Mangrove Forests and Aquaculture in the Mekong River Delta

Land Use Policy 73 (2018) 20–28

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Land Use Policy

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Mangrove forests and aquaculture in the Mekong river delta T ⁎ Thuy Dang Truonga, , Luat Huu Dob a School of Economics, University of Economics Ho Chi Minh City, 1A Hoang Dieu St., Phu Nhuan Dist., Ho Chi Minh City, Vietnam b Vietnam-Netherlands Programme for M.A. in Development Economics, University of Economics Ho Chi Minh City, 1A Hoang Dieu St., Phu Nhuan Dist., Ho Chi Minh City, Vietnam

ARTICLE INFO ABSTRACT

Keywords: The mangrove area in Viet Nam is dramatically decreasing in the last decades. Since 1995, mangrove forests in Mangrove south Viet Nam are allotted and contracted to households for protection, management and logging. Under this Shrimp farming policy, households are allowed to convert 20–40% of the allotted forests into other uses, mainly shrimp farming. Productivity Most households develop mixed shrimp-mangrove farming systems, in which shrimp ponds are mixed with Profitability mangrove forest. With the poor enforcement of the forest assignment policy, however, the mangrove forest is over-extracted as farmers are converting more than the allowed level for larger water surface areas for shrimp farming and higher returns. In this study, we examine the impacts of mangrove coverage of mixed mangrove- shrimp ponds using the production and profit functions. Our analyses show that mangrove density has no impacts on shrimp farming. However, mangrove coverage affects productivity and profit of shrimp farming. The optimal mangrove coverage for shrimp farming is found to be approximately 60%. This implies that maintaining the level of mangrove coverage of 60% does not only to comply with the policy, but also bring about the highest level of output and profit for shrimp farmers.

1. Introduction using various methods (Salem and Mercer, 2012). Mangrove forests also provide an important source of livelihood. As Mangroves are highly productive in maintaining a wide variety of reviewed by Barbier (1994, 2007), mangrove forests provide not only flora and fauna species and supporting the coastal food chains. With the indirect uses, including air pollution reduction, nutrient cycling, and emergence of climate change problems, the ecosystem services of watershed protection, but also direct uses including timber products, mangrove become more important. Mangroves play a crucial role in food, and recreation, contributing a significant value to households’ protecting coastal areas, and adapting to harsh environmental condi- livelihoods in surrounding communities. However, mangrove forests tions. Mangroves serve as natural barriers to storm, shoreline erosion are known to be over-extracted by local users (Giri et al., 2011). and sea level rise. Mangrove forests, with their physical structure and In Vietnam, the area of mangrove forests has declined dramatically characteristics, lessen the strength of wind and the height of swell during the last century. In the early 1940s, Vietnam had more than waves, bind and build soils, and as a result, reduce many threats as- 400,000 ha (ha) of mangrove forest (Vietnam Environment Protection sociated with storms or hurricanes (McIvor et al., 2012). Mangroves’ Agency [VEPA] 2005). In 2014, the mangrove forest area was reduced wide root and dense leaves reduce the effects of tidal and tsunami surge to 85,000 ha, with much lower biodiversity and biomass, and a very (Hiraishi and Harada, 2003). Mangroves also play an important role in small percentage of that is natural forest (VNFOREST, 2015; Powell carbon sequestration (Kristensen et al., 2008). Because of its capability et al., 2011; Luu, 2000). Of the mangrove forest area in the Mekong to protect shorelines and riverbanks, mangrove forests are considered a River Delta (MRD), 161,277 ha had been converted for shrimp farming good mitigation for sea level rise and provide an environment friendly as well as other uses from 1953 to 1995 (Minh et al., 2001). and aesthetically pleasing protection (Black and Mead, 2001; Gómez- There are three types of mangrove forests in Vietnam: protection, Pina et al., 2002; Khalil, 2008; Linares, 2012). In addition, mangroves special use, and production. Except for a few protected mangrove for- have important services in maintaining biodiversity and purifying ests, others are managed by individual households. Since 1995, man- water (Alongi, 2008; Sathirathai and Barbier, 2001). A large number of grove forests in South Vietnam have been allotted and contracted to studies have demonstrated the role of mangrove forests in reducing households for protection, management, and logging. The households disaster risk and valued the ecological functions of mangrove forests are paid an amount of money for managing the forests. In addition,

⁎ Corresponding author. E-mail addresses: [email protected] (T.D. Truong), [email protected] (L.H. Do). https://doi.org/10.1016/j.landusepol.2018.01.029 Received 11 July 2017; Received in revised form 15 October 2017; Accepted 16 January 2018 Available online 21 February 2018 0264-8377/ © 2018 Elsevier Ltd. All rights reserved. T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28 logging is allowed, but subject to the approval of local authorities, and and many benefits from mangrove. First, mangrove forests play a role in households can get part of the revenue from logging. Under this policy, reducing the turbulences of climate conditions which can damage households can also convert part (20–40%) of the allotted forests for aquaculture production in coastal areas. Second, mangrove forests help agriculture, aquaculture, and housing. The main activity on land con- decreasing the levels of pollutants, mitigate variation in salinity and verted from forests is shrimp farming (Thu and Populus, 2007). Parti- turbidity (Larsson et al., 1994; Kautsky et al., 1997), reducing the flow cularly, nearly 200,000 ha of mangrove areas have been lost over the of tidal water, and facilitating the deposition of sediments which may past decades for shrimp farming (VEPA, 2005). filter out and treat toxins. Finally, mangrove forests are also nursery Although cutting mangrove forest beyond the allowed proportion is grounds and habitat for many species that provide nutrients as feed illegal, massive deforestation is ongoing due to poor enforcement. The inputs to shrimp farming (Nagelkerken et al., 2008; Hong and San, lack of resources and expertise of the government have resulted in in- 1993). These services are important for mangrove-aquaculture farming effective mangrove management, leading to the poor enforcement of system. regulations in mangrove management (Hawkins et al., 2010; VEPA, The substantiality of shrimp farming is supported by the ecological 2005). system as the source of feeds and clean water. Larsson et al. (1994) The above-mention policy implies that mangrove coverage in mixed found that one ha of shrimp farm in Columbia requires 4.2 ha of mangrove-shrimp farming systems should be 60–80%. However, pre- mangroves to purify water and provide feed. Expansion of the water vious studies found that 60–80% mangrove coverage is not the profit surface for shrimp leads to the deterioration of the water filtering ca- maximizing level (Tuan et al., 1992 cited by Binh et al., 1997; Binh pacity of surrounding mangroves, which subsequently self-pollutes the et al. 1997; Minh et al., 2001; Bosma et al., 2014; Johnston et al., farm area (Rönnbäck, 1999). In addition, the role of mangrove forests 2000). The average shrimp yield per hectare in Ben Tre province was in sustaining water quality is even more important in maintaining the 204 kg (kg) for ponds with 10% mangrove coverage and 324 kg for environment for species that provide natural feed for shrimp (Menzel, ponds with 40% coverage (Tuan et al., 1992 cited by Binh et al., 1997). 1991; Beveridge et al., 1997). Meanwhile, Binh et al. (1997) analyzed data from integrated shrimp The natural food input production in mangrove forests, perhaps, is ponds in Ngoc Hien District and found that ponds with mangrove the most crucial role that mangroves play in aquaculture. The man- coverage of 30–50% have the highest return. In a recent review, Bosma grove food web is mainly supported by the transformation of mangrove et al. (2014) also confirms the optimal mangrove coverage of 30–50%. leaf litter into detritus and the presence of plankton, micro- Nevertheless, Tran (2005, cited by Bosma et al., 2014) found that farms phytobenthos, and epiphytic algae (Nagelkerken et al., 2008). Larsson with coverage less than 30% yield higher revenue in Ngoc Hien and et al. (1994) found that mangrove coverage of 25% provides about 70% Nam Can districts, Ca Mau province. These levels of mangrove coverage of feed requirement. In addition, Gatune et al. (2012) proposes that are lower than the current required level and applying them would mangrove leaf litter longevity could be a deterministic component of result in the massive conversion of the mangrove forests allotted to the nutrient supply of the ecological system. households, leading to the loss of many ecosystem services to the Mangrove forests are also life-support systems in sustaining nu- community. merous marine species (Rönnbäck, 1999). A majority of marine species The policy of mangrove forest assignment, the poor enforcement of reside in the mangrove system at a stage of their life cycles regulations related to mangrove management, and previous studies (Nagelkerken et al., 2008; Beck et al., 2001). Molluscs, especially oyster highlight the need for a proper examination of the impacts of mangrove and mussels, can use mangrove roots as living ground. coverage on shrimp farming. Although there are many studies on the Mangrove forests play a crucial role in the natural production of impacts of mangroves on shrimp farming in Vietnam, only a few of wild seeds or fry in aquaculture. Shrimp seeds can enter aquaculture them analyzed the issue from an economic perspective, i.e. estimating systems artificially or naturally via the intertidal zone (Rönnbäck, the production or profit function. In addition, these studies failed to 1999 ). Converting mangrove areas to intensive shrimp ponds reduce control important variables, which may result in biased estimates. Binh the nursery ground as well as shrimp recruitment. This not only reduces et al. (1997) analyzed the impacts of mangrove coverage, density and shrimp yield in the mixed mangrove-shrimp ponds, e.g., 100–150 kg/ age on integrated shrimp farms in Ngoc Hien district (Vietnam) using a ha/year in 2003 in comparison to 1300 kg/ha/year (Tran, 2005 cited simple linear production function without controlling important inputs. by Bosma et al., 2014), but also to decrease the mangrove mollusk yield Similarly, Johnston et al. (2000) did not control for important inputs. (Menzel, 1991). Apart from the diminishing productivity, farmers also Minh et al. (2001) focused on factors related to natural shrimp pro- bear a significant larvae cost due to the loss of natural recruitment of duction (e.g., water depth, water area, harvesting technique, and ex- production stock. changed water level) on production, but did not control for mangrove- Although mangroves purify water, they can also cause pollution. If related variables as well as important inputs. Omitting inputs of the the drainage system in shrimp ponds with mangrove cover is in- shrimp production process may results in biased estimates of the pro- sufficient, ponds could become shallow because of sediment accumu- duction function. lation, leading to temperature fluctuation. Moreover, in narrow and In this study, we investigate the effects of mangrove coverage using long ponds, water exchange may be limited resulting in wastes and the production and profit functions with data from a farm survey of the litter accumulation in the far end of the ponds (Tran, 2005 cited by coastal areas in Vietnam’s MRD in 2015. The rest of this paper is or- Bosma et al., 2014). Other studies also found adverse effects of man- ganized as follows. The next section discusses the role of mangroves in grove forests on aquaculture. Johnston et al. (2000) found that man- shrimp farming. We then provide the specification of the production grove leaf litter affect the survival and growth of shrimp. In addition, and profit functions applied for this study, the estimation strategy as different species of mangrove have different effects on aquatic organ- well as the study locations and data. Finally, we present and discuss the isms in ponds (Basak et al., 1998; Hai and Yakupitiyage, 2005). Dis- results. solved oxygen is consumed significantly in the process of leaf litter decomposition, which result in reduced water and sediment quality, 2. Mangrove ecosystem services and shrimp farming and reduced body weight of shrimp (Fitzgerald, 2000; Sukardjo, 2000). In this way, there is a decrease in the natural food production in aquatic A mangrove-aquaculture farming system consists of mangrove for- ponds (Lee, 1999). Compounds from mangrove trees (i.e., tannic acid in ests and water surface. Households assigned with mangrove forest areas Rhizophora leaves), also have negative effects on the survival and clear some parts of the forests into water surface for aquaculture. growth of aquatic organisms (Inoue et al., 1999 cited by Primavera, Depending on the water level, shrimp and other aquatic species can 2000). Besides, aquatic organisms are also damaged by other sub- move from the water into the parts of forests and thus enjoy the shading stances from mangroves trees such as root, bark, and stems (Madhu and

21 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28

Madhu, 1997 cited by Hai and Yakupitiyage, 2005). levels. Second, there may be endogeneity due to the correlation be- The mangroves’ roots can provide natural shelters and food input tween observed inputs and unobserved factors (Olley and Pakes, 1996; for marine species and maintain the environment quality, and they are Levinsohn and Petrin, 2003). In addition, shrimp farming has fixed a habitat for animals above the water (e.g. snakes and birds) factors that prevent farmers from fully maximizing profit. As a result, (Nagelkerken et al., 2008). However, this service can be a threat to post duality may not fully apply. larvae or juvenile shrimp because of the existence of predators Estimating a long-run profit function that satisfies all of the prop- (Primavera, 2000). erties is quite complicated (Fox and Kivanda, 1994). The short-run Nevertheless, the decomposition rate of leaf litter varies by man- profit function, however, does not necessarily satisfy those properties. grove species, and the leaves can bring both benefits and disadvantages In addition, it does not have problems facing the production function. to the survival and growth of shrimp. To be specific, in ponds without Therefore, we estimate the short-run profit function as aeration, aquatic organisms may die within two days if the loading rate πagpwFMi = ·(,ii , , i) (4) of leaves is more than 0.5 g/liter (Hai and Yakupitiyage, 2005). Besides, i leaves from mangrove trees release tannic acid, which may be toxic to with πi as profit divided by farm area, pi as output, wi as input prices, marine species in ponds. and Fi as fixed input. The widely-adopted Cobb-Douglas and Translog As a result, mangroves may have mixed effects on aquaculture, af- functional forms are not applicable here because of negative profit. fecting the output quantity as well as the use of inputs by farmers. Therefore, we apply the linear profit functions Therefore, the characteristics of magrove of ponds may affect aquacultural productivity as well as profitability. πβi =+0j,∑∑ βpji + γFf fi,, + ∑ϑnni A+ j f n fi 3. Mangrove as an input in the production and pro t functions 2 3 + αM12i ++++ αMii αM3 α45 Eiiii αME + ε (5) In this study, we apply production and profit functions to examine and the quadratic profit function: the impacts of mangrove on shrimp production. πβi =+0j,∑∑∑∑ βpji + βppjk j ,, i k i + γFf fi,, + ∑ϑnni A 3.1. The production function j jk f n

+ αM++++ αM2 αM3 α E αME + ε (6) There are three types of shrimp farming in the study area: intensive, 12i ii3 45iiii extensive, and semi-intensive. We focused on extensive and semi-in- In all functions, district-speciﬁceﬀects are controlled. tensive farms, which have water surface for shrimp production mixed with mangrove. We estimate the production functions 3.3. Possible endogeneity and estimation strategy

YagXAMiiii= ·( , , ) (1) The problem of endogneity may exist in our models, especially in with Yi as output measured by the harvested shrimp in the last year by the production function where coverage and output could be de- household i divided by farm area, Xi as a vector of inputs, Ai as a set of termined simultaneously. As a result, the variables of coverage, its variables reflecting management ability, and M as a set of mangrove i square and cubic form, and its zero-coverage dummy Di may be en- attributes, including mangrove coverage and density. dogenous. We apply instrumental variable regression with two instru- For the production function, we use Cobb-Douglas for its parsimony ments: the average mangrove coverage of surveyed farms within fl and translog for its exibility. We introduce Ai in linear form. However, 1000 m radius, and the ratio of surveyed farms within 1000 m radius mangrove coverage is introduced into the equation in cubic form. that has non-zero mangrove coverage. If there is no farm surveyed in Because there are a considerable number of ponds having zero level of the 1000 m radius, the district average levels are used instead. These fi – inputs, they are speci ed as ln{max (Xij,1 Dij)}. We also added a set of two instruments reflect the common practice of the community sur- dummy variables Di for these cases of zero inputs to avoid bias (Battese, rounding the shrimp farm toward mangrove, which may affect the fi 1997). The Cobb-Douglas production function for farm i is speci ed as mangrove forest conversion behavior of farm managers. To make sure that they do not affect output, we included them in the production lnlYβ=+ βn( X) + i 0 ∑ j ji, function and found they are not statistically significant.1 Similar j strategy is applied to the profit function. In both functions, endogeneity

2 3 was not found under Durbin and Wu-Hausman tests. + ∑∑γDm mi,,12+++++++ϑnni A αM i αMii αM3 αE45iiii αME ε m n (2) 4. Study area and data source Here M is mangrove coverage and E is mangrove density, measured by i i The Mekong River Delta (MRD), which is in the Southwestern re- the number of mangrove trees per 100 square meters (m2). The general gion of Vietnam, is in downstream of the Mekong River. It is approxi- Translog production function for the ith farm is defined as mately 40,000 square kilometers (km2) covering 14 provinces and ci- ties. Its population of 18 million accounts for 20.5% of the country lnYβi =+0 ∑∑∑ βj ln( Xji,,, ) + βjk ln( Xji )ln( X ki )+ j jk population. MRD is the largest farming and aquacultural region in Vietnam, accounting for 70% of the total farming area. This area pro- 2 3 vides over 52% of annual aquaculture output. In 2014, the aquaculture + ∑∑γDm mi,,12+++++++ϑnni A αM i αMii αM3 αE45iiii αME ε m n in the area was around 800,000 ha, with total output of over 2.4 million (3) tons. Aquafarming in Vietnam are mainly of three types: extensive, intensive and semi-intensive. The intensive system is based mainly on 3.2. The profit function formulated feed and automatic system of supplying and draining water. Although intensive cultivation brings high profit, the cost is quite high Under duality, the production function reflects the profit function. However, the estimation of the production function may encounter several problems. First, there may be multicollinearity among input 1 Results of these regressions are not reported, but available upon request.

22 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28 and waste water which is not treated well will lead to water pollution. visited the ponds measuring the mangrove area to validate the data The semi-intensive culture is based on a mixture of formulated and collected. For mangrove density, our enumerators pick some of the natural feed; but input level depends on the tide. Extensive culture is mangrove area in ponds and count the trees. characterized by a large farming area and natural feed. The semi-intensive and extensive systems with mangrove are often known as mixed 5. Results and discussions mangrove-aquaculture farming due to its unique ecological environment and high biological efficiency. Most farm managers in the sample were male (95%) and aged 50 A typical season of mangrove-aquaculture farming is about 10 years old on average (Table 2). This is consistent with the context of the months, including ponds preparation, water cleaning, food manage- Mekong River Delta. The number of schooling years for the decision ment and harvesting. The cycle starts with dredging the mud bank at makers in aquaculture activities was 6 years on average with 16 persons the bottom of the pond. Water are then allowed to flow in and out finishing high school (schooling years of 12). several times to clean the water. During this process, lime and tuba root The harvests are mainly shrimp, but also include crab, fishes, mol- (for killing fishes and other predators) are also used. Shrimp larvae are lusk and other aquatic species. As outputs are not homogenous, revenue usually acquired from the wild, however farmers can supplement per square meter is used as a proxy of output variable. Average revenue reared larvae with 2–4 post larvae/m2. At times, feeding is also pro- is 8.6 thousand VND/m2 on average, ranging from 0 to 144. This results vided, together with organic fertilizers in order to raise natural feed. in 118 million VND of average revenue per farm per year. There were 9 Shrimp and other species such as crab, fishes and mollusk, are har- farms that did not harvest because of shrimp diseases. The average area vested by nets or trap with the help of tidal cycles during the cultivation of shrimp farm, including mangrove forests and surface water area, is season. approximately 27,000 m2. The average mangrove coverage is 27% and The total mangrove area in coastal area and the river mouth is the average density is 71 trees per 100 square meters. Although the approximately 100,000 ha, distributed in Ca Mau (58,285 ha), Bac Lieu allowed ratio of converting mangrove forest is 20–40%, the observed (4,142 ha), Soc Trang (2,943 ha), Tra Vinh (8,582 ha), Ben Tre coverage implies that the average actual level of conversion is more (7,153 ha), Kien Giang (322 ha), and Long An (400 ha) provinces. than 70%, indicating a very poor enforcement of the policy. According to Vu (2004), the Mekong Delta has 98 species of mangrove Apart from the characteristics of household heads and the properties (e.g. Rhizophora apiculata, Kandelia obovata, Sonneratia caseolaris, and of mangrove forests in shrimp ponds, the production function is spe- Avicennia alba), with R. apiculata more abundant than other species. cified with inputs: chemicals (mainly tuba roots), lime, larvae cost, feed Recently, mangrove forests have significantly been reduced because of cost, family and hired labor, and farm area. In pond preparation, che- conversion to agriculture and aquaculture, especially shrimp farming. micals and lime, which are used in intensive shrimp farming, are not From 1980–1995, about 72,825 ha of mangrove area was converted at widely used in semi-intensive and extensive farms. The average quan- an annual rate of 4855 ha (approximately 5% per year). tity of chemicals and lime is quite low at about 200 kg each type, and 61 A survey of mangrove-aquaculture farms was conducted in 2015 in and 187 farms did not use chemicals and lime respectively. Similarly, the MRD to collect data for the estimation of Eqs. (2), (3), (5) and (6). the working hours of hired and family labor in extensive and semi- The survey was conducted in communes of six coastal provinces in the intensive shrimp ponds are 100 and 25 h, respectively. About 56% of south of Vietnam, including Ben Tre, Soc Trang, Tra Vinh, Kien Giang, farms did not hire labor in the production process while 19% did not Ca Mau, and Bac Lieu. From these six provinces, eight locations were use family labor. The average family and hired labor are low at 100 and selected. A total of 278 shrimp farms from the eight communes in the 26 man-hours, respectively. In addition, as mentioned above, most in- south of Vietnam were selected (Table 1). The distribution of aqua- puts in the production process are from natural environment, even seed culture farms as observed from the sample is shown in Fig. 1. Each farm input and feed inputs. Only 73 shrimp farms used feed inputs. The household was interviewed using a questionnaire with three parts, in- average feed cost is approximately 2.5 million VND per pond. cluding general information of respondent, perception about mangrove Nonetheless, owing to the limited natural shrimp larvae in recent years, of respondent, and aquaculture activities in 2014. most farmers had to use additional shrimp larvae. The average cost for The general information of shrimp farm households consists of de- shrimp larvae is 40 million VND per pond. mographic information (e.g., gender, age, education) of each member The short run profit function for aquaculture farms in this paper is of the households and the management ability of the decision maker in specified with input and output prices, including prices of chemical aquaculture activity (usually the head of the household). In analyzing inputs (combined chemicals and lime), larvae, hired labor, and output. shrimp production, data on the inputs used in aquaculture procedure Fixed inputs (farm area and family labor) are also included. Because of (e.g. seed, chemical, lime, fish feed, and labor days) were collected. The the heterogeneity of inputs and outputs, weighted average prices are outputs of each aquatic species are collected for each harvesting time in used. The average profit was approximately 61 million VND, with 46 a cultivation season. farms made a loss. For mangrove coverage and attributes, we used two proxies. One is Regarding output prices, there are many aquatic species such as the self-reported density of mangrove trees in the pond (trees/100 m2) crabs, catfish, blood clam, and shrimps. For parsimony, we use a single and the other is pond’s mangrove coverage (%). For mangrove coverage weighted average price for all aquatic products in this paper. The of ponds, we asked farmers for mangrove areas within the ponds, then average price is 183,000 VND/kg. Typically, the average prices of shrimp larvae and chemicals are 1000 VND/individual and 32 thousand VND/kg respectively. There are only 72 farms hiring labor. We replace Table 1 missing values of labor price with the average labor price in the village. Summary of the sample data. Similarly, we use average price of chemicals in the village for missing Provinces Districts Number of observations values.

Ben Tre Ba Tri 32 5.1. The production function Thanh Phu 22 Binh Dai 38 Tra Vinh Duyen Hai 39 Table 3 presents the OLS estimates of the Cobb-Douglas and translog Soc Trang Tran De 12 production functions and the IV regression for the translog function. In Bac Lieu Hoa Binh 56 all models, output per square meter is speciﬁed as dependent variable, Ca Mau Ngoc Hien 62 Kien Giang Kien Luong 17 and mangrove coverage is included in cubic polynomial form to test the inverted N-shaped relationship between mangroves and output. The

23 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28

Fig. 1. The distribution of the surveyed farms.

Table 2 Descriptive statistics of the variables.

Variable Obs. Mean Std. Dev. Minimum Maximum

Output Proﬁt, gross revenue minus total production cost per square meter (thousand VND/m2) 278 5.42 13.6 −23.75 140 Output, total value of output per square meter (thousand VND/m2) 278 8.62 18.99 0 144 Price of Inputs and Output Output price, weighted average of all aquatic products (thousand VND/kg) 269 183.11 69.81 6 530.77 Chemical price, weighted average of lime and chemicals price. (thousand VND/kg) 225 32.11 29.01 1.300 200 Larvae price (thousand VND/ind) 273 1.02 3.72 0.02 40 Labor price (thousand VND/hour) 72 24.739 9.762 12.5 50 Inputs Farm area, total farm area including surface water and mangrove area in farm (m2) 278 26,876.85 41,125.35 300 600,000 Family labor, (working h) of family members 278 100.24 219.94 0 1940 Hired labor (working h) 278 25.78 80.09 0 720 Chemicals (Kg) 278 199.77 2,847.4 0 47,500 Lime (Kg) 278 201.98 743.13 0 9000 Larvae cost (mil. VND) 278 39.88 301.4 0 5000 Feed cost (mil. VND) 278 2.49 11.44 0 140 The management ability Age (years) 278 50.464 11.508 23 83 Schooling years (years) 278 5.946 3.249 0 17 Mangroves Mangrove coverage (%) 278 27.37 27.90 0 100 Mangrove coverage of neighboring farms, the average mangrove coverage of shrimp ponds within 1000-m radius 273 26.939 20.160 0 75.899 (%) Mangrove existence (=1 if non-zero mangrove coverage) 278 0.629 0.484 0 1 Mangrove density (trees/100 m2) 276 71.156 133.329 0 900

24 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28

Table 3 Estimates of the Cobb-Douglas and translog production functions.

Dependent variable: output (thousand VND/m2) Cobb-Douglas Translog Translog-2SLS

Coefficient Robust Std. Err. Coefficient Robust Std. Err. Coefficient Robust Std. Err.

Constant 6.732*** 0.903 12.82** 4.989 22.37 17.43 Inputs Farm area (m2) −0.729*** 0.092 −2.188* 1.145 −4.686 4.268 Chemicals (Kg) −0.074 0.093 −0.543 0.762 −0.538 1.073 Lime (Kg) 0.011 0.095 1.205** 0.599 0.263 2.095 Larvae (mil. VND) 0.294*** 0.067 0.847 0.518 1.430 1.108 Feed (mil. VND) 0.065 0.065 −0.408 0.614 −0.133 0.967 Family labor (hours) 0.021 0.045 0.510 0.453 0.912 0.727 Hired labor (hours) 0.068 0.122 0.405 0.909 0.281 1.355 Farm area2 0.083 0.068 0.249 0.274 Farm area *Chemicals 0.081 0.067 0.014 0.116 Farm area *Lime 0.084*** 0.030 0.170 0.129 Farm area *Seed −0.049 0.065 −0.147 0.171 Farm area *Feed 0.005 0.077 −0.079 0.155 Farm area *Family −0.041 0.041 −0.081 0.066 labor Farm area *Hired labor −0.104* 0.056 −0.098 0.067 Chemicals2 −0.022 0.069 0.022 0.114 Chemicals*Lime −0.022 0.025 −0.030 0.032 Chemicals*Seed −0.085** 0.041 0.018 0.180 Chemicals*Feed 0.036 0.054 −0.010 0.096 Chemicals*Family labor 0.004 0.030 0.025 0.038 Chemicals*Hired labor 0.065 0.048 0.097 0.088 Lime 2 −0.139*** 0.051 −0.118 0.109 Lime*Seed −0.043* 0.024 −0.066 0.057 Lime*Feed 0.011 0.020 0.010 0.035 Lime*Family labor −0.023 0.017 −0.045 0.033 Lime*Hired family −0.010 0.014 −0.010 0.026 Seed 2 0.025 0.031 0.036 0.051 Seed*Feed 0.028 0.071 0.129 0.161 Seed*Family labor −0.035 0.027 −0.064 0.047 Seed*Hired labor 0.005 0.042 0.044 0.102 Feed 2 0.073 0.044 0.092 0.114 Feed*Family labor 0.033 0.060 0.119 0.151 Feed*Hired labor −0.039 0.050 −0.010 0.117 Family labor 2 0.001 0.030 0.010 0.038 Family labor*Hired labor 0.003 0.024 −0.001 0.036 Hired labor 2 0.058 0.084 0.038 0.163 Dummy variables (=1 if input quantity > 0) Chemicals 0.205 0.415 0.001 0.737 0.602 1.774 Lime 0.134 0.521 −5.241*** 1.808 −4.580 3.669 Feed 0.306* 0.161 0.196 0.189 −0.206 0.670 Family labor 0.528** 0.253 0.431 0.353 0.339 0.434 Hired labor −0.420 0.536 0.610 1.300 0.582 2.266 Mangrove variables Mangrove coverage (%) −0.060** 0.028 −0.066** 0.030 0.212 0.379 Mangrove coverage 2 0.002** 0.001 0.002*** 0.001 −0.00381 0.010 Mangrove coverage 3 −1.27e − 05** 5.23e − 06 −1.69e − 05*** 5.54e − 06 1.88e − 05 6.57e − 05 Mangrove density (trees) −0.001 0.001 −0.0003 0.001 0.007 0.015 Mangrove coverage*Mangrove density 1.51e − 05 1.41e − 05 1.37e − 05 1.35e − 05 −0.0001 0.0002 Mangrove existence (=1 if non-zero mangrove coverage) 0.620 0.405 0.686* 0.410 −4.374 7.157 The management ability Age (years) −0.005 0.005 −0.005 0.006 −0.003 0.007 Schooling years (years) 0.059*** 0.018 0.047** 0.018 0.077 0.064 District Yes Yes Yes LR-test 0.0017 Durbin test 0.8698 Wu-Hausman test 0.9205 Obs. 263 263 263 R-squared 0.540 0.626 0.313

Note: ***, **, and * refer to statistical significance at 1%, 5%, and 10% levels respectively. District-specificeffects are included to control for heterogeneity, but not reported in this table. test for the presence of mangrove effects on aquaculture production are statistically significant, while coefficients of other inputs are insignif- shown Table 5. The test results show that mangrove coverage is found icant. Negative sign of farm area indicates that larger farms have lower to have an impact on output, while density does not. Test result also productivity, while positive sign of larvae implies that supplementary indicates that translog functional form appears to be more appropriate. larvae would improve shrimp productivity. In the translog function, As mentioned, the null hypothesis that mangrove-related variables are several inputs including farm area, larvae, and lime are found to have exogenous is not rejected under Durbin and Wu-Hausman tests. The significant impacts on farm productivity under the F-test for joint sig- following discussions are on the Cobb-Douglas and translog models. nificance of coefficients of inputs, their square terms and interactions In the Cobb-Douglas model, the farm area and larvae variables are with other inputs. Other inputs, including feed, chemicals, hired and

25 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28

Fig. 2. Mangrove and farm productivity from the translog production function.

Table 4 Parameter estimates for Linear and Quadratic proﬁt functions.

Dependent variable: proﬁt (thousand VND/m2) Linear Quadratic 2SLS

Coefficient Robust Std. Err Coefficient Robust Std. Err Coefficient Robust Std. Err

Constant 13.85** 6.526 40.51*** 12.20 31.14** 12.66 Price inputs Output price (thousand VND/kg) −0.037*** 0.013 −0.160*** 0.042 −0.128*** 0.046 Chemical price (thousand VND/kg) −0.026 0.018 −0.197*** 0.051 −0.208** 0.089 Larvae price (thousand VND/ind) 0.525** 0.235 0.469 0.970 0.274 1.029 Hired labor price (thousand VND/hours) 0.098 0.171 −0.453 0.599 −0.357 0.687 [Output price]2 0.0003*** 9.09e − 05 0.0002** 0.0001 [Chemical price]2 0.001*** 0.0002 0.001*** 0.0004 [Larvae price]2 0.002 0.024 0.007 0.025 [Labor price]2 0.009 0.010 0.009 0.010 Fixed inputs Family labor (hours) 0.005 0.004 0.004 0.003 0.002 0.007 Farm area (m2) −3.65e − 05* 2.06e − 05 -4.74e − 05*** 1.57e − 05 −3.62e − 05 2.57e − 05 Management ability Age (years) −0.047 0.041 −0.079** 0.038 −0.018 0.064 Schooling years (years) 0.257* 0.148 0.134 0.150 0.365* 0.222 Mangrove variables Mangrove coverage (%) −0.341 0.209 −0.424** 0.201 1.784 2.296 [Mangrove ratio]2 0.011** 0.005 0.013** 0.005 −0.043 0.044 [Mangrove ratio]3 −9.10e − 05** 3.91e − 05 −0.0001*** 3.75e − 05 0.0003 0.0003 Mangrove existence (=1 if mangrove area in the farm > 0) −4.320 3.046 −2.758 2.889 −31.85 31.52 Mangrove density (trees) −0.0012 0.007 0.002 0.006 0.046 0.047 [Mangrove ratio*Mangrove density] 0.0001 0.0001 0.0001 9.70e − 05 −0.001 0.001 District Yes Yes Yes LR-test 0.0003 Durbin test 0.5606 Wu-Hausman test 0.6218 Obs. 264 264 264 R-squared 0.365 0.438 0.236

Note: ***, **, and * refer to statistical significance at 1%, 5%, and 10% levels respectively. District-specificeffects are included to control for heterogeneity, but not reported in this table. home labor do not affect output. and third power terms, and a positive sign on the square term. Fig. 2 About variables reflecting the management ability, age does not illustrates this relationship with the predicted productivity from the affect farm productivity, while schooling years does. In both functional translog production function. From both models, it is found that a re- forms, the manager’s schooling years has a positive coefficient, in- duction of mangrove coverage from 100 to 80% will result in a con- dicating that a higher education level improves the productivity of siderable increase in productivity. Further cutting of mangrove forest, shrimp farming. This result is in line with empirical studies in agro- particularly reducing the coverage from 80 to 60%, will result in a nomics (see, for example, Hurd, 1994). smaller increase in productivity. At mangrove coverage levels lower In both models, coefficients of mangrove forest density and its in- than 60%, productivity does not change considerably with mangrove teraction with mangrove coverage are found to be statistically insig- coverage. In other words, mangrove coverage has small marginal effects nificant, implying that density does not affect farm productivity. when its level is less than 60%. This implies that the impacts of eco- Meanwhile, both models found an inverted N-shaped relationship be- system services are approximately equal to the adverse effects when tween mangrove coverage and output with a negative sign on the first mangrove coverage is less than 60% of the pond area, while the adverse

26 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28

Table 5 on profit, while older farm managers tend to earn lower profit. Hypothesis testing. Table 5 shows test results for the presence of mangrove effects on the mixed mangrove-aquaculture farming. In both models, mangrove Null hypothesis Production function Profit function forest density appears to have positive effect on profit, however the Cobb- Translog Linear Quadratic effect is statistically significant only in the quadratic model. Mangrove Douglas coverage is found to have significant impacts on profit in both models.

ff The patterns of the impacts are very similar. Particularly, Fig. 3 presents No e ects of F-statistic 0.85 0.95 1.47 3.36 fi mangrove Degree of 22 22 the relationship between predicted pro t and mangrove coverage from density freedom the quadratic model. A negative marginal effect of mangrove coverage P-value 0.428 0.389 0.233 0.036 on profit is observed at high levels of mangrove coverage. On the other Decision Fail to Fail to reject Fail to Reject hand, the predicted profit seems to stay unchanged when coverage is reject reject less than 60%. The impacts of mangrove coverage and density is con- No effects of F-statistic 1.41 2.96 4.48 4.93 sistent with those estimated from the production functions. To be spe- mangrove cific, reducing mangrove coverage from 100 to 80% would significantly coverage fi ff Degree of 55 55 improve pro t. However the marginal e ect is decreasing when more freedom mangrove forests are converted to water surface. At 60% coverage, P-value 0.221 0.013 0.0006 0.0003 further conversion of mangrove forest would not affect profit. The es- Decision Fail to Reject Reject Reject timated profit function again shows that the impact of ecosystem ser- reject vices is equal to the adverse effects when mangrove coverage is less than 60%, but is outweighted by the adverse effects when mangrove effects become larger when mangrove coverage is higher than 60%. coverage is more than 60%. This also implies that farms should maintain a mangrove coverage of 60%. 6. Conclusion

5.2. The profit function This study was motivated by the weak enforcement of the conditions of the policy on contracting mangrove forest management out to Table 4 presents the regression results for the linear and quadratic households. Under this policy, households are assigned stewardship of profit functions. Interaction terms between input prices and output mangrove forests and are allowed to convert part of the forest into other price are, however, not included in the quadratic profit function be- uses, mostly shrimp farming. Because of weak enforcement, households cause of multicollinearity. An F-test indicates that the quadratic is more actually convert more than the allowable level of 40% in order to seek appropriate than the linear functional form. higher profit. As a result, the targeted mangrove coverage is not F-test for joined significance of the coefficients of individual vari- achieved. able and the square term is performed to test for the impacts of input We estimate the production and production function for shrimp- and output prices in the quadratic profit function. Input prices (larvae, mangrove farming systems, with mangrove coverage and density in- chemicals and hired labor) are found to have no significant effect on cluded. Cobb-Douglas and translog functional forms are applied for the profit. This is probably because the extensive and semi-extensive production function and linear and quadratic forms for the profit shrimp farms do not heavily rely on inputs, but rather use inputs sup- function. We also apply IV regression to address the possible en- plied by the natural environment. Output prices tend to affect profit dogeneity due to simultaneity between output and mangrove coverage with a convex quadratic relationship, with a flat region from price level and found no endogeneity. of 100–200 thousand VND/kg and upward sloping afterwards. This Our analyses show that mangrove coverage have significant impacts implies profit does not remarkably increase with output price until it on the productivity and profitability of shrimp farming, while man- reaches 200 thousand VND/kg. grove density does not. Particularly, we found that mangrove coverage Of the fixed inputs, family labor is found to have no impact on less than 60% has no impact, but coverage higher than 60% has ne- profit, while larger farms are found to have lower profit per square gative impacts on shrimp productivity and profitability. This implies meter. Schooling years of the farm managers appear to have no effect that farmers should not convert more than 40% of the assigned

Fig. 3. Mangrove and farm proﬁt from the quadratic proﬁt function.

27 T.D. Truong, L.H. Do Land Use Policy 73 (2018) 20–28 mangrove forests, and the current policy that allows farmers converting Sustainable Management Models for Mangrove Forests. Ministry of Forestry and 40% of the mangrove forests should be enforced. Estate Crops, Indonesia and Japan International Cooperation Agency (213 pp.). fi Johnston, D., Van Trong, N., Van Tien, D., Xuan, T.T., 2000. Shrimp yields and harvest One limitation remains in this study. Although we tried to x the characteristics of mixed shrimp–mangrove forestry farms in southern Vietnam: fac- problem of endogeneity, the instruments may be weak. In addition, we tors affecting production. Aquaculture 188 (3), 263–284. may have omitted some important variables, for example the reduction Kautsky, N., Berg, H., Folke, C., Larsson, J., Troell, M., 1997. 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