Tuna loining plant could employ 1000 but would require government concessions

By Bill Jaynes
The Kaselehlie Press
May 20, 2016
Pohnpei, FSM—An ambitious plan to setup a fish loining plant in Pohnpei during the FSM National Fisheries summit. If the plan gets off the ground it could employ as many as a thousand people after the plant reaches full capacity.
A spokesperson for Frabelle Fishing Corporation unveiled the plan for a company they would call FSM Seafood Incorporated. It would be a cooperative venture among, Frabelle, which was established in 1964 in the Philippines; Caroline Fisheries Corporation (CFC), a local Pohnpei purse seiner company established in 1990, partnered with the Pohnpei State Government; and Silla Company, Limited, a Korean fishing company established in 1967 that operates in the Western and Central Pacific Ocean and in the Atlantic Ocean.

They hope to supply frozen cooked loins to canneries associated with the proponents and to Spain, EU, US, and other markets. They currently have no plans to establish a cannery here.
The initial capital outlay for the company is proposed to be $20 million.
The plan is ambitious for a variety of reasons not the least of which is the available work force in Pohnpei. Marko Kamber of CFC says that the new entity would likely have to build housing for workers from other FSM states.
Land is another issue. The venture has identified the Misko Beach property as one potential site. They would require two hectares of land as well as wharf sites.
Kamber said that the Government of the FSM needs to help facilitate trade issues for the proposed project to be successful in the long term.
One of those issues is a European Union requirement that FSM’s National Oceanic Resources Management Authority (NORMA) be a “competent authority”. That’s not a qualitative term. It’s a legal term that the FSM has had a hard time meeting.
“A competent authority is any person or organization that has the legally delegated or invested authority, capacity, or power to perform a designated function. Similarly, once an authority is delegated to perform a certain act, only the competent authority is entitled to take accounts therefrom and no one else,” several Internet definitions say.
FSM’s NORMA does not currently have that type of authority. It’s a legal hurdle that the FSM government has been working on for several years, so far without success.
The proposal says that for the first year or more of operation the plant would operate on a single shift that would require approximately 500 workers. When it expands to two shifts in the second year it would require approximately 1000 workers. They are hoping to process as much as 60 metric tons of tuna per day which they said would require 2500 days of fishing under the Vessel Day Scheme.
The spokesperson for Frabelle said that the plant would need steam to cook the fish. They decided that the best way to provide that steam was by a biomass boiler. Eyebrows throughout the room went up when he said they planned to burn imported coal fired boiler with excess capacity to generate excess power that could then be sold to Pohnpei Utilities Corporation (PUC) at a reasonable rate.
The burning of coal would certainly set PUC back on their “zero emissions” goal for power generation.
The presenter from Frabelle pointed out the economic benefits to the FSM. He said that the processing facility would create a large number of jobs in the FSM. It would generate government revenue and would push up local revenue due to port calls that bring revenue to the FSM. He claimed that the local economy would receive an “indirect push” by having more spending by vessels locally for supplies. The presentation claimed that more employment will increase spending by local community.
He said that the joint venture project faces several challenges in investing in the FSM.
“FSM is currently experiencing trade barrier with EU in the absence of a Competent Authority (CA).
We need to establish better trade relations in order to be able to market loins to countries such as US, Japan, EU. Other island countries already have free trade access with EU through Economic Partnership Agreements. We have to compete with other processing countries with lower operational costs, lower minimum wages, free market trade access, etc. Most equipment and materials will have to be imported from other countries.” the presentation said.
The presentation listed several points on which it would need government support:

  • 7 year Income Tax holiday.
  • 10% Income Tax for the life of the project.
  • Duty/Tax free on imports and exports.
  • Assurance of sufficient Vessel Days allocated for the project which amounts to at least 2,500 vessel days per year.
  • Discount on cost of fishing days based on real economic benefit of this project to the FSM Economy.
  • NORMA to get Bilateral access with other PNA countries for the project fleet.
  • NORMA to get regional access for the project fleet.
  • Economic Partnership Agreements and Free Trade Agreements with EU, US, Japan are essential for us to be able to compete with other tuna processing countries.
  • NORMA has to gain accreditation as an EU competent authority (CA).
  • State and National Gov’t to assist in Land Acquisition for the project.
  • Government to form a Task Group to assist FSM Seafood Inc. in getting necessary approvals with the Environmental Protection Agency and other government agencies.
  • To allow the use of Coal as fuel for steam and power generation.
  • All policies related to our investment such as tax holidays, VDS, and others should be consistently maintained.

“It's a big project, a very big risk and investment. We are still in very initial stages but we can move fast once protocols are in place,” Kamber said.
The presentation said that under Philippine conditions it would take them 1 and a half years after plans, financing arrangements and construction mobilization is accomplished. Under PNG conditions it would take approximately three years. The FSM might take a little less time than the PNG conditions, the presenter said.
Presenting investors were not allowed into the room during potential competitors’ presentation. The representative from Luen Thai who also made a presentation at the FSM fisheries summit said that a cannery would never work in the FSM because it would have to compete with well established canneries with better access to the market. He said that he thought that tuna loining might possibly work.
FSM Seafood proposal is for tuna loining.
“Everyone in the industry seems to have a negative opinion about it”, Kamber said.
It remains to be seen whether or not FSM Seafood can jump all of the hurdles that are in its path.