Pangasius Rising

I attended a gathering of entrepreneurs, bureaucrats, academicians, farmers, and fisherfolk and other professionals at the Gems Hotel and Convention Center in Antipolo City,  Philippines last March 30, 2012 where the 12^th  Pangasius National Conference was being held.

 I was invited to be one of the speakers ( I spoke on the equity financing program of SB Corp.)  to this group of diverse backgrounds but common interest. And this shared interest is in the development of the Pangasius, a fish that is fast emerging as a new industry in the Philippines agri-business landscape.

I was surprised at the response of people (I estimate to be 200 individuals at least) attending the conference. There was a genuine interest and enthusiasm at an industry that has had a roller coaster journey as a fledgling industry.

The Pangasius Hypopthalmus, or popularly known in Philippine aquaculture circles as Pangga, a term of endearment in the Ilongo dialect, or to be precise, the localized name of a fish species of the cat fish family that is sold in grocery stores and supermarkets as cream dory, is slowly but surely, on the rise as its new star in the local aquaculture scene.

It all started in 1981, when the country’s Bureau of Fisheries and Aquatic Resources (BFAR) introduced this catfish to the Philippines.  Since then, attempts to grow it as a full-fledge aqua-culture industry has failed until recently when the various players in the value chain has come together to address the challenges it faces as an industry.

Glen Baticados, an entrepreneur and a Pangasius advocate who runs Bay Cove International Inc., shared his experience and his vision on how the Pangasius can become a successful aquaculture industry in the country in the said conference.

Ups and Downs

According to Baticados, Pangasius production and processing in the Philippines is characterized by a boom and bust cycle. Early attempts to establish it as a major aquaculture commodity produced locally failed.

This may be attributed, according to him, to a failure to integrate the various aspects of the industry and the different players in the value chain into one cohesive whole. There were gaps in the value chain and nobody took care to look at the big picture and address these gaps, he explained.

But it persisted. Some of its pioneers just would not give up.

Since its relaunch in 2007 as a food fish from Vietnam, its popularity has increased and so did its importation.

Merle Cruz, Department of Trade and Industry Under Secretary for Regional Operations, said that the country imports a monthly average of 600 metric tons of pangasius fillet valued at $ 1.6 million. This amount could have been earned by our local producers of Pangasius, if the industry was already well established.

The Current Situation

While importation is still growing and the demand for the pangasisus fillet increasing, the industry is still unstable given to the gaps in the value chain.

For example, Baticados pointed out several major problems of the industry that hinder its growth. First, he said there is a lack of institutional buyers. Being a new commodity in the market, it is not yet as acceptable as other fish species such as bangus and tilapia. Filipino households have not yet accepted it as a regular fare, but the product is slowly getting there.

Second, production inputs are unstable and some producers complain of high production costs. Baticados said that P 50 per kilo should be the baseline production cost for Pangasius for the industry to be competitive. Higher costs would make the locally produced pangasius more expensive than those imported. And this would kill the local industry.

Baticados is optimistic this production cost can be stabilized given that bigger producers that have resources to produce their own feeds are able to maintain the P 50 per kilo base line cost.

“Pangasisus can be fed alternative feeds such as surplus fruits and vegetables, snails (kuhol found in rice fields have been tried successfully), and duckweeds, small free floating plants found in ponds and rice paddies with high crude protein content). While this is so, however, the sustainability of sources for these alternative raw materials for feeds cannot be sustained at commercial levels.”

The challenge he said is to develop these stable supply of alternative raw materials for feeds. 

In some areas of the country this is not a concern, but for the others, the sources of alternative feed supply are a problem. So in these areas, production is dependent on commercial feeds which can be an expensive input to production resulting to higher costs of Pangasius.

“Another concern is the supply of affordable fingerlings. There are many producers but very few commercial hatcheries,” emphasized Baticados. Pangasius is a fish endemic to a certain area of the Mekong river where it exclusively breeds. Anywhere else in the world, the pangasius is incapable of natural breeding. So for the many growers, they buy their fingerlings from hatcheries that induce artificial breeding to produce the fingerlings for production.

Right now, there are not enough hatcheries to supply the demand for fingerlings so there is an irregular supply of live fishes.

Baticados sums up the problems of this emerging industry as, “weak linkages among the actors in the industry value chain.  The actors in the value chain operate independently of one another, and nobody is looking at, and taking care of, the big picture of the industry.

The Solution

The industry needs integration and managing the value chain.  To Baticados, this is what needs to be done to make the industry sustainable.

Right now, according to him there is no one in particular that manages the value chain.  For instance, the various players in the supply chain not only are independent of one another but compete among themselves.

Baticados explains that the industry can follow the example of the poultry industry where there are integrators that manage the value chain and integrate the different players to produce the final product.

And this is what Baticados has adopted as a strategy to grow his business and at the same time help in the development of the Pangasius industry. His firm, Baycove International Inc. is now in the process of establishing formal and informal linkages with the various value chain players in the industry and strategic alliances with the other major players that will facilitate the delivery of inputs and outputs in each linkage in the value chain.

For example, as Baycove tries to be the integrator, it is developing the local supply chain and doing research on at least three hatcheries it has and will establish in Luzon area---HO Hatchery in Victoria, Laguna, Meralco Foundation Inc., hatchery in Jala-jala, Rizal and the Baycove hatchery in Resureccion, Silang Cavite; signing marketing agreements with growers; forging strategic partnerships with processors and feedmillers.

“Our strategy is to bring everybody in one house,” said Baticados.

“So far we are doing good in that strategy, he added.

Already, Baticados is working on partnerships with other players such as: Meralco Foundation Inc., in hatchery operations; Fish Ventures International in Bulacan as processor; Vitarich in the supply of production inputs and feeds and growers in Bustos, Bulacan, Calamba, Laguna, and Binan, Laguna.

In addition, it has entered into a joint venture with Soro-soro Ibaba Development Cooperative (SIDC), an established agri-business coop dealing in feedmilling, hogs and poultry production, organic fertilizers production to develop and operate a 21-hectare commercial grow out farm of Pangasius in Batangas.

Optimistic about the future of the industry, Baticados says that their growers’ program practically provides a stable supply of inputs. “There is an assured supply of fingerlings, a feed support program, and a buyback program.

Baycove is trying to model its system to the existing broiler contract growing industry. However, he is not lost on the need to validate his assumptions. “To come up with a doable model, we must first standardize the production assumptions,” he pointed out.

“The integration of the value chain is a work in progress,” he further explained. “Let us collaborate first,” he calls on his colleagues in the industry. “Let the industry grow first, then there will be profit for everybody,” he emphasized.

“In the value chain, everybody should earn; even if only one segment of the value chain should wind up losing, then that would kill the industry,” he concluded.

Sources of Business Financing

The crucial role of adequate capital in starting and operating a business should not be overlooked.  Both the availability of capital and the form of financing for a newly established business will be for many a deciding factor in the development of that business.

Financing can come in the form of a loan (debt financing) or in sharing the ownership of your business (equity financing).

Loans (debt financing) are usually classified as follows:

1. Short-term Loans.  This category is used to designate borrowed capital that is to be repaid within one year.
2. Intermediate Loans.  This title is applied to borrowed capital which is to be repaid in one to five years.
3. Long-term Loans.  This capital has repayment arranged for more than five years.

The business person should determine which form of financing is the most beneficial to his/her business and then approach those lenders who specialize in that form of financing. 

 For example, a business person who is seeking money to expand inventory (short-term loan) should go to a commercial bank instead of a savings and loan company.  Commercial banks specialize in short- and immediate-term loans.  Some savings and loan institutions now make medium-term loans even though they historically only made long-term loans.

Finally, two things should be recognized when one is faced with the problem of obtaining capital assistance:
1. an established concern with a good record of operations usually has better access to available sources of capital than a new firm.
2.  Some personal capital available for investment in the firm by the new owner is almost always essential to obtain any type of outside assistance.

The following are several sources of funds for small firms with a brief description of the source:

Personal Funds
Whenever potential creditors, partners, or stockholders are invited to invest in or lend financial assistance to a new firm, their first question is, "How much does the owner have invested?"  In any event, it is important that the owner have assets of his own to invest in the firm.  The closer to fifty percent of the total capital needs that can be provided; the greater will be his independence and share of net profit.

Loans From Relatives and Friends
Many new owners are encouraged in their enterprise by parents, relatives, or friends who offer to supply loans to the firm to get it started.

However, mixing family or social relationships with business can be dangerous.  Many unpleasant situations might have been averted if the terms of the agreement had been more clearly specified, including the rights of the friend or relative to insist upon making business policy.  The best way to avoid problems is to make sure that agreements are made on a business-like basis and viewed as business dealings.  These agreements must provide for termination of business, death of partner, etc.

Trade Credit
Trade credit is the financial assistance available from other firms with whom the business has dealings.  Most prominent are the suppliers of inventory which are constantly being replaced. For example, if a P20, 000 inventory can be purchased for a P10, 000 down payment and the balance in 30 days, the wholesaler has virtually provided P10, 000 of required capital to run the business.

Loans or Credit From Equipment Sellers
This type of financial assistance is often considered another form of trade credit.

Mortgage Loans
When the new firm's planners own a commercial building, they can secure a mortgage loan on it with payments over the long term.  If the firm will operate out of the building, the planners will be making mortgage payments instead of rental payments to a landlord.  Mortgage loans are typically made by savings and loan associations, mutual banks, and mortgage banking institutions.

Commercial Bank Loans
Commercial banks are generally short-term lenders who assist businesses in expanding their working capital needs for inventory and accounts receivables.  Banks, however, will make longer term loans which are sometimes guaranteed by government.

Government Lending Programs to Small and Medium Enterprises
Government lending programs are available to small firms from agencies such as the Small Business Corporation, Quedan Guarantee and Finance Corporation, Philippine Export-Import Credit Agency, National Livelihood Support Fund (NLSF).  These agencies provide loan guarantees and make direct loans to small firms.  These loans generally are intermediate or long-term. 

Small Business Investment Companies or Private Equity Funds
These are privately owned companies which make long-term loans and even take equity positions in small businesses.  Funds from P 1 million to P 20 million or more have been obtained by new companies from these sources.

Venture Capitalists
If your business is a start-up, you may approach a venture capitalist. Venture capitalists take equity positions in firms they believe can rapidly increase sales and generate substantial profits.  Why?  Because venture capital firms invest for long-term capital gains, not for interest income.  Most venture capital firms are interested only in investment projects requiring an investment of P50 million and up.  Projects requiring lower amount of investments are of limited interest because of the high cost of investigation and administration.

Non-Government Institutions and other Micro Finance Institutions

NGOs and other micro finance institutions finance new projects but may require the borrower to undergo preparation such as values formation or teambuilding seminars that fit into their special lending schemes.

At this point, I hope I have enlightened you on some aspects of financing assistance for young entrepreneurs. I also hope that you have been inspired to become one. Our future depends on the youth of today and our country needs young entrepreneurs with a fresh vision for business. Let’s do business!

Qualities that Make a Successful Entrepreneur

I am happy to note that today more and more of the youth are thinking of going into business. This may be the result of being educated to be an entrepreneur. Schools, colleges and universities now offer entrepreneurship courses.

 Or this may be borne out of the influence of parents who are themselves entrepreneurs; who have grown their businesses and their children have to follow in their footsteps to join the family business.

Or may be out of necessity for the youth because there are no longer enough jobs in the market to absorb the growing number of new graduates yearly. On last count new graduates from college could be about 400 thousand yearly and only about 10 percent land in good jobs.

Nevertheless, the good thing is, finally, despite the slow process, more young people are changing their paradigm on how to move forward in life. Many of the young are considering becoming entrepreneurs. As entrepreneurs, instead of being job seekers, they now aim to be job providers running their own businesses.

The Young Entrepreneurs

For bankers,young entrepreneurs are a risky lot to lend to. Indeed, even discounting age, new entrepreneurs are risky borrowers.

Studies in the U.S.A. show that only one in 25 new businesses continue to operate for 10 years or longer.  Or still some studies say that 80 percent of new businesses fail.  Not a good prospect for the aspiring entrepreneur.

However, being a successful entrepreneur has great rewards --- ask Bill Gates of Microsoft or Yahoo founders David Filo and Jerry Yang. They are all Billionaires providing jobs, products and services to millions of people worldwide.  In short, it is not easy to be an entrepreneur, but the rewards are great if you become successful.

Now I pose to you the question: Do you have the right attitude and capability to startup your own business? Have you been asking yourself that big question--- To be or not to be an entrepreneur?

Then let's find out if you've got what it takes to be a successful entrepreneur.

Note: There is a debate about whether people are born with these entrepreneur characteristics and traits or are they learned through training and practice? Do these characteristics come from "nature" or "nurturing?"

First, let's define what an entrepreneur is and then we'll discuss the common characteristics and traits that most successful entrepreneurs possess. A quick look in the dictionary tells us: "An entrepreneur is a person who organizes, operates, and assumes the risk for a business venture."

Not a bad definition, however not all entrepreneurs actually do all three parts all the time. There are some entrepreneurs who just start up businesses and then sell them right away. Thus, they don't operate their small business for a very long time. Once they sell it for a tidy little profit, they move on to the next project.

So, what is the essence of an entrepreneur? I believe the definition of an entrepreneur in it's most basic form is: someone who sees an opportunity and takes advantage of it.

Traditionally, most successful entrepreneurs were thought to possess the following four characteristics:

1. Risk Taking- entrepreneurs are risk takers. They are able to calculate the risks of starting up a new business and weighing them against the benefits that may be produced for themselves as well as society. With their time, money, and reputation at stake they leave little to chance or luck. Yes, entrepreneurs take risks, but they are usually calculated risks.

2. Decisiveness- entrepreneurs must be able to make decisions on a strategic level. They are able to see where they are now, where they want to be in the future and decide on how to reach their goals. It's the ability to see the forest through the trees, and decide how to navigate through it.

3. Action takers- After conceiving an idea, calculating the risks versus the benefits, and making strategic decisions, the entrepreneur takes the initiative to make those decisions a reality. They do not allow the bigness of the endeavor to grip them with fear. Anything they can't do themselves they find others who can.

4. Innovative- Entrepreneurs see a need and are able to fulfill the demand. Whether it is a new technology or a new way of solving an old problem, entrepreneurs have been considered the people who were on the cutting edge of many industries.

These four entrepreneur characteristics and traits are still very important today. However, not every entrepreneur can invent the next great contraption and with the technology available to us today and the way it continues to make our world a smaller place, it is becoming harder and harder to even have an original idea.

So, there must be other entrepreneur characteristics and traits that contribute to an entrepreneur's success. Here are some that I think are important.

Passion- That's right, LOVE! Most successful entrepreneurs love and enjoy their work. If you are doing something you love, then it won't feel like work.

Hard working- Don't waste your time or that of other people who are willing and able to help you if you are not willing to do some good old fashioned hard WORK! Many entrepreneurs got started in business when they were young as paper boys, cigarette vendors, janitors, messengers, car wash boys etc. A strong work ethic will be the engine that powers your business' success.

Competitiveness- Most successful entrepreneurs don't like to lose and when they do fail, they aren't afraid to get back out there and TRY AGAIN. They are willing to test their abilities against those of others and even thrive on the competition.

Perseverance- The ability to keep your goals in sight and not to give up as you run into the myriad of problems and obstacles that are sure to arise as you startup your new business.

Adaptability- Entrepreneurs have the ability to find creative solutions for a variety of situations and problems. This ability to step outside the box or think outside the box is not easy and may require some unorthodox approaches.

Organized- I personally believe this is one of the more important entrepreneur characteristics that can be mastered.

You will need to make the time and a place to work.

Present, past, and future records (seven years!) and files of: sales, taxes, employee records, balance sheets, business contacts, and contracts will be necessary. Phones, faxes, computers, a desk, chair, lamp and a window view if you must.

Next, MONEY. Entrepreneurs must manage their own personal finances as well as their company's. You may need to hire an accountant at some point, but that is no reason not to know your own bottom line and Do the Math!

And finally, TIME. Another four letter word. Entrepreneurs must make calls and appointments and keep to schedules. They know they must use their time wisely and efficiently. It's the one thing you can't get back. The ability to organize your time, money and effort is critical.

Discipline- Successful entrepreneurs have the mental fortitude and discipline to stick to their plans and schedules. Long hours, no vacations, and a lack of funds are just some of the obstacles and challenges new entrepreneurs must face.

Persuasive- Entrepreneurs must deal with many types of people when doing business. They have to talk to lawyers, accountants, bankers, employees, and customers. They must be able to get people interested in their business ideas and persuade them to help attain their goals.

Optimists- Entrepreneurs see obstacles and challenges as opportunities. Their outlook on life is positive. The glass is always half full.

Loners- Finally, being an entrepreneur can be a lonely job. You may be forced to work alone without any help until you get your business up and running.

Yes, you will talk and interact with many types of people, but at the end of the day, you alone will need to make the difficult decisions and have to live with the consequences.

Also, if you do become successful, you will need to maintain a certain amount of emotional distance between yourself and your customers and your employees if you are to remain objective and fair. You may have an employee who is not doing their job and it may become necessary to fire them.

Remember this... Business is war. And as they say in the military, "The more you sweat in peace time, the less you bleed in war." Practice, train, and drill these into your brain and you'll be on your way.