Fisheries

Papua New Guinea’s fishing industry could be a world leader.

The fishing industry is a sector where PNG has the potential to become a world leader, especially in tuna. One established company in the sector is R D Tuna. General Manager of R D Tuna Canners, Erwin Ortiz, says the company has managed international risk by becoming vertically integrated, from fishing through to canning. That means it does not need to buy fish from external players to meet its production requirements.

The integration has also partially helped R D Tuna handle its foreign exchange challenges.

‘ We have to pay in kina and the fishing companies want US dollars. But, now that our fleet is upgraded, we all get our fish from our own fishing group.

‘The price of fish greatly affects the company’s profit margins. Everything else is manageable but the fish cost is not. You buy more fish when the price is low but when the price is up you have to be very careful. When the price is down, we also expect the buyers from Europe to also ask for a lower price from us.’

The way to deal with the volatility, he says, is to use cold storage to increase inventory.

‘ What we need to do is stock fish for three months. With that, we can plan well, do forward bookings effectively and be protected from any changes of price.’

Seventy per cent of R D Tuna’s revenue comes from exports, with the remainder sold to the domestic market. Ortiz says the company’s average profit margin for exports is about five per cent. On local sales, it is ‘10 per cent, on average.’

The company’s operations are highly sensitive to wage levels.

‘A one kina increase per hour in wages will be a K5.3 million pressure

on our bottom line over a year. That is around US$1.6 million drop in our bottom line. That is a big amount of money. The challenge is to increase our volume of production and partly pass it on in the price.’

Ortiz says he is ‘very, very optimistic about the future’, noting that the upgrading of the fishing fleet is paying off.

‘The rebate given by the National Fishing Authority and the government to manufacturers is very good. R D Tuna Canners is the pioneer in tuna processing in Papua New Guinea, and we believe, given the right support from the National Government, doing business here is still profitable.’

Local production

A big challenge is to increase local production. According to the government’s Medium Term Development Plan much of the fresh tuna is exported or taken overseas for processing. But there are initiatives to combat this. Papua New Guinea’s fisheries Exclusive Economic Zone of 2.4 million square kilometres is the largest in the South Pacific and supplies about 18 per cent of the world’s tuna catch, a percentage that has been steadily rising since 2010. Frozen tuna constitutes about half of PNG’S tuna exports, followed by canned tuna, cooked loins, fishmeal and chilled tuna.

James Movick, Director-general of the Pacific Islands Forum Fisheries Agency, says PNG is ‘leading the way’ in the Pacific when it comes to developing onshore processing of tuna and providing jobs.

‘The new system of rewarding tuna canneries and loining plants for the volume processed within the country will allow incentives to directly benefit the companies that help to meet the government’s objectives of building up this industry,’ he says.

There is the potential to do more. Research by the APEC Business Advisory Council (ABAC) has concluded that PNG’S fisheries industry could generate US$1 billion (K3.3 billion) a year in revenues. ABAC member Wayne Golding says that because the industry is labour intensive, an additional 250,000 people could be employed.

‘ We own it. Sixty per cent of the tuna in this region comes out of our own waters. What we have is a diminishing supply chain against demand for wild fishes. So the world is moving more towards aquaculture fisheries in order to bridge the difference.

‘It means that in PNG we have to engage with our resources to convert it into added value. It has been well recognised globally that we are the last bastion of assets in wild fisheries.’

IT HAS BEEN WELL RECOGNISED GLOBALLY THAT WE ARE THE LAST BASTION OF ASSETS IN WILD FISHERIES. Wayne Golding.

Productivity

Golding says the industry needs to become more productive. ‘Fisheries have a 40 per cent wastage factor: from one fish, 40 per cent is classified as by-product or wastage. There is now technology coming into play that says that this should be zero. That is now a key investment factor.’

Golding believes the PNG fishing industry needs to market itself better.

‘ We don’t promote our product well enough.’ 

Credit: R D Tuna Tuna catch