Fish Exports from Cambodia

Summary

Fisheries play a vital role in supporting rural livelihoods throughout Cambodia, but especially around the Tonle Sap (Great Lake) area where more than one million people depend on the fisheries sector for employment, income, and food security. With large surpluses of fish caught during peak fishing periods, fish trade and export is critical to income growth in the sector. Presently, fresh and processed fish are traded widely within Cambodia, exported in significant quantities to neighbouring countries, and in some instances exported to more distant markets. However, beyond this general picture, much remains unclear about fish marketing and export.

With an inland fisheries catch of more than 400,000 tonnes per year, Cambodia’s fisheries sector has been targeted as an important sector for export promotion. This promotion is occurring within the context of broader regional and international trade agreements, namely the ASEAN Free Trade Agreement and World Trade Organisation accession. While regional and international market integration is intended to spur “pro-poor” trade, to be effective, market integration and trade efficiencies will also need to be improved domestically, especially within and from rural areas.

Constraints on fish trade and export can negatively affect the livelihoods of the many small- and medium-scale fishers supplying exporters, as well as others working in the sector. When costs, fees, and risks associated with fish export make it difficult for exporters to earn a profit, they must reduce prices offered to fish suppliers in order to stay in business, which in turn can reduce incomes throughout the sector. Conversely, where policy changes can increase efficiencies and lower costs for trade and export, much of the benefit would be passed on to fishers (through higher prices for their fish) because exporters are intensely competing for fish supply.

To assess the current conditions under which fish are exported from Cambodia, the Natural Resources and Environment Programme of the Cambodia Development Resource Institute carried out a fish exports study from November 2002 to June 2003, with much of the fieldwork conducted during an intensive period in January 2003. The study focused on fish exports from the Great Lake to Thailand (via Poipet). Information and data were collected through more than 70 semi-structured interviews with exporters, wholesalers, traders, fishers, and government officials. In addition, researchers made three “follow the fish” trips with export shipments to directly observe trade conditions and crosscheck information gathered in interviews. Key objectives included identifying the typical market structure, describing credit and financing arrangements, assessing trade and export constraints, quantifying transaction costs (including fees), describing the official regulatory framework and actual practices, and identifying policy recommendations.


Market Structure

The market structure for fish exports from the Great Lake to Thailand involves thousands of fishers, traders, wholesalers, exporters, and Thai market distributors. Credit plays a critical role in this market structure with nearly all fishers and traders interviewed dependent on credit to support their businesses and activities. Vertical relationships based on credit ensure that fishers only sell to their trader/creditor, and traders only sell to their exporter/creditor, providing stability in the supply of fish for export.

In contrast to the stability created through credit and financing dependencies, a number of dynamic changes have been taking place within the market structure, as reflected in the collapse of KAMFIMEX’s monopoly, rise of CDCO, and consolidation of unlicensed exporters. These changes are occurring in the context of intensified competition for fish due to a declining supply and pervasive fee charges that reduce profit margins.

Profit margins are also under pressure due to the weak price negotiation position of Cambodian exporters within the current market structure. With no other export options except to sell at Long Koeur market in Thailand, and the combined threats of repaying border fees, additional labour costs, and high spoilage levels if they do not sell on the day they cross the border to Long Koeur market, exporters often find themselves accepting lower prices than expected for their fish. Exporters suggest that the presence of fish distribution facilities in Poipet would allow them to store fish for several days if necessary, making it possible to negotiate better prices with Thai distributors.


Export Costs and Fees

Data collected on fish exports from the five landing sites studied indicate, with little variation, that exporters face significant fee charges that absorb a large proportion of their potential earnings. At $83 per tonne, fees add more than 50 percent to the costs of exporting fish. Indeed, fees represent the highest component of export costs, followed by spoilage/weight loss ($51 per tonne) and transportation ($26 per tonne). Average profit margins are estimated to be about $38 per tonne. The fact that fees levels are more than twice as much as the profit margin earned on fish exports is a strong indication of the widespread “rent-seeking” activity of government institutions and officials. Fee extraction is maximised to the point where exporters report their foremost goal is business survival; investment and business growth are not viewed as possible.

Closer examination of fish export fees (through a case analysis of a shipment from Chhnok Tru in Kompong Chhnang province to Long Koeur market in Thailand) reveals several striking findings. First, exporting fish along this route involves 27 different fee payments to 15 institutions in 16 different places. The most significant fees are paid for issuing and “checking” transport permits, followed by payments to customs, a road investment company, and a range of institutions with no legal basis for collecting fees. Second, of the institutions collecting fees, fisheries institutions collect the greatest amount but this represents only 20 percent of total fees. Institutions with no direct role in fisheries management collect 80 percent of fees. Third, more than half of all fees are collected at the border. In contrast, the provincial fisheries office of Kompong Chhnang, which is responsible for fisheries management in the area, collects only about three percent of all fees (one percent is recorded as an official fee and two percent is collected informally). Finally, when comparing actual payments to official fees (if enforced), it is starkly clear that prior to any efforts to improve official compliance, the fee system itself needs to be overhauled. Enforcement of current regulations and fees would triple the current payments made by exporters, which would surely cause a collapse in fish exports.


Regulatory Framework and Actual Practice

Actual practices undertaken to export fish bear little resemblance to what is required under the official regulatory system. Most fish shipped through Poipet are exported without a license, and exported throughout the year regardless of closed season regulations. This informal process involves numerous fee payments to a variety of institutions at the landing site, along the road, and at the border. Fees are either charged with no legal basis, or, where a legal basis exists, negotiated to support informal payments. Surprisingly, licensed exporters report that they make the same series of informal payments as unlicensed exporters, despite holding a license from the Ministry of Agriculture, Forestry and Fisheries and Customs Department in Phnom Penh.

Based on interviews with exporters and observations of fish shipments, there are no instances in which official fees are paid in accordance with the official rate. All fees are negotiated. Since most official fees are based on fish quantity and/or value of the fish shipment, the most common method used by officials to collect informal payments is to vastly underreport fish quantities in licenses and permits. For example, fisheries officials record only one-fourth to one-tenth of the actual shipment amount in transport permits. Such underreporting allows officials to negotiate an informal payment on top of the much-reduced official fee.
Since many payments have no clear legal basis and may differ from trip to trip, exporters complain that the arbitrariness of payments makes operating a business very difficult because of uncertainty about costs. In an interesting market response to this problem, brokers have begun providing the service of taking responsibility for checkpoint and border fee payments in return for a set price. Through their positions as current/past government officials, military, or military police, brokers have established relations with fee collecting institutions, making it possible for them to pay lower fees and have greater certainty about fee charges than exporters who pay directly.


Recommendations

In the promotion of fish exports, much of the focus has been on spurring investment in value-added processing, improving quality standards and control, and identifying high-value export markets. Given the lack of processing, problems with quality, and scant exports to countries other than Thailand and Vietnam, these efforts are clearly important. But investment and quality improvements are unlikely to come without first having significant changes in the climate for business and trade within the fisheries sector, including a substantial and credible reduction in current fees and transparency and certainty about the regulatory environment.

Based on the findings of this study, twelve recommendations are summarised below. They are grouped under three themes:

· Improve governance and transparency; this must include a significant overhaul of the current license, permit, and fee system.

1. Remove the transport permit requirement for fish trade.
2. Eliminate fees collected by checkpoints and institutions that have no clear legal basis for collecting fees.
3. Make a public statement that “Sending Goods” letters from KAMFIMEX are no longer required for fish export.
4. End the contract with Ban Sambath House.
5. Eliminate the 4 percent fish distribution centre fees in Battambang province.
6. Revise downward the 10 percent export tax charged by the Cambodian Customs Department.
· Increase linkages and accountability between fee payments and fisheries management.
7. Concentrate fee collection at fishing grounds to support fisheries management and enforcement; eliminate or sharply reduce fee collection elsewhere.
8. Establish ‘one-stop’ fee payment service with transparent procedures and clearly defined fee levels.
9. Consider re-imposing a fishing license fee on middle-scale fishers (if transparent fee collection is possible).
· Facilitate the development of a more efficient fish trade, distribution, and export system.
10. Encourage investment in the establishment of fish distribution centres at Poipet.
11. Remove barriers to export via Sihanoukville; support identification of new export markets.
12. Support further study of the credit system in the fisheries sector.