mrag report phase 2.docx · web viewour approach was to assess all opportunities identified...

TVM Economic Study: Phase 2 Report

Enhancing Economic Returns from the

Southern Longline and Other Fisheries

Phase 2 ReportOctober, 2011

i

Executive Summary

This report presents the results of Phase 2 of the study Enhancing Economic Returns from the Southern Longline and Other Fisheries undertaken through FFA, on behalf of the Te Vaka Moana participants.

The main aim of Phase 2 was to assess ‘any and all’ opportunities to enhance returns from TVM member fisheries against normal business principles, with a view to establishing a shortlist of the most attractive opportunities for more detailed assessment in Phase 3.

Our approach was to assess all opportunities identified during the Phase 1 consultations, and in subsequent investigations, against a set of performance indicators based on commercial business principles. Indicators were selected to allow for (as far as possible) an ‘apples vs apples’ comparison of opportunities across disparate parts of the supply chain, and included those relevant to the commercial viability of an investment opportunity (e.g. capital outlay required; potential return on investment; level of risk), as well as broader considerations such as social benefits (e.g. potential employment created). Equal weight was given to opportunities in the catching, processing and marketing sectors.

Twenty-six opportunities were assessed in total. Those opportunities identified as the most attractive candidates for further assessment in Phase 3 included:

Establishing a sub regional management framework to enhance control over the ALB (and other) fishery, including harvesting rights

Development of the Southern SWO fishery (albeit a modest opportunity overall)

Establishment of EU Competent Authorities for catch certification (in the first instance)

Strengthening regional trade partnerships through established hubs Exports of primary processed fish/loins to secondary processors Development of a market for value-added bycatch in Australasia Strategic partnership between TVM and large processors for ALB supply TVM MSC certification for ALB to strengthen market access for fresh fish

products to the EU and North America

Opportunities that were not as immediately attractive, but included some features that might warrant Phase 3 assessment included:

Energy efficiency audits (to reduce fuel costs/emissions) Establishment of EU Competent Authorities for sanitary compliance Sign up to the Interim Economic Partnership Agreement Strengthening fisher's associations

Opportunities that did not appear to be good candidates for Phase 3 assessment included:

Multi-zone access arrangements for TVM vessels Multi-zone access arrangements for DWFN vessels

FAD deployment & maintenance (for the longline fishery; FADs appear to represent a good investment for the small-scale fishery)

Mothershipping for the domestic TVM ALB fleet Reducing whale and shark depredation HACCP training for domestic processors/exporters Developing a TVM brand for retail Developing markets in Japan Establishment of a TVM retail outlet in New Zealand Exploration of emerging markets (e.g. Russia, Brazil, Argentina, Middle

East, Eastern Europe) Establishment of a Pacific Fisheries Fund Establishment of domestic fisheries development funds Reviewing manning requirements/maritime code

Of this latter group, some were not recommended on the basis that the risks clearly outweighed the potential returns (e.g. multi-zone access for foreign vessels), while others were not recommended on the basis that they were already being pursued through other means (e.g. reducing whale depredation, review of the manning requirements) and would not likely benefit from further analysis in this study.

Based on the analysis of opportunities, the main findings of Phase 2 were that:

Of the opportunities recommended for Phase 3 consideration, the major strategic opportunity to enhance returns is to better control access to the southern longline fishery by implementing a framework of harvesting rights (e.g. a VDS) that can be used as an economic (as well as a sustainability) instrument. Partnerships with other ‘resource owners’ will be required to generate maximum benefit;

Many if not most of the opportunities identified in Phase 2 are dependent on, and will be influenced by, the success of others. Consideration of the inter-relationships between the most attractive opportunities should be a key consideration for Phase 3, with a view to developing an integrated and sequenced plan of measures to enhance returns from TVM fisheries. There is a need to focus on realistic opportunities, within a realistic timetable;

The main opportunities in the domestic catching sector appear to be in a range of measures to improve returns (e.g. strengthening price competition for product, product differentiation through MSC certification, partnerships with established regional trade hubs to advantage of duty free access where possible, development of markets for value added bycatch) as well as reducing input costs (e.g. energy efficiency audits). A modest opportunity also appears to exist to develop the southern swordfish fishery in the TVM region.

Complications associated with differences in the state of fleet development, domestic management arrangements and recent catches

and catch rates between members has led to mixed support for multi-zone access arrangements;

The main opportunities in the processing sector appear to be in primary processing, perhaps linked to strategic supply arrangements with larger secondary processors and the development of alternative markets for value-added bycatch;

The main opportunities in marketing sector were to secure Marine Stewardship Council certification for the fishery (rather than a TVM brand), to explore value-added markets for tuna longline bycatch in Australasia and a strategic supply relationship with a large albacore processor. The fishery would be better placed for MSC certification following the establishment of a framework of harvesting rights, together with a harvest strategy incorporating reference points and addressing bycatch and ecosystem issues.

The enabling environment surrounding the industry at the national and sub-regional levels should be optimised to enhance returns. The enabling environment in this context is the collective set of policy and regulatory instruments governing the industry (e.g. fisheries management arrangements, tax and duty arrangements, etc) and industry support mechanisms (e.g. credit facilities, technical support, capacity building – e.g. business management skills, industry representation, etc). Assessment of the conditions required to support each shortlisted opportunity will be a focus of Phase 3;

Partnerships with established regional and global players in the supply chain offer potential to enhance TVM returns;

Approaches to maximise the value of harvesting rights may vary between TVM members, based on local factors such as the state of fleet development and proximity to established trade routes.

TVM Economic Study: Phase 2 Report

Table of Contents

EXECUTIVE SUMMARY..............................................................................III

TABLE OF CONTENTS...............................................................................III

LIST OF FIGURES....................................................................................III

LIST OF TABLES.....................................................................................III

1. INTRODUCTION..................................................................................31.2 STRUCTURE OF REPORT..................................................................................3

2. ANALYTICAL APPROACH TO PHASE 2.......................................................33. RESULTS – SUMMARY TABLE.................................................................34. MAIN CONCLUSIONS...........................................................................3ANNEX 1: TERMS OF REFERENCE................................................................3ANNEX 2: DETAILED ASSESSMENTS..............................................................3

A2.1 ESTABLISHING A SUB REGIONAL MANAGEMENT FRAMEWORK TO ENHANCE CONTROL OVER THE ALB (AND OTHER) FISHERY, INCLUDING HARVESTING RIGHTS.............................3A2.2 MULTI-ZONE ACCESS ARRANGEMENTS FOR TVM VESSELS......................................3A2.3 MULTI-ZONE ACCESS ARRANGEMENTS FOR DWFN VESSELS...................................3A2.4 FAD DEPLOYMENT & MAINTENANCE..................................................................3A2.5 MOTHERSHIPPING FOR THE DOMESTIC TVM ALB FLEET.........................................3A2.6 REDUCING WHALE AND SHARK DEPREDATION......................................................3A2.7 ENERGY EFFICIENCY AUDITS (TO REDUCE FUEL COSTS/EMISSIONS)...........................3A2.8 DEVELOPMENT OF THE SOUTHERN SWO FISHERY................................................3A2.9 ESTABLISHMENT OF COMPETENT AUTHORITIES TO PROMOTE EU ACCESS (CATCH CERTIFICATION AND SANITARY COMPLIANCE)................................................................3A2.10 HACCP TRAINING FOR DOMESTIC PROCESSORS/EXPORTERS................................3A2.11 SIGN UP TO THE INTERIM ECONOMIC PARTNERSHIP AGREEMENT..........................3A2.12 STRENGTHENING REGIONAL TRADE PARTNERSHIPS WITH ESTABLISHED HUBS (E.G. FRENCH POLYNESIA, FIJI AND AMERICAN SAMOA)..........................................................3A2.13 EXPORTS OF PRIMARY PROCESSED FISH/LOINS TO SECONDARY PROCESSORS...........3A2.14 TVM MSC CERTIFICATION FOR ALB...............................................................3A2.15 DEVELOPING A TVM 'BRAND' FOR RETAIL........................................................3A2.16 DEVELOPING MARKETS IN JAPAN AND AUSTRALASIA...........................................3A2.17 ESTABLISHMENT OF A TVM RETAIL OUTLET IN NEW ZEALAND.............................3A2.18 STRATEGIC PARTNERSHIP BETWEEN TVM AND LARGE PROCESSORS FOR ALB SUPPLY

3

v

A2.19 EXPLORATION OF EMERGING MARKETS (E.G. RUSSIA, BRAZIL, ARGENTINA, MIDDLE EAST, EASTERN EUROPE).........................................................................................3A2.20 ESTABLISHMENT OF A PACIFIC FISHERIES FUND................................................3A2.21 ESTABLISHMENT OF DOMESTIC FISHERIES DEVELOPMENT FUNDS...........................3A2.22 STRENGTHENING FISHER'S ASSOCIATIONS........................................................3A2.23 REVIEWING MANNING REQUIREMENTS/MARITIME CODE........................................3

List of Figures

FIGURE 1: CUMULATIVE PROPORTION OF CATCH BY ALL VESSELS TAKEN IN THE WATERS OF POSSIBLE REGIONAL PARTNERS TO A SOUTHERN LONGLINE MANAGEMENT FRAMEWORK.............3FIGURE 2: TREND IN THE CATCH DISTRIBUTION OF SOUTHERN ALBACORE BY ALL VESSELS BETWEEN 1997 AND 2009.........................................................................................3FIGURE 3: GENERALISED TUNA VALUE CHAIN...................................................................3FIGURE 4: CATCH PER UNIT OF EFFORT (KG/HR) COMPARISON OF TROLL CATCH IN NIUE WITH AND WITHOUT FADS (‘OPEN WATER’)............................................................................3

List of Tables

TABLE 1: STANDARD PERFORMANCE INDICATORS AGAINST WHICH EACH OPPORTUNITY WAS ASSESSED.................................................................................................................3TABLE 2: SUMMARY ANALYSIS OF OPPORTUNITIES ASSESSED...............................................3TABLE 3: CASH FLOW AND NET PRESENT VALUE OF FAD INVESTMENT IN NIUE.......................3

1. Introduction

This report presents the results of Phase 2 of the study Enhancing Economic Returns from the Southern Longline and Other Fisheries. The TORs for the study are provided at Annex 1.

The main aim of Phase 2 was to assess the potential opportunities identified during Phase 1 (and any others identified subsequently) against commercial business principles with a view to developing a shortlist of the most attractive opportunities for further assessment under Phase 3. The analytical approach used by the project team to assess opportunities is described in Section 2.

A range of means were used to generate information upon which to base Phase 2 assessments. These included: in country consultations conducted during Phase 1, additional targeted consultations relevant to specific opportunities, as well as literature and web searches. Particular effort was made to seek the views of potential industry participants on those opportunities that were likely to be primarily industry-driven.

The preparation of this report also benefited from discussions with TVM participants and industry members at the first TVM Development Network meeting, held in Auckland on 25th August 2011.

Additional data was also supplied by the Secretariat of the Pacific Community (SPC).

1.2 Structure of ReportThis report is presented in four main sections. Following this introduction, Section 2 provides an overview of the analytical approach to assessing opportunities under Phase 2.

Section 3 provides a summary of Phase 2 results, detailing scoring for each opportunity against each performance indicator, as well as summary comments and an overall recommendation on whether to shortlist the opportunity for further assessment under Phase 3. These summaries are distillation of more detailed assessments of each opportunity against a standard set of commercial performance indicators presented in Annex 2.

Finally, Section 4 outlines the key findings from Phase 2.

Page 1 of 71

2. Analytical approach to Phase 2

Our approach to Phase 2 has been to assess each of the opportunities raised with the team during the Phase 1 country consultations and background research (and those subsequently identified) against a suite of normal business and development considerations. We have adopted the approach of assessing ‘any and all’ opportunities consistent with the Terms of Reference, and equal weight has been given to opportunities identified in the catching, processing/distribution and marketing sectors. Additional opportunities related to the enabling environment surrounding the fishery have also been identified and assessed.

Individual opportunities are a function of both the defined scope and content of the Southern Longline Fishery combined with an individual perspective of a participant or prospective investor in that fishery. The Terms of Reference describe the key fishery in terms of a catching methodology (longlining). However, it does not follow from this short-hand fisheries description that the study should therefore seek to identify ways of improving the economic returns to the catching sector or of longline fishers in particular. Rather, the study considers the entire value chain for albacore and other species currently caught by longlining in the region. Furthermore, it does not confine itself to the consideration of the existing value chain in that fishery but of alternatives to the status quo.

From the perspective of the TVM Parties themselves, the key economic opportunity is to add value to the albacore and other fishery resources in their individual and collective Exclusive Economic Zones. A measure of performance applied to opportunities would therefore be the impact on the sustainable value attributed to harvesting opportunities in those Zones. This means that selected opportunities must not only meet the economic objectives of the investors and participants at that point in the value chain, but those investments cannot be value destroying at the level of harvesting right revenues in the long term.

This is not to say that individual TVM countries cannot or should not trade-off where in the value chain returns from their fisheries are realised. However, it does suggest that such trade-offs should not compromise the total value of the fishery in the long term. The starting point for Phase Two analysis is whether the opportunities identified in Phase 1 are likely to prove sound investments to those most directly involved whether in the private or public sectors.

Each opportunity has been assessed against a standard set of performance indicators, based on normal commercial business principles. The full list of indicators, scoring categories and scoring guidelines are detailed in Table 1. The business and development indicators chosen were selected to allow for (as far as possible) an ‘apples vs apples’ comparison of opportunities across disparate parts of the supply chain, for the purposes of identifying a short list of the most attractive opportunities for further assessment in Phase 3.

Page 2 of 71

Indicators included those relevant to the commercial viability of an investment opportunity (e.g. capital outlay required; potential return on investment; level of risk), as well as broader considerations such as social benefits (e.g. potential employment created). Consideration has also been given to the timeframe in which the opportunity is likely to be available to TVM participants and their industry – i.e. short, medium of long term.

For each opportunity, a recommendation has been given as to whether, on the basis of the information available, the opportunity warrants more detailed assessment in Phase 3. Those opportunities categorised as ‘yes’ appear to represent the most attractive opportunities and form the shortlist for Phase 3. Those categorised as ‘maybe’ are less commercially attractive, but may be worthy of further assessment for other reasons (e.g. they may generate substantial local employment). Those categorised as ‘no’ do not appear to warrant further detailed investigation.

The main test applied in determining whether an opportunity should be recommended for Phase 3 shortlisting was whether the potential return on investment (ROI) outweighed the potential risk. Those in which the potential ROI outweighed the risks by the greatest amount were the most attractive opportunities. Where the risk and returns were roughly equal, other factors received greater consideration (e.g. would the opportunity generate social benefits? Is there a high likelihood of a capital shortfall?).

The opportunities presented here have been assessed individually however in truth, many, if not most, are inter-related. For example, the establishment of one (e.g. Competent Authorities) may be a pre-requisite for another (e.g. access to the EU market), or equally the introduction of one (e.g. the establishment of a strengthened harvest framework) may better position TVM fisheries to take another (e.g. Marine Stewardship Council certification). We have tried to capture these inter-relationships in the assessment of each individual opportunity and the report should be read with these inter-relationships in mind. Consideration of a logical sequencing of opportunities within an overall TVM development strategy/plan should be an important consideration in Phase 3.

Page 3 of 71

Table 1: Standard performance indicators against which each opportunity was assessed.

Indicator Purpose Score Scoring guidelinesPotential return on investment

To assess the commercial potential of the opportunity

Very low The opportunity is likely to realise very low returns on investment (0-3%)Low The opportunity is likely to realise low returns on investment (3-6%)Moderate The opportunity is likely to realise moderate returns on investment (6-10%)High The opportunity is likely to realise high returns on investment (10-15%)Very High The opportunity is likely to realise very high returns on investment (>15%)

Level of risk To assess the probability that investment in the opportunity would not achieve its objectives

Very Low There is a very low risk that investment will not achieve its intended objectivesLow There is a low risk that investment will not achieve its intended objectivesModerate There is a moderate risk the investment will not achieve its intended objectivesHigh There is a high risk the investment will not achieve its intended objectivesVery High There is a very high risk that investment will not achieve its intended objectives

Level of management expertise required

To assess the level of management expertise required to take advantage of the opportunity

Low Only a basic level of business management expertise is required to take advantage of the opportunity

Moderate A moderate level of business management expertise is required to take advantage of the opportunity

High A high level of business management expertise is required to take advantage of the opportunity

Capital outlay required

To assess the likely initial capital outlay required

Very low $0-100kLow $100k-$500kModerate $500k-$1.5mHigh $1.5m – $5mVery high >$5m

Potential to attract private sector investment

To assess the likelihood of attracting private sector investment in the opportunity

Low There is little prospect of the private sector investing in this opportunityModerate There is a moderate prospect of the private sector investing in this opportunityHigh There is a strong prospect of the private sector investing in this opportunity

Potential to attract donor investment

To assess the likelihood of attracting donor investment in the opportunity

Low There is little prospect of external donors providing funding for this opportunityModerate There is a moderate chance of external donors providing funding for this opportunityHigh Progressing this opportunity is likely to be attractive to potential external donors, and there

is a strong prospect that funding would be provided

Page 4 of 71

Indicator Purpose Score Scoring guidelinesTimeframe To assess the

optimal likely timeframe in which the opportunity could be implemented

Short term This opportunity is likely to be immediately available to TVM participants and industry (0-2 years)

Medium term

This opportunity is likely to be available to TVM participants and industry in the medium term (for example, after some shorter term measures are put in place) (2-5 years)

Long term This opportunity is likely to be available to TVM participants and industry in the long term (for example, after some short/medium term measures are put in place) (5-10 years)

Social (or other) benefits

To describe any social or other (e.g. environmental) benefits from the opportunity

Low This opportunity is likely to have few ancillary social benefits (e.g. job creation)Moderate This opportunity is likely to have moderate potential for ancillary social benefitsHigh This opportunity is likely to result in significant spin-off social benefits

Recommended for assessment in Phase 3

To provide an overall recommendation on whether the opportunity warrants further assessment in Phase 3

Yes This opportunity appears commercially sound and a priority for Phase 3 considerationMaybe This opportunity has some features that might merit Phase 3 considerationNo This opportunity does not appear to be a strong candidate for Phase 3 consideration

Page 5 of 71

3. Results – summary table

Table 2 presents a consolidated summary of the scoring for each of the opportunities against the performance indicators. More detailed assessments of each opportunity, including justification for each score, are included at Annex 2. Table 2: Summary analysis of opportunities assessed.

Opportunity Potential ROI

Level of risk

Level of manag. expertise required

Capital Outlay

Potential to attract private sector invest.

Potential to attract donor invest.

Likelihood of capital shortfall

Social Benefits

Time-frame

Yes/No/Maybe

Catching sectorEstablishing a sub regional management framework to enhance control over the ALB (and other) fishery, including harvesting rights

Very High Moderate Moderate Moderat

e Low Moderate Low Moderate Short Yes

Summary comments:Establishment of a sub-regional framework of harvesting rights to enhance control over the longline fishery is the main strategic opportunity identified to strengthen returns to TVM participants. A structured framework of harvesting rights provides a solid foundation for investment, allows for the introduction of agreed harvest strategies, allows for proper pricing of resource access and the extraction of rents from the entire value chain. To extract maximum benefit from a framework of harvesting rights, partnerships will be required with other resource owners (e.g. the Melanesian countries, French Polynesia) to ensure effective control. The TVM group is well positioned to act as a catalyst to progress the framework. A robust framework of harvest rights, together with an agreed harvest strategy, also better positions TVM participants to take advantage of other opportunities – e.g. MSC certification.

Multi-zone access arrangements for TVM vessels

Low Moderate-High High Moderat

e - High Low Low High LowMediu

m-Long

No

Summary comments:Not clear that MZAA for domestic vessels would have disproportionate benefits in the short term over normal bilateral access arrangements. Previous studies have highlighted opposition to MZAA on the basis that most domestic vessels are not set up to take advantage of MZAA (i.e. they are most ‘fresh’ vessels, fishing close to home ports) and benefits would flow largely to foreign-controlled freezer vessels capable of roaming across multiple zones. Support for MZAA in the current project was mixed. The largest fleet capable of taking advantage of MZAA (Cook Island – 26 freezer vessels) showed little interest in accessing more southern zones which have experienced more variable catch rates in recent

Page 6 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

years. Support amongst other members (e.g. Tonga) was strong, however considerable investment in new/upgraded vessels would be required to take advantage. A number of risks of MZAA over normal bilateral processes were highlighted, including the risk that uptake of licences may be insufficient to cover administrative costs, loss of individual state control over access and risk of revenue loss if concessionary rates are applied.

Multi-zone access arrangements for DWFN vessels

Low High High Moderate

Low-Moderate Low Moderate Low Mediu

m No

Summary comments:Not clear that DWFNs would pay a price premium for access to multiple zones (over and above the existing cumulative cost of access to individual zones), and risks to existing bilateral arrangements exist. A single MZAA allowing access to all zones would limit the ability of each TVM member to set fees at rates consistent with their fishing opportunities (e.g. Cook Is may set fees at high levels consistent with good catch rates in recent years; Tonga may wish to set rates at low levels to encourage activity in the early years of re-opening DWFN access), as well as limiting the overall number of vessels able to be licensed to be consistent with caps set by individual members (e.g. Cook Is has a cap of 40 vessels in its northern zone). Significant fishing opportunities outside of TVM and on the high seas would serve to drive down fees. If bilateral access continued to be available, it is likely DWFNs would seek access only to productive fishing zones, outside of any MZAA (assuming total fees were lower). Notwithstanding that, there may be benefit in TVM members coordinating benchmark terms and conditions following the introduction of any framework of harvesting rights (e.g. PNA members have set a minimum price of US$5,000 per vessel day).

FAD deployment & maintenance

Very High (small scale);

Low (LL)Low Low

Very Low - Low

Moderate Low Moderate - High

Moderate - High Short No (for

LL)

Summary comments:Deployment of FADs to boost catch rates and reduce fuel consumption represents a sound investment for coastal small-scale fishers, though is unlikely to deliver significant benefits for longline. Recent data from Niue in particular has shown that economic benefits in improved catch rates and reduced fuel consumption outweigh the costs of construction, deployment and maintenance. Given returns will accrue mainly to the small-scale sector, returns overall are likely to be relatively modest. Deployment of FADs for the small-scale sector may result in social benefits including greater community access to fish which may have flow-on health benefits. Resolving issues around access where FADs are privately funded is an increasing challenge for fisheries management agencies.

Mothershipping for the domestic TVM ALB fleet

Low High Moderate High Low Low High Low Medium -

Long

No

Page 7 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

Summary comments:Previous attempts at mothershipping in the region have had little success due to high operating costs, low number of catching vessels and mixed operating strategies (e.g. mix of fresh and frozen). Best opportunities for success seem to be in better utilising multi-vessel fleets (e.g. consolidation of catch at sea on a single catcher vessel, allowing other vessels to remain at sea). This model is low cost and already used by some fleets – e.g. Yuh Yow in Cook Is. Not clear that a standalone mothershipping operation would be viable, although there may be benefit in greater co-operation between domestic fleets and others offering consolidation of catch at sea.

Reducing whale and shark depredation Moderate

- HighVery High Low Moderat

e High High Low Moderate

Short - Mediu

mNo

Summary comments:Clearly a problem in many EEZs, with direct losses reported to be around 7-15% of turnover and increasing. Several approaches to mitigate depredation have been trialled in the past with little success, largely due to the intelligence of the animals. New ‘streamer’ type mitigation devices have shown promise, but remain largely untested. Problem warrants further research to develop cheap, effective mitigation devices, but evidence of effectiveness would be required before significant investment is justified. Research is continuing through the Australian Antarctic Division in conjunction with several Pacific states.

Energy efficiency audits (to reduce fuel costs/emissions)

Moderate Moderate Moderate

Very Low- Low

High Moderate Moderate Low Short Maybe

Summary comments:Fuel for propulsion, refrigeration and other purposes (e.g. lights) represents up to 40% of the direct costs of a longline operation. Savings of up to 30% of fuel costs can be achieved through comparatively modest investments in technical advice, upgrading technology (e.g. new propellers, low sulphur engines, RSW chilling systems) and changed practices (e.g. removing excess weight from vessels, regular hull cleaning). The investment required would need to be balanced against the costs of replacing the vessel (new vessels are likely to be more efficient) or chartering a newer vessel.

Development of the Southern SWO fishery Moderate Moderat

e High Moderate High Low Low Low Short Yes

Summary comments:Some prospect for a viable southern fishery between northern New Zealand and southern Tonga exists, based on a catch of 50% ALB and 50% SWO. Intensive fishing by DWFNs provides some evidence of a viable fishery, although it is not known whether stocks have been depleted. The fishery would require a chartered vessel with both freezing and

Page 8 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

chilling capability, and operated over the Dec-Jan period to coincide with peak US demand for SWO and the ‘off season’ for tuna supply. A breakeven catch of approximately 100t would be required, with 10% of fish sold chilled. The main risk is the possibility of inadequate catches. The opportunity appears worthy of exploration, though is likely to deliver relatively modest returns overall.

Processing/DistributionEstablishment of Competent Authorities to promote EU access (Catch Certification and Sanitary compliance)

Low Low Moderate - High

Moderate - High Low Moderate Low Low

Short - Mediu

m

Maybe –sanitary

Yes – catch cert’s.

Summary comments:Establishment of Competent Authorities (CAs) is not an ‘opportunity’ in itself, rather a pre-requisite to accessing the EU market. Considerable investment is required in the establishment of CAs, particularly for phyto-sanitary requirements. The main risk involved is investing in CAs if there is little exposure to, or interest in, the EU market by the catching and/or processing sector. There may be some value in consolidating investment in laboratory facilities in a single location that can be used by all TVM members. There may be value in establishing CAs for catch certificates to provide the option of third parties (e.g. French Polynesia, SE Asian processors) supplying products to the EU.

HACCP training for domestic processors/exporters

High Low ModerateVery Low - Low

Moderate High Low Moderate

Short - Mediu

mNo

Summary comments:HACCP training is not an opportunity of itself, rather a pre-requisite to accessing most developed markets. Funding for HACCP training may be available through a relationship with a secondary processor or donors. Even though the potential returns on investment are higher than the potential risks involved (assuming capital investment is low, and processing facilities to employ HACCP-trained staff are either in place or planned), we have not recommend it for further assessment here because the training is readily available and will be considered as a pre-requisite to the ‘primary processing’ opportunity described in Annex 2.13.

Sign up to the Interim Economic Partnership Agreement

Moderate Moderate Moderate High Moderate Low Moderate Moderat

eMediu

m Maybe

Summary comments:

Page 9 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

Scope of current benefits to TVM members from membership of the IEPA are relatively limited, given it applies only to product going to the EU market and only to canned and prepared and processed products (e.g. cooked loins); fresh and chilled products, which form the bulk of current exports, will still attract the 21% import duty. Duty free access to EU markets for fresh and chilled products may also be available through French Polynesia (although vessels must be HACCP compliant). Exporting direct to EU from TVM countries would require investment in Competent Authorities for phyto-sanitary and catch certificates. On balance, other trade routes and markets (e.g. US/Japan) through Pago Pago, French Polynesia and Fiji appear to offer less risk and with lower capital outlay.

Strengthening regional trading partnerships with established hubs (e.g. French Polynesia, Fiji and American Samoa )

High Low Moderate High High Moderate High moderate

Medium Yes

Summary comments:The benefits of this arrangement largely depend on being able to capitalise on duty free access arrangements available through adjacent trade hubs. French Polynesia has duty free access to the EU; and US markets; American Samoa has duty free access to the US market. Tariff free exemptions are applied to any third party exporting fish for processing in these countries. An opportunity exists to explore whether improved returns could be generated by strengthening trading arrangements through duty free hubs. Investments would be required in upgrading vessels to ensure HACCP compliance, and in establishing Competent Authorities (at least for catch certificates) where the EU market was accessed.

Exports of primary processed fish/loins to secondary processors

High Low Low - Moderate

Low - Moderat

eModerate Low -

Moderate Low Moderate Short Yes

Summary comments:Some TVM nations export whole-round (WR) or gilled-and-gutted (G&G) albacore tuna to major tuna processors in Fiji and American Samoa. There is potential to add value by dressing the fish - i.e., also removing head and tail (HGT) or stripping the loins from the frame altogether (quarter loins) – which would also reduce freezing and shipping cost by up to 50%. Converting the fish into cooked-frozen tuna loins would add further value as well as presenting an opportunity to process higher value by-products (e.g., yellowfin tuna, swordfish, mahi mahi and wahoo) for alternative markets (e.g., Australia and New Zealand), as well as the domestic market. The key risk is ensuring a sufficient supply of fish to keep the facility running at a viable capacity, and hence the opportunity may be more immediately relevant to TVM participants with higher domestic catch. This opportunity could be considered as a stand-alone, or as part of a supply arrangement with a larger secondary processor (see below).

MarketingTVM MSC certification for Moderate Low Moderate Low High High Moderate Moderat Mediu Yes

Page 10 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

ALB to strengthen market access for fresh fish products to the EU and North America

e mSummary comments:MSC certification may be important in developing new markets for TVM fish, as well as maintaining access to some traditional markets (e.g. US, France). Some evidence exists for price premiums in certified albacore fisheries. Strengthened management including the introduction of a stock-wide harvest strategy incorporating reference points and harvest control rules, as well as measures to limit bycatch interactions, would improve the chance of certification. MSC certification appears worthy of further investigation in Phase 3, though may be best pursued as a second stage activity after the introduction of a framework of harvesting rights.

Developing a TVM 'brand' for retail Low High Moderate

Low - Moderat

eLow Low Low Low

Medium -

LongNo

Summary comments:The bulk of TVM albacore are sold into commodity markets and are expected to see little benefit from a TVM brand. Another option would be to apply a brand to bycatch species sold into Australia and New Zealand. The value of a brand is a function of the price premium it commands in the market. Ultimately that premium exists because consumers identify that the quality, service and environmental or social ‘integrity’ of the products warrant a price premium. The brand does not create the premium so much as providing customers a quick way of identifying a suite of claims implied by the brand. The bulk of the investment lies in the systems underneath the brand which can be very expensive. At present, there appear to be few TVM products or supply systems that are ready for branding.

Developing markets in Japan and Australasia Low High High High Low Low Low Low Medium Japan -

No

High Low Low Low Low Low - Low Short Austral. - Yes

Summary comments:The primary opportunity in Japan is for ultra-low-temperature (ULT) seafood items; i.e., those that have been maintained at -60°C throughout the entire cold chain. Catch volumes taken in TVM waters are probably insufficient to justify the significant investments required to maintain the cold chain. Involvement of a knowledgeable Japanese partner would be an essential pre-requisite but unlikely.Better opportunities appear to exist in the Australasian market for value-added processed items originating from the by-catch of albacore longline fishing, including: yellowfin tuna, swordfish, mahi mahi and wahoo. This opportunity may be an adjunct to the ‘primary processing’ opportunity above. A person with marketing/sales experience in Australasia

Page 11 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

would be a prerequisite.Establishment of a TVM retail outlet in New Zealand

Low Low Low Low Low Moderate Low Moderate Short No

Summary comments:The possibility of establishing a retail fish outlet in Auckland, targeting the large ex-pat islander population and supplied by TVM vessels, has been examined in the past (by a Cook Is operator). At a breakeven point of 7t per week at NZ$25/kg, the project was not considered viable. If pursued, the project would be most viable from a TVM location with strong airfreight networks to Auckland.

Strategic partnership between TVM and large processors for ALB supply

_ Low Moderate Low High Low Low Moderate

Medium Yes

Summary comments:Much of the albacore harvested in the Pacific, including TVM, ends up in the north American market, and is processed through US-controlled facilities in American Samoa and Fiji. This results in a ‘buyer’s market’. However, considerable quantities of albacore are also processed in SE Asia. There is a possibility that large SE Asian processors may be interested in entering into supply arrangements with TVM (or a sub-set), to the mutual benefit of both parties. For example, Chicken of the Sea International lost much of its supply of albacore with the closure of its American Samoa plant. This opportunity may be attractive if the partner entity provided capital and training for the establishment of primary processing facilities in TVM countries.

Exploration of emerging markets (e.g. Russia, Brazil, Argentina, Middle East, Eastern Europe)

Low Moderate - High

Moderate - High

Moderate Low Low High Low Mediu

m No

Summary comments:Entry into non-traditional markets typically involves considerably higher risk that core markets, with little prospect of sustainable price premiums. TVM has yet to establish marketing relationships with primary and secondary markets, so considering tertiary markets at this stage is probably premature.

Enabling EnvironmentEstablishment of a Pacific Fisheries Fund Low -

ModerateModerate - High High Very

High Moderate Low HighLow -

Moderate

Medium -

LongNo

Summary comments:

Page 12 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

The establishment of a Pacific Fisheries Fund to support capital investments amongst the Pacific domestic fleet has been proposed in response to concerns about lack of access to credit. Under the structure proposed, the fund would act as a pool of seed capital with funds lent through banks under normal commercial conditions, with the exception of extended loan periods. Given the challenging conditions surround the global longline fishery, the limited recent success of domestic longline developments in the Pacific, and the need for favourable loan conditions, banks are likely to view the scheme as relatively high risk. It is unclear whether donors would provide initial seed capital for capital investments, although some may be available through existing ‘aid for trade’ type initiatives. Should relatively ‘cheap’ funding be available through donors, there are opportunities for capital upgrades that might produce returns, for example, upgrading vessels for compliance with EU HACCP requirements. Messages on access to credit in country were mixed. At least one bank indicated that credit was available, though funding was limited due to a lack of viable development proposals.

Establishment of domestic fisheries development funds

Low High Moderate - High

Moderate Low Moderate High Low Short No

Summary comments:The experience of development funds in the Pacific has been mixed, with a number of failures (e.g. Fiji’s Seed Capital Revolving Fund) and little sustainable development generated. Funds have notoriously been depleted by a failure of beneficiaries to repay loans after going out of business and through political intervention. Business failure has largely been attributed to a lack of business management skills amongst beneficiaries. To be successful, development funds require high levels of management expertise amongst both administrators and beneficiaries and operate consistent with normal commercial lending principles.

Strengthening fisher's associations Unknown

Low - Moderat

eHigh

Low - Moderat

eLow -

Moderate low High Low Short Maybe

Summary comments:Strong fisher representative bodies can play an important role in private sector development by influencing government policy and creating operating conditions favourable to business (fisheries management arrangements, tax, duty, labour, etc). In the context of the current study, there may also be opportunity for some fisher associations to act more like commercial cooperatives, negotiating bulk purchasing (fuel, bait, ice) and supply (guaranteed price supply contracts) arrangements to enhance returns (although this would need to take account of existing private business providing similar services). To date, funding for fisher representative bodies in the Pacific has been weak. Strengthening associations would require strong commitments from industry to provide sustainable funding at a level consistent the association’s objectives. DevFish 2 will shortly be commissioning a consultancy looking at sustainable funding sources for PITIA and national associations.

Page 13 of 71


Level of risk


Capital Outlay




Social Benefits

Time-frame

Yes/No/Maybe

Reviewing manning requirements/maritime code

High Low Low Low Low High Low Moderate

Short - Mediu

mNo

Summary comments:While the potential return on investment for this opportunity is higher than the potential risk, we expect this initiative to be followed up by the relevant groups (PITIA, SPC) outside of this work (i.e. it will happen anyway). Hence, we have not recommended further detailed investigation under Phase 3.

Page 14 of 71

4. Main conclusions

Based on the analysis above, the most attractive candidates for further assessment under Phase 3 are:

Establishing a sub regional management framework to enhance control over the ALB (and other) fishery, including harvesting rights

Development of the Southern SWO fishery (albeit a modest opportunity overall)

Establishment of EU Competent Authorities for catch certification (in the first instance)

Strengthening regional trading partnerships through established hubs (e.g. French Polynesia, Fiji and American Samoa)

Exports of primary processed fish/loins to secondary processors Development of a market for value-added bycatch in Australasia Strategic partnership between TVM and large processors for ALB supply TVM MSC certification for ALB to strengthen market access for fresh fish

products to the EU and North America

Those that included some features that might merit further assessment under Phase 3 are:

Energy efficiency audits (to reduce fuel costs/emissions) Establishment of EU Competent Authorities for sanitary compliance Sign up to the Interim Economic Partnership Agreement Strengthening fisher's associations

Those that did not appear to be good candidates for further assessment under Phase 3 were:

Multi-zone access arrangements for TVM vessels Multi-zone access arrangements for DWFN vessels FAD deployment & maintenance (for the longline fishery; FADs appear to

represent a good investment for the small-scale fishery) Mothershipping for the domestic TVM ALB fleet Reducing whale and shark depredation HACCP training for domestic processors/exporters Developing a TVM brand for retail Developing markets in Japan Establishment of a TVM retail outlet in New Zealand Exploration of emerging markets (e.g. Russia, Brazil, Argentina, Middle

East, Eastern Europe) Establishment of a Pacific Fisheries Fund Establishment of domestic fisheries development funds Reviewing manning requirements/maritime code

Page 15 of 71

Of this latter group, some were not recommended on the basis that the risks clearly outweighed the potential returns (e.g. multi-zone access for foreign vessels), while others were not recommended on the basis that they were already being pursued through other means (e.g. reducing whale depredation, review of the manning requirements) and would not likely benefit from further analysis in this study.

Of the opportunities recommended for Phase 3 consideration, the major strategic opportunity to enhance returns is to better control access to the southern longline fishery by implementing a framework of harvesting rights (e.g. a VDS) that can be used as an economic (as well as a sustainability) instrument. Partnerships with other ‘resource owners’ will be required to generate maximum benefit.

Establishment of a framework of well-defined, secure and ideally tradable harvesting rights and associated harvest strategy is the foundation for all future investment in the southern longline fishery – without it, investments are ‘building on quicksand’. A framework of secure harvesting rights allows for increased control over access to the resource, the introduction of an agreed harvest strategy, the extraction of rents from the entire value chain (without having to invest in all components) and the proper pricing of the ‘core ingredient’ in the value – access to the resource. In addition, the introduction of a secure framework of harvest rights better positions TVM to leverage other opportunities – for example Marine Stewardship Certification.

Ideally, the framework should provide uniform regional conditions of access, but allow each country to customise their own national approach to utilization and development that maximises the value of their harvest rights.

Importantly, TVM participants control only a portion of the southern ALB (and other fisheries) stock, and partnerships with other regional ‘resource owners’ (for example, some or all of the Melanesian countries, French Polynesia) will be required to establish a robust framework that exerts maximum control over, and extracts maximum value from, the fishery. The nature of partnership is open, but ‘bigger is better’ (albeit diplomatically more challenging). Our view is that TVM is well placed to act as a catalyst for the development of a regional framework.

Figure 1below shows the proportion of southern albacore and ‘all tuna’ catch in TVM participants’ waters in recent years1, as well as the coverage that could be generated through partnerships with possible regional partners (i.e. the Melanesian Spearhead Group and French Polynesia). It is worth noting that, even with most resource owners ‘in the tent’, TVM will not be in the same strategic position as PNA to leverage economic returns (e.g. PNA has historically had between 70-80% of catch within its waters, and was able to leverage higher returns by closing high seas waters as a condition of access). Nevertheless, a 1 Essentially the proportion of catch taken by vessels of all flags in TVM members’ EEZs, as a proportion of the overall catch of albacore and ‘all tuna’ taken by all vessels south of the equator.

Page 16 of 71

framework of harvesting rights establishes significantly enhanced control over a substantial portion of the stock, and places TVM (and partners) in a better position to act as a bloc in the WCPFC to strengthen management of fishing on the high seas, which has seen strong growth in recent years (Figure 2).

(a)

(b)

Figure 1: Cumulative proportion of catch by all vessels taken in the waters of possible regional partners to a southern longline management framework (TVM = Te Vaka Moana participants; MSG = Melanesian Spearhead Group countries; FP = French Polynesia). (a) shows the proportion of albacore catches taken south of the equator only. (b) shows the proportion of all tuna species taken south of the equator. (Data source: SPC)

Page 17 of 71

Figure 2: Trend in the catch distribution of southern albacore by all vessels between 1997 and 2009 (TVM = Te Vaka Moana participants; MSG = Melanesian Spearhead Group countries; FP = French Polynesia; Other EEZ = all other in zone waters south of the equator; HS = high seas south of the equator). (Data source: SPC)

While TVM members have made valuable progress on issues such as the allocation of harvest rights, less attention to date appears to have been given to the use of harvest rights as an economic instrument and how to best structure a rights-based framework to deliver maximum sustainable economic returns to participants. We suggest this would be a logical and valuable area of focus for Phase 3 of this study.

Many if not most of the opportunities identified in Phase 2 are dependent on, and will be influenced by, the success of others. Consideration of the inter-relationships between the most attractive opportunities should be a key consideration for Phase 3, with a view to developing an integrated and sequenced plan of measures to enhance returns from TVM fisheries. There is a need to focus on realistic opportunities, within a realistic timetable.

The opportunities presented here have been assessed individually though, in truth, many if not most are inter-related to some extent and will be influenced to some degree by the success or introduction of others. For example, the introduction of a framework of harvesting rights and harvest strategies will better position the fishery for MSC certification, while the establishment of Competent Authorities and vessel HACCP compliance is required to access the EU markets, etc. While we have given at least preliminary consideration to the optimal timing of each opportunity in the current Phase, consideration of the inter-relationships between the shortlisted candidates, including any sequencing considerations, should be an important focus of Phase 3. Ideally, the outputs from Phase 3 should be able to form the basis of an integrated, sequenced plan to enhance returns from TVM fisheries.

Complications associated with differences in the state of fleet development, domestic management arrangements and recent

Page 18 of 71

catches and catch rates between members has led to mixed support for multi-zone access arrangements.

The TORs for the project required specific consideration of the viability of multi-zone access arrangements (MZAA). Two types of MZAA were assessed: MZAA for domestic vessels and MZAA for foreign vessels.

The circumstances surrounding MZAA for domestic vessels are complicated by the significant differences in the status of fleet activity, domestic management arrangements and in zone productivity between members. Previous studies have highlighted little support for MZAA for domestic vessels on the basis that (a) domestic vessels are generally not well set up to take advantage of MZAA (i.e. they are typically ‘fresh’ vessels with little capacity to roam between zones) and (b) benefits would disproportionately flow to foreign-controlled freezer vessels capable of ranging across zones2.

The Cook Islands, with the largest fleet of freezer vessels capable of accessing multiple zones (26 vessels) and arguably the most productive zone, reported little interest in accessing more southerly TVM zones that have had lower catches in recent years, and consequently little interest in MZAA (indeed, the zone they expressed most interest in accessing - Kiribati’s Line Islands – is outside the TVM group). Conversely, other members (e.g. Tonga) have expressed strong interest in MZAA, however would require considerable investment in upgrading existing vessels – or increased use of charter vessels - to take advantage of MZAA for most TVM fleets and it’s not clear this will occur in the short term.

Additional possible complications with an ‘all-encompassing’ (i.e. a single licence gives access to all zones) domestic MZAA include:

o The risk that existing access fee revenues for some members will be reduced. For example, the Cook Islands currently licenses a maximum of 40 vessels in its northern zone and extracts comparatively good access fees. Under an MZAA for domestic vessels, the Cooks may be required to license vessels at concessionary rates, thereby losing revenue;

o the risk that uptake of licences would not cover administrative costs (given little interest from the largest fleet);

o the loss of some control by individual states over access to their waters, if licenses were issued by a central authority; and

o opposition from domestic fishermen unable to take advantage of MZAA, who may be forced to compete with more vessels in ‘traditional’ fishing grounds;

o potential for foreign-controlled vessels to use domestic MZAA as a means of gaining cheap access to multiple zones.

Given the development and implementation of a domestic MZAA would likely require considerable investment on behalf of TVM members (in human, if not 2 Peter Philipson, David Evans, Colin Brown and Norman Barnabas. (2007) Sub-regional Management Framework for South Pacific Longline Fisheries, DevFish.

Page 19 of 71

financial, terms), a key question is whether an MZAA would deliver disproportionate benefits over existing bilateral arrangements, which are also capable of facilitating access to multiple zones and can be tailored to local circumstances. Based on our analysis, the argument for investment in an MZAA is not compelling at present (noting also that there is an opportunity cost of spending time on MZAA when other opportunities may represent better value and resources are limited). These circumstances may change however if, for example, there is a significant shift in the structure of fleets towards freezer vessels (by ownership or charter), or interest from the larger northern freezer fleets in accessing multiple southern zones increases.

An alternative to an ‘all-encompassing’ MZAA is to agree a ‘framework’ style MZAA under which the general principles of access are agreed between parties – e.g. access will be granted on terms no less favourable than those for equivalent foreign vessels; access under any capped arrangement will be granted preferentially to TVM-flagged and controlled vessels, etc – but licences continue to be issued by each coastal state. This approach would retain sovereignty amongst parties, while at the same time giving TVM industry a signal that preferential treatment will be given if necessary investments are made in freezer vessels capable of taking advantage of multiple zones.

In relation to an MZAA for foreign vessels, further assessment is not recommended here. It is not clear that additional returns would be generated and a number of substantial risks were highlighted. These included:

o A single MZAA license set at a single fee rate would limit the ability of individual TVM members to set access fees at rates consistent with the productivity of their zones, and at rates designed to encourage activity in their zones. For example, Tonga has had little fishing activity in its zone in recent years. If it was to re-open its EEZ to foreign fishing it may wish to set rates at low levels in the early years to encourage activity to demonstrate a productive fishery. However, under a single-fee, multi-zone arrangement it would be unable to do so;

o Overall numbers of licences able to be granted under a single MZAA would likely need to be limited to the lowest cap set by an individual member (for example, to be consistent with the Cook Islands cap of 40 vessels in its northern waters).

o Members with ‘less productive’ waters may see little benefit, given effort will likely focus on areas of highest catch rates (if vessel numbers are capped, this may result in longer term equity concerns if any future allocation is based on catch history);

o The availability of similar fishing opportunities on the high seas is likely to put downward pressure on access fees.

Complications may also result from the fact that some countries – e.g. Samoa – do not currently licence foreign vessels, while an all-encompassing MZAA for foreign vessels would not fit with the access arrangements of some members (e.g. New Zealand).

Page 20 of 71

Notwithstanding that, there may be some benefit for TVM members in agreeing ‘benchmark’ minimum terms and conditions of access (e.g. PNA members have agreed a minimum price of US$5000 per vessel day) after a framework of harvesting rights had operated for a number of years. It is worth noting however, that TVM members are not in the same strategic position as PNA in demanding minimum conditions of access, given that significant fishing opportunities exist outside the TVM bloc and on the high seas.

The main opportunities in the processing sector appear to be in primary processing, perhaps linked to strategic supply arrangements with larger secondary processors and the development of alternative markets for value-added bycatch.

A number of related opportunities were identified as worthy of further assessment in the processing sector. In particular, primary processing of tuna on island to add value and reduce freight costs associated with exporting whole round and gilled and gutted fish was at the core of these opportunities. Associated with this, opportunities exist to strengthen competition for TVM product amongst buyers through strategic supply arrangements with larger, secondary processors (who may also provide funds to establish primary processing facilities) and in the development of value-added markets for bycatch species in Australasia. The key to making these arrangements work is to ensure an adequate supply of fish to keep any processing facility operating viably. As a result these opportunities may be best suited to TVM members with higher catches in the first instance.

The main opportunities in the domestic catching sector (apart from the relatively modest opportunity of developing the southern swordfish fishery) appear to be generated through a combination of measures that will increase their profitability and return on investment

Given the high cost environment in which TVM industry operates (e.g. fuel, freight, services), measures are required to both strengthen returns and reduce operating costs where possible. The main opportunities to enhance returns appear to be in strengthening competition for TVM-caught product in the supply chain through supply arrangements with established global processors, partnerships with established regional trade hubs to capitalise on preferential trade arrangements (e.g. duty free access to the EU through French Polynesia) and product differentiation through MSC certification. Investments may be required to take advantage of the first two opportunities – for example, upgrading of vessels to meet HACCP requirements, establishment of Competent Authorities if the EU is a target market. On MSC certification, the TVM fishery would be better placed to proceed with certification following the establishment of a framework of harvesting rights, including a harvest strategy that incorporated reference points, precautionary harvest control rules and measures to address bycatch and ecosystem interactions. Higher prices from MSC certification are by no means guaranteed, but the cost of doing nothing would be

Page 21 of 71

the prospect of deflated prices against higher competition from certified fisheries.

The main opportunity to reduce input costs identified here is to reduce energy inputs. Long lining is one of the most fuel intensive of fishing operations, with fuel costs representing up to 40% of the total direct costs. Advances in propulsion technology, basic vessel maintenance and improvements in freezing technology and more effective use of existing systems, can result in significant savings to operating costs. These inefficiencies can be identified through energy efficiency audits, but will require commitment to potentially medium to high levels investments by the sector. Energy audits can of course identify what may be feasible within each operator’s constraints, and make each operator more aware of energy inefficiencies which can determine future investment decisions – new, or upgrading from old. FADs will also likely reduce energy inputs for the small-scale sector.

In addition to this, other measures initiatives happening in parallel with this study – for example, developing techniques to mitigate cetacean depredation, review of manning requirements in the Pacific – may also assist overall profitability.

The enabling environment surrounding the industry at the national and sub-regional levels should be optimised.

While few specific proposals to reform the enabling environment have been recommended for Phase 3 consideration here, optimising the conditions under which industry operates will be critical to enhancing returns. The enabling environment in this context is the collective set of policy and regulatory instruments governing the industry (e.g. fisheries management arrangements, tax and duty arrangements, licensing arrangements, labour laws, tariffs, investment incentives, infrastructure, etc) and industry support mechanisms (e.g. credit facilities, technical support, capacity building – e.g. business management skills, industry representation, etc). Minimising impediments to growth (e.g. counterproductive taxes and duties) and maximising the efficiency of regulatory and administrative systems is of particular relevance to TVM members, given the need to overcome regional disadvantage in costs compared to many other regional centres. Assessing the conditions required to maximise the success of shortlisted opportunities will be a focus of Phase 3.

Partnerships with established regional and global players in the supply chain offer potential to enhance TVM returns

As noted in the Phase 1 report, the TVM grouping doesn’t include any of the main regional transport and distribution hubs, doesn’t participate as a significant player in regional processing and controls only a portion of the regional catching opportunities. As a result, partnerships with other players in the supply chain are required to improve TVM’s strategic position and enhance returns from its fisheries.

Page 22 of 71

Phase 2 highlighted a number of opportunities in which relationships with established players in the supply might enhance returns. These include:

o Partnerships with other resource owners to strengthen control over the fishery and extract greater rents;

o Supply partnerships with large processors to guarantee markets and price;

o Partnerships with strategic processing hubs to strengthen market access or reduce investment costs (e.g. French Polynesia to gain duty free access to EU markets).

Given that rents are most easily extracted from start and the end of the tuna value chain below (Figure 3), there is strategic advantage in TVM members (as suppliers of harvesting rights) partnering with reputable players at the end of the supply chain (i.e. entities which own brands and a customer base).

Figure 3: Generalised tuna value chain.

The details of potentially productive partnerships will be further assessed in Phase 3.

Approaches to maximise the value of harvesting rights may vary between TVM members.

TVM members’ main strategic advantage in the supply chain is as the owner of harvesting rights. A key question for each member in the context of this study then is how to maximise the value of those harvesting rights, the answer to which may vary based on each member’s circumstances (e.g. state of industry development, proximity to transport hubs, national development priorities, etc). For example, the Cook Islands may be geographically well-positioned to take advantage of duty free access to the EU through supply agreements with French Polynesia, while Samoa may be best placed continuing to supply the US market through Pago Pago. Given the absence of a domestic fishing industry, Tokelau may be best placed in the short term to extract value from harvesting rights through foreign access agreements.

Page 23 of 71

A clear assessment of the value chain that delivers maximum benefit to each member is needed to determine the requirements for participation. For example, a value chain delivering product to the EU will require investment in HACCP certification for vessels (and Competent Authorities if not via French Polynesia for example); some markets in the US and France will encourage MSC certification.

Page 24 of 71

Annex 1: Terms of Reference

Terms of Reference for a Consultancy to Enhance Returns from the Southern Longline and other Fisheries

Introduction

TVM Arrangement Participants (“TVM”) have agreed to a feasibility study to identify and evaluate sustainable business and development opportunities involving the catching, processing and marketing sub-sectors of longline and other fisheries of the TVM3 to enhance the returns to their domestic economies.

The objective of the study is to identify effective ways to enhance the returns to those economies by way of access, harvesting, supply, processing, transportation, marketing, creation of employment opportunities or otherwise. The study shall identify new and innovative approaches to the fisheries, including possible cooperative structures, including but not limited to joint branding, eco labeling, hygiene standards and regulation, marketing and development. This work will include an examination of subregional models of cooperation for achieving the objective of this study.

Background

Domestic tuna fisheries in the southern sub-region are at a turning point. Existing operational models that served the industry well in its formative years (1993–2003) no longer provide the commercial returns necessary to sustain or grow the sector.

Previous efforts to build a national commercial fisheries sector have focused on encouraging domestic catching capacity, but studies have shown that such developments are not necessarily best initiated by just focussing on the creation of a domestic catching sector.

Such studies concluded that the quantum of returns from the sector is most directly influenced by the operational model adopted, and that policies should be aligned to ensure that this is optimized, including potentially allowing direct foreign investment (DFI) wherever this is most beneficial to the industry, and to the national economy.

Therefore, new operational models, facilitated by innovative commercial, administrative and resource management and development frameworks are required. Frameworks may be at the national or bilateral or subregional level. This consultancy, which will include the use of value chain analysis, is designed to identify and evaluate such models.

Methodology and Tasks

The work will be conducted in three stages, as follows

3 TVM Participants are: Cook Islands, New Zealand, Niue, Samoa, Tokelau and Tonga.

Page 25 of 71

PHASE 1: BACKGROUND DATA ACQUISTION AND ANALYSIS

The consulting team (“the team”) will visit each TVM participant during Phase I and consult with all relevant stakeholders, including domestic industry. The Team will also acquire data, and other material that may be considered relevant to the objective of this study. Assistance will provided in terms of the provision of documentary material for this purpose by the FFA and TVM. The work of the team shall include but not be limited to:

Conducting a stock take of relevant regulatory frameworks for fisheries resources in TVM and previous proposals for multi-zone access arrangements

Determining current fisheries resources and activities in TVM, and a summary of scientific and catch data held by SPC, analyze trends

Generating projections on likely future fisheries resources in TVM EEZs

Assessing future market demands for longline caught tuna and swordfish and other fisheries for pelagic fish species, considering alternative market chains

Assessing existing TVM access to retail/distribution/cannery/loining operations including high value fresh markets

Drawing on approaches taken in other sectors, with a focus on New Zealand.

Examining relevant past business and development activities within TVM, both successful and unsuccessful, including any relevant reasons why.

Reviewing current value chain dynamics, including the increasing costs of doing business, demand and supply etc, in TVM

Examining similar fisheries in other geographical areas (e.g. Mauritius and French Polynesia)

Identifying other fisheries of interest to TVM– noting the objective of this study.

Output one: At the conclusion of phase I the team will provide a brief interim report on phase I, to TVM through the TVM Chair and seek confirmation of the findings of phase I with TVM before moving on to phase II

PHASE 2: IDENTIFY WAYS TO ENHANCE RETURNS FROM LONGLINE AND OTHER FISHERIES, FOR BUSINESS AND DEVELOPMENT

Taking into account the findings of phase I, the team will explore and evaluate any and all opportunities wherever they might occur both cooperatively and nationally, giving equal weight to all sub-sectors (catching, processing, marketing), and actively secure

Page 26 of 71

and incorporate the views and concerns of all stakeholders, including TVM domestic industry participants. The team shall:

Identify a variety of sustainable business and development options

Assess each identified business and development option against general business and development considerations

Assess the viability of multi-zone access arrangements

Prepare a shortlist of business and development options with reasons for selection

Identify additional measures, including regulatory measures, required to create an enabling environment that may complement the short listed business and development options.

Output II: At the conclusion of phase II the team will provide a report to TVM through the TVM Chair and will make a presentation to a TVM Governing Committee meeting to seek direction from TVM participants, so as to guide the work of phase III.

PHASE 3: ANALYSIS AND EVALUATION OF PROPOSED SUSTAINABLE BUSINESS AND DEVELOPMENT OPTIONS

In the final phase, the team, as directed by TVM, shall further investigate business and development options and additional measures (including development and investment in infrastructure) and provide an assessment and recommendations on the commercial viability of the selected options and the extent to which they might attract private sector investment, including if possible, identifying potential investment partners. The team shall comment, where appropriate, on:

Political considerations

Social welfare considerations

Commercial viability

Potential assistance required from other development partners

International competitiveness

Revenue sharing arrangements

Tariff advantages/disadvantages

Availability of supply/purchasers

Page 27 of 71

Governance arrangements, including whether co-operative structures could be utilized at any points of the value chain, cost saving or sharing mechanisms and other arrangements including joint branding, certification.

The sequence/priority of the considerations and arrangements as listed above

Output III: At the conclusion of phase III the team will provide an initial report to TVM through the TVM Chair and will make a presentation to a TVM Governing Committee meeting seeking discussion and guidance from the meeting. This discussion and guidance will be used in the production of a draft report which will be provided to TVM participants through the TVM Chair. This report will then be finalized on the basis of comments received (from TVM Participants) and will be provided to TVM Participants through the TVM Chair.

Travel

During Phase one, at least one member of the consulting team shall visit each of the TVM participant countries and consult with all relevant stakeholders, including domestic industry.

Alternative innovative travel and consultation solutions which will improve value for money and time utilization will be considered favourably, for example the use of national consultants for preliminary country-level work.

Outputs

Within two weeks of contract signature and before starting to compile the report:

An agreed work plan, methodology, and travel plan, based on the bid document but amended as necessary following an exchange of emails with the Manager, FFA REI Unit.

At the end of Phase One:

At the conclusion of phase I the team will provide a brief interim report on phase I, to TVM through the TVM Chair and seek confirmation of the findings of phase I with TVM before moving on to phase II

At the end of Phase Two:

At the conclusion of phase II the team will provide a report to TVM through the TVM Chair and will make a presentation to a TVM Governing Committee meeting to seek direction from TVM participants, so as to guide the work of phase III..

At the end of Phase Three:

At the conclusion of phase III the team will provide an initial report to TVM through the TVM Chair and will make a presentation to a TVM Governing Committee meeting seeking discussion and guidance from the meeting. This discussion and guidance will be used in the production of a draft report which will be provided to TVM

Page 28 of 71

participants through the TVM Chair. This report will then be finalized on the basis of comments received (from TVM Participants) and will be provided to TVM Participants through the TVM Chair.

Within 1 month of the conclusion of the consultative meeting to be arranged at the end of Phase 3:

A draft report of not more than 50 pages

Within two weeks of receiving comments on the draft

The final version of the document in MS Word.

Timing:

The study will commence in March, 2011 and should be completed before the end of July 2011. It is recognized, however, that collecting the necessary information may result in delays, and some flexibility will be allowed if necessary.

Reporting:

The consulting team will report directly to the FFA Manager – REI Unit or other FFA staff as designated on administrative matters and to the TVM participants on substantive consultancy matters, through the TVM Chair (or his designate).

Page 29 of 71

Annex 2: Detailed assessments

Page 30 of 71

A2.1 Establishing a sub regional management framework to enhance control over the ALB (and other) fishery, including harvesting rights

Opportunity:Description:In most cases, the most valuable potential fisheries asset available to TVM members is the right to harvest ALB and other longline fisheries within their respective EEZs. The present value of this asset is suppressed by the fact that access arrangements to these resources are split between the high seas and EEZs and arrangements within EEZs are negotiated on a piecemeal basis. Harvesters of these TVM resources are thereby able to avoid paying access fees reflecting their true potential value. The opportunity is to develop a sub-regional management framework over the ALB (and other) fishery that imposes improved collective control by coastal states over their fisheries. Such control is a pre-requisite for an associated collective approach to maximising the economic value of harvesting rights in the regional longline fishery.

Potential Return on Investment Very HighComments:Potential returns are excellent because the asset actually exists but suitable economic instruments have not been deployed to release satisfactory returns from the asset over time. The primary reason for this is that those instruments cannot be used by a single coastal state, or even a number of coastal states. The Vessel Day Scheme (VDS) that is being implemented by the Parties to the Nauru Agreement (PNA) is an example of the type of collective approach necessary for coastal states to impose effective sovereignty over highly migratory shared fish stocks. The value of a Vessel Day in this arrangement has leapt from around US$2,000 to US$5,000 in the last year (from approximately US$60m to US$150m).

The history and detail of the PNA VDS does not provide a template for TVM but it does illustrate the rewards of coastal state co-operation and the broad order of steps that must be followed to implement a robust sub-regional arrangement.

Level of Risk: MediumComments:There are two main sources of risk to the establishment of an effective sub-regional management framework (external and internal). The external risk comes from Distant Water Fisheries Nations (DWFNs) and other parties that are gaining access to the ALB (and other) fishery at present. These parties face a prospective rise in fish costs, new pressures to add more value to longline species and to reconfigure their businesses into a more competitive form. It is predictable that they will attempt to stymie the establishment of a sub-regional framework with these consequences by exerting influence through fisheries and non-fisheries bi-lateral relationships and through the Western and Central Pacific Fisheries Commission.

The internal risk comes from the temptation of TVM parties to break ranks with sub-regional ‘partners’, perhaps to pursue bi-lateral relationships inconsistent with the sub-regional framework or simply to obtain a disproportionate share of the benefits of that arrangement.

Level of Management Expertise Required: HighComments:There are two types of management expertise required: political management and technical management. Technical management expertise is required for the design, maintenance and operation of administration, compliance and trading systems necessary to support the new framework. It is likely that these systems will be customised or bespoke and the highest quality international expertise in these fields should be sought.

Page 31 of 71

Although this management expertise is scarce, it can be readily outsourced by TVM.

On the other hand, political management cannot be readily outsourced and must also be of a very high quality. A sub-regional framework that matches the geographic range of the ALB (and other) fishery will span not only TVM but also French Polynesia and parts of Melanesia. The political leadership to assemble this new group of coastal states and to overcome both the internal tensions and external pressures that stand in the way of a negotiated framework and work programme must ultimately come from within the group.

Capital Outlay: ModerateComments:The development of a new sub-regional management framework for the ALB (and other) fishery is primarily about identifying suitable ideas and plans for implementation. The costs are therefore analysis and transaction costs. The outlay therefore will take the form of a re-orientation of existing TVM and other sub-regional activities around a new agenda or set of objectives. These diplomatic and related costs are ‘sunk’ costs – the question is what return is delivered from that outlay. The return is a function of the quality of ideas embedded in the management framework design, the time required to achieve agreement over that framework and implement the systems necessary to make it work and finally, the quality of compliance with those systems.

Potential to Attract Private Sector Investment: HighComments:Once the specifications for the collective longline management regime have been agreed, it is likely that there will be strong private sector interest in the development of registries and other services such as a vessel register, vessel monitoring system, observation systems and compliance systems. This capital outlay would be recovered by the private sector investors through service contracts with the TVM partners individually or collectively and from user fees.

Potential to Attract Donor Investment: HighComments:Donors, especially the World Bank, have shown strong interest in supporting the PNA VDS initiative. It is likely that a well conceived TVM led sub-regional longline initiative would attract similar support. The strings inevitably attached to donor investment will require close examination by TVM however. In particular TVM needs to maintain discretion over the personnel and companies involved in design and service delivery work and a necessary degree of independence from existing regional and sub-regional fisheries management arrangements.

Likelihood of Capital Shortfall: LowComments:There is little likelihood of a capital shortfall with this initiative. First, the diplomatic/ negotiation costs of achieving agreement over participation in a new sub-regional fisheries management framework could be covered by a re-orientation of existing meeting programmes. Second, to the extent that outside technical expertise is needed, donor funding assistance could be sought. Third, the costs of funding the hardware, software, premises etc. needed to support the operation of the framework should be met by third party service suppliers funded ultimately by the users of these services (harvesters) through access fees. Once the framework is in place and a new collective approach to the pricing of fisheries access payments, the costs of capital investment to refine systems could be funded from enhanced access fee revenues.

Social Benefits: Medium/High

Comments:The potential benefits from the establishment of a new and tighter sub-regional fisheries management framework are available in the first instance in the form of higher access fee revenues to TVM governments or their relevant fisheries agencies. These revenues

Page 32 of 71

can be applied to government programmes designed to provide social benefits according to the priorities of the individual country.

Alternatively, governments may choose to trade–off a proportion of these potential revenues in order to support local employment or the establishment of local businesses that utilise ALB or other longline species by underwriting or guaranteeing access to harvesting rights at favourable rates.

Timeframe: Medium to Long-term

Comments:Negotiating a high-level international agreement with the coastal states who would comprise the participants in a sub-regional ALB (and other) fisheries management framework is likely to take at least one year. The design and approval of the specifications for the framework itself, including the sustainability measures and economic instruments to be employed would take another year. A third year would be required to build and implement those systems while establishing an organisational structure for the sub-regional group to oversee the implementation and ongoing delivery of internal and pout-sourced services.

The timeframe from commencing work on the concept to start-up is therefore three years. The delivery of full benefits to parties from the framework is likely to take a further three years as those benefits are contingent upon harvesters and other participants in the ALB (and other) value chain generating cost efficiencies and price improvements that underpin improved access fee prices.

Recommended for Phase 3 Shortlisting? Yes

Page 33 of 71

A2.2 Multi-zone access arrangements for TVM vessels

Opportunity: Multi-zone access arrangements for TVM domestic vesselsDescription:Multi-zone access arrangements (MZAA) are essentially an agreement amongst TVM members to allow fishing access to all EEZs for TVM vessels at a rate cheaper than for non-TVM partner vessels. Similar arrangements have been agreed elsewhere in the Pacific (e.g. the FSMA).

Supporters of MZAA have ascribed a number of theoretical benefits including the ability for vessels to ‘follow the fish’ through two or more zones to maintain catch rates and increasing use of zones that are currently ‘underutilised’ (e.g. Tonga, Tokelau).

There are (at least) two possible models for a TVM MZAA:

an ‘open-ended’ MZAA in which a single license, once granted, provides access to all TVM EEZs (albeit with a condition to operate within the laws set by each relevant coastal state); and

a ‘framework’ style agreement where the general principles of access are agreed between the TVM parties (e.g. fees charged will be lower than those for an equivalent foreign vessel), but access to each zone requires a licence from the relevant coastal state.

Access to multiple zones can also be arranged through normal bilateral licensing processes.

Previous studies examining MZAA for the longline fishery in the Pacific have found little support amongst both industry and government. Stakeholders interviewed by Philipson et al (2007) opposed MZAA on the basis that existing domestic Pacific vessels were not set up to take advantage of MZAA (i.e. they were ‘fresh’ vessels not capable of roaming multiple zones) and that benefits would flow disproportionately to foreign-controlled freezer vessels4. Notwithstanding that, some stakeholders interviewed during Phase1 of this study believed that the concept of an MZAA amongst TVM warranted further consideration, particularly in light of variable catch rates amongst zones and ongoing high fuel prices.

Potential Return on Investment LowComments:At the government/administrative level, to break even the cost of negotiating and implementing an arrangement would need to be covered by licensing revenue generated from the MZAA. Both Philipson et al (2007)5 and the country visits associated with this study revealed that there was little interest amongst some members (e.g. Cook Islands) in MZAA. Indeed vessel operators in the Cook Islands, the largest fleet, expressed most interest in accessing the (Kiribati) Line Islands and not other TVM member waters. Strong interest in MZAA was expressed in Tonga, however considerable investments in new vessels (or charter vessels) would be required to take advantage of MZAA.

At the industry level, for most TVM partners to take full advantage of an MZAA there would have to be significant investment in fleet capacity. Currently the only vessels capable of ranging widely are the 26 freezer longliners flagged to the Cook Islands, 2 flagged to Tonga and 2 New Zealand vessels. If access to multiple zones was granted relatively cheaply these vessels might generate reasonable a ROI, however it would be dependent on whether catch rates in other TVM zones were disproportionately higher than the home zone.In the case of the Cook Islands fleet there appears to be little current interest in 4 Peter Philipson, David Evans, Colin Brown, Norman Barnabas, Sub-regional Management Framework for South Pacific Longline Fisheries, DevFish, 2007.5 Philipson et al (2007), Ibid.

Page 34 of 71

accessing more southern TVM zones which have experienced more variable catch rates. In the case of Tonga, which has experienced relatively modest catch and catch rates in the past 6-7 years, strong interest was expressed in the concept of MZAA. Reforms allowing the use of domestic charters may help overcome the need for significant initial investment in freezer vessels.Level of Risk: Medium to

highComments:There are a number of possible risks that would need to be considered in structuring any MZAA. These include:

the risk that uptake of licenses would be insufficient to cover the cost of administering the MZAA;

potential for some loss of control over access for each individual member if a single license authorised access to all TVM zones;

risks associated with the significant differences in catch rates, effort and fleet development between the TVM parties. For example, some fisheries are probably under-exploited while others have placed caps on effort. Consequently, fishing fee levels vary and there is a potential for a TVM member to lose revenue through concessionary licensing;

the risk of opposition amongst domestic fleets if they are required to compete against more vessels in ‘traditional’ fishing grounds;

the risk that foreign-controlled vessels will use an MZAA as a means to gain cheap access to TVM waters while delivering few benefits to domestic economies.

An additional consideration would be how New Zealand fit within any MZAA, given the significant disparity between the industry’s state of development and access arrangement between New Zealand and other TVM participants.Level of Management Expertise Required: HighComments: The experience of the US Treaty on Fishing and the FSM Arrangement shows that the management of a MZAA would require a high level of administrative expertise to ensure the arrangement worked effectively, and as intended. Establishing fee levels, effort limits, qualifying or eligibility criteria for example would need careful consideration to ensure that TVM benefits are maximized and that no partner is made worse off. As well, there would need to be established an apparatus to administer the arrangement including with respect to licensing and financial arrangements, monitoring, compliance and dispute settlement.Capital Outlay: Medium -

HighComments:To establish, maintain and take advantage of a MZAA, investment would be required by both government and industry.

At the government level, costs would involve the initial negotiations to agree an arrangement and the subsequent costs involved in implementing the arrangement.

At the industry level, to benefit fully from an MZAA for TVM vessels and to be competitive TVM operators would need to invest in freezer vessels and/or contend with high operational costs (fuel, bait and wages). The scale of investment required for sole ownership by local companies is high and would likely require significant foreign investment. TVM partners with longline freezer vessels on the WCPFC Record of Fishing Vessels are: Cook Islands – 26, New Zealand – 2 and Tonga – 2. Vessel charters may be an option but these arrangements would need to comply with eligibility criteria.Potential to Attract Private Sector Investment: LowComments:The Philipson 2007 study indicated that there was little interest among industry and governments in the establishment of a multi-lateral access arrangement for albacore longlining. The current MRAG study revealed that both Samoa and Tonga expressed

Page 35 of 71

interest in fishing in other EEZs but that along with the Cook Islands, there was little interest shown in opening up their respective zones to TVM partners. Cook Islands industry expressed more interested in access to the Line Islands than any partner TVM EEZ.Potential to Attract Donor Investment: LowComments:Donors have shown little interest in investing in longline fishing in TVM countries to date and there would appear to be little added benefits from a MZAA arrangement to change this. If TVM participants showed strong interest in pursuing a MZAA, there is some prospect of attracting donor funding to assist in the technical elements of design and establishment of the arrangement, however a strong case would need to be made that circumstances had changed significantly from the previous study in 2007.

Likelihood of Capital Shortfall: HighComments:There is a high risk that costs associated with establishing and managing an MZA arrangement are not covered by fees levied due to a lack of license uptake. Current indications are that vessels of the largest TVM longline fleet would not be interested in fishing in another TVM EEZ. Other TVM members would need to enhance fleet capacity to take advantage of an MZA.

Social Benefits: LowComments:In the short term there would appear to be little to gain from an MZA arrangement due to the initial low level of likely license uptake – based on current fleet structures and the apparent lack of interest from industry. Even in the long term the example of the FSM Arrangement reveals that gains would be modest with low levels of domestication of vessels and low levels of additional employment.

Timeframe: Medium to Long-term

Comments:Negotiating an MZAA would likely require several meetings over a number of years. National legislation and fishery management plans would probably also need to be amended to cater for the arrangement. Once the arrangement is in place, the administrative apparatus would need to be established. In addition, the fleet development necessary to enable multi-zone fishing would be a long term prospect even if investment funding was readily availableRecommended for Phase 3 Shortlisting? No

Page 36 of 71

A2.3 Multi-zone access arrangements for DWFN vessels

Opportunity: Multi—zone access arrangements for DWFN vesselsDescription:A multi-zone access arrangement (MZAA) for foreign vessels would an administrative agreement under which foreign-flagged vessels gained access to two or more TVM member EEZs under a single license. In its most comprehensive form, a single license could be granted allowing access to all TVM member zones. More ‘tailored’ arrangements could also be agreed between groups of TVM members allowing access to a sub-set of the TVM group under a single license.

Irrespective of the number of participating states, any MZAA would require a system of centralised administration (e.g. FFA administers the UST on behalf of Pacific member states; PNAO will administer the FSMA on behalf of member states), including clear system of attributing and disbursing funds, supported by a robust system of catch and effort monitoring.Potential Return on Investment LowComments:The key question here is what is the return on investment for TVM parties that could be generated from a MZAA over and above that which could be generated through normal bilateral licensing arrangements – i.e. would foreign vessels be prepared to pay a price premium (over and above the cumulative cost of access to individual zones) for multiple zone access. (The other way to attract increased return would be to attract more vessels, although we are assuming this option would be limited by license caps applied by individual TVM members – e.g. Cook Islands).

A key consideration is whether foreign vessels would also have the option of securing access through normal bilateral agreements. Assuming this is the case, and given the significant disparity between catches and catch rates between different TVM zones, it is reasonable to suspect foreign vessels would seek access to historically productive zones only through bilateral agreements, rather than through a comprehensive MZAA (assuming they could get these cheaper than the MZAA to all waters). The alternatives to this are that (a) TVM members force all foreign access through a MZAA (which we have assumed is unlikely), and (b) MZAA fees are set at a level less than the cumulative price of the most productive zones (which we have also assumed is unlikely).

The other consideration is that significant fishing opportunities exist outside the TVM bloc and on the high seas, and there is a risk that cheap access to these opportunities will drive down prices.

Given this background, it is difficult to see how significant returns on investment could be generated through a comprehensive MZAA. Nevertheless, there may be benefit in sub-sets of TVM members agreeing multi-zone access arrangements where a strong case can be made (e.g. where both members waters we part of a logical fishing plan)

There also may be benefit in agreeing ‘benchmark’ terms and conditions of foreign vessel access amongst the TVM parties (e.g. PNA members have set a minimum vessel day price of US$5000), however the TVM group is likely to be better placed to undertake informed discussions after any framework of harvesting rights has operated for a number of years (and there is some understanding of willingness to pay, variations in price and demand between zones etc). It is also worth noting that TVM members are unlikely to be in the same strategic position as PNA with respect to demanding minimum prices for harvesting rights, given significant fishing opportunities will occur outside the TVM bloc and on the high seas.

Level of Risk: HighComments:

Page 37 of 71

Many of the risks involved in MZAA for foreign vessels are similar to those for domestic vessels. These include:

The risk that demand will be insufficient to cover administrative costs; The loss of some individual coastal state control over access to their waters, given

licensing authority would likely be ceded to a third party; Opposition from domestic fishers who may be required to compete with more

foreign vessels, if uptake was strong; MZAA would likely not fit well with New Zealand’s existing system of access

rights.

In addition to these, other risks specific to foreign vessels apply:

Some countries – e.g. Samoa – do not currently licence foreign vessels and may not be interested in participating in an MZAA;

Members with ‘less productive’ waters may see little benefit, given effort will likely focus on areas of highest catch rates;

There is a risk that ‘premium’ fees charged by some members to productive waters may be diluted if coupled with less productive water;

A single MZAA license set at a single fee rate would limit the ability of individual TVM members to set access fees at rates consistent with the productivity of their zones, and at rates designed to encourage activity in their zones. For example, Tonga has had little fishing activity in its zone in recent years. If it was to re-open its EEZ to foreign fishing it may wish to set rates at low levels in the early years to encourage activity to demonstrate a productive fishery. However, under a single-fee, multi-zone arrangement it would be unable to do so.

Overall numbers of licences able to be granted under a single MZAA would need to be limited to the lowest cap set by an individual member. For example, the Cook Islands currently limits the number of licenses to 40 for the fishery north of 15oS, and 10 south of 15oS. If access was granted to all zones under a MZAA, the number of licences would need to be set at this level or lower to ensure the cap was not breached if all vessels fished in the Cooks. Under normal bilateral arrangements, TVM members may be able to increase revenues from foreign access by licensing more vessels. For example, theoretically the Cook Is could license 35 vessels; Tokelau could licence a different 20 vessels; and Tonga could licence a different 20 vessels again.

Given the need to limit MZAA licences to be consistent with national caps, there might be flow-on equity concerns. For example, if the number of licences was limited to 40 to be consistent with the Cook Is cap, the majority of that effort is likely be focused on the more productive of the TVM zones (in recent years, Cooks Is, Samoa and perhaps Tokelau, although there has been little fishing). If catch and effort is taken into account in future allocation decisions, the bulk of the effort would accrue to the more productive TVM zones. While this may happen anyway, under bilateral arrangements, members with historically less productive waters would at least have the option of setting low foreign access fees to encourage activity.

Level of Management Expertise Required: HighComments: A high degree of management and technical expertise is required at the Government level to develop and agree equitable terms for an MZAA, as well as administer the arrangement efficiently over time.

Capital Outlay: ModerateComments:The main capital outlay in the short term would be in meetings and any technical advice to establish the MZAA. In the longer term, the main outlay would be in administering and maintaining the system (i.e. licensing, catch/effort monitoring, attribution and disbursement of funds, financial and administrative oversight, etc). These costs may be

Page 38 of 71

minimised to some extent if the administration of the arrangement was ‘outsourced’ to an existing body with infrastructure and resources (e.g. FFA), and governance/policy/oversight meetings were ‘piggybacked’ off existing meetings (e.g. FFC etc).

Some ‘opportunity costs’ would also apply if TVM representatives limited time was spent negotiating an MZAA for foreign vessels, rather than on opportunities that are likely to yield better returns in the longer term (e.g. establishing a framework of harvesting rights).

Potential to Attract Private Sector Investment: Low-Moderate

Comments:There is little prospect of attracting private sector investment to assist in the establishment of the framework.

The prospect of attracting foreign access fees through a MZAA would depend largely on whether access to multiple EEZs could be secured at a cheaper overall rate than negotiating bilateral agreements with relevant coastal states, taking into account the transaction costs involved (e.g. negotiating a single multi-zone licence would likely be more efficient than negotiating several bilateral agreements).

Potential to Attract Donor Investment: LowComments:Some donor funding might be supplied to assist with the development of the arrangement, though ongoing costs would likely need to be recovered from access fees.

Likelihood of Capital Shortfall: ModerateComments:The likelihood of capital shortfall to establish the arrangement is probably low given meetings can be piggybacked off existing meetings.

The likelihood of capital shortfall in the administration of the scheme is probably at least moderate for a comprehensive MZAA. The likelihood may be lower for smaller, more tailored groupings.

Social Benefits: LowComments:Some social benefits might apply if conditions of access required landing of (at least some) product domestically, which either supported domestic onshore investments or resulted in better availability of fresh fish. The Cook Islands already has similar arrangements in place. It is not clear whether access through a MZAA would result in any increased social benefits over and above those flowing from bilateral arrangements.

Timeframe: MediumComments:Negotiation and establishment of an MZAA for foreign vessels is likely to take at least 2 years. The flow of benefits thereafter would be dependent on the attractiveness of conditions of access.

Recommended for Phase 3 Shortlisting? No

Page 39 of 71

A2.4 FAD deployment & maintenance

Opportunity: Increased deployment of FADsDescription:The deployment of fish aggregation devices (FADs) has the potential to improve catch rates for tuna and other target species, and/or support more efficient targeting by aggregating target species. While FADs are not typically used in association with the commercial pelagic longline fishery, they can be used to improve catch rates of trolling, vertical longlining and other techniques used by smaller scale coastal fishers (e.g. handlining). Benefits to local communities through the deployment of FADs identified by SPC included improved catch rates, improved safety, reduced operating costs (i.e. reduced fuel consumption), reduced pressure on reef fish species and improved availability of fish in coastal communities.6,7

The opportunity assessed here is to invest in the deployment of FADs to improve catch rates and reduce operating costs of coastal and subsistence fishers in TVM countries.Potential Return on Investment High (for small-

scale fishers); Low (for LL)

Comments:The overall level of direct financial return on investment from the deployment of FADs is expected to be comparatively low overall given benefits will flow disproportionately to the small-scale and subsistence sector. Few direct benefits are expected to flow to the longline sector. Some of the main ‘returns’ on investment are likely to be social, through improved availability of fresh fish in TVM communities and improved catch rates for recreational and charter fishers.

Nevertheless, FADs are likely to represent a sound investment for the small-scale sector. An analysis by SPC of FAD deployment in Niue and the Cook Islands demonstrated that the value of catch taken in association with FADs (Niue: NZD$153,988; Rarotonga: NZD$230,302) outweighed the cost of materials (Niue: NZD$91,007; Rarotonga: NZD$90,480)8 (albeit the analysis did not take into account the costs of FAD deployment and maintenance which vary between locations). In particular, the economic return on investment may be higher in countries with significant small scale fleets – for example the Samoan alia fleet.

A key question in considering an investment in FADs is whether the fish expected to be taken in association with FADs would be taken without FADs (i.e. do FADs improve overall catches or catch rates?). SPC analysis of a long term monitoring program in Niue shows a clear trend towards higher catch rates in association with FADs for both offshore and inshore trolling (Figure 1)9.

6 SPC (2005) Research into more cost effective mooring systems for fish aggregating devices (FADs) in the Pacific region as a means to limit fishing pressure on inshore marine resources. Final Report to New Zealand under the Pacific Initiative for the Environment Fund. 143pp.7 Sharp, M. (2011). The benefits of fish aggregating devices in the Pacific.8 Ibid, SPC (2005)9 Ibid, Sharp (2011)

Page 40 of 71

Figure 4: Catch per unit of effort (kg/hr) comparison of troll catch in Niue with and without FADs (‘open water’). (Source: Sharp, 2011)10

The same study also reported that fuel usage amongst Niuean fishers was approximately 0.5 litres less per hour when fishing on FADS compared to fishing in open water, resulting in a saving of approximately 979 litres per annum. Applying standard prices to both fish catches and fuel, and taking into account the costs of FAD installation and maintenance, Sharp (2011) concluded that investment in FADs in Niue produced both positive cash flow and had an overall net present value of $95,813 at a 5% discount rate (anything greater than $0 represents a viable investment). There are two significant potential issues with this analysis. First FAD revenues do not seem to be estimated as a variance against a non-FAD control catch. Second, the discount rate appears to be far too low for items that are subject to damage and loss (probably a discount rate of 15-20% would be more appropriate for investments with these characteristics).

Table 3: Cash flow and net present value of FAD investment in Niue. (Source: Sharp, 2011)

Year 1 Year 2Financial Gain (cash inflow) NZD NZDOffshore FAD $64,027 $64,027Inshore FAD $7,712 $7,712TOTAL GAIN $71,740 $71,740Cost of FAD (cash outflow)5 x Offshore FADs $23,8353 x Inshore FADs $10,215TOTAL INVESTMENT $34,054Maintenance of FAD (cash outflow)5 x Offshore FADs $3,7063 x Inshore FADs $1,969TOTAL MAINTENANCE $5,675CashflowOffshore FAD $40,188 $60,321Inshore FAD -$2,503 $5,743NET CASHFLOW $37,686 $66,065Cumulative Cashflow $37,686 $103,750Net Present Value (5 % discount rate)Offshore FADs NPV $92,987.55Inshore FADs NPV $2,825.94

10 Ibid, Sharp (2011)

Page 41 of 71

TOTAL NPV $95,813.49

Level of Risk: LowComments:The benefits associated with FADs are well-recognised and relatively low risk – i.e. where FADs are deployed in areas where target species are known to occur, it is reasonable to expect that they will aggregate fish. The main risk is in FAD loss during bad weather or through deliberate vandalism. Another main consideration is the potential for increased catches from FADs to depress market prices, particularly in smaller TVM members where the domestic market is small.

Level of Management Expertise Required: LowComments:Little management expertise is required to take advantage of FADs.Capital Outlay: Very Low - LowComments:The capital outlay depends on the number of FADs deployed. SPC (2005) reported that deepwater FADs could be constructed for around NZD$4,183 in 2003, and shallow water FADs for around NZD$3,093. These costs included costs of materials, freight to get materials to the site and the mooring block, but not deployment costs. Anecdotal evidence suggests costs have not increased much since11. Costs are likely to be very low when considered at the country or island level, and low when considered across the TVM region.

Potential to Attract Private Sector Investment: ModerateComments:Historically, most FADs in the Pacific have been deployed using public (donor) sector funding, however there is increasing interest from the private sector in contributing to FAD deployment. A number of sub-surface FADs have recently been deployed by small-scale and charter fishers in Fiji, surface FADs have been installed by game fishing clubs in Vanuatu and RMI, and historically some charter boat operators in Tonga have installed sub-surface FADs12.

A key issue that needs to be considered by TVM fisheries department is the question of access to FADs which have been funded privately. Disputes over access to FADs have previously led to high rates of vandalism in some cases, and may be driving a trend towards sub-surface FADs.Potential to Attract Donor Investment: LowComments:There is reasonable potential for donor investment to provide technical advice on issues such as the best FAD designs and deployment techniques is likely to be available, however it is likely funding for materials, construction and deployment would need to be paid for privately (or through governments). SPC currently operates under this arrangement, where technical advice on FAD deployment and fishing techniques is provided to members, where the costs of materials and deployment are funded by the beneficiaries.

Likelihood of Capital Shortfall: Moderate - HighComments:The low historical rates of privately funded FAD deployment suggest there is a moderate-high likelihood of capital shortfall, particularly if government and donor funding is not available.Social Benefits: Moderate - HighComments:The main additional benefits from FAD deployment are improved access to fresh fish for 11 Lindsay Chapman, SPC. pers. comm.12 SPC, pers comm.

Page 42 of 71

TVM communities both through direct consumption of fish caught by subsistence fishers and sale by small-scale commercial fishers (with potential flow on benefits for example in community health), and improved catch rates for recreational and charter fishers.Timeframe: ShortComments:FAD design and deployment techniques are well established and can be implemented immediately.Recommended for Phase 3 Shortlisting? No (for LL)

A2.5 Mothershipping for the domestic TVM ALB fleet

Opportunity:Description:Implementing a fleet fishing strategy of using one vessel in the fleet as a “reefer” to consolidate catch and unload at port allowing the other vessels to remain on the fishing grounds. This system has been tried by the Reef Fishing company based on a mothership and four catcher vessels, operated in the Cook Islands and Niue for a brief period. A mothership strategy is currently being used by the Yuh Yow vessels operating in the Cook Islands and unloading frozen albacore and fresh bigeye in PagoPago. A condition of license will require unloading a proportion of the catch in Rarotonga.

The Reef Fishing operation is understood to have failed for a number of reasons including: the high cost of operating; a low number of catcher vessels; catcher vessels being a mix of ice boats and freezer boats; and the operational strategy based on unloading in Niue to fly fresh fish to market and sea freight frozen albacore to PagoPago. The Yuh Yow operation on the other hand is based on two “transhipping” vessels dedicated to consolidating catch from a large number of freezer vessels (16) and unloading in PagoPago the major hub port in the area. The fleet is a low cost operation with cheap labour and fuel purchased at the international bunker rate. In addition, Yuh Yow operates in partnership with Trimarine and Luen Thai who have interests in a cannery and fresh fish processing plant in PagoPago as well as air and sea-freight operations.Potential Return on Investment LowComments:The “mothership” model employed by Yuh Yow: a large number of catcher vessels13, integration with processing, freight and market operators with PagoPago as the hub along with the lowest possible operational costs, is considered viable by Yuh Yow but its viability has been questioned because of the negative effect at sea transhipment has on fish quality. TVM vessels however are relatively high cost operations and this alone would negatively affect ROI. In addition, current vessel operations are largely uncoordinated.

TVM members with longline freezer vessels on the WCPFC Record of Fishing Vessels are: Cook Islands – 26, New Zealand – 2 and Tonga – 2.Level of Risk: HighComments:A stand-alone TVM mothership operation would entail high risk due to the high cost of operating a catcher vessel. The need for high levels of coordination among individually operated vessels would also add to the risk.

Yuh Yow has indicated its willingness to take catch from Cook Islands vessels and this may be an option worth considering. Integration with the Yuh Yow fleet may come with other advantages such as lower cost fuel and at sea bunkering.

Level of Management Expertise Required: Medium

13 Chu-lung Chen, former Chairman of the Taiwan tuna boat owners association indicated that a fleet of 16 vessels should be considered a minimum to ensure a viable fresh fish/frozen albacore operation (personal comment).

Page 43 of 71

Comments:Coordination among vessels (most are individually owned and operated) would be essential. An arrangement would need to be in place to coordinate any catch consolidation strategy covering logistics as well as financial aspects. Transhipment regulations including notification, observation and reporting would need to be observed. With a high level of fleet co-ordination, the possibility arises of using harvester/reefer options whereby vessels returning to port collect chilled fish from other vessels that are remaining on the grounds.Capital Outlay: HighComments:Capital outlay would include the cost of a vessel as well as operational costs.Potential to Attract Private Sector Investment: LowComments: The strategy has been tried by a TVM company and was not successful. Investment in offshore fishing operations is considered high risk anyway particularly since the boom in investment in 2001 and the subsequent crash in 2003-4.Potential to Attract Donor Investment: LowComments:The strategy has been tried by a TVM company and was not successful. Investment in offshore fishing operations is considered high risk anyway particularly since the boom in investment in 2001 and the subsequent crash in 2003-4.Likelihood of Capital Shortfall: HighComments:The basic cost of operation for TVM vessels is high and this would be added to the cost of mothership purchase.

Social Benefits: LowComments:Additional employment benefits would be created in the form of crew and management associated with the mothership. Additional employment and food security benefits could be generated at unloading ports but unloading at a non-hub port would be a more costly prospect than unloading at a hub such as PagoPago.Timeframe: Long-termComments:Following the Yuh Yow model a viable mothership strategy would require the addition of a vessel to act as the reefer, coordination among at least 16 catcher vessels and arrangements with linked operators in a hub port.

An alternative approach of shorter timeframe would be to integrate catcher vessels with an already existing operation such as Yuh Yow.Recommended for Phase 3 Shortlisting? No

Page 44 of 71

A2.6 Reducing whale and shark depredation

Opportunity: Reducing cetacean depredationDescription:Depredation of hooked tuna by toothed whales (and to lesser extent sharks) is a relatively common occurrence in the TVM LL fishery. Where depredation occurs, it is not uncommon to lose the entire set. Cetacean depredation impacts profits through loss of bait and catch, reduced product quality, lost fishing gear, the need to avoid cetacean depredation ‘hotspots’ which can result in increased fuel usage and/or lower catch rates14, and reduced time for productive fishing15. Cetacean interactions also come at an environmental cost through occasional whale mortalities.

Estimated rates of depredation vary according to different sources. Anecdotal estimates from fishers in the TVM region put the loss of turnover at between 7-15%. Skipper interviews in the Hawaii LL fishery reported between 5% and 60% of tuna lost to cetaceans, with an average of around 30%16. Observer estimates from Taiwanese LL vessels in the Sth Pacific ALB fishery put cetacean and shark depredation rates at 1.4% and 0.9% respectively for BET.17 In the Hawaii LL fishery, skippers reported that whales preferentially ate YFT and BET over bycatch species18. Depredation tended to be more of a problem in warmer waters where whales are more prevalent. In the Coral Sea off Australia, one study showed about 9% of the catch (principally ALB, YFT and mahi mahi) was depredated, although anecdotal reports suggested up to 50% of the catch had been depredated on previous trips.19

In the Hawaii LL fishery, some coarse assumptions put the annual loss to cetacean bycatch at around US$13m in 2006 (total landed value of the fishery was around US$54m).20

A range of approaches have been trialled to reduce cetacean depredation on longlines including turning off the vessel’s lights, chemical deterrents, shooting flare guns under water, avoiding using sonar and radar and aiming powerful sonar at the whales. To date, most approaches have met with little success. More recently, a number of new technologies have developed/trialled to reduce cetacean depredation. These include wire or monofilament ‘streamers’ that deploy to cover a fish after hooking, acoustic ‘pingers’ to deter whales and GPS buoys to automatically locate whales and allow fishers to alter fishing strategies.21 The opportunity being assessed here is the development and implementation of effective cetacean mitigation devices.

Potential Return on Investment Moderate - High

Comments:Anecdotal information provided by fishers in the Sth Pacific LL fishery indicated rates of turnover loss of approx. 7% and 15%.14 In the Hawaii LL fishery, all skippers interviewed by TEC Inc (2009) reported moving away from an area if whales were sighted. Most reported steaming a full day to successfully avoid whales. 15 TEC Inc (2009) Cetacean depredation in the Hawaii longline fishery; interviews with longline vessel owners and captains. Report prepared for the NOAA NMFS Pacific Islands Regional Office. 34pp. (accessed at: http://www.nmfs.noaa.gov/pr/interactions/fkwtrt/meeting1/lessons_learned/depredation.pdf)16 Ibid, TEC Inc (2009)17 Huang, H. (2009). Bycatch of Taiwanese Tuna Longline Fisheries in Pacific Ocean. WCPFC-SC5-2005/EB-IP-0218Ibid, TEC Inc (2009) 19 AAD (2009). Update #2 – December 2009: First steps toward mitigating catch depredation by whales. (accessed at: http://www.marinemammals.gov.au/__data/assets/pdf_file/0014/2930/2.-Update-Description-of-Problem-and-Possible-Solutions.pdf)20 Ibid, TEC Inc (2009)21 McPherson, G & Nishida, T. (2010) An overview of toothed whale depredation mitigation efforts in the Indo-Pacific region. SPC Fisheries Newsletter #132 - May/August 2010

Page 45 of 71

http://www.marinemammals.gov.au/__data/assets/pdf_file/0014/2930/2.-Update-Description-of-Problem-and-Possible-Solutions.pdf

http://www.marinemammals.gov.au/__data/assets/pdf_file/0014/2930/2.-Update-Description-of-Problem-and-Possible-Solutions.pdf

http://www.nmfs.noaa.gov/pr/interactions/fkwtrt/meeting1/lessons_learned/depredation.pdf

Level of Risk: Very HighComments:Cetaceans are widely recognised as very intelligent animals and all previous attempts to reduce depredation have had little success. While the current streamer technology shows initial potential, it remains in the early stages of testing and its longer term effectiveness is still highly uncertain.Level of Management Expertise Required: LowComments:Little management expertise would be required to apply the streamer mitigation devices should they prove effective.Capital Outlay: ModerateComments:There are two main types of capital outlay required to take advantage of this opportunity: initial R&D costs and, if the devices prove successful, purchase of units by catching vessels.

The current research into streamer devices is being led by the Australian Antarctic Division (AAD), who currently running trials of new devices in conjunction with industry in Australia, Samoa and other places. The research budget is likely to be in the low bracket.

AAD’s target price for each unit is US$6. Units would need to be applied to each hook. Assuming 3,000 hooks are used on each vessel, the initial outlay would be US$18,000. Depending on the impact on setting and hauling speed of the new devices, an additional crew member may be required to set the same number of hooks. An unquantified number of devices would also need to be replaced through loss.

Potential to Attract Private Sector Investment: HighComments:The potential to attract private sector investment in the initial R&D phase is high, with several vessels already working with AAD in trialling streamer devices.

If the devices prove successful and practical, they would likely be readily adopted by affected segments of the industry.Potential to Attract Donor Investment: HighComments:AAD trials have already attracted public sector investment.

Likelihood of Capital Shortfall: LowComments:There is a low likelihood of capital shortfall if devices prove effective.Social Benefits: ModerateComments:The main additional benefit from the development of effective mitigation devices is the potential to reduce interactions with listed ETP species. Given the possible environmental benefits associated with reducing whale mortalities, the rate of return required to make the opportunity attractive may be adjusted downwards.

Reduction in cetacean interactions may have an indirect economic benefit by better positioning the fishery for environmental certification (e.g. MSC), and to avoid any future market-related sanctions on cetacean interaction.Timeframe: Short -

MediumComments:The R&D opportunity is available to the fishery immediately. Cost effective, practical devices may still be a long way off.Recommended for Phase 3 Shortlisting? No

Page 46 of 71

A2.7 Energy efficiency audits (to reduce fuel costs/emissions)

Opportunity: Energy Efficiency auditsDescription:The opportunity would be to undertake efficiency audits for vessels with a view to reduce energy input costs.

A review of the cost structures of long line vessels illustrates that most expensive operational costs are fuel 23%-40%22. Higher costs are found in freezers, which now account for only 10% of the total fleet composition.Fuel utilisation on board a vessel can be divided into three components23: propulsion, refrigeration, and other activities (lights/power). In the case of freezers, propulsion costs may account for up to 60-70% or more, and freezing 30%-40%.

Propulsion efficiencies may be realised by up to 30% in the following ways: new low sulphur emission engines, improved use of auxiliary engines, hull design, new propellers or revised pitch of existing ones, removing excess weight on the vessel, installing an electronic fuel meter to help monitor fuel consumption and establish an optimum steaming speed, regularly maintaining the hull and engine to reduce drag and enhance engine performance. Freezing costs using compressor driven RSW and chilling systems rapidly reduce the temperature of fish, but are less fuel intensive than alternative plate freezing systems. Energy savings through RSW are reported to be > 50%24.

Added benefits of converting to RSW systems are considerable improvements to the quality of fish, which would allow for A1 Albacore species, and enhance the value of the commercial bycatch. and savings on the cost of ice andPotential Return on Investment ModerateComments:The critical feature would be the extent to which the above changes can demonstrate a return on capital, and for the extra capital cost to be worthwhile against the option of buying new. The levels of return on investment will be very variable dependent on the capital values within each country. Vessel capital values range from around US$200,000-US$400,000. The costs and income generated from additional energy efficiency capital purchases, will be very variable depending on the age and design features of each. Current returns on capital are reportedly very low given a range of issues, including high fuel and freight costs. A 30% reduction in fuel costs and upgrading to RSW systems are likely to show very significant return in individual vessel profits, reducing costs from an estimated 43% of total revenue to approximately 36%25. This change is likely to demonstrate an increase in individual profits from US$17,000per vessel, or US$ 2 million from the TVM long line. Profits would be enhanced further with improvements to the quality of fish and savings in the cost of ice.Level of Risk: ModerateComments:Investment in energy efficiency is likely to achieve the desired increase in profits and will reduce the carbon footprint26. Successful working examples were implemented in a number of high energy intensive fleets such as trawl and long line fleets following the 2008 fuel crisis27. A similar strategy is being advanced by Service de Pêche in French Polynesia, as part of a strategy to reduce the dependency on fuel subsidies28.

22 Data extracted from fishing vessel records from Samoa and Tonga23 Tyedmers, P., Fisheries and energy use, 200424 http://www.nauticexpo.com/prod/teknotherm/seawater-refrigeration-systems-for-fishing-ship-31701-228427.html25 The data is extracted from vessel operators in Tonga and Samoa, and is only indicative of regional financial vessel performance.26 Raymond R. Tan, Ph.D. and Alvin B. Culaba, Estimating the Carbon Footprint of Tuna Fisheries, WWF 2010, shows long lining to have the highest levels of carbon footprint across a range of fishing methods27 Private sector owners in PNG and Mooloolaba fleets undertook energy efficiency audits in 2008, an implemented changes at costs of US$25,000 to US$100,000.

Page 48 of 71

Level of Management Expertise Required: ModerateComments:At least a moderate level of technical expertise will be required to maintain any operational efficiencies.Capital Outlay: Very Low -

LowComments:Capital outlays will be two tier:

i) Private sector capital outlays will vary between those that have fairly moderate outlays with reasonably rapid short term returns (use of auxiliary engines) and those that require significant cost, such as elaborate chilling systems;

ii) Funding for a technical assistance programme through FFA/SPC fundsPotential to Attract Private Sector Investment: HighComments:Probably high given the likely returns on capitalPotential to Attract Donor Investment: ModerateComments:Potential funding through donor support facilitated through a regional body.Likelihood of Capital Shortfall: ModerateComments:Experience from other fleets – long line29 and shrimp trawl30 suggest that the returns are positive. However, the decision to reinvest would be dependent on the return on capital. Investment options would have to weigh up the costs and benefits of buying new.Social Benefits: LowComments:Fuel savings will generate increased RoC, and could act as a catalyst for future investment.Timeframe: ShortComments:Results could be generated in less than 2 yearsRecommended for Phase 3 Shortlisting? Maybe

28 National Strategy for French Polynesian Long Line fisheries29 Maurice Brownjohn, pers comm.30 Best practice Management tools (positive incentives) (WWF, 2010)

Page 49 of 71

A2.8 Development of the Southern SWO fishery

Opportunity:Description:The northern zone of the New Zealand EEZ (QMA 10) and the southern part of the Tongan EEZ straddle an area of high seas that is currently subjected to intensive longline fishing by DWFNs especially the Spanish swordfish (SWO) fleet. Little is known about catch composition or catch rate trends from this fleet but it is very likely that this fishery extends north into Tongan waters and south into the New Zealand EEZ. The fishery would be developed with a charter vessel operating for three months (December/January February). This coincides with peak US demand for chilled SWO and is also the ‘off-season’ for tuna longlining which should provide the opportunity for a short term chartering at reasonable daily rates. NZ SWO quota is underutilised and the opportunity is dependent upon NZ SWO ITQ owners being persuaded to cover NZ EEZ catch. These owners are a logical source of (partial) commercial funding for the proposed venture.

Potential Return on Investment ModerateComments:Charter vessel costs for a suitable vessel are likely to be around NZ$400,000 for 90 days. Assuming a catch of equal parts ALB and SWO and 10% landings chilled, break even catch for the 3 months would have to be approximately 100 tonnes. It is assumed that any surplus above these costs would be split between NZ quota owners, the vessel and the Tongan Government in its capacity of supplier of catching rights in the Tonga EEZ.

Level of Risk: ModerateComments:The main risk is that catch volume and value will not cover all expenses. The SWO fishery in the region may have been depleted by high-seas harvesting in recent years. Alternatively the fishing plan proposed may be less economic than smaller vessels fishing entirely in the New Zealand EEZ and landing a higher proportion of chilled catch than the larger charter vessel.

Irrespective of the actual economics of the developmental fishing that eventuate, the collection of reliable catch data from the vessel has value to New Zealand and Tonga. Against this, the NZ Government appears to be seriously considering lobbying from the Pew Foundation (US) to close the whole of QMA10 to commercial fishing of all kinds. This closure would extinguish the opportunity and the practical opportunities for trans-boundary Tonga/NZ fishing joint ventures.

Level of Management Expertise Required: HighComments:A high level of vessel management and operation expertise is required. Developmental/exploratory fishing is more difficult than routine commercial fishing. Furthermore, the reporting requirements of this fishing are likely to be more onerous than usual. Finally, the Kermedec area of the NZ EEZ is regarded as environmentally sensitive. Swordfish fishing with its comparatively shallow line sets carries a relatively high risk of seabird catch and mortality. The avoidance or minimisation of seabird bycatch is critical to the ongoing success of this venture.Capital Outlay: ModerateComments:Capital outlay would mainly comprise charter costs of vessel and crew. It is possible that the vessel owner may moderate these ‘up-front’ costs depending on the catch sharing formula agreed in the charter arrangement. Similarly the NZ suppliers of SWO quota would receive returns largely as a formulaic proportion of any surplus revenues.Potential to Attract Private Sector Investment: HighComments:Two private sector parties have some incentive to commit underutilised ‘sunk’ assets to this venture at the risk of not recovering the marginal operational costs involved. The

Page 50 of 71

two parties are the owners of underutilised fishing vessels (in this case a large, long line vessel with both freezing and chilling capability) and the owners of under-caught SWO quota in New Zealand. Both of these parties are likely to have ALB and/or SWO marketing relationships where additional margins on an increased catch of these species could be captured.

Potential to Attract Donor Investment: LowComments:This is a fairly conventional commercial proposition that is unlikely to be of strong interest to donors.Likelihood of Capital Shortfall: LowComments:The limited duration of the charter and the high level of certainty about the costs means that a capital shortfall is very unlikely once the decision to proceed has been made. The uncertainties relate to revenues, not capital costs.

Social Benefits: LowComments:The main social benefits are mainly in the form of additional employment over three months for 8 – 10 vessel crew (probably Fiji based personnel).Timeframe: Short termComments:A charter arrangement and supporting SWO quota access could be arranged quickly and the opportunity would be proven/disproven within the 3 month term of the charter. If successful, the charter arrangement could be repeated in following years and consideration given to chartering a second or third vessel.

Recommended for Phase 3 Shortlisting? Yes

Page 51 of 71

A2.9 Establishment of Competent Authorities to promote EU access (Catch Certification and Sanitary compliance)

Opportunity:Description:Establishment of competent authorities (CA) for catch-certification and sanitary compliance.Establishment of Competent Authorities is not an ‘opportunity’ of itself; rather, CAs are required for TVM members to gain market access to the EU.Potential Return on Investment LowComments:Returning the investment in establishing competent authorities will be totally dependent upon gaining access to the EU market. In other words, without sales to the EU, the investment has no value. It is a sort of a paradox; establishing CAs is required for selling into the EU market, but if the prospects of selling into the EU are not good, there is no need to invest in the process of establishing CAs. The potential returns on investment for the establishment of CAs to issue catch certificates, where the product is exported to the EU through a third-party (e.g. French Polynesia, SE Asian processors), may be higher than for phyto-sanitary CAs.Level of Risk: LowComments:The main risk is in investing in the establishment of Competent Authorities if the domestic industry has little exposure to, or interest in, the EU market. Per the above, the risk is dependent upon establishing a customer base in the EU. Unless processors have done their “homework” the risk may be quite high. However, with due diligence, the risk may be low. In the end, it is a commercial decision.Level of Management Expertise Required: Moderate -

HighComments:It is important to remember that the objective of this exercise is to establish the competency of TVM government authorities to be able assess the compliance of fishing companies and processors, in their respective countries, with EU sanitary and catch-certification requirements. This requires sufficient education and work experience to be able to comprehend the principles involved and to establish credibility with the EU evaluators.Capital Outlay: Moderate

- HighComments:The investment in establishing competent authorities required for gaining access to the EU market is relatively high, as it is a long, involved process. It will require multiple visits by trainers and EU authorities, and, in the case of phyto-sanitary certification, will almost certainly require capital investment in laboratory facilities, processing plants, etc. There is some opportunity to build a single facility that all TVM members could use, however our initial assessment is that the arrangement may not be practical because of the cost involved in keeping product in storage awaiting results.Potential to Attract Private Sector Investment: LowComments:It is unlikely that a potential EU customer would assist with the cost of establishing competent authorities. Local processors would be required to comply with sanitary requirements.Potential to Attract Donor Investment: ModerateComments:The potential to attract donor assistance to provide technical support for this project is relatively good.

Page 52 of 71

Likelihood of Capital Shortfall: LowComments:It is far more likely that establishing competency will be the challenge rather than lack of investment.Social Benefits: LowComments:The benefits of this exercise tend to be commercial rather than social.Timeframe: Short-MedComments:It may be worthwhile separating the process of establishing the competent authority for catch-certification from the process of establishing the competent authority for sanitary requirements. The time frame for establishing the competent authority for catch-certification is shorter, the required expertise lower and the cost less. Doing so will open up markets to secondary processors (e.g., Southeast Asia) who would like to export the final products to the EU.Establishing the competent authority for sanitary requirements may require 2-3 years and will involve considerable exchange with EU authorities and food-safety experts.Recommended for Phase 3 Shortlisting? CA for Catch-Certification Yes

CA for Sanitary Compliance Maybe

Page 53 of 71

A2.10 HACCP training for domestic processors/exporters

Opportunity:Description:HACCP training for domestic processors/exporters is not an ‘opportunity’ in itself, but a pre-requisite when operating processing facilities.Potential Return on Investment HighComments:Returning the investment in HACCP training for processing management and staff is almost a certainty, since without such training, the processor has virtually no chance of securing orders from reputable buyers.Level of Risk: LowComments:There is no risk at all involved with upgrading the food safety awareness of processing management and staff.Level of Management Expertise Required: ModerateComments:Trainees will require a certain amount of education to be able to fully comprehend HACCP principles; probably degree level for management level and diploma level for staff.Capital Outlay: Very Low -

LowComments:HACCP training is readily available, so the cost will be relatively low.Potential to Attract Private Sector Investment: ModerateComments:If a primary processor has a relationship with an established secondary processor, it is quite likely that the secondary processor would willingly provide HACCP and other food safety and hygiene related training.Potential to Attract Donor Investment: HighComments:The potential to attract donor assistance into government agencies (e.g., fisheries) or universities is relatively good, because of the relatively low investment required and the ever-increasing concern over food safety related issues.Likelihood of Capital Shortfall: LowComments:Per the above, investment required is low or nil, so there is virtually no risk of capital shortfall for such a project.Social Benefits: ModerateComments:HACCP and other food processing related training encourages the production of safe and healthy food products for the domestic market, as well as for export. Training will assist in delivering social benefits if linked to the establishment of processing facilities, and by making local staff employable at such facilities.Timeframe: Short-ModComments:HACCP training could be implemented at any time, independently of the TVM project. As mentioned above, it is a requirement of customers and regulatory agencies in most developed markets. It would also serve as an excellent prelude to the process of establishing competent authorities (CA) required for gaining access to the EU market.Recommended for Phase 3 Shortlisting? No

Page 54 of 71

The potential returns on investment of HACCP training outweigh the risks, however it has not been recommended for further separate assessment here on the basis that it does not represent a distinct ‘opportunity’ and will be assessed as part of other processing opportunities (e.g. primary processing).

Page 55 of 71

A2.11 Sign up to the Interim Economic Partnership Agreement

Opportunity: IEPADescription:The EU Interim Economic Partnership Agreement has been established with Papua New Guinea allowed duty free market access for HSS codes 1604 (prepared and preserved, including canned product) and global sourcing, allowing PNG to act as a regional processing hub. Other Pacific Island countries are able to join the IEPA, and up until September 2011, only Tonga was seeking alignment. There are some constraints to IEPA status, such as export taxes have to be removed. This may pose a potential problem for some TVM members. However, the duty free exemption only applies to prepared products, and not to HSS codes 0304/0305 (fresh and chilled) products which are the desired export commodities. These commodities are not presently produced by any of the TVM countries, and continuation of this opportunity will relate to possible promotion of domestic processing capacity.

PNG’s IEPA status has been subject to an intense amount of opposition lobbying from EU Spanish fishing and processing interests31. The prospect of including HSS 0304/0305, as part of the IEPA, is therefore likely to meet with stiff resistance unless secured as part of exchange in access agreements (e.g. Spanish access for swordfish)32. The likelihood is therefore that processed product such as cooked loins could access the EU market, but fresh and chilled cannot without facing a tariff of 21%. An exception to this is product sold to Samoa which still has EPA status as a Least Developed Country.

At the same time the region does have access to alternative markets in Japan and the US; and can access EU markets, duty free through French Polynesia33. Products sold through American Samoa and French Polynesia34 are also able to avoid trade tariffs. However, vessels selling into French Polynesia must satisfy EU sanitary requirements and be HACCP compliant. Sanitary issues are also relevant for Samoa’s access of fresh and chilled product to the EU.

The critical issue for TVM Is therefore to assess the costs and benefits of access to the EU market against other alternative markets; and whether advancing 0304/0305 products might be worthwhile as a component of an EU Fishery Partnership Agreement and if having access to these category projects might generate newer markets in for example Northern Europe. There is a compelling argument that suggests that the existing regional hubs provided by American Samoa and French Polynesia are a preferable alternative, and these presently fall below the EU anti import lobby radar.Potential Return on Investment ModerateComments:Access to EU markets become attractive as the Euro strengthens against the Pacific Island currencies.Access to Europe will require investment in on-board sanitation against HACCP standards; and in processing plants. Other trade alternatives would appear to provide better options35, but circumstances may change with a strengthening of the Euro, and weakening of other currencies.Level of Risk: ModerateComments:31 ‘EU-Pacific agreement will harm the tuna industry’ http://www.bairdmaritime.com/index.php?option=com_content&view=article&id=10547:eu-pacific-agreement-will-harm-the-tuna-industry-eurothon&catid=75:fisheries&Itemid=6832 Len Rodwell, pers com, July 2011.33 French Polynesia has specific restrictions applied when sourcing from outside domestic markets, but these are specific for the protection of the domestic market, and not for processing and re-export. 34 As a concession for the US base at Bora Bora, all product processed through French Polynesia is eligible for duty free access into USA. 35 Compliance with EU food safety standards requires a significant investment for vessels and processing plants. The financial returns for the vessels are already quite marginal.

Page 56 of 71

There is a risk of low returns on investment, given the spread of markets. This status would be revised were the Euro to increase its value. Nevertheless, other markets such as USA provide strong potential through the hubs of French Polynesia and American Samoa.Level of Management Expertise Required: ModerateComments:Higher level marketing expertise might be required to generate improved access to core marketsCapital Outlay: HighComments:The capital outlay requires strengthening Competent Authorities, investment in vessels and handling / processing plants. These are requirements for both access through IEPA and the alternative of French Polynesia. Vessel upgrades are required and costs will vary depending on the state of each36. Capital costs per vessel would likely be US$ 25,000 or more. Given the reported low returns on capital for the existing fleet, upgrading of vessels suitable to meet EU Food safety requirements may be a critical constraint, especially as it will require a critical mass of vessels to commit to this task.Potential to Attract Private Sector Investment: ModerateComments:The provision for global sourcing could attract investment, but there are already existing hubs which may prove to be more attractive. There may be some merit in applying for IEPA for prepared and preserved loins.Potential to Attract Donor Investment: LowComments:Strengthening CA to implement CA cheques could be provided through donor support.Likelihood of Capital Shortfall: ModerateComments:Capital outlays are likely to be moderate to high (US$ >25000) within the context of existing low RoC. Each country will have to have CAs in place with the capacity to audit vessels, plants and train fishers/processing workers.Social Benefits: ModerateComments:If foreign investment could be attracted as part of a global sourcing requirement, IEPA would potentially offer benefits in terms of employment. This will be conditional on processing investment to produce IEPA accepted products, which are presently loins. The additional question though would be whether vessels would be attracted to land into these countries as opposed to using other existing hubs.Timeframe: MediumComments:Given hostility to allowing access for 0304/0305 products, the time frame could be greater than 2 years or more. Much effort and resources could be spent on improving access conditions, when other alternatives are available and can generate a return within a faster timeframe.Recommended for Phase 3 Shortlisting? Maybe

36 Investment costs require fibre glass coating of contact surfaces (as opposed to wood), and steel stanchions, as well as bathroom and hand basins, and fresh access to water. Each vessel would then require a HACCP Plan. The human cost in terms of training and record keeping (temperature checks) and maintenance is also quite onerous (Francisco Blaha, pers. comm.).

Page 57 of 71

A2.12 Strengthening regional trade partnerships with established hubs (e.g. French Polynesia, Fiji and American Samoa)

Opportunity: Strengthening regional trade partnershipsDescription:There are three (Fiji, American Samoa and French Polynesia), and possibly seven (PNG, Solomon Is, New Zealand and Vanuatu) existing trade hubs in the Pacific region. This template concentrates on linkages to French Polynesia, Fiji and American Samoa. French Polynesia and Fiji specialise in exporting fresh, chilled and frozen lions (HSS codes 0304/0305), while American Samoa, canned product. In both the case of American Samoa and French Polynesia, tariff free exemptions are applied to any third party exporting fish for processing in these countries (American Samoa to USA, and French Polynesia to both EU and US markets37). Fiji has no specific trade advantage for access to EU markets (See IEPA), but provides the most accessible hub for any vessel operating from Tonga. The opportunity is to establish trading partnerships/Joint Ventures between processors in these countries (French Polynesia with Cook Is, American Samoa with catchers from Samoa, and Fiji with Tonga). Respective TVM suppliers would supply fresh whole albacore, predominantly for the US and European markets, as well as fresh bigeye and yellowfin for the Japanese market. Alternative prospects to supply primary processed products for the canned or loin markets can also be explored. The receiving processors/exporters in French Polynesia and American Samoa, particularly, will be able to offer prices net of any import tariff and may also take advantage of the improved freight rates offered from these countries.

French Polynesia exports to USA, Europe and to a small extent, Japan (mostly yellowfin and bigeye tuna) with direct airfreight connections to Los Angeles and Hawaii, Paris and Narita. Freight rates are US$ 0.7/kg to USA US$ 2.08/kg to Europe. French Polynesia is able to source products from foreign vessels, but not for domestic consumption. The main prohibiting factor for foreign vessels landing into French Polynesia, e.g. from the Cook Is38, is that vessels have to be HACCP compliant, and provide a sanitary certificate from a competent authority to the customs authorities.

Fiji exports to USA and Japan. There are direct air freight connections to USA and Japan. Current freight costs are US$1.80 to USA, US $ 2.20/kg to Japan. Tariff rates for HSS 0304/0305 from Fiji to USA are 6%. Fiji is not a member of the IEPA, and HSS 0304/0305 products are taxed at 21%.

Products from American Samoa are allowed tariff free access to the US market, including products sourced from other Pacific island countries. This is the main trade channel for product from Samoa. Almost all product is canned, but American Samoa is also expanding its capacity to trade in loins and ready meals.

The major constraint to a partnership is the lack of a Competent Authority to validate TVM vessels’ food safety and HACCP compliance. The additional constraint is the investment required by some of the vessels to meet the standards (See IEPA opportunity).Potential Return on Investment HighComments:The return on investment directly relates to the ability of TVM countries to capitalise on duty free access. Duty free access would save between 6% and 21%, generating an additional TVM fleet profit of $ 800,000 to $ 2.5 million, excluding any freight cost savings that might occur through partial onshore processing, less the cost of transport to these hubs39. A proportion of these costs would be incurred in any event, but some cost savings could occur through partial on site processing, or through partnerships with

37 As a concession for the US base at Bora Bora, all product processed through French Polynesia is eligible for duty free access into USA. 38 1 Cook Island vessel already intermittently lands and sells to SARL Pacific Aquaculture Services

Page 58 of 71

carrier/transport vessels that could deliver to French Polynesia, American Samoa, Fiji.Level of Risk: LowComments:The risks are low if arrangements can be initiated through carrier/transport arrangements. Some of these linkages e.g. Samoa to American Samoa may already be established.Level of Management Expertise Required: ModerateComments:Higher level marketing expertise might be required to generate joint ventures or other arrangements with trading partners.Capital Outlay: HighComments:The capital outlay requires strengthening Competent Authorities, investment in vessels and handling / processing plants. These are requirements for both access to the EU market, and most major developed markets in the case of HACCP compliance. Vessel upgrades are required and costs will vary depending on the state of each40. Capital costs per vessel would likely be US$ 25,000 or more. Given the reported low returns on capital for the existing fleet, upgrading of vessels suitable to meet EU Food safety requirements may be a critical constraint, especially as it will require a critical mass of vessels to commit to this task.Potential to Attract Private Sector Investment: HighComments:Good prospects for partnering arrangements (e.g. joint ventures) between the TVM fleets and processors in French Polynesia, American Samoa and possibly Fiji. Investments may take the form of part processing on site, or some reequipping e.g RSW facility to allow for carrier/vessel transport of larger volumes by specific TVM companies or collective groups.Potential to Attract Donor Investment: ModerateComments:Donor investment may support the strengthening of the CA to implement EU Catch Certification and Food Safety Standards required of FDA and the EU.Likelihood of Capital Shortfall: HighComments:Capital outlays are likely to be high (vessels) and any part processing plan in meeting HACCP requirementsSocial Benefits: ModerateComments:If foreign investment could be attracted as part of a sourcing requirement, JVs would potentially offer benefits in terms of employment. Additional income to vessels would increase return on capital and domestic investment.Timeframe: MediumComments:Results could be generated within 2-5 yearsRecommended for Phase 3 Shortlisting? Yes

39 The existing freight cost/price differential from Tonga, Cook Is, Samoa to the three hubs is around $0.80/kg, $0.25/kg (fresh and whole)40 Investment costs require fibre glass coating of contact surfaces (as opposed to wood), steel stanchions, as well as bathroom and hand basins, and access to fresh water. Each vessel would then require a HACCP Plan. The human cost in terms of training and record keeping (temperature checks) and maintenance is also quite onerous (Francisco Blaha, pers. comm.).

Page 59 of 71

A2.13 Exports of primary processed fish/loins to secondary processors

Opportunity:Description:Exports of semi-processed fish and/or loins to secondary tuna processors (e.g., Southeast Asia)Some TVM nations (e.g., Samoa) export whole-round (WR) or gilled-and-gutted (G&G) albacore tuna to major tuna processors in Fiji and American Samoa. They have the potential to add value to the catch by dressing the fish; i.e., also removing head and tail (HGT) or stripping the loins from the frame altogether (quarter loins). This would reduce both freezing and shipping cost by up to 50%.One step up the “value ladder” would involve converting the fish into cooked-frozen tuna loins. This would add further value to the product by saving labour costs for the secondary processor and reducing their impact on the environment (i.e., no evisceration or cooking at the secondary location). It would also create employment at the primary processor, and would present the opportunity to process higher value by-products (e.g., yellowfin tuna, swordfish, mahi mahi and wahoo) for alternative markets (e.g., Australia and New Zealand), as well as the domestic market.This project would require the establishment of a processing plant in each location. Facilities would include a small building with receiving and processing areas, as well as a cold store with packing and loading areas. Equipment would include ice-making for both the factory and for sale to fishermen, and freezers for fish and products. In facilities of this size, brine freezing may offer the best combination of low operation costs and flexibility to handle different products of varying configuration. For cooking loins, a small boiler with cooker vessels and accessories would also be required. Additional equipment (e.g., smoker) could be included. A vacuum sealer would be required for packing.Potential Return on Investment HighComments:The potential for return on the investment is quite good, assuming of course that the processing plant is well-managed. Such a plant could handle a variety of materials and produce a variety of products for different markets and different levels of the “value ladder”.Level of Risk: LowComments:Because the investment required is relatively low and the potential for return is relatively high, the risk of such a project is quite low. The key will be the availability of fish. If the fish resource is unreliable, it would be better not to invest in such a project. Moreover, because of the need to ensure an adequate supply of fish, this opportunity is likely better suited to TVM locations with good recent catches (e.g. Cook Islands, Samoa) in the first instance.Level of Management Expertise Required: ModerateComments:The level of expertise required for plant management is moderate. It will be a business venture, thus will require good common business sense. The expertise required of the staff is relatively low. One technical person with a good understanding of basic food hygiene and safety (HACCP) is all that would be required.Capital Outlay: Low/ModComments:The capital outlay for this project depends upon the volume of fish to be processed. In general, the plants required for most TVM nations will be small or small/medium. The investment required will follow accordingly; i.e., low to low/moderate ($100,000 to $500,000)Potential to Attract Private Sector Investment: Moderate

Page 60 of 71

Comments:It is possible that customers of the primary products (i.e., dressed albacore tuna and albacore tuna loins) may be willing to provide financial assistance with such a project in return for the right of refusal of the products.Potential to Attract Donor Investment: Low/ModComments:It is certainly possible that TVM governments may be able to request and receive assistance with financing such a project. A consideration should whether the proposed project complements, rather than competes with, any existing processing infrastructure.Likelihood of Capital Shortfall: LowComments:The risk of financial short-fall should be quite low. It is simple; without the cash in hand, do not proceed.Social Benefits: ModerateComments:The social benefits of the project are moderate but significant:

It would provide a reliable outlet for the catches of local fishermen. It would provide jobs; perhaps 20 jobs for a small plant, up to 50 jobs for

small/moderate plant. It could produce safe and healthy seafood products for the domestic market.

Timeframe: ShortComments:From the date of decision until the commencement of operations is likely to be in the range of 9-12 months.Recommended for Phase 3 Shortlisting? Yes

Page 61 of 71

A2.14 TVM MSC certification for ALB

Opportunity: MSC CertificationDescription:Certification of the albacore longline fishery against fishery sustainability standards set by the Marine Stewardship Council is likely to provide TVM producers with additional market opportunities, or at least ensure that the product retains a foothold in some key strategic markets. The MSC logo is seen as important for accessing traditional markets in France41 and USA, but also in potentially accessing yet under developed markets such as UK, Germany, Netherlands and Scandinavia which are seeking to source MSC products, irrespective of whether there has been a traditional demand for the product42. However, some other traditional markets such as Spain and Japan are not as likely to be as responsive to MSC accreditation.

Experience to date with some Certified Albacore fisheries have suggested potential market premiums of up to 32%43, but probably at conservative estimates of 5-10%, with expected lower premiums on offer for canner product4445. There are a number of other fisheries that are in process of seeking MSC Certification. The Fiji longline fishery is presently undergoing assessment, whilst French Polynesia is in the process of a Fisheries Improvement Plan which could lead to assessment.

The chances of success in achieving certification relate to a number of principal indicators. Key issues that need to be addressed, and are presently weak across the range of South Pacific longline fisheries include:

The absence of a harvest strategy across the range of the southern albacore stock (i.e. all South Pacific countries and the high seas)

The application of reference points, harvest control rules and TACs (input or output controls)

Interactions with at-risk bycatch species, most specifically sharks, but also some other species such as opah and escolar

Interactions with turtles and seabirds Management plans that directly relate to RFMOs and target stock status.

Potential Return on Investment ModerateComments:The TVM longline fleets target albacore with retained species YFT and BET. The value of the albacore fishery is US$12.8 million at current market prices (US$2680/t), and YFT and BET at US$6.5 million and US$4.1 million. A fairly conservative figure of 10% price premium would be likely to net an additional turnover/value added for the TVM long line fleet of US$1.2 million, or US$ 11,000 per vessel. In some cases this return per boat, whilst small, would make the difference between marginal profitability to providing a more respectable RoC. However, additional income from MSC may form part of a package of measures (including for example energy efficiency improvements, improved trade access through regional hubs) to improve overall profitability of TVM vessels.Level of Risk: LowComments:Those fisheries that achieve MSC status are likely to achieve some level of market premium. Experience in the PNA skipjack fishery demonstrates that pre MSC accreditation of free school fishing, fish caught using FADs have seen a reduction price

41 French Polynesia’s exporters have been informed by France’s Intermarche, that Albacore must be MSC approved (Jean-françois Virmaux, SARL Pacific Aquaculture Services ([email protected]). Carrefour, France’s most significant retail outlet is now actively seeking MSC product.42 Russell Dunham (Fiji Fish Co), pers. comm.43 http://www.msc.org/documents/fisheries-factsheets/net-benefits-report/American-Albacore-tuna.pdf44 Henk Brus, Atuna, pers. comm.45 The NZ Albacore fishery season has not started as yet, so there are no indications of likely net benefits from this fishery at present (Akroyd, pers com, September 2011).

Page 62 of 71

mailto:[email protected]

by around 20-30%, whilst FAD-free and pole & line fish are selling at over a 20% price premium46.Level of Management Expertise Required: ModerateComments:Higher level marketing expertise might be required to generate improved access to core marketsCapital Outlay: LowComments:There are two main types of capital outlay required to take advantage of this opportunity:Funding of a Fisheries Improvement Plan which address the major failings in meeting MSC Scoring guideposts. A FIP using MSC Guideposts is very effective in identifying weaknesses and actions which support will support wider sustainability needs in any event such as strengthening in fisheries management, policy and capacity development. Cost US 150,000. However, actions could not be limited to TVM alone, and would need to be considered in line with parallel activities in PF and MSG as well.

MSC Assessment costs for principal countries Samoa, Cook Is and New Zealand: US$ 150,000. A combined process involving TVM and possibly other countries would generate cost savings, but would probably be in the region of $40000- $50000/country.Potential to Attract Private Sector Investment: HighComments:The potential to attract private sector participation is likely to be good, but on its own, the returns are likely to be marginal. Support funding would always be a catalyst for attracting additional interest, and the threat/opportunity cost of do nothing, could potentially have serious consequences. However, this would have to weighed up against the opportunities in the loss of some important components of commercial catch (e.g sharks, if appropriate).Potential to Attract Donor Investment: HighComments:The link between MSC and strengthening fisheries management systems is likely to attract support from donors.Likelihood of Capital Shortfall: MediumComments:MSC is likely to be available to TVM participants and industry in the medium term (for example, following the design of a harvest strategy and supporting bycatch mitigation measures.Social Benefits: ModerateComments:Increased incomes generated from higher prices for Albacore are likely to improve sector value added, including wages and potentially stimulate some benefitTimeframe: MediumComments:Benefits are likely to accrue post certification, i.e. within a 5 year time horizonRecommended for Phase 3 Shortlisting? Yes

46 Henk Brus, Atuna, pers. comm..

Page 63 of 71

A2.15 Developing a TVM 'brand' for retail

Opportunity: Establishment of a TVM ‘brand’ for retailDescription:The proposition would be to brand TVM fish or fish products to distinguish them from identical species or products supplied from other countries. The opportunity relates to species and products that are being retailed by TVM owned or controlled businesses. The brand would therefore be applied to bycatch species sold in Australia and New Zealand rather than to Albacore. The bulk of TVM Albacore is sold into commodity markets and this situation can be expected to continue in the foreseeable future.Potential Return on Investment LowComments:The value of the brand is a function of the price premium branded products command in the market. Ultimately that premium exists because consumers identify that the quality, service and environmental or social ‘integrity’ of the products warrant a price premium. The brand does not create the premium so much as providing customers a quick way of identifying a suite of claims implied by the brand. The bulk of the investment lies in the systems underneath the brand. These can be very expensive.Level of Risk: HighAt present, there appear to be no TVM products and associated supply systems that are ready for branding.Level of Management Expertise Required: ModerateComments:Living up to the explicit or implicit claims of a brand places reliability, quality and service demands on the whole supply chain for all products covered by the brand. This implies that there is an effective management entity able to exert influence over all of these steps in the production and delivery of the branded products.Capital Outlay: Low/

ModerateComments:Capital outlay would comprise analysis of the branding opportunity, the values and claims of the brand, the systems by which customers might verify those claims, the design of the brand and promotion or advertising of the brand. Conceivably, promotional expenditure could lift this proposal into the medium outlay band.Potential to Attract Private Sector Investment: LowComments:The brand is a commercial asset logically owned by private investors in the seafood production and distribution sector. A branding initiative would be the capstone of a significant prior investment in that sector. Until such time as the economics of that investment are more compelling, a branding investment would be premature. Furthermore, investors may prefer a strategy based upon the supply of retailers with their own consumer brands and established customer bases.Potential to Attract Donor Investment: LowFor reasons given above, the potential to attract donor investment is likely to be low.Likelihood of Capital Shortfall: LowComments:Capital outlay on the brand and its promotion is likely to be relatively modest compared with the costs of the systems behind the brand.Social Benefits: LowComments:The brand would potentially advertise (and therefore reinforce) social benefits generated by the consumption of TVM fish, rather than creating those benefits.Timeframe: Medium to

longComments:Brands do not engender instant trust. The value of a brand builds slowly over time as the claims of the brand are consistently demonstrated.

Page 64 of 71


Page 65 of 71

A2.16 Developing markets in Japan and Australasia

Opportunity:Description:Developing markets in Japan and Australasia.

It may be better to consider these as separate opportunities since the markets differ significantly.Japan: The primary opportunity in Japan is for ultra-low-temperature (ULT) seafood items; i.e., those that have been maintained at -60°C throughout the entire cold chain.Australasia: Perhaps the best opportunity in the Australasian market is for value-added processed items originating from the by-catch of albacore longline fishing, including: yellowfin tuna, swordfish, mahi mahi and wahoo. When albacore tuna is out of season, many fishermen also bottom-fish for snapper, grouper, etc., which could also be processed into value-added retail products.Potential Return on Investment JPN: Low

AUS: HighComments:Japan: This opportunity is probably limited to TVM nations with sufficient catch volume to justify the relatively heavy investment in facilities and equipment to maintain the -60°C cold chain required for the Japanese market.Australasia: The products for this opportunity would be produced from by-catch. However, the processing capability required would be developed for the processing of albacore tuna, as detailed in opportunity A2.16. Therefore, little or no additional investment would be required.Level of Risk: JPN: High

AUS: LowComments:Japan: Since the capital outlay for the equipment required to maintain -60°C throughout the entire cold chain is high, any TVM nation considering such an investment must be 100% sure of the market opportunity before proceeding.Australasia: Since little investment would be required for this opportunity, the risk involved is correspondingly low.Level of Management Expertise Required: JPN: High

AUS: Moderate

Comments:Japan: The requirements of the Japanese market are unique and sometimes bewildering. Experience in dealing with this market would be an absolute prerequisite for this project. Technical requirements for this project are also high regarding fish-handling techniques and equipment maintenance and operation.Australasia: A person with marketing/sales experience in Australasia would be a prerequisite for this project. Per opportunity A2.3, the level of expertise required for processing plant management and technical staff is low to moderate.Capital Outlay: JPN: High

AUS: LowComments:Japan: As mentioned above, the capital outlay for the equipment required to maintain -60°C throughout the entire cold chain is quite high.Australasia: As mentioned above, little or no investment would be required for this opportunity because the required processing capability would be developed for opportunity A2.16Potential to Attract Private Sector Investment: JPN: Low

AUS: LowComments:

Page 66 of 71

Japan: Perhaps the only way to proceed with this project would be with prior commitment of a Japanese partner, although the prospects of this happening are not particularly good.Australasia: Private sector investment would be more likely to come from customers of the primary products detailed in opportunity A2.16Potential to Attract Donor Investment: JPN: Low

AUS: LowComments:Japan: Because of the broad scope and the high investment required, it may be difficult to attract donor investment for this project. Australasia: As mentioned in opportunity A2.16, it is possible that TVM governments may be able to attract donor investment to install the processing capability required for this project.Likelihood of Capital Shortfall: JPN: Low

AUS: N/AComments:Japan: The likelihood of capital shortfall for this project may actually be quite low, since the due diligence required for an investment of this scale would preclude proceeding before everything is in place.Social Benefits: LowComments:Once again, the benefits of these projects are primarily commercial rather than social.Timeframe: JPN:

MediumAUS: Short

Comments:Japan: It would probably take 2-3 years to install all the facilities and equipment required to maintain -60°C throughout the cold chain. Australasia: As mentioned in opportunity A2.16, the time required to develop the processing capability required for this project is likely to be in the range of 9-12 monthsRecommended for Phase 3 Shortlisting? Japan No

Australasia

Yes

Page 67 of 71

A2.17 Establishment of a TVM retail outlet in New Zealand

Opportunity: Establishment of a TVM retail outlet in New ZealandDescription:Establish a fish retail outlet in New Zealand to be supplied by fresh fish from TVM vessels, air freighted to Auckland. This opportunity was investigated based on fresh fish being air freighted from Rarotonga to Auckland and sold in an (owned) outlet in south Auckland where there is a large island population with a taste for fresh fish. The initial volume of fish considered was 7 tonnes per week.

Potential Return on Investment LowComments:Indications from the initial costings suggest that the break-even point would be the sale of 7 tonnes per week at NZ$25 per kilo.

Level of Risk: ModerateAirfreight costs and regular supply would be critical elements in this initiative.

Level of Management Expertise Required: LowComments:Fresh fish catching and retail operations are well established in most TVM countries and the air-freight of fresh fish to New Zealand has occurred for over a decade.Capital Outlay: ModerateComments:Capital outlay for the setup and operation of the retail premises would be required.Potential to Attract Private Sector Investment: LowComments:The initiative has already attracted interest from the private sector but as yet not investment has been made.Potential to Attract Donor Investment: LowComments:It is hard to see donors investing in what is essentially a private operation.Likelihood of Capital Shortfall: LowComments:Capital outlay would be relatively low. Management expertise exists.Social Benefits: ModerateComments:The retail outlet would provide additional market and employment opportunities along with quality fish for New Zealand consumers.Timeframe: ShortComments:The catching, processing and freight elements of this initiative are already in place.Recommended for Phase 3 Shortlisting? No

Page 68 of 71

A2.18 Strategic partnership between TVM and large processors for ALB supply

Opportunity:Description:Strategic partnership between TVM and large canned tuna processors for the supply of albacore tuna. This opportunity may be an additional component to the opportunity for primary processing above.

Canned white meat tuna for the North American market remains the ultimate destination for the bulk of albacore tuna from the Pacific region, including TVM. Most of this is processed at USA controlled processing plants in Fiji and American Samoa. This results in a “buyer’s market”, with prices dictated by the processors, limiting the options for TVM fishermen.However, a considerable quantity of albacore is also processed in Southeast Asia, primarily Thailand. The Thai Union Group owns Chicken of the Sea International (COSI), one of the three major brands in the USA. With the closure of their processing facilities in American Samoa, COSI basically lost its primary supply of albacore. There is a distinct possibility that COSI, and perhaps other major processors of canned albacore (e.g., Bumble Bee, StarKist and Tri Marine), may be interested in entering into a strategic partnership with TVM as a whole, or with individual TVM nations, for the supply of albacore tuna. The exact scope of such a partnership with would be open to negotiation. The main benefit to the TVM industry would be to give them more supply options. Many currently operate through single buyers under a ‘take it or leave it’ arrangement. Any agreement should be negotiated to give the buyer the first right of refusal over the product. If the buyer receives a better offer, the partner would be given an opportunity to match it.Potential Return on Investment N/AComments:The investment to develop the processing capability for this opportunity would be covered as a suite of measures to undertake primary processing in some TVM countries (see 2.13). No additional investment would be required.Level of Risk: LowComments:Since no additional investment would be required, there is virtually no risk.Level of Management Expertise Required: ModerateComments:A person with the experience and savvy to negotiate such an agreement on behalf of TVM would be a prerequisite of this project.Per opportunity A2.13, the level of expertise required for processing plant management and technical staff is low to moderate.Capital Outlay: LowComments:The investment to develop the processing capability for this opportunity would be covered in opportunity A2.13. No additional investment would be required.Potential to Attract Private Sector Investment: HighComments:The point of this opportunity is negotiating a strategic agreement with a private-sector partner, who would almost certainly invest. The scope of this investment would be open to negotiation.Potential to Attract Donor Investment: LowComments:This is a commercial project, unlikely to attract interest from donors.Likelihood of Capital Shortfall: Low

Page 69 of 71

Comments:Since no additional investment would be required, there is virtually no risk of capital shortfall.Social Benefits: ModerateComments:As detailed in opportunity A2.13, the processing plant(s) required for this project would generate modest social benefits, including:

Providing a reliable outlet for the catches of local fishermen. Providing jobs; perhaps 20 jobs for a small plant, up to 50 jobs for small/moderate

plant.Timeframe: MediumComments:The time negotiating the agreement, plus the time of installing the required processing capability, is likely to be at least 12 to 24 months.

Recommended for Phase 3 Shortlisting? YesThis opportunity would be worth exploring in conjunction with the opportunity for primary processing in TVM countries.

Page 70 of 71

A2.19 Exploration of emerging markets (e.g. Russia, Brazil, Argentina, Middle East, Eastern Europe)

Opportunity:Description:Exploration of emerging markets (e.g., Russia, Brazil, Argentina, Middle East and Eastern Europe)

TVM has yet to establish marketing relationships with primary and secondary markets, so considering tertiary markets at this stage is probably premature.Potential Return on Investment LowComments:Considering the lower value and higher risk associated with dealing with tertiary markets, the potential for recouping market development costs is not particularly good.Level of Risk: Mod/HighComments:There a higher risk (e.g., non-payment, claims, rejections, cancellations, discrepancies with L/Cs, kickbacks, etc.) associated with dealing with tertiary markets.Level of Management Expertise Required: Mod/HighComments:Certainly a person with considerable marketing/sales experience would be required to deal successfully with these markets.Capital Outlay: ModerateComments:At least a moderate amount of capital would be required to cover the cost of exploratory trips by marketing personnel to the proposed markets, and to negotiate any commercial arrangements.Potential to Attract Private Sector Investment: LowComments:There seems little prospect of attracting private sector funding given the risks involved.Potential to Attract Donor Investment: LowComments:As aboveLikelihood of Capital Shortfall: HighComments:There is little likelihood of raising the necessary capital to explore the opportunity given the risks involved and uncertainty of returns.Social Benefits: LowComments:Once again, the benefit of this project is primarily commercial rather than social.Timeframe: MediumComments:It is difficult to estimate the timeframe required to establish successful supplier-buyer relationships in the proposed markets. Without a doubt it will not be a done quickly or easily.Recommended for Phase 3 Shortlisting? No

Page 71 of 71

A2.20 Establishment of a Pacific Fisheries Fund

Opportunity: Establishment of a Pacific Fisheries FundDescription:The concept of a “Pacific Fisheries Fund” (PFF) was put forward by a number of stakeholders, largely in response to concerns about a lack of access to credit. Under the structure put forward, the PFF would act as a pool of seed capital that would be loaned to support the development of the domestic Pacific fishing industry. Funds would be channelled through existing commercial banks and loaned under normal commercial conditions. Loans would be focused on funding capital investments (e.g. new vessels, upgrades of vessels, land-based support infrastructure). The main difference from existing loans was that loans could be repaid over extended periods (e.g. 10 years, rather than the normal 5) to avoid the problem of having to make large loan repayments in the early years of a company as it built up to making sustainable profits.

Some have argued it should be modelled on the European Fisheries Fund (EFF), although the EFF appears more complex in structure (comprising five separate ‘axes’ focusing on: fleet adjustment, aquaculture and inland fisheries, ‘measures of common interest’, sustainable development of fishery areas and technical assistance).

The precise source of funds to establish the PFF is not clear, although proponents have suggested initial funds might come from donors.

Potential Return on Investment Low-Moderate

Comments:Given the limited recent success of domestic longline developments in the Pacific, and the need for favourable loan conditions, it is reasonable to assume that overall returns on investment are likely to be relatively low. Should relatively ‘cheap’ funding be available through donors, there are opportunities for capital upgrades that might produce returns, for example, upgrading vessels for compliance with EU HACCP requirements.

Level of Risk: Moderate - High

Comments:Given the challenging conditions surrounding both global and local longline fisheries, and the limited recent success of domestic longline businesses in the Pacific, the level of risk associated with commercial loans to fund capital improvements is likely to be at least moderate-high. Many operators have expressed concern that access to credit is limited, an indication that banks have seen domestic fisheries developments as a risky investment in recent years (albeit there have been isolated success stories). This was supported by consultations with some banks during Phase 1 of this study (e.g. the Tonga Development Bank noted that access to credit was by no means limited, however they have had few viable proposals put to them in recent years).

To justify the investment of initial capital, it is reasonable to assume the Fund would need to be available to all Pacific Island states. In that case, the other potential risk is that many TVM businesses would be ‘outcompeted’ for access to loan capital by private operators in states that can demonstrate more commercial success (e.g. Fiji).

Level of Management Expertise Required: HighComments:A high degree of technical expertise would be required to design and develop the fund, as well as in its ongoing administration.

At least a moderate to high degree of management expertise would likely to be required to secure loans from the Fund, assuming loans are to be provided under rigorous commercial lending conditions (i.e. to develop a compelling business case, develop a

Page 72 of 71

business plan, etc). A moderate to high level of management expertise is also likely to be required in managing the business in order to service loan repayments.

Capital Outlay: Very High (initially)

Comments:A very high initial outlay would be required to provide seed capital to the Fund, although in theory this should be recovered over time through loan repayments. Under the structure put forward by consultees, it was not clear whether loan repayments would be directed back into the Fund to replenish the initial pool of seed funding, or retained by the banks as profit.

Potential to Attract Private Sector Investment: ModerateComments:Given the history of fisheries loans in the Pacific over the past couple of decades, there appears little prospect of private sector contributions to the initial seed capital to establish the Fund.

Assuming loans could be structured on terms more favourable than those of existing commercial lenders (i.e. over longer periods), it is reasonable to expect interest from the private sector in securing loans. Notwithstanding that, interest in securing loans under normal commercial arrangements appears to have been limited in some parts of the industry in recent years. For example, during Phase 1 consultations, the Tonga Development Bank noted that loans to the fishing industry had been limited in recent years not because of a lack of credit (which was readily available), but because a lack of ‘good ideas’.

Potential to Attract Donor Investment: LowComments:The potential to attract donor investment in capital upgrades to fishing and processing equipment is probably less than it may have been in the past. Most donors in recent times have preferred to direct funds towards technical assistance, rather than direct investments in capital. Of the ‘traditional’ donors, it is hard to see AusAID or NZAid investing in a fund of this nature. ADB are largely out of fisheries, and the World Bank prefers to fund technical assistance missions. The EU may be the most likely – and has a history of ‘aid for trade’ programmes – although has recently invested considerable funds in technical assistance in the Pacific (e.g. DevFish2; SciCoFish), and may not be keen to provide funds for capital upgrades. Of the Asian donors, it is unlikely that they would fund upgrades of fishing vessels that may act in direct competition with their own fleets.

Likelihood of Capital Shortfall: HighComments:Donor investment is the only plausible source of funds to establish the scheme, and potential attract donor investment in directly supporting the upgrade of capital appears limited.

Social Benefits: Low - Moderate

Comments:Some social benefits (e.g. employment) may accrue if new capital investments support sustainable new commercial business ventures, or strengthen existing ones. Moderate levels of social benefit might be achieved if labour intensive land-based processing was supported (and successful).

Timeframe: Medium – Long Term

Comments:Even assuming there was interest from all relevant stakeholders, negotiation the establishment of a PFF - including sourcing donor finance, seeking the support of, and

Page 73 of 71

agreeing the details of arrangements with, commercial lenders, structuring lending and repayment arrangements – would likely take at least three years and perhaps longer to complete.Recommended for Phase 3 Shortlisting? No

Page 74 of 71

A2.21 Establishment of domestic fisheries development funds

Opportunity: Establishment of domestic development fundsDescription:The concept of a fisheries development fund is to establish a pool of money to support domestic development through grants and soft loans. Administration of the fund usually involves fishers themselves, the fisheries department and can include the national development bank. The initial pool of money itself is usually a grant that may be replenished through a revolving fund approach, interest on loans or further grants.Development funds in various forms have featured in the Pacific region for many decades. In offshore fisheries the success of funds that provide grants and soft loans to fisheries enterprises to enhance capacity, provide plant and equipment as well as assistance with marketing has usually ended in the fund drying up and little gains in domestic development. While the availability of capital for investment may be a contributing factor to the lack of local involvement in offshore fishing enterprises, it is widely accepted that a key factor has been the lack of management skills (finance, marketing and human resources) of those awarded grants or loans. Within TVM membership the Cook Islands has initiated a NZ$200,000 fund to support local fishing enterprise through grants to fishing associations and soft loans. Funding is replenished from a proportion of foreign fishing license fees and interest on loans. The fund is initially aimed at supporting artisanal fishers but could be expanded to include processors and offshore fishers.Potential Return on Investment LowComments:Development funds established outside of the commercial banking system are based on lower interest rates than the commercial sector and hence the potential returns are low.Level of Risk: HighComments:There is a long history of failure in the region from initiatives of this kind both in terms of fund maintenance and replenishment and fisheries development mainly due to the lack of business management skills of beneficiaries. The Fiji Seed Capital Revolving Fund (SCARF) is an example of this. Another factor of failure is that the level of financial support was too small relative to the investment requirement to turn artisanal fishers into industrial longline operators.

Level of Management Expertise Required: Moderate-High

Comments:The successful management of a development fund would entail the same expertise required to run development bank accounts. The Cook Islands Development Fund is a joint venture involving Fishing Associations, the Business Investment Authority, the Ministry of Marine Resources and the Cook Islands Development Bank.Capital Outlay: ModerateComments:Resources required to support fisheries development activities would depend on particular goals. For artisanal fisheries, capital outlay may not need to be large and could be in the order of $10,000 per project. For industrial fisheries development however, the capital outlay for a vessel or processing plant is significantly higher.Potential to Attract Private Sector Investment: LowComments:The private sector would most likely invest directly into an economically viable venture. The availability of cheap finance from a DF may encourage and supplement private sector investment.Potential to Attract Donor Investment: ModerateComments:

A Development Fund is a convenient mechanism for donor contribution Currently the World Bank is looking to re-engage in fisheries development in the

region

Page 75 of 71

In the GEC era, funding core budget activities has become difficult in itself thus making the establishment of DFs of lesser priority

Likelihood of Capital Shortfall: HighComments:Revolving funds notoriously end up depleted because debtors do not repay loans and/or go out of business. Poor management of the fund including through administrative weaknesses and political interference is also a contributor. The availability of seed capital is likely also constrained by the current economic climate.

Social Benefits: LowComments:Initially high due to cash injection and purchase of goods and services but not sustainable if projects are unviable, enterprises go out of business and jobs are lost.Timeframe: ShortComments:If seed capital is available, the establishment of a fund is achievable within a year. Political will and necessary administrative capacity are also necessary.


Page 76 of 71

A2.22 Strengthening fisher's associations

Opportunity: Strengthening fishers’ associationsDescription:A general theme arising in during the in country consultations was to strengthen the capacity of fishers associations. Fishers associations can play a valuable role in coordinating industry input into governance and fishery management planning initiatives, highlighting to government the impacts on the industry of broader policies and programmes (e.g. labour issues, trade and tariff issues, national and local taxes), coordinating private sector responses to issues of common concern and potentially in coordinating direct action to strengthen profitability amongst the membership group (e.g. by negotiating bulk purchasing and sales arrangements), amongst other things.

Few specific examples of what stronger fishers’ association might do were put to the team during in country consultations (i.e. ‘we would like a stronger association to do X, Y and Z’). Rather, the general sentiment seemed to be that stronger associations could assist industry as required, based on the industry’s needs at the time. In the context of the current project, one area that might be productive is for associations to increasingly act as cooperatives to facilitate the coordinated purchase of inputs (e.g. fuel, bait, gear, ice, etc) and to maximise price through coordinated processing and sales (where appropriate).

The opportunity assessed here then is to strengthen fishers associations (at sectoral, national and where appropriate sub-regional level) for the purpose of better coordinating industry input into relevant government processes, as well as better enabling industry to act as a commercial collective to minimise input costs and maximise sales revenue.Potential Return on Investment UnknownComments:The potential return on investment from strengthening fishers associations is difficult to estimate without knowing the types of activities the association would pursue. In New Zealand, the TVM member with the most established and well funded fisher association (SEAFIC), the association focuses largely on influencing government policy (and to a lesser extent public opinion) to create a policy and regulatory environment in which individual private sector companies can use their own means to thrive. In this case, a comparatively small investment by each individual member can result in quite significant returns through favourable government decisions and strengthening of asset (e.g. quota) value. (it is worth noting often the most tangible ‘return on investment’ seen by individual fishers is where action by the association mitigates the impact of a government or other initiative that would otherwise have an acute impact their business – e.g. by redrafting the boundaries of an MPA around their fishing grounds, etc). Note that SEAFIC has an underlying membership and funding structure linked to quota ownership. It represents right holders in this capacity rather than their parallel or alternative capacities as harvesters, processers and exporters.

In the non-NZ TVM participants, the return on investment delivered by a strong association might be different. For example, a stronger association might be able to better present industry views in the design and delivery of national and regional management measures, national and regional aid and technical assistance programmes and broader government policy areas affecting the industry (e.g. trade, tax, tariffs, etc). The collective net return on investment in these areas could be significant. Alternatively, there is probably more potential for associations in non-NZ members to play a more direct role in enhancing profitability by acting more like cooperatives (e.g. arranging collective purchasing agreements, co-ordinated sales, etc). For example, one interviewee noted in Phase 1 discussions that in the year 2000, industry in Tonga was acting as a collective in the purchase of bait. Bait could be brought in by the container direct from South Africa at US$2.50/kg. Now most purchase bait individually – containers need to be broken up and bait costs US$6-7/kg. The potential ROI in this case would depend on the initiatives undertaken.

Page 77 of 71

Level of Risk: Low-moderate

Comments:Assuming staff with the appropriate capabilities are retained, the risks involved in strengthening fishers associations should be relatively low. In the case where the association is primarily focused on influencing government policy, the main risk is that despite investment in more effective and professional representation, government may not be responsive (perhaps for unrelated reasons). In the case where the association takes on initiatives akin to a commercial cooperative, the risks will be driven by the commercial viability of the projects undertaken. In this case, TVM members may also wish to consider risks to existing businesses were there to be additional competition in the marketplace for services (e.g. bait supply, ice supply, etc).

Level of Management Expertise Required: HighComments:The level of management expertise required will depend largely on the initiatives undertaken by the strengthened association. Nevertheless, it is reasonable to assume that to be effective strengthened associations will require an executive with considerable expertise within the area of relevance to the association. For example, the effective negotiation of bulk purchasing or coordinated sales arrangements may require considerable financial management expertise to develop and implement. Likewise, the effectiveness of the association’s input into government fisheries and other policy areas (e.g. labour issues, taxes and trade, etc) will be directly proportional to the expertise, leadership and commitment of the association’s executive.Capital Outlay: Low -

ModerateComments:Again, the capital outlay will be dependent on the initiatives undertaken by the association. Strengthening the capacity of a national association to contribute effectively to, and influence, government policy may be achieved by attracting 1-2 capable staff with the expertise required to provide professional advocacy on behalf of industry and supporting budget for travel and coordination purposes. This could be done within the limits of the ‘low’ price bracket. However, the establishment of a more commercial cooperative structure including some form of infrastructure (e.g. processing facilities, cold storage etc) may be moderate or high, depending on the scale.

Potential to Attract Private Sector Investment: Low - Moderate

Comments:While the advantages of strong fishers associations are relatively clear for most parts of the industry (some larger companies may be well-placed to coordinate their own input into government processes), experience has shown that funding for most Pacific fisher representative bodies has been relatively limited to date. In order for associations to be effective, industry must commit to mechanisms that deliver sustainable financing at levels that are ‘fit for purpose’.Potential to Attract Donor Investment: LowComments:Donors may invest in the short term to assist fishers associations plan for strengthening (e.g. DEVFish2 is currently commissioning a consultancy to look at ways to strengthen PITIA and national associations), however they are likely to be reluctant to commit ongoing funding to private sector representative bodies. “Project based” funding may be provided for specific initiatives – e.g. business management capacity building amongst fishers.

Likelihood of Capital Shortfall: HighComments:Experience has shown that funding provided by the private sector to fishers associations has been weak to date.

Page 78 of 71

Social Benefits: LowComments:There are few direct social benefits arising from strengthening fishers’ associations, however there may be indirect benefits if the association is effective in developing policies that maximise employment in the fishing industry and improve business profitability.Timeframe: ShortComments:The benefits of strengthened fishers associations should be able to be realised immediately.Recommended for Phase 3 Shortlisting? Maybe

Page 79 of 71

A2.23 Reviewing manning requirements/maritime code

Opportunity:Description:The South Pacific Maritime Code, 1986 sets out minimum standards for vessels including those relating to safety, manning and qualification, navigational equipment, dangerous goods and measurement. The code is intended to assist countries develop appropriate national legislation. Industry representatives have reported that differences in manning and other requirements between different areas create inefficiency and are an impediment in the movement of vessels.

The Pacific Islands Tuna Industry Association (PITIA) intends to work with the Secretariat of the Pacific Community (SPC) to update the code.Potential Return on Investment HighComments:Updating the code would require minimal investment and has the potential have significant impact across the region should countries use this as the basis to update national legislation and thus improve standards.Level of Risk: LowTVM partners are already supporting this initiative through PITIA and SPC.

Level of Management Expertise Required: LowComments:The Secretariat of the Pacific Community (SPC) Maritime Division is the regional agency responsible for the code and has the necessary management capacity to coordinate the review. No advanced management expertise is expected to be required to implement any revised requirements once adopted by relevant states.Capital Outlay: LowComments:A consultancy may cost around US$150,000.Potential to Attract Private Sector Investment: LowComments:The private sector would have an interest in the review and may contribute expertisePotential to Attract Donor Investment: HighComments:The Pacific Islands Tuna Industry Association (PITIA) has the review in its work plan.Likelihood of Capital Shortfall: LowComments:Between SPC and PITIA securing required funding and expertise should pose little difficulty.Social Benefits: MediumComments:Updated minimum standards should lead to enhanced vessel safety, and efficiency, across the region. The potential for enhanced manpower quality and quantity is also possible.Timeframe: ShortComments:The review could occur in the short term once funding and a project team are in place.Recommended for Phase 3 Shortlisting? NoComment:While the potential return on investment for this opportunity is higher than the potential risk, we expect this initiative to be followed up by the relevant groups (PITIA, SPC) outside of this work (i.e. it will happen anyway). Hence, we have not recommended further detailed investigation under Phase 3.

Page 80 of 71

mrag report phase 2.docx · web viewour approach was to assess all opportunities identified...

Documents