Indian Ocean Programme IOP/TEcri./?P .' 17
DEVELOPMENT OP FISHKRDJJS IN rl'HE JliXCLUSIVEl 11;coNOMIC ZONE OF SRI LANKA
FDOD AND AGHICULTUffill r)RGf\fflZA'I'ION Oii' 'I'!iE UNITED NATIONS UNITED NATIONS DEVELOPME1NT PROGRAMME Horne, 19'/D ;ij,
def~igne;iions omp1o;ted and the presemtation of in thirJ publioation do not imply the GfJion of nny whatsoever on the part tho J.i'ood ox1d Ag1'icnltu:n.) 0J.'gc>niza:tion of the Nations eoncEn·ning the statmJ of any v to:i'Pitm·y, cj:ty or area or of i"ts 'l;ic'1G; n<" conowrning '&he delimitation of frorrtiGl'D (H' boumlar:ieso
Campleman? Go (1978)
Teche Repe IndigE. _Ocean P:r·o~l:!2::'f';;11¥!!~ 7 ( 10) g 13 Po Development of fislrnrfas in the exclusive economic zone of Sri Lanka
Comm®rcial fishing. Economic analysiso Feasibility. Financing. Fish The; copyright in i;h:iD lJook hi veE.ri;ed in the Food and Ai;-riculture Organization of the United Nationso ~('he 1)ook may not l)e reproduced, in whole or in part, by a:ny mothod or procesr:;~ without written permission from the copyright holder" Applicv;ti.ons for f'ltWh permission, with &, ste,tement of the purpose and extent of the reproduction desh0 ed, chould 1Je addressed to the Director, Publications D:ivirJion~ Food ax1d Agriculture 01•ganiza.tion of the United Nations, Via delle 'rel'.'mt~ di Caracalla1 00'100 Home v Italy. (~) FAO 1978 ~ iii DEVEWPMEN'l' OF FISHERIES IN EXCLUSIVE ECONOM+o ZONE OF SRI LANKA b;y INTRODUCTION In Novembe1' 1977, the Gover.m1vr-1t ~l~ei J,ankn r(~queFJted assistance from FAO in the formulation of policies for the iiest utilization of the fishery resources within the Exclusive Economic Zone and to formulate a ertrategy for negotiations with neighbouring countries and private foreign interests. Accordingly, the Indian Ocean Fishery Stu'vey and Development Programme (IOP) assigned a consultant, Mr. Gordon Campleman, to study the situation and report to the Government of Sri Lanka0 He arrived in Sri Lanka on 24 November 1977 and departed on 21 December. In this hme 1 he had a nUJnber of discussions with members of the administration 1 prhrat<3 investors, locally based international staff of FAQ and of the Asian Developmmrt Bank. He was fortunate in being able to attend the "Symposium on the Th:rvf1loprneni; of OfffJhore and Deep-Sea Fishing in Sri Lanka", held in Colombo 29 and 30 Novembe1'. The consultant 1 a thanks are pa.rticula:i'ly due to Mr. Ve Pierterz, Secretary of the Ministry of Fisheries, for Mr:; kind and lrnlpful advice, and to Mre LeO e Engvall, FAO /UNDP SmaJ.1-Scale I~inh SRI LANKA - FISHERIES DEVELOPMENT AND THE EXCLUSIVE ECONOMIC ZONE Present Situation 1 The Eli:clusive Economic Zone 1 Demersal Resources 1 Pelagic Resources 1 Investment Climate 3 Fisheries Policy 3 GOVERNMENT POLICY TOWARDS FOREIGN-OWNED FISHING VENTURES 5 DEVELOPMENT ALTERNATIVES 7 Economic Feasibility ••••••••••• o ••••••••• 7 Tuna Long-Lining " • • • • " • • • • o • • • • • • • " o • 8 The Combination Gillnet/Pole-a.nd-Line Live-Bait Fishery • • e • • • • • • ., • 8 A Fisheries Development Strategy ••••••••••• o ••••••••• 9 Procedure • • • • o • • • o • 0 • • o • • • • • • • 11 SUMMARY - CONCLUSIONS 12 1 SRI LANKA = nsHERIES DEVELOPMEN'l1 AND 'THE: mxcLUSIVE ECONOMIC ZONE 'lhe purpose of this present paper is to disomrn th•3 situe;tion presently arising from the extension of Sri Lanka's EEZ to 200 m:Ues and ·the establishment of the India - Sri Lanka Mari time Boundary and to propose an effefftive strateg.y for its exploi"6ation0 'l'he existing fisheries of Sri Lanka are almost entirely coairta,1 1 small boa'G operations using floating gillnets end handlines 1 "V1Uh some trawling in th.e nor·th. Considerable pro~ gress has been me,de since the nineteen sixties in the mechanization of the fleet 1 culminating in the current introduction o:f 38~,foot drift net boats under e11_ Asian Development Bank pro ject. Total catches in 1976 amounted to '13'. 700 -to1w OY' 89% of total fish comsumption at a~ ,9_!!£Ut consumption ( 19'(4) 0f e::L1., 1 .Lb~J" :;i1pu.( :,,: ,, [' r ... ~J; b.Jnow1t to 2 700 tons, mainly shrimp and lobster and imports to ·1'.) 700 ton20 Jmporbmt eonstx'aints on development have been a chronic shortage of foreign exchange and consequent import restrictions, shortages of fishing gear 1 engines and spares, a lack of substantial local ca,pital for investment 1 a. lack of suitable deep~water harbours and c:x.tomfrve lHto1"eJ drift. It is believed that oppor-tunity· still exints for th<~ expunsi.m1 oi' the inchore fisheries through vessel and gear improvements. 'l'he establishment of the ex:pnnded EEZ 9 togt1ther with the India - Sri Lanka Mari time Boundax•y 7 has on the one hand drantically ourt.ailed ·t.raditional offshore trawling grounds, and on the other hand 1 made availa1Jle excl1rnive rights to Sri Lanka of some 90 OOO square miles The principal effect of the recent chang0s has been the loss of Sri Lankan access to the Wadge Bank after 1979 1 and one~third of the Pedro .Bank plus areas to the north now in Indian waters. These areas were the only lmmm grvund feasible for larger trawlers. There is not enough scientific evidence available to permit; any accurate assessm1mt of the demer sal potential. With a relatively naX'J.'0\1 contirnnd:aJ. shelf 1 it cannot be large. Whilst there are probably some areas capable of sustaining t-i:,awling operations for lobster, shrimp and some few comme1•cially important species of fish 1 these, in general, remain to be discovered outside the inshore area. There are some known possibilities for the development of hand and long•·line fisheries. In general, the consGnsus of opinion is that 1 despite some oppor tunities for the expansion of m'·tisanal n.nd 8'!TI8,1l~boai; trawling, the demersal fisheries do not present a substantial potential for expar1sion 1 other than small-scale trawling and long.. lining. There will be some problems of redeployment of the trawling fleet following upon the loss ·to Sri Lanka of the Wadge Bank and part of the Pedro Bank. Sri Lanka has taken steps to reduce its commitment to purchase some large ·trawlers from Norway, but it is most probable tha·t existing trawling capacity is at present o, Y The infoPma,tion used in this section is talrnn from the papers by Dr. Mendis and Dr. Sivasubramanian1 (Working Papers 3 and 4) of the Sy-mposium on the Development of Offshore and Deep Sea Fishing, Colombo, November 1977. 0 ~~--~~--· • (25.,.200 mHes Zone} tons/annum Spanii:lh M1:wl Indian Ma,ckerel 1 Flying Fish, 3 OOO Squid, etc. Frigate ~ackerel Mackerel Tuna OOO Skip jack 15 OOO Young.Yellowfin 1 OOO Old Yellowf1n 1 Bigeye 2 OOO Sharks 5 OOO Spear Fish and Marlins 1 OOO Total 29 OOO (from Sivasubramanian 1 B Working Pa,per No. 4) Due to the monsoon t;ype of climate and associated oceanographic conditions, this mixed pelagic population exhibits certain unique characteristics., Skipjack and young yellowfin a.re found in the range of up to 60 miles offshore (including inshore water) at almost all times of the year. They may be~ and are, caught with drift nets below the surface between June and September. At othe1' times of the year, they swim on the surface, and could be caught by a live bait pole-and-line fishery, or by floating lon(Sl-lines. Outside this range 1 the tunas are older and larger, living at greater depths and only accessible to a deep long--line fishery. It is said that both the near-water and offshore tunas do not school sufficiently to permit modern deep purse-seining. Sharks, marlin and spear fishes have a wide distribu tion in the offshore zone. Experiments have shown that resources for live bait and lon(Sl-line bait are readily available on both east and west coasts of Sri Lanka within 15 fathomse There is a tradi tional pole-and-line fishery in the coastal waters which is fairly successful at certain season Se The experimental live-bait pole-and-line fishing conducted by three Japanese vessels in 1973-74 cannot be considered a commercial success, partly due to problems with bait fishing, which are now resolved and partly due to the seasonal disappearance of the skip jack from the surfacee There is no possibility of a year round live-bait pole-and-line fishery for skipjacko However, in season, August/September on the east coast, and October to February on the southwest coast, good results of more than one ton per day of yellowfin and skipjack can be realizede This very cursory survey of the kno~m resources of the EEZ suggests that expansion of the fisheries of Sri Lanka will necessarily have to take the form of: a) A combination drift net/pole-and-line fishery for skipjack and small yellowfin tuna in the range between 25 imd 60 miles offshoree b) A high seas lon(Sl-line fishery for large tuna outside 25 miles and, necessarily, beyond the boundary of the EEZ0 The two methods are not competitive or mutually exclusive, except in their possible effect on the recruitment of yellowfin 1 and there is no objection to the overlapping of their potential fishing areas0 3 - Fo:r~ many yeart:i, "ih 'following the recent chanr,e in Ocrver·nmen·\; 9 steps have been taken 1 ·through agreement with the inter:ne;tional fi.oo•ic;Lug .1.nsLi i,ul;.iu:1w"' ") Libn:c•oJ5ze imports fo1' development pur- poses~ and thu8i for ·t;h.:i :f'i:i:1~t ·i;5mo i,n m1):n.y ; However, most potential invc~KJtors in fisha:cies are Bmall companies, or individuals, and :i:t is thought un1ikely that they ha·ve the finanoiaJ. resou.rces to make unaided the large ca,pita1 investments required for offshore fisheries. l1oan finance is scarce and expensive. Even under the presEmily favou:r·a~h1e oircumstanc.oB? it ia necessary to be realistic a,bout the scale and SJ.H'.:led of :.:espo:n8H of px·iva;l;o r,ir,r;~,1J:•· Lrv0stment in fisheries. It appears that 1 dei:ipitr'l vel.'Y s,dva11·tageous ·f;cJY·JHfl 1 inveffGOP Fisheries policy in Sri Lanka has to meet a mmibe1• of vbjeotivesa Principal ones are ino1'easing ·the landings of fish for loci'J,l n1ltritimi 1mrl increasing employment opportunities and earnings in coastal areas. Constraints on the realiza:tion of these objectives include a lack of nationa,lly produced inputs such as vessels, cme;ines spares and fishing gear, a consequent heavy foreign exchange burden in a situation of foreign exchange shortage 1 lack of inf1'astrucJnU'e, lack of financial :N:!!'loi.i.re<~toi among fishermen and the private business sector 1 and a la,ck of modern technology· nnd .:1ldJ. l Wi'th the expansion of tho EEZ, the:re lw,s to 1Je added to this statement an obligation both to manage the l'esources of tlH:l EEZ and to maximize its economic contribution to the national welfare. If this is to 'be done at all ~lffe stantial capital invostmerYt, moff~ of it i•equir·ing excha11ge 9 the importation of modern technology and skilll'jt and a uu}Jr3tantial upg;:('tviing of national skills in navigation and fishing techniquese Excep·t possibly on the g:1:oundr~ of fm~e:i.CJt e~:ch ,;,go P:oag•:· Dnd ea:r11ings 1 there can be little doubt that the primary objective of a f:i E1hor~ z:G dnvelopment Frtrategy in Sri Lanka should be the improvement and expansion of the coastal f'isheryo It is the main element of supplies, contributing 82% of total oom:rnrnption., It p:t'ovides the main sources of employ ment and earnings :in moat coastal area,s~ ps.:rticularly in remo·te areas relatively untouched by general economic developmento Its present equipm~mt mid methods e..re such that they can be significantly upgraded at relatively modest cost, end thus give a comparatively high rate of economic and social return to the necessary inputs. ~'hough in some areas it is probe,l)le the;t JGhe fish stocks presently exploited will not support increased fishing pressure, generall;y the areas outside 15 miles offshore present no resource problemo Even on foreign exchang-e considerations, the ooe,sta.l fishery pro duces significant expo:r1; earnings from lobster end shrimp, etco, amounting in 1976 to U0S0$ ·1003 million and e.n extension of the coasta,1 sector? mdng local materials as far as possible and including an e:i::pt)Xlf:iion of "che boa;tbuilcU.ng inr1mrtry 1 would have, a,s co'mpared. with high technology al tetw:i:'tiV<'Hl g mlil.na~~ealUe irnpor"r. cost per ton of fish produced, and almost certainly rllininmm foreign exchange coicrt per jol) created. Expansion of this sector is an efficient ur,:;e of F.Jcarce na,tional ref~ou.rces and should be the main objective of fisheries policy. Progr·ammes to achieve this end are 1,eyond the scope of this paper but would include improved marketing and infrastruc·ture development at certain ports, the up grading of fishermen's skills and awci,reness ·i;hrough improved extension programmes, and the introduc·tion of larger vessels, of perhaps 45 feet 1 capable of regularly working areas up 'co 40 miles offshore0 This latter would involve programmes to improve and expand national boatbuilding cape,bilities, and the provision of supervised credito Implicit in this view of development ir3 the conversion of some part of the existing artisanal, individual and family basis of fishery organization ,co a semi-indus·trial type of operationa If this view of the main '~hrust of fisheries development in Sri Lanka is, in general, accepted, exploitation of ·!;he EEZ becomes a subsidia,ry though important part of the develop ment strategy,, As discussed earlier, exploitation will have to take the fo:rm of a combina tion gillnet/pole--and-line fishery, and an oceanic long;-line fishery. The first question arising is the extent to which the existing f'ishing industry structure can participate, and the answer has to be 11 hardly e,t all 11 o The offshore fisheries will be capital intensive, technologically a,dvanced? export-oriented, requiring a substantial, and localized, base facility and need a high dw3gree of C(mtral:ized, integrated management. Some reports (e0g• FAO/lfol'ld JloxJk Cooperative Programme Tuna Fishery Development Project, April 1976) have postulated the combination vessels as being of 45 ft length which might seem to bring them within thEi capability of the existing coastal sector. This size of vessel seems too optimistic0 To be effective in fishing on the relatively l'are occasions when there are fish schooling, at least six poles used to be working, plus ·the chununer, the steersman or skip per, and the vessel needs a crew of at least eight or nine men who have to live on board for three or four days. Daily operations, involving so much searching, are not likely to be profitable. Subsequent shore freezing for export quality most pr<;>bably means that the vessels have to ha,ve ref1'igerated or RSW holdso A live bq,it tank and chumming station is necessary. It seems unlikely ·that all this can be contained in a vessel much lU1der 65 feet OA. It has however to be remembered that such a vessel will spend. most of its time gill netting and some sacrifice of pole fishing oapabili ty might be justified for savings in size or crew. The design of ·the vessel will have to be carefully considered, but it is unlikely that the vessel will be of a, size and simplicity suitable for existing fishermen. It seems unlikely too that existing entrepreneurs and investors in the fishery sector have the financial resources, or fishing experience 1 ·l;o contemplate the minimum scale of investment required, even for the combination fishery, let alone the long-line fishery, in the near future. It seems therefore that exploitation of the EEZ has to be regarded as a largely separate issue of fisheries policy, to be justified only by its probable costs and benefits to the colll1try and 1 as far as possible, without adversely affecting the main programmes for the development of the coai:rtal sec·toI'0 The implications of this appear to be: ( 1) The initial development has to be la:cgely foreign financed. (2) Because of ~chis 1 a la:t'ge propcJrtion of the revenue has to come from exports. (3) A new fishery operating orgi:mization has to 'be created, whether private sector, public sec·bor or mL'l{ed. (4) A substantial fo:i.~eign technical a1i:udsbJ1oe input hi initb,lly required, both for operations and for traininga Given all of this, it is apparent that developrnent of the offshore fisheries will inevita,bly involve a, very substantial reUance upon foreign interests fol' financing, tech nology and marketing, no less thar1 operational management., The problem for fisheries policy in Sri Lanka is how to obtain this on the best terms a,vailable 0 It should be stressed ·that this development situation does not arise solely because of the extension of the EEZ.. 'rhe only change is the ability, given pro:per enforcement, to exclude foreign vessels., The possibilities have always existed' and should be considered solely in ·terms of their economic feasibility and practical implementation. What perhaps has chenged through extension of the EEZ are the terms upon which foreign help and inputs ca:n be ohtainede 2. GOVERNMEN'l.' POLICY TOWARDS FDREIGN,,,,QWNED FISHING VENTURES It is assumed here that the private sector will bear the main burden of fisheries development in Sri Lanka. Where the public sector is primarily involved, the problems of joint ventm'e s are rather different, in that the Government ultimately is in the stronger position. It would appear that in most cases the Sri Lanka partner will be financially weaker, bound by foreign exchange constraints, and 1 most probably, lacking technical exper~ tii'le His negotiating position will be correspondingly weak, often to the point of the local partner being purely a figurehead, a legal device, o:r a public rela,tions exercise 1 the real decision centre and manager being the foreign partner. Rather than permit such an unsatisfactory situ.e,tion to develop, the Government should ha,ve a positive policy towards expa'triate participation in Sri Lankan fisheries, and an appropriate set of controls. The objectives of such a policy are dual and possibly conflicting., On the one hand the maximum reasonable contribution to national income should be sought and, on the other, the joint activity should contribute to national development objectives. Current income in, say1 licence fees may not be an adequate substitute for longer-term objectives such as the trans fer of skills and technology, 'the accumulation of resource data, or the development of a fishery along lines appropriate to locally available skills and other i.nputs .. This argumen,G is separate from the need for assm'ance tha,t the pricing and financial arrangements between the partners are fair and satisfactory from the public point of view0 It is neither possible oor desirable for Government to supervise day-to-da.y financial a,rrangements or fishing operations, but it should have a set of guidelines to which propof As at present, all proposals for joint ven·tu.res in fisheries should need explicit approval by the Ministry of Planning and by the Ministry of Fisheries,. The former is most interested, of course, in the general economic effects of the proposal, the foreign-exchange implications and so on., The latter is concerned that the proposal conforms to the general policy for the development of the nation's fisheries in the long term and that it makes a positive contribution to development objectives in the sector .. The Ministry of Fisheries should specify those classes of proposals which are admissible l?]'ima facie 1 and those that are not. Having regard to the resource situation, as far aR it Tsknown, and the extension of the EEZ, the following suggestions are made for consideration: (1) There shall be no foreign flag fishing in the Sri Lanka EEZ except through the medium of locally registered joint venture companiese Exceptions to this gene•·al rule are: ( . ) trawling by large vessels over 200 GRT outside the 25-mile range (~i) tuna long-lining outside the 25-mile range 6 ~. 'I'he :former is at highly Hpecuhd; :bnci The latter proposal coverl3 the possibility that S:d Lanka might permit foreign tuna long~lining in the EEZ on ce:ctain conditions without being able to ilrnist on a locally regifftered companyo (2) No foreign~owned trawlers will be licensed to fish within ?5 miles of Sri Lanka, even if operated by locally regisbo:ced companies All trawling in the inner zone should be done by Sri Lankan registet'ed vessels. (3) Foreign~owned vesseh;, only through locally regii:rtered joint ventures, may prose cute all other fisheri(JS in the EE:Z. F'urtller• consideration might 1 at some future time, have to be givN1 to restricti01:w aimed at further protecting the interests of the artisanal secto.c but it is prrnnr1,ture at the moment. 'Ihis implies that some sub stantial ves8(~1B could be~ working mshore in the gillnet 1 pole-line and long-line fisheries a.,nd for b":iito Desp:i"{;(~ uome inevitable protests from the artisanal sector, this should be accopted The specific terms of a private~sector ;joint venture are matters for negotiation between the parties concerned. The Government flhoDld require the following general provisions~ (1) That the local party hold not leBs than 51% of the voting shares in the joint company. (?) 'rhat a substantial part of the foreign exchange cost shall be met by the foreign partner by way of loan capital (3) If vessels are to be chartered, provision shall exist for their eventual transfer to the joint company. (4) 'I'ha,t the joint ventm'e agreement shall include specific provision for the training of national staff both a.t sea and inshore operations. (5) The location of the operation and the scale of provision of necessary shore faci~ lities shall be acceptable to the Government. Other desirable features of a joint venture agreement are catalogued and discussed in IOP publication IOF'C/DEV/75/37 1 "Joint Ventures in Fisheries"; Crutchfield ,tl 2:1.• 1 1975 1 most of which may be applied administratively. The above points seek to ensure that govern mental objectives in fisheries development are e;\;tained through avoidance of sham joint ventures designed solely for gaining access to l·esources 1 ensu:dng the necessary transfer of skills and technolo&.Y and minimizing fo1'eigt1=exchange needs. The Government Bhould offer foreign investment incentives in the fisheries sector on the same terms as for other economic sectors but not~ in principle 1 on any specially favoUl' able terms fo:r' fisheries. At p:cesrmt there are three p:d.ncipal incentives available to the fisheries sector, apart from direct subsidit0s on vemJehi. 'fhese are: ( 1) a.J:l eight=year t 1ax holiday ou export p:r-oc~rnds (?) a development rebatc3 mid lu1np r:itJHl d13p1°vwiatio:n allowance worth in the current finance bill 100% of the initial invcrni;men-1; (3) a fi ve~year ta>r hol for cornp1m:i.cH1 migaged in deep E4en fiehing This should make an attracti:ve for the po·tential foreign investoro However, it is not as effective as it mi be in :rela,tion to the sectoro Given that no special incentives for fisheries nre justified, the l!M3sistance avedlalJle might be bette1' tailored to the needs of the sec-tor. The tax holiday on provision is clearly diminished in value as an incenrtive when a substantial of catchtrn is sold in the national market, as it must inevitably be Import-saving is as valid a justifica·tion as expor"'r,s for this type of assistance 1 and consideration might be given ·to extending the ta_x holiday in respect of all earnings from fishery investment 0 Similarly, the lump sum allowimces !'tre of lesser value to slow maturing :investments, which may very likely show lmrnes in the first few yea,rs 1 unless specific pro vision is made for the carrying over· of the :initial allowances to later years. It appears that, in relation to the fishing industr-y 1 the tax :incentive provisions are subject to interpret at ion by the Inland Revenue Department 1 and there i El considerable uncer tainty as to their actual application in practice. It is not possible :in the time available to specify e2nwtly 'Ghe most effective type of assistance for the fishing industry within present financial cor1straiut8. There is little case for the payment of building subsidies on industrial-size vesselB to be financed 1;;y· foreign investors. Tax-related provisions should be related to total earnings and 1 perhaps, f()reign~xchange regula,tions simplified. What needs to be done is to define and clarify the incentives to be offered for larger vessels and related invel!ltments 1 through discussions with the Departments involved and to publish a specific fishing industry scheme. What is suggested therefore i1~ that ·the Ministry of Fisheries should publish widely a document setting out the Governrnerrt 1 s policy on the exploitation of national waters, speci fying the particular activities available to foreign investors and the conditions upon which participation :is sought, together with a clear statement of the financial regulations and incentives applicable to such ven·tures. Such a document might also include information on various Government services avail able to potential :investors in such fields as resource :information, export p:romot:ion, :invest· ment appraisal, financing (e.g. the proposed Fisheries Bank) and so on, and a clear indica tion as to initial responsibility for processing enquiries and proposals, i.e. The Secretacy1 Ministry of Fisheries. 3. DEVELOPMENT ALTEHNATIVES Apa.rt from the general meam.t1'eB discussed in the previous section, :it is necessary to specify development priorities. As mentioned earlier, an expansion and improvement of the existing inshore fisheries to coastal area,a should be the first priority on employment and income generation grounds i''H3 well £HJ conforming to other social objectives. There are two J:'ernaining options dictated by the character of the resources - an inter mediate (25 to 100 miles) combine:tion fishery for young yellowfin and skipjack, and an off shore, indeed nece~sarily oceanic, lon~line fishery for tunaa Economic Fea.sibilij:z Both fisheries under d:iacuas:ion have been con~idered to be economically feasible in earlier studies. The FAO/CP Identification Mission Report ooxwidered that a 70-ft lon~liner would show a. financial rate of return of 18% and a 45~ft pole-and~line vessel a re,te of return of over 50%. Current proposals hy thz:i Ji'AO/Sri Lank@, FiaherieEJ Development Project indicate a finan- cial rate of return o:f ', fo1· long-lining for the Sash:imi market and for pole ~d-line 19%. In this connect ion, po le~and=lino fthould l1B unders"rnod to be a combina.t ion pole-and-line live-bait m•d gillnet ve~rnel., 'rhe FAO/CP a 70~ft inc~ veciG:el costing approximatEi1y U. Se$ 400 OOO 1 working up to 350~·400 mileG 1 wl:rnreas the latter Fisheries Development Pro jec't proposal io bam0d on :i c o approxima;t©ly· 100 ft long~· liner w01"'king up to 1 OOO miler~, cowt Apart from vessel size tho eFH1erd;ir;i,l differmwe b!'.rLween the pn,pom'J,ls is that FAO/CP asswned p:dcee (cif) of U. 1 OOO Coe lowfi(] aud U0So~t 1 300 :for· bigeye 1 whereas the FAO/FDP proposal assumes sales of Uo 2 OOO (cif)o 'Phe difference is due to the fact that the latter pr·opcrnal aimi:: to pl:'lH1uce vc:iry· high quality tuna, frozen and held at -50°c for the Japanese Sashimi marketo·1 ~ 'J'}w pi'oposal would be uneconomical at the canning tuna price of U.S.$ 1 150 One does not hav0 to choose between these projeot variants. H is, in the present writer's opinion 9 m1li!rnl;ir \;hat 18 crew, 500 baskets of gear, and 5o~ton fishhold can bEJ accomodatfld in 70 fEcJet 00Ao H har"l to be remembered too that tuna. is highly migratory and seasona.1 in a:lmndance 1 a~nd a longer,,,range vessel is likely to prove more economically viable, ao 0,111 as lH;iing rnoro s~rn,wox''d1y0 It is difficult to fau1t the inte:i:·naJ ] ogic of tlrn FA.O/li1JJP proposal. The vessels should be capable of catching 250 ton8 of ·t,una and other fi(1h per year 1 and most of the estimates are conserva;tiVl'i It esr:Kmt dc~pends upon a highly specialized market, Sashimi or raw fish 1 for which qu0.l i ·:itarnfa.rds are very high. This market takes 83'f of the tuna consumed in Japan and '36% of the 13kipjack0 The rnax•ket for frozen tuna for Sa.shimi is growing. However, Japan iD virtually Lhe only country with this market and the whole operation would be dependent upon conditions with Japan. The proposals assume that 83% of the catch is sold to the Sct:oh:iwi max·lrnt 1 and it is clear that a significant reduction 0 in this proportion through poor h ind1:i_ng 9 and storage would render the operation uneconomic. In present circurns'ta:nces 1 it is suggested that m1 oceanic tuna, long-line fishery is a too high-risk and 1ow~p:eofit operation to be a justifiable use o:f Sri Lanka1 s scarce foreign exchang-e a,nd credit reserves. Apart from the practical problems of implementation and crew training, the employment effect of an initial project would be relatively small 1 perhaps 108 men, plus shore staff 1 say perhaps 120 jobs at a ce,p:ltal cost per job of U.S.$ 80 OOO. However 1 the possibility of a long~limJ :fishery does exist 1 and certainly some effort must be made to exploit the r'eL~ources of the EEZ. •11his sugg--ests the possibility and desirability of permitting foreign :i.ntereots tc p1•osecute the f'ishe1•y on the best terms obtainable for Sri Lanka. ThcGe are discussed in tlrn next f3ection. Both Project ProposalG are based on a 45~ft combination vessel which, as observed earlier, appeared to be too small for the work envisaged ax1d the neceGsary fe,cilities for crew and fish pret'!ervation The specification and desie,n of any :fishing vessel 1 particularly a combination one, is a process of cornp1•ornise between various cfosix•a,ble fee;i;ures 1 and the particular problems involved in the pole,~and~line/ gillnet operation do not appear to have yet been fully worked out. It is suggested later tha't one of the steps to lJ Both the two existing studierJ f;Jhow high potential rateg of' return from this fishery (CP over 50% and FDP t9%) excluding ,-1taPt up uouts, though on a comparable basis. The * Apart 9 of course 1 f)·om the dH'f<-'lront dn;tos of the p:copom~ls. e ssen"t ial diffe:c~<:ni.ce tJ be:YfJwe(Hl thc:~rn at'tJ in th~1 qmurt:h;:\.1crn caught (GP ?10 tons and FDP 150 tons) and in ver:Jsel ope:rai; ing c~xp8tHJe (GP U" 55 266 and IPJJP U,, 53 OOO) in normal years. We may conclude 1 :for tlrn g that a combinvJ;ion fi1Bhery would be profitable and financially justifiedo n also hcJ,r'l conrciidera1Jle pot Of particular aigt1ificaJ1ce w Sri Laxlket:n finhe1'1!mtff1 a·'fO in both gillnet and pole-and~line fishing as well as baiJ; fh1htng~ Of cours11 ~ therc-3 will be problems in develop ing an industrial scale of operixticm fJ(~.rticularl,y :i.mmlving live~bait fishing, but the basic skills do exist within the countr·y at prl'H~eiTl;,, Once the design of the most suito,ble ve~~1~m1 :i.r~ proved 1 a determined programme of super vised construct ion, perha,ps u:i.th nececrnaY'Y inputs of tedmical assiEJ"tancE~ 1 could ensure that a high proportion of th(l ver:;mil building coFria~ could l1e rm:rt from local resources. Though not as well rega,rded 1 or 1.i.c1 high priced as y<"lllowfin and bigeye tuna, skipjack of good size and quality is an irrtermrtional commodj flnd there nhould be foreigr1-,,exchange earnings for such exports 1 sufficient at leaxrl; 1 to makcc: a significant contrHmtion to the foreign-exchange costs of the vessels CJ.nd gnaro Essentially, what iii 'bEling said lHcn·e is that thE~ rnedimn technology alternatives of a combination fishery is both m Although there may be a quantmn gap 1 it follows the orga:oic process of extension of local fisheries from inshore ·bo coastal to near offshor·e; it is, in fact, an acceleration of the natural process of fisheries development rather than an attempt to introduce a totally new teclmology. If this reasoning is accepted, ·i;he objectives of tlw Government of Sri Lanka should be to obtain the necessary help and finance for the d~weloprnent of the combination gillnet/ pole-and~line fishery on the best possible terrns 1 using the offshore resources of the EEZ as a bargaining coun·tero Specifically, it should off It is difficul"I; to say what ~uch e, cm-1ces~Jion is wm'th in the absence of detcdled costso It should be a,ppreciated tha.t the EEZ will not FJUflte,i:n ye8J>,,round lon~lining operations" The resources of y·ellowfin and bigeye a1'e estimated ,Go yield 2 OOO tone per annwu plus aome skipjack and sha,rks. 'I'he fishery might be wor'th 2o5 million dolla,rs per year at market p1•:ices and ·thus um"l;h perlm,pici U.S.$ 250 OOO ·to a, fishing operato1', though it could be regarded fU'l worth more if co:nsidel'ed as a ne-t acidition to existing operations. Variable costs of catching long>s,line tuna e1'0 estime:ted to be U. 668 per ton~ leaving a marginal gross profit of UeS~$ 830 OOO fo:r the fishery. Probti;bly the maximum that might be negotiated would be around U,. Sa$ 500 OOO pEn' a1mumo It would ntYt a:ppear ·bo 'be pomiibhl to inn:Lst on a joint ven·ture for this fishery or to imporie condition:;i fmnh & local ba!'le or employing local lci,bour. Modern large tune, long~liner~i do no-t :mied ba~1es 1 :fol' r;:ifuelling; the fishery would be seasonal a:nd 1 a T}fe quef:rtion of feer". fol' HcemJ.tHJ .ls of the totaJ, negutiating package0 Certainly '&he initial proporsa,l .i:Jhould includ'i:i l f\:~er~p· iculo.:dy if the foreign partner insists·, as well he rnf1y, on It is considered better "tha,t the f:iJ1hii1g concest:Jion be offeriild as a whole to one foreign operator. This m~ximises its value 1md nwkirn simpler and more managl:!able the development assistance envisaged for· the cmil'birn~.tion :tic>hery. · Sin:ce excluded couirfries may· feel aggrievedt it is probably bet·l:;er that .the agreement "be concluded with a private sector company l'ather than 19,t Government level, though for<=iign g' The a15.reement should run fm' a period to be dete:i:'mhrnd by the needs of the combination fishery project 1 perha,pa five ;irears. It r-1hould specifically be for long-lining, and the Government should not btncl itself to refmm other requests for foreign participation in joint ventures in other fisheriez. Government policy wi'th tn brl; ventures in other• fisheries, particularly the demersal ones, has to be con on a. eafie l)y ca.~ie basis. New "tri:iwling joint ventures should be confined to the discovery cmd exploJ'Ctrti.on of new groux1ds but, tn general, Sri Lanka should have an open policy to foreign jo5.nt v:;i1tures 1 particularly those with a fish processing elemento It is, however, ha:cd to UN~ uhy any such joint ventures should qualify for vessel building substdieso What is required from the fo1•eign company in "the combination fishery remains to be worked out in detail. The pro jec·l; should aim to :tntroduce an initial six combination vessels to be operated from Go,He ~ with addi·l;ional vesi::411lls being brought into service each following yeare The project should not ht:we any kind of monopoly of the skipjack pole~Md~ line fisheryo Though it could lease the Galle facilities, it should be understood as pilot development project which othe:r companietJ imd fishermen would subsequently adopto The fore t gn pai"'tne:r should be asked to p1'ovide: {a) favourable loan finance for thi!l ini ttal (b) technical management of the p1'0 ject v including vessel ma,intenance and proce ssingi ( c) six masterfishernmn and six engineers and a proper "training programme for local crews; (d) export sales manageme:tr~ for a proportion of the catch, the balance being sold locally to CFC and private merchax1ts0 Management service<3 can be obfadned under a separate management contract financed out of revenuese 'I1his is a matter for nego"tiationo Future development of the fishery could br3 financed by an international bank loan, which might provide both for financing vemml ownerflhip and for developing the boatbuilding sector. The choicev or creation 9 of a local partner is yet to be decided. If it is not to be a public sector ent:ity, :i.t Nill rncied ·to bra 8, subs'rn:ni;ial private companyp and it is not apparent that local investoP~> of thi13 ee,libre he,ve shown much interest in the fishery sector. It should be remen!big1~ed too that th<'l Ci If a sui ta,ble private socto11 cam10't he ident i:fietl 1 tho Government might spon= sor a public joint stock companyp a subicrta:ntie.l rghare stake itself 9 :md placing the balance of the shares through the market.a At somti fu'cu:i:'e "i;jmo tli.e ·Government could sell its stake in the companyo This company would then form a .joint opera:~ing comp~my with the foreign partner, preferably on a ma,jorii;y (51%) ba,GifJ fen; Sri Jmnlrn;. If the ifosi~els ar0 financed by loans ·as envisaged and the technical The first essential stop for the Government is to establiuh priva·i;ely its negotiating posi tiono For thh1 it is fi:cst neoeGsar;y" to have a thorough feai:libility· study for the combination fishery which 0.oea no·t a:t exist Questions that need to be solved are the optimwn type and size of vessel 1, thci of l:iait fishery, tho amount of gillnd that can be fished for varying pole=fishing napei,oities 1 e·tc. 1 and a, project needs to be defined. 'I'he l<'AO/Sri Lanka, li'ishc~ry IJ:::ivelopment Pro jec·t; can help in this0 Another possibi lity is to ask the FAO/World Bank Cooptn•a,tivo Programme ·to field the Ttma Fishery Prepara tion Mission, with these specific },'c1tp1b'ciment~3 in mind. I,c jJj important that Sri Lanka defines the required project 2•at11c;x• than accept wha.. t a foreign par,tner may offer. One needs to know more accm'e;toly the value of a fhghing licence depending as it does on seasonality of fishing, catch ra;tesp marke'I; prices~ compositionp e"rn. The Government can then determine j:tFJ position with re to the total allowable catch of i;he offshore long'=-line fishery and the level of licence feeE1, the acceptable loan terms 1 provisions for repayment from e1u'ningfJ and so for-·th. Only when this has been done should the Government open di scussioirn with p1'onpeC't i ve partners. At the same time conRJideration can be g·iven i,o integra;t1ng other sources of ;levelop- ment assistance, e. g"' UNDP /FAO and bilate1'0,l donorFJ 9 into the basic scheme Needs fore- seen might include boai;building a,ssistanoe 1 basic :fishermen 1 8 training and offshore naviga tion 1 rad_io and navi ga.t iona,l a,ids 9 etc a It is not immedia;tely evid~mt who the mol'lt suitable par·U•.:is might bee The Japanese are said now to have little interest in 'Ghe northern Indian Ocean, concentrating most of their effori; on the higher valued southern bluefin ·!;una, south of the EJquator 1 but they might be interested in such a proposi'tione South Koreans and Taiwanese ;:i,re active in Sri Lankan waters 0 South Korea could provide the necessary ar:isistance and vessels at a lower real coste Other possibilHies a,re Spain and It&,l;r an.d related proposa,ls have been received from Malaysia. Once the Government has decided its rn3go·tfo,tine position it cax1 let it be la:own through diploma.tic a.nd fishing induErtry charmols that it iii~ prepa,red to enter into discussions on joint venture proposals. It may indeed do a.e some o-t!Hn' countrfas 1 eogo Nigeria, have done and advertised for proposals? but it would be be"~t0r to let prospec·Uve partners come to the Government rather tluu1 vice verf3<~-· The imp01'ta.nt thing is to ha,ve a clearly thought out objective a.nd strategy, aJ1d the neg"Otiating skills to the ·beff~ possilJle ·te1'ms. Probably the best first step would be to e:roato a mnull preparatory committee within the Ministry of Fisheries, coopera:ting expex"t advice fPom oxisting 13ources aa l'll1cesisary. Sh6uld 'tflero b!fl no pl'!l~t~ui:r~ ·tha p:toposa,ls wil+ hlive to '!Je chting~c,L, The tFJhou1d be iQ proceed wi ~.h the coii1 ... b'ination. fiBhc;iry by ·o·f;lu'ir' gi.ve ·!;he offshore lopg.-li:ne tuna, fishery a .low developm€1n:t p:r:i.m'.':ityo can be developed through an ipternatioi1i;i,l bank loan and avri'1lf'l,b11'1 1 thul'l po Sl'li bly·. a Ert:ra,igh·tfo:r"'.' Wardly C01ll!ll8'rcial lllallag{:J!nSP,t Orint:racrt; be dut of earntngs. An early unde1~ at anding. in principle w1 th the World l,3a~1k or ADB, µ,.'>J.'>Sibly even a conditional 1ette:r of intf'}nt, wou~-d gi.'ea.1;1y rgt:rengthen ·;;11~1 Qove:r:mnent' ri negotiating position. SUMMARY - CONCLUSIONS The review of ,r,he t'il"lhery (JAvelopmEmt f:it'l;ufl;tion in Sri Lanka, described in this paper, suggests tha;t the correct development is one wh:ich gives priority to the expan sion and improvement of the inshore fishEH'Y to '1.reas further offshore 1 while at the same time gaining maximum benefit fi:om the offshori'i resources. This goal may be achieved by; 1. Licensing for'eigi1~oimed tr·awfors ewer 200 tons GRT to fish in Sri Lankan waters outside 25 rn~.les e.gainst the pa.yTrn:in-~ of license fees and royalties. 2. Licensing preferably a foreign company to fish tuna by long-line outside the 25 mile zone :b1 t'or· UcenBe fees and 1 more important 1 financial and technical assiotmwe in ·the dovelopmerrl; of a. combination pole and line/driftnet fishery fox' skipjE;ck and young ;yt1llowf'in tunao 3o All other fish<:n'i(~([l sh(mld tie [J"(•osecuted by nahonals or locally registered joint ventures~ Immediate steps to 11<1 t!'J,ken by the 10 Determination l:lJ:ld codif:i.ca:tion of regula;Uons governing the formation of joint ventures, foreign investmen,~ j,ncentives axid tax treatment, and their publication ip the form of an l.nveFJtment l:irochure, including other information on services and facilities available in Sri. Ls.nkao 2o As a prior condition of negohationfl foi' the crea,tion of the combination fishery, the government should conrhict 1 or hav"J 1mdertaken a :feasibility study for the fishery and the specifica"t ion of the project and assistance require de steps may also be taken to identify or create a, ~uttable national partner for the joint venture proposed. 3,, To strengthen the government's negotiating posi.ti.on 9 e.nd prepare a fall~back alternative, discurJsions should pe had with lnternational financing institutions on interna:~ioni::tl financing of ·f;he dev@loprnent of the combination fisheryo Creation of the Exclusive Economic Zone has potentially greatly benefitted Sri Lanka, but the economic problems of developmEmt f.'ltill remain. It is believed that the above stra tegy represents the most irnmediate and ff~aedble path towe,rds development. It can be assisted and supplemented by othe1' for·ms of dl:'lvelopment assistance through FA00 TECHNICAL REPORTS OD' '.mm nrnIAN OCI"i;AN PHOGRAJ'.W!E: I • Iran ~ Formatlon of a Fir~heries Development B:crurnh wHhin the ADBI~ Labon, A. 1 IOP /TECH/75/l. 2. Peoherie dee Oreve·ttes = Rappo1'"t im Cl·ouvernernenl; de la Republique Ma,lgache. Labon, A. 1 IOP/TECH/75/2 (not published). 3. Fisheries Development Possibilities ln the Republic fJf Kenya. Labon, A., IOP /TF,CfI/7 5 /3 • A Report on the Building Up of a StathrUcal System for "Ghe Collection of Marine Fisheries Statistics fo the United Are,b l!:mira,tes. Banerji 1 S.K., IOP/TECH/75/4. 5. Report ·to ·the Ministry· of Agrioul:l;u:re ancl fisheries = United Arab Emirates, Labon, Aoe IOP/TECH/75/5. 6. Some Developments in the Tuna Fislw:des in the Indian Ocean. Kearney, R.E. 1 IOP /TECH/75/6. 7. Statistical System of Marine Fishex·:les in Mau:citius. Baner,ji, S.K., IOP/'I'ECH/76/7. Establishment of m1 Agr:icult.uJ•ciJ. and Fisheries Development AuthorHy in the Un:l,ted Arab Emirates. Gustafssonr N. and G,K.F. Moore, IOP/IBCH/76/8. 9, United Arab Emirates ~ Prog:r'amme of Development of l"ishery Harbours and Landing Places Reconnaissance Survey Repo:r1. Guckian v W. 1 IOP /TECH/76/9. 10. Fishery Statistical System in ~lei Lanka,. Banerji, S.K. 1 IOP/TECH/76/10. n. Summary Report on C1'uise of the R/V SHOYO MARU :in the North Arabian Sea. Yamanaka, H. 1 Y, Nishigawa, J. J\forita, 1 (translated a.nd. edited by S. Ha,yasi, Indian Ocean Programme), IOP /TECH/7 6 /11. 12. The Sultana/ue of Oman li'ive Year FishE'lries Develoi;imefft Plan. Labou 11 A., IOP/TECH/77/12. (not published). 13. Fisher:les and Marketlng; in the Yemen Arab Republic. Campleme,.n, G. 1 V. Perovic and B. Simons, IOP/TECH/77/13. Summar-y Report on Cruise of ·the R/V SHOYO MARU in the North Arabian Sea. Yamanaka, H., M. Yul Repo1•t of the Joint Miss:l,on to Plan Development of the Sard:lnella Fisheries in the Bali Stra:lt, IOP/TECH/77/15. 160 Markets for Fish Meal in the Near Errnt Region. Naylor, J'., IOP/TECH/78/16. 17 o Development of Fisheri©s in tlw Exclusive Economic Zone of Sri Lanka. Campleman, a.; IOP/TECH/78/17.