Source: Business World
The Philippines is fast losing the tuna market in Europe, and exports may just disappear in three years unless a quick government rescue is mounted.
Aggravating the EU situation is a gradual loss of the US market where the Philippines is a traditional key supplier.
Such rescue will have to come, among others, in the form of immediate removal of the export levy, real incentives in the form of concessional financing and creative subsidies to go around rules on international trade.
Soaring costs of production amid restrictions on fish catch have made tuna exports to EU simply uncompetitive.
Production on year-to-date basis is down 20%, says Francisco Buencamino, an industry colleague who runs the Tuna Canners Association of the Philippines. Shipments to the US are down 30% while competitors Thailand and Vietnam increased volumes by more than 40%.
Last month, our company tried to fill an order for five loads of canned and pouched tuna for the French market but unfortunately, we could not deliver because export prices were just too high vis-à -vis prevailing landed cost in Le Havre. We were instead advised to go to Papua New Guinea (PNG) to source the market’s tuna requirements.
Why PNG? Because PNG is the new kid on the block in the global tuna trade. In fact, it aims to become the tuna capital of the world by 2016.
It will almost certainly deal our country’s tuna presence in EU the coup de grace if no strong government support is forthcoming. Then we can kiss our EU tuna exports goodbye which last year already fell to $359 million from $400 million two years earlier.
In 2010, the Philippines was EU’s third largest supplier of canned tuna with a market share of 12% after Thailand (18%) and Ecuador (17%). PNG had a market share of only three percent. But things have changed since then.
PNG is now the recipient of a generous economic partnership package that allows tuna exports to EU to be accorded duty-free status. EU accords the privilege mostly to former colonies that have not moved up from the category of least developed countries. In contrast, Philippine tuna exports are assessed import duty of 24%.
As such, PNG enjoys a clear built-in price advantage of at least 20% compared to exports from other countries, including the Philippines.
But if it is any consolation, two of PNG’s top tuna producers are investors from the Philippines -- RD Tuna Canners Ltd. of the family that owns Philbest in General Santos City (GenSan), and Frabelle/Frescomar, a diversified marine-based group from Navotas. But not for long.
EU’s special treatment has triggered a scramble by foreign investors to put up tuna processing facilities in PNG.
As expected, China is at the head of the pack, funding a multibillion-dollar development in the northwestern part of the country called the Pacific Marine Industrial Zone (PMIZ). PMIZ will host 10 large tuna plants which will easily boost PNG’s production capacity to more than 2,000 tons per day.
Raw material will hardly be a problem. In 2010, PNG’s tuna catch was placed at 749,000 tons, or roughly 17% of world catch. Thus, it will be able to sustain its own processing requirements without resorting to imports; which will in turn translate to export prices that will be difficult to match by competitors like the Philippines.
With its huge war chest, China certainly knows where to place its bet. Several years ago, when GenSan was considered a sunrise business area, China provided $100 million to fund its infrastructure development. Today, the tuna of its eye is PNG.
Aside from China, PNG’s tuna rush has also attracted new investors from Taiwan, Thailand, Malaysia, and even the US.
Since PNG’s new tuna investors are serving the same markets as the Philippines, existing producers in GenSan, Zamboanga, and Navotas will have to come up with strategies to survive and stay in business.
Fixing the back end may come as a matter of course -- downsizing, cost cutting, etc. It is at the front end, however, where the critical job needs to be done. And it falls squarely on the government. Negotiating reduced tariffs and trade-offs where needed will have to be managed by a competent and credible team.
EU is probably a lost cause with existing unresolved business issues involving Germany, Belgium, and France.
Thus, focus will have to be on the US, Japan, Australia, and other alternative new markets. India and China are huge markets and they may yet save the day for the Philippine tuna industry.