Is the investing in tuna processing in the Pacific, a conduit for fishing rights access? / by Francisco Blaha

My colleague/friend Richard Banks, is (among other 100 jobs he does) an economist working for PNA. In a recent report has brought up some interesting questions in response to the cyclic investments developments in fish processing in the Pacific Islands Countries.

Toll boot in the outer islands channel  (SI)

Toll boot in the outer islands channel  (SI)

From work undertaken with PNG's National Fisheries Authority and with the Solomon Islands MFMR (where he is a offshore fisheries adviser), he suggests based on considerable evidence that the investments models are driven more as a means to secure fishing rights at heavy market discounts rates, in the promise of generating employment that a commercial reality. Out of the existing plants in these countries, there is evidence that 2-3 plants are striving to operate at a level above 100-120 M/T per day, which for tuna processing is not a lot. 

No doubt, the lure of "big" (1000+)  job creation is seen by politicians as a huge attraction, but the real issue for Pacific island countries is to balance the "opportunity costs" of losing high access fees from vessels, which then could serve (assuming transparency and due diligence) to provide much needed income for the Island countries beyond the temporary employment of a few thousand people.

He confirms something I have seen particularly in PNG... foreign companies provide promises on job creation, gaining major tax concessions and and cheep fishing rights, catch the fish, find some initial excuses (that then become permanent) and send the raw materials for processing in the Philippines or Thailand.

His work shows, that out of the companies operating to date, only one or two that are striving to make a profit. The most notable example being SolTuna in Noro (I wrote about then here, and still in my opinion the way fishing should be in the Pacific), where the company has an excellent track record in pushing fish caught through the plant and processing more than 75% of its product in the factory.

Catch Certification training in Noro

Catch Certification training in Noro

He says (and I completely agree) that this situation could be addressed with some strategies that fit perfectly with work we are doing in parallel in these countries (see here and here), like:

  • Efficient Catch Documentation Schemes, to check what is being processed and what is not, against fishing rights provided. So that plants are made to pay commercial fee rates (for example the value of a Vessel Day: USD 8,000/day) for fish that they don't process in country.
  • A high commitment to employment by examining proposed plant throughput against jobs created. It is comparatively easy to measure investment commitment and proposed throughput against jobs, with around 12-15 people employed per ton of fish to be processed.
  • Not allowing access until the plant is assessed by independent evaluators as being ready to operate.
  • Careful scrutiny on tax concessions provided, which should be balanced against the access fee concessions given, and the value of the jobs created.

He also suggest that there  is space for balance, too stronger focus on taxing at source will stifle investment and will only prevent the factories from operating at a profit. 

Agreements where PI Governments may provide concessions, but the foreign companies must agree to process at least 75% of its product in country, would be a good compromise.

He goes further to suggest revising many of the processing agreements that are currently in place, a recommendation that I fully agree with!