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Viewing cable 05HANOI3392, A DOLLAR HERE, A DOLLAR THERE: THE ECONOMIC COST OF

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Reference ID Created Released Classification Origin
05HANOI3392 2005-12-30 08:55 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Hanoi
This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS SECTION 01 OF 03 HANOI 003392 
 
SIPDIS 
 
STATE FOR G; EB; EAP/EX; EAP/MLS; EAP/EP; INR; OES/STC 
(PBATES); OES/IHA (DSINGER AND NCOMELLA); CA/OCS/ACS/EAP 
USDOC FOR 4430/MAC/ASIA/OPB/VLC/HPPHO 
TREASURY FOR OASIA 
STATE PASS USTR (ELENA BRYAN) 
BANGKOK FOR RMO, CDC, USAID/RDM/A (MFRIEDMAN AND JMACARTHUR) 
USDA FOR FAS/PASS TO APHIS 
DEPARTMENT OF DEFENSE FOR OSD/ISA/AP (LSTERN) 
USAID FOR ANE AND GH (DCARROLL, SCLEMENTS AND PCHAPLIN) 
STATE ALSO PASS HHS/OGHA (EELVANDER) 
ROME FOR FAO 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: AMED AMGT CASC EAGR EAID ECON EFIN EIND EINV ETRD PINR SOCI PGOV TBIO VM AFLU
SUBJECT: A DOLLAR HERE, A DOLLAR THERE: THE ECONOMIC COST OF 
AVIAN INFLUENZA IN VIETNAM 
 
SENSITIVE BUT UNCLASSIFIED - DO NOT POST ON THE INTERNET 
 
1. (SBU) Summary.  The cost of Avian Influenza (AI) both in 
human and agriculture terms has been greater in Vietnam than 
in any other country.  AI has killed 42 people in Vietnam 
and over 50 million poultry have been culled to prevent its 
spread since December 2003.  The World Bank estimates that 
the total cost of AI on the animal side will amount to 0.1 
to 0.2 percent of Vietnam's Gross Domestic Product (GDP) in 
2005 or, in dollar terms, approximately USD 50 to 100 
million.  (In 2004, Vietnam's GDP was approximately USD 45.4 
billion and GDP growth rate was 7.7 percent.)  According to 
Vietnam's Poultry Association, however, the country's 
poultry industry lost approximately USD 71 million in 
December 2005 in lost chicken and egg sales, while the 
demand side of the Vietnam's economy has been relatively 
unscathed by AI.  In fact, certain sectors such tourism 
continue to thrive, but this would likely be short-lived if 
a human pandemic or even the threat of a pandemic ever 
eventuates.  In the worst case scenario involving a full 
pandemic, the World Bank estimates that Vietnam's GDP would 
fall by two percent and growth throughout Asia "would 
virtually stop."  However, at this state, our ability to 
truly quantify the full import of such a pandemic is very 
sketchy.  End Summary. 
 
Farmers and Chickens: Hardest Hit 
--------------------------------- 
 
2. (SBU) Since the initial outbreak of AI in December 2003, 
the GVN has culled approximately 50 million poultry, 
primarily chickens and ducks, to prevent the spread of AI. 
About two-thirds of Vietnam's poultry industry is made up of 
small-scale farmers with flocks of ten birds or fewer and 
these small farmers have been devastated by sick birds, 
mandatory culling and a drastically reduced market for their 
poultry products.  Direct economic costs impact not only 
farmers, but also other sectors such as poultry 
distributors, wholesalers, feed producers, breeding farms 
and other related channels.  According to the World Bank, 
there was a 15 percent decline in poultry production as a 
direct result of the first large AI outbreak during winter 
2004-05.  Vietnam's Ministry of Agriculture and Rural 
Development's (MARD) measure of meat supply shows poultry 
supply fell from 16 percent in 2003 to 14 percent (as a 
percentage of total meat supply) in 2005.  In 2004, 
Vietnam's GDP was approximately USD 45.4 billion and its GDP 
growth rate was 7.7 percent.  The World Bank reports that 
Vietnam's poultry sector comprises 0.6 percent of GDP, thus, 
a 15 percent decline in poultry outputs results in a 0.08 
percent drop in Vietnam's GDP.  In 2005, the World Bank 
predicts that the total cost to the poultry sector will 
increase because of AI and estimates the total cost to "be 
around 0.1 percent of GDP." 
 
3. (SBU) The strict government regulations introduced in 
October 2005 on the slaughter, sale and transportation of 
poultry were another blow to Vietnam's poultry industry. 
According to the United Nation's Food and Agriculture 
Organization (FAO), the largest losses were felt by small 
scale commercial chicken farmers who had "borrowed money to 
fund poultry production and found themselves in debt when 
their birds died, were culled, or could not be sold." 
Although the sale of chickens and eggs is slowly returning 
to retail markets, the Vietnam Poultry Association estimates 
that farmers lost approximately USD 71 million in December 
2005 from unsold poultry and eggs.  The Association argues 
that if the trend continues, farmers could cumulatively lose 
more than USD 350 million or 0.8 percent of GDP over a four- 
month period ending March 2006.  Agricultural experts note 
that there are at least 500 million poultry grown each year 
for sale and/or egg production, suggesting that while the 
precise amount that the poultry industry contributes to 
official GDP may be disputed, the real economic impact lost 
sales will have on the livelihoods of farmers in Vietnam's 
rural, poorer areas is significant. 
 
4. (SBU) The threat of AI and the public's fear of poultry 
products has not slowed Vietnam's agricultural exports, 
which jumped 17 percent in 2005 (USD 5 billion), but it has 
had a dramatic impact on Vietnam's poor, whose standard of 
living has only recently started to increase, a result of, 
among other factors, the GVN's robust efforts at poverty 
reduction.  A recent report on one farmer from the Mekong 
region who had to destroy his flock of 23,000 in 2004 
illustrates how quickly AI can reverse these positive 
developments.  This Mekong farmer's 2004 losses cost him a 
decade's worth of personal savings.  Left with only 10,000 
hatchlings to raise as his sole source of income in 2005, he 
now ensures the birds are inspected every other month for AI 
and that their cages are cleaned daily.  The continuing 
threat from AI, however, could potentially wipe out his 
remaining stock, despite his best efforts at prevention. 
While some small farmers have switched to raising pigs or 
other animals to make up for their loss in income, many do 
not have the resources or the technical knowledge to make 
these changes and continue to raise poultry because it is 
what they know how to do. 
 
5. (SBU) In Vietnam, consumer demand for poultry usually 
reaches an annual peak in late January or early February 
during Vietnamese New Year or "Tet", but due to the limited 
availability of poultry products and some fears about 
product safety, this year consumers are switching to buying 
pork or other foodstuffs.  After the initial AI outbreak in 
2004, the World Bank reported that pork product purchases 
rose by 12 percent.  MARD reports that pork supply (as a 
percentage of total meat supply) only increased by one 
percent from 2003 to 2005.  In local markets today, 
Vietnamese consumers are feeling the pinch as prices for 
various foodstuffs are rising, increasing December's 
Consumer Price Index (CPI) by 0.8 percent.  In fact, the 
2005 CPI has now risen to 8.4 percent reflecting the fact 
that 49 percent of Vietnam's CPI is comprised of food 
prices. 
 
6. (SBU) With assistance from USG and other donors, the GVN 
is carrying out a nationwide poultry vaccination campaign, 
which experts believe to be the critical step for preventing 
a widespread AI pandemic.  The GVN estimates that the 
poultry vaccination program will cost over USD 35 million, 
which includes compensation paid to farmers.  To date, 
throughout the country, an estimated 189 million poultry 
have been vaccinated.  The GVN plans to continue the 
vaccination program until 2008, in the hope that enough of 
the poultry population will be protected from infection that 
the virus will be unable to sustain itself. 
The Inn is Full 
--------------- 
 
7. (SBU) While AI has dealt a devastating blow to Vietnam's 
poultry industry, the service sector has remained largely 
unaffected since the initial AI outbreak in December 2003. 
Vietnam's tourism sector, for example, has remained healthy 
with most major hotels in Hanoi and Ho Chi Minh City having 
very few vacancies.  According to the Vietnam National 
Administration of Tourism, Vietnam welcomed 3.1 million 
visitors the first eleven months in 2005, an increase of 
18.8 percent over 2004.  The increase in travelers has been 
a boom for Vietnam's airline, hotel and service industries. 
Despite the AI threat, the general perception among 
travelers is that Vietnam remains a safe destination. 
Vietnam Airlines recently announced a 28 percent increase in 
the number of passengers it handled this year versus in 
2004.  Out of six million passengers Vietnam Airlines 
handled in 2005, 2.8 million were foreigners.  In 
comparison, the SARS outbreak in 2003 crippled Vietnam's 
tourism and hospitality industry for months. 
 
Doomsday Scenario? 
------------------ 
 
8. (SBU) In addition to AI economic impact studies from the 
World Bank, Asian Development Bank and FAO, the financial 
sector has also been researching the consequences of a 
possible human pandemic and how it will affect the financial 
markets and economies around the World.  One study from a 
major U.S. bank characterizes the results of an AI pandemic 
as "worse than SARS" and in the worst case scenario, the 
economic effects would be "a global problem, not an Asian 
one."  In Vietnam and in other countries, the demand side of 
the economy will undoubtedly be affected, with disruption 
foreseen in the tourism, retail and transportation markets. 
The supply side of the economy would also be affected 
because of a contracted labor market due to sickness and 
absenteeism.  The impact that AI will have on the public and 
private health sectors, both in Vietnam and globally, is 
difficult to quantify.  The bank study notes that likely 
sector losers during an AI pandemic will "include airlines, 
airports and travel companies" but expected winners are 
"pharmaceutical stocks, hospitals and medical supplies."  In 
labor intensive countries and infrastructure poor countries 
such as Vietnam, the World Bank estimates that GDP would 
fall by two percent in the event of a full-fledged pandemic. 
Frankly, that figure seems low to us.  In reality, the true 
economic costs of an AI pandemic, should it occur, would 
certainly be staggering and in some ways, immeasurable. 
 
MARINE