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una is big business in the Philippines. The total value of tuna production
in 1999 was about Php11 billion. A mainstay of the South Cotabato-Sultan
Kudarat-Sarangani-General Santos (SOCSKSARGEN) economy, the tuna
industry accounts for a major proportion of local jobs.
Tuna exports from General Santos City alone, the hub of the southern Philippines'
tuna industry, amounted to some USD130 million in 1998. The city is home
to seven of the 12 tuna canneries operating in the Philippines. Here,
landings average 300 tons of tuna a day, hitting 387,000 tons in 1998.
Globally, the Philippine tuna industry has become a major player, growing
rapidly in the past 15 years. In 1999, Philippine exports of some 65,000
tons accounted for about nine percent of total world canned tuna market,
second only to Thailand's 230,000 tons (32 percent of the world total).
In addition, the Philippines sells a substantial volume of chilled and
frozen sashimi tuna to Japan and other countries.
Its proximity to the fishing grounds of the western central Pacific (it
is closer to the area than even Thailand) makes southern Philippines an
attractive investment area, particularly for specialty fish processors,
a number of whom have set up shop in General Santos City. Among these
is Phillips Sea Foods, an American firm that produces tuna steaks, jakitori
sticks, quarter tuna loins, saku bars, and ground fish meat, mostly
for export to Europe and North America. Phillips opened its General Santos
plant in late 1999, and in six months, the company added new processing
lines and expanded its plant capacity four-fold.
Yet, industry players, big and small alike, are worried. World prices
for tuna are at an all-time low. Competition is increasing from expanded
Taiwanese, French, Spanish, Mexican and Ecuadorian fishing fleets, all
focused on essentially the same fishing grounds used by the Philippine
fleet. And new canneries are being set up in France, Mexico and Ecuador.
Philippine tuna fishers and processors realize that, unless they get their
acts together, they stand to lose out - and lose bad - in the world market.
The tuna market
Demand for tuna in the world market falls under two main product categories:
raw tuna in the form of sashimi and broiled tuna steaks, loins,
jaws and other cuts preferred by the Japanese; and canned tuna, preferred
by North Americans and Europeans. Outside these markets, consumer preferences
are fairly evenly spread out between the two categories.
The fresh and frozen forms account for the bulk of world tuna imports.
In 1998, Thailand, with 25 percent of total imports, was the world's biggest
buyer of fresh and frozen tuna, followed closely by Japan, with 23 percent.
Except for Japan, where most of the imported tuna is consumed directly,
and the United States, which produces the largest volume of canned tuna
but consumes most of it domestically, importing countries can the product
for re-export.
World demand is growing, slowly but surely. From 1990 to 1998, canned
tuna production rose from 1.1 million tons 1.4 million tons, while world
imports increased by an average of 8 percent per year in volume terms
and 11 percent in value. The largest markets during this period were the
European Union, which accounted for more than half of the total import
value, and the United States (21 percent).
Supply and price trends
Analysts say that, unlike other marine species, tuna stocks appear to
be increasing, at least if we go by the catch rate, which registered a
3-percent increase annually from 1990 (2.9 million tons) to 1998 (3.6
million tons). In 1999, the catch went up even higher, by 11 percent,
to 4 million tons.
This sudden increase resulted in serious oversupply problems. Growth in
world demand for skipjack and small yellowfin tuna lagged behind the increase
in supply, depressing world prices for these species, with serious consequences
for the Philippine tuna industry.
In 1997, tuna canneries paid seine operators as much as USD1,063 per ton;
in 2000, tuna prices plummeted to as low as USD320 per ton. In 1998, European
buyers were willing to shell out as much as USD26 for a case of canned
Philippine tuna; in 2000, the going price for the same quantity was USD14.
Since the glut started, tuna canneries in General Santos City have been
operating at 30-40 percent of their capacity. Operators of purse seine
vessels are spending more in operating costs than the prices they are
paid for their catch, and rising fuel costs are aggravating their plight.
A new threat
Low prices are not the industry's worst enemy. Five years ago, a new threat
emerged, one that could have been much more damaging to the long-term
prospects of the Philippine tuna fishing industry than the current supply-side
problems. At that time, the United Nations began holding hearings to decide
on the allocation of tuna fishing rights and quotas in the tropical regions
of the Pacific Ocean, under what came to be known as the "Multi-lateral
High Level Conference on the Management of Highly Migratory Species in
the Pacific Ocean", or MHLC.
The MHLC meant that the Philippines, as all other tuna fishing countries,
had to be safeguard its share of the Pacific tuna catch quotas, or it
would lose access to the rich Pacific fishing grounds and, consequently,
a significant portion of its share of the world tuna market.
Some bright spots
Despite all this, industry players are hopeful. The Philippine tuna fleet
is among the most competitive in the world. A recent study revealed that
crew wages, parts and repair costs and port and licensing fees are considerably
lower than those paid by the fleets of other tuna fishing countries. The
breakeven cost for Philippine purse seine operators is therefore lower
than that of any of the other countries. Breakeven cost in the Philippines
is about USD400-450 per ton of tuna caught, compared to USD650-700 in
the United States, which has the second lowest breakeven cost.
Facing up to the MHLC challenge, the fishing associations, canneries and
other industry players in General Santos City, assisted by the city mayor's
office, successfully advocated greater participation by the Philippine
government in the MHLC talks. As a result of the enhanced involvement
of industry and government in the ensuing negotiations, and with the assistance
of the United States
Agency for International Development (USAID), the Philippines during
the final meeting of the MHLC gained approval for its most pressing demands
and stands a good chance of being awarded as much as 20 percent of the
total quota, which translates to a potential annual catch valued at up
to USD600 million.
At least as important, however, was the coming together of the various
stakeholders as one, united industry. In 1999, assisted by the GEM Program,
six local fishery groups formed the SOCSKSARGEN Federation of Fishing
associations and Allied Industries (SFFAAI) to identify key issues affecting
the tuna industry and get government to recognize and act on these issues.
SFFAAI initially brought together under a single umbrella small and large
purse seine operators and traditional pumpboat operators and, in early
2000, local tuna canneries and frozen sashimi processors as well.
Their industry's narrow escape from a potentially devastating limitation
of their fishing rights, accomplished through joint effort by all sectors,
showed in no uncertain terms the strength inherent in an industry-wide
approach to resolving current and future threats and issues that face
the industry. Buoyed by their fruitful collaboration, industry players,
supported by the Department of Agriculture's Bureau of Fisheries and Aquatic
Resources, are lobbying for the establishment of a national tuna council
to mobilize tuna stakeholders throughout the Philippines for the good
of the industry.
In the face of ever-increasing competition over fishery rights and use
worldwide, the growing ability of the key players to speak with one voice
may well ensure the sustained growth and profitability of the Philippine
tuna industry.
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