Bureaucratic barriers
Focusing on specific species and scale will help attract investment
BUREAUCRACY and a reluctance by banks to lend are among the factors holding back investment in aquaculture across Europe, a recent investigation has suggested. The study was carried out by EUMOFA, the European Market Observatory on Fisheries and Aquaculture, and has looked closely into cross border investment in fish farming in the EU in order to identify barriers and drivers influencing decisions.
The UK is included in the survey because it was a member when the evidence was compiled and is likely to remain so for the next few months at least.
The report says European aquaculture, although comparatively small in world terms (1.2 per cent of global output), is highly diversified, with many different species farmed by a variety of enterprises, ranging from large, world leading companies to small, family owned businesses.
‘This diversity leads to large differences in structures and technologies across EU member states, which in turn impacts the factors considered important for investment and growth,’ it adds.
While it blames financial and government institutions for being among the barriers to cross border growth, it also suggests the industry could and should do more for itself.
‘By focusing on specialisation and scalability rather than diversification, EU member states could encourage economies of scale, making the sector more attractive to investors and others – research and educational institutions, suppliers, and qualified workers- who ultimately will inject increased productivity and innovations into the sector.’
However, it says the position is better for salmon farming (largely confined to Scotland and Ireland within the EU), where many of the companies are listed on international stock exchanges and have better access to capital.
This is not the case in the Mediterranean, where sea bass and sea bream are the main
species, and where there is a lack of incentives to build scale.
EUMOFA says this sector of the industry has experienced cycles of boom and bust down the years.
‘The lack of incentives to build scale, and to both promote and accept a focus on producing fewer species, where EU member states could take a leading role in cost competitiveness or market volume leadership, is mentioned as a potential barrier to achieving economies of scale.’
By enhancing diversification rather than specialisation and scalability, there was a risk that enterprises end up without sufficient size to be attractive.
At 492,000 tonnes, mussels are the largest volume farmed species in Europe, worth €443 million, but salmon (172,000 tonnes) is way out in the lead in value terms and worth more than €975 million a year, followed by trout at €614 million, gilt head sea bream €449 million and oysters at €434 million.
The report points out that marine aquaculture is capital intensive, in the sense that relatively large investments are needed for the physical equipment and the stocking of cages compared to the input of labour.
EUMOFA says: ‘Successful aquaculture production is dependent on several factors. First, in all states one needs licensing from the relevant regulatory authorities (local, regional and national).
‘But the various interactions between these groups, along with European legal requirements, can make the licensing process unpredictable and protracted.
‘The main reasons for the burden in the licensing process are bureaucracy and conflicts between different governing units.
‘Multi-level governance can also constitute barriers, both with respect to different levels within the member states and between the states and the EU.’
The report concedes that the European Commission has already identified the need for a faster, more responsive, less bureaucratic approach by member state governments as one of the keys to successful development of European aquaculture. Despite this, there are still examples of licensing processes taking several years.
Locations and access can also limit growth and investment. Finfish cages tend to be concentrated close to shore, hidden from beaches and tourist centres.
‘Despite that, there are strong conflicts with tourism based uses of
“Aquaculture cages occupy less than two per coastline” cent of available
the coastline,’ the report says. ‘A significant challenge for marine cage aquaculture operators is to find ‘good’ sites in terms of current, depth, temperature, water quality, wave and wind exposure and established infrastructure, such as roads and harbours.
‘When taking these factors into consideration, the access to suitable sea sites becomes more limited. Where suitable locations are available, approving them for aquaculture production, both on land and in the sea, is often subject to resistance from, inter alia, environmental agencies, the fisheries sector, the tourist industry and the local inhabitants.
‘In this regard, prudent spatial planning that takes into account future possibilities and needs of aquaculture could reduce the administrative burden for private developers and limit the uncertainty and duration of approval processes, thus making investments more attractive.’
But of the ten countries studied, EUMOFA found that aquaculture cages occupied less than two per cent of available coastline.
Turning to financial barriers, EUMOFA says banks are looking for low-risk business opportunities, which have to be of a certain size in order for them to support the investment.
It also pinpoints a lack of knowledge and interest in the industry by some financial institutions, plus a reluctance to be involved in the development of new species.
‘Normally, banks only accept real estate, inventory, equipment and machinery as collateral. In Norway, however, companies can pledge biomass as a collateral and this has been an important factor for (Norway’s) growth in the salmonid aquaculture sector.
‘Using biomass as collateral requires the bank’s involvement and knowledge. To agree to put effort into increased knowledge in the aquaculture sector, a bank demands a minimum production scale and a minimum level of predictability of the project.’
More targeted awareness and promotional activities towards the financial sector could lower such thresholds.
The report also says the licensing processes in various countries could and should be simplified.
To help improve marketing, EUMOFA says the Norwegian model, where the industry pays a small fee on exports, allowing the country’s seafood council to promote their products abroad, should be looked at as a possible solution.
And it recommends concentrating on fewer species (especially true in southern Europe) to achieve scale and attract banks and investors. Educating the financial industry about aquaculture and what it can offer should also be taken up.
It also suggests that the industry should invite financial institutions for talks to educate them on the considerable benefits of aquaculture and its role in providing the world with healthy protein.