How much does mangrove ecosystem contribute to aquaculture an empirical study for mekong river delta

As a result, by estimating monetary values that ecosystem services might contribute to the aquaculture activities, the thesis attempted to give more insides about the existed relationshi

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

HOW MUCH DOES MANGROVE ECOSYSTEM CONTRIBUTE TO AQUACULTURE - AN EMPIRICAL

STUDY FOR MEKONG RIVER DELTA

by

TRAN PHU HOA

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, December 2015

HO CHI MINH CITY, December 2015

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

HOW MUCH DOES MANGROVE ECOSYSTEM CONTRIBUTE TO AQUACULTURE? - AN

EMPIRICAL STUDY FOR MEKONG RIVER DELTA

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

In the period of doing this study, there were things that brought me sadness and joy Those emotions had mixed together, and became the sticky creature crabbing my feet and thought I had been stuck However, someone had reminded me about the speech which was “Happiness is always defined by sadness” Thank you, my University You gave me the opportunity to challenge myself You had longed for my achievement, and you helped me to find out some of my missing parts in my journey of life

Finally, I further wished to thank my family members, my friends and I, who have provided me food, shelter and love Their love and support gave me strength to open

my eyes and worked out the problem that I had buried me deeply under the ground

Finally, please remember that I owned all of you, and I will pay back

TABLE OF CONTENTS iii

TABLE OF CONTENTS

CERTIFICATION i

ACKNOWLEDGEMENTS ii

TABLE OF CONTENTS iii

LIST OF FIGURES v

LIST OF TABLES vi

LIST OF ABBREVIATIONS vii

ABSTRACT viii

CHAPTER 1 1

INTRODUCTION 1

1.1 Problem statement 1

1.2 Research Objectives 3

1.3 Research questions 4

1.4 Scope and Methodology of Research 4

1.5 Research structure 4

CHAPTER 2 5

LITERATURE REVIEW 5

2.1 Theoretical review 5

2.1.1 Wetland and Mangrove forest 5

2.1.2 Ecosystem services 8

2.1.3 Production function 11

2.2 Review of empirical studies 12

CHAPTER 3 15

RESEARCH METHODOLOGY 15

3.1 Analytical framework 15

3.2 Modeling specification 16

3.3 Variables 17

3.3.1 Environmental variables 18

TABLE OF CONTENTS iv

3.3.2 Unit cost 19

3.3.3 Aqua-farming output 19

3.3.4 Farming cost as dependent variable 21

3.3.5 Pond characteristics 23

3.3.6 Household characteristics 23

3.4 Methods of estimation 24

3.5 Endogeneity problem 25

3.6 Data sources 26

3.7 Conclusion 28

CHAPTER 4 29

EMPIRICAL RESULTS AND DISCUSSION 29

4.1 Descriptive statistics of dependent and independent variables 29

4.2 Correlation analysis: 31

4.3 Non parametric analysis 32

4.4 Empirical results: 33

4.4.1 Estimating the effect of mangrove forest on cost of aquaculture production using OLS regression 33

4.4.2 Estimating the effect of mangrove forest on cost of aquaculture production using IV estimation 36

4.5 Conclusion 39

CHAPTER 5: 40

CONCLUSION, LIMITATION AND RECOMMENDATION 40

5.1 Conclusion 40

5.2 Limitation 41

5.3 Policy Recommendation 41

REFERENCES 43

APPENDIX 48

LIST OF FIGURES v

LIST OF FIGURES

Figure 1: Changes in world mangrove areas, 1980-2005 1 Figure 2: The link between seafood production and mangrove ecosystem services 15 Figure 3: The expected relationship between mangrove forest and aquaculture 16 Figure 4: Illustration of “Mangrove cover” variable 19 Figure 5: The graph illustrated the relationship of mangrove forest and total cost of aquaculture by using estimated valuation statistic 38

LIST OF TABLES vi

LIST OF TABLES

Table 1: Variables of household characteristics 30

Table 2: Correlation Coefficients of variables 31

Table 3: T-test results 33

Table 4: The VIF for coefficients in the non-restricted model 34

Table 5: Estimated results of three regression models 36

LIST OF ABBREVIATIONS vii

LIST OF ABBREVIATIONS

EPA The United States Environmental Protection Agency

FAOs Food and Agriculture Organization of the United Nations

GSO General Statistics Office of Vietnam

IUCN International Union for Conservation of Nature

OLS Ordinary Least Squared regression

PFES Payment for Forest Environmental Services

ABSTRACT viii

ABSTRACT

Mangrove forest exploitation had been one of the critical issues for developing countries in recent years Aquaculture expanding was believed to be the number one reason for the vanishing of mangrove forests Using the production function approach, the paper attempted to get insides about the contribution of mangrove forest to aquaculture, particularly Mekong Delta in Vietnam The result found out that mangrove forest had connected with aquaculture in the non-linear relationship It concluded that mangrove forest could help farmers to reduce their cost of production

In addition, the rate of reduction was declining as there was more mangrove forest acreage adding to the surrounding of a particular pond

Key word: mangrove forest, aquaculture, cost of production

CHAPTER 1 1

CHAPTER 1 INTRODUCTION

1.1 Problem statement

There were two reasons that motivated me to do this thesis The first one was statistics that reported about the huge mangrove destruction around the world The second one was the need of finding payment method in order to protect the forest

It had been estimated that 35 per cent of the world’s original mangrove cover had vanished on average (Valiela, Bowen, & York, 2001) For instance, it was about 3.6 million hectares of mangrove forest that had disappeared for the past 25 years In addition, Asia accounted for about more than 1.9 million hectares lost, North and Central America lost about 690,000 hectares and Africa was about 510,000 ha (FAO, 2007) Mangrove forest acreage changes from 1980 to 2005 had been summarized in the figure below, which was provided by FAO in their report about the mangrove forest 1980-2005

Figure 1: Changes in world mangrove areas, 1980-2005

Sources: Adapted from FAO (2007, Figure 4)

INTRODUCTION 2

According to this figure, Asia had been noticed for being a region that contributed the largest lost in mangrove forest area comparing to other regions in the past 25 years In fact, there were only five Asian countries creating more than 90 percent mangrove loss

in Asia, including Indonesia, Pakistan, Malaysia, Vietnam and India (FAO, 2007)

In Indonesia, Malaysia and Vietnam, aquaculture and agriculture expansion would be a significant reason of the huge reduction in forest area Indonesia, the country with the largest mangrove area in the world had faced the highest annual rate of loss from 2000

to 2005, which was about 1.6%, and it mainly caused by conversion of land for shrimp farms (FAO, 2007) Moreover, Giri et al (2011) found that 63% of mangrove destruction in Indonesia from 1975 to 2005 was attributed to aquaculture practices Similarly, it accounted for about 43 percent of 110,000 ha of Malaysia mangrove losses from 1980 to 2005 (Giri et al., 2011) In Ca Mau province Vietnam, more than 50 percent mangrove losses were converted to shrimp ponds from 1973 to 2008 (Lam-Dao, Pham-Bach, Nguyen-Thanh, Pham-Thi, & Hoang-phi, 2011) Although this number had clearly pointed out that the booming aquaculture industry especially shrimp farming was the main problem of this destruction, mangrove forest areas kept reducing in its quality and quantity

The fact was that shrimp farming could help local communities to improve their standard of living People who lived in coastal areas were often poor, especially in Southeast Asia With its high return, shrimp production seemed to promise better life for those people, although the risk of default was high In Vietnam, there was a time that the government encouraged people to construct shrimp ponds, and it was believed

to alleviate poverty Consequently, a lot of mangrove forest had been converted into shrimp ponds However, I doubted about the fact that mangrove forest could not get along with aquaculture Mangrove ecosystem services should benefits aquaculture in some ways For example, a farmer might not need to buy as many as crab and shrimp

INTRODUCTION 3

seeds, since he could collect them from mangrove forest Water running through mangrove forest might be stable in quality, so that chemical usage to treat the water input might reduce As a result, making decision on how to improve the standard living

of the coastal communities and to protect the forests in parallel would be a challenge of policy makers

In Vietnam, the government had applied Payment for Forest Environmental Services (PFES) to be the additional revenues that would finance the conserving activities The main idea of this policy was to ask for payments made by people who used mangrove ecosystem services The government had to choose the appropriated fee schedule so that it would not only maintain the conservation budget but also create the incentive of the communities in protecting the mangrove forest It should be demands on researches that attempted to value the ecosystems, as it seemed that policy makers needed reliable valuations to advise them in making good Decree and Act

As a result, by estimating monetary values that ecosystem services might contribute to the aquaculture activities, the thesis attempted to give more insides about the existed relationship of coastal forests and human activities, so that it might help policy makers

in improving the quality of their decisions

1.2 Research Objectives

The main research objective of the study was to examine the relationship between mangrove ecosystem services and aquaculture in the Mekong River Delta

There were two specific objectives:

- To estimate the monetary value of ecosystem services that mangrove forests contribute to aquaculture production in Ben Tre and Tra Vinh provinces

- To find out optimal mangrove areas for aquaculture production in Ben Tre and Tra Vinh provinces

INTRODUCTION 4

1.3 Research questions

What would be the monetary value of mangrove ecosystem services to aquaculture production?

What would be the optimal mangrove forest area for aquaculture production?

1.4 Scope and Methodology of Research

This thesis used the cross sectional data of 125 shrimp ponds in Ben Tre and Tra Vinh provinces Shrimp ponds included both intensive and extensive farming techniques Data was collected from a field survey in 2014 which was financed by IUCN

Cost function was employed to derive the role of mangrove to aquaculture on the premise that mangrove ecosystem helped to reduce farming costs by providing water quality maintenance service or food input services

1.5 Research structure

The thesis was organized in five chapters, including this introduction as Chapter 1 The following would be Chapter 2, and it reviewed key concepts showing relationship between mangrove forest and aqua-farming In addition, valuation methods for ecosystem services and empirical studies that were relevant to this topic would also be discussed Section 3 described data collection and methodology in which the analytical model and method of estimation were outlined Section 4 presented the results generated by estimating the analytical models mentioned in Section 3, and made comments on those outcomes Section 5 briefly made conclusions, recommendations and limitations of the research

CHAPTER 2 5

CHAPTER 2 LITERATURE REVIEW

In this chapter, section 2.1 would explain concepts which could be view as building blocks in understanding mangrove forests and their economic values Next, section 2.2 would review some empirical studies relating to effort of valuing mangrove forests

2.1 Theoretical review

It was divided into two sections, which were mangrove’s ecosystem services and the production function method The thesis would give a brief introduction about ecosystem services that people obtained from mangrove forests In fact, it focused on the services that had a potential relationship with aquaculture, for example, water purification, seed and food inputs The production function method would be justified for its use in answering the research questions, and then the cost function method would be introduced

2.1.1 Wetland and Mangrove forest

It was necessary to understand how mangrove forests were defined before we started to learn about their values There were debates about how mangrove forest should be defined (Barbier & Strand, 1998) Scientists had discussed several questions which were believed to be not easy to answer For example, how many time and how long a land had to be flooded, in order to pronounce it was the wetland In fact, the existence

of water in a land changed its characteristic of soils, microorganisms, plants and animals However, some lands had started as open water, but it would become dry land

as an occupation of sediment and vegetation Moreover, some lands were in the transitional zones between permanently wet and generally dry environments As a

LITERATURE REVIEW 6

result, it would be challenged for scientists and policy makers to learn and manage the wetland where classifying a land to be aquatic or terrestrial environmental habitats could not be accomplished Consequently, this issue leaded to an agreement on how wetland was defined

There was an agreement called Ramsar, which was known as the oldest of the modern global intergovernmental environmental agreements It had 168 parties which represented to 168 countries, and they all agreed in Ramsar Convention (Article 1.1) to adopt the wetland definition as:

“areas of marsh, fen, peatland or water, whether natural or artificial, permanent or temporary, with water that is static or flowing, fresh, brackish or salt, including areas

of marine water, the depth of which at low tide does not exceed six meters”

Moreover, the Convention (Article 2.1) indicated that wetlands might incorporate:

“riparian and coastal zones adjacent to the wetlands, and islands or bodies of marine water deeper than six meters at low tide lying within the wetlands”

The definition provided a general framework for countries to build their legal systems, which helped to manage wetlands or mangrove forests in particular For instance, Australia Department of Environment defined wetlands as: “areas of permanent, periodic or intermittent inundation that hold still or very slow moving water which leads to the development of hydric soils, and have developed biota adapted to flooding” The United States Environmental Protection Agency (EPA) defined wetlands as an area where water covered the soil, or near the surface of the soil all year

or for varying period of time during the year Moreover, the definition had opened the view about wetlands It might occur near the rivers, shallow coastal waters or coral reefs In fact, the wetland had five types which was reported below (Barbier et al., 1997),

LITERATURE REVIEW 7

- ‘Estuaries’ – where rivers meet the sea and salinity is intermediate between salt and freshwater (e.g., deltas, mudflats, salt marshes)

- ‘Marine’ – not influenced by river flows (e.g., shorelines and coral reefs)

- ‘Riverine’ – land periodically inundated by river overtopping (e.g., water meadows, flooded forests, oxbow lakes)

- ‘Palustrine’ – where there is more or less permanent water (e.g., papyrus swamp, marshes, fen)

- ‘Lacustrine’ – areas of permanent water with little flow (e.g., ponds, kettle lakes, volcanic crater lakes)’

According to those categories above, the mangrove forest in Ben Tre and Tra Vinh provinces would be classified as ‘Estuaries’ Moreover, it was supported by the definition, which could be found in a FAOs report called “The World’s Mangroves: 1980-2005” (FAO, 2007) They defined a mangrove forest as a coastal forest, which was observed in sheltered estuaries and along river banks and lagoons in the tropics and subtropics Those areas characterized tidal environment which was affected by inundation, high salinity and an unstable soil

In the brackish water, Tomlinson (1986) showed that ecosystem and plant species had developed to survive in this typical environment For example, some plants could actively remove salt from their tissues, such as, their leaves They also developed special root system, like stilt or prop roots and aerial or pneumatophores roots Stilt roots helped a plant to increase its stability in wet and muddy soil, and most of mangrove species developed this system, for instance Rhizophora’s roots Aerial roots assisted a plant in its aeration, and roots might have different appearance We could find down that Sonneratia root and Avicenna root had sharp pneumatophores aerial roots which looked like an anchor The Bruguiera roots were curved that looked like

LITERATURE REVIEW 8

human knees bent Moreover, mangrove plants had the most unique reproductive strategies called vivipara It was the ability of seeds to germinate into propagules while they were on the parent trees For example, seed of Rhizosphere developed to a long cigar shaped propagule before it fell to the mud This development helped those species to maintain the high reproduction rate

According to the WWF (WWF, 2013), a mangrove forest was a very dynamic and highly productive ecosystem It not only played multiple ecological functions essential

to its surrounding habitats, but was also an important resource for coastal communities

2.1.2 Ecosystem services

The thesis chose the definition of ecosystem services which had been used by Millennium Ecosystem Assessment (2005), in order to be a structure to present mangrove benefits The definition was quoted as follow: “Ecosystem services are the benefits people obtain from ecosystems” Using this definition meant that we had to consider ecosystem services in a bigger picture, as a combination of “goods” and

“services” provided by the mangrove forest in particularly The research would give an overview of the mangrove benefits It was mainly structured by following four categories, including provisioning, supporting, regulating and cultural services (MA, 2005)

Provisioning services were natural products that people could take from the ecosystem (MA, 2003) In fact, communities could obtain products, including food and fiber, fuel, genetic resources, bio-chemicals, natural medicines, pharmaceuticals, ornamental resources and fresh water (Walters et al., 2008) His research indicated that Rhizophora species could produce high calories wood (FAO, 1994), thus it was ideal for consuming as firewood or making charcoal Moreover, wood collecting from mangrove species like Avicennia and Sonneratiathe were strong and durability, which were used by coastal communities to build houses, fences, and fishing equipment

LITERATURE REVIEW 9

(Walters et al., 2008) Roofs, walls and floor mats of coastal communities in South East Asia were usually made from “nipa” palm collected from the mangrove forest (Ejf, 2003; Walton et al., 2006) In addition, FAOs (Giesen, Wulffraat et al., 2007) had shown that 77 percent of all mangrove plants could benefits to human wellbeing In fact, it was about 110 mangrove species that could be used for medical purposes While

41 percent of plants played role as medicinal, 25 percent of them were used as construction material 34 percent of those were used as food and fuel such as, vegetable, spice, fruit and charcoal Ornamental services were about 17 percent

Regulating services were benefits obtained from regulation of ecosystem processes, such as climate regulation, storm protection and water purification (MA, 2005) Using data of 25 mangrove forests in Indo-Pacific region, the calculation showed an average that one hectare of the mangrove forest contained about 1,023 Mg carbon (Donato et al., 2011) As the high capacity of storage carbon, such as CO and CO2, mangrove forests had been known as the most carbon rich forests in the tropics, and confirmed that they had a significant contribution to climate-change mitigation Mangrove forests could be low cost and effective barriers to protect the coastal communities away from casualties and damages caused by storm surges (Barbier, 2007; Barbier & Enchelmeyer, 2014) Tanaka et al (2007) had shown that mangrove species like Rhizophora and Avicennia could effectively slow down the water flow and reducing wave heights Kathiresan and Rajendran (2005) had concluded that the Indian Ocean Tsunami caused bigger damages to villages, which did not locate behind the mangrove buffer Mangrove species were special because of their complex aerial root structure, which would made them to be an important sink of suspended sediment (Wolanski et al., 1995) For example, mangrove fringes could trap to about 1,000 ton of sediment per kilometer (Wolanski et al., 1998) In fact, polluted sediments could be purified while they were trapped in the mangrove forest (Wolanski, 2007) Technically, field experiments had confirmed the wastewater treatment service (Chen et al., 2009)

LITERATURE REVIEW 10

Stabilizing toxicity and organic materials contained in sediments would contribute quality water for aquaculture Moreover, it might help to maintain the health of other ecosystems like coral reefs and seagrass which also produced huge benefits to human well-being

Supporting services were those that were necessary for all other ecosystem services, and include soil formation and retention, production of atmospheric oxygen, primary production, nutrient cycling, water cycling and provisioning of habitat (MA, 2005) Litter production was one of the important tangible benefits of mangrove forests that helped them to simultaneously provide soil formation, primary production, nutrient cycling and provisioning of habitat The high litter production and rapid turnover of leaf litter suggested that mangrove forests were the productive supplier of nutrients and organic matter (Tam et al., 1998) Thus, soils could be replenished by new nutrients, and increased in the primary productivity of mangrove species In addition, organic matter like organic carbon was the important material in the mangrove food web For example, it was food source for developing mangrove benthos communities The development of this commune had created the fuel for mangrove fauna like aquatic species, birds and mammals (Cannicci et al., 2008; Kristensen, 2008; Nagelkerken et al., 2008) Moreover, special structure of mangrove forest created ideal shelters for many living species to stay away from predators and environmental fluctuation (Nagelkerken et al., 2008) Although the provisioning of habitat of mangrove forest usually made us to go a long way to understand it, we had to admit that this service played an important role in the existence of valuable species including meiofauna, macrofauna, shrimps, fishes, etc

Cultural service preferred to those nonmaterial benefits that people received from the ecosystem services, for example recreation and tourism opportunities, aesthetic information, inspiration for culture, spiritual experience and cognitive information

LITERATURE REVIEW 11

(MA, 2005) Migratory birds chose mangrove forest to be their breeding and winter grounds, thus their existence would attract bird watchers and scientists (Barbier et al., 1997) Moreover, an increase in research papers had supported the recreational services

of mangrove (Barbier, 2012; Ewel et al., 1998; Sathirithai, 1995)

2.1.3 Production function

The mangrove ecosystem services suggested that there had appeared a connection between mangrove forests and aquaculture Provisioning, regulating and supporting services were believed to be the most important in supporting aquaculture activities

In fact, mangrove forests might provide natural seeds for farming Seeds would not only be shrimplets, juvenile fishes and crabs but also quality broodstock for suppliers

of post larval and juvenile shrimps and fishes Moreover, for the integrated farming type, the amount of phytoplankton and algae containing in the water source would be valuable food for feeding

In addition, it was believed that a mangrove forest had ability to purify water, thus water ran through it might meet the quality required for aquaculture The water parameters would be more stable and contain less toxic, so that farmers could reduce the amount of chemical to treat this input

Coastal economic activities always faced the risk of being damage by erosion, storm and tsunami The mangrove forest could trap sediment and maintain the soil formation, which might control for erosion It also reduced the energy wind and wave generated in

a storm or tsunami In sum, it was no doubt that mangrove forest could act as an important living barrier to mitigate those issues

The production function approach could only be applied in a case that the relationship between environmental regulatory function and the economic activity was well understood (Barbier, 2000) Since the potential ecosystem services contributed by the

LITERATURE REVIEW 12

mangrove to aquaculture had been confirmed, the production function approach would

be used as a main valuation method applying in the thesis The production function would expressed as follow,

With C was the cost of production

2.2 Review of empirical studies

There were an increasing number of researches using different estimation methods that attempted to value the ecosystem services of mangrove forest around the world The thesis would review some research papers that implemented valuation approaches, such

as market price, replacement cost, production function and contingent valuation

The market price approach was practiced in order to value the direct use value, such as on-site fisheries, forestry and aquaculture The approach simply found out value of ecosystem services based on a market price of a service and the quantity of it For example, Christensen (1982) found out that mangrove forest providing fruit, cigarette wrappers and nipa thatch had the value of US$230 per hectare a year in Chanthaburi, Thailand Moreover, a hectare of mangrove forest would give the same value of US$30

a year for on-site fishery and forestry It contributed to aquaculture and agriculture the average value of US$206 and US$165 per hectare a year respectively In Vietnam, Do and Bennet (2005) had estimated the total value of one hectare of Camau’ mangrove forest producing in the year 2001, which equaled to AUD$982.3 In fact, the aquaculture had the highest estimation which was AUD$523.6 per hectare Timber was

LITERATURE REVIEW 13

in the second place of AUD$275.8 per hectare It contributed the value of AUD$163, AUD$10, AUD$9.4 and AUD$0.5 to fisheries, medicinal plants, fuelwood and Nipa leaf respectively

The placement cost approach had been used to value the erosion mitigation and storm prevention services providing by mangrove barriers The idea of this approach was to estimate the cost of replacing mangroves with the artificial barrier that provided the same services (Chong, 2005) Sathirathai and Barbier (2001) had used the cost of US$1011 (in 1996) to build one meter of artificial coastal barrier which was provided

by Thailand government They found out that US$13.38 per m2 was the price to pay for storm prevention service providing by 75-metres stand of mangrove

The production approach could be used in cases that ecosystem services were proved to have beneficial contributions to the productive activities (Barbier, 1994) For instance, using pool time-series and cross sectional data over the 1983-96 period for Thailand, Barbier (2007) concluded that the annual loss in the habitat-fishery supporting service was around US$99,000 The result was calculated by assuming that the aquatic stock did not change, and it was called the static approach In order to make the valuation in the biological growth, the dynamic model could be applied The model found out that the loss was much bigger which equaled to about US$1.5 to 2.0 million

The contingent valuation approach could be employed to estimate the use values and nonuse values of mangrove ecosystem services (Barbier, 2000) In fact, by asking people the willingness to pay for ecosystem services, the stated-preference study needed two key conditions The first one was the availability of information about the interested services, so that it would encourage people to give their rational willingness

to pay The second one was that the change in the natural ecosystem needed to be well explained, so that people might not fell to reject the valuation scenario (Bateman et al., 2011)

LITERATURE REVIEW 14

The valuation conducted in Kosre, Micronesia had shown that local people would like

to pay from about US$1.00 to 1.26 million to protect the mangrove swamps (Naylor

&Drew, 1998) Moreover, basing on the available net value of marketable products, it estimated that the value of mangrove forest would be between $666 thousand and $1 million per year (1996 prices) In Vietnam, by asking the willingness to pay of the shrimp farmers to ecosystem services collecting from mangrove forests, Ha (2005) showed the estimated value of mangrove ecosystem services for supporting the aquaculture was about US$7.60 per hectare a year

2.3 Conclusion

In summary, this chapter had presented the definition of mangrove forest and its ecosystem services Moreover, the potential benefits of mangrove forest that could contribute to the aquaculture production had been noticed in order to emphasize the use

of production function in estimating the ecosystem services value In addition, there were reviews of different valuation methods used to estimate the contribution of mangrove forests

CHAPTER 3 15

CHAPTER 3 RESEARCH METHODOLOGY

3.1 Analytical framework

Figure 2 described the conceptual framework (Rönnbäck, 1999), which was adopted by this thesis for evaluating the relationship of mangrove forests and the aquaculture This figure had shown the ecological and biophysical links of mangroves that sustained seafood production (Rönnbäck, 1999) Mangrove forest supported the aquaculture by five identical services, including insurance, water quality maintenance, food input, broodstock and seed

Figure 2: The link between seafood production and mangrove ecosystem services

Source: Adapted from (Rönnbäck, 1999)

RESEARCH METHODOLOGY 16

There was a notification about harmful effect to the aquaculture creating by overloading of mangrove leaf litter (Hai & Yakupitiyage, 2005) An experiment had been evaluated the effects of leaf litter-loading rates of three mangrove species, which were Rhizophoraapiculata, Avicenniaofficinalis and Excoecariaagallocha The results showed that growth and survival rate of shrimps would increase in the moderate loads

of mangrove leaves condition In the high leaf-loading condition, the concentration of

H2S increased to the level that caused the significant reduction in survival rate of shrimps Consequently, the thesis expected to observe this effect while the square term

of “mangrove cover” variable had been added in the regression function The hypothesized figure below had shown the expectation relationship between mangrove forests and the total cost of production

Figure 3: The expected relationship between mangrove forest and aquaculture

3.2 Modeling specification

In order to analyze the effect of mangrove forests on the operating cost, the thesis constructed the cost function (Vincent et al., 2015) to estimate relationship between mangrove forests and the aquaculture production Basing on Vincent et al (2015), it would be four types of variable that were included in the model There were farming’s

RESEARCH METHODOLOGY 17

output level, prices paid by a farmer for labor and other non-environmental inputs, the quantity of capital and other fixed factors used by the farmer, and amount of environmental inputs used by him In addition, because of the appearance of many zero values in the data which taking log would create missing values, so that the Vincent’s model was applied like the following regression model:

Ci = c + β1Si+β2S2i + αQi+ mDi+∑𝑘𝑘=1𝑘Hki+ ∑𝑙𝑙=1𝑙𝑃li+ ui

Ci: operating cost of aquaculture activitiesi

Si: mangrove forest acreage

Qi: quantity of aquaculture output produced by a farmeri

Di: the price of 1kg feeding material

Hi: characteristics of a farmer; including, ages, gender, education and experiences

Pi: farming characteristics; such as, ages, farming type and waste disposal

by farmers for fixed factors or capital, and the quantity of environmental inputs

3.3.1 Environmental variables

The research employed a variable called mangrove density in the given data set to be the main environmental factor for the regressions The variable was defined as mangrove forest acreage that could be found in 500-meters radius from the pond location It was named “Mangrove cover” in the research Figure 4 would help to describe this variable

According to the above sections, benefits of mangrove forest providing to human activities had been accepted by an increasing number of researchers and communities That was the reason why the expected sign of “Mangrove cover” would be negative It could be explained that cost of production would reduce if mangrove density increased

By the way, countries had reports that mangrove forests had been destroyed to practice shrimp farming Then, mangrove forests might have a negative effect on those activities in some points, which suggested a non-linear relationship of mangrove forests and aquaculture farming It meant when mangrove forest acreage reached a certain point, then it might make the cost of production to increase The relationship could be tested by adding variable called “Mangrove squared” The variable was calculated by multiplying values of two “Mangrove cover” together By doing this, the

RESEARCH METHODOLOGY 19

research expected to observe a positive sign of this variable, which showed the shape creating by “Mangrove cover” and “Cost of production” variables Those maps below would visualize how the “mangrove cover” variable was calculated

hump-Figure 4: Illustration of “Mangrove cover” variable

RESEARCH METHODOLOGY 20

supplementary feeds In addition, shrimps and fishes were totally raised by artificial food in intensive farming (FAO, 2015)

In the two provinces, the aquaculture had applied those types There were two seasons

in intensive farming, which was about three to four months Extensive farming and improved extensive farming season would remain longer than intensive farming, which was about a year

Moreover, it was hard to precisely identify which would be extensive farming and improved extensive farming It was because farmers recently believe that providing various types of food in production process would promise an increase in outputs, so they were going with this trend Classifying types of aquaculture depending on the above definition could not help me in this case In fact, there were only twelve ponds classified as improved extensive farming in the sample data Thus, the thesis would consider those ponds to be extensive farming which results in the total of 49 extensive farming observations As a result, the thesis focused only on extensive farming and intensive farming

In intensive farming, people attempted to farm only one type of aqua-product In contrast, there were different kind of species would be raised in extensive farming ponds For example, farmers could raise different types of shrimps, crabs and fishes together in one season In fact, the thesis made an assumption that farmer was a small firm producing a single output Thus, an imagination output, which was priced at 100,000 VND per kilogram, was created in order to simplify outputs into one single product Consequently, extensive farming output quantity would be a sum of revenue earning by selling aquaculture products for a year divided by 100,000 VND In intensive farming, it would be a sum of revenue produced in two seasons in a year divided by 100,000 VND

RESEARCH METHODOLOGY 21

Moreover, market prices needed to be unchanged over time in the model, however changes would be observed over different seasons The T-test had been applied to test this hypothesis suggesting that there were no significant change in price

The following equations showed exactly how outputs were calculated:

Outputs of intensive farming (OIi) = (outputs in season 1 x price in season 1 + outputs

in season 2 x price in season 2)/100000

Outputs of extensive farming (OEi) = (outputs in a year x market price)/100000

3.3.4 Farming cost as dependent variable

Dependent variable would be the operating cost of aqua-farming, including all variable costs and fixed costs In aqua-farming, cost for renting the land to construct the pond and prices of aeration systems would be viewed as the main fixed costs The variable costs had been divided into six categories Those categories were defined by following the time sequence in the farming operation process, for example, preparation cost should be considered before the seed cost would paid Consequently, chemical treatment cost should follow by cost of buying seed, and then it would be feeding cost, water treatment cost and other cost respectively

First of all, farmers would be asked about their ownership of the land that they had used for their production The rented ratio would be what the farmer had to pay in the recent year Next, the aeration systems would be calculated by summing prices that paid for diesel engines and the set of paddle-wheels The discounted value should be considered because farmers often bought the paddle wheel aerator for long-term usage Preparation cost (CPi) included liming cost, pesticide cost, and labor cost According to FAO (2015), liming application meant to reduce soil acidity by using calcium and magnesium compounds To control undesirable species, farmers used pesticides

Seed cost (CSi) = shrimp fries costi + crab fries costi + fish fries costi

Chemical treatment cost (CCi) equaled to cost of chemical used by farmers to control input water quality plus labor cost Input water was one of the most important factors

in aqua-farming, because poor water quality might reduce survival and growth rate of fries Consequently, farmers had to make water measurement and then used chemical

to manage input water quality, including pH, salinity, dissolved oxygen, and nitrogen compound In addition, labor would be needed to do this process

Chemical treatment cost (CCi) = primary chemical costi + labor cost of chemical treatmenti

Feeding cost (CFi) was a sum of cost to buy food and cost to hire labor This labor had

to make sure that shrimps or fishes were feed enough and on schedule

Feeding cost (CFi) = food costi + labor cost of feeding activityi

Water treatment cost (CWi) would be all the cost in order to manage water quality after fries had been released to the pond They were chemical cost and labor cost

Water treatment cost (CWi) = secondary chemical costi + labor cost of water treatmentiOther cost (COi) was sum of other costs, payment to advisor, and electronic cost or aeration cost

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Other cost (COi) = other costi + advisor paymenti + electronic costi+ transport costiTotal cost (CTi ) of aqua-farming would equal to the sum of cost’s six types mentioned above which were preparation cost, seed cost, chemical treatment cost, feeding cost, water treatment cost and other cost

Total cost (CTi) = (CPi + CSi + CCi + CFi + CWi + COi)

In the questionnaire, those costs were recorded as 1Vietnam Dong (VND), and the maximum amount could be more than million VND The numbers would be too long to present in the descriptive statistic table, so the thesis would present costs in unit of 1 million VND

3.3.5 Pond characteristics

First of all, it was necessary to know what type of farming the pond was implemented such as, intensive farming or extensive farming Secondary, how many years that farmers used their ponds for farming was also questioned, since it was believed that a reduction in soil quality in the old pond would increase preparation cost and disease outbreaks in the next season Finally, farmers were asked whether they discharged pond waste directly to nearby river or lagoon If a farmer discharged cleaner wastes to the environment, he might have to build a waste treatment pond Thus, it would increase cost of production

3.3.6 Household characteristics

Older people were believed to have more experiences than young people, so that they could manage the cost of production better than the young one Consequently, people who had more years in doing aquaculture activities would be able to choose better methods to control their ponds In addition, people who had more time at school may make better rational decisions than people who could not study more time at school Moreover, a male might be more rational in decision making than a female Size of