Over the past three years, the Vietnamese seafood industry has demonstrated strong resilience and adaptability despite fluctuations in global demand and, at times, challenging local conditions. The industry has opportunities but faces challenges, write Dr. Richard Ramsawak and Dr. Adeel Ahmed, economics lecturers at RMIT.
Vietnam's total seafood exports reached $11 billion in 2022, the third highest global export value after China and Norway. The largest export markets for Vietnam’s seafood products remained the U.S, China, Japan, and South Korea.
Vietnam continues diversifying its seafood exports, with shrimp and shrimp products being the leading contributors to export value. Aquaculture production is also becoming an increasingly important component of overall seafood production. This remains a deliberate strategy by the government to reduce the over-exploitation of offshore and near shore resources and reign in quality standards. However, the production of seafood products has declined in recent years due to rising costs.
Indeed, the buoyancy witnessed in 2022 was followed by challenges in 2023. The global economic slowdown cast a shadow over the industry, impacting growth in export markets. Experts estimate that exports to the U.S. will decline by 32%, followed by China with 15%. Exports to South Korea, Japan, and the EU are also expected to decline by 10% to 20%.
The Ministry of Agriculture and Rural Development has already lowered its predictions for Vietnam's seafood exports by 5% to $9.5 billion for 2024, which is still 3% higher than in 2023. The seafood industry in Vietnam also continues to suffer from rising input and transportation costs, which continue to constrain producers' margins, and there remains an urgent need for infrastructure upgrades, particularly among fish farming communities.
Despite these challenges, the Vietnamese government, in collaboration with industry stakeholders, continues to implement measures to ensure the sustainability and competitiveness of the seafood sector. The removal of the yellow card for Illegal, Unreported, and Unregulated fishing (IUU) remains a crucial priority for the industry, which requires confronting the biggest issues of lack of traceability of seafood products, ensuring food safety is maintained throughout the seafood value chain, and implementing steps to combat illegal fishing.
As the industry addresses these obstacles, it remains integral to the nation's economic landscape, with its performance intricately tied to both domestic and global economic dynamics. Roughly 3.9 million people are working in Vietnam’s seafood industry, mostly women, so apart from its economic contribution, the industry also contributes significantly the socio-economic landscape in Vietnam.
Future prospects and opportunities
In 2024, it is forecast that seafood production and exports in Vietnam will face numerous challenges. The key factor contributing to these difficulties is global inflation, which has negatively impacted the consumption and demand for seafood worldwide. Geopolitical issues, particularly the Russia-Ukraine conflict, have further disrupted global trade, leading to increased transportation costs and input prices for aquaculture and seafood processing.
This challenging scenario is particularly significant for major export items like Vietnamese shrimp and pangasius. Intense competition is expected, resulting in a substantial increase in shrimp production (around 5.9 million tons) and subsequently lower prices. Additionally, the value addition of pangasius will pose a challenge for exporters of this product.
While the overall cycle of price decline for many aquatic species may persist until the end of the first half of 2024, there is a notable shift in consumer demand towards more affordable product segments. This shift focuses on canned fish, raw fish for processing canned fish, dried fish, and dried shrimp.
The seafood industry in Vietnam faces further obstacles in terms of market access. The persistent issue of the IUU yellow card poses a significant challenge, potentially causing a halt to EU exports due to a lack of adequate human resources and infrastructure. Simultaneously, the fast recovery of the Chinese market demand and high competition and low prices present a complex scenario for the Vietnamese seafood industry to manage. This combination of challenges creates a complex landscape for Vietnam's seafood production and exports in 2024.
Despite the numerous challenges mentioned earlier, an opportunity is also on the horizon. The inclusion of Japanese investments in seafood processing in Vietnam is anticipated to contribute to the gradual recovery of Vietnam's seafood exports in 2024, with a more positive outlook expected in the year's second half.
Through adaptation and adjustment to the market context, it is predicted that seafood businesses will play a crucial role in helping the industry's export sales recover in the coming years. This potential recovery is a ray of hope amid the Vietnamese seafood industry's complex landscape.