Report on the Implementation of the derogation to ... - Trade Websites

Final <strong>Report</strong>
RoO Derogation under the PACP-IEPA
facilities, given production levels have generally remained constant and well below capacity. To
date, existing plants have generally been able to meet raw material needs with EU-compliant
catches from their own fleets, or if sourcing from non-company vessels, are yet to branch out and
utilise the RoO derogation to its full capacity to source fish from vessels who have not traditionally
supplied them in the past.
There are currently five new planned tuna processing investments for PNG, each at different stages
of development; four at Malahang Industrial Estate, Lae and one at the Pacific Marine Industrial
Zone at Vidar, Madang. By 2016, estimated total daily production could potentially reach around
730 mt/day (~182,500 mt raw material), should all five new and proposed operations proceed. At
present, there are few other confirmed additional projects in the pipeline for tuna processing in
PNG, and the publicity given to the possibility of rapid large scale expansion seems not be based on
the reality of existing development plans.
Expansion is currently driven largely by PNG’s National Fisheries Authority (NFA) policy of linking
fisheries access to onshore processing, rather than duty free access to the EU market and global
sourcing per se. However, while not the primary driver for attracting onshore investment, the
derogation will play a critical role in industry expansion in the future and its survival. One of the
primary intentions of negotiating global sourcing was to reduce the impediment to industry
expansion of inadequate supplies of wholly originating fish for export to the EU market. Global
sourcing, amongst other factors, will assist in efforts to achieve greater economies of scale, such that
PNG tuna processing facilities can improve their competitiveness in the short-medium term. In
doing so, if and when PNG’s margin of preference (24%) to the EU gradually erodes in light of more
favourable trade preferences garnered by PNG’s major competitors (e.g. Thailand, Philippines),
global sourcing will be a contributing factor in sustaining PNG’s processing sector in the future.
Income generation
For 2007-2010, total direct income generated to the PNG economy by the existing three tuna
processing facilities was in the order of around K 35 million – K 48 million annually (US $16 - 22
million). The most significant contributions to the economy were employee earnings (average K 25
million/year; 45% of net income) and net purchases in local businesses (average K 13.5 million/year;
32% of net income).
Since 2007, the total net direct income generated from canned tuna and tuna loin processing has
generally increased, however, this cannot be directly linked with global sourcing. This trend relates
largely to increased contributions from one of the three existing canneries, whose production has
expanded annually since establishment in 2006. Also, employee earnings have increased
consistently in line with increases in the minimum wage rate.
In the medium term, as new onshore investments come on stream, additional income will be
generated in the economy - the largest direct contributions being employment earnings and
spending by canneries (and their employees) in local businesses.
Employment
New tuna processing facilities will generate a significant increase in employment opportunities for
PNG nationals, particularly young women (potentially in the order of 50,000 direct and indirect jobs
by 2016).
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