By BUSINESS ADVANTAGE PNGPORT MORESBY, PNG ----- The northern coast of Papua New Guinea is experiencing a boom in investment from international companies looking to process fish onshore. Samantha Magick examines why.
Around 18% of the world’s total tuna stock is found in PNG’s 2.5 million square kilometre Exclusive Economic Zone (EEZ). The fishing industry has grown from a dependency on access fees in the early 1980s to a more diversified sector, with significant downstream processing today.
Annually, about three-quarters of a million tonnes of tuna is caught in PNG waters. Most of these are landed in other countries for further processing. The Pacific Tuna Forum estimates the raw value of PNG’s annual catch at about US$1.5 billion per annum and says this figure could more than double if more value-added activities were implemented. Indeed, PNG has a long-term goal of processing in-country 100% of the tuna catch from within its EEZ.
Room for expansion
Much of the growth in the fisheries sector is taking place near Lae, where four new plants are planned for Malahang, with broad support from the provincial government and landowners.
Among them is Majestic Seafood, a joint-venture between Frabelle Fishing Corporation of the Philippines, Philippine-based Century Canning Corporation, and Thailand’s Thai Union Corporation (a subsidiary of Thai Union Frozen Products—the largest tuna canner in the world). Majestic Seafood’s K80 million (US$38 million) tuna canning plant, scheduled to commence operations in June 2013, is expected to create as many as 5000 local jobs when in full production.
Others planning tuna loining plants in Lae include the South Korean company Dong Wong, Nambawan Seafoods and Haili Sheng from mainland China. Two other operators, Malaysia’s International Food Corporation and Frabelle already have canneries in Lae.
Meanwhile, Managing Director Pete Celso says R D Tuna—currently PNG’s largest canner—is about to begin construction of another cannery in Madang, which will double its production and employ 3000 people. The cannery is expected to be operational in early 2014.
Why PNG, why now?
The surge in investment is motivated in part by the advantages of bringing the canning process closer to the Pacific’s fishing grounds.
R D Tuna’s Pete Celso says PNG’s duty-free access to the European Union (EU) has also been a plus. Under its Economic Partnership Agreement with the EU, ratified in 2011, PNG can not only enter the European market duty-free but it has also been permitted to export processed fish to the EU from any vessel fishing outside its territorial waters, thus exempting PNG from the usual Rules of Origin compliance, provided the fish is processed in PNG.
Germany, the United Kingdom and the Netherlands are PNG’s main European markets for canned tuna. Loin exports to Spain and Italy are also significant, and increasing.
The increased emphasis on the fisheries industry also reflects national government priorities. The country’s Vision 2050 strategy makes frequent reference to the fisheries sector as an area of the economy requiring more development if PNG is to diversify beyond its oil and gas revenue base. The EU estimates that by 2016 some 53,000 jobs will be created in the PNG tuna industry if planned projects go ahead.
Madang Industrial Centre
The proposed Pacific Marine Industrial Zone (PMIZ) has been the flagship project of PNG’s fisheries industry for several years. Planned for a 215-hectare site 30 km north of Madang, it is designed to create greater economies of scale and greater efficiency for fish processing factories, port facilities, power generation and waste water processing. A Chinese contractor has already been selected for the construction work—the state-owned enterprise, Shenyang International Economic and Technical Cooperation Company.
In recent months, the PMIZ it has undergone a name change and a shift in focus. It is now known as the Madang Industrial Centre and activities will be broadened beyond fisheries, according to National Fisheries Authority (NFA) Director Sylvester Pokajam.
Niugini Tuna Limited—a partnership between the R D Corporation of the Philippines, Fairwell Fishery Group of Taiwan, and Tri Marine International of the US—plans to operate at the zone, while the PNG Government recently held discussions with the French Sapmer-Piriou joint venture, which is considering a fisheries wharf, tuna processing plant, dry dock and shipyard in the zone.
The zone is being funded by a loan of US$72 million from China Exim Bank—a matter of contention amongst some landowners which is now being challenged in the courts. Political support for the project remains strong, however, with Madang Open MP and Police Minister Nixon Duban saying it is important for the province and must be progressed.
The industry faces several challenges, including the need to improve productivity, achieve great scale, and deal with high operating costs and infrastructure constraints. R D Tuna’s Pete Celso says reducing the cost of freight is a major challenge, as export is a ‘volume game.’
Sylvester Pokajam at the National Fisheries Authority says the planned doubling of domestic tuna processing capacity for early 2013 is only the start of a new expansionary phase.
‘This is not the end, as we still have further growth in processing planned, with thousands more jobs being created.’