A Glance to the Liberalization of Fisheries Sector

The fishery industry is an industry subject rapid and huge fluctuation in fish caught depending on the season, weather and many other fringe factors. These erratic fish collection affects a few other companies whose business depends on the fish collection. There is always an uncertainty about the amount of fish being caught in a given season. Local fishermen are working hard increasing the fish collection in general, but State owned MIFCO are not always able to meet hard work of fishermen. It’s normal in the Maldives to throw away the fish in peak seasons and it’s normal to see grief of fishermen on such occasions. So in order to make things right for local fishermen, to increase the growth of the industry and to increase the contribution of fisheries sector to the national economy, the fisheries sector was liberalized. Licensed private companies started operating on specific zones to achieve those goals. Have these companies made an impact to the industry? Have liberalization made any positive effect?

There is a relatively wide market for local fishermen. Around 70 percent of the fish catch are exported in fresh, chilled, frozen, canned, dried and carious other forms. Remainder of the fish is used for local consumption. Local consumption is assumed to remain same or grow very slowly in short term because it basically depends on the population of the country. If that is case, then fishermen would only be better off if the exporters are demanding more fish (also noting that a large weight of the fish caught is sold to the exporters).

Export of fish would very much depend on the international market performance, especially of those countries where the Maldivians export fish. Major export partners are Sri Lanka, Thailand, Japan, and UK. There are many other European countries to which Maldivian fish exports are directed.

The global fish prices are, like any other commodity, subject to changes in demand and world supply. Price and global fish catch observations in Japanese sashimi market and European fresh and canned tuna market shows generally the price changes normally occur due to fluctuations in world supply rather than demand. But during times of higher prices, exporters would tend to export more fish. In both Europe and Japan, there are huge fluctuations in tuna prices during the 2000’s. In Europe the prices fell during 2003 but have been on a rising trend since then. In Japan the prices were on a falling trend from early 1990s but started picking up on 2003. So the last couple of years are some good years for exporters as prices have an upward momentum although they are subject to sharp short term fluctuations.

The unit value of the Maldivian tuna exports (both skipjack and yellow fin) followed a similar trend. Unit value or average price received for the exporters fell during late 90s but has been on a rising except for 2003. Maldivian exporters could be assumed to have a good time in global tuna market since 2003 as it has prices were strong overall since 2003. The year also coincides with the first time newly licensed companies have exported a shipment even though some companies were given the license in 2000.

In early 2000s the amount of tuna exported has increased sharply but since the intervention of the private companies this growth has slowed down. Ideally one would assume them to fly high but data suggests that there are barriers in their way. These barriers could be the small capital or small fishing fleet of the companies compared to state owned fisheries giant, MIFCO.

Liberalization or privatization of the sector would indeed increase the competitiveness of the industry. But this competitiveness is not very clearly seen and also the companies failed to take the maximum advantage of good global market conditions.

However, as private companies started to export the falling unit value of Maldivian tuna started to pick up again. It is worth noting that average price receive for all Maldivian tuna is much lower than that of the prices in Japanese, US or European markets. This may be due to lower prices received from two largest export partners, Sri Lanka and Thailand. Therefore increase in unit value suggests that private companies are more oriented towards European and Japanese markets where they can obtain good value. This could perhaps be a good road to move on as it will increase the profitability and revenue of the companies and will eventually benefit the industry.

During recent years when fisheries market was growing and doing well in terms of price, the Maldivian fishermen has to throw away fish they caught. The thrown away fish otherwise would have been maximizing profit for the companies. But storage difficulties have not them enabled to do so. Then the question is why the companies and investors are not keen to expand storage facilities and exploit the benefits of some good years in the industry? The answer may lie in the huge seasonal fluctuations witnessed in fisheries. Local fishery companies have supposedly expanded their storage capacity but the supply of fish currently is not sufficient to cover the cost of this expansion.

To conclude, the secondary fisheries sector has not gained much so far from liberalization. The speed of the growth in fish processing and exporting sector has declined but unit value received for the companies and other exporters has increased. So the industry is on a good track, trying to expand and exploit benefits, but not fast enough. Local fishermen have gained a little as private companies are (supposedly) offering higher prices for fish than MIFCO. MIFCO has also increased their prices recently because of the competition in a low supply season. So this kind of competition would better off fishermen and competition between companies will increase as fisheries sector was more liberalized. Fluctuations would occur in the fisheries sector and the companies need to cope with this. Local companies need to have a strategic plan rather than being short sighted. Some of their investment activities might not be economical in short run but it could be a money making machine in longer term given the current global long term market trends.