Facilitating the expansion of the country’s tuna industry

Already one of the world’s premier tuna producers, PNG is looking to further capitalise on its rich fisheries sector by boosting downstream capabilities. In its bid to ensconce itself among the global seafood exporting elite, on par with the likes of Thailand or Ecuador, PNG is working to more than double its domestic cannery production. The linchpin of the country’s fisheries development is the tuna industry, with PNG annually supplying around 10% of the world’s tuna supply.

In The Net

Catchment and exports from PNG waters have increased over the past two decades. As late as 1996, PNG’s annual output stood at 2000 tonnes each of canned and frozen tuna, according to National Fisheries Association (NFA) data, but the industry has since expanded dramatically. In the ensuing decades fishing fleets from across the globe have descended on PNG waters and processing facilities have been added. Annual tuna catch increased to between 450,000 and 580,000 tonnes by the 2000s and have held steady at roughly 750,000 tonnes per annum worth some $1.5bn for the past five years. Three-quarters of the tuna caught is of the skipjack species, with yellow fin tuna filling out most of the rest of the catch, and a smattering of bigeye and other species rounding out the field.

While the fish can be found throughout PNG’s waters, the primary hotspots are located in the northern and eastern areas of the country’s waters. Much of PNG’s annual tuna exports are shipped to Europe as the country benefits from a tariff-free economic partnership with the EU allowing it to circumvent the 24% tariff normally applicable. This arrangement also serves as a strong incentive for firms to set up onshore processing facilities as globally sourced products (even if not caught in PNG waters) are eligible for the duty free scheme as long as they are processed in the country.

Value Added

While PNG has been stocking the world’s fishmongers and supermarkets with tuna, it has historically garnered only a fraction of the benefits of this bounty. More than 90% of the annual catch is still taken by foreign-flagged vessels and landed in their respective home ports, although recent reforms in PNG’s trade agreements and fisheries policies are beginning to pay dividends locally. With the new vessel day system (VDS) replacing previous quota arrangements, foreign fishing vessels have strong incentives to process fish in-country, which translates into more local jobs and downstream processing investment.

These efforts are largely centred on the ports and processing facilities in Lae and Madang along the northeastern coast. The centrepiece of these policies is the Pacific Marine Industrial Zone (PMIZ) in Madang, which is seen as becoming a key processing centre for the tuna industry. Located in a special economic zone designed to offer tax breaks and other incentives to bring foreign investors into the fold, the $161m PMIZ is being constructed on a 216-ha plot purchased from the country’s largest tuna processor, RD Tuna. The site will cater to the tuna industry and related spin-off services and will include infrastructure like wharfing, berthing and processing facilities for the export industry.

Build Up

After five years of delays, the project looks to be moving forward after the government signed a $95m deal with Chinese contractor Shenyang International in March 2013 to begin construction. The government allocated PGK60.5m ($24.6m) in its 2013 budget for the development of PMIZ and another PGK53.8m ($21.9m) in 2014 with additional annual expenditures of at least PGK52m ($21.1m) through 2018. The $27m, 200-tonnes-per-day Niugini Tuna processing plant currently under construction will be one of the first canneries in the PMIZ. It will be joined by another $500m complex developed by French industrial tuna fishing group Sapmer and the French construction group Piriou, which will include a processing plant along with a 300-metre wharf, 400-metre dry-dock and cold storage plant in the PMIZ.

While the potential economic benefits of thousands of jobs and billions of kina in revenue are enticing, the project has also had its share of critics that have created roadblocks. Various landowner groups protested the project and petitioned the government to halt development. The situation was ostensibly resolved in May 2013 when Richard Maru, the commerce and industry minister announced that the three main groups opposed to the PMIZ had withdrawn their cases.

Doubling Capacity

With no controversy like that affecting the PMIZ, expansion is taking place in the industrial port town on Lae, which should double previous processing capacity. Four new canneries are going up at the Malahang Industrial Centre on the outskirts of the city. These include the 350-tonnes-per-day Majestic Seafood plant, which opened in October 2013. The PGK80m ($32.5m) project is a joint venture between Philippines-based Frabelle Fishing and Century Canning along, with Thailand’s Thai Union Frozen Products subsidiary, Thai Union. The $15m Namabawan Seafoods Tuna project is a joint venture between Trans Pacific Journey Fishing and TSP Mariner Industries of the Philippines to construct a 200-tonnes-per-day cannery.

Approval was also granted by the NFA to South Korea’s Dongwon Industries to build a 200-tonnes-per-day processing plant in Lae as well as for another plant with the same capacity operated by China’s HailiSheng. These new arrivals will join established canneries already operating in PNG, including Malaysia’s International Food Corporation (120 tonnes per day), the Philippines’ RD Tuna, South Seas Tuna Corporation (200 tonnes per day) and Frabelle (120 tonnes per day). RD Tuna added to its existing plant when it opened a second 140-tonnes-per-day cannery in Madang in early 2014. Frabelle upgraded its processing plant in 2013 to raise efficiency and diversify its products, and also embarked on a two-year investment plan to replace six of its 20 PNG-flagged fishing boats and build an additional wharf.

Group Effort

The gradual implementation of a consolidated VDS regulatory system has also helped boost revenue streams. First introduced in 2007, VDS replaces an ad-hoc set of bilateral agreements with a comprehensive framework offering a set number of fishing days to commercial fisheries that can be used, sold or traded. In 2013 the charter fee charged by the NFA increased to $5500 per day, in line with the rising market fish price of $2000 per tonne, according to the NFA. The VDS scheme must also comply with the conditions levied by the Parties to the Nauru Agreement (PNA) which subjects all signatories to a set of policies and regulations designed to ensure sustainability of the industry for all stakeholders. After assessing current stocks and fishing trends, the PNA has set current catch targets to their 2010 levels in terms of fishing days allocated, vessels allowed in the exclusive economic zone and tonnage caught. The largest foreign recipient of VDS in 2013 was the US purse seine fleet (whose bilateral agreement with PNG ended in 2012) with a total of 8000 days, while other non-PNA members were granted 300 days according to the NFA. The sale of these rights garnered the government $63m in 2013, a three-fold increase over the $21m taken in the previous year.