Key to achieving economies of scale to reduce costs, compete globally

Cooperate, advice to shrimp farmers

UBAIDILLAH MASLI
BANDAR SERI BEGAWAN

Thursday, November 20, 2008

Key to achieving economies of scale to reduce costs, compete globally

SHRIMP farmers must cooperate to reduce fragmentation and improve the efficiency of the industry in order to expand and reach economies of scale, said the director of the Fisheries Department.

Hjh Hasnah Ibrahim made the call to local shrimp culture operators yesterday in response to the article, "Realising potential of local shrimp industry," published by The Brunei Times on November 8, 2008.

For local farmers to compete in the global shrimp farming sector, it is necessary for farmers to implement a profitable production model based on a niche product that commands premium prices, the director said in a letter to The Brunei Times.

"They must also implement more efficient production technologies that reduce costs and leverage (on) the strengths of Brunei: a well educated and bilingual workforce, excellent infrastructure and low energy costs," she added.

The Fisheries Department acknowledged the causes of the competitive disadvantages faced by the country's shrimp farmers was the switch in production of Rostris (Litopenaeus stylirostris) from a similar shrimp, Litopenaeus vannamei, but said that there were other factors involved which needed to be considered.

With most of the world shrimp farmers opting for the vannamei, this particular shrimp has become a low-price commodity as result of oversupply and disproportionate drop in price for the small-sized shrimp. Therefore, only low-cost producers were willing to produce large volumes, while experiencing thin profit margins so that they were able to compete in the market via the vannamei.

"This is not a good fit for Brunei," Hjh Hasnah said.

According to the department, Brunei produced less than 1,000 tonnes of shrimp annually, equivalent to less than one per cent of shrimp production of many competing countries. The director said that the lack of economies of scale in the local industry resulted in higher costs of feed and post-larvae.

She went on to say that although Brunei enjoyed lower energy costs than most competing countries, this only made up a small component of the overall operating costs.

Due to underlying factors such as high labour costs, the key issue still remained: "Brunei has higher costs of production than other shrimp farming countries in the region".

As these difficulties have grown, Brunei shrimp farmers have "retreated" from the highly competitive export markets and focused more on the local markets, which have also succumbed to the threat of vannamei, as more of this cheaper variety of shrimp are being imported into Brunei.

The department felt that the answer to the problem was not competing "head-on" with the low-priced commodity but, rather, to restructure the farming sector to reduce costs and generate high-value products.

In this effort, the Fisheries Department in a three-year agreement with US company, Integrated Aquaculture International (IAI), implemented plans to introduce the black tiger shrimp over the past two years. The shrimp, which is also known as the Penaeus monodon, could grow to a much larger size than the other two types of shrimp and could command higher prices in international markets.

However, the monodon had to be selectively bred over several shrimp generations to combat their susceptibility to disease and thus, generating a specific pathogen free (SPF) stock.

The director said that the programme was well under way and the F2 generation of SPF monodon has already been developed.

With the plans to build the Telisai Phase II farm expansion, Brunei's shrimp production could see an increase to 2,000 metric tonnes per year.

This target productivity could achieve the required economies of scale in feed, post-larvae, processing and marketing, the director said.

Apart from their cooperation in developing SPF shrimp, IAI also worked with the department in genetically-improved post-larvae, high-performing feeds, and sustainable farming systems and techniques aimed to produce quality shrimp for premium markets.

"We are hopeful that the new business model will grow, prosper and lead to other high-value spin-offs that will benefit Brunei for years to come," said Hjh Hasnah.

In an interview with a local shrimp farmer, Hj Nasrul Hakim Hj Othman of S Kota Sdn Bhd told The Brunei Times that at present, there was no particular organisation which unites the 13 local shrimp culturers.

However, he said that, under their own initiative, the farmers did meet and work together to collect data and discuss issues faced by the farmers to present to the Fisheries Department.

Hj Nasrul Hakim welcomed the formation of such an organisation but wished the department would emphasise the idea to all the farmers directly on the significance of this cooperation.

The Brunei Times