investing in onshore tuna processing in solomon islands · ifc international finance corporation |...

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Investing in Onshore Tuna Processing in

Solomon Islands

Solomon Islands GovernmentMINISTRY OF FISHERIES AND MARINE RESOURCES

2 | Investing in Onshore Tuna Processing in Solomon Islands

Linking onshore investment to fisheries access provides investors with a significant new opportunity Solomon Islands has a total land area of 28,369 sq km spread over more than 600,000 sq km of ocean and an Exclusive Economic Zone (EEZ) of 1.3 million sq km. Solomon Islands’ EEZ is located within the Western and Central Pacific Ocean – home to the world’s most significant tuna fishery.

The total catch of skipjack, yellowfin, bigeye and albacore in Solomon Islands has increased significantly since 2004, reaching a peak of nearly 200,000 tonnes in recent years. Skipjack is the dominant species, representing 69% of the catch, followed by yellowfin (18%), albacore (9%) and bigeye (4%).

The majority of the catch taken in Solomon Islands is currently transshipped or landed outside the country.

The Government of Solomon Islands is now implementing a policy encouraging private sector investment in local onshore processing. Companies that establish an onshore tuna processing facility will be given first priority and long term fishing access to Solomon Islands’ EEZ based on the volume of catch required for their onshore processing plant. Fishing days and/ or licences will be offered for sale annually using a formula based on prevailing market rates and the net national benefit of the related onshore investment. Investment opportunities are open to citizens or foreign investors on an equal basis. Fishing days not allocated to processing facilities will be allocated competitively with priority given to the highest bidder.

The Ministry of Fisheries and Marine Resources (MFMR) is responsible for regulating access to Solomon Islands’ tuna fishery. It has established a Project Management Unit (PMU) to manage and promote major fisheries development initiatives within the country. The PMU is a focal point for information about investment opportunities within the fisheries sector and can assist investors through the investment approval process.

Contact details for the PMU are as follows:

This summary provides interested companies with an overview of the process for establishing an onshore tuna processing facility in the Solomon Islands.

Point of Contact: Deputy Director Policy, Planning & Projects, Ministry of Fisheries and Marine Resources

Mailing Address: P.O. Box G2, Honiara, Solomon Islands

Telephone: +677 39 143

E-mail: [email protected]

Investing in Onshore Tuna Processing in Solomon Islands


A bird’s eye view of the overall process There are three basic steps in the process to establish an onshore tuna processing facility in Solomon Islands. These steps are described below. Each step is important. Investors are required to follow and complete each step before proceeding on to the next. Failure to do so may result in delay in the process. Furthermore, it is important to note that under some of the steps there are sub-steps that require completion of other sub-processes as well.

Steps Involved in Establishing a Tuna Processing Facility in Solomon Islands

Clarify the investment opportunity The first thing an interested investor is advised to do when planning to establish an onshore tuna processing facility in Solomon Islands is to contact staff members of the PMU. The PMU can clarify how much of the allowable annual tuna catch remains available as potential inputs to a new onshore processing facility, and ensure investors have all the information they need to develop a fully informed investment proposal.

Negotiate an onshore fish processing agreementInvestors will need to negotiate an onshore fish processing agreement with the Government of Solomon Islands. It is a legally binding, multi-year agreement that sets out the parties’ respective responsibilities and commitments regarding the investment.

Long term access to Solomon Islands’ tuna fishery will only be awarded to investors whose proposed processing facilities create significant net economic benefits for Solomon Islands, particularly in the form of government revenues and citizen employment, and whose operations adhere to best practice environmental and social standards.

Key investor commitments expected under an investment agreement include:

— Establish an onshore fish processing facility of a specified size (in terms of round fish capacity) at a specific location in the country.

— Purchase fishing days and / or licences at the start of each year at a price based on prevailing market rates and the net national benefit of the related investment, and take responsibility for ensuring vessels chosen to purchase fishing days or licences comply with all licence conditions. Fishing days will only be available for purchase once the facility is independently certified as being physically complete, compliant with international food safety standards, and has an internationally recognised food safety management system in place.

— Process to a specified state an agreed minimum proportion of its Solomon Islands’ catch in its onshore processing facility.

Investment Process

1 Clarify the investment opportunity

2 Negotiate an onshore fish processing agreement

3 Implement the investment

– Business start-up requirements

– Land and site development approvals

– Annual fisheries related approvals


— Employ an agreed minimum number of citizen workers in its onshore processing and related fishing operations.

— Comply with all national laws and reporting requirements associated with establishing and operating an onshore tuna processing facility and ancillary activities.

The agreement specifies mechanisms that will be used to monitor compliance with these commitments and ensure they are effectively enforced.

Implement the investment Once an onshore fish processing agreement has been signed, the investor can proceed to implement their investment. This involves complying with a range of business start-up, land and site development, and annual fisheries related approvals.

The table at the end of the document provides a summary of these requirements. While investors will need to comply with most of these requirements, a few are dependent on an investor’s circumstances.

Detailed information about the overall investment process, along with each requirement, is provided in the publication Investment Approvals Guide to Establishing a Tuna Processing Facility in Solomon Islands.

Land

It is important to note that accessing land for commercial purposes is a challenge in Solomon Islands given that the majority of land remains under customary tenure arrangements1. Customary land typically needs to be registered before it can be used commercially because of the uncertainty surrounding its boundaries, ownership and associated use rights. Moreover, foreign investors, by law, cannot hold or enjoy any interest over customary land or acquire a perpetual interest in land. They can, however, access land under a long term lease agreement.

As a result, most investments in the country must address two land related processes. First, the land, if customarily owned, must be surveyed, ownership established and the title registered. Second, a lease agreement is negotiated and registered. The following table mentions only the second process – land lease registration. Investors are encouraged to talk with the PMU as early as possible to clarify the land ownership situation of their prospective facility site and discuss the process for registering any areas of land that may remain under customary forms of tenure. The Government of Solomon Islands is also making efforts to ensure suitable land is made available to investors.

Infrastructure

It is also important to note that access to infrastructure services outside of the country’s urban areas is limited. All infrastructure development will be considered as part of the environment consent and development planning processes. Power generation is the only area where legislation requires a developer to seek separate government approval before proceeding. Nonetheless, investors will be expected to consult with government sector agencies when developing other types of infrastructure services to ensure they are consistent with national plans and standards.

ConclusionSolomon Islands has been blessed with a large ocean environment that is home to one of the most productive tuna fisheries in the world. To date, much of the tuna caught in Solomon Islands EEZ is transshipped for processing in other countries. The Government is committed to increasing the economic benefits the country receives from its tuna resources by encouraging greater onshore processing. This is being done by linking onshore investment to fisheries access.

Investors interested in learning more about Solomon Islands and an opportunity to secure long term access to the country’s sustainably managed tuna fishery are invited to contact the Project Management Unit (PMU) at the Ministry of Fisheries and Marine Resources (MFMR) in Honiara.

1 The characteristics of customary tenure systems are complex and significantly different from those of public or freehold forms – land rights are managed by customary groups according to their own unique processes, which are linked to underlying social and spiritual belief systems.


APPROVAL DESCRIPTION RESPONSIBLE AUTHORIT Y

Business Start-Up Requirements

Initial registrations

Foreign investment registration

All foreign investments must obtain a foreign investment registration certificate. A foreign investment is defined as an investment that includes any amount of foreign ownership. The purpose of the requirement is to regulate access into certain sectors of the economy. Full foreign ownership is permitted in the tuna fishing and fish processing sectors. The certificate must be obtained before an investor can enter into an MOU or agreement with other parties in the country, and be issued to a legal entity registered in Solomon Islands. Once registered, foreign investors are required to submit an annual return describing their activities during the previous year.

Investment Division, Ministry of Commerce, Industry, Labour and Immigration

Company registration

The requirement applies to investors wishing to establish a legal entity in Solomon Islands. Investors can choose to register as a domestic private company, domestic public company or an overseas company. Annual returns are required as a condition of registration.

Company Haus, Ministry of Commerce, Industry, Labour and Immigration

Tax registration and exemptions

Tax identification number (TIN)

All businesses must register for tax purposes. Registration results in the issue of a unique TIN which is used in all dealings with the tax authority. Registration enables a business to lodge income tax returns and meet other tax obligations, such as make “pay as you earn” payments on behalf of employees.

Inland Revenue Division, Ministry of Finance and Treasury

Goods tax registration and exemption certificate

Manufacturers and wholesalers are also required to separately register for goods tax. Goods tax is charged on the final wholesale price of goods sold within the country, whether the goods are manufactured domestically or imported. The rates for goods tax are 10% for locally manufactured goods and 15% for imported goods. Once registered, businesses are eligible to obtain a goods tax registration certificate. The certificate provides a means of importing certain types of manufacturing related inputs and capital goods without paying the goods tax. These statutory exemptions are identified in the first Schedule of the Goods Tax Act.

Inland Revenue Division, Ministry of Finance and Treasury

Statutory import duty exemptions

Manufacturers can also apply for a statutory exemption from import duties on goods that are directly consumed as raw materials, capital equipment used in the production process, or goods used in the packaging of finished products.

Customs and Excise Division, Ministry of Finance and Treasury

Other exemptions Businesses may also apply for other tax and duty exemptions, including income tax holidays, accelerated depreciation of capital costs associated with factory construction and income deductions for training citizen workers.

Revenue and Customs Exemption Committee, Ministry of Finance and Treasury

Investment Approval Requirements



Employment related approvals

National Provident Fund (NPF) registration

All businesses employing workers in Solomon Islands must register with the NPF within 14 days of hiring a worker. Once registered, employers are responsible for making social security contributions to the Fund on behalf of their workers equivalent to 12.5% of their gross salary, of which 7.5% is paid by the employer and 5% by the employee.

Solomon Islands National Provident Fund

Non-citizen workers

The Government expects all investments to create employment opportunities for its citizens. The Government, however, recognizes there are skill gaps in the citizen workforce and permits employers to hire non-citizen workers with the expectation that they will be replaced over time with citizen workers. Each non-citizen worker must obtain a work permit and a residence permit. Employers are responsible for obtaining these permits on behalf of foreign workers they wish to employ. The work permit component ensures non-citizen workers have the necessary skills and experience to undertake the proposed position, and that the position cannot be legitimately filled from the citizen workforce. The residence permit component ensures non-citizen workers are not a potential threat to public health and safety. The permits can be issued for a period of up to two years. The requirement also applies to foreign investment owners wishing to reside in the country to implement their investment.

Work permit – Labour Division, Ministry of Commerce, Industry, Labour and Immigration

Residence permit – Immigration Division, Ministry of Commerce, Industry, Labour and Immigration

Other business start-up approvals

Approval to borrow funds from overseas

Permanent residents, including companies registered in Solomon Islands or operating in the country on a branch basis, must obtain approval to borrow funds from a non-resident. This is to ensure the country is able to maintain a comprehensive and reliable registry of private debt. Solomon Islands also implements measures to control overseas payments associated with imports, services, dividends, management fees and commissions. While foreign currency is made readily available to businesses, some types of payments require prior approval before being they can be made.

Central Bank of Solomon Islands

Business licence Business licences are administered at the sub-national level. Any person operating a commercial enterprise within the jurisdiction of a province or town must obtain a licence from the relevant local authority. Licences are issued on an annual basis.

Provincial Government or Town Council

Land and Site Development Approvals

Land lease registration

Under the Constitution, the right to hold or acquire a perpetual interest in land is restricted to Solomon Island citizens. Foreign citizens, however, are able to lease land. The leasing of land is regulated under the Land and Titles Act. Lease agreements, as well as subsequent land dealings such as mortgage agreements, are registered with the Registrar of Titles. The Government levies a stamp duty on all legal documents including lease agreements.

Office of the Registrar of Titles, Ministry of Lands

Environmental consent

The Environment Act requires certain types of projects, including fishery development projects, to complete an environmental impact statement (EIS) with the aim of ensuring proposed activities do not negatively impact underlying natural and social systems. Specific guidelines for completing an EIS for fish processing plants have been developed. EIS reports are subject to public review. Investors are responsible for funding the cost of completing the EIS, including the public consultation process. Investors are also expected to cover the cost of an external independent review of the EIS as well as an independent monitoring program to ensure key risks are effectively addressed over time.

Environment and Conservation Division (ECD), Ministry of Environment, Conservation and Meteorology



Development planning and building approval

The Government regulates the land development to ensure it is done in an orderly way and in the interests of community members. The construction of buildings and other infrastructure is regulated for reasons of public safety. The development control system is administered at the sub-national level. There are two types of planning permissions – outline planning permission, which may be sought to obtain in-principle approval for a development concept, and full planning permission which ensures proposed developments conform to prescribed standards.

Provincial Government or Town Council

Power generation licence

Solomon Islands has limited electricity generating capacity and its electricity grid does not extend far beyond urban centers. In recognition of this constraint, the Government allows developers to install and operate their own power plants. Such facilities are licensed in order to ensure they follow national standards and are an effective and efficient fit with the country’s existing and planned power network. Once issued, a licence must be renewed on an annual basis.

Solomon Islands Electricity Authority

Annual Fisheries Approvals

Agreement to purchase VDS days and licensing of fishing vessels

Investors will be offered the opportunity to purchase fishing days at the start of each year in line with commitments specified in their onshore fish processing agreements. Once an annual purchase agreement has been signed and the associated fees paid, the facility owner selects which vessels it wishes to use on its purchased fishing days. Each nominated fishing vessel must obtain a separate fishing licence. The total fishing effort of the investor’s licensed vessels cannot exceed the total number of fishing days it has purchased. Each licence includes a standard list of conditions that all vessels must comply with when fishing in Solomon Islands waters. They encompass a range of monitoring and surveillance requirements including on board observers.

Ministry of Fisheries and Marine Resources

Fish export approval number

A fish export approval number enables a commercial enterprise to export fishery products from Solomon Islands. The purpose of the approval is to ensure the country’s fishery products are safe for human consumption and meet the safety standards of importing countries. Separate export approval numbers are issued for each link in the production chain – onshore fish processing facilities, fishing vessels and other activities such as landing sites and seaports/ airports. Export numbers must be renewed annually. The system includes a minimum set of requirements for exporting to all international markets, along with a set of additional specific requirements for businesses exporting to the European Union.

Inspection and Certification Unit, Environmental Health Division, Ministry of Health and Medical Services

Fish processing establishment licence

Fish processing establishment licences are issued annually and allow businesses to process fisheries products in Solomon Islands. The licence applies to tuna products as well as other fisheries products.

Ministry of Fisheries and Marine Resources

Vessel registration and safety certificate

Commercial vessels more than 10 meters in length wishing to operate in Solomon Islands must be registered with a competent authority to ensure they are structurally and operationally safe, and maintained in line with International Conventions. Vessel owners can choose to register their vessel in Solomon Islands. Registration is regulated under the Shipping Act, which requires vessels registered in Solomon Islands to employ Solomon Islands citizens as crew. The Act also stipulates that no vessel can go to sea without first obtaining a valid safety certificate.

Solomon Islands Maritime Safety Administration

Contact Details

Email address: [email protected]

Ministry of Fisheries & Marine Resources Kukum Highway PO Box G2 Honiara Solomon Islands

T (677) 39143 F (677) 38730

Solomon Islands GovernmentMINISTRY OF FISHERIES AND MARINE RESOURCES

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