Willingness to pay for white leg shrimp insurance

MINISTRY OF EDUCATION AND TRAINING NHA TRANG UNIVERSITY PHAM KY ANH WILLINGNESS TO PAY FOR WHITE LEG SHRIMP INSURANCE: THE CASE OF SHRIMP FARMERS IN QUANG NINH PROVINCE MASTER THESIS

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNIVERSITY

MINISTRY OF EDUCATION AND TRAINING

NHA TRANG UNIVERSITY

PHAM KY ANH WILLINGNESS TO PAY FOR WHITE LEG SHRIMP

INSURANCE: THE CASE OF SHRIMP FARMERS IN QUANG

NINH PROVINCE MASTER THESIS

Major: Marine Ecosystem Management & CC Topic allocation Decision: 1035/QĐ-ĐHNT date 24 th October 2017

Assoc Prof Lê Kim Long

Faculty of Graduate Studies:

KHANH HOA – 2019

UNDERTAKING

I undertake that the thesis entitled: “Willingness to pay for white leg shrimp insurance:

The case of shrimp farmers in Tien Yen, Quang Ninh province” is my own work The

work has not been presented elsewhere for assessment until the time this thesis is submitted

Khanh Hoa, May 2019

Author

Pham Ky Anh

ACKNOWLEDGEMENT

I would like to express my heartfelt gratitude to Professor Curtis M Jolly (Auburn University) and Assoc Prof Kim Anh Thi Nguyen (Nha Trang University) for their devotion and assistance in directing my thesis Their comments were extremely valuable

in the completion of my studies The supervision was essential in confidence building and enabled me to complete this study in a timely manner I am fortunate to have them as

my supervisors

I would also like to thank the People‟s Committee of Hai Lang commune, Tien Yen district, Quang Ninh province for helping me to conduct the investigation and in data collection Thanks to all the numerous authors whose studies that I have consulted and reviewed

I would like to thank my parents, wife and children, as well as my friends and colleagues who provided relentless support throughout this course of studies Without their assistance, I would not have made it

Finally, I wish to express my sincere appreciation to NORHED program, University

of Tromso and Nha Trang University for giving me the opportunity to study Marine Ecosystem Management and Climate Change

May God bless them all

Nha Trang, May 2019

Author

Pham Ky Anh

TABLE OF CONTENTS

UNDERTAKING i

ACKNOWLEDGEMENT ii

TABLE OF CONTENTS iii

LIST OF TABLES vi

LIST OF FIGURE ………vii

ABTRACT……… viii

CHAPTER 1: INTRODUCTION 1

1.1 Identify research problems 1

1.2 Objectives of the study 3

1.2.1 Overall objectives 4

1.2.2 Specific objective 4

1.3 Research question 4

1.4 Scope of the study 5

1.5 The implications of the research results 5

1.5.1 Scientific 5

1.5.2 Field 5

1.6 Structure of the thesis 5

CHAPTER 2: THEORY AND MATERIALS 6

2.1 Concepts 6

2.1.1 What is agricultural insurance? 6

2.1.2 Household 6

2.1.3 Risks 6

2.1.4 Fisheries insurance 7

2.1.4.1 Regulated insurances 7

2.1.4.2 Scope of insurance 7

2.1.4.3 Premium insurance 9

2.1.4.4 Contents related to fisheries insurance (shrimp/fish) 10

2.2 Theoretical Framework 12

2.3 Overview of research on factors affecting decision to participate in Agricultural Insurance 13

2.3.1 Foreign studies 13

2.3.2 Domestic studies 14

CHAPTER 3: METHODOLOGY 16

3.1 Research process 16

3.2 Research area 18

3.2.1 Land resources 19

3.2.2 Weather and Climate 20

3.2.3 Socio-economic characteristics 22

3.2.3.1 Economic development situation 22

3.2.3.2 Population and labor 23

3.2.4 Current status of application of science and technology into aquaculture 23

3.2.5 Labor and labor qualification in aquaculture 25

3.2.6 Status of epidemics in saline and brackish aquaculture 25

3.3 Household interview 26

3.4 Method 26

3.4.1 Risk identification 26

3.4.2 Assessment of willingness to pay 26

3.4.3 Factors influencing willingness to participate 27

3.4.4 Empirical model and data analysis 27

3.4.5 Descriptive statistics method 29

3.4.6 Data collection 29

3.4.6.1 Primary data collection 29

3.4.6.2 Secondary data collection 29

3.4.6.3 Data analysis 30

CHAPTER 4: RESULT AND DISCUSSION 31

4.1 Analysis of sample results 31

4.1.1 Description of characteristics of shrimp farmers 31

4.1.2 The situation of raising white shrimp 33

4.1.3 Information about techniques for white leg shrimp farming 34

4.1.4 White leg shrimp production activities 35

4.2 Economic efficiency 35

4.3 Disease risk in farming white leg shrimp 36

4.4 Natural disaster 38

4.5 Awareness of agricultural insurance on shrimp farming 38

4.6 Willingness to pay agricultural insurance for white leg shrimp farming 39

4.7 Factors affecting decisions on agricultural insurance participation 40

4.7.1 Describe the variables in the model 40

4.7.2 Analysis of factors affecting the decision to participate in insurance for white leg shrimp 41

CHAPTER 5: CONCLUSION AND SUGGESTION 43

5.1 Conclusion 43

5.2 Suggestion 43

REFERENCE 45 APPENDIX

LIST OF TABLES

Table 2.1 Premium rates of insurance 9

Table 2.2 Formula of fee insurance 9

Table 2.3 The damage ratio of insurance for White Leg Shrimp 11

Table 2.4 The damage ratio of insurance for Tiger Shrimp 11

Table 2.5 The damage ratio of insurance for Tra (Catfish) fish 12

Table 3.1 Total socio-economic production value in 2018 Hai Lang commune 22

Table 3.2 Summary of industrial shrimp farmers in Hai Lang commune 24

Table 4.1 Socio-economic characteristics of the respondents on WLS farms in Hai Lang commune, Tien Yen district, Quang Ninh province 31

Table 4.2 Characteristics of age, demographic, labor of shrimp farmers in Tien Yen district, Quang Ninh province, 2018 33

Table 4.3 Area, experience of raising white leg shrimp in Tien Yen district, Quang Ninh province, 2018 33

Table 4.5 Number of crop, cultural day, stocking density, and FCR 35

Table 4.6 Average production cost of ha/shrimp crop of shrimp farmers in Tien Yen district, Quang Ninh province, 2018 35

Table 4.7 The frequency of epidemics for white leg shrimp for five years 36

Table 4.8 Awareness of agricultural insurance on shrimp farming 38

Table 4.9 Farmers' judgment on total cost, average revenue, damage rate, and insurance payment rate calculated on total cost, premium rate calculated on total cost………… 40

Table 4.10 Descriptive statistics of qualitative variables in econometric models 40

Table 4.11 Descriptive statistics of quantitative variables in econometric models 41

Table 4.12 Logit model results "Analysis of factors affecting the decision to participate in shrimp insurance" 41

LIST OF FIGURE

Figure 3.1 Diagram of research process……… 16Figure 3.2 Tien Yen district and Quang Ninh province……… 18

ABTRACT

On March 1, 2011, the Vietnam Government issued Decision No 315/QD-TTg on the pilot implementation of agricultural insurance in the period of 2011-2013 The pilot agricultural insurance program was implemented in twenty provinces, cities across the country with three types of products, rice insurance (seven provinces), pet insurance (nine provinces) and aquatic insurance (five provinces) with the aim of reducing risks to stabilize income in general and shrimp farmers in particular (Decision No 315/QD-TTg

of Vietnam Government) The implementation of the pilot agricultural insurance was necessary at this period to contribute to conditions for people to access insurance on the principle of voluntariness, ensuring social security, and stabilizing capital in pine production through compensation of losses suffered by rural people (Hoang and Khoi, 2015) However, Quang Ninh is a province that has not been able to pilot fisheries insurance

The aim of this research is to evaluate aquaculture farmers‟ risks and measures adopted to manage these risks The evaluation of farmers‟ willingness to pay and the factors influencing their decision to purchase insurance will enable policy makers to propose suitable institutional mechanisms to implement an insurance program for shrimp farmers The use of insurance program as a mitigation measure against climate change will be evaluated The overall objective of this study is to assess the willingness to participate for farming white leg shrimp insurance by farmers in Hai Lang commune, Tien Yen district, Quang Ninh province

The research study will help evaluate the willingness to participate in insurance and the factors affecting the willingness of households involved in farming white leg shrimp in Hai Lang commune, Tien Yen district, Quang Ninh province The results will help policy makers to propose steps toward the successful implementation of an agricultural insurance program to help limit risks in white leg shrimp farming in Quang Ninh province

In this study, the contingent valuation method (CVM) will be used The data collected by 120 white leg shrimp farmers in Hai Lang commune, Tien Yen district, Quang Ninh province In particular, the study uses binary logit model to evaluate the factors affecting the decision to participate in fisheries insurance for white leg shrimp farmers, processing data by Excel and SPSS

According to the survey results and analysis of 120 households, it is shown that:

- About financial and technique efficiency: Total production cost of white leg

shrimp farming on the average is 870,977,825 VND/ha: Feed is a main component of

cost and accounts for 60.5%, seed cost of white leg shrimp is the second largest portion

of all costs and is responsible for 15.1%, chemicals (including drugs) account for 8.61%, energy (electricity, petrol) accounts for 10.3%, cost for labor is 1.6%, cost of pond improvement is 2.0%, and the other costs are about 1.7% According to the result of production cost, it shows that white leg shrimp farming requires high investment in Tien Yen district, Quang Ninh province (compared to other province in Vietnam) It requires the use of seed, feed, and energy per crop compared to traditional production systems

- The six factors included in the logit model "Analysis of factors affecting the willingness to participate in shrimp insurance", there are three factors with statistical

TRAINING, and INFO_INSURANCE are not statistically significant (with significance level more than 0.05) Among the three statistically significant impact factors, all of them have a positive correlation with the dependent variable The factors mean: for a one unit increase in education there is a 0.80 percent chance of increase in willingness to participate in the insurance program; for a one unit increase in experience there is a 0.77 percent chance of increase in willingness to participate in the insurance program; for a one unit increase in area there is a 0.756 percent chance of increase in willingness to participate in the insurance program

Based on the research results achieved, in order to make agriculture insurance program should apply in Quang Ninh province, it is necessary The government needs to create conditions for many insurance enterprises to apply agricultural insurance products for farmers

Keywords: Willing to pay, shrimp insurance, white leg shrimp, Tien Yen district, Quang

Ninh province

CHAPTER 1: INTRODUCTION

1.1 Identify research problems

Vietnam is the third largest shrimp producer in the world (after China and Indonesia), with an output of 600,000 - 650,000 tons/year it has always remained among the top five shrimp exporting countries in the world So far, Vietnamese shrimp are exported to nearly 100 countries and territories Vietnam is currently the largest supplier

of shrimp to the Japanese market, the third largest to the US market and the fourth to the

EU Shrimp is the leading producer of Vietnam's agriculture During the conference to develop Vietnam's shrimp industry in 2017, Prime Minister Nguyen Xuan Phuc of the Ministry of Agriculture and Rural Development declared an export target of 10 billion USD by 2025 (Tran Van Tho, 2017)

The feasibility of attaining this target level of production is in doubt and will be challenged by the number of constraints facing the industry The current shrimp farming industry faces many difficulties: Lack of detailed planning for shrimp farming areas; Lack separate canal and drainage channels; The small scale of shrimp farming that limits the application of international standards, and; Feces canopy from intensive and continuous production practices Coupled with these problems are productivity and economic efficiency that are questionable; qualifications and techniques are mainly based

on experience; lack of compliance of regulations on safe farming practices; cleanliness of farming practices; quality and management of shrimp seed is still limited All these factors are affected by the quality of shrimp production, shrimp feed prices, aquatic veterinary medicine services, and the simultaneous increased of aquaculture services These challenges have rendered output unstable accompanied by increased risks of climate change events (drought, saline intrusion, natural disasters, crop failure, epidemics) Value of investment in large shrimp farming is risky because of diseases and poor farming practices like recirculating none treated water in the ponds Therefore, people need a guarantee for their property and effort, a solution that enables them to produce the next crop Hence, a look at insurance as an alternative strategy for shrimp industry growth is increasingly important, if not essential

On March 1, 2011, the Government issued Decision No 315/QD-TTg on the pilot implementation of agricultural insurance in the period of 2011-2013 The pilot

agricultural insurance program was implemented in twenty provinces, cities across the country with three types of products, rice insurance (seven provinces), pet insurance (nine provinces) and aquatic insurance (five provinces) with the aim of reducing risks to stabilize income in general and shrimp farmers in particular(Decision No 315/QD-TTg

of Vietnam Government) The implementation of the pilot agricultural insurance was necessary at this period to contribute to conditions for people to access insurance on the principle of voluntariness, ensuring social security, and stabilizing capital in pine production through compensation of losses suffered by rural people (Hoang and Khoi, 2015).At the same time, create conditions for insurance enterprises to deploy new business products to diversify insurance activities in the economy, contributing to the implementation of the Party and State's socio-economic strategic objectives However, after 3 years of pilot implementation, in addition to the initial results, there are still many difficulties that need to be solved to find common voice from the people and insurance enterprises (Nguyen and Pongthanapanich, 2016) The situation of agricultural insurance profiteering is quite sophisticated because the boundary between insurance risk and uninsured risk is difficult to control Coupled with such complication are limited the technical facilities; information technology systems and insurance enterprises; and there

is a thin staff with not much experience in implementing new insurance operations In addition, statistical data for the determination of insurance premiums are "missing and weak", which greatly affects the determination of appropriate fees; lack of specialized agencies, independent inspection agencies for insurance work and assessment of losses leading to inappropriate insurance products have resulted in the piloting of fishery insurance in Vietnam 2017

Vietnam is a country where the economy still depends heavily on agriculture with 70% of the population‟s livelihoods coming mainly from agriculture However, the agricultural sector often faces risks due to natural disasters and epidemics, with estimated losses of 1.5% of GDP due to natural disasters in Vietnam (Department of Agriculture and Rural Development Quang Ninh) Therefore, frequent disasters and natural disasters open up a potential market for agricultural insurance development

Over the past years, Agricultural Insurance has been encouraged by the Party and the State and included in the rural agricultural development strategy The content of building mechanisms and forms of Agricultural Insurance has been included in the

Party‟s Congressional Documents (10th and 11th times), Central Resolution No 7 (10th term) on Agriculture and Farmers and Rural and Decision No 315/QD-TTg of the Prime Minister in which, insurance for rice is implemented in Nam Dinh, Thai Binh, Nghe An,

Ha Tinh, Binh Thuan, An Giang and Dong Thap provinces Insurance for buffaloes, cows, pigs and poultry established in Bac Ninh, Nghe An, Dong Nai, Vinh Phuc, Hai Phong, Thanh Hoa, Binh Dinh, Binh Duong and Hanoi Insurance for catfish aquaculture, basa fish, tiger shrimp, white leg shrimp initiated in Ben Tre, Soc Trang, Tra Vinh, Bac Lieu and Ca Mau (Decision No 315/QD-TTg of Vietnam Government)

The Ministry of Finance's Agricultural Insurance Pilot Program has encountered many difficulties during its implementation in a period of less than 3 years in spite of attempts to encourage the participation of local and international private sector enterprises Hence the domestic and foreign insurance providers have not been successful

in this service sector Typical examples such as compensation rates in agricultural insurance account for over 80% of insurance premiums, much higher than the compensation rates of other insurance operations of Bao Viet (compensation rate) usually 50%)(Hoang and Khoi, 2015) According to Myriam Hadnes and Kristina Czura (2014), when evaluating the government's pilot program on Aquaculture Insurance in Ca Mau Province for the period of 2011 - 2013, it showed farmers' satisfaction with the current insurance program was low This is mainly due to the change in compensation from Decision No 3035 to Decision 1042 - in fact Decision No 1042 has never been implemented because people disagreed The main reason why people do not buy insurance anymore is that the program has stopped Although dissatisfied with the insurance program and especially its way of conducting business, people still see the value of insurance and they are aware of the benefits of the program against risks

Therefore, in order to re-implement the agricultural insurance program in general, and in aquaculture, it is necessary to understand the factors affecting the participation in agricultural insurance (shrimp insurance) as well as the willingness to participate in agricultural insurance (shrimp insurance) at any fee Therefore, it is for this reason that

the topic "Willingness to pay for white leg shrimp insurance: The case of shrimp

farmers in Tien Yen, Quang Ninh province" is carried out

1.2 Objectives of the study

1.2.1 Overall objectives

The aim of this research is to evaluate aquaculture farmers‟ risks and measures adopted to manage these risks The evaluation of farmers‟ willingness to pay and the factors influencing their decision to purchase insurance will enable policy makers to propose suitable institutional mechanisms to implement an insurance program for shrimp farmers The use of insurance program as a mitigation measure against climate change will be evaluated

The overall objective of this study is to assess the willingness to participate for farming white leg shrimp insurance by farmers in Hai Lang commune, Tien Yen district, Quang Ninh province

1.2.2 Specific objective

The specific objectives are to:

insurance for shrimp farming households;

shrimp farmers;

The research study will help evaluate the willingness to participate in insurance and the factors affecting the willingness of households involved in farming white leg shrimp in Hai Lang commune, Tien Yen district, Quang Ninh province The results will help policy makers to propose steps toward the successful implementation of an agricultural insurance program to help limit risks in white leg shrimp farming in Quang Ninh province

(4) What are the intended policy implications to help shrimp farmers voluntarily participate in agricultural insurance?

1.4 Scope of the study

This study emphasizes the theory and practice of agricultural insurance and the willingness of shrimp farmers Hai Lang commune, Tien Yen district, Quang Ninh province to participate in white leg shrimp insurance Research of the thesis is conducted

in the culture zone of white leg shrimp farming in Tien Yen district, Quang Ninh province from October to December 2018

1.5 The implications of the research results

1.5.1 Scientific

The study contributes to determining the factors affecting the decision to participate in shrimp insurance of white leg shrimp farming and the willingness to pay for shrimp insurance

1.5.2 Field

The study analyzes the situation of producing white leg shrimp, identifying risks

of natural disasters and epidemics in cultivating white leg shrimp, as well as analyzing the factors affecting the decision to participate in shrimp insurance for white leg shrimp farming, as well as the willingness to buy shrimp insurance (fee insurance) According to the research results, the researcher suggests solutions to encourage farmers to participate

in shrimp insurance, and proposes policies on appropriate fees for shrimp insurance for white leg shrimp farming The results of the research can be used as a reference for other studies with similar contents

1.6 Structure of the thesis

The thesis includes five chapters

Chapter 1: Introduction

Chapter 3: Methodology

Chapter 4: Results and Discussion

Chapter 5: Conclusion and Suggestion

CHAPTER 2: THEORY AND MATERIALS 2.1 Concepts

2.1.1 What is agricultural insurance?

According to Nguyen Van Dinh (2008), Agricultural insurance is a non-life insurance business that covers insurance risks arising in the field of agricultural production and rural life, including risks associated with: crops and livestock, materials, goods, and factory materials

According to Clause 3, Article 3 of Decree No 58 on Government Insurance (Vietnam) issued on April 18, 2018, "Agricultural insurance is the type of insurance for producers in the agricultural sector Industry, forestry and fisheries, whereby the insurance purchaser pays the insurance premium, the insurer compensates the insured when the insurance event occurs"

2.1.2 Household

According to Dao The Tuan (1995) defines a household as a group of people with the same bloodline living together or not living with other people in the same household; eat together and share funds, and there is a common distribution of income sources that their members create

According to Nguyen Sinh Cuc (1991) shows that farm households analyzed the rural survey that agricultural households are households with all or 50% of the laborers regularly or indirectly involved in farming, livestock and agricultural services (land preparation, agricultural irrigation, plant seed, plant protection, and et cetera) and often the main source of livelihood of households depends on agriculture

2.1.3 Risks

In the agricultural sector, risks are losses, uncertainties, and the failure to achieve the desired results Risks are measureable In other words, it is necessary to cope with many uncertainties (uncertainties) related to environment, epidemics, market and many political and societal issues In order to make reasonable decisions, the owner of the production and marketing unit, in general, and the farm owner in particular, must take into account the possible risk factors in production and businesses

According to the Decision No 2114/QD-BTC of the Ministry of Finance issued

on August 24 2012, and Decision No 3035/QD-BTC dated December 16, 2011 of the Ministry of Finance have mentioned the risks covered by the shrimp insurance including:

- Diseases: white spot disease, yellow head disease, atrophy and hepatopancreatic necrosis (for tiger shrimp); Taura syndrome, atrophy and hepatopancreatic necrosis (for white leg shrimp) The above shrimp diseases are confirmed and published by competent authorities

- Natural disasters: are storms, floods, droughts, coldest, deep freeze, frost, saline intrusion and tsunami according to the regulations of the Ministry of Agriculture and Rural Development published by the competent authorities

2.1.4 Fisheries insurance

According to Decision 315/QD-TTg dated March 1, 2011 of the Prime Minister, the Decision on pilot implementation of agricultural insurance in the period of 2011-2013 has regulations

2.1.4.1 Regulated insurances

This insurance applies to black tiger shrimp, white leg shrimp (shrimp) and pangasius (fish) cultivated commercially in aquaculture facilities Specifically: Pangasius fish in Ben Tre and Tra Vinh; Black tiger shrimp and White Leg Shrimp in Ben Tre, Bac Lieu, Ca Mau, Soc Trang and Tra Vinh (Thus, Quang Ninh province is not pilot areas for agriculture insurance)

2.1.4.2 Scope of insurance

The insured will be compensated according to the prescribed compensation rate for losses caused by natural disasters (losses of 80% or more) and the following direct illness:

- For tiger shrimp: white spot disease, yellow head disease, hematopoietic necrosis and epithelial organ (IHHNV); Acute hepatopancreatic necrosis syndrome (AHPNS)

- For white leg shrimp: White spot disease, yellow head disease, hematopoietic necrosis and epithelial organ disease (IHHNV), muscle necrosis or viral muscular disease (IMNV); and Taura syndrome, acute pancreatic necrosis syndrome (AHPNS) The above epidemics are published epidemics or disease certifications by competent authorities

- For catfish: Pangasius of insured farming establishments suffers from 80% or more damage due to pus and liver disease which are announced or confirmed by competent authorities

- Regarding natural disasters, including the following natural disasters: Storms, floods, droughts, cold, harms, frosts, saline intrusion, tsunamis, thunderstorms, and tornadoes according to the announcement of natural disasters by competent authorities (Article 4, Decision No 3035/QD-BTC on rules, fees and liability of shrimp/fish insurance)

The insurer will not compensate the insured for any losses resulting from causes or consequences from the following subjective actions of the insurance purchaser: willful act and willful misconduct, causing toxicity or injury to shrimp/fish; Losses caused by epidemics within 10 days of stocking; Losses caused by any substances or chemicals that contaminate water and/or cause disease, injury and/or death for shrimp/fish; Shrimp and fish that are killed or burned not by epidemics at the request of competent authorities; Failure to make a monthly declaration of the actual situation of raising shrimp/fish at each farming establishment or changing the area of the farming establishment without declaring to the insurer At the same time, insurers have the right to refuse to compensate

a part of the insurance indemnity for the loss that the insurer can prove in the following cases: The insured declares loss more slowly with regulations (except for the case where the insured person has a legitimate reason for delaying the declaration to the insurance enterprise about the occurrence of the insurance event); The insured person does not perform aquaculture strictly according to the density (actual shrimp density is 80% lower than the density in the certificate of insurance), the process of raising aquatic products and epidemic prevention according to the agency's regulations authorized functions; Heterogeneous dead shrimp in size are defined by different types of age in an aquaculture facility (Article 8, Decision No 3035/QD-BTC on rules, fees and liability of shrimp/fish insurance)

Through analysis, we see that the scope and objects of insurance have been very limited According to Circular 47/2011/TT-BNNPTNT, there are only two insured events: Types of natural disasters (storms, floods, droughts, cold, cold, frost, saline intrusion, and tsunami) and some types of diseases About epidemics, there are only some diseases such as: For catfish (pangasius), pus is liver and kidney disease; Black tiger

shrimp are white spot disease, yellow head disease, atrophy and hepatopancreatic necrosis; White leg shrimp include white spot disease, yellow head disease, Taura syndrome, atrophy, and hepatopancreatic necrosis The above regulation makes it difficult for people who want to buy insurance for a type of insurance, but in the locality,

it is not implemented for the insured who has limited the participation of the insured In addition, regulations on natural disasters and epidemics are still limited All kinds of natural disasters, especially epidemics in our country, are always diversified and difficult

to control The regulation of natural disasters and epidemics within the framework has made it difficult for farmers to suffer from the actual occurrence of other causes but not belonging to the group of diseases covered by insurance

2.1.4.3 Premium insurance

According to Decision No 315/QD-TTg, insurance fee is the amount of money that an insurance enterprise earns a part from the insured and a part from the State's support fund

For fisheries insurance: Insurance is calculated by the ratio of insurance premiums multiplied by the sum insured and shown in the insurance policy

According to Article 6, Rules, fees and liability levels of shrimp/fish insurance, premium rates and the formula for calculating the insurance amount are showed in tables 2.1 and 2.2 as follows: The premium rate applies to all forms of intensive, semi-intensive, improved extensive farming and is calculated as a percentage of the insurance amount

Table 2.1 Premium rates of insurance Type of insurance Premium rates of insurance (%)

MD: density (piece/m2)

HS: average quantity feed of shrimp

Therein Tiger shrimp: 0.03 kg/piece,

White Leg shrimp: 0.02 kg/piece

GT: average price of feed (VND/kg)

CT: seed price

HS: average quantity feed of fish Therein Tra (Catfish) fish: 1.8 kg/piece, Basa (Catfish) fish: 0.02 kg/piece

GT: average price of feed (VND/kg) CT: seed price

2.1.4.4 Contents related to fisheries insurance (shrimp/fish)

According to the Decision No 2114/QD-BTC of the Ministry of Finance issued

on August 24, 2012, Decision amending and supplementing a number of articles of rules, premiums and liability levels of agricultural insurance issued together with the Decision

No 3035/QD-BTC dated December 16, 2011 of the Minister of Finance

- Insurance policy holder: is the insured person and/or representative authorized by the insured, approved by the Commune People's Committee Representing the insured person may be a commune government official, heads of commune and professional organizations in the commune

- The insured person: is a farmer household or a farming organization of black tiger shrimp and white leg shrimp

- Insurance enterprises: are non-life insurance enterprises permitted to pilot agricultural insurance

- Farming establishments: are ponds, lakes, marshes, ponds, cages and rafts in the participating communes The farm must be certified by the Commune People's Committee for its location and area/volume

- Covered objects: Being black tiger shrimp, white leg shrimp (shrimp) cultured in commercial farms

- Epidemic diseases: White spot disease, yellow head disease, atrophy and hepatopancreatic necrosis (for tiger shrimp); White spot disease, yellow head disease, Taura syndrome, atrophy and hepatopancreatic necrosis (for white leg shrimp) Shrimp diseases are confirmed and published by competent authorities

- Natural disasters: are storms, floods, droughts, cold, frost, saline intrusion and tsunami according to the regulations of the Ministry of Agriculture and Rural Development published by the competent authorization

- Amount of compensation: A sum of money in Vietnam dong that an insurance enterprise must pay to the insured to compensate for their farms suffered damage due to the reasons stated in the insurance coverage determined When an insurance event occurs,

the insurer will pay the insured the compensation amount calculated according to the following formula:

Compensation amount = (Damage losses of insurance* Insurance money) * (100% - Discount level)

In which: The discount level is calculated as 30% of the compensation amount per each farm that is damaged due to causes within the insurance that the insured must bear The damage ratio of insurance is stipulated in the following tables:

Table 2.3 The damage ratio of insurance for White Leg Shrimp

The damage ratio of insurance (%) Disease Disaster Disease Disaster

Source: (Ministry of Finance, 2013 Decision No 1042/QD-BTC, 08 May 2013)

Table 2.4 The damage ratio of insurance for Tiger Shrimp Culture

days

The damage ratio of insurance (%)

Culture days

The damage ratio of insurance (%) Disease Disaster Disease Disaster

60 – 64 31 31 115 – 119 3 93

Source: (Ministry of Finance, 2013 Decision No 1042/QD-BTC, 08 May 2013)

Table 2.5 The damage ratio of insurance for Tra (Catfish) fish

The damage ratio of insurance (%) Disease Disaster Disease Disaster

Methods for valuation include stated preference and revealed preferences The

“stated preference” method estimates the monetary value of goods and services This is done by asking people how much money they are willing to pay for a particular good or service, or how much they are willing to accept as compensation if the services were to

be eliminated (Boxall et al 1996; Birol et al 2006, Rasul, 2009) Two most common

methods of stated preference are used in this category: contingent valuation method (CVM) and choice experiment model (CE) Revealed preference (RP) methods differ from stated preference (SP) methods in that they use people‟s actual behavior in real markets, rather than their conjectured behavior in hypothetical markets The revealed preference method uses information about a marketed commodity to infer the value of a related, non-marketed commodity through a complementary (surrogate or proxy) market (Rasul et al., 2011) Methods used for valuation may depend on time and money constraints

In this study, the contingent valuation method (CVM) will be used CVM is a survey based methodology that simulates a market in which farmers are exposed to information on the new goods or services and make decision about their willingness to pay (Chee et al., 2004; Zapata and Carpio, 2012) CVM is considered flexible and adaptive to some valuation tasks that other techniques cannot handle (Padi et al., 2015)

It has been widely used by studies in the fields of environmental economics and health economics (Cho et al., 2005; Cho et al., 2008; Jin et al., 2016; Whitehead, 2005; Hudson and Hite, 2003; Yegbemey et al., 2014) However, since CVM uses a hypothetical market the main issue is whether people are actually willing to pay what they claim they will pay The CVM has been criticized for its inability to deliver reliable and accurate estimates of the willingness to pay (Diamond and Hausman, 1994) and for many biases including strategic bias, design bias, hypothetical bias and operational bias (Pearce and Turner, 1990; Padi et al., 2015)

2.3 Overview of research on factors affecting decision to participate in Agricultural Insurance

2.3.1 Foreign studies

According to Smith and Baquet (1996), consider the demand for multi-risk insurance products of wheat farms in Montana (USA) With the use of expected utility theory, the two authors pointed out that: loans, education levels, attitudes toward farm operators' risk and if the farm ever received benefits due to natural disaster are factors that motivate farms to participate in insurance It is a special in their study is that the premium does not affect the insurance decision

According to a research by Oyinbo et al (2013) on the factors affecting the decision to participate in agriculture insurance of farmers in Nigeria "Determinants of

Crop Farmers Participation in Agricultural Insurance in the Federal Capital Territory, Abuja, Nigeria" The author used survey data of 120 sampled farmers, descriptive statistical method and logit regression model and showed that factors such as age, education level, farm size and access to credit are important variables that affect farmers' ability to participate in the agricultural insurance program

According to Ulimwengu and Sanyal (2011) study on people's joint estimation of farmers‟ willingness to pay for agricultural services using a probit multivariate model, the authors showed that access to agricultural extension services tends to reduce the willingness of households to participate in agricultural insurance Access to markets that

is farmers are willing to participate if the market is more available than those who do not have access to the market plays an important role in their decision Land use rights also affect people's willingness to participate, the larger the land use size, the higher the level

of willingness to participate in agricultural insurance

2.3.2 Domestic studies

Research by Phan Dinh Khoi et al (2014) on the pilot program on agricultural insurance on shrimp farms in Bac Lieu province after 2 years of implementation shows that the number of shrimp farmers participating in insurance is still very low compared to the program's objectives The education level factor is negatively correlated with the decision to adopt shrimp insurance for shrimp farmers Factors such as gender, participation in training, experience, borrowing, and production costs do not affect the decision to participate in shrimp insurance in shrimp farming in Bac Lieu province

According to Nguyen Ba Huan (2015) has a study on "The willingness to pay for agricultural insurance for pig growing by farmers in Chuong My district in Hanoi" The study used Contigent Valuation Method (CVM) to determine the willingness to pay of agricultural insurance of farmers for pig production in Chuong My district In addition, the author used a linear regression model to identify factors affecting the willingness to pay for agricultural insurance through the investigation of 300 surveyed households Positive impacts on farmers' willingness to pay are the following factors: Type of households, technical training on livestock, risk level according to household's assessment, information on agricultural insurance, and livestock scale

According to Luong Thi Ngoc Ha (2015) when studying the factors affecting the willingness to participate and payment of agricultural insurance for households, it was

assumed that household production scale and support policies (such as credit agricultural extension and use) have a great influence on participation decisions and payment for rice insurance of rural households in Tien Du district, Bac Ninh province

According to Nguyen Duy Chinh and his colleagues (2016) used Logit regression

to determine factors affecting farmers decision to participate in rice insurance in Can Duoc district, Long An province The household that are interested in premium rates, and the dependence on rice, increase their participation in insurance Contrary to factors such

as the size of cultivation area, rice productivity and rice production experience, are negatively correlated with the willingness to participate in agriculture insurance on rice Other household characteristics such as age of household head, gender, did not affect the decision to participate in insurance

According to Dang Kim Khoi et al (2016) the problems of information communication, product risk coverage, product diversity, procedures for compensation assessment and premium assistance by the Government impact the level of participation

of rice farmers in Dong Thap province and livestock households in Vinh Phuc

In summary, domestic studies have pointed out factors such as farm households working locally, accessing insurance information, farm size, education levels, credit policies, and agricultural extension affecting the decision to participate in agricultural insurance and the willingness to pay agricultural insurance for farmers

CHAPTER 3: METHODOLOGY 3.1 Research process

The study is conducted according to the following process:

Figure 3.1 Diagram of research process

Theoretical basis and research model

Consult key informants; Design questionnaires

Identify problems, objectives, scope and objects of research

Test samples (n = 10) to adjust the questionnaire

According to steps of research process, the student studied the theoretical frameworks and model of agricultural insurance, fisheries insurance, and found domestic and foreign studies in relation to the topic of thesis The student builds an analytical framework In addition, the student relates the framework to the production situation in Hai Lang commune, Tien Yen district, Quang Ninh province The student also interviews key informants, official of local Departments and provincial Departments and then deigned the questionnaires Tien Yen is a coastal mountainous district located in the center of the eastern region of Quang Ninh province, with geographical

North and the North borders Dinh Lap district of Lang Son province and Binh Lieu district of Quang Ninh province, the South-west borders Ba Che district and Cam Pha city, and the South of the Tonkin Gulf, the North-West borders the district Tien Yen district is located in the middle of the Mong Cai city and Ha Long city, located at the intersection of the national highways The geographical position is particularly important

in the socio-economic development of Quang Ninh province (Report of Aquaculture Planning Tien Yen District)

Questionnaire

After consulting experts and conducting focus group decisions (FGD), the student designed a questionnaire The questionnaire has seven major parts: the first section is general farmer information; the second section is about household information; the third section is about household income in 2018; the fourth section is about white leg shrimp production activities in the household in 2018; the fifth section is about perils in white leg shrimp farming; the sixth section is about awareness on agricultural insurance for shrimp; and the last section is about willingness to pay agricultural insurance for white leg shrimp

After completing the questionnaire, there was a test of the questionnaire on ten farmers According to the output of this test, the questionnaire was modified and corrected

Sample

The survey sample size was selected in accordance with the formula of Tabachnick and Fidell (1996):

n = 50 + 8*m

Where;

n is the size of sample

m is the number of independent variables

The selected study area depends on consultations with the Department of

Agriculture and Rural Development local representatives Purposive sampling technique

was used in the choice of the district and communes The district chosen for the study

was based on the levels of shrimp production and the number of shrimp farmers in the

province

3.2 Research area

Tien Yen District, Quang Ninh Province

Figure 3.2 Tien Yen district and Quang Ninh province

The accessibility of the farmers is a major consideration The student selected Hai

Lang commune, because the commune has an aquaculture zone (especial for white leg

shrimp) In addition, Hai Lang commune is one of the biggest intensive zones for white

leg shrimp farming in Quang Ninh province The student will obtain a list of active white

leg shrimp farmers from local representatives of the Division of Agriculture and Rural

Development in Hai Lang commune By the aquaculture training class, the student will

Study site: Tien Yen district

choose 120 shrimp producing farmers in order to interview The sample size is constraint

on the student time availability and resources to conduct the survey Accessibility to the farmers may be a constraining factor in the choice of farmers

The sample size is:

Semi-intensive

Improved extensive

district The land area of Hai Lang commune is divided into two main areas: coastal land and hilly land: Coastal land includes saline soil, sand dunes and sandy beaches; Hilly land includes such types as pale yellow feral on mountains, and typical tropical moist agricultural and forestry lands (Report of Aquaculture Planning Tien Yen District)

accounting for 10.9% of the district's land area The structure of land use in Hai Lang commune in 2016 is as follows:

Non-agricultural area: 199ha, the rest is another area

Area of water surface and intertidal area is about 2,000 ha located in the dyke and outside the tidal flat This is a great potential and favorable condition for the local socio-economic development (Report of Aquaculture Planning Tien Yen District)

3.2.2 Weather and Climate

The weather and climate of Hai Lang commune are characterized by a tropical monsoon climate, with four seasons of the year Some climate weather characteristics of Hai Lang commune are as follows:

Temperature:

Yen District)

Rain:

The average annual rainfall is about 2,385mm, the highest year is 3,667,4mm, the lowest year is 1,103.8mm The number of rainy days in the year averages 163 days; the most rain is between May and October The rain is less from November to April, the rainfall is unevenly distributed throughout the year, the rains often come from March to September accounting for 80-85% of the total annual rainfall, the highest rainfall in July

is about 452mm, the smallest rainfall is in December and January about 30mm (Report of

Aquaculture Planning Tien Yen District)

Air humidity:

Although there is heavy rainfall, the average annual evaporation is low (26%), so the annual average air humidity is quite high at 84%, the highest air humidity in March and April reaches the value 87 - 88%, the lowest is in October and November and about

76% (Report of Aquaculture Planning Tien Yen District)

Wind, storm, flood:

Wind: There are two main types of wind blowing in the direction of North - Northeast and South - Southeast Northeast wind usually operates from October to April next year, average wind speed of 2.0– 4.0 m/s, especially when the North East wind comes back; it is often cold, windy and dry (Report of Aquaculture Planning Tien Yen

District)

Storm: It is a coastal commune so it is often affected directly by storms The storms often appear in June to October, the frequency ranges from two to four storms and tropical depressions occur every year with wind strength of eight to 10 level, causing heavy rains lasting from three to four days causing damage to agricultural - forestry -

fishery production and people's life (Report of Aquaculture Planning Tien Yen District)

Flood: flood often occurs from April to May during the first rainy season, but flows through the dry season causing huge losses in the basin The flood peaks are often small but the flood amplitude in the rivers usually reaches about 1m In recent years, due

to climate change, there have been very big floods that cause damage to infrastructure and community assets (Report of Aquaculture Planning Tien Yen District)

Climate change and sea level rise:

Climate change and sea level rise will have negative impacts on socio-economic development of Tien Yen district in general and development of aquaculture in Hai Lang commune in particular According to Vietnam‟s climate change scenario and sea level rise under the impact of global climate change, by 2030 the average temperature in

1980 - 1999 By 2030, the average annual rainfall may increase by 2.0% compared to the average of 1989-1999, and the rainfall is increasingly concentrated in the rainy season and less in the dry season These changes make the risk of aquaculture higher in the

future (Report of Aquaculture Planning Tien Yen District)

Hydrology:

The tide of Hai Lang commune, Tien Yen district is a diurnal tide, one up and one down per day The number of days of high and low tide is about 25 with an average frequency of 85-95% per month The area of Hai Lang commune has the largest tidal range in the country, about 3.5 - 4.0m The tide is strongest in January, June, July and December During these months, the actual water level reaches more than 4m (compared to "0" depth) The lowest tide is in March, April, August and September, the water level is 0.3 m The number of days in a year with a high water level of 3.5 m is

101 days The tidal characteristics in Tien Yen lead to some advantages, due to the high tidal amplitude and good water exchange level, which is very convenient for water intake and discharge of aquaculture ponds (Report of Aquaculture Planning Tien Yen District)

Salinity:

Coastal water is a mixture of sea water and fresh water from the high mountains in the west and north west Ba Che, Tien Yen and Cai Mam rivers flow into the bay The salinity of the bay water during this season ranges from 26-300/00 In the rainy season, from May to August with rainfall and added rainfall from the high mountains it decreases

3.2.3 Socio-economic characteristics

3.2.3.1 Economic development situation

Hai Lang is one of 12 communes and towns of Tien Yen District In recent years the situation of economic development of the commune has been growing, with relatively high economic growth rate over the years In 2016, the total socio-economic production value of the commune is 126.975 billion VND In particular, the total production value of agriculture, forestry and fishery still accounts for 101.975 billion VND, accounting for over 80% of the total industry - handicrafts accounts for 25 billion VND or 19.7% (Report of Aquaculture Planning Tien Yen District)

Table 3.1 Total socio-economic production value in 2018 Hai Lang commune

TT Industry Name

2018 production value (billions dong)

Proportion (%)

Agricultural production: According to Economic Report in 2018 of Hai Lang

commune, agriculture is still the main contributor to the sector dominated by food crops production In 2018, the commune's rice land area was 443,0 ha, the average yield was

48 to 50 quintals/ha, the total annual food production (seeded plants) reached 2,405.6 tons The value of agricultural production for the whole year is VND 32 billion

Fisheries: Hai Lang is one of the most developed communes in Tien Yen district

thanks to its advantage of large water surface area as well as other affording conditions Compared to Tien Yen District from 2010 - 2016, the area of aquaculture of the commune has continuously increased and with a faster growth rate than the whole district In 2016, fishery production of the whole district was 7,170.5 tons Water surface area for aquaculture was 1,052.11ha In 2018 the total catch and aquaculture production reached 516 tons, of which shrimp production was 220 tons, the average yield of extensive shrimp was 150kg/ha and that of industrial shrimp farming was 15.000 kg/ha In recent years, extensive shrimp production has been on a decline, but improve extensive and intensive have been on a rise resulting in environmental pollution, diseases proliferation, destruction of irrigational systems and deterioration of the actual farming conditions in the area

3.2.3.2 Population and labor

According to the 2018 socio-economic report of the Hai Lang Commune People's Committee The population of the commune as of the end of 2018 was 1,403 households with 5,729 inhabitants, a population density of 69 people per km2, much lower than the average level of the district as well as of Quang Ninh province of 190 people/km2 The population is unevenly distributed with about seven ethnic groups living together (Kinh, San Diu, Dao, Tay, San Chi, Muong, Hoa) of which the majority is Kinh (37.4%), the rest are other ethnic groups (accounting for 63.6%) The average increase in population

of Hai Lang commune in eight years (2010 to 2018) is 2.27%, equivalent to an increase

of 721 people Number of employees in the age group: 2,450 employees

3.2.4 Current status of application of science and technology into aquaculture

The application of science and technology in aquaculture in Hai Lang commune, Tien Yen district in the past period is of interest to ministries, departments, branches and local authorities Science and technology activities have played an important role in the development of aquaculture in the commune, significantly contributing to the development of the fisheries sector in the past decade In commercial

farming: Advanced farming technologies in many forms of intensive, semi-intensive, and technology of raising economic objects such as white leg shrimp are studied and applied

in many localities in the country The district has contributed to improving productivity and production value However, applying scientific and technical progress and high technology in aquaculture is limited Aquaculture practice in Hai Lang commune is mainly in the form of extensive and improved extensive white leg shrimp The semi-intensive and intensive farming models have just started to develop in recent years By 2018, the number of farming households in industrial form has increased to 350 households with an area of 60ha The statistics on the number of households and the area

of shrimp farming and industrial shrimp farming during the period of 2015-2018 are as follows:

Table 3.2 Summary of industrial shrimp farmers in Hai Lang commune

No Category Year

Shrimp culture: The main species of shrimp produced in the area are the black

tiger the white leg shrimp, and Japan shrimp, with an average of two crops per year, spring-summer season which lasts from March to June and the summer-autumn crop from July to September For extensive and improved extensive farming in the commune area, the main focus is from black tiger shrimp stocked with wit fish and harvested two to three times per year depending on the amount of shrimp in the pond The yield of shrimp

is about 200 and 300kg/ha per crop For the industrial intensive farming model, the main

production of white leg shrimp using the intensive system has been adopted and growing

at a fast rate due to short time of raising, and the ability to grow and develop quickly with high productivity

3.2.5 Labor and labor qualification in aquaculture

The survey results show the number and quality of household labor and aquaculture companies operating in the farming area of Hai Lang Commune The average number of employees is about one to two persons/household Quality of labor in aquaculture in Hai Lang Commune is still low with most of them untrained: the average number of untrained workers accounts for 90.0% The trained workers are certified The heads of households engaged in shrimp aquaculture depend mainly on experience, and hence the adoption of technologies based on the application of science and technology is limited

3.2.6 Status of epidemics in saline and brackish aquaculture

Disease in aquaculture is complicated The disease epidemics occur at all stages of development from breeding to grow out The diseases rein production systems, from improved extensive farming, intercropping with fish or rice of industrial farming Environment and epidemics in aquaculture (shrimp, crab, fish .) increasingly affect the natural environment Waste in aquaculture is not treated before being discharged One of the reasons for epidemics in aquaculture is due to unplanned development, intensive farming, farming season, raising stocking density, using poor quality industrial feed… , abuse of chemicals and preparations for environmental treatment, seed quality is not guaranteed has led to many environmental problems and epidemics (Aquaculture Report of Department of Agriculture and Rural Development Quang Ninh)

Brackish shrimp farming often suffers from dangerous viruses such as: whistle disease caused by MBV (MonodonBaculovirus); White spot syndrome (White spot syndrome virus - WSSV); Hepatopancreatic Parvovirus (HPV) disease; Subcutaneous viral infections and necrosis (Infectious hypodermal and haematoietic necrosis virus - IHHNV) Diseases caused by Vibrio bacteria such as phosphorescent disease, redness along the body, occium erosion, early death disease (EMS)

In recent years, in the area of Hai Lang Commune, a large number of epidemics have occurred in the aquaculture households, causing much damage to farmers Disease occurs at the time of the season (end of April and early May to June) in hot weather during heavy rains Some diseases have appeared and caused damage to farm crop, many