Papua New Guinea pursues value-added tuna processing

A regulatory overhaul is paving the way for Papua New Guinea to focus on developing the processing side of its fisheries industry, supporting the country’s plans to become a major downstream player in the global tuna market.

The new policy, which includes a requirement that 100% of tuna caught in PNG’s archipelagic waters be processed locally, is expected to boost the sector’s contribution to GDP through greater value-added production, higher exports and job creation.

The regulations could also bring about tighter control of the country’s territorial waters, helping authorities address concerns about unregulated fishing practices and preserve duty-free access to the EU market.

Value-added tuna

Home to around 18% of the world’s tuna stock, according to industry press, PNG’s 2.5m-sq-km exclusive economic zone has long been the focus of both foreign and domestic fishing vessels.

Under the current vessel day scheme, which has been in operation since 2005, operators are required to pay daily access fees of around $10,000 directly to the state. While the system was originally put in place as a means to harness the country’s marine resources, the development of value-added processing could yield more substantial economic benefits for PNG.

According to estimates from the Pacific Tuna Forum, the country could double the value of its tuna market to around $2.7m by expanding its processing industry. Moreover, the EU forecasts that some 53,000 jobs – equivalent to 7% of the formal workforce – could be created by 2016 thanks to the segment’s expansion.

Local capacity building

Under the new regulations, the government plans to assign fishing rights to domestic processors, who in turn will allocate fishing days to vessels permitted to operate in PNG’s waters on the condition that their catches be brought to local plants for processing.

Announcing the reforms in September, Mao Zeming, minister of fisheries and marine resources, said that only vessels with a commercial link to domestic processing plants would be permitted to fish in the country’s archipelagic waters.

The new requirements are expected to drive significant expansion in downstream capacity, which will feed into economic growth. The fisheries sector contributes around 4% of GDP, according to government data, and while catches made in PNG’s waters account for 15% of the global tuna trade – which is estimated to be worth around $4bn-5bn per year – most of the value has historically been taken offshore.

Capacity challenge

With the new regulations set to accelerate the development of PNG’s fisheries industry, processing capacity will need to be expanded to keep pace with the expected increase in demand. Under the present system, only around 25% of vessels operating in the country’s waters process their catches locally, Pedro Celso, CEO of RD Tuna, told OBG earlier this year.

PNG is already home to five tuna processing plants, with a sixth facility set to open in late 2015. The new plant is expected to add another 150-200 tonnes of daily processing capacity and generate some PGK169m ($58.6m) in exports per year, according to local media.

Established local processors are also working to bolster capacity. Majestic Seafood – a joint venture between the Philippines’ Frabelle, Thai Union Frozen Products and Manila-based Century Canning Corporation – is investing another $9m in its $35m plant, which opened in 2013, to shore up capacity and roll out related infrastructure around Lae city.

The funds will be used to expand port facilities and improve power supply, which will be needed to meet higher processing demand, James Johnston, general manager of Frabelle PNG, told OBG.

Lae has become an epicentre for tuna processing, thanks to support from the provincial government and local landowners. Johnston is confident that the area has the potential to become a major regional processing destination. “Lae could easily become the main fishing hub in the Pacific if the government continues to invest in infrastructure, as we have seen in recent years,” he said.

While some have voiced concerns to the media that PNG could face competition while pursuing the new plan’s goals, pointing to lower processing costs in other countries with fishing industries, if all catches are landed and processed domestically, greater economies of scale are expected to drive down per-unit processing costs.

Supervisory boost

The new regulations could also help ease European Commission (EC) concerns about unregulated fishing in the country’s territorial waters.

Both PNG and the Philippines were warned by the EC last year that more needed to be done to combat illegal, unreported and unregulated (IUU) fishing. Failure to bolster industry supervision could result in trade sanctions, the EU noted, risking a closing off of duty-free exports to the lucrative European market, which boasts some 500m potential customers.

As of February, the commission announced that PNG had made credible progress in curbing IUU fishing and was on track to meet the regulatory criteria.

Local processing will be instrumental in helping the country more accurately track the fish caught in PNG’s waters. This will also support national efforts to regulate both domestic and foreign fleets, building on a recent drive to improve transparency in the tuna industry through closer monitoring of operations and more stringent catch documentation and certification mechanisms.