PNG government provides incentives to boost domestic fish processing

In an attempt to persuade foreign-owned fishing vessels to process their catches from Papua New Guinea waters at local facilities, Prime Minister Peter O’Neill announced the cancellation of a fishing fee subsidy in December 2017 and replaced it with a rebate for processing seafood onshore. While the move is designed to improve PNG’s fisheries export potential, the new rebate has been met with mixed reactions. Previously, the government gave an allowance through a vessel day scheme (VDS) on the premise that the companies receiving the subsidy would process their catch locally, but that was usually not the case.

State of Affairs

Reviews of the scheme found that around 80% of fish caught in PNG waters were being processed in other countries. In addition to the low volume of local processing, more than half of PNG-flagged tuna vessels did not return to their home ports in 2017. According to industry stakeholders, fishing companies would get subsidised access to PNG waters if they brought fish onshore for processing, but this started to work against the country as it did not limit the amount of fish that could be sent abroad. Indeed, the new programme will be based on how much fish a company actually brings into PNG for processing. Tuna exports are already an important source of foreign currency, and the government is seeking to augment this via local processing. However, with four processing plants already operating in Malahang Industrial Centre in Lae and another two plants under construction, the nation’s processing facilities are currently underutilised compared to catch volumes. To increase activity at this step of the value chain, both foreign and domestic fishing companies that land their catch and process it in PNG plants will receive $400 per tonne as an incentive under the new programme.

Rebate

The government estimates that the new rebate system will save the state PGK235m ($73.4m) in 2018 and prompt existing processors to expand capacity, which would help create jobs, bolster revenue and increase foreign currency receipts. The new scheme stipulates that all ships, whether foreign or domestic, will pay the full VDS fee, but receive rebates for processing fish onshore. Given the size of catches by fishing vessels in PNG waters, the government’s goal of more than doubling processing output is within reach.

However, the high cost of doing business in the country remains a deterrent, with a lack of modern infrastructure and a shallow talent pool driving up costs. Some foreign fisheries companies have threatened to close their existing processing operations and move elsewhere if the old system of a rebate on the VDS is not re-introduced.

Additional Works

While efforts to improve operating conditions are under way, some remain behind schedule. As of the beginning of 2018, the Pacific Marine Industrial Zone (PMIZ) project in Madang Province, designed to reduce the cost of doing business and assist with economies of scale, remained incomplete after a decade.

The PMIZ is envisioned to host up to 10 tuna canneries and integrated port facilities, with some 100 ha earmarked for an industrial zone, and 115 ha for residential and commercial use. Primary funding is coming from the Export-Import Bank of China, which holds a 78% stake in the project.

More concrete progress is being made on another front, however. According to industry stakeholders, the National Fishing Authority and the government are currently building a network of fish markets across the country. These markets are planned to integrate supply chains and offer support to industrial development around fisheries, while also helping small and medium-sized enterprises generate more positive results. This is expected to improve the business environment and show investors that the PNG fisheries sector is working to offer new opportunities.