.

Even as unsupportable as it now appears to call Basa fish "catfish," in Vietnam a guiding commercial principle today remains that the buyer should beware.  Vendors are practically free to make any claim that is not anti-revolutionary as it is the buyer's responsibility to insure the product is what it is claimed to be.  

This holds true for a 1,000 dong (6-cent) battery that all students first test at a store before a purchase to insure it has a charge, to the highest cost durable goods. A Vietnamese seller will often proffer a meaningless "guarantee" that is not supported or upheld at any level as there is no culture for, or readily available form to enforce, greater responsibility. 

American commerce was the same until the mid 1970s when the concept of consumer awareness and product liability forced a change in the entire legal and social structure of America. That spread to Europe and Japan slowly but is now incorporated into the EU and Japanese laws as well. 

If the Vietnamese employed American consultants before marketing their fish in America, they should call us to discuss how to make claim against those consultants for the consultants' failure to give proper advice.  

If the Vietnamese had greater experience or used proper consultants, they would have been able to better understand the  profitable but volatile American market.  We would have told them (as we have so often written about in these pages) that the American way of doing business today is far removed from the caveat emptor "let the buyer beware" days of long ago. No longer do purchasers buy at their own risk.  

Today, it is more appropriate for Vietnam to consider caveat venditor, or "let the seller beware."

Had the decision makers in Vietnam properly done their planning before marketing this wonderful product, had they called the fish anything that it actually was and not tried to sell (and still promote) it as what it so clearly appears not be, there probably would not be any large tariff imposed today on Basa or Tra fish, and Vietnam would be working hard to produce more and not reduce the supply of these great fish products.

OK, so maybe our research is not complete and perhaps we've missed a fine point or two in this complex argument between Cat-fishers and Basa-fishers. But our main point is yet valid:  Vietnamese managers and decision makers must be more aware of international and particularly American market customs and procedures if they want to succeed.

Saddled now with a 64% tariff on Basa fish, this challenge of both learning and adapting to markets wider than Vietnam, may be only the tip of the iceberg.  Sharp marketing practices by Vietnamese in other industries can mask if not destroy Vietnam's real benefits from entering world commerce.  [Update May 2006.  See prosecutions for violations at http://www.nmfs.noaa.gov/ole/news/news_SED_050806.htm] 

High productivity in Vietnam must come from natural resources, low local costs, high flexibility, and marvelous work ethics. Vietnam can be the world’s source for well manufactured and lower cost, high quality products in many industries, including agri and aquaculture.

However, if Vietnam's leaders fail to heed the call to change, then Vietnam risks loosing more commercial ground in the short term then the nation achieved in the first 17 years of Doi Moi.  

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DISPATCHES

*Regional Deflation Sourced - China -  Remarkable as it may seem to those in other parts of the world, the economic impact today from a sneeze in China erupts as if it were a flu in the rest of Asia.  Even before the full impact of the 1997 economic crisis can be felt across these broad lands, we are beginning to feel the press of deflation.

Vietnam is barely out of a full year in the black ink when we and others must face the challenges stemming from a hoard of cheap products and less costly plants that are being exported from China.  The impact is to depress wages and property prices in other parts of Asia.

The Nihon Keizai Shimbun reported that structural deflationary trends are likely to accelerate in Asia amid price slides due to economic globalization arising from the impact China has on the region.

Consumer prices fell in leading  Asian economies last year, with Hong Kong seeing a shart 3% drop.  Japan too saw an annual price decline, while in Singapore prices fell by 0.4 percent, the first drop in four years. 

Taiwan too saw a drop in 0.2% due to low priced Chinese imports and IT factories relocating to the mainland.  Only South Korea of the leading economic regional powers was unaffected with a 2.7% gain in prices last year. [Bangkok Post - 3 March 2003]

However, other sources state that China's entry to the WTO establishes new standards for sustained growth and dynamic resources allocation by this large and potentially huge economy.   Some estimate China will be the region's largest exporter by 2110 but point out that  China will also be the region's largest importer five years before that date.

In one model [by David Roland-Holst for U. Berkeley at the ADBI in Tokyo] shows that the trade triangle between China, the west, and the rest of east Asia will by 2020 show a trade surplus in China of $122 billion in constant 1997 dollars. It's bilateral surplus with the US will top $166 billion while that with Europe will top $66 billion.

Constraining China is a lack of natural resources with a great benefit to its neighbors should they form a free-trade area with China.

Will centuries-long, head-to-head competitiveness in the region yield to programmed cooperation? The western view is that pragmatism should hold that it will. Stay tuned.

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Viet Kieu buying farms - The local property market has recently witnessed a new trend – Overseas Vietnamese, or Viet Kieu, returning to buy land and set up farms. 

Statistics from the Ho Chi Minh Farm Company (HFC) show that it has so far organized 16 agricultural land trading sessions, with 500 to 1,000 hectares in the southeastern region changing hands each session. 

Viet Kieu have invested in all kinds of agricultural activities. 

For example, Ong Thi Thanh, a Viet Kieu in Australia, invested VND1.1 billion in a four-hectare piece of land in Tay Ninh province’s Trang Bang District, to grow orchards and rubber plantations.

Another Australian Viet Kieu, Cong Tang Ton Nu, who has been living abroad for 24 years, won a bid for a five-hectare farm to rear shrimp. Sam A Minh, an American Viet Kieu, has a 20-hectare area for rearing animals. 

Others who began earlier have success stories to relate. 

Nguyen Van Hiep from the US said his 100-hectare rubber plantation was doing well. Taiwanese Viet Kieu Van Binh said that his seven-hectare orchard of Taiwanese carambola yielded star fruit throughout the year. 

Viet Kieu owners who grow livestock and other cash crops have no reason to complain either; people in the sector say they get even-handed treatment. Their activities are supported and encouraged by authorities as a means of modernizing agriculture. 

“However, Vietnamese law still does not allow Viet Kieu and other foreigners to own land. All of them just buy land under the name of their relatives,” said Hat. 
While Viet Kieu land purchases are up, few have register to buy houses recently. 
Only 14 Viet Kieu have purchased housing in Ho Chi Minh City under their own names and had their property ownership registered since a general regulation allowing this came into effect a little more than a year ago.  

“This is well short of the number hoping for a house of their own here,” said Nguyen Viet Thuan, vice chairman of the Overseas Vietnamese Committee in Ho Chi Minh City, adding that a great number of Viet Kieu want to buy homes in the city. 

Government Decree 81/2001/ND-CP, effective from November 2001, lists four groups of Viet Kieu entitled to purchase houses in Vietnam under their own names. 

• The first are those with approved plans for long-term investment under the foreign or domestic investment laws.

• The second are those deemed as making valuable contributions to Vietnam. 

• The third are cultural and scientific researchers

• The fourth are holders of permanent residence permits.

The fourth category is more than a mite troublesome though since detailed regulations on home purchasing by members of this group have yet to surface. 

“Apparently comments are being collected to complete a draft on the matter,” said Thuan. 
One area of great interest to would-be Viet Kieu home owners is newly-urbanized Saigon South and the projected development of the Cua Lap Resort in Vung Tau.

Many among the Viet Kieu community have traveled to these and other sites to see what’s on offer. But Bui Thanh Son, vice chairman of the Saigon South town developer Phu My Hung Joint Venture, said, “no one has actually made an application to buy”. 

“Viet Kieu find it hard to buy houses in Vietnam as they do not meet the various requirements of the government,” he said. 

He suggests that the regulatory scope be widened so that more categories of Viet Kieu become eligible since so many express a wish to buy houses in their native land for use as winter retreats or as investments.

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Forex conversion revoked - Vietnam's central bank will shelve later this year its stipulation that exporters have to convert 30% of their ForEx into the Vietnamese dong.

The removal will exert a considerable impact on the local ForEx market. Commercial banks should seek to buy the U.S. dollar from sources other than exporters as at present.

The new rule is just one among an array of measures taken by the central bank and related authorities to strengthen the domestic ForEx market and bolster export.

Other moves will include tax exemption for foreign investors' profit repatriation -- if approved by the National Assembly, and issuance of regulations related to ForEx instruments such as options, forwards and swaps. An ordinance or a law on ForEx operations will also come out this year to replace some stipulations currently in force.
The central bank's ForEx database has also been planned to provide forecasts of market demand and supply.

Remarkable changes to the ForEx regulations were made last year, according to which the regulatory conversion was cut to 30% from 40% and the dong-trading bank broadened to 0.25% from 0.1%.  Banks are now authorized to hold a ForEx rate in any currency up to 30% of their chartered capital. In addition, credit institutions can act as overseas remittance agents for enterprises.

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Tourism industry expects boom times -  Based on results from the first two months, Vietnam looks forward to beating its own domestic and international tourist targets for 2003.

The goal is set at  2.8 million international tourist arrivals and 14 million domestic tourists for this year. Observers consider these targets are modest given last year's figures of 2.6 million and 13 million, respectively.

In addition to the international recognition as a safe destination, Vietnam builds its ambition based on a series of festive events planned for the year. Tour operators say these events -- especially the 22nd Southeast Asian Games, which is held here for the first time -- will bring more tourists.

The northern province of Quang Ninh, home to world-famous Ha Long Bay, plans "Visit Ha Long" tourist program. Meanwhile, Khanh Hoa, Lam Dong and Lao Cai provinces are preparing for festivals to celebrate the anniversary of Nha Trang, the 110th of Dalat and the 100th of Sapa, respectively.

Last year, Vietnam registered a 11.5% growth rate in international tourist number and 12% in domestic tourist number, earning over VND23 trillion, up 14% over 2001.

International tourist arrivals
'90 250,000
'94 1,000,000
'97 1,716,000
'00 2,130,000
'01 2,330,000
'02 2,600,000
'03 2,800,000 (est.)

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Second largest cashew exporter -  With an output of 200,000 tons of raw cashew and 63,000 tons of cashew nut for export, Vietnam has filled the second slot on the global hierarchy of cashew exporters. India tops the list with 290,000 tons and 175,000 tons, respectively.

The U.S. is currently Vietnam's largest buyer, making up 33.7% of Vietnam's total cashew export. Present in America since 1990, Vietnamese cashew nuts have taken a quantum leap in this enormous market. Vietnamese cashew exports to the States has soared from 18,500 tons to 63,000 tons in 2002 while sales climbed from US$110 million to US$214 million.

Over the past three years, Vietnamese cashew farmers have grown by 50,000 hectares, which boosted the total cashew area nationwide to 300,000 hectares. Some 80 cashew processing factories are operating in Vietnam, employing over 70,000 workers.  

Vietnam sets a target of exporting 75,000 tons of cashew nut by 2005. The U.S. will remain Vietnam's largest importer followed by China. The Vietnam Association of Cashew plans to export the product to Russia, Ukraine and the Middle East. 

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Danang gets high-speed Internet access -   Vietnam Data Communication Co. (Zone 3) is piloting a high-speed Internet access service using Asymmetric Digital Subscriber Line technology in Danang. Installation fee is US $ 100-150 for a personal computer and US $ 400-500 for a local area network (LAN). Users will not have to pay telephone charges and the maximum connection fee is fixed at VND4 million per month.

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