VietNamNet Bridge – Many seafood processing companies in southwestern provinces of Vietnam have gone bankrupt, resulting in the instability of the largest aquaculture area of the country.

In late 2014, many more bosses of seafood processing firms in the region were arrested for investigations of "swindling appropriate assets".

The first case was Mr. Tran Tan Hai, former director of the Viet Hai - Ca Mau Company.

Viet Hai was established in 2008 with charter capital of VND15 billion ($750,000). Taking advantage of preferential policies and good relations with some bank officials, Hai borrowed up to VND120 billion ($6 million). The unpaid interest money was close to VND50 billion ($2.5 million) on the day he was arrested.

The police also detained Ms. Dang Thi Ngoi, director of Ngoc Sinh Company and Mr. Phan Minh Nhat, deputy director of Minh Chau Company, both in Ca Mau province, for similar acts, with a total appropriation of more than VND700 billion ($35 million).

Before these cases, the police had arrested many people involved in the insolvency case of Phuong Nam Seafood Processing Company. This firm’s boss - Lam Ngoc Khuong – committed swindling and fled to America, leaving VND1.6 trillion ($800 million) in debt. Up to 25 officials of five banks were prosecuted last December for violating regulations on loans.

Earlier, the famous businesswoman Dieu Hien also went bankrupt. Her house was surrounded by hundreds of fish breeders, while her banking debt reached hundreds of millions of USD.

Many other famous seafood processors like Thien Ma, Dong Nam, Viet An, An Khang and others also went bankrupt or are about to go bankrupt.

According to the Association of Seafood Processors and Exporters of Ca Mau Province, about a third of the seafood processing companies have gone bankrupt.

In such a situation, many company bosses have had to find a way to withdraw from the industry.

For almost one year, Mr. Nguyen Tuan Anh, Chairman of NTACO, a seafood processing firm in An Giang Province has tried to sell 60 percent of shares in this firm at cheap prices, but he has not been successful.

Double-edged sword

Ms. Truong Thi Le Khanh, Chair of Vinh Hoan Seafood, one of the 10 richest people in the stock market, said that easy credit had hurt the catfish industry in particular and seafood sector in general.

The overheated development of the seafood processing sector and the anticipation of price increases encouraged many firms to borrow bank loans to breed and process fish for export.

When the market was in a state of oversupply and export markets were in trouble, they failed to pay debts and interest.

NTACO’s short-term debt amounted to VND644 billion last September, 4.2 times over its equity. A big seafood processing firm - Camimex – also had short-term debt that was 11.4 times over its equity.

The period from 2012 to 2014 witnessed a sharp polarization of seafood companies. The overheated development pushed these firms, and they fell in their own traps. At the same time, others with sustainable development policies rose to 'empire' status in the market. In 2014, two giant seafood processors were among the top 10 richest people in the Vietnam stock market.

The difficulties of many seafood processing companies will lead to more merger and acquisition deals in the future.

S. Tung