Stimulating investment in pearl farming in ... - World Fish Center

Page 24provide them with technical and material support, including marketing. It could be envisagedthat the process of spat collection could progressively be upgraded to small-scale pearlfarming through a process in which communities or individuals form partnerships withcommercial pearl farms. In that case the commercial pearl farm would provide support in theform of materials, technical assistance and, importantly, seeding. In exchange the smallfarmer would be obligated to have his pearls harvested under the supervision of thecommercial operator, and included in that operator’s marketing arrangements. Therelationship would need to be laid down in clear and immaculate detail under a bindingcontract that committed both parties to pre-determined and transparent dealings with eachother. Similar arrangements would apply in the case of partnerships or joint ventures thatmight develop between the commercial pearl operation and domestic investors. Licensing ofsmall farms could be a useful stage for the encouragement of the nucleus-estate model.This is unlikely to be a perfect arrangement in all cases, or universally supported.Smallholders in other countries have entered into arrangements with large-scale operators andsubsequently claimed to have been cheated on marketing deals, especially where complexmulti-company arrangements permit transfer pricing and somewhat subjective attribution ofcosts. Conversely, larger operators often lose patience with small farmers whose demands forfinancial and material support become excessive, who fail to follow proper husbandry or farmmaintenance practices, or who persist in trying to market inferior quality pearls despite themarketing agreements in place. However in the absence of better alternatives the nucleusestatemodel seems to be the option of choice. This approach is being used in another pearlfarming operation in the region but is relatively new and thus has not so far stood the test oftime.In any case this is not likely to be an issue in the near future. It will probably take 5 to 10years at least before the industry develops to a point where small-scale pearl farmingbecomes a management issue. However the problems need to be anticipated so that, in theevent that an industry does develop, it does not then become undermined by the qualityproblems that have arisen elsewhere. Government policy on pearl farming needs to recognisethe need to control indiscriminate pearl marketing, possibly by licensing marketing as aseparate activity to farming itself. Under such an arrangement pearl marketing licences wouldonly be issued to larger-scale operations with sufficient demonstrated production volume toparticipate in industry auctions and major marketing events.7. INVESTOR INCENTIVESThe main natural attractions for pearl farming in Solomon Islands have already beenidentified in section 4.1 as multiple farming sites, high pearl oyster growth rates, and lowlabour costs. Additional incentives that could be offered by Government or the WorldFishCenter are described by Hughes (2008) in an accompanying report and are summarisedbelow.7.1. Duty and tax reliefGiven that pearl farming is an industry that requires long time and investment horizons thereare strong arguments for providing full or partial duty relief on the importation of materialsand supplies needed to establish the pearl farm, and tax relief for an initial period of tenyears. Many other countries offer such concessions for pioneer and rural industries, and forSolomon Island not to do so would reduce the relative attractiveness of the country to foreigninvestors.