pacific islands development program

Pacific Islands Development Program

Multinational Corporations in the Pacific Tuna Industry

DEVELOPMENT cF THE PHILIPPINE TUNA INDUSTRY

Jesse M. Floyd Ph.D.

^^ I • a.t , %%vq Ceuler • 1 77 Fi i Wei R-.t .J • IIuT L'IIL. 1 1:1",111 96Yd18

JESSE M. FLOYD, Ph.D. was a Research Fellow with the Tuna Project at thePacific Islands Development Program in 1985.

The Pacific Islands Developiient Program is publishing this report foruse by Pacific island governments. To ensure maximum dissemination ofthe material contained in the report, it is not copyrighted and islandgovernments are encouraged to copy the report or portions of it at will.The Pacific Islands Development Program requests, however, that organi-zations, institutions, and individuals acknowledge the source of anymaterial used from the report.

DEY LOPMENT OF THE PHILIPPINE TUNA INDUSTRY

Jesse M. Floyd Ph.D.

February 1986

David J. Doulman, Ph. D.Project Director

Multinational Corporations in the Pacific Tuna IndustryPacific Islands Development Progran

East-West Center1777 East-West Road

Honolulu, Hawaii 96848

CONTENTS

Page

List of Tables and Figure ......................................... V

Foreword .......................................................... vii

Abstract ...................................................... ix

Terms of Reference ................................................ xi

Introduction............................... 1

1. Tuna-Fishing Industry ......................... 3Municipal operations ................... 3Commercial operations ....................................... 5

2. Philippine Government Policies ................................. 7

3. Operators in the Philippine Tuna Industry ...................... 11Frozentuna exporters ....................................... 11Distant-water fishing operations ............................ 13Canned tuna exporters ....................................... 14

4. International Trade in Tuna Commodities ........................ 19

5. Decline of the Tuna Industry ................................... 23Internal problems ........................................... 23Externalproblems ........................................... 26

6. Conclusion ..................................................... 29

Abbreviations ..................................................... 31

Appendices

1. Major Features of Philippine Pavaos.......................... 33

2. Incentives Available to Fishery Enterprises in thePhilippines................................................. 35

3. Members of the Philippine Tuna Producers & ExportersAssociation................................................. 37

Notes.............................................................. 41

Pacific Islands Development Program - iii

LIST OF TABLES AND FIGURE

Table 1. Tuna production in the Philippines, 1970-84 .............. 49

Table 2. Tuna production and trade in the Philippines, 1970-84 .... 50

Table 3. Major tuna producing nations ....... ...................... 51

Table 4. Profiles of major tuna exporters in the Philippinesin1980 ................................................ 52

Table 5. Composition of the Philippines tuna fishing fleetin1981 ................................................ 53

Table 6. Philippine canned tuna export production by company,1981-82 ................................................ 54

Table 7. Philippine canned tuna export production by company,1983-84 ................................................ 55

Table 8. Capacity of major tuna canneries in the Philippinesin 1984-85 ............................................. 56

Table 9. Philippine chilled/frozen tuna exports by destination,1979-82 ................................................ 57

Table 10. Philippine canned tuna exports by destination, 1979-82 ... 58

Table 11. Cost of tuna canning operations in the Philippines andThailand, 198+ ......................................... 59

Figure1. The Philippines .......................................... 60

Pacific Islands Development Progran - v

FOREWORD

At its inaugural meeting in Pago Pago in 1981, the Pacific IslandsDevelopment Program was directed by the Standing Committee of the PacificIslands Conference to evaluate the potential beneficial role of multinationalcorporations in the Pacific islands region. In 1984 the Standing Committeeagain addressed the question of multinational corporations and approved thatthis study be undertaken on a sectoral basis, with the tuna industry being thefirst sector to be examined.

The tuna industry was selected as the first sector for investigation bythe Standing Committee because the tuna fishery and industry in the Pacificislands region affects all countries and territories. The broad objectives ofthe tuna sectoral study are (1) to analyze the current and future role ofmultinational corporations in the tuna industry in the Pacific islands region,and (2) to evaluate the potential contribution these corporations could make toindustry development in the region. This is the first time that acomprehensive study of the tuna industry in the Pacific islands region willfocus on regional and international issues affecting the industry from theperspective of all island countries.

A proposal outlining the tuna sectoral study was drawn up in 1984. Thiswas done in consultation with the Forum Fisheries Agency and research commencedin January 1985. The study will produce a range of technical reports that willaddress issues critical to the development, management and expansion of tunaindustries in the Pacific islands region.

This report, prepared by Dr. Jesse Floyd, traces the evolution, expansionand decline of the tuna industry in the Philippines. The industry in thePhilippines is important for Pacific islands countries for two reasons.Firstly, it is a competing industry for Pacific island countries and changes inthe Philippines' industry could affect investment and marketing opportunitiesfor industries in the Pacific islands. Secondly, the reasons for the declineof the Philippines' industry could provide policy guidance for island countriesin developing and managing their industries.

This report will be complimented by two other similar studies dealing withthe development and current status of the tuna industries in Mexico andThailand.

The Pacific Islands Development Program's tuna study is financiallysupported by the East-West Center, the United Nations Development Programme andthe Australian Development Assistance Bureau.

David J. Doulman, Ph. D.Project DirectorMultinational Corporations in the Pacific Tuna industry

Pacific Islands Development Program - vii

ABSTRACT

In the the second half of the 1970s the Philippines' tuna fisheryemerged as the largest and most valuable fishery in the country. Totalproduction of tuna and tuna-like species increased from less than 25,000metric tons (mt) in the early 1970s to over 200,000 mt in the 1980s.Approximately one-half of the tuna catch consists of ski pj ack (Katsuwonusoelamis ) and yellowfin (Thunnu albacares ) and one-half of frigate tuna(Auxin thazard ) and eastern little tuna (Euthynnus affin s). Several othertuna and tuna-like species are occasionally caught in Philippine waters,but they are not landed in commercial quantity and are not distinguished inPhilippine fisheries statistics.

Tuna-fishing operations are undertaken by both the small-scale andcommercial fishing sectors. Small-scale fishermen operate boats less than3 gross tons (gt), most of which are wooden double-outrigger canoes knownas bancas . Although they have traditionally accounted for the majority oftuna production, the small-scale fishermen's share of the catch hasdeclined steadily since 1977. Landings by commercial operators, however,have increased rapidly as a result of the successful introduction oflarge-scale tuna purse-seining operations in combination withfish-aggregating devices, locally known as navaos . This has beenaccompanied by dramatic increases in frozen and canned tuna exports thatexceeded US$90 million at their highest level in 1980 and 1981.

Since 1981 frozen tuna exports have declined, and permits have beengranted for importing tuna to meet the demands of the local processingindustry. The need to import tuna is the culmination of several problemsthat have plagued the Philippine tuna industry and contributed to itsrecent decline. These problems include over-fishing, resource depletion,and overcapitalization in the industry. They have resulted in fish supplyshortages and increasing competition among operators in the industry. Thissituation has been exacerbated by increased operating costs and taxes forboth producers and processors and by deteriorating economic conditions inthe Philippines generally. In addition, Philippine tuna exporters havebeen confronted by external problems over which they had little control.The major external problems are poor international market conditions fortuna commodities, higher import duties on canned tuna imports to the UnitedStates, and increased competition from other tuna-processing nations,particularly from Thailand.

Pacific Islands Development Program - ix

Terms of Reference

CASE STUDY: TUNA INDUSTRY IN THE PHILIPPINES

The major purpose of the case study is to describe and analyze theimportance of the tuna industry in the Philippines. Particular attentionshall be focused on, but not limited to, the following six thenes. Whereapplicable these themes shall be discussed in relation to their effect on,and implications for, tuna operations in the Pacific islands region.

1. Industry Overview. This section shall describe tuna operations in thePhilippines and establish the importance of the industry in regard to itsrole in the international tuna industry. To meet these objectives, thissection shall cover, among other things:

(a) the nature of the tuna industry in the Philippines, includingdomestic and overseas tuna-fishing operations and marketing andprocessing operations;

(b) production trends and catch-per-unit-of-effort (CPUE) by fishinggear since 1975; and

(c) infrastructure development for tuna operations.

2. G(Yverrment Policy. This section shall address:

(a) government policy in the fishing industry generally and in thetuna industry in particular;

(b) government interests in the tuna industry;

(c) incentives for domestic and foreign investors; and

(d) the extent of foreign investment in the industry.

Particular attention shall be focused on any changes in government policies

and investment incentives that were made to facilitate and promote tunaindustry operations.

3. Major Tuna Operators. This section shall:

(a) indentify the major tuna operators in the Philippine tunaindustry;

(b) examine the nature and extent of their relationship with overseasoperators in the international tuna industry;

(c) assess their contribution to national development.

Emphasis shall be placed on the relationships with overseas operatorsactive in the tuna industry in the Asia and Pacific regions.

Pacific Islands Development Program - xi

44 • International Trade. This section shall:

(a) review the volune and value of international trade in tunacommodities to and from the Philippines since 1975;

(b) establish the importance of tuna trade from the Philippines withregard to its role in the international tuna industry;

(c) identify the Philippines' major trading partners and the patternof trade for both the import and export of tuna commodities; and

(d) examine the contribution of international tuna trade to thenational economy.

5. Development Problems. This section shall focus on identifying andanalyzing the internal and external factors which have accelerated and/orimpeded the development of the tuna industry in the Philippines. Thesection shall cover, among other things:

(a) tuna resource availability;

(b) cost of labor and processing materials;

(c) credit limitations and domestic economic conditions;

(d) competitive advantage vis-a-vis other competing nations in theregion;

(e) trade relations with the United States and other major importingnations; and

(f) the effects of world market conditions on the domestic tunaindustry.

6. Development Potentials. This section shall review the findings of thecase study and assess the development potential of the Philippine tunaindustry. Emphasis shall be placed on:

(a) analyzing the impact of Thailand's tuna operations on tunaoperations in the Philippines; and on

(b) investigating prospective development problems as a result of theeconomic and political crisis in Philippines.

Pacific Islands Development Program -- xii

INTRODUM *

During the second half of the 1970s the Philippines a majortuna-producing nation. The Philippine tuna industry's success was due toimproved catching methods, which, in turn, were accompanied by improvedpreservation and storage facilities and by modern processing techniques.The overall result was dramatic increases in the export trade of frozen andcanned tuna commodities from the Philippines. In terms of foreign exchangeearnings, however, the Philippine tuna industry appears to have peaked in1980-81. Since then the annual value of exports has declined, and thetotal volume of frozen tuna exports has decreased. Deterioratingconditions in overseas markets have contributed to the decline of thePhilippine tuna export industry, but internal factors have had a moresignificant impact on the industry's development potential.

This paper examines the rapid development and the subsequent declineof the Philippine tuna industry. It is divided into five major sections.The first section focuses on tuna production trends in the Philippines anddescribes the nature of tuna-fishing operations. The next section analyzesgovernment policies in the fishing sector, particularly policy changes thatwere made by government to facilitate and accelerate development in thetuna industry. The third section identifies major tuna operators andexamines the extent of foreign investment in the industry. The followingsection looks at the volume and value of Philippine tuna commodity exportsand at the pattern and direction of international tuna trade. The internaland external factors underlying the decline of the Philippine tuna industrysince 1981 are addressed in the fifth section. The conclusion takes stockof the present status of the Philippine tuna industry.

Pacific Islands Development Program - 1

1. T<JNA-FISHII& INDUSTRY

The tuna fishery emerged as the Philippines' largest fishery sectorduring the five-year period from 1976 to 1980. As shown in Table 1, total(recorded) production of tuna and tuna-like species increased from lessthan 25,000 mt in the early 1970s to over 200,000 mt in 1980. 1 Since 1980the total tuna production has consistently exceeded 200,000 mt. It reachedits highest level of 242,000 mt in 1983 and then declined seven percent inthe following year to 226,000 mt.

Almost one-half of the tuna catch in the Philippines consists ofskipjack CKtsuwonus pelamis) and yellowfin(Thunnus albacares) (Table 1) .These tuna are in high demand on international markets, and they are animportant export commodity from the Philippines. Frigate tuna CAuxisthazard ) and eastern little tuna (Euthynnus affinis ) are equally abundant,but they are lower-value species, generally sold as fresh fish on the localmarket, and they are not in demand in export markets. In addition to thesefour species, several other tuna and tuna-like species are occasionallycaught in Philippine waters. 2 The most important of these is big-eye tuna(Thunnus obesus), which is often caught in all quantities with yellowfin.Big-eye tuna is not distinguished from yellowfin in Philippine fisheries,statistics.

Tuna-fishing operations are undertaken by both the municipal andcommercial fishing sectors. The distinction between the two sectors ismade solely on the basis of vessel size. Municipal operations involvesmall-scale artisanal fishermen operating boats less than 3 gt, most ofwhich are wooden double-outrigger canoes known as b ancas , 4-11 meters (m)in length. Accurate data on the number of municipal vessels are notavailable, but it is estimated that there are about 110,000 motorizedbancas, typically equipped with 10-16 hp inboard gasoline engines, and90,000 non-motorized bancas .3 Al]. fishing boats over 3 gt are classifiedas commercial vessels and require an operating license from the Bureau ofFisheries and Aquatic Resources WAR). In 1981 at the peak of the tunaindustry, there were 2,3 149 registered commerical fishing vessels and 675accessory vessels. The majority of the commercial fishing vessels weresmall purse seiners, ringnetters, bagnetters, and trawlers less than 20 gt.Among the larger fishing boats, 131 were over 100 gt, 89 were purse seinersoperating primarily in the offshore tuna fishery, and 25 were trawlers.Most of the accessory vessels were fish carriers.14

Municipal operations

Tuna-fishing operations in the municipal sector occur year round, butthe fishing effort and production vary in different regions of the countryat different times of the year. The major factor governing operations isthe prevailing monsoon. During the northeast monsoon from November throughMarch, strong winds and heavy rains restrict fishing operations on the eastcoast. At this time, fishing activities intensify on the west coast wherecoastal fishing areas are protected. During the southwest monsoon fromJune to October, operations shift back to the east coast because fishing isdifficult and productivity low on the western side of the islands. The


southwest monsoon coincides with the typhoon season, during which fishingis interrupted by up to 20 tropical storms per season. These stormsgenerally hit Luzon, Bicol, and the eastern Visayas (Figure 1) .Approximately one-half of the storms are hurricane intensity. The westernVisayas, Palawan, and Mindanao are rarely affected by tropical storms, andfishing in these areas generally occurs throughout the year.5

The most common fishing gears used by municipal tuna fishermen arehand-lines, gill nets, and ringnets. The most productive of these gears isthe hand-line. It accounted for 80 percent of skipjack and yelloafinproduction by municipal fishermen in 1981 and 60 percent of total municipaltuna production. Gill nets accounted for 10 percent of skipjack andyells ifin production and 20 percent of total municipal tuna production.Ringnets accounted for the majority of the renaming municipal tuna catch,but a variety of other gears such as the long-line, troll line, and fishcorral were also used. 6 Although the BFAR compiles some data on the totalnumber of municipal fishermen and bancasper region and on tuna productionby region, the data do not indicate the number of fishermen, boats, andunits of gear involved in catching tuna on a full-time or part-time basis,and it is not possible to estimate the catch-per-unit of effort.

Municipal handline operators frequently catch large, deep-sea yellcwfintuna as well as score big-eye tuna and billfish. These operations occurthroughout the year with a peak season during the sunnier months from Marchto June. They are particularly common in the Moro Gulf and the Sulu Sea,the most productive tuna fishing grounds in the Philippines (Figure i).7In General Santos City in South Cotabato, for example, about 4+0 mt of largeyellowfin tuna, weighing from 30 to 80 kilograms (kg) each, are landeddaily by municipal handline fishermen operating approximately 6,000 a cduring the height of the tuna-fishing season. 8 The fish are purchased bylocal tuna-exporting companies and either frozen for further processing orpacked in ice for immediate air transportation to the Japanese fresh fishmarket. These procedures are duplicated in Zamboanga and Davao, and to alesser extent in Cagayan d'Oro on the northern side of Mindanao and inPuerto Princessa on Palawan, where tuna-exporting companies haverepresentatives and where freezing facilities are available. Sometuna-exporting companies also operate a fleet of ships (up to 300 gt each)that purchase tuna fran municipal fishermen on the fishing grounds toinsure adequate supply, proper handling, and the quality of the product.In many instances, however, municipal landing sites are isolated and lacksuitable preservation and storage facilities. As a result, much of thetuna landed by the municipal sector is consumed by communities in thevicinity or transported to regional marketing centers for localconsumption.

Despite the nature of their gear and the limited size and range oftheir fishing vessels, municipal fishermen have consistently accounted forthe majority of tuna production in the Philippines. In 1976, the firstyear for which data are available, the municipal sector landed 85 percentof total tuna production and 65 percent of skipjack and yellcwfinproduction (Table 2). Since then the proportion of tuna landings bymunicipal fishermen has declined as a result of the rapid development of


the commercial tuna- fishing industry. Municipal fishermen landed 51percent of total tuna production in 1982 and approximately 50 percent ofthe skipjack and yellcwfin production from 1982 to 1984.9

Ccm ercial operations

The development of the commercial tuna fishery into an industrial-scaleindustry has its roots in the late 1960s. At that time a handful ofoperators were engaged in buying yellowfin tuna from :mall-scale fishermenin the Palawan area and the Sulu Sea for export to and processing in Japan.Although production from these activities amounted to less than 2,000 mt,their success generated interest in the tuna export industry andconcentrated attention on meeting the quality control standards necessaryfor export markets.l0

The commercial tuna-fishing industry gr rapidly in the 1970s asPhilippine producers developed the capacity for export operations inresponse to the increasing demand for tuna on the international market.Most of the growth was the result of increased production by smallpurse-seine and ringnet operators fishing at night with drifting bamboorafts, locally known as Pavaos . (Sane major features of Philippine pavansare discussed in Appendix 1.) The success of these operations prompted theFAO-sponsored South China Sea Fisheries Development and CoordinatingProgramme (SCSP) to conduct fishing surveys in late 1974 aboard thechartered vessels Southward Ho and Royal Venture. These surveys confirmedthat tuna resources were substantial in Philippine waters and that bamboorafts could be modified and used for commercial operations asfish-aggregating devices. The SCSP survey team estimated that thepotential catch of seiners such as the Southward Ho or Royal Venture (420gt and 283 gt, respectively) would be at least 1,500 mt. if they fishedcommercially in Philippine waters for 25 days per month, 10 months ayear. 11

Two Philippine private companies, RJL Martinez Fishing Corporation andPhilippine Tuna Venture Inc., spearheaded tuna purse-seining with oavaosshortly after the successful completion of the SCSP fishing surveys. Thesecompanies were soon joined by others who responded to Presidential DecreeNo. 704 "to keep the fishery resources of the country in optimum productivecondition . [and to achieve] the maximum utilization of its fisheryresources. "12 Promulgated in 1975, the decree also established the FisheryIndustry Development Council (FIDC) to create "a healthy investment climatefor the development of the fishery industry. " 1 3 The proclamation of a200-mile Exclusive Economic Zone (EEZ) by the Philippine government on 11June 1978 (Presidential Decree No. 1599) further intensified interest inthe tuna industry.

Both the effectiveness of oay aos in increasing the production of tunapurse-seining operations and the government's incentives to induceinvestment in the Philippine fishing industry fueled the rapid expansion ofthe commercial tuna sector. Commercial production of skipjack andyellewfin tuna increased from 13,000 mt in 1976 to its highest level of63,000 mt in 1983 (Table 2). As a result of this success and the


continuing high levels of production by the municipal sector, thePhilippines became one of the top five producers of albacore, yellcwfin,skipjack, big-eye, and bluefin tuna in the world in the second half of the1970s. As shown in Table 3, Japan has consistently been the largestproducer of these tuna in the world, followed by the United States, SouthKorea, and the Philippines. In 1983, the last year for which data areavailable, the Philippines surpassed South Korea and became the fourthlargest producer of albacore, yellawfin, skipjack, big-eye, and bluefintuna in the world.


2. PHILIPPINE GCNERNMENT PCLJ CIFS

The introduction of the purse-seine fishing method in combination withpavaos has been accompanied by two important sets of changes in Philippinegovernment policies. The most important set of changes in fisheries'development policy occurred as a result of Presidential Decree No. 704. Asecond and related set of policy changes is reflected in Philippineinvestment incentives legislation. Both sets of policy changes have playeda critical role in the rapid expansion of the Philippine tuna industry.

Prior to 1975, operations in the Philippine commercial fishing industrywere governed by Republic Act No. 3512. This act was legislated by theFifth Congress of the Republic of the Philippines on 20 March 1963. Theact declared it the "national policy to encourage, promote and conservenational fishery resources to insure a steady and sufficient supply of fishand other fishery products for the increasing population and to minimizefish importations and help stabilize the national economy. *14 PresidentialDecree No. 43, issued on 9 November 1972, reaffirmed the government'spolicy emphasis on self-sufficiency and called for the integrateddevelopment of the fishery resources of the country.15

Presidential Decree No. 43 and earlier laws relating to the fishingindustry were superseded three years later by Presidential Decree No. 704.Issued on 16 May 1975, Presidential Decree No. 704 revised and consolidatedall laws and decrees affecting the Philippine fishing industry. The decreealso changed the emphasis and direction of fisheries development policy byfocusing attention on the economic contributions of the fishing industryand by declaring the industry "a preferred area of investment." Inaddition, the decree made it a government policy to "encourage and promotethe exportation of fish and fishery/aquatic products to enable the fishingindustry to contribute positively to the development and growth of thenational economy. " 16 Although Presidential Decree No. 704 acknowledges"the compelling need to increase the production of fish to bring down itsprice to a level that will be within the reach of our people," no explicitreference is made to the policy emphasis on self-sufficiency contained inearlier fisheries' legislation.

Presidential Decree No. 704 currently provides the basis for allgovernment policies and programs in the Philippine fishing industry. Italso authorizes foreign investment in the fishing industry in contrast toearlier legislation that limited the exploitation of the country's marineresources to Filipino citizens and corporations. According to Section 21,

Citizens of the Philippines and qualified corporations orassociations engaged in commercial fishing may, subject to theapproval of the Minister, enter into charter contracts, lease orlease-purchase agreements of fishing boats, or contracts forfinancial, technical or other forms of assistance with anyforeign person, corporation or entity for the production,storage, marketing and processing of fish and fishery/aquacticproducts: Provided that the foreign craw members of the foreignfishing boat shall not exceed seventy-five per cent of the


complement of the boat . . . [and] that it shall be a conditionin all charter contracts, lease or lease-purchase agreements thatFilipino seamen and fishermen shall be given instruction andtraining by the foreign crew members in the operation of thefishing boat and the use of fishing gears and after two yearsshall replace all foreign crew members.l7

Changes in fisheries' development policy have been complemented bychanges in Philippine investment incentives legislation. Investmentincentives in the Philippines are prescribed by the Investment IncentivesAct of 1968 (Republic Act No. 5186) and the Export Incentives Act of 1971(Republic Act No. 6135). The objectives of these acts are (1) to encourageFilipino and foreign investors to develop projects in fisheries,agricultural, mining, and manufacturing industries and (2) to activelyencourage, promote, and diversify export services and manufactures. 18Commercial deep-sea fishing, fish canning, and the export of frozen andprocessed fish are specifically addressed in this legislation. Under theInvestment Incentives Act of 1968, however, only corporations organizedunder Philippine laws (as opposed to completely foreign-owned firmsexisting under Philippine laws or joint-venture corporations formed for thespecific purpose of engaging in fisheries activities) are eligible forinvestment incentives.19

The Investment Incentives Act of 1968 was amended on 3 June 1977 byPresidential Decree No. 1159, otherwise known as the AgriculturalInvestment Incentives Act. The purpose of the decree was to foster foreignparticipation and investment in the Philippine fishing industry by makingjoint-venture corporations and foreign-evened firms incorporated in thePhilippines eligible for the investment incentives offered under RepublicActs No. 5186 and No. 6135 and by extending additional incentives forinvestors in agricultural and fisheries activities. Under the provisionsof the Agricultural Investment Incentives Act, individuals, partnerships,and domestic corporations whose voting capital stock is 60 percent owned byPhilippine nationals, cooperatives, and other entities organized andexisting under Philippine laws may qualify for investment incentives. 20 Theinvestment incentives available to qualifying enterprises under all threepieces of legislation are listed in Appendix 2. The major incentivesapplicable to fishery enterprises include: (1) duty-free entry of boats andgear; (2) tax deductions for pre-operating expenses and approved trainingcosts; (3) net operating loss carry-over; (4) accelerated depreciation onboats, and (5) for exported products: tax credit for taxes and duties paidon supplies, such as fuel, and tax reduction for five years for the cost cflocal labor and materials.21

The policy changes in fisheries development policy and investmentlegislation contained in Presidential Decrees No. 70 44 and No. 1159 haveenhanced business opportunities for both local and foreign investors in thePhilippine tuna industry. This led to a growing number of operators in thetuna industry in the late 1970s and early 1980s and to rapid increases incommercial tuna production and export trade. The policy have alsoinfluenced investment patterns in the tuna industry and resulted in the

Pacific Islands Development Progran - 8

diversification of export trade Iran frozen tuna to higher-value productforms such as canned tuna.22

Pacific Islands Developrnent Program - 9

3. OPERATORS IN THE PHILIPPINE TUNA INDUSTRY

Prior to 1976 the Philippine commercial tuna-fishing industry and thefresh and frozen tuna export industries were unstable. The supply ofexport quality tuna from the municipal fisheries sector was irregular andlimited, and the quality of the fish was unreliable because of theinadequate fish preservation and handling system. In the mid 1970s thesituation changed. Attractive export prices and growing demand forcannery-grade tuna in overseas markets, in combination with governmentpolicy changes and incentives to increase investment in the tuna industry,prompted several fishing and exporting companies to expand their businessoperations and to establish freezing and processing facilities capable ofmeeting the quality control standards in export markets. Export operationsinitially depended on tuna production purchased from municipal handlinefishermen, but improved financial returns as a result of betterpost-harvest handling techniques and increased tuna production from thepurse-seine/Davao fishing method soon led to a proliferation of companiesin the frozen tuna and canned tuna export industries.

Frozen tuna exporters

The potential of tuna as a major export commodity in the Philippinesprompted representatives and officials of several tuna-exporting companiesto found the Philippine Tuna Producers and Exporters Association (PTPEA) inNovember 1973. The principal objectives of the PTPEA were to establishconfidence in the quality of Philippine tuna products in foreign markets,to foster fair and friendly competition among members, and to promotecooperative studies with government and international agencies forthe effective development and exploitation of the fisheries' resources ofthe country. The original members of the association were Dole PhilippinesInc., Ephirol Enterprises Inc., Judric Seafoods Company, LindamarCorporation, Manteri Fishing Company, Mar Fishing Company Inc., OceanicFisheries (Philippines) Inc., Pure Foods Corporation, P.R. Garcia & SonsDevelopment Corporation, RJL Martinez Fishing Corporation, RicsanDevelopment Corporation, and South Pacific Export Corporation. 23 Five ofthe founding members stopped their tuna export operations before 1 979. Theothers were still active in the tuna industry and members of theassociation in 1982-83: Dole, Ricsan, and RJL exported frozen tuna;Judric, South Pacific, and Pure Foods canned tuna for export markets; andMar Fishing was engaged in integrated fishing and canning operations.

The total membership of the PTPEA included 22 companies in 1982-83.(Appendix 3 lists the name and address of each member.) All the major tunapurse-seine and long-line operators and four of the most important tunacanners were members of the association, but several other companies wereexporting tuna that were not members. At the peak of the frozen tunaexport industry in 1980, for example, up to 30 companies were exportingfrozen tuna from the Philippines. Twelve companies, all of which weremembers of PTPEA except Glory Fishing & General Merchandise, accounted for95 percent of the volume and value of frozen tuna exports in 1980. 24 Briefprofiles of the PTPEA member companies and their actual and potentialproduction capacities in 1980 are presented in Table 4. In the industry as


a whole, 42 purse seiners and 12 tuna longliners were operating in 1980,compared with 20 purse seiners and 4

+ longliners the previous year.25

Frozen tuna exports declined in 1981 despite an increase in total tunaproduction and a larger number of companies exporting tuna. In 1981 therewere 35 companies exporting fresh and frozen tuna, operating a total of 80purse seiners, 14 of which were over 500 gt, and 56 longliners were between20 and 79 gt. The companies listed in Table 4 (apart from Mar Fishing,which exported only canned tuna in 1981) accounted for approximately 85percent of the volume and value of frozen tuna exports in 1981 and handled52 of the purse-seine vessels operating in the tuna fishery. 26 Eight ofthe purse seiners in excess of 500 gt were managed by Philippine TunaVenture, five by RJL Martinez, and one by Fortuna Mariculture. 27 R & VTFisheries and Development Corporation and Frabelle Fishing had largepurse-seine fishing fleets, but their vessels were comparatively small(Table 5) .

Five of the major frozen tuna exporters in 1981 were officiallyrecognized as joint ventures. They were Philippine Tuna Venture, PeninsulaFishing Corporation, Fortuna Mariculture Corporation, Eastship FishingCorporation, and World Marine & Development Corporation. 28 Each of thesecompanies was classified as a joint venture and registered with the FisheryIndustry Development Council because they involved charter agreements tolease foreign fishing vessels. Dole Philippines Inc., a wholly evenedAmerican company, was the second largest exporter of frozen tuna in 1981,but it is not classified as a joint venture by Philippine fisheryauthorities. 29 As a group, these six companies exported 12,943 mt offrozen tuna worth US$15.8 million in 1981, approximately 36 percent of thetotal volume and value of Philippine frozen tuna exports.30

The downward trend in frozen tuna exports in 1981 continued into 1984,forcing six of the eleven tuna exporters listed in Table

1 4 to ceaseoperating. Bonaventure Fishing, Eastgate Export Corporation, FortunaMariculture, and RJL Martinez Fishing, the second largest in the industand its subsidiary, Peninsula Fishing, all went out of business in 1983.1Ricsan Development Corporation stopped operations in 1983 and was declaredinsolvent in 1984 by the Davao City regional trial court with outstandingliabilities of 167 million pesos (US$10 million) and assets of only 81million pesos (US$5 million).3 2 The closures were attributed to fourfactors: (1) depletion of tuna resources in the country, (2) high fuelcosts aggravated by the ban on fishing within seven kilometres from theshoreline, (3) depressed market conditions for tuna in the United Statesdue to the recession, and (4) declining world fish prices.

Those companies that renamed active in the tuna industry were alsoaffected by the downward trend in Philippine frozen tuna exports. Somecompanies such as Orient Marine shut down their fishing operations andengaged only in buying tuna from small-scale fishermen, while othersreduced their operations by putting some of their fishing vessels up forsale. Philippine Tuna Venture, for example, sold two of its five vessels,the Jasna and the Hornet (593 gt and 779 gt, respectively), to FrabelleFishing for a total of US$1-1.2 million.33 Fraballe Fishing also acquired


the San Juan (850 gt) from RJL Martinez, which increased the number ofpurse seiners in its fleet that could be put into operation to ten. Fiveof these vessels have been fitted with two nets so that they can be usedduring the tuna-fishing season fran March to June as well as during themackerel-fishing season that follows from June to 0ctober.34

R & VT Fisheries has followed a similar strategy and diversified itsfishing operations, but it has not been as successful Fraballe Fishing.R & VT Fisheries operates a fleet of 12 purse seiners (80-120 gt) in thetuna and mackerel fisheries in the waters off northern and western Luzon.The performance of these vessels in exploiting tuna, however, is reportedto be poor because of the vessels' limited range and lack of freezingfacilities and because of inferior tuna-fishing conditions in the watersoff Luzon compared to fishing in the southern Philippines.

In addition to Fraballe and R & VT Fisheries, only two other companieshad sizable purse-seine fleets operating in the Philippine tuna fishery in1985. RBL Fishing had six vessels, and Mar Fishing had six vessels, one oncharter from the defunct Fortuna Mariculture and five vessels that it hadbuilt in Canada. Each company, however, only operated three vessels in thePhilippine tuna fishery in 1985. These six vessels were reportedly ,joinedby four vessels from Fraballe, twelve vessels from R & VT Fisheries, andfour to five other purse seiners less than 200 gt owned by at least threedifferent companies. The total number of purse seiners in the Philippinetuna fishery in 1985, therefore, was 26 or 27 vessels.35 This compareswith 80 purse seiners operating in the Philippine tuna fishery in 1981 andwith reports of only 25 operating in 1982.3 6 Market conditions in thePhilippines improved in 1983, and 50 purse-seine vessels were believed tobe operating that year and in the first half of 1984. The improvedconditions were due to the rapid expansion of the canned tuna industry,which absorbed an estimated 90 percent of the purse-seine catch in1983-84.37

Distant-water fishing operations

Several of the purse-seine operators still active in the Philippinetuna industry have dealt with the problems of excess fishing capacity,resource depletion, and financial losses by extending the range of theirfishing operations through fisheries' access arrangements with neighboringcountries. Such access arrangements date back to 1981 when Fraballe andRicsan each sent one purse seiner to Palau to explore the area's fishingpotential. Neither agreement was renewed, and Fraballe's venture is !mownto have been an economic failure. Rebecca Fishing and RJL Martinez hadagreements with the state of Sabah to fish in its waters off western Borneoin 1982 and 1983, and Mar Fishing paid a license fee of approximatelyUS$10,000 for one of its boats to operate in Papua New Guinea's waters fortwo months beginning in August 1984. Mar Fishing also had agreements withthe Federated States of Micronesia (FSM) in 1983 and 1984, but it operatedonly in 1983 and only in the open seas bordering the country's 200-mileEE2. Jaynes Chiongbian, owner of Philippine Tuna Venture and EastshipFishing, paid license fees to fish in FSM waters but never took advantage


of the opportunity.3 8 The reason that Chicngbian did not operate hisfishing vessels is not available.

Despite the number of access agreements between Philippine tunaoperators and neighboring countries, provisions in Philippine law havehampered the growth of distant-water fishing operations. Theprovision--which has been most detrimental--requires that Philippine-flagvessels operating outside Philippine waters to pay import duty on thatportion of their production landed in the Philippines. For example, aPhilippine-flag vessel with an access agreement to operate in Papua NewGuinea's waters must pay a one percent import duty on the total value offish brought back to the Philippines by carrier vessel or landed in thePhilippines by the fishing vessel itself. The import duty, however, waslifted on 7 August 1985 by virtue of Executive Order No. 1047. The orderalso granted incentives for distant water fishing operations by allowingthe duty drawback on fuel oil used by fishing vessels operating outsidePhilippine territorial waters and by reducing the work force requirementsfor fishing vessels in non-Philippine waters.39

Executive Order No. 10'47 has had a significant effect on thePhilippine tuna industry in the short period since its implementation. Ithas led to the intensification of ongoing distant-water fishing operations,and it has generated new interest in negotiating fisheries' accessagreements. Mar Fishing, for example, operated three of its purse seinersin Papua New Guinea for five months in 1985, and RBL Fishing registered twoof its purse seiners with the Malaysian government and deployed then inSabah. 40 Fraballe Fishing also operated in the waters off Sabah in 1985and is actively seeking access agreements with other neighboring nations.And Chiongbian has investigated the possibility of a joint venture withKiribati and is currently negotiating with Papua New Guinea andIndonesia. 41 Although neither the production of these activities nor thepotential of proposed activities is available, there is no doubt thatincreasing Philippine distant-water fishing efforts will be necessary forthe continued survival of the Philippine canned tuna industry.

Canned tuna exporters

The Philippines has processed and exported canned tuna since the early1970s, but the volune and value of exports were quite small until 1978(Table 2) . That year Judric Canning Corporation, became fully operationaland began processing tuna exclusively for export markets. Judric's entryinto the Philippine canned tuna industry motivated other establishedcanners to intensify their tuna processing operations, and by 1980 exportproduction amounted to over 11,000 mt and almost US$30 million.

In 1980 five canners were active in the Philippine canned tuna exportindustry besides Judric: Century Canning Corporation, Premier Industrial &Development Corporation, Pure Foods Corporation, South Pacific ExportCorporation, and Santa Monica Canning Corporation. 42 Judric was thelargest producer of canned tuna by far, accounting for almost one-half ofthe estimated total export volume in 1980. Judric was initially


established by Richard M. Fowler (80 percent ownership) and SAFCOL HoldingsLtd. (20 percent), but SAFCOL acquired full ownership in late 1982. PureFoods was the next largest producer and accounted for 19 percent of theestimated export volume. Twenty percent of its capital stock is owned bythe American Hormel International Corporation; most of the remainder isheld by the Ayala Corporation, a Filipino-Japanese joint venture. Century,the largest locally awned corporation in the industry, accounted for 13percent of the estimated canned tuna export production in 1980, SantaMonica nine percent, Premier Industrial six percent, and South Pacific fivepercent.13

In 1981 four more companies entered the Philippine canned tuna exportindustry. Philippines Tuna Canning Corporation (PTCC) and Mar FishingCompany, Inc. were the largest of these new companies. Philippines Tunawas owned by Richard M. Fowler (60 percent), Tony Curatolo (20 percent),and SAFCCL Holdings (20 percent) at the time of its establishment. In late1982, however, SAFCDL acquired 100 percent equity in PTCC. Mar Fishing isa joint venture between British Columbia Packers of Canada (30 percentequity ownership) and Marcopper Mining Corporation (70 percent), itself ajoint venture between Placer Development Ltd. of Canada (40 percent) andlocal Filipino interests (60 percent). These two companies, in combinationwith Judric and Pure Foods, accounted for 44 percent of the reported 1.72million standard and institutional cases of canned tuna exported in 1981(Table 6)

.44 The other companies entering the canned tuna export industry

in 1981 were Standard Food Products and Majescan Manufacturing Corporation.Each of these companies is owned by Filipino shareholders, and each cannedother fish species for local markets prior to 1981. Their combined cannedtuna export production was insignificant, amounting to less than 1 percentof the total in 1981.

Canned tuna exports increased by 150,000 cases over the previous yearand totaled an estimated 1.86 million cases in 1982. Fifty-one percent ofthe total export production consisted of standard cases compared with 64percent the previous year. 45 The decline in retail production in 1982probably indicates an increasing number of contract sale agreements betweenPhilippine processors and large overseas buyers and institutionaldistributors. 46 The decline in retail production may also reflect a lackof confidence in the quality of Philippine canned tuna and its acceptancein overseas retail markets or a lack of confidence in being able to meetthe tight shipment schedules customary with retail orders. The overallresult was a sharp decline in the average unit value of Philippine cannedtuna exports, which fell from roughly US$25.00 per retail case in 1981 toUS$19.50 in 1982. 47 The decrease in unit value affected all producersworlc1wide and was, of course, due to other factors such as dullinternational market conditions and reduced consumption in the UnitedStates because of unreasonably high retail prices. 8

Deteriorating conditions in overseas markets in the early 1980s had aserious impact on Philippine canned tuna operations. All of the 17domestic fish canners that had intended to diversify their production andenter the canned tuna export industry in 1982-83 cancelled their plans.Some companies such as Standard Foods and Majescan stopped processing tuna

Pacific Islands Developient Program - 15

for overseas markets in 1982. Others reduced their Manila-based operationsbecause of tuna supply shortages and higher fish prices and decentralizedtheir activities by either building new canning facilities or expandingtheir existing facilities in the southern Philippiness. Both Pure Foodsand Santa Monica, for example, established new plants in General SantosCity in order to be closer to the fishing grounds and to maintain fishsupplies and cut transportation costs. (The differential in wage rates inprovincial areas, as opposed to wage rates in Manila or other urban areas,was not a factor as it frequently is in other developing countries.)Safcol followed a similar strategy. After closing the Judric plant inSeptember 1984, SAFCC . transferred some of its equipment from the Judricplant in Manila to its PTCC plant in Zamboanga.

The adjustments made by processors in the canned tuna industry and theexpansion of facilities in the southern Philippines led to furtherincreases in Philippine canned tuna exports in 1983. That year canned tunaexports increased to their highest level of 2.07 million cases, 72 rcentof which were retail cases and 28 percent institutional (Table 7). 5U If itis assumed that one mt of tuna yields 50 standard cases and that there are113 cases in each mt, the total volume of tuna processed for exportamounted to roughly 53,000 mt in 1983 compared with only 255 mt in 1977.51The result was a tremendous increase in the volume of Philippine cannedtuna exports from only 113 mt in 1977 to its highest level of 23,000 mt in1983 (Table 2).

Part of the reason behind the rapid expansion of Philippine cannedtuna exports and the number of exporters in the industry was the ban oncanned mackerel and sardine imports in August 1983. The ban was imposed bygovernment as a means of conserving foreign exchange. But it also had thebeneficial effect of encouraging processors, which previously had cannedtuna only for export markets to diversiflj their production and cannedmackerel and sardines for the local market without competition franoverseas processors, primarily from Japan. Mar Fishing was the onlycompany not to take advantage of the import ban, while most of the othercanners found thenselves processing more mackerel and sardines than tuna.This trend has continued into 1984 and 1985, and it has sustained thePhilippine canned tuna industry at a time when exporters are facingdepressed prices on international markets and increasing competition fromother tuna-processing nations such as Thailand.

Although the import ban has had a positive effect, conditions have notimproved for the Philippine canned tuna industry. Exports declined in 1984to 1.85 million cases, approximately the same level as 1982, and theindustry utilized only 40-45 percent of its estimated 110,000 mt processingcapacity. Those canners active in the tuna industry in 1984-85 andincluded in the estimate of the industry's total capacity are listed inTable 8. Eight of the canners have been major producers since 1981. Insular, Kingston, Philsunrise, and Tresco have had limited production andhave not participated in the industry on a regular basis. Diamond Seafoodswas the only other cannery in the tuna industry. It began operations inFebruary 1983, but it operated ten days and canned less than 10 mt of fishbefore defaulting on its P38 million (US$2.3 million) loan from the


Development Bank of the Philippines (DBP).52 The vice president in chargeof operations at Century Canning leased the foreclosed Diamond Seafoodscannery from DBP in 1985, but there is reportedly no affiliation betweenDianond and Century.


Pacific Islands Development Program — 18

I. INTERNATIONAL TRADE IN TUNA COMMMITIES

The proliferation of companies entering the Philippine tuna industrysince the introduction of industrial tuna purse seining in 1976 hasresulted in the rapid expansion of international trade in tuna commodities.As shown in Table 2, exports of frozen skipjack and yellowfin tunaincreased from only 5,735 mt and US$3.6 million in 1976 to 47,290 mt andUS$65.2 million in 1980. Roughly 141,000 mt of export production in 1980was skipjack and yellowfin weighing 2-8 kg, 4,000 mt was yellowfin 10-40kgs, and 1,000 mt was yellowfin and big-eye tuna greater than 40 kgs.53

Increasing exports of frozen tuna in the late 1970s were accompaniedby exports of dried and smoked tuna. Virtually all of the production wasexported to Japan where it was marketed as shaved katsuobu h i and used as afood additive. Bonito and undersized skiPjack weighing less than 1.5 kgare generally used for katsuobushi because of their lower oil content,which facilitates drying during the manufacturing process.54

Exports of katsuobushi reached their highest level in 1980, totaling608 mt and US$2.6 million. At that time 18 companies were active in thekatsuobushi industry. The largest company, accounting for approximatelyone-third of the volume and value of exports, was Orient Marine & FishingResources. In 1981 production declined by almost 50 percent to 341 mt andUS$1.2 million, and the number of major companies in the industry fell tosix.55 The following year the industry declined further, and exportsamounted to only 193 mt and US$0.5 million.56

Frozen tuna exports also declined dramatically in 1981 and 1982 fromits highest level in 1980 to only 17,731 mt and $15.9 million in 1982(Table 9). Although exports increased by a snail margin in 1983 to 18,559mt and $21.2 million, they declined to their lowest level since 1976 of13,759 mt in 198 4.57 Nine percent of the export volume in 1983 (1,742 mt)was sashimi-grade yellcwfin destined for fresh fish markets in Japan, 20percent (3,774 mt) was frozen skipjack, and 70 percent (13,043 mt) wasyellowfin suitable for cann_ing.5

8 The composition of frozen tuna exports

in 1983 reflects both a steady increase in the volume and proportion ofsashimi-grade exports since 1980 and a general decline in the proportion offrozen skipjack in total exports.

The United States has consistently been the largest importer ofPhilippine frozen tuna in terms of volume. As shown in Table 9, the UnitedStates imported 23,536 mt of frozen tuna worth US$20.4 million from thePhilippines in 1979. This amounted to 72 percent of the total volume and64 percent of the total value of Philippine exports that year. In 1980 and1981 the volume of frozen tuna exports to the United States remained fairlystable, but the proportion of Philippine exports destined for the UnitedStates decreased due to the overall increase in the volume of exports. In1983 Philippine frozen tuna exports to the United States declined to itslowest level since the mid-1970s and amounted to only 4,796 mt and US$2.6million, or 26 percent of the export volume and 12 percent of the exportvalue.


As the proportion of exports to the United States has declined, therole of Italy and Japan as trading partners has increased. In 1983, thelast year for which data are available, Italy imported 1 5 percent of thevolume and 49 percent of the value of Philippine chilled/frozen tunaexports. Most of the exports to Italy were frozen yellowfin tuna suitablefor canning. Japan imported 26 percent of the volume and 36 percent of thevalue, approximately one-third of which was sashimi-grade tuna.

One reason behind the decline in Philippine frozen tuna exports hasbeen the rapid expansion of the canned tuna industry. In just four years,canned tuna exports increased to such an extent that they surpassed frozentuna exports as the most valuable Philippine fishery export commodity,growing from 113 mt and US$238 thousand in 1977 to over 18,000 mt andUS$51.7 million in 1981. Canned tuna exports increased to 19, 41 1 mt thefollowing year, but the value declined to US$42.7 million. As shown inTable 10, the United States has been the major importer, accounting formore than two-thirds of the volume of Philippine canned tuna exports from1979 to 1982. During the same period the Philippines increased its marketshare in the United States from 13 percent of all canned tuna imports to 32percent, making it the largest importer to the United States in 1981 and1982. 59 Thailand replaced the Philippine as the largest canned tunaexporter to the United States in 1983 even though the total volumePhilippine export production increased to its highest level of 23,537 mt.

The rapid expansion of the Philippine tuna canning industry has beenaccompanied by frozen tuna imports since 1981. That year and as a resultof pressure from the International Monetary Fund, the government deletedseveral commodities including frozen fish from the existing import ban andapplied a 100 percent ad valorem customs duty on frozen fish imports. Butin response to demands from the local processing industry, the BFAR, theBOI, and the Central Bank, in cooperation with the Tariff Commission,initiated a permit system authorizing a limited amount of frozen fishimports at a reduced duty of 5 percent ad valorem.

The first of these permits was granted to Mar Fishing in December1981, and it imported 5,000 mt of frozen tuna worth US$2.85 million fromIndonesia to meet the operational requirements of its plant in Zamboanga.60In 1982 another ad hoc interagency committee, which included the Ministryof Natural Resources as well as BFAR, BOT, and the Federation of FishingAssociations (FFAP), granted fish canners the authority to import 14,000 mtof frozen tuna worth US$10.5 million for processing and re-export. 61 Thelevel of imports was increased and the import permits were granted becauseof the local processors' inability to satisfy the canners , raw materialrequirements, particularly during those months when tuna and mackerelproduction is low. But according to preliminary BFAR data, frozen tunaimports to the Philippines amounted to only 348 mt in 1982. Industrysources estimate that imports were 1,500 mt, still much less than theimport authority that the industry was granted.

The agreement among government officials and industry representativesto allow annual frozen tuna imports of 14,000 mt has been in effect since1982. In April 1985, however, the Tuna Canning Association of the


Philippines (TCAP) requested that the government increase the level ofimports to 30,000 mt annually to reflect more recent increases in theindustry's capacity. 62 According to the TCAP processors, 30,000 mtrepresents the difference between the industry's operating capacity(approximately 110,000 mt) and the volume of fish available for processing(70-80,000 mt). But the industry's request for an increased level of tunaimports seems unwarranted in view of the industry's failure to takeadvantage of the tuna import permits. BFAR preliminary data show thatthere were no frozen tuna imports in 1983, and industry sources indicatethat there were only 2,000 mt of imports in 1984. Also there were no tunaimports in 1985.

Several factors account for the industry's failure to take advantageof the tuna import authority. The most important of these is related tothe country's lack of foreign exchange and high interest rates. Accordingto some industry representatives, another factor is the bureaucratic timedelay involved in actually issuing and implementing the import permit.Increased production of distant-water fishing operations may have also beena factor, but 1cw prices for canned tuna in international markets and aprotected domestic market for canned mackerel and sardines have probablybeen more important factors influencing the industry's decision not toimport tuna and to use its excess processing capacity to can mackerel andsardines for the local market.

Pacific Islands Development Program. - 21

Pacific Islands Developwent Program - 22

5. DECLINE OF THE TUNA IMXJSTRY

The need to import frozen tuna to meet the raw material demands of theprocessing industry is the culmination of several problems that haveplagued the Philippine tuna industry and contributed to its decline in the1980s. One major problem is overcapitalization of the industry, which, inturn, has led to overfishing and resource depletion. This has resulted infish supply shortages and increased competition among operators in theindustry. This situation has been exacerbated by higher operating costsand taxes for both producers and processors and by deteriorating economicconditions in the Philippines generally. In addition, Philippine tunaexporters have been confronted by external problems over which they hadlittle control. These problems included poor international marketconditions for tuna commodities, higher import duties on canned tunaimports to the United States, and increased competition from othertuna-processing nations.

Internal problems

The FFAP first expressed concern about signs of overfishing andresource depletion in 1981. In a position paper commenting on the rapidexpansion of the country's tuna-fishing fleets, an FFAP representativenoted that dozens of purse seiners were operating in close proximity withone another in the limited expanse of the Sulu Sea and the Moro Gulf andstated that many boats were reporting low yields and signs of resourcedepletion. 6 3 Similar concerns were also expressed by two of the country'slargest tuna operators: James L. Chiongbian, president of Philippine TunaVenture, and Ruben Martinez, head of RJL Martinez Fishing.64

In response to the overfishing and resource depletion problems, theFFAP has recommended (1) adopting a policy that would impose a limit on thenumber of tuna seiners operating in the country at any given time and (2)requiring an operator to phaseout an equivalent older vessel if a moremodern vessel is built or imported as a means of maintaining theestablished tonnage and number limit. 6 5 No limits were proposed forlong-line fishing vessels.

Several factors have contributed to the resource depletion problem.One factor has been the proliferation of companies entering the Philippinetuna industry, as well as the increasing number of large purse-seinevessels over 500 gt operating in the fishery. This has been accompanied byboth numerous reports and apprehensions of foreign fishing vessels poachingin Philippine territorial waters. According to Virginia Aprieto, thePhilippine Coast Guard apprehended 144 Japanese and Taiwanese fishingvessels for illegal fishing from 1972 to 1977, an average of 2.3 vessels amonth. Taiwanese fishery authorities, in turn, acknowledge that fivefishermen have been killed and that 53 fishing boats and 167 fishermen havebeen detained by Philippine authorities. b6 In view of the country's longcoastline and the Philippine Coast Guard's limited surveillance andapprehension capability, the actual number of foreign boats engaged inillegal fishing in Philippine waters is presumably quite large. The FFAP

Pacific Islands Development Prog r am - 23

has estimated that the illegal catch may be as high as 50,000 to 100,000tonnes a year. 67 The FFAP has also called on the government to take astronger stand against vessels caught fishing illegally in Philippinewaters.68

Another factor affecting the resource depletion problem has been theintroduction and widespread adoption of the purse-seine/ pay ao fishingmethod and its apparent effect on the catch of juvenile fish. In GeneralSantos City, for example, about 100 mt of shall skipjack, weighing 70-100grams each, are unloaded daily during the height of the tuna- fishing seasonfrom March to June. Available catch reports from commercial exportoperators also suggest that the Philippine purse-seine tuna fishery iscatching a significant quantity of small tuna. Data from four exportersindicate that almost two-thirds of their production in 1981 consisted ofundersized tuna. 69 They are undersized from a biological viewpoint in thatthe tuna have yet to reach first maturity, and from an economic viewpointin that tuna smaller than i4 pounds do not have the same commercial value aslarger tuna because they are not suitable for export as frozen tuna or forprocessing as canned tuna.

Moreover, it has been claimed by researchers with the former SCSP thatmore than 95 percent of all skipjack landed in the Philippines are lessthan 30 centimeters (cm) in length and that fish are routinely landed at alength of 1 cm .7° The problem is further aggravated by the fact thatlarge numbers of shall tuna are not landed but are used as bait forlongline and handline fishing around Davaos .

Although difficult to enforce, a ban on catching or landing tuna belowa certain size or on regulating the use and placement of aay aos couldalleviate the problem of wall tuna landings and could help prevent growthof overfishing—a reduction of catch due to the early capture of recruits.But over-fishing, resource depletion, and shortages in supply to the localtuna-processing industry were not the only problems confronting thePhilippine tuna industry in the early 1980s. Continued growth in the tunaindustry was also constrained by increases in the costs of operation,particularly increases in the cost of fuel, which accounts for between 50and 60 percent of the total operating costs of distant--water fishingvessels.

The cost of imported fuel to the fishing industry and the industry'sright to a subsidy on its fuel expenditures are controversial issues in thePhilippines. The controversy arises over the interpretation of Section106(a) of the Tariff and Customs Code that provides for a refund (dra4back)of up to 99 percent of the duty paid on all imported fuels used for thepropulsion of vessels engaged in coastal trade. Industry representativesargue that fishing vessels are entitled to the fuel duty drawback and thatfailure to grant the industry the drawback has prevented the industry fromoperating at full capacity. The industry's position was endorsed by theformer Minister of Natural Resources Jose J. Leido Jr. after review by theFIDC. In his Memorandum to the President of the Philippines dated 29 April1981, Minister Leido found "legal, economic and policy justifications forgranting the instant request [for the fuel duty drawback] to the fishing


industry. "71 The former Minister of Finance Cesar Virata, however, arguedthat fishing companies are not importers because they pu rchase fuel fromoil companies that import the crude oil from which the fuel is refined.Virata advised the President against approving the fishing industry'srequest in a Memorandum dated 7 August 1981, and the President denied theindustry's request.72

Another setback for Philippine tuna producers occurred when thePhilippine government proposed the imposition of a 4 percent tax on frozentuna exports. The proposed tax was later reduced to 2 percent but it wasimplemented in November 1983 by virtue of Executive Order 920.13According to the order, the principal purpose of the export tax was tocapture the so-called windfall profits gained by exporters from thedevaluation of the peso in October 1983 and not necessarily to capture theresource rent from the exploitation of the country's tuna resources.Naturally the tax was a controversial issue between government andindustry, but it also led to a split between the tuna producers andprocessors who at that time were both represented in the PTPEA. The breakoccurred because the processors in the newly formed TCAP endorsed the 2percent tax on exports, while producers felt that the export tax wouldplace them at a disadvantage in negotiating prices with local tunaprocessors.714

The export tax was the first of three taxes levied on exporters by thegovernment in recent years to bolster the troubled Philippine economy. Thetwo other taxes were the result of Presidential Decrees No. 1928 and 1929.The first of these decrees, promulgated in June 1984, imposed an excise taxof 10 percent on the purchase of foreign exchange and payment for freight,interest, and other charges. The second decree established a stabilizationtax of 30 percent on the exchange rate differential resulting from the June1984 peso devaluation.75 In addition, tuna exporters have had to pay acustomary inspection fee to the BFAR equivalent to 0.5 percent of theproducts' FOB value.

The export, excise, and stabilization taxes were intended to promoteeconomic stability in the Philippine economy by compensating foradjustments in the peso exchange rate. But in the industry's view, thetaxes have added to operating costs and undermined the competitiveness ofthe Philippine tuna industry vis-a-vis other developing countries with tunaprocessing industries such as Thailand. Moreover, the taxes were imposedat a time when production, manufacturing, and packing costs have beenincreasing and tuna commodity prices have been declining. In the cannedtuna industry, for example, Philippine processors claim that they have lostan average of US$2.49 per case of canned tuna for sales made from November1983 to August 1984.7 6 This figure may overstate actual losses, but thereis no escaping the fact that the new taxes and the increased cost ofimported goods (i.e., fuel, tin plate, and spare parts) as a result of thesuccessive peso devaluations have had a serious effect on the profitabilityof tuna operations in the Philippines.

Another factor affecting the operating costs of the Philippine tunaindustry is the high cost of freight charges on exports of canned tuna to


the west coast of the United States, the major destination of Philippinetuna products. According to PTPEA representatives, members of thePhilippine-North American Conference (PNAC)--American President Lines,Sealand, Barber Blue, Maersk, Hapag Lloyd, and Lyke Lines--charged US$198per mt for canned tuna freight to the U.S. west coast in 1982,approximately 30 percent of the FOB Manila export price of US$650 per ton.This rate compared with only US$160 per mt from Singapore and Guam to theU.S. west coast and US$95 from Japan. The disparity in freight rates hasprompted PTPEA members and officials to claim that commercial freight ratesfrom the Philippines are disproportionately high and that high freightrates have put the Philippine tuna industry in an uncompetitive position onthe U.S. market.77

External problems

As if these internal problems were not enough, tuna exporters havefaced a number of problems in overseas markets that have affected theprofitability of the Philippine tuna industry. The problem receiving themost attention has been the sharp decline in tuna prices on internationalmarkets generally and in the United States in particular. For example, thevalue of frozen yellcwfin exports from the Philippines to Japan and Europefell from US$1,487 per mt in 1980 to US$950 in 1981, and the value offrozen skipjack to the United States fell from US$1,180 per short ton in1981 to US$'450 in 1982.7

8 Despite recovery from the economic recessionexperienced in western economies in the early 1980s, international marketconditions for frozen tuna have not improved significantly. Oversupply inrelation to demand has been the major reason behind the continuing slump ofthe world tuna market since 1982.79

The glut of frozen tuna on the international market has beenaccompanied by higher import duties on canned tuna to the United States.Imports of canned tuna to the United States, the major destination ofPhilippine canned tuna exports and the largest canned tuna market in theworld, are subject to a quota established at 20 percent of the previousyear's annual domestic production, excluding production in American Samoa.Imports of canned tuna not in oil arriving in the United States before thequota is filled are dutied at 6 percent ad valorem and after at 12.5percent. 80 Given that imports of canned tuna not in oil to the UnitedStates have consistently exceeded the quota by progressively larger amountssince 1980, Philippine exporters of canned tuna have had to pay higher dutyon an increasing proportion of their canned tuna exports to the UnitedStates. This has added to the operating costs of Philippine processors andexporters when they are already disadvantaged by declining prices andweakening consumer demand in the U.S. market.

Besides the U.S. import duty, canned tuna from the Philippines issubject to a countervailing duty. The countervailing duty was imposed inAugust 1983 by the U.S. government on Philippine canned tuna imports inresponse to a petition submitted to the U.S. Department of Commerce by theU.S.-based Tuna Research Foundation (TRF) on behalf of the major Americantuna processors. The petition successfully argued that the Philippine

Pacific Islands Developnent Program - 26

government subsidized the local tuna-processing industry by grantinginvestment incentives to export-oriented enterprises; by providingpreferential financing benefits for exports; by holding equityparticipation in at least one Philippine tuna cannery, Dianond Seafoods;and by issuing policies of insurance and certificates of guarantee againstcredit risks arising out of or in connection with export transactions.81

The petition also called for a 10 percent ad valoren countervailingduty, but the International Trade Administation (ITA) imposed a 0.72percent duty. After reviewing the case more recently, the ITA instructedthe U.S. Customs Service to forego collection of the countervailing dutyeffective 8 March 1985.82 A deposit is still being collected pending theITA's final report.

The U.S. countervailing duty was imposed at a time when Philippinecanned tuna imports were losing their dominance in the U.S. market. Aftersuccessfully competing with Japan and Taiwan and becoming the largestcanned tuna exporter to the United States in 1981 and 1982, the Philippinesfell behind Thailand as the largest exporter to the United States in 1983.That year Thailand exported 33 percent of the total volume of U.S. cannedtuna imports, and the Philippines exported 26 percent. The following yearThailand expanded its exports to the United States by 125 percent from18,108 mt in 1983 to 40,763 mt in 1984 and increased its share of the U.S.canned tuna market to 55 percent. The Philippines' market share declinedto 14 percent in 1984, and its exports to the United States dropped from14,502 mt in 1983 to 10,079 in 1984.83

According to Philippine industry representatives, Thailand hassurpassed the Philippines as the most important exporter of canned tuna tothe United States for three reasons. The single most important reason isthat Thailand can import fish without restrictions. The second reason isthat Thai exporters enjoy cheaper packing credit interest rates. And thethird is that manufacturing costs, particularly the costs of cans, cartons,and labels, are at least US$1.00 (roughly 5 percent at current canned tunawholesale prices) less per case in Thailand than they are in thePhil ippines.

Several other factors have contributed to Thailand's success andenabled it to improve its competitive position vis-a-vis the Philippines inthe canned tuna industry. As shown in Table 11, Thai processors are notsubject to any import fees, export taxes, or foreign duties. Labor,electricity, and freight charges, as well as can, carton, and label costsare less. Interests rates are lower, and foreign exchange to import itenssuch as tin plate and spare parts, not to mention fish, is more accessible.The only advantage that the Philippines enjoys are less expensive fishprices. However, Philippine tuna producers are more inclined to exporttheir fish to Thailand where prices are higher. Philippine tuna producersmust also export some of their production to earn foreign exchange so thatthey can purchase essential import items not available in the Philippinessuch as nylon nets, electronic equipment, and spare parts for theirvessels.


6. CONCLUSION

The Philippine tuna industry is plagued by numerous problems and iscurrently struggling for survival. Dwindling tuna resources, escalatingcosts, increasing taxes, and declining export prices were only some of theproblems that Philippine tuna producers and processors faced in 1985.These problems were complicated by the national economic crisis, highinterest rates, and the country's lack of foreign exchange; by thecontinuing slump in international tuna markets; and, perhaps mostimportant, by Thailand's effectiveness in competing in the internationalcanned tuna industry.

The government has responded to the seriousness of the situation byrecently taking steps to alleviate some of the problems affecting theindustry. Its most decisive action has been the implementation ofExecutive Order No. 1047 granting incentives for distant-water fishingoperations. In addition, the government promulgated Executive Order No.1016 in April 1985, abolishing the BFAR inspection fee on fishery productexports. 81 + Although it was largely ignored, the government reportedlylifted the 2 percent export tax in September 1985. And it also liberalizedits policy in 1985 prohibiting the purchase of fishing vessels below 100 gtand more than ten years old by allowing fishing firms to import or charterfishing vessels that were 25-100 gt and 10-15 years old. 85 No efforts,however, have been taken by the government to limit fishing effort,regulate the use of Davaos , or control the number of operators in the tunaindustry.

Those measures taken to assist the tuna industry in 1985 are apositive indication of the Philippine government's intentions.Nonetheless, operators in the tuna industry have reason to question thegovernment's good intentions. The taxes that were imposed on Philippinetuna exporters and those still in effect have eroded the industry'scompetitiveness, weakened its morale, and destroyed any cooperation thatmay have existed between industry and government. Moreover, the industry'sconfidence in government has been seriously shaken by the government'sfailure to grant the duty drawback for fuel oil for all fishing vesselsregardless of where they operate. Added to this is the industry'scontention that the MAF has purposely delayed issuing tuna import permits.

By far the biggest and most contentious issue loaning over the futureof the Philippine tuna industry is the government's intention to liberalizetrade for several commodities including canned and frozen fish. If thegovernment decides to implement the liberalization plan--whether on its ownor as a result of pressure from international lending organizations--and ifthe plan authorizes the importation of canned mackeral and sardines,Philippine tuna processors will once again have to face competition fromcheaper Japanese canned fish imports. This situation will certainlyundermine the success that tuna processors have had on the local marketsince the ban on imported fish products in 1983, and it may spell the endof the Philippine tuna-canning industry because processors now depend onlocal sales of their canned mackerel and sardine production to sustain


their tuna operations. A decision on whether the liberalization plan willbe imposed and whether it will apply to canned fish is expected sanetime in1986.

Government policies and inaction, however, are not the only factorsbehind the demise of the Philippine tuna industry. Even in the event of afavorable decision on the liberalization plan in the tuna industry'sbehalf, it is not likely that the Philippines will be able to regain itsposition as the major tuna-processing nation in Southeast Asia and thelargest exporter of canned tuna to the United States. The industry isovercapitalized, the resource is showing signs of being depleted, andsupply shortages are a common complaint of the processing sector. Thereare also reports that the tuna industry is inefficient and particularlythat the yield from processing canned tuna in the Philippines is lower thanit is many other countries. This inefficiency is due to several factorssuch as the smaller size of fish processed in the Philippines, the lack ofmotivation among the work force, and the poor quality control at sea andduring the manufacturing process. The overall result is a product thatmany importers feel is inferior to other products on the international tunamarket.

Overshadowing the problems brought about by government inaction andindustry inefficiency is the general state of the Philippine economy.Economic conditions have deteriorated steadily since the early 1980s, andthey are not likely to improve until the current political crisis isresolved. Even then, it will take time before the economy is revived andbefore local and foreign investors are inclined to renew investment in thetuna industry or the Philippine economy in general.

In view of this situation and the other problems affecting thePhilippine tuna industry, it is unreasonable to expect a significantresurgence of the industry in the near future.


ABBREVIATIONS

BFAR - Bureau of Fisheries and Aquatic ResourcesBOI - Board of Overseas InvestmentDBP - Development Bank of the PhilippinesFFAP - Federation of Fishing Associations of the PhilippinesFIDC - Fishery Industry Development CouncilFOB - Free on-boardgt - gross tonITA - International Trade Administrationkg - kilogransL/C - letter of creditMAF - Ministry of Agriculture and Foodmt - metric tonNCSO - National Census and Statistics OfficeNFA - National Food AuthorityPNAC - Philippine-North American ConferencePPC - Philippines Packing CorporationPTCC - Philippines Tuna Canning CorporationFTPEA - Philippine Tuna Producers and Exporters AssociationSCSP - South China Sea Fisheries Development and Coordinating

ProgrammeTCAP - Tuna Canning Association of the PhilippinesTRF - Tuna Research Foundation


Appendix 1

MAJOR FEATURES OF PHILIPPINE PAYACS

Three types of Davao are commonly used by commercial fishermen in thePhilippine tuna fishery: inshore pavaos, deep-sea Davaos , and steel

Davaos . Inshore Davaos cost approximately US$210 each, are generally usedby small ringnettes, and are made of natural fibers and materials. Theyare anchored in up to 75 meters (m) of water with two concrete sinkers,each with anchor lines of about 120 m. Deep-sea aayaos cost up to US$1000and are generally made of the same materials used for inshore Davao .Often, discarded motor vehicle tires are cut in such a way that they can beused to replace expensive nylon line anchor lines. Both inshore anddeep-sea inshore oavaos are serviced by their owners' scout boats every twomonths during the fishing season. Steel ppyaos can cost up to US$2700;they measure 2.5 m wide, 60 centimeters high, and over 4 m long. Theygenerally need repair only once a year and can withstand heavy seas. Theirmain disadvantage is that they can be easily sunk with a gun shot, a commonpractice used to reduce competition in the fishery.

The three types of pay aos are approximately the same size. The surfacearea of the pavan does not seem to be a critical factor in inducingschooling. Depth of water is also not considered a critical factor ininducing schooling as Filipino fishermen set Day aos in known tuna groundsregardless of depth. The power of lights used to attract small bait fishto the surface during the night and prior to the tuna purse-seineoperation, however, is critical. It is also a source of conflict betweenoperators of different scales because stronger lights are able to attractmore fish to the surface and often away from other operators in the area.For example, large purse-seine operators use 60-kilowatt bulbs or mercurylamps to attract bait fish around the vessel and the pay a4 . Ringnetoperators generally use 10-kilowatt bulbs.

In 1981 up to 2,000 oaayaos were in place in the Philippines, comparedwith approximately 900 in 1985. Most of these pay aos were located in theCelebes Sea, Mindanao Sea, Moro Gulf, Sulu Sea, and the waters of westernLuzon (Figure 1). Because of the cost of setting Davao and theirpotential to induce schooling, commercial operators have devised rental andcommission fees to protect their investment. Rental fees to fish at asister company's or joint-venture partner's pavans may be as high asUS$200,000 a year. Commission fees to fish at a payao owned by anotheroperator ranges up to 10 percent of the net income for the fish caughtduring a particular operation.

Commercial fishing around Davao is monitored by small-scale fishermenwho, in return for their efforts, are permitted to handline around thepavan . These fishermen watch for poachers and make free dives at the payaoto monitor the amount of schooling. Nonetheless, poaching, vandalism, andviolence are quite common. In an effort to curb these problems, thePhilippine Tuna Producers and Exporters Association (PTPEA) has agreed tolimit the number of oavao to 40 per purse-seine vessel. The FTPEA has


also agreed that the distance between payaos of different owners shallbe at least 4 nautical miles. The distance between Davao of the sameowner is optional.


Appendix 2

INCENTIVES AVAILABLE TO FISHERY ENTERPRISES IN THE PHILIPPINES

Under he InvestmentIncentives Act 8:

1. Deduction of organizational and pre-operation expenses from taxableincome over a period of not more than ten years from start ofoperation.

2. Deduction of labor-training expenses from taxable income equivalentto 0.5% of expenses but not more than 10 percent of direct laborwage.

3. Accelerated depreciation.

4. Carry-over deduction from taxable income of net operating lossesincurred in any of the first ten years of operation deductible forthe six years immediately following the year of such loss.

5. Exemption/reduction and/or deferment of tariff duties andcompensating tax on importation of machinery, equipment, and spareparts.

6. Tax credit equivalent to 100 percent of the value of compensating taxand customs duties that would have been paid on machinery, equipment,and spare parts (purchased from a domestic manufacturer), had theseitems been imported.

7. Tax credit for tax withheld on interest payments on foreign loans,provided that such credit is not enjoyed by lender-remittee in hiscountry and that the registered enterprise has assumed liability fortax payment.

8. Deduction from taxable income in the year that reinvestment was madeof a certain percentage of the amount of undistributed profits orsurplus transferred to capital stock for procurement of machinery andequipment and other expansion.

9. Protection from government competition.

!fir th Emmert Incentives _Act .QQ 1911:

1. Additional deduction from taxable income of direct labor cost andlocal raid materials utililized in the manufacture of export productsbut not exceeding 24 percent of total export revenues for producers,10 percent of total export sales for traders; and 50 percent of totalexport fees for service exporters.


2. Preference in the grant of government laws.

3. Exemption from export and stabilization taxes.

4. Additional deduction from taxable income of 1 percent of incrementalexport sales.

Under t^f',g Agricultural Investment Incentives .Act Qf 1977 :

1. Accelerated depreciation of breeding stock. Under this decree,breeding stock is considered fixed asset or capital equipment subjectto depreciation.

2. Additional deduction from taxable income of 25 percent of researchand development expenses and 25 percent management training expensesof Philippine nationals provided deduction shall not exceed 10percent of taxable income within seven years from date ofregi strati on.

3. Tax exemption on breeding stocks, fish, plants, and genetic materialsimported within seven years from date of registration.

A4 Additional deduction from taxable income of 30 percent of freight andtransportation expenses within 7 years from date of registration ofenterprises established in a preferred geographical area forfishery/agricultural development where transport facilities aredeficient and such freight and transportation expenses are incurredin the course of transporting registered products from theenterprise's project area to the nearest economic marketing center asdetermined by the board.

Source: Philippines, Ministry of Natural Resources, FIDC,"Incentives for the Fishery Industry," appended Brochure No. 3,pp. 4.5, in Investing n Philippine Fisheries , July 1980.


Appendix 3

MEMBERS CF THE P1-IJLIPPINE TUNA PRODUCERS & EXPORTERS ASSOCIATION

1982-83

BONAVEN'IURE FISHING CORP.Mr. Vicente de Ocampo, Jr.Operations Manager1065 M. Naval, NavotasMetro ManilaTel. #232181/222092

DOLE (PHILIPPINES) INC.Mr. Luisito GoducoPresident8th Floor, V. Madrigal Bldg.Ayala Avenue, MakatiMetro ManilaTel. # 881311

FORI1JNA MARICULTURE CORP.Mr. Antonia V. RocesOperations ManagerSarmiento Bldg. IIPasong Tano Ext., MakatiMetro Manil aTel. # 868775

FRABELLE FISHING CORP.Mr. Francisco T. LaurelPresident235 Northbay Blvd.Navotas, Metro ManilaTel. # 231651

MAR FISHING CO. INC.Mr. Richard CherryPresidentMr. V. Hizon (Procurement Mgr.)6th V. Madrigal Bldg.Ayala Ave. , Makati, Metro ManilaTel. 1/ 8677

ORIENT MARINE & FISHING, RESOURCESMr. Johnny Yap LiwagPresidentRm. 211, Fed. of ChineseChamber of Commerce,Juan Luna corner Dasmarinas, BinondoManilaTel. # 1461809

PANGUIL BAY FISHING ENTERPRISES CORP.Gov . Muhammad All DimaporoPresidentJovan Condominium, Shaw Blvd.Corner Samat St., MandaluyongMetro ManilaTel. # 794771

PENINSULA FISHING CORP.Mr. Ruben S. MartinezPresident248 C. Arellano, MalabonMetro ManilaTel. # 231413/222238/236416

PHILIPPINES TUNA VENTURE INC.Mr. James L. ChiongbianPresident4th Floor, Domestic

Insurance Bldg.Port Area, ManilaTel. # 401081 1238/481803

RBL FISHING CORP.Mr. Alonso TanPresident925 M. Nav alm NavotasMetro ManilaTel. # 235647/234051


(Appendix 3 cont'd)

MEMBERS OF THE PHILIPPINE TUNA PRODUCERS & EXPORTERS ASSOCIATIOH

1982-83

RJL MARTINEZ FISHING CORP.Mr. Ruben S. MartinezPresidentRm. 301, Marbella Bldg. IIRoxas Blvd., ManilaTel. # 585768/580116

R & VT FISHERIES & DEVELOPMENT CORP.Mr. Rufino TiangeoPresident12 Baradero St., NavotasMetro ManilaTel. i/ 236561

RICSAN DEVELOPMENT CORP.Mr. Ricardo AngPresidentMr. Domingo Ang#7 San Juan ApartmentSan Juan StreetPasay CityTel. # 573871

.tee CANNERS

CENTURY CANNING CORP.Mr. Richard PoPresident2nd Floor, Dalayaan Bldg.Salcedo St., Legaspi VillageMakati, Metro ManilaTel. # 8176601

JUDRIC CANNING CORP.Mr. Tony. Cur atol oPresidentRm. 601, Golden Rock Bldg.1 68 Sarcedo St., car. de La RosaMakati, Metro ManilaTel. # 582357/500835

FU REF0ODS CORP.Mr. Alfonso JuanengoPresidentOrtigas BuildingOrtigas Avenue, PasigMetro ManilaTel. # 601482/783311

SQJTH PACIFIC EXPORT CORP.Mr. Mario JoaquinPresident/Gen. Manager87-89 Josefa Llanes EscodaNavotas, Metro ManilaTel. # 219846/48

STAR-KIST ASIA, LTD.Ms. Marilyn Montoya4th Floor, Magsaysay Center Bldg.Roxas Blvd.Manila


EASTGATE EXPORT CORP.Mr. Joe ChuaPresident#7 San Juan ApartmentSan Juan St., Pasay CityTel. it 57 3871

PESCADOR CORP.Mr. George PePresident#37 Igdalig St.Quezon CityTel. # 355061/352320

(Appendix 3 cont'd)

MEMBERS OF THE WILIPPINE TUNA PRODUCERS & EXPORTERS ASSOCIATION

1982-83

SEASCAPES DEVELOPMENT CORP.Mr. Richard Boneng TyPresident#6 G. Araneta AvenueQuezon CityTel. # 60L1311/603789

WORLD MARINE & DEVELOPMENT CORP.Dr. Modesto LlamasPresident176 Roosevelt AvenueSan Francisco del MonteQuezon CityTel. # 355061/352320


1. Part of the reason explaining the rapid increase in total tuna productionin the second half of the 1970s is that municipal landings were not recorded bythe Bureau of Fisheries and Aquatic Resources (BFAR) prior to 1976.

2. According to Virginia L. Aprieto, "Philippine Tuna Fisheries:Resource and Industry," Fisheries Resources Journal g the Philippines 5(1)(January-July 1980) :53, 21 species of tuna occur in Philippine waters, but onlythe four specified are caught in commercial quantity.

3. United Nations, Food and Agriculture Organization (FAO), Fishery SectorProfiles and of jr Selected Countries , Vol. 9, Joint ADB/FAO( SCSP/INFOFISH) Market Studies (Manila: United Nations Development Programme,1983), p. 17.

4. Philippines, (BFAR), 1981 Philippine Fisheries Statistics , Vol. 31, pp.259-64.

5. Virginia L. Aprieto, Fishery Management and Extended MaritimeJurisdiction: ftg Philippine Tuna Fishery Situation, East-WestEnvironment and Policy Institute, Research Report No. 4 (Honolulu:East-West Center, 1981), p. 17.

6. BEAR, "Report of the Tuna Research Project, January-December 1981," Table11, unpublished.

7. According to an unpublished report by the BEAR, "Status of Philippine TunaFisheries," the west, south, and east Sulu Sea (statistical fishing areas)accounted for 30 percent of total tuna production in 1982, and the More Gulfaccounted for 74 percent. The Bohol Sea accounted for 6 percent of total tunaproduction in 1982. It was the only other statistical fishing area to accountfor more than 5 percent of total tuna production.

8. Estimates are not available of the number of municipal hand-line fishermenoperating in the tuna fishery and landing their catch in General Santos City.

9. BFAR, 19$2 Fisheries Statistics the Philippines , Vol. 32, p. 20. See•Table 2 for preliminary estimates of skipjack, yellarfin, and big-eye tunaproduction by municipal fishermen in 1983 and 1984.

10. Personal communication with operators in the Philippine tuna industry.Precise data are not available on the extent of the buying operations fromsmall-scale fishermen in the late 1960s and early 1970s.

11. S. Chikuni, A.C. Simpson, and W.R. Murdoch, Test shin Tuna _acrd SmallPelagicFishes: Reports on the Operations Qf .0 Chartered Pulse SeinersinThilinpines and South China Tea Waters, 1974-1977, South China Sea Developmentand Coordinating Programme Report No. SCS/DEV/78/18,Manila, 1978. Prior to 1975, Japan and the Philippines were the onlysuccessful countries in tuna purse seining in the western Pacific. Earlier


failures in tuna purse-seine operations were generally believed to be theresult of the clarity of the water and the depth of the thermocline.

12. Philippines, office of the President, Presidential Decree, . lQ!,"Revising and Consolidating All Lass and Decrees Affecting Fishing andFisheries," 16 May 1975, Section 2, p. 2.

13. Presidential Decree Aq,. 1, Section 13, p. 8.

14. Felix R. Gonzales and Aurora B. Reyes, "National Policies and Supports inthe Philippine Fishery Industry," Philippine Journal Fisheries 12(1&2)(January-December 197+) :11.

15. For a review of Philippine fishery legislation, see Felix R. Gonzales, "AnOverview of the Philippines Fisheries Industry," Asian Fishing & Shipping IV(2)(1979):24-27; and Romeo B. DeSagun and Roberto S. Bautista, Undated Index igPresidential DecreesQn Fisheries (Manila: BFAR, revised January 1979) .

16. Presidential Decree_L4. 1Q, "Declaration of Policy," Section 2, p. 2.

17. Presidential Decree fig. IQI, Section 21, pp. 13-14. For a full descriptionof the regulations governing foreign investment in the Philippine fishingindustry, see Philippines, Ministry of Natural Resources, Fishery IndustryDevelopment Council, Investing Philippine Fisheries, July 1980, and theappended brochures, "The Legal Framework for Investing in Philippine Fisheries"and "Documentary Requirenents for Investing in Philippine Fisheries."

18. Fishery Industry Development Council, "Incentives for the FisheryIndustry," appended Brochure No. 3, p. 2, in Investing jn Philippine Fisheries .

19. "Incentives for the Fisheries Industry," Asian Fishing & Shipping IV(1)(1979) :8-11. According to the article, 56 fishery enterprises were approved bythe Board of Investments for investment incentives from 1968 to 1979. Only 42firms were reported to have operated during the 11 year period: 21 firms incommercial deep-sea fishing, 17 in fish processing, and 4 in fish farming.

20. "Incentives for the Fisheries Industry," p. 9.

21. Fishery Industry Development Council (FIDC), Joint Venturesin Fisheries :policies and Implementation Plan , September 1978, PP . 9- 1 0 . Also see Edward D.Evans, "Legal and Policy Consideration for Use of the Chartered Fishing Vesselsin Philippine Waters," South China Sea Fisheries Development and CoordinatingProgramme Report No. SCS/80/WP/93, Manila, 1980.

22. For a full assessment of the effects of fishery industry developmentincentives, see MAF, FIDC, Review of Incentives and Industry Burdens ForFisheries , December 1984. (FIDC was located in the Ministry of NaturalResources, but it was abolished by Executive Order No. 967 at the end of 1984.Some former FIDC staff members, however, are still engaged in fisheries policyresearch at the MAF.)


23. Virginia L. Aprieto, "Philippine Tuna Fisheries," Fisheries ResourceJournal, p. 63.

2 L . Federation of Fishing Associations of the Philippines (EFAP), "TotalShipments of Frozen Tuna from January to December 1980 from Port of Manila,Davao City, and General Santos," unpublished report. R & VT Fisheries &Development Corporation and RBL Fishing Corporation were the only other PTPEAmembers active in the frozen tuna export industry in 1980 that were not amongthe top 12 exporters.

25. Personal communication with representatives of the FFAP.

26. FFAP, "Total Shipments of Frozen Tuna from January to December 1981 fromPort of Manila, Davao, and General Santos City," unpublished report.

27. FFAP, "List of Tuna Purse-Seiners to be Covered by Payao GuidelinesAgreement," unpublished report, December 1981.

28. Personal communication with the staff of the FIDC. In addition to thejoint ventures operating in 1981, there were a dozen more joint-ventureenterprises with approved applications not yet operating and several otherswith pending applications. Most of the applicants sought entry into the tunaindustry.

29. Dole Philippines was granted a permit to process and export tuna in 1976.Although the PTPEA opposed Dole' s permit application on the grounds thatforeign controlled corporations are prohibited from exploiting Philippinenatural resources, the Justice Department ruled in favor of the Americantransnational corporation and Dole started exporting tuna in 1977. SeeMindanao Report: _4 Preliminary Renort on fli_P con cair d Social OriginsQfSocial Unrest (Davao City: Afrim Resource Center, 1980), pp. 94-95.

Philippine Packing Corporation (PPC), a wholly owned subsidiary of theAmerican transnational corporation Del Monte, was a major tuna-exporting firmin the Philippines from 1972 to 1978. PPC was also named in the petitionbrought by PTPEA, but the Justice Department allowed PPC to continue itsoperations. The closure of Del Monte's cannery plant in Puerto Rico, however,led to the closure of PPC's tuna division in 1978 and the sale of all itsfishing vessels to Fortuna Mariculture.

30. FFAP, "Total Shipments of Frozen Tuna from January to December 1981,"unpublished report.

31. Rose de la Cruz, "5 Top Tuna Exporters Close Shop," Dail y Exoress (Manila),16 November 1983. Pelican Fishing, Rebecca Fishing, S & S/ Sandovall, andQueens Fishing also went out of business in 1983-84.

32. "Davao Fishing Firm Drowns Under 1?1167M Indebtedness," Bulletin Today , 4August 1984.

33. The J asna and the Hornet were owned by Geronimo Velasco, the formerMinister of Energy and Janes Chiongbian's partner in Philippine Tuna Venture.The other three purse-seine vessels are still awned and operated by Chiongbian.


In addition, Chiongbian owns Eastship Fishing, which has four purse seiners inits fleet. These four vessels were built in France and reportedly financed byStar-Kist. Star-Kist also maintains an open letter of credit for Chiongbianwith the Central Bank in the Philippines to facilitate frozen tuna exports.

3 I4. The major difference between a tuna and mackerel net is the mesh size.Tuna nets in the Philippines are generally 3 inches (measured diagonally) inthe wings and 2 inches in the back portion; mackerel nets are 1 inch andthree-quarters of an inch, respectively.

35. Personnel communication with industry sources in October 1985. The totalnumber of purse seiners in the Philippine tuna fishery in 1985 reported heredoes not include the seven vessels owned by Janes Chiongbian's two companies,Philippine Tuna Venuture and Eastship Fishing. Although each of these vesselsis believed to have fished during 1985, they operated irregularly and theircombined production was less than 5,000 mt.

36. Maharlika Broadcasting System (Quezon City), "Relief for Fishing Industry,"FBIS ILA ar Pacific Newsletter , Vol. IV, No. 229 (28 November 1983) , p. 5.This report probably underestimates the purse-seine fishing effort in view ofthe substantial increase in total commercial production of skipjack, yellawfin,and big-eye tuna reported between 1981 and 1982 in Table 2.

37. Frank C. Thomas, "Develop ent of the Philippine Tuna Fishing Industry," and"Tuna Industry Trends in the Philippines (19811)," papers presented at theWorkshop on National Tuna Fishing Operations, in Tarawa, Kiribati, May-June1984, unpublished.

Total purse-seine catch is not available in the Philippine fisheriesstatistics or from industry sources. Thus changes in the number of purseseiners operating in the Philippine tuna fishery during the 1980s cannot becompared with the increases in total commercial production of skipjack,yellewfin, and big-eye tuna between 1981 and 1983 as reported in Table 2.

38. Based on formal and informal interviews with Philippine tuna industryrepresentatives in October 1985.

39. "FM Acts on Fisheries Problems," Fishery Bulletin , Vol. IX, No. 7-8(July-August 1985) :1-5. (The Bulletin , the official publication of the FFAP,became the Fishery Bulletin at the beginning of 1984.)

140, RBL Fishing changed its vessels' country of registration to avoid theimport duty levied on fish caught by Philippine-flag vessels operatingoverseas. The production of its Malaysia-registered vessels in the waters offSabah, however, is generally landed in Zamboanga. This could be viewed assmuggling, but the Philipine government has not taken any action.

41. Janes Chiongbian operated two or three of his vessels in Papua New Guineain 1984. Production from these vessels, however, did not enter thePhilippines. It was reportedly sold to Star-Kist and transshipped in Guam forcanning in one of Star-Kist's canneries in American Samoa or Puerto Rico.


42. According to industry sources, Judric's production capacity in 1980 wasoptimistically estimated to be 750,000 cases a year, or approximately 40 mt aday (if a yield is assumed of 50 cases per mt of tuna processed and 365 daysper year of operation). Santa Monica's rated capacity in 1980 was 600,000cases a year (33 mt per day), Century's was 300,000 (16 mt), Premier's and PureFood's were each 240,000 (13 mt), and South Pacific's was 180,000 (10 mt).

43. These estimates are based on a series of unpublished company profilereports by the FFAP staff. According to the reports, total canned tunaproduction in 1980 was 973,426 cases or 9,743 mt: 58 percent of productionwere institutional cases (6 x 66.5 ounce cans) destined for food serviceoutlets, and 42 percent were standard cases (48 x 6.5 ounce cans). The totalreported by the FFAP in 1980 is 13 percent less than the total quantity ofexports reported by the National Census and Statistics Office in Tables 2 and10.

44. According to industry sources, canein 1981 and 1,862,925 cases in 1982, orThe value of canned tuna exports is not

Industry estimates of the volume of8 percent less than the totals reportedOffice (NCSO) in Tables 2 and 10.

ed tuna exports totaled 1,718,597 cases16,449 mt and 18,321 mt, respectively.available.canned tuna exports are approximatelyby the National Census and Statistics

45. Calculated from Table 6.

16. One major difference between contract sale agreements and consignment saleor lot sale agreements is that the final price is generally established beforethe product is processed. Such agreements reflect the processor's inability tomarket the finished product and thus frequently result in a lower price to theprocessor.

47. Calculated from Table 2 it is assumed that all Philippine canned tunaproduction use standard cases weighing 19.5 pounds each.

48. INFOFISH, Wed Fish MarkMarket INFOFISH Report No. 8, Kuala Lumpur,January 1983, pp. 5-9.

49. Eduardo C. Tadem, "Modernization and Depletion: The Case of the FishingIndustry in Mindanao-Sulu," in Showcases of de develo e t: ishe Forests,an Fruits(Davao: Alternate Resource Center, 1984), p. 59.

50. The total volume of canned tuna exported reported in Table 7 was 2,065,998cases in 1983 and 1,851,538 cases in 1984,1 or 20,103 mt and 17,712 mt,respectively. The 1983 total is 13 percent less than the total volume ofcanned tuna exports reported in Tables 2 and 10.

51. The estimates of processed tuna reported here are based on total volume ofcanned tuna exports reported in Table 2. They are only rough estimates becausethe number of cases from each mt of tuna varies according to the size andquality of the tuna used in processing, the type of product being manufactured(i.e., whether it is flake, chunk, or solid pack), and the efficiency of the


processing operation. The estimate of 50 cases per mt used here is high andprobably overestimates the efficiency of most Philippine packers.

52. Eduardo C. Tadem, "Modernization and and Depletion: The Case of theFishing Industry in Mindanao-Sulu," in Showcase f Underdevelopment : Fishes,Forests. and .Fruits ( Davao: Alternate Resource Center, 1984), p. 60.

53. FFAP, 'Tuna Fish Utilization in the Philippines in 1980," unpublishedreport. The report indicates that approximately 36,000 mt of skipjack,yellcwfin, and big-eye production were utilized locally in 1980: 20,000 mt ofundersized skipjack (0.5-2.0 kgs) and

14,000 mt of ski pj ack/y el lcwf in 2-8 kgswere processed by domestic canners; and 12,000 mt of undersized skipjack and anunspecified amount of large yellowfin (greater than 40 kgs) were sold in thefresh fish market.

No explanation is available for the discrepancy between the total volume ofexports in 1980 and the disaggregate FFAP tuna export figures.

54. The katsuobushi manufacturing process entails cutting, splitting, boiling,and boning the fish and repetitions of smoke-drying and cooling in which thereis an 80-percent reduction in the live product weight to the finished productweight. Namaribushi is a product that has been boiled only; arabushi is aproduct that has been smoke-dried; hadakabushi is a product that been planed ordressed; and karebushi is a product that has been molded. This last stage canbe repeated up to four times. For m ore details about the manufacturingprocess, see Kaoru Fujita, "Manufacturing 'katsuo-bushi," in Fisheries .Japan: Skipiack Mackerel ( Tokyo: Japan Marine Products Photo MaterialsAssociation, 1976) , pp. 157-58.

55. Fishing Associations of the Philippines, "Export Shipments of Dried Tuna1980 and 1981," unpublished. Dried tuna export data are not available prior to1980.

56. BFAR, 1982 Fisheries Statistics 1e Philippines, p. 390.

57. The volume of frozen tuna exports in 1984 is an industry estimate. Thevalue of exports in 1984 and data for 1985 are not available.

58. Frank C. Thomas, "Tuna Industry Trends," Annex A.

59. Calculated from the U.S. Department of Commerce, National Marine FisheriesService, Fisheries tj e United State, ,1933, quoted in United StatesInternational Trade Commission, Certain Canned Tuna Fish, Report to thePresident on Investigation No. TA-201-53, USITC Publication No. 1558, August19814, p. A-23.

60. Estrella M. Santos, "80I Approval of Tuna Fish Importers Hit,"Daily x ess, 21 December 1981.

61. "NFA (National Food Authority) Mulls Import of Frozen Fish," Business . y( Manila), 23 September 1982; Jake Espino, ' w't Allows FFAP to Import $10.5-MWorth of Frozen Tuna," Daily Tribune (Manila), 8 September 1982.


62. Jowie Pagayon, "No Sacred Cows," Bulletin , Vol. IX, No. 4 (April 1985) :6.

63. "Seek Limits to Tuna Seiners, " Bulletin (January-February 1981) ,pp. 1, 4. Also see, "Curb on Tuna Fishing Urged", Bulletin Today (Manila), 18April 1982.

64. "Dwindling Tuna Resource?" Bulletin, 1 981 Anniversary Issue, p. 7. Alsosee Ruben J. Pascual, "RP's Tuna Resources Depleted?" Business may, 2 March1982, P. 5.

65. "Seek Limits to Tuna Seiners," Bulletin , pp. 1, 4.

66. Virginia L. Aprieto, Fishery Management and Extended Maritime Jurisdiction ,p. 40 • Also see Nestor Cervantes, 'Fishy Business Afoot in Manila Waters," et a't Time (Singapore), 29 January 1980, p. 1.

67. "Foreign Fishing Boats 'Invade' Tuna Haunts," Bulletin Today , 7 August

1979, p. 8.

68. "Urge More Teeth to Poaching Lars,"Bulletin(January-February 1981), p. 7.At the time the article was written and according to BFAR Atty. ArsenioAdriano, 140 cases of illegal fishing were pending in various Philippine courts.Details are not available about the outcome of these cases or about settlementsinvolving the apprehension of illegal operators fishing in Philippine waters.

69. J.M. Floyd and D. Pauly, "Smaller Size Tuna Around The Philippines--CanFish Aggregating Devices Be Blamed?" INFOF1SH Marketing Digest , No. 5(Septenber-October 1984):25-27.

70. T. White and M. Yesaki, Status Tuna Fisheries in Indonesia air d thePhilippines , South China Sea Development and Coordinating Programme Report No.SCS/82/WP/112, Manila, 1982.

71. "Why the Industry Must Have the Fuel Drawback, r' Bulletin , 1 981Anniversary Issue, pp. 4-6, 23-25.

72. "Industry Must Have the Fuel Drawback," p. 4.

73. Several frozen tuna exporters have not paid the 2 percent export tax on thegrounds that Board of Overseas Investment (BQI)-registered firms are exemptedfrom payment of all export taxes. Others paid in protest while the BOI soughtthe opinion of the Ministry of Justice, which subsequently found in theexporters' behalf in a decision rendered on 6 August 1984. This decision wasoverturned on 16 April 1985 after an appeal by the Minister of Finance, and itwas ruled that frozen tuna exporters are subject to the export tax. See "Tunaand Shrimp Exports Imperilled: Justice and Finance Ministries Stand on ExportTaxes Assailed," Bulletin, Vol. IX, No. 5-6 (May-June 1985):6.

74. The dispute between the fishing companies and processors represented in thePTPEA was also concerned with the importation permits granted to localprocessors to import tuna, mackerel, and sardines. While the fishing companieshad misgivings about importing tuna, they were angered by the canners'


insistence on including 6,000 mt of sardine and mackerel because they felt thatthe importation of sardines and mackerel would deflate prices for locallycaught varieties. See "Fish Canners, Commercial Fishersto Part Ways Over Economic Issues, " business Day , 1 6 Nov ember 1982.

75 • "A Year of Modest Growth," and "The Uncanny Fact About the Tuna Industry,"in Phili ineFisneries Annual , 1985 Edition (Manila: PFDA, 1985), pp. 12-15,27-28.

76. "Tuna Canners Seek Exemption From Excessive Taxes," Fishery Bulletin, Vol.III, No. 4 (July-August 198'4) 3. According to the article, Philippine cannersclaim that their losses almost doubled from US$2.149 in June 1984 to US$4.15 inJuly-August 1984 as a result of the combined effects of declining marketprices, rising costs, and increasing taxes.

77. Estrella Santos, "Tuna Exporters Assail Philippine-North AmericanConference (PNAC) Freight Rate Hike," Daily Express, 6 May 1982; "TunaExporters Lodge Protest Against PNAC Freight Rates," Business , 20 May 1982;

and "Fishing Hits High Freight," Bulletin Today , 24 May 1982.

78. Eduardo C. Talon, "Modernization and Depletion," p. 48.

79. FAO's Fish Utilization and Marketing Service and INFOFISH, EisheryCommodity S tuation.pnd Outlook 1g8^/84 , INFOFISH Report No. 12, June 1984, p.14.

80. The duty rates cited here refer to nations with most-favored-nation tradestatus. For a full description of the canned tuna quota regulations, see JesseM. Fl ay d, Import Regulations in United fate Focus Tuna Commoditiesfrom the Pacific IslandsRegion, Pacific Islands Development Program, East-WestCenter, Honolulu, Ha.iaii, May 1985.

81. Tuna Research Foundation, "Memorandum in Support of Petition by TunaResearch Foundation, Inc. for the Assessment of a Countervailing Duty as toCanned Tuna Imports from the Republic of the Philippines," 10 March 1983,unpublished.

82. United States, Federal Register Notices, Vol. 50, No. 46 (8 March 1985), p.9'474.

83. United States, Department of Commerce, Fisheries f the United States,198 x}, quoted in Samuel F. Herrick, Jr. and Steven J. Koplin, "U.S. Tuna TradeSummary, 1984, "National Marine Fisheries Service, Southwest Region,Administrative Report SWR-85-6, June 1985.

84. "A Million Thanks . . .," Fishery u le , Vol. IX, No. 5-6 (May-June1 985):12.

85. "Marina Relaxes Import Ban," Fishery Bulletin, Vol. IX, No. 4 (April1985):1o. The liberalized policy is in effect for one year only.


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Figure 1.

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Note: The shaded areas indicate the location of payaos in the Philippines tuna fishery in 1981 . The informationis based on an untitled, unpublished repo rt by the Federation of Fishing Associations of the Philippines.

Pacific Islands Development; Program - 60

RESOURCE MATERIALS COLLEC. I 1

Pacaftc Islands Development Program

East-West Center, JAB 4063

Honolulu, Hl U.S.A. 96848

THE EAST-WEST CENTER is a public, nonprofit educational institution with aninternational board of governors. Some 2,000 research fellows, graduate students,and professionals in business and government each year work with the Center'sinternational staff in cooperative study, training, and research. They examinemajor issues related to population, resources and development, the environment,culture, and communication in Asia, the Pacific, and the United States. TheCenter was established in 1960 by the United States Congress, which providesprincipal funding. Support also comes from more than 20 Asian and Pacificgovernments, as well as private agencies and corporations.

Situated on 21 acres adjacent to the University of Hawaii's Manoa Campus, theCenter's facilities include a 300-room office building housing research andadministrative offices for an international staff of 250, three residence halls forparticipants, and a conference center with meeting rooms equipped to providesimultaneous translation and a complete range of audiovisual services.

PACIFIC ISLANDS DEVELOPMENT PROGRAM

The purpose of the Pacific Islands Development Program (P I DP) is to help meetthe special development needs of the Pacific Islands region through cooperative

research, education, and training. PI DP also serves as the Secretariat for the1980 Pacific Islands Conference, a heads of government meeting involvingleaders from throughout the Pacific region, and for the Pacific Islands Con-ference Standing Committee, which was established to ensure follow-up ondevelopment problems discussed at the Conference.

PI DP's research, education, and training activities are developed es a directresponse to requests from the Standing Committee, PI DP's projects are plannedin close cooperation with the Committee to ensure that the focus and theorganization of each project address the deeds identified by the heads ofgovernment on the Committee, a process which is unique within the East-WestCenter and in other research and educational organizations serving the Pacific,

A major objective of the program has been to provide quality in-depth analyticalstudies on specific priority issues as identified by the Pacific Island leaders andpeople. The aim is to provide leaders with detailed information and alternativestrategies on policy issues. Each Island country will make its own decision basedon national goals and objectives. Since 1980, PIDP has been given the task ofresearch in six project areas: energy, disaster preparedness, aquaculture, govern-ment and administrative systems, roles of multinational corporations, andbusiness ventures development and management.

pacific islands development program

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