Evaluating domestic tuna fisheries projects

• National Fisheries Authority, Papua New Guinea
• Forum Fisheries Agency, Solomon Islands

While Papua New Guinea has substantial stocks of tuna within its Exclusive Economic Zone, the annual sustainable catch from these resources has probably already been achieved. Further development of the tuna fishery will take the form of a change in the balance between the longline and purse seine fisheries, or a change in the allocation of the purse seine catch. PNG has adopted a policy of domestication of its tuna fishery, which involves encouraging domestic longline vessels and expanding the proportion of the purse seine catch taken by locally based vessels supplying domestic canneries. As locally based purse seiners displace the purse seine fleets of distant-water fishing nations, the level of access fees paid by the latter will decline. Lower access fees are a real cost to PNG and it is important to ensure that the domestic operations which replace those fleets generate at least corresponding benefits for the host nation.
Many foreign companies have expressed interest in setting up tuna processing operations in PNG. At the time the Project was conceived, two plants were in operation with several others proposed. Staff at the National Fisheries Authority needed help in developing and applying a method of analysing the economic benefits and costs to PNG of competing proposals. Other countries in the Pacific Islands region were facing similar issues and staff at the Forum Fisheries Agency indicated that they would also like to be involved in the project.

The objective of the project was to develop a benefit-cost model that could be applied to proposals for domestic development of the tuna industry in order to calculate the full range of benefits and costs of any proposed development by a foreign firm. The methodology of a spreadsheet based benefit-cost model had already been developed, and the aim of the project was to gather the data required to apply this model to the analysis of an established cannery in Madang, PNG, as a case study. The case study would then serve as a template for analysis of proposed processing projects in the region.

The project team first modified the existing evaluation framework and applied it to measure the private and social net benefits of a locally-based tuna operation in PNG. The team then generalised the framework to make it relevant for analysis of policy decisions regarding domestication of tuna and other industries.
The process involved collecting and summarising detailed information about project inputs and outputs, together with taxes, charges, tariffs and concessions. Other data collected included foreign exchange and public funds shadow prices and calculation of prices.
The team carried out a cannery labour force survey, and analysed results of tuna shadow-price calculation and analysis of data. The outcomes were incorporated into a draft template for spreadsheet benefit-cost model and discussion of design, preparation of template spreadsheet and review by project leaders.
The framework was generalised and presented at a Project implementation workshop which included formation of a contact group. The team interacted with policymakers on the benefit-cost spreadsheet model, then prepared a publication summarising the work.

Estimates of a range of shadow-prices required to measure the opportunity cost to PNG of the resources, principally fish stocks and labour, it contributes to a domestic tuna processing operation were generated. A large sample survey of the domestic labour force in the Madang cannery was undertaken with the cooperation of the company and a great deal of data about employees' personal and employment characteristics was collected and analysed to determine the shadow-price of labour. The data were also used to determine the effect of level of education on labour productivity in the cannery.
Shadow-prices of tuna catches, foreign exchange, public funds, environmental costs and locally provided services were also considered. The results were incorporated in a spreadsheet benefit-cost analysis using the method earlier developed by Campbell and Brown, which emphasises the net benefits to the host country. A member of the FFA staff undertook a similar analysis of a proposed tuna cannery in the Solomon Islands.
The benefit-cost model details and measures the range of benefits and costs which the host country could expect to flow from a domestic tuna cannery. Since the model also measures the net benefit to the foreign firm under a range of possible financial arrangements, it can be used as a tool in negotiating any tax or similar concessions requested by the firm. Since partner-country staff members were fully involved in the survey work at the cannery and the subsequent development of the model they are able to apply their knowledge to new proposals as they come forward. Working on the project has also improved the general level of understanding about the range and size of the benefits and costs of domestication to the countries of the region. The model and its results are available to fishery analysts throughout the region at: www.uq.edu.au/economics/tuna.