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Cablegate: Hopes and Fears of Mekong Delta Rest with Its Developing

VZCZCXRO7355
OO RUEHAST RUEHDT RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
DE RUEHHM #1075/01 3511134
ZNR UUUUU ZZH
O P 161134Z DEC 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5224
INFO RUEHHI/AMEMBASSY HANOI PRIORITY 3481
RUEHHM/AMCONSUL HO CHI MINH CITY PRIORITY 5454
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE USD FAS WASHINGTON DC
RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC
RUCPDOC/USDOC WASHDC PRIORITY 0092

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 001075

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, USAID/ANE, EEB/TPP/BTA/ANA, OES/STC
USDOC FOR 4431/MAC/AP/OPB/VLC/HPPHO
HHS/OSSI/DSI PASS TO OGHA (MABDOO) AND FDA (MLUMPKIN/RCAMPBELL)
CDC FOR COGH AND CCEHIP/NCEH

E.O. 12958: N/A
TAGS: ECON EAGR SENV TBIO EFIN ETRD VM
SUBJECT: HOPES AND FEARS OF MEKONG DELTA REST WITH ITS DEVELOPING
SEAFOOD INDUSTRY

HO CHI MIN 00001075 001.2 OF 003


1. (SBU) Summary: In anticipation of possible changes to the
way the United States regulates imported Vietnamese tra and basa
("catfish"), Senior Investigator David Nelson from the House of
Representatives' Committee on Energy and Commerce visited
seafood producers in the Mekong Delta on December 9 and 10,
2008. Without exception, the producers stressed that the
stringent hygiene requirements of their overseas customers have
forced the modernization and improvement of aquaculture,
processing, monitoring, and testing capacity in Vietnam, often
employing products and technologies imported from the United
States. Increasingly, Vietnamese producers are buying U.S.
technology to ensure export safety and U.S. feed inputs like soy
meal to improve the quality of aquaculture products. Despite
these gains, safety gaps persist: GVN regulations lack bite,
and uncertified inputs may still enter the production chain.
The Delta's seafood producers continue to seek engagement with
food regulators to increase both productivity and safety. Post
continues to engage GVN regulators and private and public sector
producers on fish safety issues and facilitate USG training and
capacity building efforts. End summary.

Threat of Losing Markets Prompted Safety Improvements
--------------------------------------------- --------
2. (SBU) Vietnam had more import detentions than any other
seafood exporter to the United States in 2001. When this wave
of contaminated seafood exports closed markets to Vietnamese
seafood products earlier in the decade, the GVN mandated testing
for all shipments bound to key markets (including the United
States), leading seafood producers to invest heavily in seafood
safety to maintain overseas market share. Consequently,
Vietnam's seafood safety record improved significantly. Last
year, the GVN scaled back its mandatory testing regime for
U.S.-bound shipments, shifting to producers the responsibility
for many routine quality and safety tests. Following their
earlier meetings with regulatory officials in Hanoi (septel),
Chief Investigator Nelson and Investigative Counsel Krista
Rosenthal examined Vietnamese aquaculture practices, processing
facilities, as well as monitoring and testing capacity of a
range of seafood producers, noting continuing progress and
remaining challenges.

Private Sector Expanding Safety Testing Capacity
--------------------------------------------- ---
3. (SBU) In an office adorned with certificates from U.S. and
European food safety auditors, as well as Kosher and Hallal
certifying organizations, the founder and president of Can Tho
city based Hiep Than Seafood company proudly noted that none of
the firm's $40 million dollars' of seafood exports has been
refused entry in the company's two year history. He attributed
this to continuous food safety training for employees, modern
processing facilities, and a rigorous inspection regime. Company
engineers test every shipment for microorganisms and outsource
testing for banned antibiotics to the global safety auditing
firm Intertek.

4. (SBU) While outsourcing testing to international firms is an
option in Can Tho, the Mekong Delta's largest city, the
joint-venture Kim Anh company in outlying Soc Trang province had
to build its own testing facility. Hit hard by anti-dumping
duties on exports to the United States in 2003, the firm moved
to high-end seafood products like sushi, tempura and breaded
catfish. To simplify quality control, the company adopted the
most rigorous safety requirements of its numerous import markets
and built a laboratory comparable to that of Vietnam's national
quality assurance lab. "Only one or two containers every
several years of the two thousand shipped abroad yearly" are
refused entry for contamination, the company chairman told
Staffdel.

5. (SBU) The General Director of the publicly held Min Phu
Seafood Corporation told Staffdel that the company stopped using
chemical additives in its shrimp ponds four years ago, and now
depends on U.S. biotechnology products to maintain sanitary
conditions. Located in the capital of Vietnam's southernmost
province (and site of a regional GVN seafood inspection and
testing center) the company pays the regional laboratory over
600 million VND ($35,000) per month to test its shrimp exports,
including those headed for Walmart and Costco in the United
States. After touring their state-of-the-art shrimp processing
facility, a delegation member noted that the plant "was better

HO CHI MIN 00001075 002.2 OF 003


than most he'd seen in the United States."

Going Natural: Raising Shrimp without Chemicals
--------------------------------------------- --
6. (SBU) The 100 percent U.S.-invested Hiep Thanh company
stopped using drugs or chemicals entirely in 2005, and instead
lowered shrimp density to three per square meter of surface
water (in contrast with densities of ten or more typical of
commercial shrimp farms). Made possible by cheap land (the
company leases over 1900 acres from the Bac Lieu provincial
government) this environmentally-friendly method produces
healthier 'natural' shrimp, according to company officials.

7. (SBU) All of the seafood processors visited by Staffdel
Nelson contracted with small farmers to supplement
company-raised seafood, providing feed, technology, and
know-how. They are in various stages of developing 'pond to
plate' product identification systems that will allow them to
determine the date of harvest and origin of any processed
product. Kim An, for instance, can track each box back to a
particular pond to determine feed contents on any given day.

U.S.-Vietnam Seafood Trade a Two-Way Street
-------------------------------------------
8. (SBU) Every seafood exporter we spoke to said they used
American inputs in their products, ranging from ground soybeans
for fish feed to micro biotic technology to clean shrimp ponds.
Several collaborate with U.S. researchers to develop custom
shrimp varieties, while others use U.S. seafood quality auditors
to conduct sanitation and certification checks. These inputs
were a major factor in the doubling of U.S. agricultural exports
to Vietnam in 2007, a trend that continues to grow in 2008.
U.S. soybean exports to Vietnam, for example, are up nearly 300
percent this year. While a portion of the resulting seafood is
shipped back to the United States, much of it is also shipped to
Europe, the Middle East and other world markets.

Aquaculture the biggest game in town
------------------------------------
9. (SBU) Mekong Delta catfish (26 percent) and shrimp (40
percent) are the largest components of Vietnam's aquatic
exports, which grew over 12 percent to reach $3.76 billion (5.3
percent of GDP) in 2007. Seafood processors are among the Mekong
Delta's largest employers -- the four companies visited employ
over 9,000 workers directly and many thousands more as contract
farmers. As the Mekong Delta provinces lack land transportation
infrastructure and are not rich in other natural resources,
development of a modern seafood processing industry was crucial
in reducing poverty in the region and maintaining current
economic growth.

10. (SBU) Investing in quality control measures to meet
developed countries' safety standards is a hurdle faced by all
developing country seafood exporters, and those that meet those
standards most quickly will come out ahead in international
trade. In that sense, improvements in the Mekong Delta's
seafood safety record have come none too soon as a number of
large Chinese catfish and five shrimp processors are likely to
enter the market in the near future. These Chinese products may
comprise Vietnam's stiffest competition in the coming year.

Gaps Persist in Safety Control
------------------------------
11. (SBU) Although seafood processors have modernized
aquaculture and processing and greatly improved monitoring and
testing capacity, gaps clearly remain in the seafood safety
control system. The fish and shrimp provided by contract
farmers remain outside the company's quality control regimes
though they are tested on export. Despite a government ban, one
of the processors visited still 'cage-farmed' catfish, and
although these fish made up only one and two percent of the
firm's total production, it is possible that they could enter
the export chain. Meanwhile the GVN regulatory regime does not
include administrative fines or criminal penalties for
unsanitary or adulterated shipments. Producers said that in
such 'extreme cases' regulatory agencies could revoke a firm's
export license, though none could recall such an occurrence. To
the producers, the only deterrent was the major costs incurred
by a returned shipment.


HO CHI MIN 00001075 003.2 OF 003


Improving Food Safety Going Forward
-----------------------------------
12. (SBU) Nevertheless all of our interlocutors were passionate
about safety, eager to learn of any changes in U.S import
requirements and working to assure the safety of their exports
with the technology or testing most appropriate to their
circumstances. Staffdel noted the sharp contrast between Hanoi,
where officials told them that processors are allowed to export
if no contaminants are found during quarterly or biannual
inspections, and with the companies themselves which say they
not only meet the GVN regulations but exceed them in order to
meet the testing requirements of their exports market
regulators, their customers and standards/certifying
organizations.

Comment:
--------
13 (SBU) Vietnam's seafood industry has been the driving force
behind the development of the "deep south" provinces of the
Mekong Delta, which otherwise rank among the poorest in the
country. The GVN pays close attention, since the industry is
the largest employer in the region with an estimate two million
jobs nationwide, and the Delta suffers each report of major
market disruptions -- on trade issues (e.g., antidumping orders)
or product safety issues (e.g., export detentions orders due to
proscribed substances). Enlightened self-interest encourages
the seafood exporters' industrial organization to push
provincial officials and national regulators to improve
standards and testing services. Finally, the aquaculture
industry is a big part of the rapid increase in U.S. agriculture
exports to Vietnam; set to top one billion dollars for the first
time in 2008. End comment.

14. (U) This cable was coordinated with Embassy Hanoi.
FAIRFAX

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