INCREASING THE NET BENEFITS FROM FISHERIES AND ASSOCIATED SECTORS IN SEYCHELLES

INCREASING THE NET BENEFITS FROM FISHERIES AND ASSOCIATED SECTORS IN SEYCHELLES

Liam Campling

Campling and Associates, London

Kwame Mfodwo

Monash Law School, Melbourne

Colin Barnes

Cambridge Economics, Cambridge

Report commissioned by the Seychelles Fishing Authority

Government of Seychelles

September 2009

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TABLE OF CONTENTS

EXECUTIVE SUMMARY List of Tables List of Figures List of Boxes List of Abbreviations and Acronyms 1. INTRODUCTION AND GUIDE TO USE OF INCREASING NET BENEFITS REPORT 2. CONTRIBUTION OF THE EXPORT‐ORIENTATED FISHERIES SECTOR TO THE SEYCHELLES

ECONOMY 2.1 Introduction: Status Analysis of Seychelles’ Intersections with fisheries supply chains

2.1.1 Status Analysis of the Port Victoria Complex 2.1.2 Schematic of the IOT Production Network 2.1.3 Schematic of the High Value Export‐orientated Production Network

2.2 Contribution to the Economy by (Sub‐)Sector 2.2.1 The distant water fishing fleet – Licence revenues 2.2.2 Distant water fishing fleet – vessel expenditure in Seychelles 2.2.3 The Seychelles‐owned longline vessels 2.2.4 Fish processing 2.2.5 Aggregate value added derived from tuna and other fishing activities in the Seychelles

2.3 Net Foreign Exchange Contribution to the Seychelles Economy 2.4 Employment Chain Analysis 2.5 Government Revenue from the Export‐orientated Fisheries Sector 2.6 Summary: The Economic Contribution of Fisheries to the Seychelles Economy 2.7 A Note on Environmental Aspects of the Western Indian Ocean Tuna Fishery 3. OPTIONS FOR INCREASING SEYCHELLES NET BENEFITS FROM ACCESS ARRANGEMENTS 3. 1 Background and Rationale for this Section

3.1.1 Suggested options – EU 2011 FPA negotiations 3.1.2 Suggested EU medium‐term (post 2011) options 3.1.3 Suggested options – next Japan & Taiwan longline agreements re‐negotiation 3.1.4 Suggested options – medium‐term Japan & Taiwan longline agreements 3.2 Raising Net Benefits – Review of Options Open to the Seychelles 3.2.2 Hybrid methods

3.3 Long term rights‐based approaches 3.4 Long term Onshore Investment‐based Approaches (‘Second Generation’ Access) 3.5 Effective Monitoring, Control, Surveillance and Enforcement – A Pre‐condition for

Success 3.6 Implementing a Robust Compliance Bond in all Access Agreements and Direct Licensing

Arrangements 3.7 Enhanced negotiating ability including an ability to withdraw from negotiations 3.8 The importance of economic information and intelligence generally

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3. 9 The role of regional co‐operation 3.10 The environmental levy method 3. 10.1 Implementing the environmental levy method

3.11 Conclusions and Recommendations 3.11.1 Sequencing of options and essential pre‐conditions 3.11.2 Constraints and Risks

4. ACCESS ARRANGEMENTS – ORGANISATIONAL CONTEXT, ARRANGEMENTS AND POLICY OPTIONS FOR IMPROVEMENT 4.1 Overview of this section of the Report 4.2 The Management of Access Agreements – A critical new area of policy action for

fisheries‐dependent developing countries 4.3 Making Access Agreements Management More Professional

4.3.1 Establishment of strategic objectives 4.3.2 The strategic as well as routine management of agreements

4.4 Does Seychelles Currently have the Ability to Undertake Key Management Tasks? 4.5 The Regulatory Network for Seychelles Access Agreements

4.5.1 Ministry of Natural Resources, Environment and Transport (MNRET) 4.5.2 The Seychelles Fishing Authority 4.5.3 SFA fisheries research – sound fisheries science orientation – poor economic analysis and commercial intelligence capacity 4.5.4 Can SFA address the challenges posed by a net benefits approach?

4.6 The Negotiating Context – Financial Independence and Resilience or Over‐dependence on Negotiating Partners? 4.6.1 The current Seychelles approach to fisheries access negotiations

4.7 Organisational Assessment – Non‐Fisheries Sector Organisations 4.7.1 The Seychelles Coast Guard 4.7.2 The Seychelles Ports Authority 4.7.3 The Seychelles Licensing Authority (SLA) 4.7.4 Central Bank of Seychelles 4.7.5 Ministry of Finance 4.7.6 Ministry of Foreign Affairs 4.7.7 The Attorney‐General’s Department

4. 8 Deepening the use of intelligence, forward strategy and planning 4.9 Improved Data Collection and Reporting on the Fisheries Sector – Developing an

integrated economics and environmental accounting approach specific to Seychelles 4.10 Using an Independent Negotiator – Caution required 4.11 SFA and the Private Sector 4.12 Improving Seychelles Organisational Capacity to Enhance Net Benefits

Recommendations 5. THE CURRENT LEGISLATIVE REGIME – AN ASSESSMENT OF ITS COMPATIBILITY WITH NET BENEFITS OBJECTIVES 5. 1 Overview, objectives and methodology for this section of the report 5. 2 International Law Aspects

5. 2. 1 The importance of international law issues to the increased net benefits programme

5.3 National legislation and actions to implement international law obligations and rights

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5. 4 Interaction between the Seychelles Fisheries Regime and the International law of Fisheries, Bio‐diversity and Ecological Protection

5. 5 Maritime Boundary Claims, Délimitation, Contested Maritime Areas and Regional Co‐operation

5.6 Protection of Natural Capital and Ecological Assets – a firm and established principle of international law

5.7 The National Legislative Framework 5.7.1 Fisheries sector legislation 5.7.2 Other Legislation

5. 8. VMS Aspects 5. 9 The Environment Protection Act (EPA) 1994 5. 11 The Role of Marine Protected Areas/Reserves 5. 12 Conclusions and Recommendations

5.12.1 VMS Recommendation 5.12.2 Establishing a robust compliance bond framework 5.12.3 Ensuring compatibility with the EU IUU Regulation regime 5.12.4 Areas requiring amendment once a net benefits approach is fully defined

6. ACCESS ARRANGEMENTS BETWEEN SEYCHELLES AND KEY PURSE SEINE FLEETS: THE EU FISHERIES PARTNERSHIP AGREEMENT AND THE SEYCHELLES‐FLAGGED FLEET 6. 1 Overview, objectives and methodology for this section of the report

6.1.1 Rate of return (ROR) to Seychelles from EU Fisheries Partnership Agreement 6.2 The Seychelles‐EU Access Agreements Relationship – a brief historical overview 6. 3 A comparative assessment of the Seychelles Fisheries Partnership Agreement 2005‐2011 6.4 EU Access Agreements Strategy

6.4.1 The Common Fisheries Policy (CFP) 6.4.2 Structure of the EU purse seine fleet 6.4.3 Implications for the Seychelles

6.5 Options for increasing net benefits from the Seychelles‐EU framework 6.6 Seychelles‐flagged Spanish Owned Purse Seine Fleet

6.6.1 Reasons for up‐take of Seychelles‐flag by Spanish purse seiners 6.6.2 Benefits to the Seychelles from flagged Spanish‐owned purse seiners 6.6.3 Rate of return (ROR) on value of catch by Seychelles‐flagged purse seine fleet 6.6.4 Comparing licence fees for Seychelles‐flagged purse seiners with those applied

by selected Pacific Island Countries 6. 7 The IUU Regulation, Access Agreements and Non‐Complying Coastal State Status –

Impacts on Seychelles 6.7.1 The IUU Regulation 6.7.2 Fundamental elements of the Regulation 6.7.3 Implications for Seychelles as an access granting State 6.7.4 Implications for Seychelles as a potentially certifiable State of non‐compliance

6.8 The 2009 Green Paper on Reform of the CFP – Implications for the Net Benefits Programme

6. 9 Conclusions and Recommendations – Applying net benefits options to the relationship with the EU

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6.9.1 Financial recommendations 6.9.2 For immediate action 6.9.3 Short term recommendations 2009‐2011 – for development and subsequent

tabling during the 2011 FPA renegotiations 6.9.4 Medium term actions 6.9.5 Non‐financial aspects – recommendations 6.9.6 Recommendations for other purse seine fleets (including Seychelles flagged)

7. AGREEMENTS BETWEEN SEYCHELLES AND EAST ASIAN LONGLINE FLEETS AND STATES 7.1 Overview and objectives for this Section of the Report

7.1.1 Gap analysis of agreements against international best practice 7.1.2 Rate of return to Seychelles from current arrangements and comparison with

Pacific island licence fees 7.2 The Seychelles‐Japan Access Agreements Relationship

7.2.1 Evolution and types of fisheries agreements between Seychelles and Japan 7.2.2 The Seychelles‐Japan fisheries access agreement of 2007‐2009 7.2.3 The Seychelles‐Japan Goods and Services Agreement of 2003 – main features 7.2.4 The evolution of licence fees in the Seychelles‐Japan relationship 7.2.5 Gap analysis 7.2.6 Japanese access agreements strategy 7.2.7 Japanese Tuna Industry Associations and their relations with the Japanese

government and financial sector 7.2.8 Relations between Japan’s processing, retailing and catching sectors 7.2.9 Japan’s cold chain system 7.2.10 The role of Japanese Official Development Assistance 7.2.11 Flag of convenience (FOC), IUU and traceability issues 7.2.12 Increasing net benefits – overall evaluation of the Seychelles‐Japan relationship

7.3 The Seychelles‐Taiwan Access Agreements Relationship 7.3.1 Evolution and types of fisheries agreements between Seychelles and Taiwan 7.3.2 The Seychelles‐Taiwan Fisheries Access Agreement of 2007‐2008 7.3.3 Seychelles‐Taiwan fisheries agreements: licence fee changes, 1997‐2008 7.3.4 Gap analysis 7.3.5 Taiwanese access agreements strategy 7.3.6 Taiwanese companies and fishing fleets 7.3.7 Regulation of the Taiwanese distant water fleet 7.3.8 The overseas fisheries support bases system 7.3.9 End‐markets for Taiwanese catch 7.3.10 Crewing arrangements 7.3.11 IUU Issues and global regulatory patrols 7.3.12 Overall implications for Seychelles 7.3.13 Increasing net benefits – overall evaluation of the Seychelles‐Taiwan relationship

7.4 The Seychelles‐China Fisheries Access Agreement relationship 7.5 The East Asian Longline Fleet – Overall Conclusions and Recommendations

7.5.1 Financial recommendations – general observations 7.5.2 Financial aspects – specific recommendations for immediate action 7.5.3 Negotiation of future access agreement with Japan and Taiwan – after 36

months from now approximately

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7.5.4 Non‐financial aspects – recommendations 7.5.5 Recommendations for the Seychelles‐China relationship 7.5.6 Recommendations on matters for SFA to review

8. MARKET ACCESS ISSUES IN FISH EXPORTS FROM THE SEYCHELLES – CROSS‐CUTTING ISSUES 8.1 Trade preferences and market access for Seychelles fish exports

8.1.1 Implications for the Seychelles 8.2 Trends in Seychelles fish exports to the EU and the US

8.2.1 The European Union 8.2.2 United States

8.3 The Impact of Preference Erosion on Established Competitive Advantage for Seychelles Processed Fish Exports 8.3.1 EU tariff quotas on canned tuna and tuna loins 8.3.2 The EU’s Generalized System of Preferences (GSP) regime 8.3.3 Non‐Agricultural Market Access negotiations at the WTO Doha Round 8.3.4 The indirect impact of free trade agreements 8.3.5 Summary points

8.4 Fisheries Rules of Origin and the Fisheries Chapter in the ESA‐EU Economic Partnership Agreement 8.4.1 Rules of Origin in ESA‐EU Interim Economic Partnership Agreement (IEPA) 8.4.2 Fisheries Chapter of ESA‐EU IEPA 8.4.3 Coverage of other fisheries issues in ESA‐EU IEPA 8.4.4 Fisheries rules of origin negotiations in ESA‐EU Comprehensive EPA 8.4.5 Summary points and recommendations

8.5 EU Sanitary and Phytosanitary (SPS) Measures 8.6 EU Regulation to Combat Imports of IUU‐caught Fish 9. REVENUE GENERATION, UPGRADING AND INVESTMENT 9.1 Revenue Generation, Investment and Upgrading in Port Victoria: Maintaining Status as

the Western Indian Ocean Purse Seine Hub 9.1.1 Enhancing revenue generation at Port Victoria – determining revenue

opportunities from the purse seine fleet using a centre of gravity model 9.1.2 Revenue generation option at Port Victoria – Tuna transhipment/landing fee 9.1.3 Revenue generation option at Port Victoria – Port dues 9.1.4 Investment and upgrading in Port Victoria – a hypothecated fund for port

maintenance and development 9.2 Revenue Generation, Investment and Upgrading in Canned Tuna Production

9.2.1 GoS‐MW Brands relations 9.2.2 Enhanced revenue generation from IOT 9.2.3 Enhanced revenue generation from IOT – tuna landing fee 9.2.4 Enhanced revenue generation from IOT – simplifying IOT Shareholder dividends 9.2.5 Enhanced revenue generation from IOT – Social Security Fund contributions 9.2.6 Investment and upgrading at IOT

9.3 Investment and Upgrading in High Value Fish Processing 9.3.1 Status of the high value fish processing sector 9.3.2 Opportunities for the high value fish processing sector

9.4 Investment and Upgrading in Sashimi‐grade Value Chains

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9.4.1 Recommendations on intersections with foreign tuna longline industry 10. CONSOLIDATED RECOMMENDATIONS 10.1 Recommendations – Action‐Reaction‐Response Tables List of persons consulted References LIST OF TABLES Table 2.1: Seychelles export of fish and fish products compared to total commodity exports (SR million fob) Table 2.2: Summary of Seychelles fishing licence receipts for foreign owned vessels, 2003 ‐ 2008 Table 2.3: Rate of return to GoS on gross reported catch value by purse seine and longline in Seychelles EEZ compared to actual payment (all in US dollars) Table 2.4: Expenditure by foreign fishing vessels in Port Victoria, 2000‐2007 (SR) Table 2.5: Breakdown of foreign fishing vessel expenditure in Port Victoria (in SR) Table 2.6: Contribution of the fisheries sector to Seychelles Port Authority income, 2005 – 2007 (SR) Figure 2.8: Contribution to gross domestic product/value added by fisheries related industry at current market prices (SR million) Table 2.9: Categories of fisheries‐related firms involved in value added in the Seychelles Table 2.10: Estimates of value added from fishing and fishing associated companies (all in SR) Table 2.11: Leakages from the Seychelles economy of items associated with fisheries Table 2.12: Estimates of foreign exchange retention in Seychelles (% retention) Table 2.13: Percentage breakdown of total vessel expenditure 2000‐2007 and assumed percentage retention of foreign exchange Table 2.14: Actual vessel expenditure and estimated foreign exchange retention in Seychelles Table 2.15: Employment in the fisheries and associated sectors Table 2.16: Government revenue from the tuna and associated supply chain Table 2.17: Social Security payments made by enterprises and companies operating in the tuna and associated fisheries and fish processing sectors Table 2.18: Taxation generated from fisheries and fisheries related activities (SR) Table 2.19: Seychelles – Key Economic Contributions from the Fisheries Sector (all in USD) Table 2.20: Findings of the IOTC Scientific Committee – Status of Indian Ocean Tuna Stocks Table 3.1: Recommended actions EU 2011 FPA negotiations Table 3.2: EU beyond 2011 Table 3.3: Japan and Taiwan – immediate action proposals Table 3.4: Japan and Taiwan – Medium‐term actions Table 3.5: Options for increasing access fee payments – the current menu of options Table 3.6: Hybrid methods Table 3.7: Preferred options – selected implementation issues Table 4.1: Original methodology for assessing Seychelles organisational capacity in access negotiations Table 4.2: The regulatory and implementation network Table 4.3: Fluctuations in SFA budgetary allocations, 2004‐2006 Table 4.4: The Seychelles approach to fisheries access negotiations – key features Table 4.5: Overall evaluation and key gaps Identified by the organisational assessment Table 5.1: National legislation implementing Law of the Sea jurisdictional rights Table 5.2: Core fisheries and fisheries‐related conventions and agreements of significance to Seychelles Table 5.3: Maritime Boundary Delimitation Agreements and Continental Shelf Issues

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Table 5.4: Precautionary principle in Fisheries Amendment Bill of 2008 Table 5.5: Current legislative controls over foreign fishing vessels and access agreements – compatibility with net benefits objectives Table 5.6: Current legislative controls over local fishing vessels – compatibility with net benefits objectives Table 5. 7: Enforcement powers – compatibility with net benefits objectives Table 5.8: Current regime of offences, penalties and enforcement powers – compatibility with net benefits objectives Table 6.1: Actual rate of return to Seychelles from FPA access payments compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2008 (all in US dollars unless otherwise specified) Table 6.2: Financial components of EU‐Seychelles access agreements, 1984‐2002 Table 6.3: Analytical Table – Seychelles‐EU Fisheries Partnership Agreement 2005‐2011 Table 6.4: Actual rate of return to Seychelles from locally flagged Spanish‐owned purse seine vessels compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2008 (all in US dollars unless otherwise specified) Table 6.5: Comparing Seychelles and Pacific Island Country purse seine licence fees, in US dollars (all licences for 2007 unless otherwise stated) Table 6.6: Overview of Options for increasing net benefits from the Seychelles‐EU framework Table 7.1: Actual rate of return to Seychelles from longline licence payments compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2006 (all in US dollars unless otherwise specified) Table 7.2: Comparison of longline licences applied by the Seychelles and selected Pacific Island Countries (licences for 2007 unless otherwise specified) Table 7.3: Main Characteristics of Seychelles‐Japan 2007‐2009 Agreement Table 7.4: Typical content of Seychelles‐Japan Goods and Services Agreements Table 7.5: Evolution of licence fees in Seychelles‐Japan Access arrangements, 1989‐2005 Table 7.6: Licence Fees in Seychelles‐Japan 2007 Agreement Table 7.7: Gap‐analysis – Japan‐Seychelles Agreement 2007/2008 Table 7.8: Key Tuna Associations/Co‐operative Organisations (mid‐2000s) Table 7.9: OFCF Financial instruments Table 7.10: Options for increasing net benefits from the Seychelles‐Japan Access framework Table 7.11: Main characteristics of Seychelles‐Taiwan Agreement 2008 Table 7.12: Seychelles‐Taiwan access fee trends Table 7.13: Gap‐analysis Seychelles‐Taiwan Agreement 2007‐2008 Table 7.14: Options for increasing net benefits from the Seychelles‐Taiwan access framework Table 7.15: Main Characteristics of the Seychelles‐China Agreement Table 7.16: Gap‐analysis – Seychelles‐China Agreement 2006 Table 8.1: Simplified Tariff Structure for Tuna, Fish Fillets and Tuna Products for EU, Japan and USA Table 8.2: Total Seychelles export of fish and fish products to the EU27, 2003‐08 (in million euro) Table 8.3: EU27 import of Seychelles canned tuna and tuna loins and distribution by principal market, 2004‐08 Table 8.4: Extra‐EU15 import of canned tuna by major supplier (in million Euro), 1998‐2007 Table 8.5: Total US import of fish and fish products, 2003‐8 (in US dollars) Table 8.6: Selected elements of the ESA fisheries chapter (Articles 25 to 35) Table 9.1: Estimated additional costs in steaming days of EU purse seiners using regional ports in the Western Indian Ocean Table 9.2: Tuna transhipment/landing fees – actual and potential using flat fee and higher rates 2005‐07 Table 9.3: Identifiable purse seine‐related dues collected through tuna landing/transhipment activity as % of SPA total, 2005‐07* Table 9.4: MW Brands company strategy and implications for Seychelles Table 9.5: IOT actual and estimated employer SSF contributions (in SRs) Table 9.6: Non‐MSC vs. MSC canning‐grade albacore cost, 2008

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Table 9.7: Seychelles fish exports to Japan (Chapter 3 of HS), 2003‐08 (in Mt and USD) Table 10.1: Institutional/Organisational Recommendations – Action‐Reaction‐Response Table 10.2: Revenue/Financial Recommendations – Action‐Reaction‐Response Table 10.3: Commercial/Infrastructure Recommendations – Action‐Reaction‐Response Table 10.4: Access agreements and relationships – Action‐Reaction‐Response Table 10.5: Access agreements and relationships – Review of Legal Regime LIST OF FIGURES Figure 2.1: Comparing EU purse seine catch with total in the WIO and in the Seychelles EEZ, 1984‐2007 (in mt) Figure 2.2: Tuna catch by species in the WIO, 1950‐2005 (in mt) Figure 2.3: Schematic of Western Indian Ocean tuna migration Figure 2.4: Purse seine transhipment and landing in the WIO, 2000‐08 Figure 2.5: Port Victoria complex Figure 2.6: IOT Production complex Figure 2.7: High Value Export‐orientated Production Network Figure 2.8: Origins of Seychelles licence revenue from foreign purse seiners Figure 2.9: Origins of Seychelles licence revenue from foreign longliners Table 2.18: Taxation generated from fisheries and fisheries related activities (SR) Figure 4.1: Organisational structure of SFA and proposed placing of Fisheries Industrial Intelligence and Analysis (FIIA) unit Figure 6.1: Current interaction between sub‐components of the CFP and the EU access agreements regime Figure 6.2: Organisational structure of the French purse seine fleet active in Seychelles Figure 6.3: Organisational structure of the Spanish purse seine fleet ‐ ANABAC Figure 6.4: Organisational structure of the Spanish purse seine fleet ‐ OPAGAC Figure 8.1: EU and USA canned tuna prices, origin Thailand (carton 48x6.5oz), June 1983‐March 2009 Figure 8.2: Annual average landed price for whole frozen skipjack and yellowfin for canning, Bangkok and Spain, 1995‐2007 Figure 9.1: Centre of gravity model for Western Indian Ocean purse seine fishery – average quarterly and annual catch and effort barycentre across 2001‐06 LIST OF BOXES Box 3.1: Indexation of prices and revenue‐sharing in the US‐Pacific Island Multilateral Tuna Treaty Box 3.2: An example of the Rate of Return method as set out in a recent Pacific Island Country Agreement Box 3.3: The Pacific Island Countries’ Vessel Day Scheme (VDS) – Operational Context Box 3. 4: Adding a price‐index element to the ROR method ‐ a hypothetical example Box 3.5: Procedures for implementing ROR + price‐index top‐up Box 3.6: The Pacific Island Countries’ FSM Arrangement Box 3.7: The VDS method in the Pacific – implementation aspects Box 6.1: The EU purse seine fleet at a glance Box 6.2: The 2009 CFP Green Paper ‐ Issues for public consultation Box 8.1: A guide to interpreting product types and tariff systems Table 8.1

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LIST OF ABBREVIATIONS AND ACRONYMS AA Access agreement ACP African, Caribbean and Pacific countries AGOA African Growth and Opportunity Act ALC Automatic Location Communicator ANABAC Organización de productores de túnidos congelados ANCORS Australian Centre for Ocean Resources and Security ASCM Agreement on Subsidies and Countervailing Measures of the WTO ASEAN Association of Southeast Asian Nations BET Bigeye tuna CBS Central Bank of Seychelles CFFA Coalition for Fair Fisheries Agreements CFP Common Fisheries Policy CITES Convention on International Trade in Endangered Species of Wild

Fauna and Flora COMESA Common Market for Eastern and Southern Africa CPA Cotonou Partnership Agreement CPUE Catch Per Unit Effort DG TAXUD Directorate‐General for Taxation and Customs Union (European

Commission) DG Trade Directorate‐General for Trade (European Commission) DWF Distant water fleet (foreign fishing vessels) DWFN Distant Water Fishing Nation EAC East African Community EBA Everything But Arms initiative EBITDA Earnings before interest, taxes, depreciation and amortisation EC European Commission ECU European Currency Unit EDF European Development Fund EEZ Exclusive Economic Zone EIA Environmental Impact Assessment EPA Economic Partnership Agreement (EU) EPA Economic Partnership Agreement ESA Eastern and Southern Africa EU European Union FA Fishing agreement FAD Fish aggregating device FBOA Fishing Boat Owners Association (Seychelles) FFA Forum Fisheries Agency FIIA Fisheries Industrial Intelligence and Analysis (Unit) FIIA Fisheries Industrial Intelligence & Analysis unit FIQCU Fish Inspection and Quality Control Unit FMC Fisheries Monitoring Centre FOC Flag(s) of convenience FPA Fisheries Partnership Agreement (EU) FSM Federated States of Micronesia FTA free trade agreement FVO Food and Veterinary Office GDP Gross domestic product GoS Government of Seychelles GPS Global Positioning System

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GRT Gross registered tonnage GT Gross tonnage GSP Generalized System of Preferences GSP+ Generalized System of Preferences Plus (EU system) GVA Gross Value Added HS Harmonised System of Tariff Classification IBC International business company IBP International Best Practice IEPA Interim Economic Partnership Agreement ILO International Labour Organization IMF International Monetary Fund IMF International Monetary Fund IOC Indian Ocean Commission IOT Indian Ocean Tuna Ltd IOTC Indian Ocean Tuna Commission IRD Institut de recherche pour le Développement ISO International Organisation for Standardization IUU Illegal, Unregulated and Unreported fishing JC Joint Committee (EU FPA) JICA Japan International Cooperation Agency JVE joint venture enterprise LDC Least Developed Country LL Longliner MAFF Ministry of Agriculture, Forestry and Fisheries (Japan) MCS Monitoring, control and surveillance MENRT Ministry of Environment, Natural Resources and Transport MEY Maximum Economic Yield MFN Most‐Favoured Nation MoF Ministry of Finance MPA Marine Protected Area MRAG Marine Resources Assessment Group MRL Minimal risk level MSC Marine Stewardship Council MSC Marine Stewardship Council MSY Maximum Sustainable Yield Mt Metric ton MWB MW Brands MWB MW Brands NAMA Non‐Agricultural Market Access NGO Non‐governmental Organisation NSB National Statistics Bureau OCT Overseas Countries and Territories of the European Communities ODA Official Development Assistance/Overseas Development Assistance OECD Organisation for Economic Co‐operation and Development OFCF Overseas Fisheries Co‐operation Foundation OPAGAC Organización de productores asociados de grandes atuneros

congeladores OPRT Organization for the Promotion of Responsible Tuna Fisheries ORTHONGEL Organisation des producteurs de thon congelé PACP Pacific ACP countries PFOI Pêche et Froid Océan Indien PIC Pacific Island Country PNA Parties to the Nauru Agreement

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PNG Papua New Guinea PP Precautionary principle PPP Public Private Partnerships PS Purse seiner RAP Running average price RDTC RD Tuna Canners (PNG) RFMO Regional Fisheries Management Organisation RoO Rules of origin RoR Rate of return SBS Seychelles Bureau of Standards SBT Southern bluefin tuna SCG Seychelles Coast Guard SEC Statistical equivalent case SEPEC Seychelles Petroleum Company Limited SFA Seychelles Fishing Authority SFP Strengthening Fishery Products Health Conditions in ACP/OCT

Countries SITZ Seychelles International Trade Zone SITZ Seychelles International Trade Zone SKJ Skipjack tuna SLA Seychelles Licencing Authority SPA Seychelles Port Authority SPA Seychelles Ports Authority SPS sanitary and phytosanitary SR Seychelles rupee (unit of currency) SSF Social Security Fund SSTC South Seas Tuna Corporation (PNG) TAE Total allowable effort TAC Total allowable catch TDSTBA Taiwan Deep Sea Tuna Boatowners and Exporters Association TDM Thon des Mascareignes TLS Tuna‐like species TOR Terms of reference ULT Ultra‐low Temperature (‐60°C frozen) UNCLOS United Nations Convention on the Law of the Sea (1982) USD US dollar VA Value added VDS Vessel Day Scheme VMS Vessel monitoring system WCPFC Western and Central Pacific Fisheries Commission WCPO Western and Central Pacific Ocean WIO Western Indian Ocean WPTT Working Party on Tropical Tunas WTO World Trade Organisation WTPO World Tuna Purse Seine Organisation WWF World Wildlife Fund YFT Yellowfin tuna

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EXECUTIVE SUMMARY

A. INTRODUCTION

As set out by the terms of reference, the overall objective of this study was to identify, analyse and develop methods for maximizing economic returns/benefits from the fisheries sector in the Seychelles in a manner consistent with the sustainable utilization of the resource. The study commenced in October 2008 and was completed in May 2009. The full terms of reference are reproduced at Appendix 1.A.

The consultants critically interrogated all information available to them with a view to providing realistic and achievable policy options and specific recommendations. In terms of policy recommendations, we interpreted the central thrust of the terms of reference to be as follows:

� Specific and immediate measures that can be applied to increase Government of Seychelles (GoS) revenue from the fisheries sector.

� Specific and immediate measures that can be applied to improve effectiveness and efficiency of the Seychelles various intersections with the global seafood industry, which will, in turn, either ensure the continuation of existing levels of net benefits or improve Seychelles relative positioning.

� More general and medium‐term measures that will either enhance GoS revenue generation or develop Seychelles various intersections with the global seafood industry.

In the consultants’ analysis of options for increasing revenue, a central consideration was avoiding recommending any actions by GoS that might push away key foreign private sector partners (i.e. MW Brands and the EU purse seine fleet). Included within this consideration was the impact of the global economic downturn, poor fishing years in 2007‐08, and the current economic impacts of piracy on vessel operations.

B. CONTRIBUTION OF THE EXPORT‐ORIENTATED FISHERIES SECTOR TO THE SEYCHELLES ECONOMY

B1. Background

The fisheries sector is taken to include the offshore activities of foreign fishing vessels (mainly EU purse seiners and Asian longliners), the activities of the Seychelles fishing fleet and the onshore activities which directly or indirectly are linked to fishing including port activities for DWF fleets and Seychelles fishing vessels that supply export‐oriented processors/packers, fish packers/processors, shipping agencies, stevedoring, chandlers, vessel and net repairing companies and other activities which may be linked to the export‐orientated fishing sector.

Seychelles is situated in a geographically strategic position for tuna fisheries in the Western Indian Ocean and the centre of gravity for purse seine tuna fisheries for three quarters of the year (using annual average reported catch and effort for 2000‐06).

The IOTC Working Party on Tropical Tunas considers that stocks of bigeye and yellowfin tuna are near to or exceeding MSY and therefore this is a reason why Seychelles needs to adopt the

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precautionary principle with respect to vessel numbers, power and size as well as the use of FADs and other technologies.

B.2 Contribution of Fisheries to the Economy

At the primary level, the gross benefits from the fisheries sector in Seychelles related to the income derived from distant water fishing vessels (licence fees and EU financial compensation) as well as the catches of high value demersal and tuna species by the small Seychelles fishing fleet. The main contribution to the economy is from the expenditure of EU purse seiners in Victoria. While consisting of a small fleet, the Seychelles semi‐industrial and subsistence fishing sectors makes a contribution to the local economy through supplying locally owned processing plants which also source by catch from visiting EU purse seiners.

At the secondary level, the activities of DWF fleets and notably the EU purse seiners which unload and transhipment in Victoria bring substantial benefits to Seychelles. This includes expenditure in port including bunkering, berthing, transhipment, towage, pilotage and other expenditure including vessel services (stevedoring, testing and validation and other handling costs), vessel supplies and vessel and net repairs. Apart from vessel handling, supplies and other vessel support services, the main onshore activity is fish processing including the tuna canning plant of IOT, can manufacture by Impress and the packing and processing of tuna and high value demersal species by Oceana and Sea Harvest. Other onshore supply chain linkages to fisheries include shipping agencies, chandlery, transport, energy and water supplies and legal, insurance, medical and financial services.

Table 1 summarises the key contributions of the fisheries sector to the Seychelles economy. It should be noted that these data exclude the value of the Seychelles semi – industrial and artisanal fleets for which the team was unable to obtain data. The estimated value added is based on our estimates applying a value added ratio of 30% to declared company turnover. The variation in value added is also due to variations in company turnover availability. The other of estimates of corporate revenue, taxation and social security payments are based on interviews with companies and other sources.

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Table 1: Seychelles – Key Economic Contributions from the Fisheries Sector

2003 2004 2005 2006 2007 2008

Licence fees 3,652,312 3,829,176 4,744,077 4,109,075 3,780,561 2,948,147 of which EU vessels 781,884 971,486 1,298,968 1,906,875 1,509,041 1,802,647 EU financial contribution 3,079,400 2,802,600 2,768,000 3,300,000 3,011,250 2,805,000 Vessel expenditure retained 13,391,637 18,066,616 24,495,821 34,068,872 16,756,388 no data Port dues received from fishing vessels

no data no data 1,223,903 1,318,912 848,351 no data

Transhipment payments in port

no data no data 1,078,621 542,826 375,686 no data

Taxation (fisheries related) no data 2,685,395 5,341,320 10,438,336 6,068,458 no data Social security payments (fisheries related)

no data 2,321,712 2,563,431 2,399,909 1,445,734 1,035,301

IOT dividend 561,878 ‐ 817,986 712,750

‐

SPA dividend (fisheries related)

1,085,899

2,914,390

2,597,437

1,308,120

Estimated value added1 70,455,781 74,953,121 79,061,579 85,923,242 88,352,397 65,594,209

Sources: SFA, SPA Ministry of Finance and stakeholder interviews (2009)

According to the most recent statistical bulletin produced by the National Statistics Bureau (2009), The total value added contribution from fisheries and related sectors was SR 669.9 million (USD 71.5 million) with a contribution to the national economy of 7.7%. The NSB bulletin estimates that the GDP contribution of fisheries and related sectors to the national economy increased from 6.4% in 2004 (final estimate) to 7.7% in 2008 (indicative estimate). It is not clear whether the NSB data includes the contribution of licence fees and other financial payments as well as other services which are provided to the fisheries sector.

The team estimates that the contribution of fisheries to GDP from company turnover data and using a value added/turnover ratio of 30% was USD 65.6 million in 2008 which is probably an underestimate given the incomplete company turnover data. Including data for IOT the value added/turnover in 2007 was USD 88.4 million which is higher than the NSB estimate. (This may be because the NSB data does not include the same sample of companies that the team included in estimating the value added and GDP contribution of the fisheries and associated sectors.) The use of this value added ratio is clearly an approximation although it is in line with the estimates of tuna related activities in the Pacific and from other studies. In practice the value added`/turnover ratio will vary year on year for any particular enterprise/company

1 This estimate of value added is based on applying a 30% ratio to declared company turnover relating to fishing activities.

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It is clear that the most important contributions to the Seychelles economy is the in country retained expenditure of foreign fishing vessels, largely consisting of the EU purse seiner fleet, licence fees, social security payments by employers and employees in the fisheries and associated sectors and taxation receipts from fishing related activities. Retained expenditure by fishing vessels is more important than licence fees and the EU financial contribution. This retained expenditure depends on attracting EU vessels (principally French and Spanish owned) to Port Victoria for unloading, transhipment, bunkering and taking on other supplies.

The net foreign exchange benefits (i.e. retained in the Seychelles economy) from the fisheries sector are highest from export revenues, retained expenditure from visiting fishing vessels, licence fees and the annual EU financial compensation payments.

Inshore mariculture may develop in the future following the production of a feasibility study in 2009. A recent study on the future of mariculture estimated a potential value of USD 105.3 million and that the mariculture sector, assuming a value added ratio of 30 per cent could contribute 3.4% of 2008 GDP. There have however been some failures in past state‐led development including prawn farming at Coetivy.

B.3 Fisheries‐related Employment Chain

In terms of employment creation, IOT is the major player in the fisheries and fish processing sectors. Overall total direct employment is estimated at 3,829 persons which assuming a low case employment multiplier if 1.2 would give direct and indirect employment as 4,595 persons. A higher case multiplier of 1.5 which would allow for indirect and induced employment would give total direct, indirect and induced employment of 5,744 persons. In addition assuming that total Seychellois employees were 2,829 persons and that a multiplier of 1.5 were applied would give total direct, indirect and induced employment of 4,244 persons and assuming that each FTE Seychellois employee had 3 dependents this would give total population dependency on the fisheries sector of 12,731 persons. These estimates of direct, indirect and induced employment are probably an underestimate as there are other activities directly linked to fisheries e.g the coastguard and other services. However, arguably the employment multiplier might allow for this.

B.4 Recommendations for Future Economic Analysis

A Fisheries Industrial Intelligence and Analysis (FIIA) unit of two professional staff be established at SFA to lead the development of technical economic work, forward looking strategy development and policy recommendations. The FIIA unit will focus on the foreign owned and export orientated segments of the fisheries economy in the Seychelles. (For more on this, see below.)

It is recommended that the SFA and NSB work closely together to develop a focus on the fishing sector and ancillary activities which can be measured in the national accounts and potentially in input‐output tables for the Seychelles economy. Until recently the NSB had a

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sectoral focus on tourism although the April 2009 statistical bulletin included a section on the gross output, intermediate consumption and gross value added for the fishing and related sectors for the period 2004 to 2008 in current market prices. The development of input‐output tables would allow for better estimations of value added and employment linkages between fisheries, fishing port activities and other ancillary activities linked to fishing.

There is a clear need to reorganise data collection, analysis and storage, particularly with reference to catch data, vessel expenditure in order that the data may be more readily used by policy makers in SFA. This is already underway with the project being undertaken in collaboration with IFREMER, but SFA must ensure that this reform process also includes organising and aligning data so that it is of use for economic analysis as well for fisheries management.

C. OPTIONS FOR INCREASING SEYCHELLES NET BENEFITS FROM ACCESS ARRANGEMENTS

C.1 Overview of access options

The consultants undertook a comprehensive review of current approaches to increasing receipts from foreign fishing as found in the practice of States and of regional fisheries management organisations as well as approaches proposed by the academic literature. Several approaches were selected from the menu of options currently available and each was then explored in the context of both the purse‐seine and longline fleets active in Seychelles waters. Other options identified but eventually rejected are also discussed in Appendix 3A, this analysis will allow Seychelles to be able to respond to developments in those areas should this be needed. For now, the consultants identified 4 options as appropriate to the situation and aspirations of Seychelles:

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Option 1

Apply an improved rate of return (RoR) approach

This method raises the access fee by increasing the percentage of the ex‐vessel price that is paid to the Seychelles. This method can be used to significant advantage immediately by Seychelles as it builds on the approach currently in use.

Option 2

Apply a price index approach leading to Seychelles capturing some of the extra profits currently captured by the fleets during boom times

This method would index the Seychelles access fee to changes in agreed indicators, including ex‐vessel prices. This is an approach which also captures a part of the rent. It can be undertaken in a very simple way (which is what we initially propose) and with experience can become much more sophisticated capturing the broad range of factors critical to production and value‐added. A version of this approach is currently in use in the South Pacific between the Pacific Islands group and the United States.

In its simple version – focusing solely on key prices like Bangkok or any other selected price – this is a method that can be deployed by Seychelles over the next 24 months in time for the 2011 negotiations with the EU

In a more complex version incorporating factors like risk‐sharing through a gas‐oil index, it would take 36 months or more to develop.

Option 3

Apply an environmental levy or a natural capital depletion levy

This is not a stand‐alone fee. It seeks to add a responsible fisheries component to a base access fee calculated through other methods – this extra payment would justifiably seek to compensate Seychelles for natural capital depletion caused by fisheries withdrawals from its zone. This fee would be paid on condition that Seychelles uses it to address fisheries management and habitat restoration and improvement matters – hypothecation – this approach is new but fits with current ideas on maintaining critical natural capital and would help move Seychelles towards an ecosystems approach.

This is a medium term approach to be developed over a 36‐48 month period

Option 3

Utilise a vessel day (VDS) approach

This method seeks to charge fleets for access on the basis of vessel days purchased by the fleet. It is an approach now under active development in the Western Central Pacific fishery and more closely reflects catch activity, fleet strategies and the value of the zone to a particular fleet. This approach captures some of the rent. This is a medium to long‐term method for Seychelles.

Applying these methods to the current and prospective medium term capacities and aspirations of Seychelles, the consultants offer the following options for consideration by GoS with respect to the EU and the East Asian longline fleets respectively. C.2 Options to improve benefits from the relationship with the European Union

(i) Proposed immediate action – 2009‐2010 (Section 6. 4. 2 provides the background)

Apply an Increased tonnage fee

Immediately (2009/2010) through the Seychelles‐Joint Committee framework seek an increased tonnage payment from Euro 25/mt. This might include differentiation because of the higher yellowfin yield in the Seychelles EEZ. The EU may however be reluctant as this will set a precedent for other FPAs. The high and more valuable yellowfin to skipjack ratio can be used to effectively justify this claim.

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(ii) Proposed options to be explored and then applied within renegotiation process for 2011 EU FPA

Deploy rate of return method in a more comprehensive way

During 2011 FPA renegotiations Seychelles to request an improved rate of return (RoR) fee based on annual average at 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations).

Implement a compliance bond procedure

Develop and model a comprehensive compliance or performance bond scheme to be applied after 2011 to ensure Seychelles is able to meet its EEZ management obligations under the EU IUU Regulation as well as general international law

Implement a price index approach

If sufficient domestic capacity is in place (see Section D below), introduce a high licence fee plus a price indexed top‐up at 6% of the ex‐vessel value of the catch.

(iii) Options to be deployed beyond EU 2011 and dependent on directions set out in EU CFP Reform Green Paper 2009 as well as improvements in Seychelles institutional capacity

RoR + price‐indexed top up

Seychelles to introduce a baseline licence fee plus an annually calibrated 6% RoR top‐up fee. The top‐up fee kicks in if the percentage rate of return on gross value of catch exceeds the up‐front payment – this is a simple price index approach

Environmental Levy /natural resource depletion levy

Hypothecated resource depletion/environmental levy applied to each agreement as a top up to compensate Seychelles for the depletion inherent in fisheries removals and other environmental impacts. Hypothecated financing will be paid directly into a GoS account that is used exclusively for funding of GoS environmental activities (this could include fisheries science research).

Vessel day scheme

This would charge fleets for access on the basis of vessel days purchased by the fleet and more closely reflects catch activity, fleet strategies and the value of the zone to a particular fleet.

A full price‐index scheme replacing the current RoR

Indexing the Seychelles access fee to changes in agreed indices – ex‐vessel fish prices; fuel price indexes etc.

C3 Options to improve benefits from the relationship with Japan and Taiwan with applicability to Chinese and other longline fleets

The principal finding of this aspect of the project was that the IOTC exemption allowing longliners to tranship on the high seas rather than in ports like Port Victoria constitutes a major impediment to the objective of improving Seychelles net benefits in this long‐standing relationship. Seychelles, effectively having no substantial/substantive connection with these fleets is thus not in a position to influence either the fleets or their value chains. Despite this major and debilitating constraint, the consultants recommend that the following strategies be pursued with respect to the Asian fleets:

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(i) Proposed immediate actions with respect to the re‐negotiation of the next Japan & Taiwan longline agreements (12‐24 months)

Deploy current rate of return method in a more comprehensive way

That Seychelles request an improved rate of return (RoR) fee based on annual average 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations).



(ii) Suggested options – medium‐term change to Japan & Taiwan longline agreements (36 months and beyond)

Apply a price‐indexing method

Seychelles introduce a baseline licence fee plus an annually calibrated 6% RoR top‐up fee. The top‐up fee kicks in if the percentage rate of return on gross value of catch exceeds the up‐front payment – this is a simple price index approach. This approach must however follow a degree of success/experience with the EU fleets.

Apply an environmental levy /natural resource depletion levy

Hypothecated resource depletion/environmental levy applied to each agreement as a top up to compensate Seychelles for the depletion inherent in fisheries removals and other environmental impacts.

Shore‐based investment in return for access rights

Subject to the IOTC ban on transhipment being lifted, establish arrangements in which access is conditional on onshore investment, landings and transhipment through the Seychelles.

D. ACCESS ARRANGEMENTS – ORGANISATIONAL CONTEXT, ARRANGEMENTS AND POLICY OPTIONS FOR IMPROVEMENT

This section of the report (section 4) reviewed the organisational arrangements within which access agreements are currently negotiated, implemented, evaluated, monitored and re‐negotiated in the Seychelles. The key organisations within the system were assessed, based upon extensive interviews conducted by the consultants with key officials in January 2009. Despite significant gaps in the following areas:

� Ability to analyse the global dimensions of the fisheries economy and the various value chains;

� Ability to respond promptly and effectively to trade issues;

� Ability to gather and use operational as well as strategic commercial intelligence on relevant fishing fleets, supply networks and cold chain arrangements;

� Ability to conceptualise and analyse environmental and bio‐diversity issues and factor these into agreement negotiation and implementation.

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The consultants found that the organisational arrangements of Seychelles were creditable internationally, outperforming many other organisations of much better endowed countries. To address the gap areas, the consultants propose that GoS take rapid action with respect to two highly critical matters:

� Establishment of a small but well‐resourced Fisheries Industrial Intelligence & Analysis (FIIA) to undertake a range of functions currently undertaken by the Managing Director of SFA so as to free up the Managing Director to undertake effective strategic activity and forward planning in collaboration with this unit and other SFA managerial staff.

� Improvement of Seychelles fisheries enforcement capacity, as the significant weaknesses in this area fundamentally compromise current as well as future efforts to improve financial and other benefits from foreign fishing and access agreements. revenues and other returns and additionally permit IUU fishing to flourish

The consultants are of the strong view that a lack of action in these two identified areas will likely prevent Seychelles from being able to effectively implement crucial elements of the net benefits programme, especially those which require that the GoS utilise strategic economic intelligence or require that it effectively apprehend and sanction offenders against the proposed new arrangements. Rapid action on the enforcement as well as commercial intelligence fronts are both actively and urgently required.

E. THE CURRENT LEGISLATIVE REGIME – AN ASSESSMENT OF ITS COMPATIBILITY WITH NET BENEFITS OBJECTIVES

This aspect of the project undertook a desktop review of key domestic legislation and international legal instruments to assesses the whether the legislative regime can adequately support the programme of increasing net benefits.

The desktop review found that in general, the legislative regime of the Seychelles is adequate both for current and future tasks. However, the legislation operates within an environment with significant deficiencies and limitations. Their cumulative effect is to make the legislation ineffective. This is particularly the case with respect to monitoring, control and surveillance (MCS) as well as enforcement. Key areas of constraint and lack of effectiveness which now and in the future sharply limit the ability of the legal regime to support an enhanced benefits approach are:

� The absence of appropriate and/or substantial enough surface and air surveillance assets to police an extremely large zone;

� Limited financial resources – the consequence here is that the Seychelles Coast Guard (SCG) and other institutions are unable to effectively use and service the limited number of existing MCS and enforcement assets;

� The absence of effective arrangements for regional/sub‐regional cooperation – the consequence here is that effective international co‐operation potentially of great assistance in lowering economic costs and policing highly mobile fleets is virtually absent;

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� The absence of any credible means for verifying compliance with the law encourages non‐compliance and IUU fishing.

Other factors limiting effectiveness now and in the future include:

� A lack of Flag‐State willingness to effectively monitor flagged vessels operating in Seychelles waters – this external accentuates the lack of effectiveness of the SCG and contributes to making the legislation relatively ineffective

� The new threat from Somali piracy – a possible consequence is that pure fisheries enforcement is unlikely to be given as high a priority by donors as anti‐piracy operations – anti‐piracy arrangements although having a degree of overlap with fisheries enforcement are fundamentally different activities

F. ACCESS ARRANGEMENTS BETWEEN SEYCHELLES AND KEY PURSE SEINE FLEETS: THE EU FISHERIES PARTNERSHIP AGREEMENT AND THE SEYCHELLES‐FLAGGED FLEET

Access agreements have two aspects – financial and non‐financial. The financial aspects of the Seychelles‐EU relationship have already been discussed with options to increase net benefits in this arena set out at Executive Summary Section C above. Non‐financial aspects were also investigated by the consultants, through a comparative analysis of the Seychelles FPA against FPAs negotiated in the 2004‐2008 period. This was backed by extensive interviews with EU private sector interests in France and Seychelles as well as with Seychelles regulators.

The consultants observe that EU strategy for gaining and maintaining access to marine fisheries resources are always changing. EU strategy is explored by this section (Section 6) with a particular focus on two new instruments of policy: (a) the IUU Regulation, an instrument with considerable potential to constrain Seychelles access to EU markets (b) proposed new policy directions foreshadowed by the EU CFP Green Paper 2009, including the possibility that the EU will now use regional agreements to gain access to region‐wide tuna resources in the Western Indian Ocean, the Western Central Pacific etc.

Consultant recommendations for change in the non‐financial aspects of the current FPA in the lead‐up to its expiration in 2011 cover: validity and duration of fishing rights; strengthening VMS and transhipment frameworks; inserting an arbitration clause in the next FPA; better use of the Seychelles‐EU Joint Commission to enhance Seychelles interests; using the consensus positions of the IOTC Scientific Technical Committees rather than the political outputs to support Seychelles policies; increased grant of resources to support Seychelles commitment to responsible fishing and protection of bio‐diversity and marine and maritime fauna and ecosystems. Section 6 also makes proposals on port reporting, at sea reporting and IUU fishing.

G. AGREEMENTS BETWEEN SEYCHELLES AND EAST ASIAN LONGLINE FLEETS AND STATES

Options to increase financial net benefits from relations with these fleets have been canvassed above. Consultant analysis also closely assessed the texts of the most current agreements with Japan and Taiwan against international best practice and their historically well‐developed and multi‐pronged frameworks for securing and maintaining resource access. The consultants propose that Seychelles should seek change in the following areas:

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� A much more detailed set of clauses covering information on vessel and fleet characteristics;

� Longer agreements – probably a maximum of three years and a minimum of two, with revision clauses in the agreement providing flexibility.

� The strategic use of compliance bonds to complement and strengthen the low level of actual surveillance capacity in the Seychelles

� Basing compliance with IOTC requirements on the consensus findings of the IOTC Scientific Committee rather than on IOTC recommendations.

� Working diplomatically within IOTC to remove the IOTC exemption so as to provide an opportunity for the longline fleets to become regular users of Port Victoria with likely flow on economic effects.

H. MARKET ACCESS ISSUES IN FISH EXPORTS FROM THE SEYCHELLES – CROSS‐CUTTING ISSUES

H.1 Seychelles Trade Preferences with Principal Markets

The EU, Japan and the US all continue to apply relatively high tariffs on processed tuna to better protect their domestic industry. Unprocessed fish does not encounter significant tariff barriers in any principal market, except for the EU

The EU is the only market that offers the Seychelles an important margin of preference for a wide range of fish products, not just canned tuna and tuna loins. Other product lines effectively encouraged by this preference margin are those exported by Oceana and Sea Harvest: whole fresh‐chilled or frozen tuna which is not for canning, all types of fish fillets. This trade preference is provided under the Interim Economic Partnership Agreement (EPA) between the EU and the East and Southern Africa (ESA) grouping of countries.

Seychelles access to the EU market depends on whether Seychelles can meet other EU requirements relating to: a) fisheries Rules of Origin (RoO); b) sanitary and phytosanitary measures (SPS); and, c) the new regulation to control IUU fishing;

It is likely that Mauritius will soon be making representations to the US government arguing that African Growth and Opportunity Act (AGOA) fisheries RoO are unusable because of the difficulty of meeting the 35 percent value added criteria (i.e. because the most expensive inputs, fish and cans, are imported). If GoS is interested in enabling domestic firms to export canned tuna in oil to the US, Seychelles could join with Mauritius to make this case. This would however, only be of use if the current Exclusivity Clause with IOT is amended.

H.2 The Inevitability of Erosion of the EU Tuna Preference

Future direct threats and more indirect impacts on the preference come from the Doha Round at the WTO and also from the rise of Free Trade Agreements (FTAs) involving competing sites of production. The erosion of EU tuna preferences to commercially non‐valuable levels is inevitable. It is only a question of the form that this preference erosion takes (i.e. NAMA or FTAs) and over what time period (probably within 8‐10 years). Therefore, the question facing

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GoS in its policy development on onshore fish processing is how to prepare for and mitigate this eventuality. Some recommendations are suggested below in the sections on upgrading and investment (section 9.2 and 9.3). The major implication of the EU’s Generalised System of Preferences Plus (GSP+) – which provides Cotonou equivalent tuna preferences – is that Spanish capital (mainly OPAGAC members) is already heavily (maybe over) extended in the Central American and Andean countries, meaning that it is unlikely that it will turn to invest substantially in additional sites of production such as the Seychelles.

There is little that GoS can do influence these outcomes except for working closely with IOT and the EU industry lobby group, Eurothon, to provide political support where appropriate (e.g. in opposing preferential access for tuna products in any future FTA between the EU and ASEAN countries).

H.3 EU Fisheries Rules of Origin

The deletion of the crew requirement in EU fisheries RoO means that Seychellois boat owners are able to utilize foreign crew if necessary. It also erodes the incentive for employment of Seychellois on EU purse seine vessels, but the terms of the EU‐Seychelles Fisheries Partnership Agreement (FPA) continue to assert employment of Seychellois. GoS should be careful to ensure that this clause is maintained in future FPAs so as to provide a mechanism for the up‐skilling of Seychellois crew.

The leasing/chartering clause may allow EU RoO‐compliant Seychelles fleet development without the expensive (and highly risky) purchase of vessels. GoS should investigate the practical applicability of this clause with European Commission authorizes (i.e. DG TAXUD and DG MARE).

The extended automatic derogation for canned tuna under the Interim EPA provides significantly increased flexibility over the prior allocation under the Cotonou Agreement.

GoS should continue to oppose global sourcing RoO as an ESA position in Comprehensive EPA negotiations. GoS needs to be prepared to sustain an evidence‐based case against Mauritius demands for global sourcing (several points are provided above to support this case). Given Mauritius aspirations to expand its seafood processing capacity, GoS needs to be prepared to discuss alternative fisheries RoO methodologies that come as close to a win‐win as possible.

GoS proposed simplification of the value tolerance provision, its expansion from 15 to 20 percent and an increase in the automatic derogation in the Comprehensive EPA. This will provide an important flexibility for the utilization of non‐originating fish during low fishing seasons for both IOT and processed fish produced by Oceana/Sea Harvest.

GoS urgently needs to develop and test proposed improvements in RoO beyond the value tolerance provision that will specifically benefit high value segments of fish processing (e.g. Ocean / Sea Harvest). To do so, some form of focused workshop might be necessary. It is proposed that the consultant take part in such a workshop when in Seychelles to present this report.

H.4 Fisheries Chapter under the Interim EPA

The Fisheries Chapter under the Interim EPA appears to provide a firm commitment by the EC to support VMS and MCS capacity in ESA states. Considering the dual threats of IUU fishing in the WIO (mainly tuna longline) and incursions by sea pirates in and around Seychelles EEZ, a strong

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case can be made for serious levels of EC financial and technical support to the development of improved MCS capacity on the part of SFA and the Seychelles Coastguard (and perhaps the SDF, although this might be more controversial). Note that the same set of commitments are included in the EAC EPA Fisheries Chapter, which could be used to establish VMS on a sub‐regional level (i.e. along the lines of the FFA regional VMS model).

H.5 EU sanitary and phytosanitary (SPS) measures

The trade‐related importance of Seychelles meeting SPS requirements cannot be over‐emphasized. Several countries have been banned from exporting fish and fish products to the EU as a result of failings in inspections by the Food and Veterinary Office (FVO) of DG SANCO, most recently Fiji and Malaysia.

The main problem facing the SBS laboratory’s accreditation to the EU is the need to accredit tests to ISO standard 17025 on Competence of Testing and Calibration Laboratories – this requires the purchase of heavy metal testing equipment. This process has to be completed by 31 December 2009. Funding to facilitate this has been committed by the European Communities and the South African National Accreditation Service (SANAS) will visit Seychelles to accredit the SBS lab with ISO17025. The problem is that the SANAS visit cannot take place until the EC funds have been provided to pay for necessary equipment, but these funds may not be available until the latter part of 2008. The relevant agency of GoS – probably the Ministry of Foreign Affairs – should approach relevant EC representatives to ensure that these funds are dispersed swiftly. If they are unlikely to be in place in time, Ministry of Finance should advance financing for the purchase of essential equipment.

A major challenge facing the Fish Inspection and Quality Control Unit (FIQCU) is ensuring compliance with EU SPS measures by artisanal vessels. If FIQCU requires additional inspectors, GoS should ensure that funding is allocated to do this. If not, some fishers will not be able to export to the EU. Given the socio‐economic importance of artisanal fisheries to the Seychelles and the centrality of export markets in earning foreign exchange, this is an eventuality that must be avoided. Similarly, GoS should investigate a support programme with Development Bank Seychelles to allow fishers to upgrade their vessels to meet EU requirements if necessary (e.g. separating fish from fuel, compliance with food contact surface/ fibre glass decks).

FIQCU should start to charge a cost‐recovery user fee for provision of health certificates of consignments of fish from foreign‐owned vessels (i.e. French and Spanish owned purse seiners, including those flagged by Seychelles). Representatives of these vessels have already been approached by FIQCU and they agreed to a user fee.

Similarly, FIQCU should assess actual costs its annual renewing of approval and inspection of Seychelles‐flagged purse seiners with a view to ensuring full cost recovery. This recommendation combined with the previous one may allow FIQCU to function without subventions by the Ministry of Finance.

It is believed that there are internal discussions on the possibility of moving FIQCU to fall under the auspices of SBS. The rationale for this is unknown, but given the importance of responsive action by FIQCU to the specific needs of fisheries sector and the possibility that tying the two might encourage rent seeking (i.e. to maximize testing revenue), it is logical that it remain within the remit of SFA

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H.6 EU regulation to combat imports of IUU‐caught fish

On 30 September 2008, the EU Agriculture and Fisheries Council adopted the Regulation establishing a Community system to prevent, deter and eliminate IUU fishing. This will apply from 1 January 2010. Seychelles exports of fish and fish products to the EU must comply with this regulation and GoS, vessels and processors firms have just over six months to prepare to implement the extensive measures detailed in this regulation. SFA is tasked with ensuring compliance of Seychelles exports with this Regulation.

It is essential that GoS – led by SFA – undertake immediate measures to ensure that certification systems are in place for all vessels supplying the export‐orientated industry in the Seychelles.

The greatest challenge of this regulation will be providing compliant certification to artisanal vessels in the Seychelles. Given the constraint of time of only several months before the enforcement of the IUU Regulation, it is logical to prioritize SPS and, in turn, IUU certification of those artisanal vessels that have a record of exporting to the EU; the second level of priority should be applied to those vessel owners who express an interest in supplying EU‐centred supply chains and that have a realistic potential of doing so in the medium term; SFA can then proceed with certification of remaining vessels.

I. REVENUE GENERATION, UPGRADING AND INVESTMENT

I.1 Maintaining Port Victoria’s Status as the Western Indian Ocean Purse Seine Hub while Enhancing GoS Revenue

The attraction of other regional ports depends on the infrastructure and services provided as well as the distance from key fishing areas. While a port may have excellent facilities and offer good prices for tuna, if the port is some distance from fishing grounds at that time of the year then vessel owners will have to look at steaming costs and the loss of fishing effort time as well as port dues and bunkering costs, transhipment and licence fees.

The consultants applied assumptions on steaming costs to an SFA model on the centre of gravity model for Western Indian Ocean purse seine fishery. In short, Victoria is the closest port to the barycentre for overall purse seine catch and effort and for the first, third and fourth quarters. However, the diversion costs if vessels do not use Victoria are negative/ insignificant in the second quarter averaged over the period 2001‐ 2006. This is because the centre of gravity for both catch and effort by EU purse seiners is concentrated in the outer northern periphery of the Mozambique Channel at the furthest distance from Seychelles. This explains why Diego Suarez is the second most important purse seine transhipment port in the WIO.

This model was used as a basis for assessing the extent to which GoS can extract additional revenue from the EU purse seine fleet without making Port Victoria non‐competitive with other ports in the WIO region. The consultants believe that potential revenue increases should be set firmly in the context of: a) The negative effects of piracy on EU purse seiner profitability due to reduced fishing opportunities (the extent of the WIO that can be safely traversed) and increased insurance costs; b) Maintenance and extension of port quays available to the tuna fishing industry so as to maintain and enhance Port Victoria as the premier tuna transhipment port in the WIO with its profoundly important spin‐off benefits to the economy (i.e. the provision of goods and services to purse seiners and reefers, and fish supply to IOT). The rationale being to ensure the long‐term and sustainable intersection of the Seychelles with the EU fleet; c) Improvements in onshore efficiencies, including better government‐industry relations, resolving

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disputes around Land Marine’s monopoly over the Commercial Port; d) More effective and/or competitive provision of goods (e.g. chandlery) and vessel services (e.g. marine electronics).

I.2 Applying a flat rate tuna transhipment/landing fee

Our recommendation for reform of the current system of charging a fee per tonne for tuna transhipped in Port Victoria has three components:

� Extend the fee to both transhipment and landing of fish by foreign‐owned boats.

� Increase the fee in two stages: to US$4/mt for the first year only and US$6/mt from then onwards. GoS must be clear that the US$6/mt fee will be frozen for at least five years to ensure investor security and facilitate financial planning by purse seine companies (these firms normally plan over a 5‐year cycle). The staging (from US$4 to 6) is to allow the fleet to recover from poor fishing years in 2007/08 and to provide a year to improve on the reducing the incidence of piracy in the WIO.

� 50 percent of the transhipment fee should be dedicated exclusively (hypothecated) to port improvement to the primary benefit of the operations of the industrial tuna fleet and IOT. We use a clear percentage‐based system for hypothecation so as to exclude any possibility of dispute regarding allocation.

This entire process should be openly and transparently announced to all industry players (i.e. IOT and EU purse seiner fleet).

I.3 Hypothecated Port Maintenance and Development Fund

We recommend that GoS applies hypothecation to 50 percent of all transhipment/landing fee income for exclusive use in essential port improvements. In order both to provide the payers of this tax a degree of ‘comfort’ (and compensation) and to ensure that port improvements benefit the fishing sector (and are not captured or manipulated by other vested interests), this hypothecated fund should be managed by a committee consisting of public (50%) and private (50%) sectors.

Based upon extensive discussions with government and industry in 2006 and 2009, the priorities for Port Victoria would probably be: a) construction of new quay space for purse seines; b) repair of the existing industrial port quays. If this was agreed to, work would probably be scheduled in this order (i.e. construct new quay, then repair existing) so as to minimize disruption to activities at the port.

I.4 Increasing Port dues applied by the Seychelles Ports Authority

The consultants recommend SPA to identify dues that are not specific to the purse seiner fleet so as to mitigate against discriminatory practices (i.e. dues with disproportionate effects on the industrial fishing sector). Instead, the focus should be on increasing revenue from dues that are applied to all types of vessels in the port. Given the lack of information supplied to the consultants we are able to provide more specific points on port due increases beyond five broad recommendations:

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� Port dues are currently very low and there is certainly scope for increases.

� GoS should ensure that port due increases do not disproportionately penalise the EU fleet (including reefer and supply vessels), because these activities are the singularly most important contributor to SPA income generation.

� Linked to point 2), the extent of port due increases should not penalise purse seiners for staying in port longer (i.e. time‐based charges). This is because it is not in the economic interests of these vessels to stay in port, their interests are the precise opposite (i.e. to maximise days spent at sea

� SPA should consult more extensively with port users in policy development as this will better allow the identification of opportunities and constraints.

� In the context of the prior four points, SPA needs to be able to justify precisely why and which dues should be increased.

I.5 Relations with IOT

The consultants believe that it will be considerably more productive for GoS to focus more on what can be developed in the future in its relations with IOT, rather than emphasizing extraction of perceived losses because of prior negative agreements and outcomes. There are several rationales for this recommendation, including the fact that GoS must try to ensure, as far as it is able, that IOT is prepared to survive economically when the erosion of the EU tuna preference occurs.

I.6 IOT Shareholders ‘Profits’

The IOT Shareholders Agreement calculates annual ‘profits’ to be paid to signatories using a complex method using a statistical equivalent case (SEC) formula. Within this arrangement annual dividends are capped at €1.75 million (‘guaranteed profits’) and are paid to all shareholders. As 40 percent shareholder GoS consistently receives (a capped) €0.7 million. Profits and retained earnings are used to service the Diamond Project loan, which will probably not be repaid until 2017.

The SEC dividend formula is overly complicated and should be simplified to reduce the potential for disputes in the future. Moreover, the formula should better reflect actual market value through species differentiation (i.e. percentage of canned yellowfin) and sales of innovative products if successful (e.g. perhaps the new ‘no drain’ canned tuna).

However, we do not recommend a removal of the guaranteed profit mechanism so that shareholders benefit from ‘real profit’ (i.e. actual turnover less actual costs). This is because GoS could be exposed to losses should IOT become unprofitable, negotiating such an outcome would be incredibly difficult and would probably only have limited additional financial gains, not least because MW Brands is a highly sophisticated integrated company and GoS would be unable to check whether ‘real’ profits were allocated (e.g. factoring‐in of advertising and product innovation costs).

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I.7 IOT SSF employer contributions

Since the November 2008 liberalisation of the exchange rate, IOT’s wage bill as a percentage of its total euro sales would certainly have reduced substantially. Comparing 2007 and 2009, we estimate that exchange rate liberalisation will produce a 50 percent decrease in the real IOT wage bill for Seychellois workers alone in 2009.

Currently IOT receives an indirect subsidy in the form of only very partial payment of SSF contributions for its workers. For example, IOT paid less SSF contributions than SFA in 2008! IOT employs around 1,300 Seychellois, all of whom are entitled to the full range of social policy interventions, including free health care at‐point‐of‐use. This means that all other contributors to the SSF are subsiding Seychellois IOT employees, and this, in turn, represents a subsidy to IOT’s operations.

Therefore, it is recommended that GoS approach IOT with an agreement that it start making higher SSF contributions. We recommend that GoS should push for the standard rate of 20%, but we do not recommend a red line for a GoS negotiation position (i.e. the lowest % contribution it is willing to accept).

I.8 Request IOT to explain how it intends to expand production into higher‐value product ranges

If IOT can secure sufficient supply of yellowfin from the EU fleet, Spain and Italy may become market opportunities in the medium‐ to long‐term. Importantly, given that canned yellowfin is a more expensive product, the relative commercial importance of the EU tariff preference rises (i.e. 24% of the cif value of the product). Therefore, canned yellowfin and other higher value items offer a greater potential for IOT’s competiveness when the EU preference is eventually eroded.

IOT primarily processes basic ‘commodity’ products (i.e. canned tuna in oil or water). While the new ‘no drain’ can launched in the UK under the John West brand is an important counter to this trend, the market success of this innovative product is not yet known. This raises two strategic questions for GoS: a) why does MW Brands not invest in higher value added production in IOT? b) What can be done by IOT (including GoS facilitation) to expand into higher value product types?

I.9 Demand a ten‐year strategic plan from IOT management

GoS should leverage IOT through its 40% shareholding and ask management for a Ten‐year strategic plan. This plan should account for probable erosion of the EU tariff preference and focus on IOT competitiveness in EU markets should the preference be reduced to 6 or 7%. Key areas for consideration include:

� Details of investment in process technology to improve ‘recovery rates’ (i.e. the volume of canning‐grade meat butchered from the fish);

� Intensify investment in worker training programmes. For the first option to succeed, workers on the fish gutting and cleaning will probably require greater skills. Labour

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productivity and absenteeism are issues that could perhaps be addressed through the provision of improved incentives for workers;

� Invest in the mechanisation of production to reduce labour costs. Given that around 40% of workers are expatriates, this will not necessarily serious impact the Seychelles economy assuming that Seychellois will work night shifts;

� Improved valorisation of by‐products would also increase fish price savings. Currently around 60% of by‐product is transformed into low‐cost fish meal;

� Increases in IOT volume of production should, at a minimum, return to 2005/6 highs (i.e. compared to the decline in the last two years). IOT management should also show how they intend to increase volume to new highs and demonstrate to GoS how this will increase current levels of Shareholder dividends (see above on reforming the SEC formula).

I.10 Opportunities for the high value fish processing sector

The high value fish processing segment is far less important to the economy than IOT or the interactions between the EU purse seine fleet and Port Victoria. Nonetheless, the current status of high value fish processing in the Seychelles represents a missed opportunity because it has not reached capacity for domestic fisheries development and, given the threat of EU preference erosion, it is logical to promote the sector now while the competitive advantage of EU market access remains.

There is a possibility that Seychelles branding (a project already being undertaken at SFA) together with an accreditation for sustainable fisheries could bring a premium value to exports of fish and fish products. This needs further investigation.

Marine Stewardship Council (MSC) eco‐labelling offers any opportunity. There are however, barely any developing country MSC certified fisheries. This is primarily due to the cost and complexity of certification, including the need for very effective fisheries management of the target fishery. In the developed world, some tuna fisheries have been certified. This has proven highly profitable. At the same time, the high cost of MSC fish can be too high for some retailers (20% higher in this case), meaning that any attempt to investigate MSC certification in the Seychelles must start with serious consideration and identification of market opportunities.

One of the major issues facing the retail of fresh tuna and other tropical fish products is seasonality. The super‐freezing of fish products to ‐60°C is an important technological innovation to overcome this issue (otherwise known as ultra low temperature – ULT – treatment).

Some ultra low temperature (ULT) product is finding its way to the EU market (including transhipped from Spanish purse seiners in the Seychelles, using Maersk containers), which is defrosted and retailed fresh, although the packaging makes it clear that it was originally frozen. ULT cold stores are being created in the UK and the market potential is currently small but it is building (apparently there is a similar situation in Belgium). Reportedly ULT infrastructure is already in place in Holland and Spain. While establishing a ULT cold chain is a highly complex and expensive, the commitment by upper‐end UK food retailer M&S (Marks & Spencer’s) to end

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procurement of food supplies via airfreight might provide an important incentive to investment in the development of a ULT market in the UK, and, in turn, in the Seychelles.

I.11 Investment and Upgrading in Sashimi‐grade Value Chains

The longline industry uses an organisational model that keeps vessels at sea close to fish resources and freezer reefer vessels come alongside to offload so as to maximise fishing effort and, thus, returns to investment by vessel owners. At present, this model of transhipping at sea is permitted under the IOTC.

To prepare for the possibility of an end to the IOTC exemption allowing longline transhipment at sea and to better develop intelligence and analysis to feed into future access agreement negotiations with these fleets, the following is recommended as a starting point:

SFA should undertake full barycentre (centre of gravity) analyses of all available longline catch and effort data in the WIO. This analysis should include aggregate activity and for individual fleets separately by flag and by ‘national’ ownership. It will allow a far better picture of the economic activity and associated relationships of key players. This analysis would have to be complemented by work on the ownership structure of these players and their linkages to supply chains;

From an MCS perspective, this data could be adopted to assess: current/projected patterns of single‐handed enforcement activity by Seychelles; steaming time and other distance related costs for enforcement vessels; enforcement aircraft flight times and related information; estimated evasion times for a standard or representative fishing vessel for a particular fleet, such a vessel seeking to exit the Seychelles EEZ at maximum speed from each of these pivots of activity. This work would be an ongoing side project of the proposed FIIA unit in collaboration with the Manager of Fisheries Research and the Manager of MCS at SFA.

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SECTION 1 INTRODUCTION AND GUIDE TO USE OF INCREASING NET BENEFITS REPORT

1.1 Study Rationale, Scope and Core Considerations The fisheries and tourism sectors are the main two productive pillars of the Seychelles economy. While tourism receives significant high‐level policy attention, the fisheries sector has historically received less policy attention and analysis. As set out by the terms of reference, the overall objective of this study was to identify, analyse and develop methods for maximizing economic returns/benefits from the fisheries sector in the Seychelles in a manner consistent with the sustainable utilization of the resource. The study commenced in October 2008 and was completed in May 2009. The full terms of reference are reproduced at Appendix 1.A. The consultants critically interrogated all information available to them with a view to providing realistic and achievable policy options and specific recommendations. In terms of policy recommendations, we interpreted the central thrust of the terms of reference to be as follows:

Specific and immediate measures that can be applied to increase Government of Seychelles (GoS) revenue from the fisheries sector.

Specific and immediate measures that can be applied to improve effectiveness and efficiency of the Seychelles various intersections with the global seafood industry, which will, in turn, either ensure the continuation of existing levels of net benefits or improve Seychelles relative positioning.

More general and medium‐term measures that will either enhance GoS revenue generation or develop Seychelles various intersections with the global seafood industry.

In the consultants’ analysis of options for increasing revenue, a central consideration was avoiding recommending any actions by GoS that might push away key foreign private sector partners (i.e. MW Brands and the EU purse seine fleet). Included within this consideration was the impact of the global economic downturn, poor fishing years in 2007‐08, and the current economic impacts of piracy on vessel operations. 1.2 Methodology and Scope Prior to in‐country consultation, SFA provided a range of databases, some of which contained confidential information not previously seen by the consultants. The consultants reviewed this material and supplemented it with the following additional elements to form initial analytical thoughts: a) their existing knowledge and personal libraries based on relevant professional experiences in the Western Indian Ocean, West Africa and the Pacific islands; b) reviewed and interpreted statistical databases; c) research in university libraries; d) informal discussions with a range of relevant personal contacts; and, e) interview notes from the consultants’ prior research visits to the Seychelles (Barnes in 2005 and Campling in 2006). Based upon this, it was fairly

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immediately clear that Seychelles would probably be unable to double its net benefits from its various intersections with the seafood industry. Even so,, several initial ideas on how net benefits might be increased were tentatively developed for further ‘testing’ during in‐country consultations. Two of the consultants (Barnes and Campling) undertook a fact‐finding mission to Seychelles from 18 to 30 January 2009. During this visit they undertook an extensive programme of interviews with a wide range of relevant stakeholders. The major gap in this interview programme was meetings with local representatives of the Spanish‐owned purse seine fleet. It is not known why they did not participate, but it is suspected that the (then) ongoing dispute over tonnage payments within the EU‐Seychelles Fisheries Partnership Agreement (FPA) may have raised sensitivities. Upon completing this trip, the consultants came to the realisation that it was also necessary to meet and discuss key components of the project with senior representatives of the main foreign private partners involved in the Seychelles tuna industry. As such, from their own budget, the consultants visited Paris to meet with representatives of MW Brands (majority shareholder of IOT Ltd) and the Eurothon lobby group, as well as Concarneau to meet with representatives of the French purse seine fleet and ship building yards. The consultants also contacted representatives of the Spanish purse seine fleet (primarily based in Bermeo), but they failed to reply, even when we were introduced by other industry players. Again, the reasons for this non‐cooperation are not known, but it was a serious limitation on the effective extent of consultation. A full list of persons consulted is provided by Annex 1.B and whilst the references used are set out by Annex 1.C. During the in‐country visit, the consultants made requests for additional information from various agencies of GoS as well as the private sector. These requests were followed‐up through email communication and, in general, were met efficiently. There were significant delays in receiving certain sets of information, including those from the Seychelles Port Authority (SPA) and the Seychelles Revenue Commission. The consultants also encountered poor levels of cooperation from some parastatals (including SPA – which did not meet some very basic information requirements – and SEPEC, which simply ignored all email communications). There was also no communication with certain private sector representatives, including Hunt Deltel, all Spanish interests in the Seychelles (except Echebastar/ Hartswater) and in Spain. On the flip side, Juliette Dorizo, Michel Marguerite and Rondolph Payet (all at SFA) were instrumental in the timely provision of information before, during and subsequent to the consultants’ in‐country visit. We are very grateful for the help provided and the courtesy and diligence with which it was done. Finally, in terms of methodology, some chapters provide accounts of the specific methodologies used in the arenas covered by those chapters.

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1.3 Reading the Study – a Guide This study is not intended to be read as a straight document (i.e. cover to cover). Instead readers would probably benefit best if they identified particular sections or sub‐sections of relevance using the guide to reading (set out in Table 1.1 below) table or the table of contents. Relevant additional sub‐sections are referenced internally. The study is significantly longer than the consultants had originally expected. On balance though given the fundamental nature as well as the importance of the task set by the TOR, we came to the view that that a high level of detail as well as clarity of analysis was necessary. We felt that the high level of professionalism within GoS and the important policy implications of large portions of our work, required that we fully explain or set out the analysis and/or information base underpinning our conclusions. We were loath to merely summarise key points as this would provide policy makers with insufficient evidence and/or analysis to support our recommendations. To address the time constraints facing busy policy‐makers in GoS, we have provided a table which allows readers to quickly identify the sections that are likely to be of the most interest. In addition, each chapter is largely written to be self‐contained and, as such, readers can focus their attention on those issues that concern them at any given time. Finally, each section or sub‐section ends with a summary of central recommendations. These are largely repeated with less detail in the executive summary and the conclusion, thereby providing readers with a ‘quick glance’ option for each chapter.

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Table 1.1: Guide to reading this study

Policy issue/action item/theme Relevant sub‐section of report

Responsible GoS agency or agencies

Priority in terms of GoS policy action (high‐medium‐low)

Timeframe for GoS action

Compliance with TOR (by contract no.)

Status of Seychelles intersections with fisheries supply chains

2.1 None required N/A 3.3

Assessment of overall contribution of fisheries to the Seychelles economy

2.2 and 2.6 To be read by SFA, SPA, NSB, Ministry of Finance

None required N/A 3.1

Summary of taxes, duties and other financial charges paid under the current regime

2.5 None required 3.2

Analysis of trends in Seychelles trade ‐ fish and fish products

2.1.1, 8.2, 9.2.6, 9.4

To be read by SFA None required N/A 3.3

Maintaining Seychelles exports of fish and fish products by addressing non‐tariff barriers (i.e. EU rules of origin, sanitary issues, IUU regulation)

6.7, 8.4.4, 8.5 and 8.6

SFA, SBS, MoFA High Short‐term 3.3

Valuation of annual catch by EU flagged purse seine fleet

6.1.1 SFA Data provides basis for understanding increasing net benefits proposals

Short‐term 3.8

Valuation of annual catch by Seychelles flagged purse seine fleet

6.6.3 SFA As above Short‐term 3.4

Valuation of annual catch by longline fleet 7.1.2 SFA As above Short‐term 3.8 Comparison of EU‐Seychelles Fisheries Partnership Agreement with other FPAs

6.3 SFA As above Short‐term 3.8

Comparison of Seychelles longline licence values with Pacific Island licence payments


Comparison of Seychelles purse seine licence values with Pacific Island licence payments


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Options for increasing returns from foreign fishing and increasing net benefits – General overview

3 SFA High Short to long‐ term

3.8

Options for increasing net benefits from EU FPA 6.5 and 6.9 SFA High for short‐term gains Medium for future renegotiations

Short to medium‐ term

3.8

Proposals for increasing net benefits from non‐EU FPA purse seine

6.9.6 SFA High Short to long‐ term

3.8

Options for increasing benefits from Japanese longline fleets

7.5 and Table 7.10

SFA High Short to long‐ term

3.8

Options for increasing benefits from Taiwan longline fleets

7.5 and Table 7.14

SFA Medium Short to long‐ term

3.8

Proposals ‐ alternative approaches – China longline

7.5 SFA Low (no agreement at present)

Short to long‐ term

3.8

Assessment of SFA organisational capacity 4 SFA, MENRT, Coast Guard, MoF, CBS, SLA, MoFA, AG’s Dept

Low Short to medium‐term

3.9

Recommendations for reform of SFA organisational capacity

4.12 SFA, MENRT, Coast Guard

High Short to medium‐term

3.9

Assessment of SFA legal capacity to implement proposed agreements

5 SFA, MENRT, AG’s Dept

Low Short to medium‐term

3.9

Recommendations for reform of SFA legal capacity

5.12 SFA, MENRT, AG’s Dept

Medium Short to medium‐term

3.9

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Proposals to enhance SFA capacity – Fisheries Industrial Intelligence & Analysis (FIIA) unit

4.8 SFA, MENRT High – an essential component to net benefits approach

Short‐term 3.9

Increase direct return on transhipment dues paid by fishing vessels

9.1.2 and 9.1.4

SFA, SPA, MoF High Short‐term 3

Increase direct return on port dues paid by fishing vessels

9.1.3 SFA, SPA, MoF High Short‐term 3

Increase direct returns from IOT – implementing tuna landing due

9.1.2, 9.1.4 and 9.2.3

MoF, SSI, SPA, SFA

High Short‐term 3 and 3.6 and 3.7

Increase direct returns from IOT – increasing employer Social Security contributions

9.2.5 MoF, SSI High Short‐term 3 and 3.6 and 3.7

Increase direct returns from IOT – simplifying capped dividends

9.2.4. MoF, SSI Medium Short‐term 3 and 3.6 and 3.7

Proposals to move Seychelles up the value chain – Port Victoria

9.1.4 SFA, SPA, MoF High Short to long‐term

3

Proposals to move Seychelles up the value chain – canned tuna

9.2.6 MoF, SSI Medium Medium to long‐term

3

Proposals to move Seychelles up the value chain – High value fish products

9.3.2 MoF, SFA Medium Medium to long‐term

3

Proposals to move Seychelles up the value chain – sashimi‐grade

9.4 SFA, SPA Low Long‐term 3

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SECTION 2

CONTRIBUTION OF THE EXPORT‐ORIENTATED FISHERIES SECTOR TO THE SEYCHELLES ECONOMY

2.1 Introduction: Status Analysis of Seychelles’ Intersections with fisheries supply chains As noted in the Introduction, the scope of this study is limited to the export‐orientated fishing and fish processing sector based in (and intersecting with) the Seychelles. There are three main sets of intersections by Seychelles‐based actors with the production and international exchange of fish and fish products:2

1) The relationships between the Seychelles government and locally‐based firms with the Western Indian Ocean (WIO) purse seine fishery; this is primarily labelled here as the ‘Port Victoria Complex’, but the fishery also has important secondary relations with IOT and minor relations with the ‘High Value Export‐orientated Production Network’ (i.e. Oceana and Sea Harvest).

2) The relationships between the Seychelles government and locally‐based firms with MW Brands via the Indian Ocean Tuna Ltd (IOT) cannery (the ‘IOT Production Complex’). Its exports are captured in Table 2.1 under ‘canned tuna’ and, by extension, ‘fish meal’ (the major by‐product of IOT in terms of value and volume).

3) The relationships between the Seychelles government and locally‐based firms in the High Value Export‐orientated Production Network. This, of course, includes the inputs of the Seychelles‐owned fishing fleet (semi‐industrial and artisanal). The exports of this network are captured in Table 2.1 under ‘other processed fish’ and, in part, ‘fish (fresh and frozen)’.

The fisheries sector and notably the export of canned tuna is the main commodity export from Seychelles. Fish and fish products accounted for SR 1.347 billion or 96.1 percent of commodity exports in 2007.3 Exports of fish and fish products have consistently accounted for over 90 per cent of commodity exports over the period 2004 to 2007. The structure of fish and fish product exports will have changed since 2007 with the termination of frozen prawn exports which in 2007 were valued at SR12.9 million. Table 2.1 summarizes fish and fish product exports for the period 2004‐2007. (Section 8.1 provides a more detailed overview of Seychelles exports to the EU, Japan and US,4 and the rest of Section 8 details the main actual and potential barriers to exports with a focus on the EU.)

2 The study does not consider the Coetivy prawn farm because it no longer exists and has been in terminal decline for some years. 3 National Statistics Bureau (2008). Seychelles in Figures 4 See also, Annex 2.A: Seychelles Exports to the EU27 by Detailed Tariff Classification and Principal Market.

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Table 2.1: Seychelles export of fish and fish products compared to total commodity exports (SR million fob)

2004 2005 2006 2007 Canned tuna 923.2 969.6 1,030.4 1,231.2 Fish (fresh and frozen) 13.1 16.0 16.5 13.9 Other processed fish 8.3 10.2 3.2 6.5 Fish meal 15.8 26.7 25.1 29.6 Frozen prawns 42.7 31.8 23.7 12.9 Total fish and fish product exports

1,003.1 1,054.3 1,098.9 1,294.1

Total commodity exports 1,095.1 1,164.7 1,187.8 1,346.5 Fish and fish product exports as a % of total commodity exports

91.6% 90.5% 92.5% 96.1%

Source: National Statistics Bureau (2008). Seychelles in Figures In order to better indicate broad relationships and central dynamics in the Port Victoria, IOT and high value‐added production networks (and the similarities and connections between them), these have been categorized into four groupings of activities:

1) Private sector production activities – these firms are predominantly owned or controlled by foreign interests.

2) Private sector services, logistics and standards – these firms are predominantly owned or controlled by Seychelles‐based interests.

3) Government/ parastatal logistics and technical services.

4) Government/ parastatal regulation and revenue generation.

These activities and the relations with and between them will be explained in the following. 2.1.1 Status Analysis of the Port Victoria Complex The WIO purse seine industry is dominated by EU political‐economic interests – the fleet itself and the economic and diplomatic relations associated with resource access to Coastal State EEZs. Figure 2.1 illustrates the historic capture of value by French‐ and Spanish‐owned vessels since the earliest experimental fishing in the WIO at the beginning of the 1980s.5 This capital flow (i.e. of the vessels) occurred during the onset of poor fishing in the Eastern Atlantic off the coast of West Africa in the late 1970s.6 For the entire period 1984‐2007, EU catch was 92 percent of the total recorded WIO purse seine catch, and 92 percent of total catch within the Seychelles EEZ.

5 Attempts by a Soviet firm to enter the fishery with the backing of the Soviet state (e.g. fisheries cooperation and access arrangements) barely made a dent. 6 This oceanic sub‐region was the prior global centre of EU distant water tuna fisheries since the 1950s. For an overview of these developments, see Campling 2009 [PhD]

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‘EU catch’ in Figure 2.1 includes vessels flagged by France, Italy and Spain, Spanish‐owned vessels flagged by Belize, Dutch Antilles and Seychelles, and French‐owned vessels flagged by Mayotte. Spanish‐owned vessels were also registered in the Cayman Islands and Panama in the mid‐1980s.7 Data on these vessels are not included in the ‘EU group’ detailed in Figure 2.1 because it is not known for certain if all Panama‐flagged vessels were Spanish‐owned and there are no entries for Cayman Island vessels in the SFA database.8 The far higher downturn of EU catch in the WIO in general in 2007 compared to in the Seychelles EEZ can be partly explained by the impact of the threat of piracy (i.e. the reduction in catches in the no‐go zone in and around the Somali EEZ). The general decline in 2007 is also the effect of El Nino, but also perhaps the environmental impact of fishing effort on yellowfin populations. Purse seine fisheries always catch a mix of tuna species, but the WIO fishery is unusual in that the ratio between skipjack and yellowfin has always been relatively even over time. Figure 2.2 provides a simplified summary of the main trends in the WIO for the three main commercial canning‐grade species. Given the higher value of yellowfin, this a very important economic consideration, especially for the purse seine sector (see Sections 6 and 9).

7 Lawson et al 1986: 9. 8 Interviews and personal communications, Seychelles government officials and EU tuna industry representatives officials, Seychelles 2006, email 2008 and France 2009.

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Figure 2.1: Comparing EU purse seine catch with total in the WIO and in the Seychelles EEZ, 1984‐2007 (in mt)

Sources: Calculations using FFA database (EEZ data is confidential) Figure 2.2: Tuna catch by species in the WIO, 1950‐2005 (in mt)

Source: FAO FIGIS database

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The flow of tuna populations in the WIO is depicted Figure 2.3. This flow is represented by annual average purse seine fishing effort. It helps to explain why Port Victoria has been the central transhipment point in the WIO purse seine fishery: The economics of purse seining ensure that vessel owners will always tranship from the nearest available port, assuming that there is sufficient infrastructure and the domestic security situation permits (e.g. thereby discounting transhipment from the Somali coast since c.1993). This allows vessel owners to maximize profitability as they reduce both operating costs (especially fuel) and returns to fixed costs through faster return journeys between port and fishing ground (‘vessel steaming costs’). The historic prevalence of tuna flows in and around the Seychelles EEZ also explains why the Seychelles has been the centre of the European Communities’ tuna access strategy in the WIO (for details see Section 6).9 Figure 2.3: Schematic of Western Indian Ocean tuna migration

Source: John Pearce, MRAG

9 Seychelles’ first commercial purse seine access arrangements were agreed with the EEC (representing the French fleet) and the government of Spain in 1983 and 1984 respectively.

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Figure 2.4 details known transhipment and landing volumes by the WIO purse seine fleet. The importance of the Seychelles to this flow is clear: Port Victoria accounted for 88 percent of total known transhipment/landing volumes for entire period 2000‐08, this was followed by 6 percent in Antsiranana, 5 percent in Mombasa, 0.6 percent in Port Louis, and 0.04 percent in Dar es Salaam. The fact that Mauritius is insignificant to this flow counters the fears of several GoS officials that Port Louis ‘competes’ with Port Victoria as a WIO transhipment port, despite the creation of the Mauritius Seafood Hub (MSFH). (For the implications of this for the Seychelles see Section 9 on enhancing revenue from Port Victoria.) Figure 2.4: Purse seine transhipment and landing in the WIO, 2000‐08

Source: SFA database Figure 2.5 provides a schematic of current economic and regulatory activities in Port Victoria. This serves as a central reference point to the analysis in this report, providing readers with a snapshot of key relationships. The main production chain is depicted in black. The other nodes reflect, variously, the range of public and private services provided to facilitate production and points of public regulation. The Port Victoria complex is intimately linked to the survival of IOT through the supply of EU caught tuna and partly connected to the high value‐added branches through the supply of by‐catch (see below for more on these relationships).

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2.1.2 Schematic of the IOT Production Network Data on IOT export of canned tuna to the EU is provided in Section 8, while Section 9 provides a range of policy options available to GoS in terms of investment and upgrading in this value chain. Figure 2.6 simply summarises the central players and relations in the IOT production network.

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2.1.3 Schematic of the High Value Export‐orientated Production Network Analysis of the market access issues facing Oceana and Sea Harvest’s export of fish and fish products is provided in Section 8, while Section 9 provides a range of policy options available to the Seychelles government and locally‐based firms in terms of investment and upgrading in this value chain. Figure 2.7 simply summarises the central players and relations in the high value export‐orientated production network.

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2.2 Contribution to the Economy by (Sub‐)Sector

The terms of reference for this study call for the team to:

Assess the overall contribution to the economy, and the financial contribution to Government revenue of domestic/IBC fishing companies and the foreign fleet, to as full an extent as possible. This to include disclosure of employment as well as amounts paid under taxes, duties, license fees, and all other charges levied on the fishing sector (on both inputs and exports).

The fisheries sector in the Seychelles makes a range of direct and indirect contributions to the Seychelles economy through the generation of value added (or contribution to gross domestic product), employment creation (direct, indirect and induced), foreign exchange generation as well as contributions to government revenue through social security payments, taxation, licence fees, access agreement payments as well as payments for other government services. The major contribution to the economy is currently derived from the activities of the EU distant water fleet (DWF) which are targeting tuna and tuna like species . The economic contribution from DWF vessels comes mainly from EU purse seiners which land and tranship in Seychelles. The contribution includes licence fees, tonnage and transhipment payments, the annual financial contribution paid by the EU10 and most significantly, vessel expenditure in port, a proportion of which is retained in Seychelles. In addition the IOT tuna canning plant receives its raw material supplies from EU purse seiners. As well as the contribution of the DWF fleet vessels, there is a local semi‐industrial fleet of long liners and artisanal fishing vessels which target tuna and tuna like species, and high value demersal species. In addition, the Government of Seychelles (GoS) receives contribution through dividend payments from its 40% equity holding in Indian Ocean Tuna and state ownership of equity participation on other parastatals and enterprises whose activities are linked to fishing activities. The latter include:

SEPEC (bunkering of fishing vessels)

Seychelles Port Authority

Land Marine

Public Utilities Corporation (sale of electricity and water to IOT, the SPA and other activities linked to fishing, fishing vessel movements and fish processing, fishing boat repair and boatbuilding).

Macroeconomic data collected and analysed by the National Bureau of Statistics11 give estimates of the gross domestic product/value added contribution of the fisheries related industry, including fishing, manufacturing, wholesale and retail trade, transportation and storage. According to NSB data the contribution of fisheries related activities has increased from 6.4% to 7.7% of GDP over the period 2004 to 2008 (see Table 2.8 below). It is not clear from the NSB data the extent to which all the supply chain activities linked to fisheries are

10 The licence fees, over quota tonnage payments and the annual financial contribution are set out in the Fisheries Partnership Agreement signed between the Government of Seychelles and the European Union, 2005‐2011. 11 National Statistics Bureau (2009). Statistical Bulletin. National Accounts Estimates 2004 ‐ 2008. April.

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included as well as the contribution of all vessel expenditure in Seychelles and the revenue from shipping engaged in the transport of fish and fish products, air transport, licence fees, tonnage and other payments made by DWF fleet vessels which use Victoria as well as the EU financial contribution which made as part of the fishing partnership agreement between Seychelles and the EU. The contribution to the economy will be considered with reference to different economic sectors and sub‐sectors. 2.2.1 The Distant Water Fishing Fleet – Licence Revenues The distant water fishing fleet consists of 3 main segments (a) European purse seiners, mainly French and Spanish fishing under the EU/Seychelles Fisheries Partnership Agreement (b) Spanish‐owned purse seiners and East Asian owned longliners flying under the Seychelles flag (c) Mauritian flagged longliners fishing under the fishing agreement between Mauritius and Seychelles (d) Asian longliners fishing within the Japanese and Taiwanese fishing agreements with Seychelles (e) other, predominantly Asian longliners which have private licences to fish within the Seychelles EEZ. The contributions of these different segments of the DWF fishing vessels may be summarised as:

EU annual payments for the fisheries partnership agreement plus targeted expenditure (research, Seychelles Fishing Authority)

Payment of port fees (EU purse seiners, reefers and supply vessels)

Vessel expenditure in port, including bunkering provisions, repairs and associated taxes paid on these (mainly EU purse seiners, reefers and supply vessels)

Payment of fishing licence fees (EU purse seiners and Asian longliners)

Payment of VMS fees and fines for infractions

Tonnage payments by EU vessel owners where declared catches exceed reference tonnages as specified in the EU/Seychelles Fisheries Partnership Agreement

Provision of raw materials for the IOT tuna processing plant

The major contribution to the Seychelles economy in terms of licence fees, tonnage payments and the annual financial contribution comes from the EU purse seiner fleets.

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Table 2.2 summarises the licence payments received from foreign fishing vessels by country and by types of fishing vessel. It is clear from Table xx that the major contributors in terms of licence fees are purse seiners, the French and Spanish fleets, followed by the Seychelles flagged vessels (which are principally Spanish purse seiners). However the Seychelles flagged vessels which are predominantly Spanish purse seiners only contribute licence fees and vessel expenditure in Victoria and do not operate under the EU Fisheries Partnership Agreement. With respect to fishing licence revenue from longliners, the most important contributions came from Taiwan, Japan and China followed by Seychelles flagged vessels which were of Taiwanese origin. As a percentage, licences from European purse seiners were more important (60% of total revenue) than Asian longliner licence revenue (40% of total licence revenue), although in previous years, the contribution from Asian longliners was more important. However in addition to the licence receipts from EU vessels, Seychelles receives financial compensation and technical support under the EU Fisheries Partnership Agreement. Figures 2.8 and 2.9 illustrate the origins of licence revenues by flag. Table 2.2: Summary of Seychelles fishing licence receipts for foreign owned vessels, 2003 ‐ 2008

2003 2004 2005 2006 2007 2008

EU purse seiners 327,729 393,986 691,468 1,038,750 780,822 1,111,765

EU (Spanish) longliners

4,170 ‐ 7,500 13,125 8,219 30,882

Seychelles flagged purse seiners

449,985 577,500 600,000 855,000 720,000 660,000

East Asian longliners 2,810,094 2,767,678 3,355,110 2,202,200 2,001,520 1,145,500

Source: SFA

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Figure 2.8: Origins of Seychelles licence revenue from foreign purse seiners

Figure 2.9: Origins of Seychelles licence revenue from foreign longliners

Key to the returns to Seychelles is a comparison between the receipts from licence fees and other fishing access payments (e.g. EU tonnage payments and Japan goods & services agreements), transhipment fees and the value of declared catches (the rate of return). Table 2.3 summarises the rate of return for EU and Seychelles flagged purse seiners and Asian longliners. The data shows that a rate of return on 5% and 6% on EU and Seychelles flagged purse seiners is close to what Seychelles receives in licence fees, EU financial compensation and tonnage payments. For the East Asian longliners however there is on the face of it a disparity between declared catch values and the amount that Seychelles receives in licence fees and it is thought that Seychelles could extract more rent from these fishing activities when compared with the

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activities of East Asian longliners in the Pacific. More detailed breakdowns of the relationship between licence fees and the rates of return on declared catch value are given in Table 6.1 for the EU FPA, 6.4 for Seychelles flagged purse seiners and 7.1 on Japan, Korean and Taiwan flagged longline fleets. For the longliners the most important contributions in terms of licence fees over the period 2003–2005, were the Taiwanese followed by the Japanese and the Koreans. Table 2.3: Rate of return to GoS on gross reported catch value by purse seine and longline in Seychelles EEZ compared to actual payment (all in US dollars) Year Total declared

catch value Rate of return 5% Rate of return 6% Actual total

payments to Seychelles*

2003 77,524,808 3,876,240 4,651,489 5,500,281

2004 87,545,915 4,377,296 5,252,755 5,517,195

2005 71,243,717 3,562,186 4,274,623 5,212,407

2006 90,113,313 4,505,666 5,406,799 6,650,438

2007 90,419,120 4,520,956 5,425,147 5,276,100*

EU FPA

2008 54,524,959 2,726,248 3,271,498 5,206,920*

2003 9,302,276 465,114 558,137 449,985

2004 15,178,012 758,901 910,681 577,500

2005 7,451,606 372,580 447,096 600,000

2006 11,354,886 567,744 681,293 855,000

2007 13,241,953 662,098 794,517 720,000

Seychelles flagged purse seine

2008 8,352,031 417,602 501,122 660,000

2003 47,172,734 2,358,637 2,830,364 2,871,381

2004 77,360,210 3,868,011 4,641,613 2,789,750

2005 96,795,439 4,839,772 5,807,726 3,365,610

East Asian longline

2006 47,977,984 2,398,899 2,878,679 2,240,006

Source: SFA, Globefish, industry data and consultants’ estimates

* FPA total payment includes EU vessel licences, European Commission compensation and tonnage payments. It excludes tonnage payments for 2007 and 2008 as data not available to consultants. Longline data does not include additional payments; variously, admin, observer and Seychelles fishers fees, and goods & services agreement payments. Longline fleets catch reporting is very poor, hence no data for 2007 and 2008.

2.2.2 Distant water fishing fleet – vessel expenditure in Seychelles Table 2.4 summarises expenditure by fishing and fishing supply vessels visiting Victoria over the period 2000 ‐ 2007. It is evident from this table that the most important contribution to the Seychelles economy in terms of expenditure in country is that by the EU purse seiner vessels (predominantly French and Spanish) which use Victoria as a base for the unloading of tuna for the IOT factory and for transhipment to Europe and regional destinations such as Mauritius (mainly to supply the tuna processing plants of Princes Tuna and Thon des Mascareignes in Port Louis), secondly comes the contribution of port expenditure by reefers, while expenditure by

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Asian longliners and supply vessels is relatively small. Vessel expenditure includes bunkering, provisions, repairs, shipping agency and ship chandlery, crew advances and provisions. Table 2.4: Expenditure by foreign fishing vessels in Port Victoria, 2000‐2007 (SR)

2000 2001 2002 2003 2004 2005 2006 2007

TOTAL of which flagged by:

377.1 344.0 313.5 398.6 474.5 640.2 865.6 607.6

Spain 94.4 80.2 105.0 140.1 188.0 279.4 397.6 242.2

France 104.6 96.9 80.7 92.5 127.0 154.4 198.6 156.1

Mayotte ‐ ‐ ‐ ‐ ‐ ‐ 3.5 19.5

Seychelles 82.8 68.6 56.7 72.9 82.2 117.9 146.6 98.2

Taiwan 0.0 0.2 0.9 2.5 0.1 0.9 ‐ 0.6

Japan 7.9 5.9 5.2 7.9 1.0 2.2 1.9 1.6

REEFERS 21.0 22.4 18.3 27.7 34.0 41.6 50.2 29.7

SUPPLY VESSELS

5.9 3.1 2.7 5.2 6.2 14.7 25.5 25.3

Source: Seychelles Fishing Authority Table 2.4 demonstrates the key importance in terms of expenditure in Port Victoria of Spanish, French and Seychelles flagged purse seiners, the latter are all owned. By contrast, expenditure in port by East Asian longliners is marginal and is exceeded by reefers and supply vessels which predominantly serve the needs of EU purse seiner vessels. EU purse seiners are (a) landing in Seychelles for IOT (b) transhipping for other destinations, including Europe, Mauritius , Madagascar and Kenya (c) using Victoria, Seychelles as a base for their activities in the Western Indian Ocean. Table 2.5 gives a total breakdown of vessel expenditure by category spent in Seychelles. The most important categories of expenditure are gas oil which in 2007 accounted SR 444.9 million) followed by stevedoring which accounted for 29% of total expenditure (SR 31.2 million). Consideration is given to the vessel expenditure which is retained in Seychelles in terms of net foreign exchange retention by category of expenditure in section 2.6 of this report.

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Table 2.5: Breakdown of foreign fishing vessel expenditure in Port Victoria 2000‐07, (in SR)

2000 2001 2002 2003 2004 2005 2006 2007

Port dues 8,452,851 8,016,885 6,666,162 7,902,122 7,170,981 9,540,950 8,833,285 7,173,316

Agency fees 2,997,271 2,574,302 2,662,029 3,703,205 3,458,235 3,820,489 4,430,597 4,027,715

Ship chandlers 7,159,903 6,937,187 6,496,505 7,739,255 7,358,105 7,116,050 8,627,063 9,841,756

Telephone 110,687 130,152 224,846 198,641 129,994 211,464 191,868 156,957

Travel 119,230 106,618 93,857 121,142 158,617 226,897 311,597 187,312

Stevedoring 34,481,269 30,665,374 34,813,671 46,450,240 41,234,196 46,007,547 58,001,545 31,234,862

Agent transport

657,227 587,705 517,365 667,767 874,338 1,250,715 1,717,599 1,032,511

Advance to master 6,151,895 4,876,863 3,753,737 4,651,195 3,178,273 4,054,976 3,588,791 4,585,422

Water 322,655 242,864 278,212 275,294 236,926 196,960 200,320 189,760

Plant hire 5,672,251 4,159,506 3,810,304 4,972,775 6,211,811 4,953,219 6,269,970 4,556,476

Crew salary 2,972,917 2,405,272 1,592,456 1,107,826 1,955,211 2,244,501 2,400,398 1,853,124

Marine brokerage 18,680 22,441 21,523 17,801 139,794 19,807 14,182 18,913

Fish purchase 1,099,031 1,020,742 1,062,339 1,052,529 1,069,500 855,085 988,696 941,168

Garbage 1,099,031 1,020,742 1,062,339 1,052,529 1,069,500 855,085 988,696 941,168

Casual labour 872,731 958,110 425,483 349,410 575,620 467,039 313,801 178,303

Bond certification 31,700 28,868 38,135 35,005 22,300 26,430 27,511 26,812

Medical 1,304,706 766,703 472,452 481,120 411,922 622,341 552,947 538,207

Custom bills 1,043,008 1,082,272 1,523,361 1,607,251 1,701,397 1,396,360 2,234,103 2,855,287

Staff overtime 1,985 ‐ 651 525 ‐ ‐ ‐ 1,350

Electricity 2,150,565 1,440,720 1,214,702 1,191,773 846,668 460,880 961,342 797,476

Miscellaneous fuel ‐ ‐ 432 58 ‐ 1,670 480 8,693

Slipway engine 3,970,501 4,162,107 3,192,363 4,429,445 3,967,331 5,065,531 2,401,859 2,202,639

Other 3,166,906 2,493,671 2,492,648 2,350,491 2,126,497 1,906,275 2,103,821 2,725,806

Entertainment 1,515,616 1,703,230 1,974,007 2,069,168 2,307,242 2,295,294 2,628,440 3,224,902

Total no oil 86,272,779 76,207,498 75,095,375 93,929,660 87,049,052 94,807,145 107,849,206 81,349,145

Gas oil 204,566,595 191,604,494 163,333,592 210,738,512 300,380,401 450,633,529 649,855,967 444,883,752

Total foreign owned fishing vessel expenditure in Port Victoria 376,211,989 343,214,327 312,818,547 397,094,741 473,633,910 639,036,239 865,494,084 605,532,831

Source: SFA database

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In addition, the foreign fishing fleets make a significant contribution to the revenues of the Seychelles Port Authority. The main contributions are the revenues from EU purse seiners, reefers and supply vessels. These include payments for port and berth dues, pilotage, towage, berthing and unberthing, maritime safety and the hire of motor boats. In addition the SPA administers a tonnage payment for fish transhipped in Victoria. In addition SPA pays dividends to government (as a parastatal) which may vary year on year depending on investment requirements. Table 2.6 shows the contribution of the fisheries sector from payments to the SPA. The major contribution from fishing vessels is from reefers which serve the EU purse seiner fleet and from purse seiners. In addition the Port Authority receives income from transhipment fees. The contribution of fisheries vessels to port revenues is higher than the 17 per cent of total SPA revenue shown for 2007. In addition a proportion of container traffic12 is also connected with the export of tuna as either frozen or canned products. Table 2.6: Contribution of the fisheries sector to Seychelles Port Authority income, 2005 – 2007 (SR) 2005 2006 2007

Total Revenue (SR) 55,235,204 51,436,430 50,240,899 Purse seiners 2,096,363 2,187,513 1,861,917 Long Liners 242,305 183,028 99,384 Reefer Vessels 4,692,051 5,085,559 3,814,716 Supply Vessels 155,084 114,754 149,403 Transhipment of fish 5,997,135 2,980,117 2,520,856 Fishing Vessels as a % of total port revenue

23.9 20.5 16.8

Source: Seychelles Port Authority 2.2.3 The Seychelles‐owned longline vessels There are a number of Seychelles flagged semi‐industrial fishing vessels which are based in Victoria. Their contribution to the national economy is relatively small and it has declined since initial highs in the mid to late‐1990s. The contributions come from:

Licence fees

The landing of fish for sales as fresh, frozen, chilled and smoked fish into the domestic and to a lesser extent the export market.

Expenditure on bait, provisions and bunkering.

Employment of crew

12 The team was unable to obtain from the SPA data on the proportion of container vessel revenue linked directly to the transport of fish and fish products.

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In addition to the small semi‐industrial fishing fleet, there is some subsistence and semi‐subsistence fishing in the country but there are no estimates of the economic importance of this segment of the local fishing fleet (pers. comm. SFA) 2.2.4 Fish processing Fish processing in Seychelles is dominated by the tuna canning and products factory of Indian Ocean Tuna (IOT) which is 60% owned by MW Brands.13 The contribution of the IOT factory is mainly limited to direct, indirect and induced employment generation which is estimated at 1,800 – 2,000 Seychellois. But also, IOT’s exports are a huge percentage of the Seychelles’ total and its imports are a very significant percentage of the total meaning that IOT activity is a major driver for the current frequency of cargo vessels visiting Seychelles, without IOT these will almost certainly decline and freight costs might well increase. As a 40% shareholder in IOT, GoS receives an annual dividend which is capped at USD700,000 (see Section 9). IOT operates in the SITZ so foreign exchange payments for fish are not recorded in the Central Bank statistics. On another issue, IOT does not pay full SSF employer contributions. Probable transfer pricing between IOT and MW Brands Seychelles means that revenue and profits are made offshore. This means that Seychelles loses a proportion of the value added which is exported and that the estimated contribution of IOT operations to gross domestic product were estimated at 3.5% of GDP (SR 185 million) in 2007.14 2.2.5 Aggregate value added derived from tuna and other fishing activities in the

Seychelles Recent data produced by the National Bureau of Statistics15 gives estimates of the value added contribution of fisheries and ancillary activities to the Seychelles economy. It should be noted that previously, the national accounts data did not produce disaggregated figures for the fisheries sector and associated activities. As one would expect from an economy which heavily depends on the activities of distant water fishing fleets operating within its EEZ, the majority of the value added comes from fish processing – IOT, Oceana and Sea Harvest. However it is not clear from NSB data whether these data take into account the contribution that Seychelles receives from licences, expenditure by foreign vessels, fishing partnership payments.

13 Much of the financial and economic data on Indian Ocean Tuna was obtained from a report to the World Bank produced by Caillart, B. and Henry, G. (2008). Benchmark Tuna Process in Seychelles. 14 Caillart and Henry: 2008 15 National Statistics Bureau (2009). Statistical Bulletin. National Accounts.

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Seychelles 2.8: Contribution to gross domestic product/value added16 by fisheries related industry at current market prices (SR million)

2004 2005 2006 2007 (provisional)

2008 (indicative)

Fishing 61.8 60.4 68.0 66.4 78.1 Manufacturing, includes fish processing; repair of fishing equipment and fishing vessels

143.1 167.3 194.7 276.1 366.0

Wholesale and retail trade, includes fuel sales, retail of fishing equipment

51.2 61.1 62.8 72.9 146.3

Transportation and storage, includes service activities incidental to fishing, service activities incidental to other water transport, other support activities for transportation and warehousing

43.3 60.1 65.0 61.6 79.4

Total fisheries related Value Added 299.4 348.9 390.4 476.9 669.9

Source: NSB Statistical Bulletin (2009). National Accounts Estimates The report by Caillart and Henry17 on the operations of IOT indicate that through transfer pricing, much of the value added generated by the factory, one of the largest tuna processing factories in the world, is provided to MW Brands. Their report estimates that the total sales by IOT were valued at €129.22 million in fiscal year 2006, while for fiscal year 2007, the value of sales was € 164.4 million. After deducting intermediate consumption, the value added was estimated at 14% of total turnover or € 18.5 million in 2006. Caillart and Henry estimate that the contribution of IOT to GDP was 3.5% (SR 185 million), while if offshore profits of € 15 million were retained in the Seychelles economy, the contribution of IOT to GDP would be 6.5%. The practice of transfer pricing is common with multinational companies and therefore there is nothing unusual in the practice of IOT and the MW Brands group, although as is shown elsewhere in this report there may be other approaches for the GoS to claw back some of the benefits and reduce some of the subsidies from which IOT has benefited.

16 Gross Domestic Product is (GDP)defined as the sum of value added generated by the productive activities in the Seychelles economy. For each productive unit in the economy value added (VA) may be calculated as Gross Output Value minus the value of intermediate consumption. Gross output is the value of goods and services produced plus the margins on goods and services resold. Intermediate consumption is the value of goods and services consumed in the production process or as the value of inputs required to produce a a given service. Alternatively value added may be estimated as the sum of compensation to employees (incomes) plus taxes less any subsidies plus gross operating surplus (net profit before depreciation, financial costs , investment income and bad debts). 17 Banque mondiale (2009). Benchmark Tuna Process in Seychelles. Projet de rapport final v.2. Juin. Report by Caillart and Henry, Océanic Development and Fisheries and Agriculture Economic Consulting. (report to the World Bank)

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In the absence of complete company gross revenue data and accounting data which would give a breakdown of value added from fisheries and fisheries related activities, estimates have been made of value added with assumptions on the relative proportion of company turnover which relates to fishing and fishing related activities. Given the confidential nature of the taxation data used in our analysis, we have anonymised this information by grouping firms and parastatals into groups of categories (Table 2.9). These estimates are detailed in Table 2.10. We have used an average value added/turnover ratio of 30 per cent. With existing partial accounting data, the estimate of value added from fishing and fishing related activities is approximately SR 614 million in 2008 which is not far from the NSB estimate for fisheries and fisheries related value added of SR 670 million. Table 2.9: Categories of fisheries‐related firms involved in value added in the Seychelles

Institution/Enterprise/Company General category used in Figures 2.5 to 2.7

Refined Category

Impress Private sector production Canned tuna production Indian Ocean Tuna (IOT) Ltd Private sector production Canned tuna production Oceana Fisheries Co. Ltd. Private sector production High value processing Sea Harvest Private sector production High value processing CASAMAR Private sector services Net and vessel repairs

Marine and Engineering Works (Mazrzocchi)

Private sector services Net and vessel repairs

Naval Services (1994) Ltd Private sector services Net and vessel repairs Seychelles Electronic Maritime Co. Ltd (SEYCMI)

Private sector services Net and vessel repairs

Bernard Toulon Private sector services Net and vessel repairs

Seychelles Fishing Authority Government/parastatal regulation

Parastatal services

Seychelles Petroleum Company (SEPEC) Government/parastatal services

Parastatal services

Seychelles Port Authority Government/parastatal services & Government/ parastatal regulation

Parastatal services

Hunt, Deltel & Co Ltd Private sector services Services to vessels (stevedores, fish testing)

Landmarine Private sector services Services to vessels (stevedores, fish testing)

Société de Contrôle d’Expertise Maritime et Pêche

Private sector services Services to vessels (stevedores, fish testing)

Aquarius Shipping Agency Private sector services Vessel supplies and agents Chandler 99 Private sector services Vessel supplies and agents CMB Private sector production Vessel supplies and agents Echebastar/ Hartswater Ltd. Private sector services &

Private sector production Vessel supplies and agents

Southern Ocean Ship Chandlers Private sector services Vessel supplies and agents

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Table 2.10: Estimates of value added from fishing and fishing associated companies (all in SR)

2000 2001 2002 2003 2004 2005 2006 2007 2008

Canned tuna production

206,358,816 214,217,430 302,033,085 283,556,643 270,792,375 275,579,307 278,076,099 340,555,623 ‐

High value processing

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 13,950,000

Net and vessel repairs

1,056,360 901,080 796,680 819,900 731,940 834,120 786,540 16,284,000 16,284,000

Parastatal services

‐ ‐ 74,819,760 88,671,960 113,248,320 152,769,480 185,684,160 229,694,040 237,600,000

Services to vessels

9,117,265 9,754,457.10 9,438,414 9,526,388 10,230,314 10,399,470 7,171,800 6,310,920 ‐

Total value added

216,532,44 224,872,967 387,087,939 382,574,891 395,002,949 439,582,377 471,718,599 592,844,583 613,961,795

Source: Ministry of Finance data and consultants’ estimates based on interviews with companies

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2.3 Net Foreign Exchange Contribution to the Seychelles Economy The fisheries sector provides important sources of foreign exchange to the Seychelles economy. However what is key to the country are the net foreign exchange benefits. DWF fishing vessels generate foreign exchange through the payment of licence fees, fishing agreement payments (the EU FPA), expenditure on port dues, bunkering, food and other supplies, processed tuna and other fish exports, air transport with Air Seychelles for crew changes on EU purse seiners and other sources of foreign exchange revenue. However while the EU purse seine fleet makes a contribution through EU access agreement payments, other targeted payments and vessel expenditure in Victoria, the Asian longliner fleet only makes contributions through the payment of licences and very occasional port calls as no longliners currently land fish in Seychelles. Parker (1986)18 estimated gross foreign exchange receipts from the fisheries sector and associated activities at USD 24.27 million in 1986, while the net foreign exchange receipts in the same year were USD13.91 million. These figures show that the ratio of net foreign exchange receipts were 57% of gross foreign exchange receipts. It should be noted that the estimates by Parker appear to exclude exports from the Seychelles fishing fleet. Parker also estimates the first round leakages from the Seychelles economy of different activities associated with fishing. These leakages are summarised in Table 2.11 Table 2.11: Leakages from the Seychelles economy of items associated with fisheries

Item Leakage Factor (%) Licence fees 0 Bunkers (fuel) 88 Other 20 Customs 0 Stevedoring 5 Travel 80 Ship chandlery 25 Agency fees 25 Engineering and telecoms 40 Cash advances 0 Port dues 0 Cold storage 50

Source: Parker (1986) Kasprzyk et al (1994)19 in a study on the impacts of industrial tuna fishing in the member states of the Indian Ocean Commission estimated that in 1994, total employment generated by the industrial fishing sector was 1,166 persons with a gross value added contribution to the

18 Parker, D. (1986). Economic Activity in the Seychelles. Industrial Fisheries Sector. 19 Kasprzyk, Z. Ralison, A. Et alcxz (1996). Étude d’Impacts des Activités Thonières Industrielles sur l’Économie des États‐Membres de la Commission de l’Océan Indien.

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economy of USD8.14 million after a loss of value added of USD1.39 million from fish processing. The gross contribution to foreign exchange earnings in 1994 was USD49.8 million of which the contributions were:

Purse seiner and reefers/cargo USD20.37 million

Longliners USD 1.07 million

Fish processing USD 20.39 million

Fishing agreements USD 7.94 million The net contribution to foreign exchange earnings was estimated at USD22.52 million which indicates that in 1994, Seychelles was losing 55% of the foreign exchange earnings from industrial fishing activities through leakage outside the economy. Kasprzyk et al made estimates of the foreign exchange retention which are presented in Table 2.12. The Kasprzyk study observes that the net retention of foreign exchange from tuna related activities had fallen between 1989 and 1994 with net foreign exchange receipts declining from USD 17.9 to USD 11.3 million. There are various reasons given for this including the decrease in expenditure by purse seiners, the decrease in visits by Asian longliners (mainly Japanese). The main reasons for the drop in expenditure by foreign tuna fleets in Seychelles over the period 1991 – 1994 (Kasprzyk: 1994) were given as:

The fall in expenditure on fuel bunkering and the fall in the average fuel price.

A decline in handling, ship chandling and port duty expenditure.

The fall in port duty expenditure was due to (a) a drop in port tariffs and (b) less average vessel time in port

With respect to the net foreign exchange earnings over the period 1991 and 1994 the main features were:

The dominance of port handling and storage services in net foreign exchange contribution (between 30.9% and 36.1%)

Followed by fuel bunkering (between 7.1% and 13.3% of net foreign exchange earnings)

Crew advances and payments of local sailors (12.2% and 14.3%)

A decrease in the net foreign exchange benefits from port operations but with

An increase in the net foreign exchange benefits from vessel repair and maintenance (5.8% in 1991 and 14.3% in 1994).

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Table 2.12: Estimates of foreign exchange retention in Seychelles (% retention)

Fleet segment Category Purse seiners and Longliners (1986)

Purse seiners (1994)

Longliners (1994)

Port duties 100 99 99 Handling 95 98 0 Vessel repairs and maintenance

60 88 90

Bunkering 12 14 21 Ship chandlery 75 47 58 Consignment 75 93 96 Crew advance 100 73 81 Wages – local sailors 100 100 0 Non commercial services

100 100 100

Other 80 80 79

Source: Parker (1986) and Kasprzyk et al (1996). However against foreign exchange revenue, there are foreign exchange for the repayment of external loans, expatriate labour (in the IOT tuna canning factory as well as in the tourism sector, hydrocarbon fuels, machinery and equipment spare parts, sheet metal for tuna canning, capital investment. There has been serious scarcity of foreign exchange in the Seychelles since the late 1990s which underlines the importance of estimating the net foreign exchange benefits of the fishing and fish processing sectors. The estimates by Parker (1986) and Kasprzyk (1994) are global and we have tried to provide a more detailed estimate of vessel expenditure and the proportion retained within Seychelles from interviews with both parastatals and private sector companies. The current situation with respect to foreign exchange receipts and retention is based on estimates using on data from a number of sources and on best estimates. Although Parker and Kasprzyk made estimates of foreign exchange retention from the expenditure of foreign vessels in Victoria and licence fees, we could find no analysis of how these retention percentages were estimated. The estimates for retention used in this report are based on a combination of their data and from the interview programme in Seychelles in 2009. These are detailed in Table 2.13. It is evident that the most important items of vessel expenditure in Victoria by foreign fishing vessels (predominantly EU purse seiners), reefers and supply vessels are, in order of priority, bunkering (fuel) and stevedoring. SFA vessel expenditure data indicates that a relatively low proportion of vessel expenditure was spent on port dues, vessel services and repairs.

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Table 2.13: Percentage breakdown of total vessel expenditure 2000‐2007 and assumed percentage retention of foreign exchange

Item % of total vessel expenditure

in Victoria 2000 ‐ 2007

% estimated foreign exchange retention in Seychelles

Port dues 1.6% 100% Agency fees 0.7% 80% Ship chandlers 1.5% 50% Telephone 0.0% 70% Travel 0.2% 20% Stevedoring 8.0% 95% Agent transport 0.3% 90% Advance to master 0.9% 0% Water 0.0% 90% Plant hire 1.0% 80% Crew salary 0.4% 0% Marine brokerage 0.0% 50% Fish purchase 0.2% 0% Garbage 0.1% 100% Casual labour 0.1% 100% Bond certification 0.0% 80% Medical 0.1% 100% Custom bills 0.3% 100% Staff overtime 0.0% 100% Electricity 0.2% 80% Miscellaneous fuel 0.0% 10% Slipway engine 0.7% 40% Other 0.5% 50% Entertainment 0.4% 100% Total no oil 17.5% 15% Gas oil 65.0% 15%

Source: SFA database for vessel expenditure 2000‐07 and Parker (1986), Kaprzyk (1994) and stakeholder interviews for estimated foreign exchange retention. Our estimates of the proportion of vessel expenditure20 retained in Seychelles are based on the estimates of Parker (1996) and Kaprzyk (2004) together with our own estimates (see Table 2.14). An average annual retention percentage is based on the annual average expenditure by category and for each category a retention coefficient is estimated over the period 2000 to 2007. The average annual retention is estimated as 26 per cent of total so that vessel expenditure retention varies year on year according to the distribution of expenditure. The reason for the low retention rate is due to the fact that the major proportion of vessel

20 The vessel expenditure data was obtained from SFA records.

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expenditure in absolute and percentage terms is on bunkering fuel, in addition, multiple other elements are import dependent (e.g. chandlery, spare parts, etc). Table 2.14: Actual vessel expenditure and estimated foreign exchange retention in Seychelles (all in SR except for final row in USD

2000 2001 2002 2003 2004 2005 2006 2007

Port dues 4,372,663 3,910,118 3,442,135 4,442,793 5,817,146 8,321,264 11,427,537 6,869,505

Agency fees 1,517,844 1,357,285 1,194,838 1,542,188 2,019,255 2,888,488 3,966,741 2,384,551

Ship chandlers 2,101,572 1,879,266 1,654,346 2,135,278 2,795,814 3,999,334 5,492,258 3,301,595

Telephone 64,687 57,845 50,921 65,725 86,056 123,101 169,054 101,624

Travel 119,230 106,618 93,857 121,142 158,617 226,897 311,597 187,312

Stevedoring 21,065,814 18,837,451 16,582,887 21,403,671 28,024,778 40,088,661 55,053,489 33,094,642

Agent transport 657,227 587,705 517,365 667,767 874,338 1,250,715 1,717,599 1,032,511

Advance to master ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Water 119,187 106,579 93,823 121,098 158,559 226,815 311,483 187,244

Plant hire 2,234,366 1,998,013 1,758,880 2,270,201 2,972,475 4,252,043 5,839,302 3,510,216

Crew salary ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Marine brokerage 9,359 8,369 7,368 9,509 12,451 17,811 24,460 14,704

Fish purchase ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Garbage 377,229 337,325 296,952 383,279 501,844 717,874 985,851 592,631

Casual labour 283,949 253,913 223,523 288,504 377,750 540,362 742,075 446,088

Bond certification 12,976 11,603 10,215 13,184 17,263 24,694 33,912 20,386

Medical 352,943 315,608 277,834 358,603 469,535 671,657 922,382 554,477

Custom bills 924,088 826,337 727,437 938,909 1,229,355 1,758,558 2,415,016 1,451,754

Staff overtime 309 276 243 314 411 588 808 486

Electricity 497,641 445,000 391,740 505,622 662,033 947,020 1,300,536 781,799

Misc fuel 78 69 61 79 103 148 203 122

Slipway engine 806,539 721,222 634,903 819,474 1,072,974 1,534,860 2,107,812 1,267,082

Other 676,094 604,576 532,217 686,937 899,437 1,286,619 1,766,906 1,062,151

Entertainment 1,215,354 1,086,793 956,720 1,234,846 1,616,839 2,312,843 3,176,212 1,909,336

Total no oil 7,237,932 6,472,296 5,697,658 7,354,015 9,628,938 13,773,927 18,915,642 11,370,876

Gas oil 26,921,678 24,073,876 21,192,590 27,353,453 35,815,091 51,232,487 70,357,230 42,294,274

Total fishing vessel expenditure retained in Seychelles (SR)

71,568,758 63,998,145 56,338,515 72,716,591 95,211,064 136,196,766 187,038,105 112,435,365

Total fishing vessel expenditure retained in Seychelles in USD

12,577,989 10,828,789 9,597,703 13,391,637 18,066,616 24,495,821 34,068,872 16,756,388

Source: SFA database and consultants’ estimates 2.4 Employment Chain Analysis The estimates of employment creation linked to the fishing and fish processing sector in Seychelles are based on a programme of interviews and data collection in Seychelles which were carried out during January 2009 and followed‐up in a series of email communications. Employment in the fisheries and associated sectors includes direct employment in fishing activities and fish processing as well as employment in other activities which are linked to fishing and fish processing. These other activities include input production for processing (steel plate

35

and packaging, electricity and water), port activities, transport (sea, air and road), shipping agents and chandlery and other activities relating to the fishing and fish processing sectors. A literature check was carried out on employment multipliers in the fisheries and fish processing sector in the absence of specific data for Seychelles, the estimates provided by Gillett, McCoy, Rodwell and Tamate (2001) were used. The data by Gillett et al relates to the tuna sector in the Pacific Ocean and is therefore of relevance to Seychelles as it includes industrial and local fishing fleets and tuna processing in island economies. Total employment may be estimated using Type I (direct and indirect employment) and Type II employment multipliers21 (direct, indirect and induced employment) from other sources. It is important to avoid double counting between sectors. A report by Gillett et al22 prepared for the Asian Development Bank and the Forum Fisheries Agency which relates to the tuna sector in the Pacific Islands estimates that the employment multiplier varies between 1: 1 and 1:5 between those fishing at sea and indirect employment generation. Gillett thinks that the employment multiplier will vary between islands in the Pacific however that a conservative ratio of two indirect jobs for every direct job in fishing and fish processing. However, in the case of the Seychelles the direct and indirect employment is linked to the activities of purse seiners which use Seychelles as a base, the fish processing plants of IOT and to a lesser extent Oceana and Sea Harvest, and the activities of the Seychelles semi‐industrial fishing fleet and other fishing activities. Given that Table 2.15 includes many of the indirect activities linked to the fishing sector in Seychelles, a low employment multiplier of 1.2 has been applied to include both indirect and induced employment. In addition it should be recognised that for every employee in the fishing sector there are other family members who benefit from the income from such employment. Estimates of direct employment related to the tuna and other fisheries sectors in Seychelles are based on data collected by the study team during their visit to Seychelles as well as from subsequent data sent by companies. Table 2.15 summarises the direct employment with full time equivalent (FTE) workers. To these are added FTE employment calculations for part‐time/casual labour including stevedores, artisanal and semi‐industrial fishers and fishing crews. Table 2.15 shows that direct employment linked to tuna and other fishing activities has increased in Seychelles from nearly 1,200 in 1994 persons to nearly 4,000 persons.

21 The employment multiplier is the ratio of direct plus indirect (plus induced if Type II multipliers are used) employment changes to the direct employment change. Induced employment is that created as a result of expenditure on goods and services from the incomes received by direct plus indirect employment (Scottish Government: 2009). 22 Gillett 2001.

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Table 2.15: Seychelles – Employment in the Fisheries and Associated Sectors

Institution/Enterprise/Company Kasprzyk 1994

IOC MCS study (2005) and Barnes, Campling, Mfodwo

(2009) Air transport 3 Aquarius Shipping Agency 14 Bernard Toulon 8 CASAMAR 55 Chandler 99 10 CMB 2 Competent authority/fish inspection unit SFA

9

Echebastar/ Hartswater Ltd. 2 FAD manufacture 5 Hunt, Deltel & Co Ltd 35 Impress 76 IOT/seychellois 1,320 IOT/expatriate 1,000 Landmarine 15 Mahe Shipping 3 Marine and Engineering Works (Marzocchi) 19 Misc vessel agents 14 Naval Services (1994) Ltd 20 Oceana Fisheries Co. Ltd. 52 Sea Harvest 45 Seychelles Bureau of Standards 37 Seychelles Coastguard 10 Seychelles Electronic Maritime Co. Ltd (SEYCMI)

20

Seychelles Fishing Authority 110 Seychelles Petroleum Company (SEPEC) 40 Seychelles Port Authority 110 Seychelles fishing fleet (semi‐industrial/artisanal)

785

Société de Contrôle d’Expertise Maritime et Pêche

24

Southern Ocean Ship Chandlers 8 TOTAL 1,166 3,829

Sources: Kaspazyk (1994), SFA, and consultants interviews in 2006 and 2009

Table 2.15 indicates that direct employment in fisheries related activities in Seychelles have varied between 1,166 in 1994 (Kasprzyk) and the current estimate of 3,829 persons employed. Assuming a moderate employment multiplier of 1.2 to include other indirect and induced employment would give a total direct, indirect and induced employed in the fisheries sector as 4,595 persons. A ‘best case scenario’ with an employment multiplier of 1.5 would give total direct, indirect and induced employment as 5,744 persons. In addition assuming that direct and indirect employment is linked to other family members for Seychellois employees and assuming that

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there are 2,800 Seychellois employees out of the total figure of 3,82923 employees with a ratio of 3 persons per employed person this would be equivalent to 8,400 persons directly or indirectly dependent on the fisheries sector. In addition to the employment created directly by fish processing, SFA and other parastatals (SEPEC, SPA), net and vessel repairs and services to vessels port activities, there is also the employment created by the Seychelles fishing fleet. According to SFA data, there are 785 registered fishers and 574 boat owners which include the semi‐industrial and subsistence fishing fleets. 2.5 Government Revenue from the Export‐orientated Fisheries Sector Government revenue from the tuna chains includes access payments, licence fees and port duties from the primary activities within the tuna supply chain (fishing at sea up to port entry) including direct and indirect taxes. Secondary value added includes all the activities related to the tuna supply chain and other fishing activities after the landing of fish in Victoria. This is taken to include taxes, licence fees and royalties derived from on shore fish processing and preparation, the supply of utilities and other goods and services which are related to fisheries in the Seychelles EEZ. Figures 2.2, 2.6 and 2.7 above illustrate conceptually the internal and external supply chain relationships for the fisheries sector in Seychelles for (a) the primary value added supply chain and (b) the secondary value added supply chain. Government revenue from taxes does not apply in the International Trade Zone (SITZ) . This means that the GoS receives no business tax revenue from the operations of IOT, Impress or the DWF, which are treated as SITZ firms. Government revenue streams are summarised in Table 2.16.

23 At IOT there are around 1,000 foreign employees from, variously, Philippines, Bangladesh, Kenya and other countries.

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Table 2.16: Seychelles – Government Revenue from the Tuna and associated supply chain Supply Chain Segment Contribution to Government

Revenue Comment

Distant water fleet (DWF) fleet activities in the Seychelles EEZ

Fishing access agreement payments Licence fees EU financial compensation payments VMS fees

DWF fleet activities in Victoria port

Transhipment fees Port dues and associated piloting and berthing Contributions (social security) and taxes paid by the SPA, shipping agents and ship chandlers

Paid mainly by EU fishing vessels Port dues are paid to SPA, a government parastatal DWFs receive significant tax break as treated as SITZ firms

Seychelles fishing fleet Licence fees Land based activities associated with fishing vessels

Contributions (social security) and taxes paid by shipping agents and ship chandlers, including stevedoring, vessel repair and equipment suppliers

Dividends paid by those companies with state participation (Land Marine and IOT)

Indian Ocean Tuna Capped dividends paid to Government. Taxes paid by and social security payments paid on Seychellois workers Payments to government parastatals for water and electricity

The dividends are paid according to the annual results of IOT. IOT has agreed concessions on the payment of social security with the GoS. Public Utilities Corporation has lost money through IOT advanced payment on electricity as agreed by GoS.

Other fish processing activities Corporation and GST tax paid to Government

These firms receive significant tax breaks in form of Agriculture and Fisheries (Incentives) Act 2005

Other activities linked to fishing Corporation and GST tax paid to Government

Air transport of fishing vessel crew changes; road transport Professional services (accounting, legal and insurance services)

All sub sectors Social security contributions paid to government

Relatively low contributions from the major employer IOT (because of government deal on private SITZ health insurance requirement, where IOT only pays 5% SSF contribution)

Table 2.17 shows the social security payments that have been made by companies operating in the fisheries sector and ancillary activities. The estimates of social security payments which may be imputed to fishing and associated activities are based on company interviews and team

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estimates. Over the period 2004 – 2008, the main contributors to social security payments are enterprises grouped under the categories detailed above in Table 2.9. Table 2.17: Social Security payments made by enterprises and companies operating in the tuna and associated fisheries and fish processing sectors

2004 2005 2006 2007 2008 Actual employer Contributions

Canned tuna production SR 2,083,763 2,326,502 2,240,869 2,024,571 1,145,995

High value fish processing SR 264,017 275,100 258,424 269,768 146,692

Net and vessel repairs SR 719,780 591,602 545,556 638,865 836,134

Parastatal services SR 3,173,960 4,531,117 5,260,922 4,991,399 5,306,922

Services to vessels SR 5,881,122 5,644,266 6,991,789 4,918,666 6,443,386

Vessel supplies and agents SR 786,079 704,650 805,825 688,797 731,546 Total Employer SSF contributions SR 12,908,721 14,073,237 16,103,386 13,532,066 14,610,675 Total Employer SSF contributions USD 2,321,712 2,563,431 2,399,909 2,067,294 1,696,738 Estimated employee Contributions

Canned tuna production SR n/d n/d n/d 2,094,000 1,256,400

High value fish processing SR n/d n/d n/d 145,500 87,300

Net and vessel repairs SR n/d n/d n/d 67,530 40,518

Parastatal services SR n/d n/d n/d 321,000 192,600

Services to vessels SR n/d n/d n/d 93,000 55,800

Vessel supplies and agents SR n/d n/d n/d 51,000 30,600 Total Employer and Employee SSF contributions SR n/d n/d n/d 16,304,096 16,273,893 Total Employer and Employee SSF contributions USD n/d n/d n/d 2,490,777 1,889,887

Source: SSF (2009), SR to USD conversion done using annual average exchange rates available here: http://www.oanda.com/convert/fxhistory

Only partial time series data was available for employers’ contribution to the SSF. Data on the employers’ contributions is based on data from the SSF while employees’ contributions are based on our estimates of employment, an annual average wage and a percentage contribution by the employee to the SSF.24 The employees’ contributions have been estimated for 2007 and 2008. In addition to social security payments, GoS derives income from corporate/business taxes and from GST. Only partial information was made available on the taxation revenue generated by the fisheries sectors. Table 2.18 summarises from the data made available the taxation which is

24 It has been assumed that the average monthly wage was SR2,500 in 2007 with an employee contribution of 5 per cent while from 2008 the average monthly wage was estimated at SR3,000 with an employee contribution of 2.5 per cent.

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generated from fisheries and related activities. It should be noted that the main contributors to taxation are SEPEC, shipping agents and stevedore services. Data was not made available for Oceana and Sea Harvest nor the Port Authority. It should also be noted that IOT and Impress do not pay business taxes. Table 2.18 includes the following types of taxes: trades tax, GST on imports and business taxation.; again, this uses the categories of firms and parastatals detailed above in Table 2.9 Table 2.18: Taxation generated from fisheries and fisheries related activities (SR)

2004 2005 2006 2007

Canned tuna ‐ ‐ ‐ ‐ High value processing

‐ ‐ ‐ ‐

Net and vessel repairs

227,225 271,160 311,293 723,070

Parastatal services 5,276,580 17,731,120 41,606,753 18,023,579 Services to vessels 6,744,487 9,976,338 13,433,960 19,317,430 Vessel supplies and agents

1,903,740 1,719,122 1,954,461 2,655,276

TOTAL (SR) 14,152,032 29,697,740 57,306,467 40,719,356 TOTAL (USD) 2,685,395 5,341,320 10,438,336 6,068,458

Source: Ministry of Finance and team estimates 2.6 Summary: The Economic Contribution of Fisheries to the Seychelles Economy Table 2.19 summarises the contribution of fisheries to the Seychelles economy. This data is based on data provided by the SFA, Ministry of Finance and stakeholder interviews in the Seychelles. It should be noted that this data are in some cases incomplete; however the data do indicate the key contributions to Seychelles from fisheries and related activities. While our estimate is that value added from fisheries and related sectors is USD 65.6 million, recent NSB data give a figure of USD 71.6 million (NSB: 2009). Overall the most significant contributions to the economy are from IOT value added, retained vessel expenditure in Seychelles, followed by licence fees and the EU financial contribution.

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Table 2.19: Seychelles – Key Economic Contributions from the Fisheries Sector (all in USD)

2003 2004 2005 2006 2007 2008

Licence fees 3,652,312 3,829,176 4,744,077 4,109,075 3,780,561 2,948,147

of which EU vessels 781,884 971,486 1,298,968 1,906,875 1,509,041 1,802,647

EU financial contribution 3,079,400 2,802,600 2,768,000 3,300,000 3,011,250 2,805,000

Vessel expenditure retained 13,391,637 18,066,616 24,495,821 34,068,872 16,756,388

Port dues received from fishing vessels

no data no data 1,223,903 1,318,912 848,351 no data

Transhipment payments in port

no data no data 1,078,621 542,826 375,686 no data

Taxation (fisheries related) no data 2,685,395 5,341,320 10,438,336 6,068,458 no data

Social security payments (fisheries related)

no data 2,321,712 2,563,431 2,399,909 1,445,734 1,035,301

IOT dividend 561,878 ‐‐ 817,986 712,750 ‐‐ ‐‐

SPA dividend (fisheries related)

‐‐ ‐‐ 1,085,899 2,914,390 2,597,437 1,308,120

Estimated value added25 70,455,781 74,953,121 79,061,579 85,923,242 88,352,397 65,594,209

Sources: SFA, SPA, Ministry of Finance and stakeholder interviews (2009)

2.7 A Note on Environmental Aspects of the Western Indian Ocean Tuna Fishery This report assumes that GoS will continue to place sustainability at the heart of its policy making on fisheries. The following provides necessary basic context to an understanding of the environmental limitations and volatilities associated with the Western Indian Ocean tuna fishery. The Report of the Tenth Session of the IOTC Working Party on Tropical Tunas26 give some indications of the status of tuna stocks in the Indian Ocean. Key findings are summarised in Table 2.20. The evidence from the IOTC is that tuna stocks for certain species, notably bigeye and yellowfin tuna are subject to overfishing and that there may be excessive pressure in some years on these stocks and on juveniles. There is still considerable debate amongst marine scientists on the impact of floating fish aggregating devices (FADs27) on effort and catch levels in the Western Indian Ocean, however this practice is used by EU purse seiners and in particular Spanish purse seiners and given the possible fragility of certain of these stocks it is important that Seychelles

25 This estimate of value added is based on applying a 30% ratio to declared company turnover relating to fishing activities. 26 IOTC 2008. 27 For a comprehensive bibliography on the use of FADs and fisheries management strategies see MRAG 2009.

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adopts a precautionary principle28 in the issue of licences, taking into account vessel size and power. Table 2.20: Findings of the IOTC Scientific Committee – Status of Indian Ocean Tuna Stocks

Tuna Species Findings/Recommendations Big eye tuna No comprehensive stock assessment conducted. Initial analyses of tagging

data indicate that exploitation rates for ages 0 – 2 appear to be below MSY levels. No new advice for this stock

Skipjack tuna No comprehensive stock assessment. Initial analyses of tagging data indicate that exploitation rates on most selected length classes did not exceed 0.3. No new advice provided for this stock.

Yellowfin tuna Overfishing is currently occurring. Levels of fish mortality will result in stocks being overfished. Recent recruitment are estimated to be below the long term average. Fishing pressure should be closely monitored and assessments be undertaken annually over the next few years

Source: IOTC 2008 Climate Change and Seychelles Fisheries

In the short‐term (<10 years), climate variability is one factor amongst many that will affect the stability of the position of Seychelles in tuna markets and its short‐term returns. It is likely that there will be 1 or 2 strong climate anomalies in the next decade with each corresponding to approximately a 40% impact for the economy. In the long‐term, there is more reason to be worried. The potential for over‐fishing and stock depletion appears strongly dependent on climate‐ocean anomalies that increase the vulnerability of tuna to capture and for which the underlying mechanisms are uncertain (e.g. 2003‐2006). There is an issue of how far the Seychelles fishery (effective fishing effort) is under management control and IOTC are currently unable to set or change effective fishing effort, the optimal levels of which vary inter‐annually as a function of the complex relationship between past levels of fishing mortality and current climate‐ocean oscillations29.

28 In broad terms the precautionary principle (PP) means states agree to act with care when taking actions which may harm the environment. The application of the PP implies the institutionalisation of precaution which entails shifting the burden of proof from those opposing environmental degradation to those absorbed in the challenged activity. 29 A comprehensive review of the likely impacts of climate change on the Seychelles tuna industry is provided in Robinson et al 2008.

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SECTION 3 OPTIONS FOR INCREASING SEYCHELLES NET BENEFITS FROM ACCESS ARRANGEMENTS

3. 1 Background and Rationale for this Section In accordance with the terms of reference, the consultants undertook a comprehensive review of current approaches to increasing receipts from foreign fishing. This involved a review of current as well as proposed options available in the practice of States and international organizations as well as those proposed by the academic literature. Following on from this review and taking all other factors into account, the consultants have proposed (at Sections 6.7 and 7.5 respectively) that the Seychelles seek to progressively negotiate new terms and conditions with the EU purse seine fleets and the Asian longline fleets (see also immediately below 3.1.2 to 3.1.5 for a statement of these proposals). It is in this context that this section of the report together with appendices, provides the reader with a consolidated statement of the key points of our review, including information on, and discussion of a number of approaches and methods, which although potentially applicable, were eventually rejected by the consultants as not currently suitable to the situation of Seychelles. The approaches appraised and eventually rejected are set out in full at Appendix 3A. The options that it was decided were suitable are set out in their particular context by sections 6.7 and 7.5 However, for reference and to make this section useful for the reader these options are restated immediately below. The rest of the section then elaborates on our suggested choices, emphasizing in particular, a number of changes that GoS needs to make as a vital pre‐condition for these proposed options to work. 3.1.1 Suggested options – EU 2011 FPA negotiations Table 3.1: Recommended actions EU 2011 FPA negotiations

Increased tonnage fee

Immediately (2009/2010) through the Seychelles‐Joint Committee framework seek an increased tonnage payment from Euro 25/mt. This might include differentiation because of the higher yellowfin yield in the Seychelles EEZ. The EU may however be reluctant as this will set a precedent for other FPAs. The high and more valuable yellowfin to skipjack ratio can be used to effectively justify this claim.


During 2011 FPA renegotiations Seychelles to request an improved rate of return (RoR) fee based on annual average at 6% ofon gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations



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3.1.2 Suggested EU medium‐term (post 2011) options Table 3.2: EU beyond 2011

ROR + price‐indexed top up


Environmental

Levy /natural resource depletion levy


Vessel day scheme


A full price‐index scheme replacing the current ROR method


Continue and further refine the compliance bond procedure

See compliance bond discussion at 3.6 below

3.1.3 Suggested options – next Japan & Taiwan longline agreements re‐negotiation Table 3.3: Japan and Taiwan – immediate action proposals


That Seychelles request an improved rate of return (RoR) fee based on annual average 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations).



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3.1.4 Suggested options – medium‐term Japan & Taiwan longline agreements Table 3.4: Japan and Taiwan – Medium‐term actions

Price‐indexing method

Seychelles introduce a baseline licence fee plus an annually calibrated 6% RoR top‐up fee. The top‐up fee kicks in if the percentage rate of return on gross value of catch exceeds the up‐front payment – this is a simple price index approach.

Environmental levy /natural resource depletion levy

Hypothecated resource depletion/environmental levy applied to each agreement as a top up to compensate Seychelles for the depletion inherent in fisheries removals and other environmental impacts.

Investment in return for access arrangements

Subject to the IOTC ban on transhipment being lifted, arrangements in which access is conditional on onshore investment, landings and transhipment through the Seychelles.

3.2 Raising Net Benefits – Review of Options Open to the Seychelles From their review of the literature, the consultants came to the view that three broad approaches are open to the Seychelles:

Raising the access fee through one or more different approaches

Tying access to related investments in priority fisheries sectors as identified by the Coastal State – this approach is categorised here as ‘second generation’ access arrangements and seeks to capture the value added accruing further up the value chain

Tying access to some form of joint venture – there is often an overlap here with second‐generation’ access.

3.2.1 Raising net benefits through access fees The universe of possible access fee methods that could potentially be applied by the Seychelles on a ‘stand‐alone’ or hybrid basis was identified as follows:

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Table 3.5: Options for increasing access fee payments – the current menu of options

Access fee type Explanation

An improved rate of return (ROR) fee

This method raises the access fee by increasing the percentage of the ex‐vessel price that is paid to the Seychelles30

This method can be used to significant advantage immediately by Seychelles and is elaborated on further below by Table 3. 7. titled Preferred options – selected implementation issues.

See also Box 3. 2 for a description of the method as applied in the Pacific

Price indexed fees This method indexes the Seychelles access fee to changes in agreed indicators, including ex‐vessel prices31 This is an approach which also captures a part of the rent. It can be based on a very simple index or a more sophisticated index capturing a broad range of factors critical to production and value‐added

This is a medium term method for Seychelles – see Table 3.7 and also

Boxes 3.3 & 3.4 for examples and guidance

Environmental levy/natural capital depletion levy/ecological compensation levy

This is not a stand‐alone fee. It seeks to add a responsible fisheries component to a base access fee calculated through other methods ‐ this extra payment would justifiably seek to compensate Seychelles for natural capital depletion caused by fisheries withdrawals from its zone. This fee would then be paid on condition that Seychelles uses it to address fisheries management and restoration matters – hypothecation – this approach is new but fits with current ideas on maintaining critical natural capital and would help move Seychelles towards an ecosystems approach32

This is a medium term method– see Table 3.7. below and also Appendix 3C for an example of current state of the art thinking on this issue

Vessel day fees This method seeks to charge fleets for access on the basis of vessel days purchased by the fleet. It is an approach now under active development in the Western Central Pacific fishery and more closely reflects catch activity, fleet strategies and the value of the zone to a particular fleet.

This approach captures some of the rent.

This is a medium term method for Seychelles – see Table 3.7 below

Impressionistic inflation based increases in access fees

This method raises the licence fee based upon a perceived value change in the context of inflation and rising prices.

The consultants view this method as currently unsuitable.

It is however discussed further by Appendix 3A

Peak period fees This method raises the access fee by limiting access to the period when peak catches of interest to the foreign fleet occur in the Seychelles zone.33

This method was viewed as currently unsuitable. It is however discussed further by Appendix 3A

30 This is the current approach in use in the Indian Ocean, the Pacific and the African Atlantic. 31 This proposal is discussed in Squires et al 2006; Yongil et al 2008. 32 There has been a lot of recent work looking at the ecological impacts of fishing and designing approaches to address these impacts. See Dayton et al 2002; ICES 2005; Failler et al 2006. 33 This approach is widely used although it is not set out explicitly in any access agreement. When a foreign fleet accesses the EEZ only at certain times of year, this is effectively an implementation of this approach.

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Locational value fees

This method raises the access fee by linking it to the locational value of rights to catch (e.g. basing access fee on the marginal value to the fleet of catches in the Seychelles EEZ where such catch is of higher value than catch on the High Seas34)

This method was viewed as currently unsuitable. It is however discussed further by Appendix 3A

Value added fees This method raises the access fee by basing the fee on a percentage/proportion of the total value added generated within a specific value chain originating in the Seychelles EEZ (e.g. the EU value chain for purse seine fishing; the Japanese value chain for longline etc.).35

This approach captures a part of the extra‐normal profits or rents associated with the industry.36

This method was viewed as currently unsuitable. It is discussed further by Appendix 3A.

Resource rent fees based on rents in the harvest sector

This method seeks to capture a portion of the resource rent and would be based on calculation of rents in the fishery in an approximate but still robust manner working its way towards a highly precise formulation.37

This method was viewed as currently unsuitable. It is discussed further by Appendix 3A.

Box 3.2: An example of the Rate of Return method as set out in a recent Pacific Island Country Agreement

34 See for example, the analytical work set out in MRAG/DFID (no date) 35 This approach has not yet been tried. However the work being undertaken by this project on the value chain elements of the Seychelles fisheries provides a starting point for developing the methodologies supporting this approach. It is however, a difficult approach and can only provide a rough approximation as much of the data would be confidential. 36On fisheries rent generally, see Cayré et al 1998 ; Campbell and Haynes 1990 ; Cunningham and Bostock (2004). 37 This approach is currently under investigation by FFA and Ausaid.

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3.2.2 Hybrid methods The consultants also came to the conclusion that it was possible to combine these fee methods in different ways with the basic ROR approach in wide use at the moment as follows: Table 3.6: Hybrid methods

ROR fee with ecological compensation top up

This is a two‐tier fee and would add a responsible fisheries component to the base ROR access fee charged by the Seychelles – this extra payment would justifiably seek to compensate the Seychelles for negative ecological impacts caused by fisheries withdrawals from its zone with this aspect of the fee tightly linked to ecological improvements – this fits with current ideas on maintaining critical natural capital and would help move Seychelles towards an ecosystems approach38

ROR fee with responsible fisheries top up

This is a two‐tier fee and would add a responsible fisheries component to the base ROR fee to support specified fisheries policies and practices (e.g. to move the fisheries towards responsible fishing and; in recognition of efforts against IUU fishing etc).

ROR fee with resource rent top up

This is a two‐tier fee and would add an extra‐normal profit‐sharing element to the ROR access fee

ROR fee with value added top up

This is a two‐tier fee and would add on an element reflecting the value‐added that accrues in other parts of the Seychelles linked value chain

Other hybrid combinations are also possible. Box 3.1: Indexation of prices and revenue‐sharing in the US‐Pacific Island Multilateral Tuna Treaty A revenue‐sharing arrangement is under implementation between the USA and various Western and Central Pacific Island Parties. When the ex‐vessel price for cannery grade skipjack tuna is above a minimum price, Pacific Island Parties would share in the increased revenue. This arrangement provides economic incentives to these island nations to control fishing capacity and thereby increase revenues and economic rents. This arrangement raises the issue of which market and species prices to use as a benchmark as no party in a revenue‐sharing arrangement is likely to accept a treaty based on ex‐vessel price levels without a clear understanding of the price formation process.

38There has been a lot of recent work looking at the ecological impacts of fishing and designing approaches to address these impacts. See Dayton et al 2002; ICES 2005; Failler et al 2009

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3.3 Long term rights‐based approaches39 Two rights based approaches were also briefly explored. These are however long term options.. They are however being researched by the Forum Fisheries Agency (FFA) and are clearly foreshadowed in the just released EU Green Paper on proposed reforms to the Common Fisheries Policy (CFP), that document making a range of references to the possible use of rights‐based approaches within Regional Fisheries Management Organisations (RFMOS).

The rights‐based approaches that are conceptually possible but are still many years away are:

Limiting access to the Seychelles zone to a number of selected fleets with such fleets: (1) selected through auction or tender40 (2) granted semi‐permanent medium to long term rights; (3) subjected to periodic payments or royalties – with the option for such royalties to carry a resource rent tax element similar to those used in the petroleum industry 41

Limiting access to the Seychelles zone to a number of selected fleets with such fleets: (1) selected through auction or tender (2) granted permanent long term rights; (3) subjected to periodic payments or royalties – with the option for such royalties to carry a resource rent tax element similar to those used in the petroleum industry 42

Currently, the Pacific Island Countries (PICs) through the FFA are exploring the possibility of using rights‐based approaches.43 This is in the context of the possible establishment of a well‐defined quota system of allocation with respect to the Western and Central Pacific stocks. PICs are exploring a system in which a regional commercially‐oriented and organized public international corporation will: 1) hold and manage quota rights on behalf of the PIC on a long‐term basis; 2) lease/contract out such rights to fishing fleets and companies on a long‐term basis, these fleets having been chosen through some form of price‐based selection process, most probably a tender or auction. The experience of rights‐based approaches in New Zealand,44 Iceland45 and Australia46 show that it is possible to implement rights‐based approaches despite issues such as catch variation, tuna price volatility, fuel cost variation and other variables.

39 See Grafton et al 2006; OECD 2006. 40 The auction/tender approach is controversial. Tender approaches should in theory deliver reasonably reliable information about the true value of rent in the fisheries. Tender approaches are currently in limited use in Australia to allocate exploratory fishing rights. See generally, Cox and Kemp 1999. See also Macquarie Island Toothfish Fishery Management Plan (no date); Munro and Parkes 1999. 41 This is a variant of an ITQ system and may follow logically from WCPFC work on quotas in the WCPO tuna fishery. MRAG has recently undertaken a study for the WCPFC on what a quota system might look like. New Zealand’s extensive ITQ experience and those of Iceland, Australia etc are also available as reference points. See generally, MRAG 2006; Grafton et al 2006. 42 See references immediately above. 43 FFA 2009; FFA/DEVFISH 2008; Pacific island countries PIC are also seeking to tie access to obligations to build, operate and supply raw materials to shore based factories organized within an export‐processing zone complex. 44 Newell et al 2005. 45Arnason 1997. 46 Campbell et al 2000.

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In New Zealand and Iceland in particular, a wide range of uncertainty factors are now well understood by industry and are effectively capitalized into the price that commercial actors within the quota‐management systems of these countries are prepared to pay for 1) long term ownership of the rights; 2) shorter term leasing of rights annual rights to catch are prepared to pay. The Australian experience of grafting a quota‐based system onto the international regulatory system of the Convention for the Conservation of Southern Bluefin Tuna is worth noting here. Also worth noting is the fact that since 2004, New Zealand has managed the tuna resources of its zone using a quota management approach. In the Western Central Pacific, it is only country using such an approach. These examples show that provided the particular fisheries resources are valuable enough to distant‐water fleets and the quota‐based fishing rights are limited to a limited set of participants, are well‐defined and well protected (particularly from illegal activity and poaching by outsiders to the rights‐based system) fishing fleets who value these resources highly will pay a price to secure long term access and will make the necessary long term commitments consistent with ownership of the right to catch a valuable resource. Resource access rights of this type should also ideally be fully traceable. However, full traceability can be approached on a step‐by‐step basis. Although rights‐based approaches are limited to a few countries, and it can justifiably be argued that these situations are to some degree unique, it is also true that they offer useful reference points for Seychelles should Seychelles wish to systematically move towards rights based approaches. The trend in any case is for tuna management organizations to start to consider quota and rights‐based approaches to fisheries allocations in the various oceans, including the Indian Ocean. As indicated above, PICs are currently investigating these issues. Seychelles will benefit from continuing to follow this approach to access in a general way.

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Box 3.3 : The Pacific Island Countries’ Vessel Day Scheme (VDS) – Operational Context47 In the early 1980s, the eight Pacific island countries with the most productive tuna waters – and thus the greatest potential to collectively control access to the region’s transboundary fishery – formed a sub‐regional alliance.48 Given that eighty percent of the WCPO purse seine catch took place in their waters, they began standardizing relations with distant water fleets, utilizing collective bargaining power to avoid being played off against each other and, in turn, to increase their rents.49 In 1982, they signed the Nauru Agreement; it dictated minimum and uniform terms of access for foreign vessels and required the Parties to the Agreement to identify specific ways to prioritize domestic fishing vessels over foreign vessels.50 In short, the Parties to the Nauru Agreement, known as the “PNA countries”, sought to assert their property rights to control access to their resources, albeit primarily for economic rather than conservation objectives. The PNA countries subsequently engaged in a series of initiatives to better control, and extract economic benefits from, the WCPO tuna fishery.

As the operational remit of the Western and Central Pacific Fisheries Commission (WCPFC) emerged (it came into force in 2004), the PNA countries announced that they would license purse seine vessels based on vessel days, rather than the vessel numbers strategy used in the past. The resulting Vessel Day Scheme (VDS) commenced in December 2007 after a one year trial.51 The scheme defines total fishing days in PNA waters and distributes the fishing days to PNA members, who in turn allocate them to distant water fleets at their discretion. The VDS also details the management terms of fishing days and sets up a small secretariat (of one person) to monitor and enforce the scheme. The official position of the PNA countries is that the VDS increases control over fishing effort to enhance biological sustainability and increase economic returns, both to PNA countries and to participating vessel owners.52

Unofficially however, the impetus for the VDS is embedded in the political, economic and environmental challenges that have emerged with the lenient management regime of the Pacific island countries in the past. For one, PNA countries began to exceed an agreement on vessel number caps when (under pressure from distant water fleets) they began to reassign unused licenses. Since this practice became ubiquitous, the PNA countries formally agreed to allow countries to license vessels as long as the total number of operational vessels stayed within the 205 vessel limit. In short, the PNA countries were not maintaining pre‐agreed quotas, allowing distant water fleets to rapidly expand their fishing activities in the region. Through this practice, the PNA countries saturated the market with licenses, eliminating the competition that the vessel number cap was intended to generate (with its assumed upward driving effect on access fees).

The VDS was implemented to address three main concerns.53 First, the vessel number scheme locked‐in specific fleets, making it difficult for the PNA countries to introduce new fleets and increase competition for access. Second, the vessel number arrangement could not account for the relentless motion of ‘effort creep’ (driven by a combination of technological advances and increases in vessel size).

47 Adopted from Havice and Campling (forthcoming). 48. These countries are: The Federated States of Micronesia (FSM), Kiribati, Marshall Islands, Nauru, Palau, Papua New Guinea, Solomon Islands and Tuvalu. Their EEZs are also all adjacent, interspersed with pockets of high seas (or “donut holes”). 49. Doulman 1987c, 257. 50. Nauru Agreement Concerning Cooperation in the Management of Fisheries of Common Interest 1982, Article II (b,a) (respectively). 51. Palau Arrangement for the Management of the Western Pacific Purse Seine Fishery – Management Scheme (Vessel Day Scheme) 2005. 52. Rodwell, Len. 2004. FFA Initiatives Related to the Palau Arrangement, Purse Seine Management and the Management of Bigeye Fishing Mortality in the WCPO. Paper presented at 17th Meeting of the Standing Committee on Tuna and Billfish, August 9‐18, Majuro, Republic of the Marshall Islands, p. 2. 53. Dunn et al 2006.

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For example, older purse seines have a hold capacity of 400‐800 metric tons of fish, while newer vessels have a hold capacity of between 1,200‐2,000 metric tons; but each was equal only to one vessel.54 Finally, the PNA countries were concerned that the vessel number arrangement could disadvantage them in WCPFC‐level fishing allocation processes. This is because the vessel number scheme allocated licenses to the flag states of distant water fleets, whereas the preferred position of Pacific island countries is for the WCPFC to recognize Pacific island country resource ownership while fish are within their exclusive economic zones. The VDS allows Pacific island countries to maintain their property rights and control fishery access within the WCPFC framework.

However, the VDS has complications, particularly for monitoring and enforcement. In a year long trial period, more than thirty percent of distant water fleets failed to consistently report their fishing locations. Japan proved the most problematic, with ten of their thirty‐five licensed vessels failing to report regularly; Taiwan also had significant reporting lapses. According to a fisheries specialist working on the monitoring of the VDS: ‘We need for them to report at the minimum every four hours. As the text of the VDS stands, if they’re not reporting they won’t be charged a fishing day. This is money lost’.55 In addition, incomplete reporting paints an incomplete picture of resource health.

Further complicating matters, the value of access is never simply about the price or the revenue drawn by the agreements themselves.56 According to a fisheries specialist, there is little chance that the VDS will have a stronger enforcement clause, rather: ‘Other incentives are going to continue to interfere. Taiwan continues to try to give [Pacific island countries] aid to win diplomatic recognition, Japan gives [Pacific island countries] technical assistance and grants, the Philippines try to leverage good standing through domestic investment, China gives loans and grants and sports stadiums in Fiji and FSM. It’s hard to divorce these issues, and it’s equally hard to unite them’.57 In other words, the effectiveness of the VDS can only be understood in the context of the political and economic relationships between distant water fleets, their ‘home’ states and Pacific island countries. Implications for the Seychelles: The Pacific islands vessel day scheme is a very complex arrangement and its effectiveness is yet to be proven. As such, GoS is not advised to enter into similar auction arrangements until: 1) the full range of ‘lessons learned’ are known based upon the experiences of the Pacific islands; 2) SFA has developed the capacity necessary for implementing, monitoring and enforcing a similar arrangement. However, the VDS does provide a concrete example of how SIDS have successfully challenged existing norms in fisheries access arrangements, albeit in the context of effective South‐South political cooperation between resource owners vis‐à‐vis DWFNs/DWFs; a context that is sorely lacking in the WIO. 3.4 Long term Onshore Investment‐based Approaches (‘Second Generation’ Access) 58 This strategy differs from ‘cash for access’ agreements in that the foreign fishing interest is required to invest onshore (e.g. by basing their company in a Coastal State or by creating a business operation) in the Coastal State as part of the licensing agreement. In principle, second generation access agreements give the distant water fishing firm the access it desires, while

54. VDS may still be subject to effort creep if vessel days remain constant and vessel capacity continues to increase. The VDS attempts to minimize effort creep by taking into account variations in vessel length (an inherently weak capacity measure), but these are mainly to ensure that smaller vessels do not have to pay the same for a vessel day when they catch far less than their larger competitors. 55. Interview with international fisheries specialist, 2007. After the start of the VDS in December of 2007, PNA countries noted improvement in the level of VMS reporting. Island Business, 13 March 2008. 56. On the range of types of access agreements see Havice 2007. 57. Interview with international fisheries specialist, 2007. 58 See generally, Havice 2007; FFA/DEVFISH 2008. The following draws on Havice 2007 and Campling, Havice and Ram‐Bidesi 2007.

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Coastal States increase the return on their fish resources because onshore investments generate employment and infuse money into local economies. Gaining popularity in recent years, these strategies have to date played themselves out in two different ways:59

– Domestically‐based foreign fishing companies: Foreign fishing firms register as a local company. Depending on national legislation, domestic registration may require that the foreign owner become a Coastal State national, that the foreign owner enter into a joint venture with a Coastal State national, or registration may not have any requirement for national registration or joint venture at all. Once registered locally, firms purchase domestic licenses, often at a discounted price compared to foreign licences, and avoid the competition for what may be limited foreign licenses.

– Domestically‐based foreign processing companies: Foreign fishing firms interested in securing long‐term access invest onshore in exchange for foreign and/ or domestic licenses. The most common investments to date have been in processing plants, but other investments have been made as well, such as net repair facilities and other businesses that provide support for tuna fishing operations. These investments have been made by two different actors in the fishing industry:

• Fishing companies have directly invested in onshore processing facilities in order to get licenses for their vessels. In this case, the fishing company has become fully integrated into the processing sector;

• Trading companies have spearheaded processing plant investments; in exchange, they have received fishing licenses, which they have distributed to vessels that help to finance the processing facility. In this case, the processing and harvest sectors are separate operations, but are part of contractual agreements in which the vessels supply the processing facility.

In short – the DWF receives long‐term discounted access in return for investment in onshore processing, thus the DWF must be a serious player. Second generation access must also be contingent upon: 1) evidence of construction of facilities before licenses are issued; 2) concrete target and outcome driven measures in the area of investments performance 3) comprehensive review and evaluation of the sustainable number of fishing licenses; 4) the relationship of pre‐existing relationships with access for investment proposals. 3.5 Effective Monitoring, Control, Surveillance and Enforcement – A Pre‐condition for

Success With respect to all these approaches, the consultants are of the view that a highly effective MCS and enforcement system is critical to effective implementation of any of these approaches by the Seychelles. Moreover, to the extent that these options allow progress from one approach to another – movement up a hierarchy of options delivering more benefits with respect to increased receipts and other benefits effective enforcement is crucial as it will provide information on fleet activity and permit the modeling required to support a transition from one approach to another.

59 The following draws on Havice 2007 and Campling, Havice and Ram‐Bidesi 2007.

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3.6 Implementing a Robust Compliance Bond in all Access Agreements and Direct

Licensing Arrangements The consultants are of the view that Seychelles should rapidly develop a mechanism for applying a substantial compliance bond to all fishing fleets and vessels. Such a mechanism could be applied to Seychelles agreements based upon failure to provide full log returns (for longline, or ‘LL’) agreements and, if a dispute arose, regarding likely under‐reporting of in‐EEZ catch (i.e. recent Spanish purse seine case) the bond could be kept until full vessel records were provided. The value of the bond would have to be sufficiently high to act as a deterrent. There are currently operative arrangements (for example the PNG performance bond procedure set out at Appendix 3A) which can be rapidly investigated and adapted for use by Seychelles. It is proposed therefore that Seychelles commit to the following immediately:

Introduction of a compliance bond requirement into all its access agreements and also ask for a considerable sum – $100,000 say from LL association with each member contributing, with bond probably paid up front fully or partially paid up front and the rest in the form of a letter of credit

Arrange to have the amount invested for a jointly agreed period with interest earned paid back to the Association/payer of the bond

However the main sum would be immediately available to be drawn upon by SFA for infractions and can be lost completely where infractions are serious

This financially rigorous innovation is justifiable in light of the global determination to ensure compliance with fisheries rules and reduce IUU fishing. It is also an effective way for Seychelles to meet its obligations under international law in light also of EU IUU Regulation and well known limitations it has with respect to physical enforcement within its large zone. It can justifiably demand such measures from the EU because the EU IUU Regulation has changed the international environment considerably and require now that Seychelles demonstrate best endeavours with respect to enforcement actions to prevent being classified a non‐compliant State by the EU.

Issues requiring further policy work by Seychelles before tabling before the EU in 2011, but which could be partially resolved in time for negotiation with Japan include the following:

Determination of appropriate amount of bond so that does not become a disincentive – the amount however should be quite high

Determination of whether the compliance bond is to be paid by the Association or by individual vessels/companies or even by DWF State itself in implementation of the principle of Flag State responsibility and in light of often expressed determination to use innovative tools to address IUU fishing and also implement principles of responsible fishing

Relating bond levels to vessel/fleet profitability

Transferring lessons learnt in application of compliance/performance bonds in other contexts (petroleum, construction, PNG experience) to Seychelles context

Whether GoS wants to hire a professional firm to advice on design and implementation

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The proposed FIIA unit would be able to more finely tune bonds once more extensive fleet profiles established

3.7 Enhanced negotiating ability including an ability to withdraw from negotiations The consultants are of the view that, Seychelles must be able to bargain effectively. That ability must also be backed by high quality intelligence and analysis. In particular, during the bargaining process itself Seychelles would need to be in a position to exercise options for withdrawal from the negotiations and/or should be able to use suspension of the negotiations as a tactical device. The Seychelles should also be in a position to threaten and also enforce zone closure against a recalcitrant fleet which will not accept a particular new approach that the Seychelles wishes to implement. This requires a sound assessment of the weaknesses of the Seychelles in any given context and at a particular time. Such an assessment must include honest and informed assessment of what pressures are available against it; the weaknesses of the particular fleet or distant‐water Fishing State; and the particular strengths of the Seychelles in a given context as well as generically. Whatever bargaining strengths are identified must then be significantly enhanced during the period between negotiations. 3.8 The importance of economic information and intelligence generally For success with any one of these approaches to be successful also requires that Seychelles develop/invest in a minimum level of capacity with respect to knowledge of market arrangements and value‐chains; price and pricing information and other critical aspects of markets and economic intelligence. In particular GoS would need to more fully understand the kinds of internal price arrangements within particular chains and how these apply to the Seychelles. Developing this understanding would be an incremental exercise and would require focused intelligence gathering, analysis and scenario‐building. For example, Seychelles would have to be able to answer the following questions at a high level of accuracy:

Which tuna species are critical to the ex‐vessel price formation process and, consequently, upon which ex‐vessel species should any proposal base itself?

Arrangements for pre‐financing of trips and boats by Asian longlining interests ‐ these arrangements need to be at least marginally understood as in principle, they affect the level of the ex‐vessel price either through collusion, price fixing (e.g. supply contracts) or more market‐based phenomena

The role of cold storage holdings Inter‐connections amongst key markets – Bangkok, Pago Pago, Port Louis, Spain, Port

Victoria, and to a lesser extent Antsirinana (Madagascar)

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Box 3. 4. Adding a price‐index element to the ROR method ‐ a hypothetical example The current ROR approach to access fess requires fleet owners or fishing States to pay the Coastal State, an access fee calculated at a percentage of the running average FOB market price for an averaged out unit of tuna. The running average price (RAP) is applied to the reported tonnage of all catch and a given percentage of the resultant number is calculated as the access fee. Under an ROR approach with a rent extract ion element, all vessels would pay a non refundable license or access fee for the right to fish. This can be calculated in much the same manner as access fees are calculated at present using a deemed figure for catch and value.60 The bonus/surplus element is shown below using an example in which it is assumed that a generic purse seiner catches 7000mt of fish per year at an average price of $700/mt and that its annual revenue is $4.9 million which, using a figure of 6% , generates $294,000 in access fees. Operating and ownership costs for such a purse ‐seiner have been assumed for the purposes of this example to be $4 million/yr leaving approximately $900,000 as profit. Where the fish price increases significantly (say to $1300/mt) the outcome changes dramatically. The vessel’s revenue rises from $4.9 million to $9.1 million, which generates an access fee of $546,000 and much more importantly it produces a profit of approximately $5.1 million. Whilst the current ROR method for calculating access fees captures a share of the increase (6% of $700/mt and 6% of $1300/mt) it fails to adequately reflect the dramatic improvement in the vessel’s profitability. Applying a surplus rent extraction element to the basic fee effectively captures elements of the supernormal profit and returns this to the Coastal State The arrangement could work as follows:

1. The 6% figure is used to calculate a non refundable access/license fee based on $700/mt applied to the estimated catch tonnage for the coming year.

2. Average Bangkok prices for 4‐7.5 lb Skipjack are tracked on a daily basis over the year and a RAP established.

3. At the end of every quarter the RAP for the preceding quarter is declared. 4. For every $100 increment or part thereof that the RAP exceeds $700 an additional 2% is levied on the catch

value for the preceding quarter ie. $800/mt = 2%, $900/mt = 4%, $1200/mt = 10%. 5. If the RAP is at or below the $700 figure no adjustment is made unless the assessed catch tonnage exceeds

the amount used in the initial entry fee calculation. 6. At the end of every quarter and immediately the RAP is known, the SFA would levy all vessels owners (or

associations) for their surplus earnings contribution. Non refundable access fee, 7000mt @ $700/mt = $4,900,000 @ 6% = $294,000 Surplus earnings fee calculation. Actual catch 7000mt. 1st quarters catch 2000mt @ RAP $800/mt = $1,600,000 @ 2% = $32,000 2nd quarters catch 2000mt @ RAP $1000/mt = $2,000,000 @ 6% = $120,000 3rd quarters catch 2000mt @ RAP $1100/mt = $2,200,000 @ 8% = $176,000 4th quarters catch 1000mt @ RAP $950/mt = $950,000 @ 4% = $38,000 Outcome Coastal State Non refundable access fee = $294,000 Levy on surplus earnings using RAP = $366,000 ($32,000+$120,000+$176,000+$38,000) Total payment to resource owner = $660,000 Vessel owner Total vessel revenue = $6,750,000 Deemed breakeven = $4,000,000 (includes payment of non refundable access fee) Surplus earnings/profit = $2,750,000 Levy on surplus = $366,000 Net to vessel owner = $2,384,000

60 It is necessary to assume or deem a breakeven point because operating and ownership costs vary considerably across the fishing industry and by country. A deemed price is also useful because some vessels operate as stand‐alone profit centres whereas others are located within vertical processing chains and are accounted for as a cost of production.

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Box 3.5: Procedures for implementing ROR + price‐index top‐up

WITHIN 45 DAYS OF END OF PERIOD Canneries to submit unloading and price data and all other relevant data (fuel etc.) to designated independent entity

WITHIN 7 DAYS OF RECEIPT OF DATA Independent entity to calculate weighted average skipjack and

yellowfin prices as per agreed formula

WITHIN 3 DAYS OF PRICE CALCULATION Independent entity to notify EU Rep and PS Fleets Rep and GoS/SFA of weighted average skipjack and yellowfin prices

Average price of skipjack greater than EU/$ per metric tonne

Average price of skipjack less than EU/$XXX per metric tonne

WITHIN 7 DAYS OF EU REP AND PS FLEETS REP AND SEYCHELLES NOTIFICATION OF AVERAGE PRICES

Independent entity to calculate bonus using calculated average skipjack and yellowfin prices and skipjack and yellowfin tonnages as shown on purse seine unloading

and transshipment logsheets

No payment to be made and No further action required

WITHIN 3 DAYS OF BONUS 1. Independent entity to notify EU Rep and PS Fleets Rep and Seychelles on the total bonus payable 2. Independent entity to inform EU Rep and PS Fleets Rep and competent Seychelles of bonus payable by each vessel WITHIN 7 DAYS

Each vessel to forward its bonus payment to the GoS account

WITHIN 14 DAYS OF NOTIFICATION OF TOTAL BONUS

PS Fleets Rep to forward the collected bonuses to account designated by Seychelles and EU Rep

notified

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3. 9 The role of regional co‐operation It is also clear from our analysis that regional co‐operation has a critical role to play in transition towards several of these new approaches and that the relative bargaining power of Western Indian Ocean Coastal States would be increased through such cooperation. Regional co‐operation need not however necessarily take the character of the approaches currently in use in the context of the Pacific Islands Forum Fisheries Agency (see Box 3.6), but would need to be calibrated to suit the specifics of the Western Indian Ocean region. The degree of intensity and institutionalization of regional co‐operation would have to be assessed for each scenario. Regional co‐operation questions which would require closer attention but which are beyond the scope of this consultancy to address in detail include:

What degree of co‐operation between regional States is required to support each approach?

Are regional minimum terms and conditions required – if so, of what type?

If it is necessary to have the common adoption of a specific access fee approach in the Western Indian Ocean – how is it to be approached?

The final question is: who could provide regional leadership by introducing these issues so that action can start on an incremental basis?

Perhaps Seychelles could (re‐)initiate61 this process through a workshop on access fees and value chains in the IOTC region so that some of these options can be introduced into the policy debate in the region.

61 A prior attempt to pursue regional cooperation between Independent WIO Coastal States was the Western Indian Ocean Tuna Commission (WIOTC) based largely on the Pacific Islands Forum Fisheries Agency model. The SFA Fisheries Intelligence & Analysis Unit would review the reasons for the rise and fall of the WIOTC to gather lessons learned for setting up an initial workshop revisiting this approach.

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Box 3.6: The Pacific Island Countries’ FSM Arrangement62 Domestic fisheries development has consistently been an aspiration of the PNA countries. In the early 1980s, the eight Pacific island countries with the most productive tuna waters – and thus the greatest potential to collectively control access to the region’s transboundary fishery – formed a sub‐regional alliance. Given that eighty percent of the WCPO purse seine catch took place in their waters, they began standardizing relations with distant water fleets, utilizing collective bargaining power to avoid being played off against each other and, in turn, to increase their rents. In 1982, they signed the Nauru Agreement; it dictated minimum and uniform terms of access for foreign vessels and required the Parties to the Agreement to identify specific ways to prioritize domestic fishing vessels over foreign vessels. In short, the Parties to the Nauru Agreement, known as the “PNA countries”, sought to assert their property rights to control access to their resources, albeit primarily for economic rather than conservation objectives. The PNA countries subsequently engaged in a series of initiatives to better control, and extract economic benefits from, the WCPO tuna fishery. When initial Pacific island country investments in the fishing sector in the 1970s and 1980s were frustrated by lack of capital and experience, market access constraints and the turbulent global market for tuna products, the PNA countries sought more effective interventions to nurture domestic development. The PNA countries implemented the FSM Arrangement for Regional Fisheries Access (FSM Arrangement). The Arrangement offers vessels that are based in PNA countries discounted fishing licenses and reciprocal access (i.e. fishing rights to all of the PNA country waters, rather than just the one in which the vessel is licensed).63 In so doing, the Arrangement provides vessels with a huge strategic commercial advantage: cut‐price access to extensive tuna resources. The Arrangement defines criteria – including equity structure, vessel flag, persons employed, local purchases and onshore investment – that, when met, make a vessel eligible for an FSM license. The objective for PNA countries was to generate spin‐off benefits and local economic development, which would make up for lost licensing revenue.64 Despite Pacific island countries’ emphasis on the FSM Arrangement, FSM vessels represent a very small portion of the purse seine access agreements in the region. As mentioned above, in 2006, less than fifteen percent of purse seine catch in the WCPO was made by FSM vessels; demonstrating the limited capacity of Pacific island countries to control fisheries production despite their control over access and management procedures. Implications for the Seychelles: South‐South cooperation between coastal states in the WIO is far weaker vis‐a‐vis DWFs than it is in the South Pacific. As such, the FSM Arrangement model is not valid to the Seychelles at the present juncture. However, if the late 1980s model of the Western Indian Ocean Tuna Organisation is further pursued, the FSM Arrangement does offer an important empirical case study of the prospects and pitfalls of a regional approach.

62 FSM stands for Federated States of Micronesia, where the Arrangement was signed. Box adopted from Havice and Campling (forthcoming). 63. The FSM Arrangement for Regional Fisheries Access 1995: Article 2. 64. These criteria have evolved and were augmented in 1997 and 2004 to add local offloading, local fuel purchases, local management and government revenue as additional criteria, reflecting the changing perspectives of what “adds value” in domesticated industries.

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3.10 The environmental levy method It is also possible to argue that there should be a segment of the fee compensating the Coastal State for the ecological impacts caused by the removal of fish resources. This argument goes considerably beyond recognising bycatch issues, as it would cover marine bio‐diversity, critical habitat impacts and impacts on natural capital generally as required under the ecosystem approach to fisheries management reflected now in the FAO Fisheries Code of Conduct in the UN Fish Stocks Agreement of 1995 and increasingly recognised in the policy documents and practice of the EU. Other principles which support this approach include:

Agenda 21’s recognition of the need to “incorporate environmental costs in the decisions of producers and consumers, to reverse the tendency to treat the environment as a free goods and to pass these costs on to other parts of society, other countries or to future generations” (Paragraph 8.31(a));65

Agenda 21’s exhortation to States to “move more fully toward integration of social and environmental costs into economic activities so that prices will appropriately reflect scarcity and total value of resources and contribute towards the prevention of environmental degradation” (Paragraph 8.31(b)).

The constant calls by the OECD (which groups the most highly industrialised and market‐oriented countries) for member countries to adopt the principle of full cost pricing of the use of natural resources so as to prevent over‐consumption and ecological degradation.

In the context of access agreements this would mean that fees and payments should cover the costs of fisheries research and MCS, impacts on critical habitat and their restoration, and a significant element of the value‐added flowing from the fisheries. 3. 10.1 Implementing the environmental levy method This approach can be taken further through GoS convening an expert meeting at which experts working in this area, can report on their methodologies and explore how these could be applied in the context of access agreements. This could be followed by a tender process in which offers are made to develop this approach for Seychelles. Appendix 3C provide an example of the type conceptual work currently being undertaken in this area.

65 The text of Agenda 21 was launched at United Nations Conference on Environment and Development (Rio, 1992) and strongly reaffirmed at the World Summit on Sustainable Development (Johannesburg, 2002)

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Box 3.7: The VDS method in the Pacific – implementation aspects As stated earlier, the VDS is a scheme under which vessel owners purchase and trade days fishing at sea in places subject to the jurisdiction of the Parties to the Nauru Agreement (PNA). The Arrangement operates by establishing an overall limit on the number of days that can be fished by purse seine vessels operating in the EEZs of the PNA Members. The purpose of the VDS is to constrain and reduce catches of target tuna species, and also increase the rate of return from fishing activities through access fees paid by Distant Water Fishing Nations (DWFNs). The total allowable effort (TAE) is set each year by the Parties at a special meeting convened for that purpose. The TAE is set and apportioned between Pacific Island members for one‐year periods up to three years in advance. Parties have flexibility to carry over unused fishing days to future years, to borrow fishing days from future years, and to transfer fishing days between themselves on whatever terms they mutually agree. This flexibility is necessary to take account of the migratory nature of tuna stocks and the fact that oceanographic conditions (the El Nino and La Nina cycles) influence the distribution of stocks across the western and central Pacific. The scheme is run on a three year rolling basis. At each anniversary of the commencement of the scheme the TAE is set for the new third year. Balances are rolled into the new three year period and Parties can utilise those balances as they see fit.

The VDS Management Area

NR KIKI

MHFM

PG

PW

SB TV

KI

Area bounded between 20°N and 20°S and the eastern boundary of the WCPFC Convention Area – This is the Area for Automatic Location Communicator monitoring. The VDS Register The Register has the following rules:

All purse seine vessels (domestic, locally based and foreign which wish to undertake fishing activities in PNA waters (including EEZs, archipelagic waters, and territorial waters) must register

The registration period is 1 Sept – 31 August, for 3 years; All vessels must be in good standing on the FFA Vessel Register; All vessels must complete a VDS Register application form and

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All vessels must pay VDS registration fee (US$2,400 for 3 yrs per vessel) VDS Reporting and Monitoring Requirements

Vessels must have an FFA approved Automatic Location Communicator (ALC) which transmits at least every 4 hours

The ALC must operate at all times when the vessel is in the VDS Management Area; Manual reporting musty be undertaken by a vessel at 4 hourly intervals if ALC fails The Administrator is to notify the vessel of any ALC transmission failure within 12 hours after the

transmission was due, Where a vessel is unable to comply with the manual reporting, stow fishing gear and head for

nearest designated port or other port as directed by the Administrator. Controls over vessel fishing power and efficiency To prevent or constrain technical changes in fishing power and efficiency that may lead to maintaining or increasing catches as a result of the implementation of the VDS, a fishing day under the VDS has been apportioned based on vessel length:

every fishing day by a purse seine vessel with a length overall of less than 50 metres shall equate to a deduction of one half of a fishing day;

every fishing day by a purse seine vessel with a length overall of between 50 metres and 80 metres shall equate to a deduction of one fishing day;

every fishing day by a purse seine vessel with a length overall in excess of 80 metres shall equate to a deduction of one and one half fishing days.

The apportionment between vessel length and a fishing day can be modified over time to account for changes in fishing power and efficiency. This modification of the relationship between vessel length and fishing capacity, in addition to the ability to change the total number of days that can be fished over time provides the ability to change catch effort relationships Source: FFA Rules and Aims of VDS http://www.ffa.int/node/55 3.11 Conclusions and Recommendations The consultants are of the view that of the range of options available, the Seychelles should seek to use items individually or in combination as follows:

Enhanced ROR capturing values over a 5 year period but expressed in the form of a flat licence fee.

Price‐indexing method ROR flat licence fee plus price‐indexed top up Vessel Day Scheme Environmental levy Onshore investment in return for access arrangements Implement a compliance bond procedure

3.11.1 Sequencing of options and essential pre‐conditions

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The consultants also suggest that the options be viewed as a staircase of short to medium term options. The most important first steps in implementing whichever suite of options is selected by the Seychelles would be:

1) significantly improve Seychelles enforcement capacity across the EEZ – the sticks aspect of the equation. This will be complemented and supported by the proposed compliance bond;

2) significantly improve Seychelles capacity on intelligence and analysis of industrial fisheries (i.e. establish the proposed FIIA unit);

3) significantly improve Seychelles ability to engage the Asian longline fleets by getting the exemption on longline at sea transhipment removed so as to bring these fleets within the reach of the Seychelles from a regulatory as well as value‐extraction point of view;

4) significantly improve the attractiveness of the Seychelles as a fisheries port destination –the carrot aspect of the equation – this would attract Asian fleets once the transhipment exception is removed.

3.11.2 Constraints and Risks The principal constraints/risks are that:

1) Application of these methods will be beyond the current analytical and implementation capacities of the Seychelles. This risk can be hedged against by recruitment and retention of suitable qualified personal at appropriate rates of pay together with the provision of the appropriate political and technical support.

2) Application of new methods to the EU PS fleet may be complicated by the FPA system as it may not be politically possible to introduce entirely new methodologies within FPAs. However, the recent 2009 CFP Reform Green Paper suggests that further changes to the FPA system are envisaged and that this could include a much more focused approach to ensuring that fishing fleets pay the full costs of their activity. It may thus be timely for Seychelles to seek to introduce some of elements during this period of instability and review in EU fisheries policy. This makes establishing an intelligence unit which can address different approaches to access fees a matter of urgency.

3) Application of these methods to the longline fleets may be confounded by the current lack of understanding in the Seychelles of their arrangements and their lack of connection to the Seychelles economy due to the IOTC transhipment exception. Both constraints would need to be addressed by GoS.

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Table 3.7: Preferred options – selected implementation issues

Method Examples/Comments Advantages Disadvantages

Information requirements

Institutional requirements

Current & future applicability to Seychelles

Raising the access fee based upon percentage of the ex‐vessel price for tuna that is paid at selected ports (e.g. Spain, Yaizu, Bangkok etc.)

This is the most common approach to access fee payments The trend in the South Pacific trend is to try and increase the percentage from 5% upwards

This approach does not capture rents or above normal profits The information demands on the Coastal State are relatively minimal compared to other methods

Comparative information on access agreements entered into with other States

A dedicated fisheries industrial intelligence and analysis unit (FIIA) with ability to source information about access agreements practice

This is the approach currently used by Seychelles However, it is undertaken in an ad‐hoc way and would benefit from the establishment of a dedicated and focused intelligence and analysis unit concentrating solely on industrial fisheries and associated global markets

Indexing the access fee to tuna prices only

This would require agreement on a formula and reference prices etc and also price‐formation information etc.

Information requirements are initially high Negotiations would shift to tracking and negotiating in response to international price changes

Which tuna species are critical to the ex‐vessel price formation process and, consequently, upon which ex‐vessel species should any proposal base itself?

Establishment and effective operation of FIIA Parts of the intelligence and information gathering could be outsourced but capacity should ideally be progressively transferred to Seychelles

• This approach is not currently in use in Seychelles.

• It is in partial use in the South Pacific between the US Fleet and the FFA countries under the US Multilateral fisheries access treaty

• Seychelles could closely monitor developments in the South Pacific and assess within the next few years whether it wishes to adopt this approach

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Raising the vessel fee by limiting access to the Seychelles zone to a number of selected fleets with such fleets: (1) selected through auction or tender (2) granted temporary rights. Auction and tender would effectively be applied through the purchase of vessel days. This is thus not a one‐off auction but a continuing auction durin g the period of most interest to the fishing fleets

South Pacific Vessel Day Scheme (see Box 3. . VDS as applied to purse seine vessels in the FFA region is based on vessel days, rather than vessel numbers66 The scheme defines total fishing days in relevant waters and distributes the fishing days to member States within the arrangement. The Coastal State then allocates these to distant water fleets at Coastal State discretion. The VDS also details management terms for fishing days and is managed by a very small group to monitor and enforce VDS intended overall to increase control over effort; increase economic returns and ecological sustainability

Provides a much better picture of actual fleet behaviour and value of access VDS is a much more precise indicator of fishing effort and also value of access but it is also subject to significant weaknesses Very high quality and intensive, 24 hour a day monitoring and enforcement is central to the VDS FFA experience is that during their 1 trial period, more than thirty percent of VDS eligible fleets failed to consistently report their fishing locations with both Japanese and Taiwanese reporting noticeably poor Non‐reporting means FFA cannot bill the fleets for vessel days

Reporting has to be every four hours to effective Extremely high quality and reliable VMS Information on transshipment schedules and patterns and activity at outer margins of Seychelles EEZ Information on bunkering and resupply

Well trained, resourceful and innovative VMS technical staff as they will be faced with the full range of fleet behaviour including misbehaviour on a real time basis Robust FIiA VMS unit and enforcement activity concentrated on hotspots and at margins of EEZ

This approach is applicable to the Seychelles and will come with all the advantages currently enjoyed by the FFA participating States However it is conditional on a high level of VMS coverage and well developed enforcement capability Enforcement can however be very precisely targeted due to the higher quality of fishing strategy data generated Enforcement can be incrementally calibrated and tightened as more information generated

66Palau Arrangement for the Management of the Western Pacific Purse Seine Fishery – Management Scheme (Vessel Day Scheme) 2005.

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Indexing the fee to changes to a broader set of indicators including tuna and petroleum prices

1. This approach requires the use of a reference price to trigger profit‐sharing (probably requiring agreement on a tuna and gas oil price index – latter data available through SEPEC)

2. This approach captures proportion of above

1. Information requirements are initially high

2. The trigger point would need to be periodically negotiated

1. Information about global tuna and gas oil market prices

2. Information to determine price triggering profit‐sharing

3. Periodic variations in reference price

4. Modelling of good and bad years (probably over a 5‐year cycle)

FIIA needed to ensure Seychelles has comprehensive ability to keep global market conditions in review Parts of the intelligence and information gathering could be initially outsourced but capacity should ideally be progressively transferred to Seychelles

1. Not currently in use 2. Can be persuasively

argued for by Seychelles in its negotiations next three to four years

3. Core task for FIIA – aspect can be initially outsourced

Adding on an environmental levy/resource depletion/ecologically responsible component to ROR access fee

For example the Seychelles could ask for compensatory DWF/DWFS payments to address depletion impacts/negative ecological impacts on the zone

Information requirements are initially high

Extensive but can be met as a number of research projects (Australian; UN; EU auspices provide adaptable & robust methodologies for calculating ecological aspects of fisheries in economic terms

FIIA required to ensure that Seychelles can undertake necessary assessments and calculations Parts of the required work and information gathering could be initially outsourced but capacity Seychelles

This approach is currently in use in rudimentary form in the Seychelles‐EU agreements and is to some degree reflected in the penalty assessment process in the Fisheries Bill 2008. Robust adaptable methodologies are available

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B. Long term onshore investment‐based approaches Method Examples/Comments Advantages

Disadvantages Information requirements



Bilateral second generation….

PNG: South Seas Tuna Corporation (SSTC), RD Tuna Canners – the right to fish is granted conditional on fleets agreeing to fish in the PNG EEZ.

Employment generation, greater onshore spin‐off benefits The granting of permanent long term rights is a risky endeavor and thus requires detailed analysis on a case‐by‐case basis.

Information would be required on the entire value chain; the profits made at each stage and to whom these accrue and whether there are super‐normal profits. This would be necessary to effectively assess advantages/ disadvantages

Establishment and effective operation of FIIA Parts of the intelligence and information gathering could be outsourced but capacity should ideally be progressively transferred to Seychelles

IOT exclusivity clause works against application of this approach to canned tuna and tuna loin facilities

Multilateral second generation…

PNG South Seas Tuna Corporation (SSTC), RD Tuna Canners (Parties to Nauru Agreement – the right to fish in the EEZs of parties is granted on a regional basis subject to an obligation to invest in onshore processing facilities

See table immediately above

See table immediately above

A high level of regional co‐operation with other States Establishment of a FIIA See text immediately above

There are sub‐regional licencing cooperation arrangements in place in the WIO which if properly applied can support this approach

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SECTION 4 ACCESS ARRANGEMENTS – ORGANISATIONAL CONTEXT, ARRANGEMENTS AND POLICY OPTIONS FOR

IMPROVEMENT 4.1 Overview of this section of the Report This section of the report reviews the organisational67 arrangements within which access agreements are currently negotiated, implemented, evaluated, monitored and re‐negotiated in the Seychelles. The key organisations within the system are assessed, based upon extensive interviews conducted by the consultants with key officials in January 2009. Suggestions for organisational change to address areas of weakness and gaps are provided. While the options for increasing GOS revenue from proposed reform to access arrangements detailed in Section 3 are a central context to this section’s proposed reforms, it also provides recommendations that are broader in scope. In this regard, the principal proposals are:

1) That a small but well‐resourced Fisheries Industrial Intelligence & Analysis (FIIA) unit be established and that a range of functions currently undertaken by the Managing Director of SFA be entrusted to this unit. This will free up the Managing Director to undertake effective strategic activity and forward planning in collaboration with this unit.

2) That Seychelles as a matter of extreme urgency seek to rapidly improve its fisheries enforcement capacity – significant weaknesses in this area fundamentally compromise any efforts to improve revenues and other returns from access agreements.

The section also contains an analysis of the significant challenges facing Seychelles in the area of both strategic and day‐to‐day management. The key feature of the current international environment is that unlike the situation in the past, access agreements overlap with many other policy areas. Many of these areas are also volatile and subject to sudden change. Seychelles cannot afford to be complacent in such a turbulent environment and needs to even further professionalise its approach to negotiation and management of its portfolio of access agreements. A comprehensive statement of the range of tasks that must be addressed by a programme of professionalisation is provided by Section 4.3 below. In terms of the requirements of the terms of reference, this section responds specifically to those aspects, which required the consultants to:

assess the ability of the Seychelles Fishing Authority’s capacity in relation to implementation of the agreements.

evaluate organisational capacity to implement policy change and recommend changes or adjustments.

set out the means of implementing any such system recommended including the agencies responsible (including the possibility of outsourcing functions), the mechanisms of enforcement, structures to ensure co‐ordination between relevant bodies and the need for further technical assistance, or external support.

A large number of recommendations are made at the end of the section and quite a few gaps are identified in the Seychelles framework for managing agreements. This should not however obscure the fact that the

67 The term organization is used in preference to the term institution.

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Seychelles system has considerable strengths. Indeed the consultants are of the view that compared to organisations in other fisheries‐dependent countries the SFA is strikingly well run. Even so, in a highly competitive global environment, Seychelles cannot afford to be complacent and must adapt its previously well‐tested approaches to meet new challenges. 4.2 The Management of Access Agreements – A critical new area of policy action for fisheries‐

dependent developing countries For countries highly dependent on fisheries resources – the Seychelles, the Pacific Island Countries and West African countries (like Mauritania) are good examples – sound organisational management of access agreements has now become essential. There are many reasons for this previously neglected field having become much more important as Section 4.3 immediately below shows. Despite their diversity, there is one common thread running through the many reasons why the organisational aspects of access agreements must now be taken seriously – simply put, the access agreements arena now overlaps and is driven by external factors, many of which are complex and high profile in character. Additionally, globally powerful political NGOs (WWF, IUCN, Greenpeace, Oxfam, etc.) are all concerned in various ways with what they see as negative impacts of current regulatory frameworks for managing foreign fishing. Significant change in factors overlapping with access agreement concerns can also occur quite dramatically and countries dependent on fisheries like the Seychelles need to be able to respond equally rapidly and effectively to such changes in the external environment. The best example in recent times is the threat now posed by piracy in the Western Indian Ocean – the rise of this issue has been completely unexpected and poses a considerable short term threat to foreign fishing in the Indian Ocean. Paradoxically however, it also presents an opportunity as many countries are likely to respond positively to requests to significantly upgrade the naval and military capacity of Seychelles. In such a context, requests for military and enforcement assistance must take account of the fisheries enforcement deficiencies of Seychelles. Requests for naval and surveillance assets must be driven as much by anti‐piracy concerns as by fisheries enforcement concerns. The factors listed immediately below, show that countries dependent on fisheries resources and for whom access agreements are important run considerable risk if they continue to approach access agreements in an ad‐hoc, reactive and disorganised way. Key areas which currently intersect with the negotiation, implementation and re‐negotiation of access agreement and now impose a need for professional and integrated management approaches include:

The need to sharply improve financial returns from access agreements – this is a matter now of interest to the World Bank, the Asian Development Bank and in the Seychelles context, the International Monetary Fund.

The relationship between access agreements and development assistance policy.

The relationship between access agreements and the rules of international trade, including the question of whether access agreements provide a framework for subsidisation of foreign fleets thereby impacting negatively on the environment.

International and regional policies to control IUU fishing.

The question of whether fishing under access agreements threatens developing country food security, including in particular, the livelihoods of the poor with specific emphasis on the situation of women and children.

The relationship between foreign fishing under access agreements and development of the local fishing sector.

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The relationship between fish caught under access agreements and emerging frameworks for certification of fish products on grounds of ecological sustainability, including the question of fish traceability for certification purposes.

Other developments which also make it imperative that Seychelles further professionalise its approach to access agreements include:

The emergence of access agreement issues as a distinct field within the overall area of EU policy action – access agreements are not just part of the Common Fisheries Policy (CFP) but currently overlap with development assistance policy; trade policy, including existing an emerging WTO rules; fish imports policy; policies to control IUU fishing; certification of fish products to address ecological sustainability and consumer safety concerns; and finally, internal EU policies of assistance to poor and economically challenged EU regions.

The emergence within the EU of an increasingly professional approach to negotiation of its access agreements – professionalisation now includes the use of comprehensive policy analysis and country profiles.

Finally, there is the question of regional approaches and how Seychelles will more usefully engage with regional approaches and regional organisations should these become more important in coming years. The successes recorded by the Forum Fisheries Agency amply demonstrate that small island States can complement their national efforts through Coastal State owned and oriented regional organisations. More recently, indeed within the last few months, the 2009 EU Green Paper on reform of the Common Fisheries Policy also now suggests that the EU wishes to re‐examine the regional arrangement approach to fisheries access. Should the EU decide now to shift towards regional fisheries agreements, Seychelles and the coastal countries of the Western Indian Ocean will then have to decide how to respond. A sound SFA with a well organised approach to commercial intelligence, economic analysis and negotiations will ensure that Seychelles benefits significantly from any future regional arrangements whether internally driven by Indian Ocean States or driven by EU preferences. It is in this context that this organisational review is provided and it is against this general background that the report as a whole is written. 4.3 Making Access Agreements Management More Professional The following two sub‐sections summarise what issues and elements GOS must consider if it wishes to make the management of access agreements more professional and, in turn, enhance net benefits to the Seychelles. 4.3.1 Establishment of strategic objectives Viewed broadly, sound management of access agreements can be defined as covering the following distinct but also overlapping areas of policy and managerial action:

Establishment as well as implementation of the objectives to be served by access agreements within the framework of the overall economic, trade, customs control, environmental, employment, industrial policy, food security, maritime and international relations policies and practices of a particular country – in this case Seychelles.

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Establishment as well as implementation of the objectives to be served by access agreements within the framework of higher level policies connected with fisheries and maritime resource use in the specific country – principally – fisheries conservation and regeneration policy; fisheries resource extraction policy; fisheries policy in the context of competing marine and maritime uses – tourism, oil and gas etc.

The specific management of access agreement relationships with key fleets and/or Fishing States, principally but not exclusively, the European Union, Japan, Taiwan, China and Korea.

The management of other arenas related to access agreements, including principally aid, trade, processing sector, value chain upgrading, food security, informal sector as well as gender aspects

At the international organisation level, sound management also requires a strategic approach to managing the relationship between access agreement frameworks and broader multilateral treaties such as the Indian Ocean Tuna Convention and the Western Central Pacific Fisheries Convention.

4.3.2 The strategic as well as routine management of agreements The organisational matters that lie at the heart of access agreements management today and which are, in effect, the tasks facing the Seychelles under a reform programme to improve net benefits can be listed as follows:

Cost‐effective and relatively successful negotiation of agreements (strategy; tactics; review; post‐negotiations debriefing; modelling and simulation of options; scenario building; acquisition and timely use of negotiations intelligence).

Identification and use of the most appropriate agreement types.

Identification and use of strategic characteristics of agreements and licences to maximise Coastal State advantage – e.g. duration of licences.

Management of a broad range of fleet issues requiring an understanding of fleet strategies, fishing capacity and links to global value chains etc.

Management of transhipment activity requiring an understanding of the value chains and global cargo and cold chain arrangements of the global fishing industry.

Steady period‐by‐period improvement of economic returns from all aspects of agreements, not just access fees.

Identification and management of economic and revenue aspects of agreements such that revenue aspects do not overshadow all other aspects of the access agreements framework.

Establishment and implementation of a regime of control over IUU fishing, including an ability to respond rapidly to changes in the strategies, tactics and profiles of IUU fleets.

Management of the organisational and dispute settlement aspects of access agreements.

Incorporation of international organisation rules into access agreements practice – e.g. the precautionary principle, fisheries reference points etc.

Accurate identification and implementation of bio‐diversity and ecological protection in rules in light of changing developments and international trends.

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Effective implementation of MCS across all domains (at sea, on the high seas, in ports and harbours and elsewhere as relevant).

Effective implementation of VMS as the core of the MCS system.

Prompt and effective use of domestic enforcement capacity to respond to illegal behaviour by licensed and unlicensed fleets.

Integration of foreign fleets and joint ventures with the domestic economy, principally through use of local services and companies as set out in agreement texts but also as made possible by the characteristics of the specific value chain of the fleet.

Integration of foreign‐owned processing companies into the domestic economy.

Preventing excessive revenue leakage from the domestic to the external sectors – control over transfer‐pricing; over and undervaluation.

Management of access frameworks to ensure support for domestic fisheries rather than their extinction.

Establishment of adequate data reporting, collection and analysis to support monitoring of foreign fleets and as inputs into strategic planning and resource management.

Well targeted identification, procurement, cost‐effective and nationally‐oriented use of the development assistance component within access agreements (goods and materials; services; technical and organisational support) ‐ currently little attention is paid to whether development assistance effectively supports the fisheries sector or not.

4.4 Does Seychelles Currently have the Ability to Undertake Key Management Tasks? In analysing current Seychelles organisational arrangements, the consultants applied a networks capacity assessment approach. Essentially we asked whether and to what degree the Seychelles was well‐placed with respect to the range of tasks that management of access agreements currently requires (Sections 4.3.1 and 4.3.2 provided a generic overview of these requirements). The analysis was undertaken as a combined desk‐top and fieldwork exercise. As shown by Table 4.2, the original methodology envisaged a combination of desk‐top analysis and semi‐structured interviews, culminating in a strategic directions workshop with key Seychelles fisheries sector officials. Table 4.1: Original methodology for assessing Seychelles organisational capacity in access negotiations

Desktop analysis

− Review key statutes and policy documents

− Review previous recent studies of the fisheries sector in Seychelles and the public sector generally

Fieldwork analysis

− Design and apply a comprehensive questionnaire seeking information as well strategic perspectives from key actors within the network68

68 See Appendix 4A for the text of this questionnaire. It is proposed that the FIIA unit use this questionnaire to complement this study and further develop Seychelles access regime.

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− Convene a strategic issues workshop to further discuss issues set out in the questionnaire69

− Semi‐structured individual interviews with key actors within the network.

Eventually, however, various constraints prevented the consultants from utilising the original questionnaire instrument, whilst the non‐availability of key personnel led to the strategic issues workshop not taking place. Despite these limitations on the fieldwork process, vital information and perspectives were still extensively gathered through individual interviews. In particular, virtually all the issues targeted for attention during the workshop and in the content of the questionnaire were thoroughly and frankly addressed by individual interviewees. The consultants are of the view that even without use of the first two instruments, a sound enough picture of the overall access agreements and foreign fishing system emerged such that the TOR requirements have been met. Essentially the comprehensive set of interviews allowed the consultants to discuss the following inter‐related issues with key actors in the Seychelles regulatory and implementation system:

The managerial capacity of current organisational arrangements and whether these are appropriate to current as well as future tasks.

Current internal processes and procedures at various stages of the access agreement negotiation, regulation and implementation process.

Current inter‐organisational arrangements and the extent to which these support or hinder achievement of access agreement objectives.

The intersection between access agreements and measures for improving value‐added and upgrading of the position of Seychelles within global tuna value‐chains.

Changes that need to be made to meet increased net benefits objectives.

4.5 The Regulatory Network for Seychelles Access Agreements The governmental arrangements for managing agreements are essentially a weakly integrated network of actors with SFA at the centre. Many firms and organisations in the commercial sector are also participants (directly and indirectly) in access agreements matters given the dominance of fisheries in the economy and the orientation towards fisheries exports. The analysis does not however focus on these organisations. It should be noted that many of the commercial sector organisations are mentioned in other sections of the report, including in Section 9 on possible upgrading within the value chain. As far as the governmental sector is concerned, the consultants are of the view that the legal powers and mandates of all actors within the network are well defined. In accordance with its legislative mandate (see below) SFA plays the central role with other organisations providing support to SFA on a case‐by‐case basis or as required.

69 See Appendix 4B for details of the guidance sheet to facilitate discussions at the workshop as well as the proposed list of participants. As with the last point, this guidance sheet could be used by the FIIA unit in a future strategy workshop of Seychelles access regime.

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Table 4.2: The regulatory and implementation network

Institution type

Agency/organisation Role within Access Agreements Network

Government and regulatory

− Seychelles Fishing Authority (SFA) − Seychelles Licensing Authority (SLA) − Ministry of Natural Resources,

Environment and Transport (MNRET) − Attorney‐General’s Department − Central Bank of Seychelles − Ministry of Finance − Ministry of Foreign Affairs − Seychelles Ports Authority (SPA) − National Statistics Bureau (NSB) − Seychelles Investment Bureau (SIB) − The Seychelles Coast Guard − The President’s Office

− Regulatory functions ‐ SFA is the principal regulator supported by the Seychelles Coast Guard, SPA and SLA

− Policy direction is provided by MNRET and SFA and the Office of the President

− Facilitatory and information functions are provided by the NSB, SIB, SFA, MNRET, CBS, Ministry of Finance, SPA

− Financial receipts and revenue aspects are addressed by SLA, CBS and the Ministry of Finance

− International law aspects and dispute settlement are addressed by the Ministry of Foreign Affairs, the Attorney General’s Department and SFA

International organisations

Indian Ocean Tuna Commission (IOTC)

− Recommendations of regional fisheries organisations incorporated into access agreements

− Statistics and data on foreign fleets − Forum for enhancing regional co‐operation

Research − SFA − IRD − OFCF − IFREMER − WIOMSA − UK‐Seychelles Fishing Commission − Links with other external research centres

of fisheries and marine resource management

� Provision of fisheries research � Provision of inputs on fisheries management � Sharing of methods and intelligence on MCS

issues regarding distant water fleets

4.5.1 Ministry of Natural Resources, Environment and Transport (MNRET) The Ministry of Environment and Natural Resources (now Ministry of Environment and Natural Resources and Transport) was created in 2004. All three sections of the Ministry have relevance for access agreements with the strictly navigational, shipping vessel or maritime aspects of the access agreements framework now falling under the Transport area of the Ministry. The two secretariats of the Ministry which are however of key importance are the secretariats for Natural Resources and for the Environment. Both work to implement the National Agriculture and Fisheries Policy 2003‐2013 discussed in more detail below and contribute to different aspects of access agreements policy. The MNRET is a central player within the system although in practice the SFA is a much more important and active player. Secretariat for Natural Resources

This secretariat has responsibility for both agriculture and fisheries. With respect to access agreements, the policy and guidance role of MNRET appears however to be a limited one consisting of contributions to the oversight function for international negotiations and ensuring integration of fisheries issues within the larger economy. Other fisheries matters falling under the natural resources portfolio are of a more operational character and also have significant implications for access agreements and joint venture policy as well as exports and value‐added matters. This is because this secretariat has responsibility for health and sanitation matters including in particular ensuring that the EU requirements for fish processing establishments are met. Since 2008 the Fish Inspection Unit/ Competent Authority has been transferred to

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the organisational remit of SFA. This applies to both land‐based and vessel‐based fish processing plants. The Ministry undertakes this task together with the SBS. There is also responsibility for training of fishers and other participants in the sector, including observers. Secretariat for Environment

Two areas of work of this secretariat have a direct connection with access agreements policy and practice. They are control of marine pollution and pollution of the environment generally as well as regulation of marine reserves. In particular, in light of the consultants’ proposals that environmental aspects of fisheries assume a much higher profile in access agreements policy (see Section 3. 10.), it is to be noted that marine reserves are strictly controlled under the Fisheries Reserves Act 2000 with police powers to prevent breaches of this statute falling under the Secretariat for the Environment. A Centre for Marine Research focusing on research to do with corals and marine biodiversity also falls under this section of the MNRET. Under the Environment Protection Act 1994 this section of MNRET has to be consulted with in respect to all development projects which might have an impact on the environment, in particular those to do with fisheries and tourism. The Environment Protection Act 1994 has elaborate environmental impact assessment provisions with a land‐based focus. Mariculture also falls within the EIA process under this Act. The National Agriculture and Fisheries Policy 2003‐2013

In 2003/2004, GoS promulgated the National Agriculture and Fisheries Policy 2003‐2013 to provide a guiding framework for the long term development of the fisheries and agricultural sector. This policy is not a formal planning document with binding objectives and outcomes. It provides general guidance and orientation only. It states that fisheries policy in Seychelles – as a subset of general agricultural policy – is to be implemented in a manner which is compatible with the international agreements that the Seychelles is a party to. The global objective of the fisheries sector is to seek to achieve food security through the promotion and sustainable development of the sector and the optimisation of benefits received from the sector so as to meet the needs of both current and future generations. This objective is to be achieved by the promotion and use of sustainable management and a responsible approach to fishing, ensuring the supply of domestic fisheries requirements and the effective protection of the marine environment. With respect specifically to foreign fishing, the NAFP explicitly states that the precautionary principle is to be applied when appropriate and that the conservation and management of fisheries and marine resources is to be undertaken with a view to ensuring long term sustainability and viability. A key sub‐objective is ensuring that revenues from the fisheries sector are maximised (export receipts, access fees, other sources) and that maximum value added is secured from the fisheries sector. Quality standards for fish exports are also to be improved as also the quantity and quality of processed tuna and other fisheries products exported from Seychelles. Another sub‐objective is ensuring that the facilities of Port Victoria are put to maximum and effective use and that Port Victoria is maintained as the principal port for transhipment in the Western Indian Ocean. 4.5.2 The Seychelles Fishing Authority The Seychelles Fishing Authority is a parastatal body charged under the Seychelles Fishing Authority (Establishment) Act 1984 with policy oversight as well as executive powers with respect to the fisheries sector, particularly foreign fishing and access agreements. Section 6 of the Act sets out the SFA’s powers as follows:

to promote, organise and develop fishing, fishing industries and fishing resources in Seychelles;

to assist in the formulation of national policy with respect to fishing, fishing industries and fishing resources and the implementation of that policy;

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to conduct negotiations, or engage in meetings, seminars or discussions, with regard to fishing or fisheries and the establishment or operation of fisheries enterprises whether at a national or international level

to identify the manpower training requirements of Seychelles with regard to fishing and fishing industries; and (e) those mentioned in any other written law

Section 7 of the Act then gives the SFA extremely wide powers. As can be seen immediately below, there are thus no legal limitations on the SFA being able to carry out the range of tasks involved in regulating an upgraded presence within the value chain. The SFA’s extensive powers are:

Subject to this Act, the Authority has power to do all things necessary or convenient to be done for or in connection with, or incidental to, the performance of its functions and. in particular the Authority may — (a) own, lease or dispose of movables or immovables; (b) own, operate or charter any vessel: (c) form companies under the Companies Act, 1972; (d) enter into partnership or joint ventures; (e) act as agent for the purpose of the management of any business or enterprise, or for any other purpose; (f) hold shares in, or debentures of, any company; (g) carry on any business or enterprise for or in connection with: (i) fishing or fisheries; (ii) processing, transporting, handling, marketing or distributing fish or fish products; (iii) exporting fish or fish products; (iv) the sale of equipment or apparatus to be used for fishing; or (v) any other matter relating to its functions where, in the opinion of the Authority, the carrying on of such a business or enterprise is in the best interest of the Republic; (h) conduct surveillance operations, in conjunction with the Ministry of Defence, in relation to fishing operations in the exclusive economic zone or in the waters superadjacent to the continental shelf; (i) monitor the catch of all fishing vessels: or (j) carry out scientific and development research.

The SFA currently operates through three main sections all of which contribute to the management tasks for access agreements and regulation of foreign fishing as set out by Figure 4.1.

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Figure 4.1: Organisational structure of SFA and proposed placing of Fisheries Industrial Intelligence and Analysis (FIIA) unit

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4.5.3 SFA fisheries research – sound fisheries science orientation – poor economic analysis and

commercial intelligence capacity The SFA is charged with research functions under its parent legislation. Currently the focus of research is on scientific and technical matters, rather than on economic matters. Yet, to increase net benefits, Seychelles must rapidly develop a sound understanding of the strategies, tactics and weaknesses of the global networks currently utilising Seychelles fisheries resources. This is a major area of weakness which needs to be immediately remedied as both economic analysis and commercial intelligence are critical to any attempt to raise net benefits over the medium‐ to long‐term. The gap in the economic analysis and commercial intelligence area does not however define the achievements of the SFA in this arena. Indeed, it needs to be recorded that the research produced by the SFA is of excellent quality given its limited resources, with particular value attaching to the regular studies as well as annual reports on the activity of the industrial fleet. Areas of criticism would however, be that currently publication of annual reports and many of the other documents have fallen behind. While the day‐to‐day running of SFA – including its various operational activities – is correctly considered as a priority, the timely publication of analytical assessments of these activities provides pause for reflection, which, in turn, may provide insights assisting with the improvement of operational activities. In addition, reports such as these are the public face of SFA and enable local analysts (including within other GOS agencies) and foreign researchers to better assess SFA’s activities and, thus, potentially offer suggestions for improvements. Other aspects of the scientific‐technical strengths of the SFA and Seychelles generally which must be noted include: ownership of a research vessel, ‘L’Amitié and strong and effective participation in various international programmes of work in association with the IOTC, various French and Spanish fisheries research agencies (e.g. IRD and IEO); research programmes of the European Union, as well as programmes of work with researchers from Newcastle University (UK), James Cook University (Australia), and Rhodes University (South Africa). 4.5.4 Can SFA address the challenges posed by a net benefits approach? Key gaps in economic analysis capacity

The consultants observed that although significant amounts of information are gathered by and are available to SFA, much of this activity is undertaken as a passive information collection, data receipt and archiving exercise. The consultants concluded that gaps in the research and analytical capacity of the SFA are in the following areas:

Ability to analyse the global dimensions of the fisheries economy and the various value chains;

Ability to respond promptly and effectively to trade issues;

Ability to gather and use operational as well as strategic commercial intelligence on relevant fishing fleets, supply networks and cold chain arrangements;

Ability to conceptualise and analyse environmental and bio‐diversity issues and factor these into agreement negotiation and implementation.

To address these gaps the consultants propose that GoS establish a small Fisheries Industrial Intelligence and Analysis unit to undertake both economic analysis and commercial intelligence gathering/analysis to support the new approaches being proposed. The role of the Managing Director

The SFA currently has a number of divisions with formal activity designations, position descriptions etc.

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However in reality, what the consultants found was a situation in which decision making is over‐reliant on top‐down management arrangements, leading to management inefficiencies, overwork of the Managing Director (MD) and an absence of full understanding of certain policy directions where key professional SFA staff are concerned. While the new post of Deputy MD will go some way to reducing the administrative and managerial responsibilities of the MD, the solution in our view is the additional effective devolution of some of the MD’s responsibilities to:

empower and further professionalise key personnel (heads of divisions), including in relations with other GOS agencies;

free‐up the time of the MD to allow a focus on key tasks, which would be focussed primarily on policy development and implementation, strategy, and high‐level relations with other GOS agencies and with industry.

4.6 The Negotiating Context – Financial Independence and Resilience or Over‐dependence on

Negotiating Partners? As most access fee revenues do not go directly into the coffers of SFA, going rather to the central government’s funds at the Ministry of Finance, the SFA derives its working budget from the following sources:

an annual government subvention

revenues derived from its commercial activities, including payments under the EU FPA

• authorised grants and donations

Between 2004 and 2007, the profile of the SFA budget was as follows with significant contributions made by Japan and the EU under their access agreements. Table 4.3: Fluctuations in SFA budgetary allocations, 2004‐2006

2004 2005 2006 External allocation

8. 5 million rupees (decrease of 8% compared with 2003)

8 million rupees (decrease of 6.25% compared with 2004)

9.05 million rupees (increase of 11.97% compared with 2005)

Source of allocation

Japan GSA EU Protocol



Source: various SFA Annual Reports Even though this assistance has been useful to the SFA, it clearly also has the potential to create dependence on these foreign partners and to weaken the position of SFA in its negotiations. This is particularly so given the general trend of decrease in government subventions and the difficulties in access to foreign exchange. The external partners are of course aware of these dynamics. Whilst there is no direct evidence that the assistance has necessarily weakened the bargaining power of Seychelles, it is reasonable to argue that a degree of strategic advantage is given to the foreign negotiator when they know that the financial assistance being offered is of high marginal value to the SFA. As part of its strategy to increase net benefits, this strategic advantage of the negotiating partner would have to be significantly nullified.

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4.6.1 The current Seychelles approach to fisheries access negotiations The Seychelles currently seeks in its negotiations to achieve the following general objectives:

Securing as high a percentage as possible of the value of the landed catch as an access fee

Securing goods and services to support the domestic fishing industry as part of the access payment

It does not appear that any other objectives are pursued. It is against this background that the consultants examined how Seychelles approaches its access negotiations. Table 4.4: The Seychelles approach to fisheries access negotiations – key features

Issue/Theme Information on Seychelles approach

Ministry/agency with overall responsibility for access agreements

Ministry of Environment, Natural Resources and Transport (MENRT)

Source of negotiation mandate for each negotiation

The Cabinet of GOS. The Cabinet receives SFA proposals and suggestions, including top/ bottom lines. The Cabinet reviews this information, makes suggestions or disagrees. SFA initiates the process. The judgment of Cabinet is thus dependent on the information provided to it by SFA. SFA in turn is the key contact point for DWFs.

Internal procedures for selecting the Seychelles negotiating team

Under the Fisheries Act the Minister of MENRT has the mandate for selecting the members of the negotiating team, but typically issues of team composition are delegated to SFA, usually to the Managing Director or the Chairperson of the Board. SFA does the background work and leads the negotiations. The team typically includes representatives from the Ministry of Finance, Foreign Affairs and also receives legal advice from the Attorney General’s office. Where such advice is not available the SFA lawyer or an independent lawyer (maintained on retainer) supplies legal advice. The current independent lawyer is a former Attorney‐General thereby ensuring consistent legal advice.

Typical team composition on a Ministry/agency basis

Composition depends on availability of persons and complexity of proposed agreement. Negotiation document is sent to Cabinet for approval. The policy direction is to have an independent negotiator, to remove SFA from direct negotiations. SFA will still be present and deeply involved (e.g. preparation of all documents). An independent with negotiation experience is perceived by SFA to be in GOS interests as more objective, less friendly relations, and more ‘tough’.

Arrangements typically in place with respect to preparation procedures and arrangements for each round of negotiations.

In general terms, the preparation process is driven by SFA as follows: − an assessment of previous performance is typically undertaken –

vessels, activities over the previous period, etc; assessment of market information from external sites (e.g. NOAA site for the landed price in Japan) is used to assist with preparation

− terms of existing access agreements and proposed new one are compared

− comparison with terms in other foreign agreements is also undertaken

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Utilisation of SFA databases and other sources of intelligence in negotiations process

In terms of using its extensive information sets on foreign fleets to back negotiations, SFA has for instance paid particular attention to:

− timing issues with respect to licenses and sought to manipulate licence duration to suit SFA requirements rather than those of the foreign fleet

− since 2002 behaviour recorded by the VMS and seeks to use such information in negotiations

Post‐negotiation analysis and evaluation

When negotiations are over results are reviewed by Cabinet with SFA explaining the results However, SFA and other organisations in the network do not conduct formal or explicit post‐negotiation analysis.

Typical locations for conduct of negotiations

This depends upon the DWF or DWFN. If there are 2 rounds, normally 1 is in Seychelles and 1 in their country. For the EU it is alternate. The new policy is for all negotiations to be in Seychelles because it provides a home ground advantage. Specific recent experiences include for Taiwan and Japan, long drawn out negotiations both in Seychelles and the foreign country. Technical issues are usually settled in advance of the main negotiations

Involvement by SFA of Ministries of Finance and Foreign Affairs in negotiations

The Ministry of Finance and Foreign Affairs have a relatively passive involvement with SFA the lead authority Negotiations with Taiwan do not involve Foreign Affairs given firm adherence of Seychelles to the One China policy.

Commissioning of external legal and/ or economic advice to assist GOS in pre and post negotiation analysis

The current approach to negotiations does not involve formal impact analysis of key parameters. The focus is principally on financial aspects – these are also not extensively modelled prior to the negotiations SFA has tended to use publicly available impact analyses or those generated for example by Megapesca for the EU

Ecological issues pre‐negotiation and during negotiations

Serious ecological issues are addressed during negotiations (e.g. shark, by‐catch issues). Usually international organisation recommendations – FAO, IOTC – are addressed before actual negotiations. Thus, for example, recommendations from an IOTC Scientific Committee meeting on possible overfishing of a specific tuna species would be addressed in pre‐negotiation communications.

Compliance and enforcement issues pre‐negotiation and during negotiations

Typically, compliance issues are set out in pre‐negotiation discussions and are then tackled during the negotiation process where it is not possible to get prior agreement. The trend is for more technologically sophisticated solutions to be provided to compliance problems and for these to be addressed before and during negotiations.

Source: multiple interviews, Seychelles, January 2009 4.7 Organisational Assessment – Non‐Fisheries Sector Organisations The effectiveness of these organizations is constrained by the fact that fisheries issues are only one of their areas of priority. While current informal arrangements are adequate to meet current tasks, the more intensified approach to access agreements proposed by this report will require the non‐fisheries organisations to become much more thoroughly grounded in access agreement issues to improve co‐ordination and integration within the sector. A training and familiarisation programme of some type will be needed.

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4.7.1 The Seychelles Coast Guard70 The Seychelles Coast Guard is an extremely important institution within the current network as in principle it provides enforcement for the system. The SCG was created in 1992 under the Defence Force Act, 1980 and is the equivalent of a navy since Seychelles has no navy. It has two wings, a naval wing and security or infantry division. It has approximately 250 personnel. In addition to its fisheries surveillance and enforcement duties, the SCG carries out the following activities within the Seychelles EEZ: surveillance and enforcement to prevent maritime pollution and oil spills; surveillance of marine parks and reserves; hydrographic surveys and assisting with immigration control; anti‐terrorism activities and maritime security generally. The SCG recently acquired responsibility for search and rescue as well as environmental protection, taking these functions over from the Port and Marine Services Division. Around 40% of SCG activity relates to fisheries matters. The SCG has around 30‐40 personnel with specialised training in fisheries MCS. The SCG has several vessels including the Italian‐built Andromache, the Scorpio, two Indian manufactured vessels, four Motor Life Boats, and the luxury yacht Gemini that also is used as the presidential yacht. The vessels have a length of between 18‐42 metres and can undertake at sea missions of between 2 days to 1 week. The speeds achievable by these vessels are up to 25‐30 knots. Patrols by the SCG take place on a regular basis as well as to meet requirements based on sightings of illegal activity. Regular patrols take place on average 3‐4 times a month, whilst patrols in response to heightened IUU activity take place on average 7‐8 times a year. The total number of patrols undertaken is around 50 patrols a year. The average cost of a deployment was in 2004‐2005 around USD15,000‐30,000 depending on patrol objectives and the duration of the mission. The Russian built craft that were key parts of the fleet in the 1980s and 1990s appear now to be under limited use due to age and spare parts issues.71 The Coast Guard currently has no air wing. The Island Development Corporation (IDC) maintains a pool of aircraft from which the air complement of the SCG is drawn for surveillance purposes.72 The number and type of aircraft available to the Seychelles for long‐distance surveillance is very limited and none of the current aircraft are specifically fitted out for aerial surveillance and MCS support. However, the SCG has priority of access to aerial resources from the IDC. Regular reports are made to the Head of the SCG and the SFA on enforcement activity. The EU recently funded a project (Projet Pilote régional sur la Surveillance, le Contrôle et le Suivi (SCS) des pêches des grands pélagiques migrateurs) to enhance regional co‐operation with respect to the monitoring and control of highly migratory species in the Indian Ocean. Part of the proposals for funding under this project included significant upgrading of the SCG. It is unclear what progress has been made on this proposal. SCG and the access agreements regime

The SCG is an extremely important part of the access agreements regime as it provides deterrence against IUU fishing and also breaches of the law by licensed vessels. It also provides a means for arresting and prosecuting vessels. Revenues from court proceedings can be an important periodic source of revenue for a country, although this cannot be looked upon as a steady source of revenue. The extremely limited capabilities of the SCG pose one of the biggest problems for the Seychelles as far as increasing net benefits is concerned. Improving the capacity of the SCG is one of the principal pre‐conditions for success in this endeavour. An effective SCG is crucial to the net benefits objective in at least three ways:

It would help combat IUU activity;

70 See generally Wertheim (2007: 697‐698) for a detailed discussion of the profile of the Seychelles fleet in 2006. 71 Wertheim (2007: 697) 72 For SFA review: Extent to which the utilisation of these craft is maximised relative to other uses by IDC?

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It would enforce existing agreements as well as future agreements;

The presence of effective MCS and enforcement capacity would limit or completely curtail disruptive activity by any distant water fleet which believes that an absence of enforcement capacity provides an opportunity to continue to fish in defiance of efforts by Seychelles to negotiate significantly higher financial return or any other new measures proposed, for example performance bonds or ecological access fees (see Section 3).

Unless significant and urgent improvements are made to SCG capacity, implementing a net benefits approach will most probably be impossible. 4.7.2 The Seychelles Ports Authority The Seychelles Ports Authority, previously the Port and Marine Services Division (PMSD) under the Ministry of Transport was set up under the Seychelles Ports Authority Act 2004 to regulate, control and administer ports in the Seychelles. The SPA provides the entire suite of maritime support services with a particular focus on services for the tuna purse seining sector. Port Victoria enjoys the advantages of strategic location, compliance with all international maritime standards and a well established track record in the areas of safety and security. The main source of revenue for the SPA is payments by the tuna seining sector with up to 80% of port activity driven by purse seiner requirements. Inspectors from the SFA undertake port inspections of fishing vessels whilst SPA inspectors inspect other aspects of vessel compliance with international rules and the laws of Seychelles. The SPA is also responsible for protecting the marine environment in and around the harbour area. SPA and the access agreements regime

Port Victoria and the SPA play two roles under the access regime:

The main port for transhipment for the purse seine fleet, but a much more subordinate (virtually non‐existent) role for the longline fleets of Japan, Taiwan and China (the port authority was far more significant when the longline fleet came into Port Victoria in the 1990s);

An important role for fleets and vessels not entering under fisheries agreements (including service vessels and reefers involved in transhipment activities).

The most important constraint the SPA faces appears to be the need to significantly improve the port. Institutional skills would appear not to be a problem as any expansion in port activity can be met locally or through the import of skilled personnel. Unskilled labour needs are currently met locally with little difficulty. Proposals to improve port facilities are addressed elsewhere in the report (see Section 9.1). Improved facilities may increase the numbers of vessels using the port and would thus also require a significant increase in port based enforcement staff and would require their training and upskilling. 4.7.3 The Seychelles Licensing Authority (SLA) The SLA licenses vessels with guidance provided by the SFA. It is a general purposes licensing agency rather than an agency specifically devoted and trained to undertake fisheries licensing. That it handles fisheries licences is due more to an accident of history and the previous status of fisheries licences as simple and generic instruments.

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SLA and the access agreements regime

The SLA currently performs simple recording and document issuing tasks on advice from the SFA and appears to perform them swiftly. There is however no reason for fisheries licensing which has become a highly specialised process to be carried on by the SLA given the SLA’s lack of specialised skills and knowledge. In particular FAO requirements on fishing capacity and also arrangements for control of IUU fishing from the EU and FAO can be better met by bringing licensing under the SFA as this is a specialised activity. 4.7.4 Central Bank of Seychelles The Central Bank of the Seychelles receives revenue earned from access agreements. It appears to play no other role in the system at the moment. Its nascent skills in the area of economic modelling could possibly be usefully applied to scenario building activity by the SFA. It is understood that NBS and CBS would like support in improving economic modelling, if this is provided (e.g. via the IMF and/or World Bank), the consultants recommend that this include coverage of the specificities related to the fisheries sector. Under the current set of rules governing financial transactions, loans and accrual of debt by Seychelles, the Central Bank has an oversight role to tightly control the grant of local and domestic credit. It also reports regularly to the IMF on all financial transactions. 4.7.5 Ministry of Finance The Ministry of Finance is principally concerned with access revenues and makes decisions on access fee and fisheries sector revenue as part of the budgetary process. In many countries, the Ministry of Finance plays a central role in the negotiation of access agreements and the establishment of fee levels to be requested during negotiations. This is not the case in the Seychelles. The experience of the consultants in West Africa suggests that in general Finance Ministry officials tend to take a very short term view of access revenues and in negotiations are usually a source of internal pressure to concede rapidly. Therefore, should the role of the Ministry of Finance be expanded this should be accompanied by induction processes for all staff who run the fisheries desk at this Ministry and also should involve an intensive training course in the basic elements of the fisheries sector, fisheries negotiations and different approaches to access agreements and revenue. Significant levels of participation by Ministry of Finance personnel in negotiations will be most useful where the personnel concerned have a sound understanding of the fisheries sector. 4.7.6 Ministry of Foreign Affairs The Ministry of Foreign Affairs appears to play a limited role in the negotiation and implementation of access agreements. Matters of international law have not so far been contentious in the fisheries relations of the Seychelles and have therefore not required extensive diplomacy oriented intervention by the Ministry. Again, as with the Ministry of Finance, a more extensive participation in the sector will only be of benefit to the Seychelles if the officials concerned are required to undertake a serious short course of study on the specific features of the fisheries sector and access agreements. The recent dispute with Spain demonstrates the need to have the Ministry of Foreign Affairs more closely involved with access agreements. Any attempt to improve net benefits including the introduction of new approaches will most likely provoke diplomatic reactions from the fleets initially or as a second phase response, re‐itering the need for Foreign Affairs personnel to undertake a serious short course of study.

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4.7.7 The Attorney‐General’s Department The Attorney‐General’s Department provides legal advice to the SFA on a case‐by‐case basis, It has final responsibility for the drafting of fisheries and other laws, it does not however take extensive part in the negotiation or implementation/management of fisheries agreements. Significant disputes with a foreign State or fleet would require the involvement of the Attorney‐General’s department. Arrangements to ensure that this Department is fully informed of key matters would ensure that it can quickly assist should major disputes with foreign partners occur. An induction programme for AG Department personnel would also be useful.

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Table 4.5: Overall evaluation and key gaps Identified by the organisational assessment

Issue/Theme Responsible Institution(s)

Are current organisations and arrangements effective in implementing the current approach to access agreements?

What changes are required to ensure and/or maintain effectiveness under a new approach to maximise net benefits?

Negotiation of agreements; strategy; tactics; review; post‐negotiations debriefing; modelling and simulation of options; scenario building; application of negotiations intelligence; implementation generally

Presidency & Cabinet; SFA; Ministry for Environment and Natural Resources

− Appears currently to be effective: Clear lines of authority and clear mandate to undertake negotiation

− Principal gap is in area of negotiations analysis and intelligence and application to negotiation of agreements

− Overload on higher executive levels of SFA exists and needs to be removed through creation of a small Fisheries Industrial Intelligence & Analysis (FIIA) support unit

− Effective job being undertaken under current relatively ad‐hoc approach to agreements

Extremely significant and limiting gaps exist here: − Current relatively ad‐hoc system will not be able to address the needs of

a new system in which access agreements are only one of the modalities for increasing revenues

− FIIA unit needs to be established urgently − Initial outsourcing of key work to outside Seychelles probably required − Significant capacity augmentation and scenario building capacity required

– especially in area of applying VMS and other fleet information to negotiations and also any new approaches to revenue raising (e.g. insertion of environmental taxes/levy into access regime or national legislation)

− Establishment of relations with regional countries – Mauritius, Madagascar, Kenya, Tanzania etc and also with the Forum Fisheries Agency (Honiara, Solomon Islands) will considerably strengthen capacity. In addition, existing relations with UK (i.e. under auspices of BIOT) and France should be maintained

Determination of agreement types; zonal coverage, beneficiaries etc.

SFA Effective – experience with all current agreement types. Principal gap is in area of negotiations analysis and intelligence and how this is to be applied to different agreement types

FIIA unit required to address these issues

Fleet aspects and vessel types, including fleet strategies and fishing capacity and link to global value chains etc.

SFA; Seychelles Licensing Authority

− Currently effective with respect to meeting basic registration requirements

− Not fully effective in area of matching knowledge of fleet strategies and behaviour to negotiations and implementation process

− Major capacity gap − Can be augmented through establishment of FIIA − Initial outsourcing of key work probably required

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− Not effective with respect to FAO IUU and capacity control requirements

Transhipment: Legal and IUU

SFA; Coast Guard − Not effective as SFA and Coast Guard lack at‐sea enforcement capacity

− IOTC rules currently permit transhipment at sea by longliners

− IUU transhipment not well understood and controlled

− Strong technical basis available via VMS to address this issue − Significant capacity building required − Current VMS capability provides sound basis on which to build − Urgent training programme required as per emerging centres for VMS

improvement (e.g. dedicated training centre at University of Wollongong, Australia)

Organisational aspects and dispute settlement

SFA; Ministry of Foreign Affairs; Attorney‐General

Effective Seychelles has a well established tradition of independence and assertiveness in foreign relations and diplomacy when required

− Current arrangements under FPA are not particularly effective as shown by the recent dispute with Spain

− New benefits approach will disturb established behaviour patterns of foreign fleets and will possibly lead to disputes

− Seychelles will need to review the current dispute settlement system and draw up a list of international personnel able to quickly support Seychelles in any arbitration

− Such experts must be made familiar with Seychelles strategy to improve net benefits

Incorporation of international organisation rules into access agreements practice

SFA Effective Sound co‐ordination with IOTC

Change in IOTC rules on transhipment required to allow Seychelles to exert greater controls over longliners

Implementing agreed fisheries technical conservation measures as set out in laws and agreements

SFA; other agencies; local populace

− Not effective as at sea enforcement virtually non‐existent

− No sound picture of at‐sea by‐catch issues and impacts of fleets

− Strong organisational and research basis exists within SFA

− Significant degree of strengthening needed − This would build on current strong SFA organisational and research

capacity in the science and technical area

Better defining, expanding and

SFA; Ministry for Environment and

− Effective within current legal limits inshore – probably not

− Significant degree of strengthening needed − Would proceed from current strong SFA organisational and research

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implementing bio‐diversity and ecological protection

Natural Resources effective further offshore as no enforcement capacity

− Major challenges given resource shortage and size of EEZ and threats from piracy

capacity base − Civil society organisations would need to be briefed on the basis that

ecological improvements within access agreements supports the environment and improves tourism

− International NGOs would need to be briefed on Seychelles efforts to introduce ecological elements into access agreements

Monitoring control and surveillance

SFA; Coast Guard − Not effective ‐ extremely poor at sea enforcement and deterrence

− Major challenges given resource shortage and size of EEZ and threats from piracy

− High level of capacity building needed – equipment, resources; personnel, training, incorporation of skills and talents of civil society;

− Possibility of drawing on commitments for financial and technical assistance by European Communities in this area (Fisheries Chapter, ESA‐EU Interim EPA), see Section 6 for details

VMS SFA; Coast Guard − Improving and has significant potential

− Absence of at sea enforcement capacity severely limits usefulness

− Major challenges given resource shortage; size of EEZ and piracy threat

− Improved levels of analysis of raw data needed (including for purposes of economic assessment) but subject to confidentiality rules

− Strategic approach needed to further deepen primary data gathering and second stage analysis

− Significantly improved at sea enforcement; a ban on transhipments and up‐to‐date profiles of fleet strategies from FIIA unit would improve returns from VMS system dramatically

Port visits and local landings

SFA; SPA; Customs

Not effective although significant levels of information generated and usable – many external factors influence this issue and cannot be resolved within access agreements organisational framework

− Significant infrastructure improvements required for ports and adjacent areas

− Improved port and higher levels of usage will require significant strengthening and re‐organisation of management and regulatory arrangements for the port area; dedicated use of portions of port revenue to support specific objectives to enhance capture of value added from port aspects of fisheries operations and retain more foreign exchange within the local economy

Local crew on‐board

SFA; MENRT Not effective but local crew could support enforcement activity and building up knowledge of foreign fleet activity

− An important area for action as local crew with training and better wages provide the basis for deploying more observers and strengthens enforcement

Use of local services

SFA; SPA; Customs

Could be improved – many external factors influence this issue and cannot be resolved within access agreements

− Significant infrastructure improvements required for port − Improved port and higher levels of usage will require significant

strengthening and re‐organisation of management and regulatory

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organisational framework arrangements for the port area; − Dedicated use of portions of port revenue to support specific objectives

to enhance capture of value added from port aspects of fisheries operations and retain foreign exchange within local economy (see Section 2 and 9 on intersection with value chains) and economic impact analysis

Procurement and management of development assistance – goods and materials

SFA Effective within current limits and also subject to usefulness of in‐kind assistance from Japan

Much more detailed analysis of aid granted by Japan and others will be required with the right of return of inappropriate assistance to be written into the Goods and Services Agreements

Development assistance – technical and organisational support

SFA Reasonably effective but slightly over‐biased towards mainstream fisheries science and therefore does not fully support current access regime

− Character of assistance sought will have to shift to include assistance with economic analysis; environmental and fisheries economics and other disciplines to support a more economically focused approach to access agreements

− Fisheries science and technology orientation of assistance will also have to be retained

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4. 8. Deepening the use of intelligence, forward strategy and planning To increase the benefits from its fisheries sector and from the operations of DWF fleets, it is important that the SFA plays a more strategic role. It is recommended that a Forward Strategy and Planning unit or Fisheries Industry and Intelligence Analysis (FIIA) unit be established within the SFA. The role of the unit would be:

to monitor developments in the demand for tuna, tuna like and high value demersal and other marine species on world markets,

to monitor the income and performance of access agreements between Seychelles, the EU and other countries, monitor the real value and rate of return of licence, transhipment fees, port duties and other potential sources of income from the fisheries sector.

to assess the opportunities for foreign investment in fishing and aquaculture in Seychelles, taking into account the real benefits to the Seychelles economy in terms of employment and value added

to assess the opportunities for regional collaboration in fisheries management and fish processing.

It is proposed that this unit which would report to the managing director and Board of Directors of the SFA would be staffed by:

A fisheries economist or a social scientist with extensive applied experience in fisheries policy and management with experience in the public and private sectors, including experience in the Western Indian Ocean .

A trade and markets specialist with extensive knowledge of fisheries trade issues (e.g. WTO, ACP‐EU, rules of origin, SPS), good knowledge of markets for fish and fish products in Europe, Asia, North America and elsewhere, and , ideally, either firsthand experience of trade policy negotiation or working in fish and fish product value chains.

The indicative range of tasks that would be undertaken by this Unit includes:

Liaison with all local and foreign export‐orientated enterprises and with foreign‐owned fishing fleets.

Constant monitoring of industry press, Globefish and related publications, and other relevant sources (e.g. trends in gas oil prices). Short briefings should be produced for circulation within SFA and other relevant agencies/ departments (SPA, Finance, MoFA, etc).

Regular meetings with the private sector on their concerns domestically and internationally through quarterly or bi‐annual consultation meetings.

Assess viability and benefits to the Seychelles economy of all export‐orientated fisheries‐related investment proposals

Monitor and analyse prices for all Seychelles FP exports in all current and potential principal markets (including the maintenance of relevant databases). This would include keeping track of global supply and demand for key products (i.e. whole frozen skipjack and yellowfin, canned tuna and related products, fresh chilled loins of tuna, swordfish, and other key species, including high value demersal species and crustaceans).

Constant monitoring of and development of expertise in fisheries trade‐related issues, including the WTO, EU tariff policy, FTAs, SPS, other non‐tariff barriers (NTBs), etc.

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Provision of sensitization workshops and other exercises for private sector and GOS on issues of importance (e.g. new EU IUU regulation, fisheries rules of origin, new private quality and other standards).

SFA liaison with other relevant GOS agencies: Ministry of Finance (Trade), Ministry of Foreign Affairs (International economic affairs).

4.9 Improved Data Collection and Reporting on the Fisheries Sector – Developing an

integrated economics and environmental accounting approach specific to Seychelles The increased strategic role of the SFA must be accompanied by better data collection, analysis and management relating to the analysis of licence fees, transhipment fees, vessel expenditure in port. This information is vital to the monitoring and evaluation of fishing activities by both distant water fishing fleets operating in the Seychelles EEZ as well as local fishing fleets, both semi industrial and artisanal. One important area that was discussed while the study team was in Seychelles was the need for there to be a more rigorous analysis of the fisheries and associated sectors at the level of the National Statistics Bureau (NSB). While the recent statistical bulletin includes a section on gross domestic product by fisheries related industry at current market prices, given the importance of fisheries and associated activities to the Seychelles economy (foreign exchange earnings from exports of canned tuna and to a lesser extent high value demersal species, fishing vessel activities in port, EU FPA) there is a need to deepen this analysis so that the performance of the fisheries and associated sectors can be better tracked. This will need very close collaboration between the SFA, NSB and Ministry of Finance. The proposed forward strategy and planning element of the FIIA unit will have a vital role in this process. Appendix 3C provides an example of the core elements of a set of fisheries satellite national accounts and current best practice in the statistical, accounting and asset valuation area. Work in this area would also feed into the development and implementation of an environmental levy. 4.10 Using an Independent Negotiator – Caution required It has also been suggested that an independent negotiator outside of SFA might be considered by the Seychelles. An independent negotiator with a sound knowledge of existing and prior access agreements, fishing, trade and price data, political economy interests of DWFs and/or DWFNs, and GoS objectives is another option but would be a considerable policy shift. If an independent negotiator is be employed he/she would need to be employed for a reasonable period of time to allow personal ‘value added’ through institutional memory, etc. The negotiator would of course, have to be closely monitored by SFA and other GoS technical staff. An alternative to an ‘independent’ would be to utilise existing GoS personnel, such as a senior official with a track record of successful negotiation skills and the ability to harness a wide range of data effectively. 4.11 SFA and the Private Sector In addition it is important that the SFA in its advisory and management role in fisheries include representatives of the private sector. The aim should be to have the public and private sectors engaged in the management of the country’s fisheries.

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4.12 Improving Seychelles Organisational Capacity to Enhance Net Benefits Recommendations In conclusion, the consultants recommend the following measures to strengthen the organisational capacity of the SFA so that, as the central actor within the access agreements network, it can tackle the tasks appropriate to an enhanced net benefits regime. Issue/ Organisation

Recommendation Priority

SFA institutional capacity

Establish an Fisheries Industrial Intelligence & Analysis (FIIA) Unit

1. The consultants recommend the formation of an industrial fisheries intelligence unit to better integrate economic and MCS intelligence and analysis into negotiations.

2. The unit would constantly monitor trade and market information and, as far as possible, include comparison with access agreements involving other countries.

3. The Unit would be the primary source of technical information for negotiations

4. The Unit would produce post‐mortem reports after the conclusion of each negotiation for discussion amongst all relevant GoS players.

5. Liaise with Forum Fisheries Agency (FFA) and other important actors to exchange experiences on scope of tasks required

High – immediate


The Managing Director to delegate responsibility for developing and calculating approaches to access‐related revenue generation to FIIA Unit.

High – immediate

SCG enforcement capacity

Urgently seek increase in naval assets suitable for fisheries enforcement – this may be pursued in the context of current concerns with piracy

High – immediate

Improvements to VMS system and use of VMS data to support negotiations

• Significant capacity building capacity required in area of applying VMS and other fleet information to negotiations and also to any new approaches to revenue raising (e.g. insertion of environmental taxes into access regime or national legislation)

• Urgent training programme in area of VMS improvement (e.g. send students to dedicated training centre at University of Wollongong, Australia)

• Internships with FFA, US, Canada, Australia required as these are all countries which use VMS to enforce rules over large sea areas

High – immediate& pre‐condition for success of net benefits programme

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Negotiations Institutionalise pre and post negotiation analysis. Post negotiation analysis and evaluation should be a formalised and systematic process with a key role for the industrial fisheries intelligence unit

High – immediate & pre‐condition for success of net benefits programme

Databases SFA should formalise the integration of its existing databases and other information into its preparations for negotiations. Currently, these databases are often in a poorly organised state and very difficult to utilise. It is recommended that the FIIA Unit take responsibility for this process.

High ‐ immediate & pre‐condition for success of net benefits programme

Negotiations Formalisation of team composition and inclusion of high‐level technical officials is a priority for reform. Consistency of team is a priority for: a) institutional knowledge/ memory; b) experience of tactics and strategies; c) development of expertise in knowledge of data and trends

High – after Establishment of FIIA unit

Negotiations Involve private sector stakeholders in consultations on negotiations and possibly even in the negotiating process itself

Medium – after FIIA unit established

Funding to support proposed institutional changes

Explore possibility of drawing on commitments for financial and technical assistance available under EPAs ‐ (Fisheries Chapter, ESA‐EU Interim EPA) Seek assistance from Norwegian and Swedish funds Seek assistance from US environmentally oriented Foundations to support policy work on ecological access fee aspects – Pew Charitable Trusts; Packard Foundation

High – immediate. Certain funding applications could be done by FIIA unit when operational

Negotiations with Japan

Much more detailed analysis of aid granted by Japan and others will be required with the right of return of inappropriate assistance to be written into the Goods and Services Agreements


Dispute settlement

The net benefits approach will disturb established behaviour patterns of foreign fleets and will possibly lead to disputes. Accordingly, Seychelles will need to review the current dispute settlement system and draw up a list of international personnel able to quickly support Seychelles in any arbitration. Such experts must be made familiar with Seychelles strategy to improve net benefits.

Medium – after FIIA unit established; public relations programme inaugurated and net benefits approach formally approved

Negotiations and public relations

Securing support from civil society organisations at national and international level is crucial for net benefits approach

• Civil society organisations would need to be briefed particularly on the proposal to insert an ecological fee element into the access agreements

• International NGOs would also need to be briefed on Seychelles efforts to introduce ecological elements into access agreements

Medium – after net approach officially adopted and in operation

Participation by non‐SFA

Representatives from Finance and Foreign Affairs should be more actively involved in the process, whether it is from a legal

Medium – after FIIA unit

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agencies perspective (i.e. relationships with other International laws that the Seychelles adheres to) or from an economic perspective (e.g. maximising access revenue) or from the perspective of process (e.g. utilising accumulated experience in negotiations from other areas)

established

Negotiations

Virtually all AA negotiations should be held in the Seychelles The move to hold all negotiations in the Seychelles is probably a positive one in terms of a negotiation advantage (i.e. home turf and physical commitment by the DWF/DWFN in question), as well as a cost reduction exercise and the reduction of time spent overseas by key GoS personnel.


Improve international relations specifically focused on access agreement issues

Open dialogue with regional countries – Mauritius, Maldives, Madagascar, Kenya, Tanzania – on need to increase access fee returns and remove transhipment exception for longliners. Explore possibility of reviving WIOTO Establish relations with Forum Fisheries Agency (Honiara, Solomon Islands) and fund short internships for VMS and other staff to gain experience in dealing with Asian longline fleets


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SECTION 5 THE CURRENT LEGISLATIVE REGIME – AN ASSESSMENT OF ITS COMPATIBILITY WITH NET

BENEFITS OBJECTIVES 5. 1 Overview, objectives and methodology for this section of the report This section of the report sets out the findings of the desk‐top review of relevant domestic legislation undertaken under the terms of reference and assesses the question of whether the legislative regime can adequately support the programme of increasing net benefits. The focus of the review was principally directed at domestic legislation, in particular the Fisheries Act 1986 (as amended including proposed amendments put forward in 2008). However, because of its importance in regional Indian Ocean terms and the importance of ongoing compliance with international law, we also reviewed the international law and regional co‐operation aspects of the Seychelles regime in a more general way. A more detailed review of the international regime will in our view be required once GOS has decided what basket of policies it will adopt. This is required to ensure that the programme is in compliance with international law and will also reduce the scope for complaint by any of the key fleets and States likely to be affected by significant changes. The international law dimension is also important because Seychelles can usefully utilise developments in international law as legitimate justification for some of the changes to access agreements and foreign fishing proposed by this report. We refer in particular, to those proposals in Section 3 advocating that fish withdrawals and related ecological/environmental impacts be explicitly factored into the financial calculations and revenue aspects of the access agreements framework, as a component of the access fee or as an environmental levy. In terms of methodology, the Fisheries Act 1986‐2008 was exhaustively analysed against the following criteria:

Does the Act have clear statements in relation to its scope of application and the authority responsible for fisheries management?

Does it contain any elements which might constrain any of the benefit enhancement measures proposed by the study?

Does the Act provide a framework which would facilitate a programme of reform?

Does it provide the regulator with the ability to use a wide range of fisheries management mechanisms and measures including the use of fishing rights and a planning or management by objectives approach?

Does it facilitate the implementation of the concepts of responsible fishing, including principles such as the ecosystems approach; protecting against ecological harm; the polluter/user pays principle as well as the enhanced protection of marine bio‐diversity principle?

Does it enable the Seychelles authorities to undertake the full range of monitoring, control and surveillance and enforcement actions required to protect the fishery and ensure it can deliver enhanced benefits?

Does it provide the flexibility for the Seychelles authorities to use administrative processes to achieve the necessary objectives where this is required?

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Given the relative lack of capacity and resources in the Seychelles, does it provide a sound and flexible enough framework for implementing different approaches to enforcement?

The desktop review found that in general, the legislative regime of the Seychelles is adequate both for current and future tasks. However, the legislation operates within an environment with significant deficiencies and limitations. Their cumulative effect is to make the legislation ineffective. This is particularly the case with respect to monitoring, control and surveillance (MCS) as well as enforcement. Key areas of constraint and lack of effectiveness which are likely to sharply limit the ability of the legal regime to support an enhanced benefits approach are:

The absence of appropriate and/or substantial enough surface and air surveillance assets to police an extremely large zone;

Limited financial resources – the consequence here is that the Seychelles Coast Guard (SCG) and other institutions are unable to effectively use and service the limited number of existing MCS and enforcement assets;

The absence of effective arrangements for regional/sub‐regional cooperation – the consequence here is that effective international co‐operation potentially of great assistance in lowering economic costs and policing highly mobile fleets is virtually absent;

The absence of any credible means for verifying compliance with the law encourages non‐compliance and IUU fishing.

Other factors limiting effectiveness now and in the future include:

The absence of settled maritime boundaries in many parts of the Seychelles EEZ – although currently of little consequence, this gap would sharply limit the ability of the SCG to police the outer limits of the EEZ were it to acquire the ability to do so – the issue here is that enhanced enforcement activity increases the threat of maritime disputes where boundaries are not well established

A lack of Flag‐State willingness to effectively monitor flagged vessels operating in Seychelles waters – this external accentuates the lack of effectiveness of the SCG and contributes to making the legislation relatively ineffective

The new threat from Somali piracy – a possible consequence is that pure fisheries enforcement is unlikely to be given as high a priority by donors as anti‐piracy operations – anti‐piracy arrangements although having a degree of overlap with fisheries enforcement are fundamentally different activities

5. 2 International Law Aspects 5. 2. 1. The importance of international law issues to the increased net benefits

programme International law is a key source of obligations for access agreements and foreign fishing matters generally. Recent developments in international law including the ecosystem approach; responsible fishing; the precautionary principle; addressing climate change issues on behalf of small island developing States (SIDS); protecting biodiversity as well as limiting impacts and harm to the marine environment from fisheries activity are all of relevance to the Seychelles.

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With respect specifically to the possibility of increasing net benefits by imposing an environmental levy, one of the key medium term recommendations of this report, it is therefore extremely important that Seychelles ensure that it has ratified and fully implements the full range of marine and maritime conventions, not just those closely related to fisheries. The review below assesses the state of Seychelles compliance with relevant international law and is also thus an indicator of the rights that can be claimed under international law to support an enhanced net benefits programme. It is not however exhaustive and would require a proper review once the full programme of measures has been agreed by GOS. 5. 3 National legislation and actions to implement international law obligations and

rights In accordance with the United Nations Convention on the Law of the Sea of 1982, Seychelles claims the following maritime zones and follows the relevant rules with respect to baselines and outer limits. The claims are:

a 12 nautical mile territorial sea

a 200 nautical mile EEZ based on 29 sets of geographic co‐ordinates

a contiguous zone of 24 nautical miles

a continental shelf of 200 nautical miles with the possibility of extension out to 350 nautical miles should ocean topography permit this.

Table 5.1: National legislation implementing Law of the Sea jurisdictional rights

Maritime Zones Act 1999, Act No. 2 of 1999

Maritime Zones (Exclusive Economic Zone and Continental Shelf) Order, 14 November 2002 (S.I. 27 of 2002, Maritime Zones Act, 1999)

5. 4 Interaction between the Seychelles Fisheries Regime and the International law of

Fisheries, Bio‐diversity and Ecological Protection The core international treaties of relevance to the Seychelles are set out below. The interaction appears to be satisfactory as Seychelles has ratified all treaties relevant to the Indian Ocean and also ensures that it meets the required standards even where the treaty is not ratified. Seychelles participates actively in all relevant international meetings – FAO; SADC; IOTC and, previously, was a key driving State behind the formation of the Western Indian Ocean Tuna Organisation, the latter organisation is not functioning. All the important global treaties of relevance have also been ratified.

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Table 5.2: Core fisheries and fisheries‐related conventions and agreements of significance to Seychelles

Conventions, Treaties and Agreements Ratified by Seychelles Status for Seychelles

General International Law of the Sea Treaties and Conventions United Nations Convention on the Law of the Sea Ratified Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 Relating to the Conservation and Management of Straddling Fish Stocks and High Migratory Fish Stocks

Ratified

Fisheries Treaties Agreement for the Establishment of the Indian Ocean Tuna Commission Ratified Agreement to Promote Compliance with International Conservation and Management Measures by Fishing Vessels on the High Seas

Ratified

Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of the Sea of 10 December 1982 Relating to the Conservation and Management of Straddling Fish Stocks and High Migratory Fish Stocks

Ratified

Biodiversity‐related Conventions Convention on Biological Diversity Ratified Convention on International Trade in Endangered Species (CITES) Ratified Convention on Migratory Species (CMS) Ratified International Coral Reef Initiative (ICRI) High level of

participation General Marine Pollution Control and Regional Seas Programmes and Agreements

Global Programme of Action for the Protection of the Marine Environment from Land‐based Activities

Participant status

Convention for the Protection, Management and Development of the Marine and Coastal Environment of the Eastern African Region (Nairobi)

Ratified

International Convention for the Prevention of Pollution from Ships (MARPOL 73/78)

Ratified

Climate Change United Nations Framework Convention on climate Change Ratified 5. 5 Maritime Boundary Claims, Délimitation, Contested Maritime Areas and Regional

Co‐operation Seychelles supports the application of the equidistance principle in its delimitations with its neighbours. This principle is thus applicable to arrangements with Mauritius, Tanzania (Mafia island); Madagascar, Mauritius, France (les îles Glorieuses), Mayotte and Comoros. However it is important to note that not all the maritime boundary disputes between Seychelles and its neighbours are settled. Recent progress includes an agreement with France over the Glorieuses Islands and a treaty with Tanzania. In a good sign for future regional co‐operation – an essential component to improving benefits from fisheries for all the States in the region – Seychelles and Mauritius made a joint submission on continental shelf matters to the UN at the end of 2008.

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Table 5.3: Maritime Boundary Delimitation Agreements and Continental Shelf Issues

Seychelles and France Agreement on Boundary Delimitation

Agreement between the Government of the French Republic and the Government of the Republic of Seychelles concerning Delimitation of the Maritime Boundary of the Exclusive Economic Zone and the Continental Shelf of France and of Seychelles, 17 February 2001 (entry into force: 19 February 2001; registration #: 37782; registration date: 29 October 2001)

Seychelles and United Republic of Tanzania Agreement on Boundary Delimitation

Agreement between the Government of the United Republic of Tanzania and the Government of the Republic of Seychelles on the Delimitation of the Maritime Boundary of the Exclusive Economic Zone and Continental Shelf, 23 January 2002 (entry into force: 23 January 2002; registration #: 38874; registration date: 4 October 2002)

Submission In Compliance With The Deposit Obligations Pursuant To The United Nations Convention On The Law Of The Sea (UNCLOS)

M.Z.N. 44. 2003. LOS of 7 May 2003: Deposit of the list of geographical coordinates of points defining the outer limits of the exclusive economic zone and the continental shelf of the Republic of Seychelles as specified in the Maritime Zones (Exclusive Economic Zone and Continental Shelf) Order, 2002 (S.I. 27 of 2002).

Continental Shelf Beyond 200 Nautical Miles From The Baselines From Which The Breadth Of The Territorial Sea Is Measured

Joint submission by the Republic of Mauritius and the Republic of Seychelles to the Commission on the Limits of the Continental Shelf made on 1 December 2008 However, matters to do with the water column above the continental shelf and subsoil – the main site of fishing activity are not covered in this submission, meaning there is still no high level joint co‐operation on fisheries matters.

5. 6 Protection of Natural Capital and Ecological Assets – a firm and established

principle of international law A key part of our proposals for the medium term is that Seychelles consider implementing an environmental levy. These proposals reflect ongoing developments in international law and reflect both the precautionary principle and the ecosystems principle, both of which are currently core elements of the concept of responsible fishing in international law. Sustainable development also requires that we maintain the natural capital – in this case fish resources that we withdraw from the environment. One of the ways of doing this is for ‘users’ of these resources to pay as full a price as possible for the use of those resources including an element which provides significant resources to compensate for the withdrawal of those resources – an application of the ‘full cost’ principle in environmental economics. It is thus important to note that Seychelles is already, albeit indirectly, starting to recognise elements of the environmental levy approach in its new Fisheries Amendment Bill of 2008 as follows:

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Table 5.4: Precautionary principle in Fisheries Amendment Bill of 2008

Recognition of the precautionary principle and the ecological damage principle

Section 23 Fisheries Act 1986‐2008 as amended

In determining the value of bond or other security to be deposited with the court, the court shall have due regard to: (a) the value of the seized vessel or other article; (b) the maximum fine or fines for the alleged offence or offences; (c) the estimated value of the damages caused by the offence on marine resources and ecosystems; (d) any costs or expenses incurred or reasonably foreseen to be incurred by the State and recoverable under this Act. Section 26 Fisheries Act 1986‐2008 as amended

A compounding committee shall be established to determine the sum of money to be paid by the offender under subsection (1)(a), having due regard to the nature, circumstances, extent and gravity of the offence, the past behaviour of the offender, the extent of the damages caused by the offence on marine resources and ecosystems, and the financial benefits accrued from the violation by the offender.

These provisions show that Seychelles recognises the above‐mentioned cluster of ecological harm; natural capital maintenance and related principles to some degree. A court case successfully imposing a bond or a fine on this basis would considerably strengthen the argument that an environmental levy is justified. Preparation and issuing of guidelines on how ecological damages will be assessed will be useful further step in developing Seychelles regulatory requirements in this area and if not protested by fishing States would be an important step in securing recognition of the ecological harm aspects of foreign fishing and access agreements. 5. 7 The National Legislative Framework The legislative framework at national level consists of the following statutes and regulations backed by policies and plans operating over a multi‐year period. The fundamental law is the Seychelles Constitution of 1993. Relevant policies and plans are discussed in Chapter 4 on the organisational arrangements. 5. 7.1 Fisheries sector legislation The Fisheries Act 1986‐2008 (latest proposed amendments are set out in a Fisheries Bill dated 2008) is the main statute analyzed. The following laws are of also of relevance as the Act invokes their application to certain fisheries management activities:

the Seychelles Fishing Authority Act – this Act provides the SFA with extensive authority over fisheries;

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the Seychelles Licensing Authority Act (licences under the Act are issued by the Seychelles Licensing Authority (SLA));

the Public Officers (Protection) Act 1976 (this Act provides protection for fisheries officers when undertaking their duties).

This report proposes that unless the fisheries information expertise of the SLA is enhanced, the better option would be to remove the SLA from the fisheries vessel licensing process. This is because, in the period ahead, vessel information, licensing and registration issues are likely to become more complicated. Both the Seychelles Fishing Authority Act and the Public Officers (Protection) Act 1976 however provide effective support for an enhanced benefits programme. In particular, the wide powers of the SFA under its parent act are to be noted as these powers adequately support any programme of reform. 5.7.2 Other Legislation The Maritime Zones Act 1999 is the other important piece of legislation. It is currently adequate. The Environmental Protection Act 1994 is also crucial. Overview of the Fisheries Act 1986‐2008

The Act revises and consolidates the laws relating to fisheries. It provides a general framework for the regulation of fishing and aquaculture in Seychelles waters, defined as ‘the exclusive economic zone, territorial waters, internal waters and all other waters subject to the fisheries jurisdiction of Seychelles’. The main management actions are vested in the SFA. Typically, the Minister responsible for fisheries is vested with the powers to make regulations for the proper management of fisheries and to establish specific management measures. The Minister can enter into agreements with other States, intergovernmental organizations and associations representing foreign fishing vessels operators for the purposes of allocating fishing rights. He can also compound offences. Assessment of the Fisheries Act including the Fisheries Bill 2008 against net benefits requirements

The section immediately below assesses the current Act against the changes that would be required to implement a new regime of increased net benefits. The focus is on those provisions directly affecting access agreements and foreign fishing as well as those sections relevant to local fishing vessels. It is broken into four broad themes as follows:

controls over foreign fishing vessels and access agreements

controls over local fishing vessels

powers of authorised officers

enforcement and penalties

The assessment addresses key issues as discernible from the legislative text. No detailed discussion of specific provisions was undertaken during the field trip. The consultants gathered however that the legislation was viewed as now adequate especially in view of recent amendments. In any case, the Act can be amended or relevant regulations drafted to further support and strengthen any comprehensive programme adopted.

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Table 5.5: Current legislative controls over foreign fishing vessels and access agreements – compatibility with net benefits objectives Issue regulated Section Summary Ability to support a net benefits approach Fishing Plans Fishing Agreements Section 6

� Minister may enter into agreements with other States, intergovernmental organisations and associations representing foreign fishing vessel operator

� Agreement shall include provision establishing the responsibility of other State, organisation or association to take all necessary measures to ensure compliance by its vessels with the agreement and the law relating to fishing in Seychelles waters

� The total fishing rights allocated by agreements made under this section shall be in accordance with the applicable fisheries management and development plan and where such applicable fisheries management and development plan does not exist a precautionary approach shall be applied.

Yes – this section can be amended to more precisely reflect net benefits objectives and aspirations agreed

Foreign fishing vessel licence

Section 7 No foreign fishing vessels shall be used for commercial fishing in Seychelles waters OR for commercial fishing for sedentary species on the continental shelf, unless granted with Seychelles Licensing Authority (SLA) licence and on advice of SFA

It would be more appropriate for the Seychelles Fisheries Authority rather than the SLA to be in charge of licences

No licence to be granted unless there is an access agreement

Section 6 No licence shall be granted in accordance with subsection unless there is in force with the Government of the flag state of the vessel, with an intergovernmental organization to which the flag state has delegated the power to negotiate fishing agreements, or with an association of which the operator is a member, an Agreement

This clause appears to substantially restrict independent licensing

Where there is no access agreement, licences can only be granted after

Section 6 In the absence of an agreement between Seychelles and the Flag State or relevant association, the SLA may grant a licence to a foreign fishing vessel if the applicant provides sufficient financial and other guarantees for the fulfillment of all

Very appropriate provision ‐ It would be best for the Seychelles Fisheries Authority rather than the SLA to be in charge of licences But not adequate ‐ this provision should be

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Issue regulated Section Summary Ability to support a net benefits approach substantial bond/guarantee

obligations under this Act. substantially extended to cover all access agreements. The PNG model as discussed in Section 3.6 shows that compliance bonds can be useful for enforcement purposes, and in combination with other monetary/valuation procedures, shows how much a particular fleet values access. Fleets prepared and able to pay a larger sum clearly value these resources more. Arrangements to invest bonds and pay interest to the person depositing the bond or alternatively sharing of interest payments with the SFA may make the performance bond procedure more acceptable to the foreign fleet.

SLA to take account of a range of enforcement, IUU and other issues in considering application for licence

Section 7(5) SLA shall not grant a licence if the foreign fishing vessel has a record of non compliance with international conservation and management measures and/ or is recorded on a certified RFMO list covering vessels engaging in or supporting IUU fishing; is absent from any list of authorised vessels established by a regional fisheries management organisation to which Seychelles is a party, and/or is absent from on any other list of authorized vessels that is recognized internationally.

This section can be amended to explicitly state that the SFA will take contributions to net benefits and value‐added into account when granting a fleet, company or vessel a licence. Such a general condition can be made more effective by requiring that the licence holder provide specified information to the SFA during the course of each year; half‐year; quarter to demonstrate that it is in fact meeting this condition of the licence. Information generated by this provision can contribute to the work of the proposed Fisheries Industrial Intelligence & Analysis (FIIA) Unit.

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Issue regulated Section Summary Ability to support a net benefits approach Foreign fishing vessel without licence required to ensure adequate stowage

Section 8 Any foreign vessels that is not licensed shall: - notify SFA of time and place of entry into or exit from Seychelles water and

declare quantities of aquatic organisms on board; - keep fishing gears stowed, deactivate and not use any device on board

used for detecting aquatic organisms; and - where using any Seychelles port facility for landing, transhipping or loading

fish, except for force majeure, report its position upon entering Seychelles waters

Yes – adequate

Fees

Section 13 Licence fees and other payments may be prescribed by the Minister

Yes ‐ adequate

Validity of Licence Section 14 Licence shall be valid for a period not exceeding 12 months

This provision may need to be reworded to reflect a new approach to licensing

Suspension and cancellation of licence

Section 15 Licence may be suspended or cancelled by SLA where: - Vessel involved in activity in contravention of the Act or conditions of the

licence or international conservation measures - Vessel does not comply with national and international safety, health or

maritime labour standards - Vessel does not comply with marking requirements

This provision may need to be amended to reflect a new approach to licensing and may include wording about non‐conformity with net benefits and value added arrangements if required Meets new EU IUU regulation (to be enforced externally on 1 Jan 2010)

Scientific research Section 17 SFA may authorise any person or vessel to fish in Seychelles waters for scientific research purposes

Yes – adequate but could be amended to include requirement to share results with Seychelles

Aquaculture Section 18 No person shall engage in aquaculture in Seychelles waters without an SLA licence; EIA approvals which must also meet other control arrangements

Yes – adequate

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Issue regulated Section Summary Ability to support a net benefits approach Foreign Vessel in Seychelles port

Section 19 (9) Where a foreign fishing vessel is in a Seychelles port or offshore terminal, no fish or aquatic organism shall be landed or transhipped unless with SFA authorisation and where required, an inspection has been carried out

Yes – adequate but will probably require more detailed implementing regulations especially with respect to landing and transhipment May also be more exhaustively implemented administratively than as at present

Regional enforcement arrangements against foreign fishing vessels

Section 22 The Minister may enter into arrangements or agreements with other States in the Indian Ocean, either directly or through an international organization, providing for joint or harmonized surveillance and enforcement measures in respect of foreign fishing vessels.

Adequate

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Table 5.6: Current legislative controls over local fishing vessels – compatibility with net benefits objectives Issue regulated Section summary Ability to support a net benefits approach Seychelles fishing vessel licence

Section 9 � No Seychelles fishing vessels shall be used for commercial fishing in

Seychelles waters unless granted with SLA licence � The Minister may make regulations exempting any category of

Seychelles fishing vessel from applying for licences

The provision allowing exemption for licensing requirements should probably be removed as provides too much discretion to the Minister or may be made subject to appeal by affected parties

Refusal to grant application

Section 9 SLA shall not grant licence where vessel is not a Seychelles fishing vessel, issue of the licence is not compatible with any licensing programme, applicant is unable or unwilling to comply with licence conditions, the vessel has a record of non‐compliance or has been engaged in IUU fishing.

A net benefits and/or value added criterion can be added into the legislation if desired This will give the Minister the power to take certain actions or make certain decisions either to advance net benefits objectives or to restrain/constrain an actor whose actions do not advance net benefits objectives Exact legal wording would need advice from the Attorney General’s department

Validity of Licence Section 14 Licence shall be valid for a period not exceeding 12 months

This provision will need to be reworded to reflect whatever new approaches Seychelles decides to adopt


Section 15 Licence may be suspended or cancelled by SLA where : - Vessel involved in activity in contravention of the Act or conditions of

the licence - Vessel does not comply with national and international safety, health or

maritime labour standards - Vessel does not comply with marking requirements

This provision may need to be amended to reflect a new approach to licensing and may, if required, include wording about net benefits and value added

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Issue regulated Section summary Ability to support a net benefits approach Scientific research Section 17

SFA may authorise any person or vessel to fish in Seychelles waters for scientific research purposes

Yes – adequate but could be amended to include requirement to share results with Seychelles

Authorisation of external fishing

Section 17A No Seychelles fishing vessel shall be used for fishing outside Seychelles waters except with authorisation

Adequate

Aquaculture Section 18 No person shall engage in aquaculture in Seychelles waters without a SLA licence

Adequate although SFA should have exclusive authority over licensing

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Table 5. 7: Enforcement powers – compatibility with net benefits objectives Section title Section summary Ability to support a net benefits

approach Powers of authorised officers (including powers of entry, seizure, arrest)

Section 19(1) Officers may without a warrant : - in Seychelles waters, stop, board and search any fishing vessels - on high seas, stop, board and search any Seychelles fishing vessel or fishing

vessel flying flag of a state party to an international agreement with Seychelles - examine licence, logbook, certificate of registry - examine fishing gear and any aquatic organism - examine any navigational, position fixing and communication equipment and

any aquatic organism detection device on board; - require master of vessel to take vessel to any place for inspection where there is

weather or technical conditions - take samples of aquatic organism found on board

Officers may without a warrant : - enter and search any premises where reasonably believe that evidence of

offence may be found - enter and search any premises where necessary or expedient - enter and inspect any aquaculture facility to examine document or record,

inspect infrastructure, equipment etc, take samples of aquatic product - stop, enter and search any vessel, vehicle or aircraft which may be transporting

aquaculture products

Adequate

Assistance to enforcement officers

Section 19 (2) The master of any fishing vessel ordered to stop shall take all necessary measures to facilitate boarding of the vessel

Adequate

Custody of seized articles

Section 23 � The court may order any aquatic organisms or other perishable articles seized to

be sold � The court may order the release of any vessel or other article seized on receipt

Adequate

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Section title Section summary Ability to support a net benefits approach

of satisfactory bond or other security � If no proceedings in respect of a seized article are instituted within 15 days of its

delivery to the court, it shall be released on demand to any person who is entitled thereto

Forfeiture

Section 25 � If an article not ordered to be forfeited, shall be held until all fines, costs and

expenses have been paid. � If any part of the fines remains unpaid within 30 days, such article may be sold

and proceeds to be applied towards the payment of fines etc.

Adequate

Information and Data Section 26A Information and data transmitted by vessel tracking device shall be prima facie evidence of vessel’s position at the time and date stated

Adequate

Photograph Section 26B Photograph taken of any fishing activity shall be prima facie evidence

Adequate

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Table 5.8: Current regime of offences, penalties and enforcement powers – compatibility with net benefits objectives

Offence Penalties (Maximum Penalties) Ability to support a net benefits approach Hot pursuit Article 20

Where, following the commission in Seychelles waters of an offence against this Act with the use of a vessel, the vessel is pursued beyond the limits of Seychelles waters, the powers conferred on authorized officers under section 19 shall be exercisable in respect of such vessel beyond the limits of such waters in the circumstances and to the extent recognized by international law.

Adequate – extensive training needed should Seychelles become more active in outer reaches of the zone to act against IUU fishing and raise net benefits

Commercial fishing in Seychelles waters or commercial fishing for sedentary species on continental shelf without licence

Section 24 � Fine of USD2,000,000 � Vessel (together with its gear, catch, stores and cargo) shall be forfeited and

master of vessel prohibited to operate and board any fishing vessel in Seychelles water for 2 years

Amounts appear to be adequate – however more precise information about economic values from fishing may mean values require revision to more accurately reflect costs of illegal activity and also Government transaction costs for enforcement It is unclear the extent to which these amounts reflect a tipping point beyond which incentives to fish in the Seychelles decrease remarkably

Failure to comply with authorised officer’s order to stop

Section 24A � Fine not less than USD1,000,000 and not exceeding USD2,000,000 for

industrial fishing; � Fine not less than USD20,000 and not exceeding USD150,000 for artisanal

fishing � Any fish or other aquatic organism caught and fishing gear on board shall be

forfeited

As above

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Offence Penalties (Maximum Penalties) Ability to support a net benefits approach Falsifies, conceals or destroys evidence for judicial proceedings



fishing

As above

Tampers, wilfully destroys, damages or interferes with VMS




forfeited

Penalty may have to be raised to increase enforcement value of VMS

Usage of Seychelles fishing vessel for fishing in Seychelles waters without authorisation



fishing

Penalty may have to be increased subject to tipping point considerations

Usage of Seychelles fishing vessel for fishing outside Seychelles without authorisation




forfeited

Adequate but may need revision in light of EU IUU Regulations and if number of domestically based vessels increases

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Offence Penalties (Maximum Penalties) Ability to support a net benefits approach Provides false or misleading catch information



fishing � Fish or gear forfeited

Adequate

Discards aquatic organism




Adequate

Unauthorised use of vessel for fishing in Seychelles waters for scientific research

Section 24B � Fine not less than USD500,000 and not exceeding USD1,500,000 for

industrial fishing; � Fine not less than USD 10,000 and not exceeding USD 100,000 for artisanal

fishing � Any fish or other aquatic organism forfeited

”Adequate

Breach of condition or licence issued for foreign fishing vessel




Adequate

Failure to report licensed fishing vessel’s position


industrial fishing;

Adequate

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Offence Penalties (Maximum Penalties) Ability to support a net benefits approach � Fine not less than USD 10,000 and not exceeding USD 100,000 for artisanal


Contravenes gear stowage and equipment deactivation requirements



fishing & fish or gear forfeited

A critical provision which must match other VMS oriented provisions

Fails to provide notice of entry or exit waters and fails to declare quantities of catch



fishing & any fish or other aquatic organism forfeited


Contravenes conditions relating to transhipment in Seychelles water or port or landing of aquatic organism





Fishes, tranships, possesses, sells, buys etc of prohibited or undersized species of fishes




May require change upwards

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Offence Penalties (Maximum Penalties) Ability to support a net benefits approach Contravenes international fisheries conservation and management measure by RFMO





Falsifies, conceals, alters or deletes the identification marks of fishing vessel or gear





Possesses or uses prohibited fishing gear or method in Seychelles water



fishing � Any fish or other aquatic organism forfeited � Prohibited gear, explosive, electric device or noxious substance forfeited

Penalty may need to be raised in view of IUU considerations

Possesses or uses explosives, electric device or noxious substance for fishing



fishing � Any fish or other aquatic organism forfeited � Prohibited gear, explosive, electric device or noxious substance forfeited

Adequate

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Offence Penalties (Maximum Penalties) Ability to support a net benefits approach Fishing in any fishing prohibited area




Adequate

Wilfully prevents or hinders authorised officer in exercising his powers

Section 24D Offence under Public Officers (Protection) Act

Adequate

Import, export, tranship, sell or purchase in Seychelles of fish which were transported, possessed in contravention of laws of another State

Section 24E � Fine not less than USD 500,000 and not exceeding USD 1,500,000 � Fish or other aquatic organism forfeited

Adequate

Aquaculture activity in Seychelles water without licence or in contravention of any condition

Section 24F Fine not less than USD 100,000 and not exceeding USD 500,000

� Given recent proposals to undertake tuna ranching and the critical importance of the ecological values and beauty of the inner sea areas, a much higher penalty is probably required both on cultural and philosophical grounds but also to protect the tourism industry.

� A higher penalty would also be consistent with an environmental tax and ecological harm approach

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5. 8. VMS Aspects An issue requiring specific attention is the place of VMS in the legislative regime and fisheries policy generally. Section 27 (1)(c) sets out the framework within which Seychelles uses VMS, with the Minister empowered to make regulations requiring any licensed vessel to be equipped with specified communications equipment and vessel tracking device and any other equipment or device designed to enhance monitoring of fishing activities. Additionally there are a number of references to the VMS system, especially through the use of the term ‘vessel tracking device’. Additionally, the access agreements of the Seychelles all currently contain detailed VMS provisions. The current framework is adequate but needs to be supported by a comprehensive set of regulations reflecting the experience of the Seychelles since initiation of the VMS scheme in the 2000‐2002 period. 5. 9 The Environment Protection Act (EPA) 1994 The Environment Protection Act 1994 provides for the protection, preservation and improvement of the environment and for the control of hazards to humans and biodiversity. The Act also provides for the coordination, implementation and enforcement of policies pursuant to the national objectives on environment protection. This Act is administered by the Department of Environment in the Ministry of Environment and Natural Resources, which has been designated as the Authority. The Act provides for the management and protection of coastal zones as well as the management and minimisation of wastes and hazardous substances. The Act also makes provisions for Environmental Impact Assessment (EIA) studies and authorisation for particular projects and activities. A person wishing to undertake any prescribed project or activity in a protected or ecologically sensitive area is required to produce an EIA document to the Ministry of Environment. The primary aim of the EIA is to assess the risk associated with the development and to come up with a risk management protocol before the development is authorised. 5. 10 Integrating Fisheries Issues into Coastal Area Management The fisheries sector in the Seychelles impacts on other users of coastal and marine resources, including in particular tourism. At the same time, urbanization, land‐based pollution and the exploitation of other natural resources and the pressures from tourism affect fisheries. To better control these interactions, fisheries issues need to be much more tightly integrated with coastal area and environmental resources management generally. There is currently inadequate attention paid to this matter. Should an ecological tax approach or an ecological access fee component be adopted, the Seychelles will have to undertake a range of studies to provide a comprehensive inventory of environmental and coastal resource values affected by fishing as well as the threats to fishing posed by other users of the zone. Foreign fleets asked to pay an ecological compensation element will expect that the Seychelles has well developed policy approaches in this area. Although a number of approaches are used to cross‐integrate fishing with the activities of other users of the zone, these approaches will also have to be considerably scoped, analyzed and then strengthened.

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5. 11 The Role of Marine Protected Areas/Reserves Marine Protected Areas (MPAs) have become one of the most important management measures in a fishery and marine environment context. Whilst they provide protection, they also appear to make a significant contribution to marine productivity as the areas adjacent to them have been shown to have significantly increased productivity. The more widespread use of MPAs in Seychelles waters is recommended subject to the proper scientific examination of their specific merits and location. The issue once again however is enforcement as MPAs, especially spatially significant ones, will require physical enforcement. VMS has a very strong role to play here and it will be possible to shape VMS practice, VMS reporting and VMS requirements generally to support more extended use of MPAs. This is an aspect of fisheries policy which needs to be explored more comprehensively by the Seychelles. 5. 12 Conclusions and Recommendations Seychelles has a set of national laws which are generally in accordance with international law. The relevant EEZ and Continental Shelf zones are also defined. There is a trend of movement towards settlement of boundaries and also the ability to work jointly with Mauritius on continental shelf issues. The question is whether co‐operation in this arena can be extended to co‐operation in the fisheries arena. The main limitations are not legal. 5.12.1 VMS Recommendation Given that VMS forms the core of the Seychelles enforcement system and it is currently very weak, Seychelles needs to fund a comprehensive analytical review of its current VMS strategies and tactics as developed over the last 5 years. This should then logically lead on to development of a more comprehensive VMS Strategy. This Strategy would support effective compliance with fisheries management measures, including anti‐IUU measures as required under the EU IUU Regulation and ongoing developments in the IUU control arena and would provide additional benefits for other compliance functions in the area of customs, immigration, counter terrorism and anti‐piracy. Such a strategy would lead to better use of existing compliance assets, further development of appropriate infrastructure and procedures and would boost the prospects of enhanced regional co‐operation in this arena. It would also lead to the production of a set of Fisheries Regulations and a Manual appropriate to the specific EEZ conditions of the Seychelles. Finally, a course of training in this area focused on the needs of the Seychelles would complement the analytical study. The VMS studies and associated work could be undertaken with external assistance from leading capacity building institutions in this arena. A good example of such an institution is ANCORS, the Australian Centre for Ocean Resources and Security,73 currently leading the elaboration of a comprehensive approach to VMS for

73 ANCORS currently offers a training programme covering: Introduction to VMS, communications and how they work; Global Positioning System (GPS), Mobile Transmitting Units (MTUs), Overview of the Pacific VMS,

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Pacific Island States. The findings of this programme of research including case studies and pilot programmes to customise the VMS approach more specifically to the needs of island States like the Seychelles should be of great interest and use to the Seychelles once the programme is completed (completion is due in the next 2‐3 years). 5.12.2 Establishing a robust compliance bond framework It is strongly recommended that the Seychelles immediately implement a compliance bond scheme under which fishing fleets and vessels interested in fishing in the Seychelles EEZ deposit a substantial performance bond to hedge against non‐compliance with reporting and other requirements. The GOS should make deposit of such a bond an absolutely non‐negotiable pre‐condition to the grant of licence fees under access agreements or independent licensing arrangements. GOS should persuade all States which support responsible fishing and negotiate agreements with Seychelles to accept such a provision. The effectiveness of such a scheme can be evaluated after a three year period. The scheme is further discussed in the section of the report canvassing options for increasing net benefits (Section 3.6.). 5.12.3 Ensuring compatibility with the EU IUU Regulation regime Another recommendation is a review of compatibility with the EU’s proposed IUU control regime once that has become operational. This should be supported by a Seychelles government programme to take advantage of the opportunities for technical assistance and other assistance currently proposed by the EU. 5.12.4 Areas requiring amendment once a net benefits approach is fully defined On the basis of our work as set out in the report, the consultants suggest that a review be undertaken of the legislation and that the legislation might require amendment as set out below. This is not to criticize the legislation as it is currently adequate. However, since some of the net benefits approaches are likely to generate controversy, it would be important that the legal regime be in full accordance with the net benefits approach. Areas of attention in our view would be:

Introduction to VMS data types, Guide to aspects of Operational VMS, Interpretation of VMS data, Hands on (DNID management, Vessel Monitoring, Interpretation), Law and Regulations.

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Issue regulated and theme in legislation

Recommended amendments to support a net benefits approach

Fishing Plans This section could usefully be amended to more precisely reflect net benefits objectives and aspirations agreed

Fishing Agreements This section could usefully be amended to more precisely reflect net benefits objectives and aspirations agreed

Foreign fishing vessel licence

It would be more appropriate for the Seychelles Fisheries Authority rather than the SLA to be in charge of licences

SLA to take account of a range of enforcement, IUU and other issues in considering application for licence

This section can be amended to explicitly state that the SFA will take contributions to net benefits and value‐added into account when granting a fleet, company or vessel a licence. Such a general condition can be made more effective by requiring that the licence holder provide specified information to the SFA during the course of each year; half‐year; quarter to demonstrate that it is in fact meeting this condition of the licence. Information generated by this provision can contribute to the work of the proposed fisheries intelligence unit


This provision may need to be amended to reflect a new approach to licensing and may include wording about non‐conformity with net benefits and value added arrangements if required Meets new EU IUU regulation (to be enforced externally on 1 Jan 2010)

Scientific research These provisions could be adequate but could be amended to include requirement to share results with Seychelles

Aquaculture Yes – adequate Foreign Vessel in Seychelles port

Yes – adequate but will probably require more detailed implementing regulations especially with respect to landing and transhipment May also be more exhaustively implemented administratively than as at present

Seychelles fishing vessel licence

The provision allowing exemption for licensing requirements should probably be removed as provides too much discretion to the Minister or may be made subject to appeal by affected parties

Refusal to grant application

A net benefits and/or value added criterion can be added into the legislation if desired . This will give the Minister the power to take certain actions or make certain decisions either to advance net benefits objectives or to restrain/constrain an actor whose actions do not advance net benefits objectives. Exact legal wording would need advice from the Attorney General’s department

Validity of Licence This provision will need to be reworded to reflect whatever new approaches Seychelles decides to adopt


This provision may need to be amended to reflect a new approach to licensing and may, if required, include

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Recommended amendments to support a net benefits approach wording about net benefits and value added

Scientific research This provision could be amended to include requirement to share results with Seychelles

Aquaculture Adequate although SFA should have exclusive authority over licensing

Hot pursuit Adequate – extensive training would be needed should Seychelles become more active in outer reaches of the zone to act against IUU fishing and raise net benefits

Commercial fishing in Seychelles waters or commercial fishing for sedentary species on continental shelf without licence

Amounts appear to be adequate – however more precise information about economic values from fishing may mean values require revision to more accurately reflect costs of illegal activity and also Government transaction costs for enforcement. It is unclear the extent to which these amounts reflect a tipping point beyond which incentives to fish in the Seychelles decrease remarkably

Tampers, wilfully destroys, damages or interferes with VMS

Penalty may have to be raised to increase enforcement value of VMS

Usage of Seychelles fishing vessel for fishing in Seychelles waters without authorisation

Penalty may have to be increased subject to tipping point considerations

Usage of Seychelles fishing vessel for fishing outside Seychelles without authorisation

Adequate but may need revision in light of EU IUU Regulations and if number of domestically based vessels increases

Contravenes gear stowage and equipment deactivation requirements


Fails to provide notice of entry or exit waters and fails to declare quantities of catch


Contravenes conditions relating to transhipment in Seychelles water or port or landing of aquatic organism


Fishes, tranships, possesses, sells, buys etc of prohibited or undersized species of fishes

May require change upwards

Contravenes international fisheries conservation and management measure by RFMO


Falsifies, conceals, alters or deletes the identification marks of fishing vessel or gear


Possesses or uses prohibited fishing gear or method in Seychelles water

Penalty may need to be raised in view of IUU considerations

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Recommended amendments to support a net benefits approach

Aquaculture activity in Seychelles waters without licence or in contravention of any condition

� Given recent proposals to undertake tuna ranching and the critical importance of the ecological values and beauty of the inner sea areas, a much higher penalty is probably required both on cultural and philosophical grounds but also to protect the tourism industry.

� A higher penalty would also be consistent with an environmental levy and ecological harm approach

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SECTION 6 ACCESS ARRANGEMENTS BETWEEN SEYCHELLES AND KEY PURSE SEINE FLEETS: THE EU

FISHERIES PARTNERSHIP AGREEMENT AND THE SEYCHELLES‐FLAGGED FLEET

6. 1 Overview, objectives and methodology for this section of the report This section of the report provides analysis of and recommendations on the access arrangements for purse seine fleets active in the Seychelles EEZ and adjacent areas. The principal fleets in this regard are the Spanish fleet followed by the French fleet, although on the basis of European Communities’ law it is the European Commission which negotiates on behalf of EU flagged vessels fleets of these Member States. There are also locally flagged vessels principally from Spain. In the main, the EU fleet catching tuna under the Seychelles‐EU Fisheries Partnership Agreement (FPA) lands tuna raw material direct to the IOT factory while the rest is transhipped by reefer and other vessels to Princes Tuna in Mauritius, to Madagascar (the processing plants in Antsiranana), Kenya and to Europe, mainly Spain. This access agreement and associated value chain is therefore in principle much more open to being influenced by interventions put in place by the GoS than the longline sector (see Section 7). The EU agreement is thus a primary target for some of the new options suggested by this report. Recent new directions in EU access agreements and distant‐water fisheries policy as put forward by the recently announced Green Paper on Reform of the Common Fisheries Policy (CFP)74 also further strengthen the argument for consideration of some of the new options identified by the consultants. The structure of the discussion is as follows:

Returns to Seychelles from current FPA

The Seychelles‐EU access agreements relationship

A comparative assessment of the Seychelles Fisheries Partnership Agreement 2005‐2011

EU access agreements strategy under the Common Fisheries Policy (CFP)

Structure of the EU fleet and implications for Seychelles

Analysis of the Seychelles flagged purse seine fleet and comparison of ‘direct’ (i.,e. Non‐agreement) licence fees with Pacific Island Countries

The IUU Regulation, access agreements and non‐complying Coastal State Status – impacts on Seychelles (including Seychelles as an access granting State and as a potentially certifiable State of non‐compliance)

Options for increasing net benefits from the Seychelles‐EU framework

The 2009 Green Paper on Reform of the CFP – Implications for the net benefits programme

Conclusions and Recommendations – The Relationship with the EU

74European Commission, 2009. Green Paper. Reform of the Common Fisheries Policy, Brussels COM(2009)163 final http://ec.europa.eu/fisheries/cfp/review_en.htm

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6.1.1 Rate of return (ROR) to Seychelles from EU Fisheries Partnership Agreement Table 6.1 details all payments paid to GoS by the EU flagged purse seine fleet and the European Commission under the terms of the EU‐Seychelles Fisheries Partnership Agreement (FPA). It compares these payments to the theoretical percentage rate of return (ROR) on the gross value of reported catch. The ROR method is discussed in detail in Section 3. The use of 5% and 6% ROR is based upon accepted practice in other regions, including several Pacific Island countries. three key analytical points can be made on the basis of the data depicted in this table:

First and foremost, Seychelles receives over 6% ROR on the fob value of the catch, which is an acceptable level. However, as detailed below in Table 6.2, at least 36% of the EU’s financial contribution (a subsidy) has to be allocated to finance sectoral fisheries policy in the Seychelles. In other words, over a third of EU payments which were €4,125,000 per year in 2006‐08 represent tied or conditional financial flows.

When comparing the 6% RoR column with the licence fees + compensation payments and final (‘total’ column), it is clear that the tonnage payments are an important boost to ensuring that a level of compensation beyond 6% RoR is reached for each year. While data on tonnage payments were not available for 2007 and 2008, it is assumed that they served to push the total payments beyond the 6% RoR level for 2007.

It is clear that subsidies from the European Commission are essential to meeting a 6% RoR. The only payment made by vessel owners is for licence fees, which are very low (see Section 6.5.3 for comparative analysis of purse seine licence fees). Therefore, should this subsidy be withdrawn it is possible that EU vessel owners would not be able to pay the full 6% RoR. This is important because, in its Green Paper for reform of the Common Fisheries Policy (CFP), the European Commission raises the possibility – albeit now still perhaps an outside likelihood – that access subsidies will be dropped in favour of full payment by EU vessels themselves (see Section 6.3 below). In this case, GoS could look to implementing new approaches to access arrangements specifically aimed at maximising revenue generation, such as the South Pacific’s Vessel Day Scheme (see Section 3 and the rest of this Section). This however, would have to take full account of the fact that the economic importance of the EU purse seiner fleet lies not primarily with access payments, but with the activities of these vessels in Port Victoria (i.e. expenditure in port, see Section 2).

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Table 6.1: Actual rate of return to Seychelles from FPA access payments compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2008 (all in US dollars unless otherwise specified)

Year SKJ/BET catch (mt)

YFT catch (mt)*

SKJ/BET Price (USD/ mt) fob

YFT Price (USD/ mt) fob**

SKJ/BET catch value

YFT catch value

Total value of EU catch

ROR at 5% of

value of catch

ROR at 6% of

value of catch

Licence fees

EU financial

compensa‐tion

Licence fees +

financial compensa‐

tion

Tonnage payments

Total (licence fees + EU compensa‐

tion + tonnage payments)

2003 28,799 60,773 691 948 19,900,107 57,624,701 77,524,808 3,876,240 4,651,489 667,904 3,460,000 4,127,904 1,372,377 5,500,281

2004 31,001 50,482 871 1,199 27,002,301 60,543,614 87,545,915 4,377,296 5,252,755 940,389 3,460,000 4,400,389 1,116,806 5,517,195

2005 34,679 36,841 781 1,199 27,081,408 44,162,309 71,243,717 3,562,186 4,274,623 904,693 3,460,000 4,364,693 847,714 5,212,407

2006 29,236 46,000 893 1,391 26,105,712 64,007,601 90,113,313 4,505,666 5,406,799 1,197,000 4,125,000 5,322,000 1,328,438 6,650,438

2007 27,390 38,882 1,326 1,391 36,315,235 54,103,885 90,419,120 4,520,956 5,425,147 1,151,100 4,125,000 5,276,100 N/A N/A

2008 12,541 24,129 1,671 1,391 20,949,411 33,575,547 54,524,959 2,726,248 3,271,498 1,081,920 4,125,000 5,206,920 N/A N/A

Sources: SFA databases, confidential private sector sources (SKJ/BET fob price data), Globefish (YFT price data), and all Euro to USD conversions were done using annual average exchange rates for each year using: http://www.oanda.com/convert/fxhistory

Key: SKJ = skipjack; BET = bigeye tuna (caught as by‐catch, usually juveniles); YFT = yellowfin tuna; N/A = not available

* The consultants were surprised that the YFT to SKJ ratio is so high in the in‐EEZ purse seine fishery, especially given average annual species ratios in the WIO, which always represent higher SKJ catch (see Figure 2.2). Upon enquiring on this point, a representative at SFA informed that the ratio of purse seine sets made on free swimming schools to that on schools associated with fish aggregating devices (FADs) is much higher inside the EEZ than outside. Free swimming schools are predominantly composed of yellowfin tuna. FAD associated catches have a higher percentage of Skipjack. Sets on the latter are more often made outside the EEZ, which contributes to make the overall WIO skipjack ratio higher.

** This fob price was arrived at generating an annual fob‐cif differential using SKJ price. That is, the difference between the confidential private sector price data for WIO SKJ price and Globefish Spain landed price for SKJ. This differential was applied to Globefish landed Spain YFT price to provide an estimate of WIO YFT fob price. Note that all of the price data are only indicative, not only because they only represent the average and they also do not take into account potential quality differentials (e.g. Spain landed fish might be larger thus equating to a better recovery rate in processing).

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6.2 The Seychelles‐EU Access Agreements Relationship – a brief historical overview Following successful test trials by French and Spanish ship‐owners, Seychelles has had a consistent set of framework agreements and protocols with the EU following a three year cycle since 1984 as shown by Table 6.2. Financial payments consist of two components, one paid by the EU and the other by the shipowners. The 2002‐2005 agreement (details not shown) was a transition to a Fisheries Partnership Agreement which extends from 2005‐2011 as shown in detail by Table 6.2. Appendix 6A provides an even more systematic and detailed review of the terms of this current agreement. Table 6.2: Financial components of EU‐Seychelles access agreements, 1984‐2002 Period Financial compensation Vessel‐owners

contribution Additional Funds Number of vessels

18.01.84 to 17.01.87

Ceiling of ECU 3,000,000 for period of agreement. Minimum annual payment of ECU 300,000 for catch over 6,000 tons of tuna caught in EEZ ECU 20/ton of tuna

ECU 120,000 per annum . advance payment

ECU 250,000 for scientific and technical programmes

Not exceeding 18 purse seiners per year. Provision for other types of vessels

18.01.87 to 17.01.90

Minimum of ECU 2,000,000 p.a. for catch over 40,000 tons of tuna caught Ceiling of ECU 2,200,000 in any one year ECU 20/ton of tuna

ECU 5,000 advance payment per vessel per year for catch over 250 tons

ECU 750,000 for scientific and technical programmes

40 Purse seiners. Provision for other types of vessels.

18.01.90 to 17.01.93

ECU 6,900,000 for period of agreement for catch over 46,000 tons of tuna per annum ECU 20/ton of tuna

ECU 10,000 advance payment per vessels per year for catch over 500 tons

ECU 2,700,000 for scientific and technical programmes ECU 300,000 study grant and attendance at international meetings

40 purse seiners Provision for other types of vessels

18.01.93 to 17.01.96

ECU 6,900,000 for period of agreement for catch over 46,000 tons per annum ECU 20/ton of tuna

ECU 5,000 advance payment for purse seiners for catch over 50 tons of tuna caught in EEZ ECU 500 advance payment for long‐liners for catch over 25 tons


40 purse seiners Tuna trollers and surface long‐liners not exceeding 18m

18.01.96 to 17.01.99

ECU 6,900,000 for period of agreement for catch over 46,000 tons per annum ECU 20/ton of tuna

ECU 500 advance payment for long‐liners for catch over 25 tons of tuna ECU 7,500 advance payment for purse seiners for catch over 375 tons of tuna


42 purse seiners 15 surface long‐liners not exceeding 37m

18.01.99 to 17.01.2002

EURO 6,900,000 for period of agreement for catch over 46,000 tons of tuna per annum EURO 25/ton of tuna caught in EEZ

EURO 7,500 advance payment for purse seiners for catch over 300 tons of tuna EURO 1,375 advance payment for long‐liners for catch over 55 tons of tuna

EURO 1,950,000 for scientific and technical programmes EURO 300,000 for study grant and attendance at international meetings. EURO 450,000 setting up of VMS/Satellite tracking system EURO 750,000 development fund for local long‐line fleet

47 purse seiners 32 surface long‐liners not exceeding 37m

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6. 3 A comparative assessment of the Seychelles Fisheries Partnership Agreement 2005‐2011 The consultants reviewed the current Seychelles FPA against other FPAs entered into in the period from 2004‐2008. Comments on the Seychelles provisions are also provided. A more detailed analysis of the EU FPA is provided by Appendix 6 A. As well as providing detailed deconstruction of the Seychelles FPA, comparison with other countries’ FPA and a series of consultant comments and recommendation, the structure of the following table is designed for negotiation purposes – it offers a firm basis for negotiating parameters and a revised framework legal framework.

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Table 6.3: Analytical Table – Seychelles‐EU Fisheries Partnership Agreement 2005‐2011

Issue – Agreement type, zonal coverage, beneficiaries

Issue EU 2005‐2011 All FPAs from period 2004‐2008 surveyed, including both mixed and tuna only FPAs

Consultant comments and suggested new Seychelles positions

Type Tuna and other species incl. swordfish, marlin, sailfish, sea bream and shark, See also Appendices 2 and 3 Catch Reports

No relevant comments

Coverage is adequate

Zonal coverage No fishing in zones prohibited under the Fisheries Regulations 1987 or any other Seychelles law; not w/n 3 miles of Fish Aggregating Devices; S will notify EU of any relevant laws (Annex, Chapter II)

No comments

Coverage is adequate

Issue – Validity and duration of fishing rights

Validity and duration of fishing rights

EU 2005‐2011 Other EU Tuna FPAs Consultant comments and suggested new Seychelles positions

Agreement (months)

18 January 2005 to 17 January 2011, Letters A and B b/w Seychelles and EU; for a period of 6 years (Protocol, Article 1)

All other FPA also long term

Period probably much too long – 3 years probably best – a lot can change in 5 years; annual consultations allow change but probably best to have a mid‐term review including a stock assessment. In addition, the tacit renewal clause for 5 years in many FPAs makes capture of Coastal States by EU interests even more likely as we are in principle now talking about 10 years.

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Licences (months) Licences are valid for 12 months and are renewable (Annex, Section 2, 1) Fee process: Step One – Advance Payment: licence issued once standard amounts have been paid to SFA: Step Two – Statement of Fees – SFA draws up a statement of fees due for the previous calendar year on the basis of catch declarations, etc. by 31 March; shipowner may protest the fee statement by 31 May Step Three – Additional Payment – Shipowner makes any additional payment (on top of step one above) as required by the statement of fees by 30 June; this is calculated on a standard fee of EUR 25 per tonne caught; however where the final statement is less than the advance payment (see step one above) the balance shall not be recoverable by the shipowners

All other FPA have these provisions

Satisfactory – will however require change in light of consultants’ recommendations for changes to Seychelles procedures on access fees. An immediate signal may be to push the Additional Payment (additional tonnage fees under step three) to a level that reflects inflation in fish price, as well as the higher yellowfin to skipjack ratio in Western Indian Ocean purse seine fishery vis‐à‐vis other oceanic regions.

Issue – Fleet aspects and vessel types

Fleet aspects and vessel types

EU 2005‐2011 Other FPAs Consultant comments

Freezer tuna seiners

40 ocean‐going tuna seiners (Protocol, Article 1)

Difficult to compare vessel levels between different agreements

Together with the locally based Spanish purse seiner fleet, the EU probably maintains close to a monopoly on purse‐seining in the Indian Ocean. Resource rent associated with this is significant and Seychelles should be able to capture a much higher portion of this Increasing resource rent would also mean internalising value added from EU purse seiner landings including the current operations of IOT

Surface longliners 12 (Protocol, Article 1) Difficult to compare vessel levels between different agreements

Limited presence in Seychelles waters

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Issue ‐ Transhipment

Transhipment EU 2005‐2011 Other FPAs Consultant comments Coverage Vessels wishing to tranship catches in

Seychelles waters shall do so within Seychelles ports; vessels must notify Seychelles at least 24 hours before of names of fishing and cargo vessels, tonnage by species, day; all other transhipment shall be prohibited in EEZ, and penalties will apply; transhipment shall be considered as an exit from Seychelles waters, so vessels must submit catch declarations to SFA upon transhipment; vessel masters shall allow and facilitate inspection of operations by SFA (Annex, Chapter IX, 5)

Similar clauses in other FPAs

• Seychelles long term interest is to maximise transhipment and landing in Port Victoria as without this it is impossible to secure elements of value‐added from fisheries activity (e.g. vessel expenditure in port etc, see Section 2)

• In practice this provision is enforced between EU and Seychelles by means of VMS and Port Victoria port procedures as purse seine transhipment banned in IOTC region and EU purse seiners land and tranship c.80% of their Western Indian Ocean catch in Seychelles

• Real issue in transhipment is LL transhipment exemption for Asian LL fleets; latest IOTC Resolutions continue exemption for LL fleets but subjects activity to an observer scheme. Key issue is whether transhipment arrangements for Asian LL fleets is appropriate and what changes can be made (if any)

• VMS has a significant role to play in regulation of transhipment • Seychelles for its part needs to thoroughly review and better

understand how VMS contributes to future regulation of transhipment and IUU activity

• Taking previously financed projects into account, Seychelles should request funds and technical assistance from EU to deepen its VMS capacities on transhipment and related activities.

• Comprehensive study required of transhipment issues in Seychelles EEZ and adjacent areas and ports so at to be able to better respond to EU IUU Regulation challenges

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Issue ‐ Institutional aspects and dispute settlement

Seychelles‐EU 2005‐2011 Other EU FPAs Consultant comments Joint Committee

Requirement for Joint Committee (meet yearly alternately in EU and Seychelles, or meet specially at the request of either party); functions incl. monitoring the performance, interpretation, etc. of the Agreement, providing liaison, resolution of disputes, reassessing level of fishing opportunities and other functions (Agreement, Article 9) Suspension: • Agreement, Article 13: the Agreement may be

suspended at the initiative of either Party where there is serious disagreement; the Parties then enter into consultation with a view to resolving their differences amicably

• Protocol, Article 8: any dispute re: Protocol shall be the subject of consultations in the Joint Committee; if the consultations do not lead to amicable settlement, suspension may occur; if suspension occurs the parties shall continue to consult with a view to amicable settlement; upon resumption of the Protocol the financial contribution shall be reduced in proportion to the suspension period

Termination: • Agreement, Article 12: Agreement may be

terminated by either Party where there exist serious circumstances; notification of intention to terminate will open consultations between the parties; if termination occurs the financial contribution shall be reduced proportionately

Similar clauses in other FPAs Joint Committee now have more and more functions under FPAs Dispute settlement and consultations Discussions of stock evaluations and assessments and other scientific matters Monitoring performance on fisheries policy implementation issues and likely to become a forum for IUU discussions as well

Seychelles will need to look more closely at the JC framework to see how it can be improved – this question arises because it is unclear that the current Joint Committee procedures effectively address disagreements given the recent disagreements between the EU and Seychelles? The issue for the Seychelles is whether the JC model is adequate in both legal and institutional terms Matters that need to be addressed by Seychelles to provide a basis for improvement of JC framework and legal possibilities in next round of negotiations include:

� What in practice happens during JC meetings?

� What critical issues have arisen in the JC context?

� How do the different partners approach JC meetings?

� How does Seychelles prepare for JC meetings

� What is off‐limits in JC discussions?

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Arbitration Nil Nil • Probably useful to have an arbitration clause inserted to

bring an independent element into the framework should there be a major dispute

• Arbitration can also internationally expose EU malpractice and therefore the threat of recourse to arbitration in certain contexts can be a useful political and strategic tool

• Arbitration procedures should be undertaken in a European venue where attention will be to paid to arbitration outcomes by key European NGOs – e.g CFFA, WWF .

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Issue ‐ Role of Recommendations of IOTC and other international organizations

Recommendations IOTC

Seychelles‐EU 2005‐2011 Other EU FPAs

Consultant comments

IOTC • Statistical cooperation – parties will consult directly or within IOTC to ensure management and conservation of resources in Indian Ocean and to cooperate in relevant research (Agreement, Article 4)

• Cooperation on responsible fishing – after consultation in the Joint Committee (see above), may take measures to ensure sustainable management resources based on IOTC guidelines and best scientific advice ( Protocol, Article 3)

• Review of fishing opportunities – allocations among different vessel categories can be reviewed by agreement provided that any changes comply with IOTC guidelines (Protocol, Article 4)

• Technical measures – vessels to comply with IOTC guidelines re: fishing gear, their technical specifications, etc.

• “White list” – parties agree to prohibit the landing of vessels not listed on the “white list”, which is maintained by IOTC

Similar in all other FPAs

• Issue is how IOTC recommendations can be better integrated into EU‐Seychelles practice

• Can financial payments be sought to implement IOTC requirements explicitly in Seychelles practice especially given the importance of applying IOTC provisions to all fleets fishing in the Western Indian Ocean?

• Seychelles should consider incorporating the views of the Scientific and Technical Committee rather than Recommendations as the views at the scientific level are much more stringent and follow the precautionary principle more closely

• Seychelles should propose this to all fleets and stick by this principle in negotiations

Other international organisations

ILO (International Labour Organization) – • Employment of Seychellois seamen on EU vessels shall be

governed by the ILO Declaration of Fundamental Principles and Rights at Work; concerns esp. freedom of association, the effective recognition of the right to collectively bargain and the elimination of discrimination (Agreement, Article 3)

• The same shall apply as of right to all seamen on EU vessels and wages paid to Seychelles seamen not be below ILO standards ( Annex, Chapter IV)

• FAO etc. – Agreement is made in the awareness of principles established by FAO Code of Conduct for responsible fisheries and UN Convention on the Law of the Sea, Agreement, Preamble

Similar in all other FPAs

This clause is satisfactory.

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Issue ‐ Fisheries policy, conservation and responsible fishing Fisheries policy, conservation and responsible fishing

Seychelles‐EU 2005‐2011 Other EU FPAs Consultant comments

Responsible fishing and EU contributions to national fishing policy Article 7

• EU agrees to contribute financially to support Seychelles fisheries policy formulation and implementation (Protocol, Article 7)

• At least 36% of the financial contribution shall go to the development of a sectoral fisheries policy in Seychelles with a view to promoting responsible and sustainable fisheries; this allotment shall be managed in light of objectives agreed by mutual agreement and the annual and multi‐annual programming to attain those objectives; to that end within 3 months of the Protocol entering into force the Joint Committee shall agree on a multi‐annual sectoral programme and detailed implementation rules covering, inter alia, objectives to be achieved re: responsible and sustainable fisheries, taking into account Seychelles national fisheries policy, etc. (Protocol, Article 7)

• There shall be a joint scientific meeting held annually in the Seychelles and EU alternately; based on its conclusions and the best scientific advice, the Parties shall consult in the Joint

Similar clauses on fisheries policy present in all other FPAs agreements and allow EU varying rights of intervention, including rights of suspension, termination and also rights to receive reports on progress with respect to fisheries policy issues. In some cases (Mozambique) 100% of the contribution must be used to support fisheries policy; percentage differs from country to country. In Mauritania, there is a very specific detailing of what the money is to be spent on. In Guinea Bissau, health conditions and market access are defined specifically for improvement. Seychelles has one of the least interventionist clauses. In some agreements, the Community's financial

• This clause is highly interventionist and gives the EU considerable scope to intervene (leverage) in Seychelles fisheries policy.

• Seychelles retains some independence due to the requirement that EU intervention should be based on the principle of non‐discrimination between the different fleets fishing in Seychelles waters, and without prejudice to the agreements concluded between developing countries within a geographical region, including reciprocal fisheries agreements.

• However, effectively Seychelles has agreed not to adopt fisheries policy without first consulting the EU and it provides a framework for a very significant degree of intervention on matters to do with IUU fishing and will probably be used in this way by the EU over the next few years

• For instance, and of huge importance for Seychelles policy space, entry of new participants could also be raised for discussion under fisheries policy matters even though EU assistance and intervention is supposed to be done without discriminating against other fleets

• In further implementation of this clause, Seychelles should ask for substantial financial assistance from the EU to establish an effective enforcement and MCS system, including a revamped VMS system to better support responsible fishing as the current financial contribution does not adequately support VMS and enforcement requirements

• Contributions to enhanced VMS and enforcement also

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Committee, and where necessary agree on measures to ensure sustainable management; Parties will also consult directly or within IOTC to ensure management and conservation of resources in Indian Ocean (Agreement, Article 4)

• The financial contribution not only warrants access by EU vessels to Seychelles waters but also factors‐in EUsupport for the introduction of responsible fishing and the sustainable exploitation of fisheries in Seychelles waters (Agreement, Article 7)

• The number of fishing opportunities may be reduced by agreement for the purposes of conservation and the sustainable exploitation of resources (Agreement, Article 7)

• The parties are to promote responsible fishing based on the principle of non‐discrimination between the different fishing fleets in those waters; after consultation in the Joint Committee, may take measures to ensure sustainable management of resources (Protocol, Article 3)

support is explicitly for introducing responsible fishing and the sustainable exploitation of fisheries resources South Pacific contributions (Kiribati, Solomon Islands, [others?]) are the lowest – around 20%; contributions are highest in Guinea Bissau and Mozambique where virtually the whole amount goes to fisheries policy Seychelles at 36% appears to be in the middle

strongly required to respond to piracy threat • Seychelles may wish to change wording of Preamble or

the text of this clause to mention piracy specifically with the proviso that the clause be drafted so as to remove the reference to piracy when conditions improve and piracy is no longer a threat

Issues to be addressed internally by Seychelles for effective implementation of this provision • What are the practical impacts of the EU financial

contribution to fisheries policy under the Agreement? • How are the anticipated annual and multi‐annual

fisheries policy requirements met? • To what extent is the Joint Committee meeting

concerned with evaluating implementation of the fisheries policy reforms directed at responsible fishing envisaged under the agreement

• This provision has the potential to significantly limit Seychelles fisheries policy autonomy – thus significant sums of money should be given by the EU in return for Seychelles agreeing to this clause

Scientific observers

Comprehensive observer scheme set out Annex, Chapter VI)

Same as in other FPAs Clause is satisfactory

By‐catch Tuna seiners landing in Port Victoria will endeavour to make by‐catches available to SFA at local market price

Same as in other FPAs Clause is satisfactory

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Issue ‐ Bio‐diversity and ecological protection

Bio‐diversity and ecological protection


Biological recovery clause

Biological recovery periods are only present in the non‐tuna or mixed fisheries agreements‐ (i.e. are found in Guinea‐Bissau, Mauritania and Morocco, and Cape Verde and Gabon ), they appear to have disappeared from tuna FPA

This is a very important provision which Seychelles should be seeking to further implement given state of WIO stocks Seychelles should be asking the EU to co‐operate further to study and use the biological recovery provisions and see how they can be used technically with respect to tuna

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Issue – Reporting and VMS

Reporting and VMS


At sea position and catch reports

Vessels shall, whenever in EEZ, report every 3 days to SFA the particulars of catches, Annex, Chapter IX Vessels shall notify of any entry/exit 3 hours before the event by fax or email, and at the same time communicate their position and the volume and species kept on board; may seek an exemption to communicate by radio if not fitted with fax or email capabilities (Annex, Chapter IX) When in Seychelles waters a vessel’s VMS device will automatically report their position at least every hour in the prescribed format (Appendix 4, 4) Penalties apply (Annex, Chapter IX)

Same as in other FPAs with some slight and unimportant variations

• Closer calibration of VMS and this type of report will be required in the context of EU IUU controls

• Funding to support Seychelles capacity to undertake this will be required most appropriately through an increased financial contribution

• Seychelles should raise issue of increasing VMS automatic reporting frequency to desired level (i.e. SFA noted the option of increasing to every 15 minutes)

Port catch reports All vessels must communicate their catches to SFA by completing forms at Appendices 2 and 3 whether or not they catch fish and submit such reports, within five days of arrival into Port Victoria or before leaving the port whichever is earlier; in any other case must submit or within 14 days of arrival in any other port; copies to go to relevant scientific institutes; penalties apply for non‐compliance ( Annex, Chapter III)


• Port visits and information gathered on fishing activity is an important contribution to understanding the value‐added elements of the production chain and is also a potentially powerful enforcement tool given the frequency of port visits

• Is it possible to establish an inter‐agency task force to review current Seychelles use of port procedures and look at ways of deepening enforcement value of port catch reports with closer matching to VMS and at sea reports?

• A review of international best practice, matching current developments to the needs of the Seychelles could also be useful as a next step as it would meet both value

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added and improved enforcement objectives

VMS • Seychelles will communicate to the flag states’ FMCs (Fisheries Monitoring Centres) the co‐ordinates of Seychelles waters (Appendix 4, 1)

• Parties will exchange info on respective electronic addresses, contact details of FMCs, etc. (Appendix 4, 3 & 11)

• Position reports, etc. transmitted automatically and in real time (Appendix 4, 5)

• VMS to be kept on at all times when vessel is operating in Seychelles waters (Appendix 4, 5)

• Requirements particular to VMS technical problems are also provided, incl. requirement to replace defective equipment as soon as trip is concluded or within a month at maximum – new fishing trips may not commence after a month (Appendix 4, 6)

• VMS devices to be tamper proof, operating automatically and regardless of conditions; prohibited to destroy or damage; master shall ensure that data is not altered, antennae not obstructed, etc. (Appendix 4, 7)

• Flag state FMC will monitor the tracking of their vessels at 1 hour intervals, and will notify Seychelles immediately if not proceeding as required (Appendix 4, 8)

• Flag state FMC and Seychelles FMC will


• This clause is satisfactory. In practice, VMS system needs to be significantly strengthened and improved to meet challenges of IUU fishing and also the requirements of the EU IUU Regulation especially providing adequate surveillance of non‐EU fleets

• EU vessels must meet all VMS requirements • VMS issues also crucial to dealing with piracy issues • Increased financial contribution is needed for all these

purposes. • This contribution could be made under EU commitment

in Fisheries Chapter Article 32 (b)(2) of ESA‐EU Interim Economic Partnership Agreement (EPA).

• EU should fund an independent study of the VMS needs of the Seychelles in light of international best practice as a matter of urgency so that can confidently address the new overall situation in the Western Indian Ocean

• Internal issues for Seychelles in improving implementation of this clause include:

1. What is the actual VMS reality? 2. What is VMS information used for by the Seychelles? 3. What sense is there of the anomalies for each fleet

detected by VMS over the last three years? 4. How does VMS origin information inform negotiations

(i.e. JC meetings; Seychelles fisheries policy)? 5. Has any detailed analysis been done of VMS data to

provide fleet profiles? 6. Are there plans to seriously build on VMS data to

support an extension of Seychelles enforcement activity?

7. Have there been any prosecutions driven by VMS information?

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co‐operate, must communicate regularly, etc. (Appendix 4, 9)

• Provision for review of these requirements; must provide at least 15 days notice of such a meeting; disputes go to consultation in Joint Committee (Appendix 4, 12‐13)

• Penalties apply for non‐compliance with Appendix 4 protocols (Appendix 4, 7)

• See ‘At sea position and catch Reports’ above

8. An internal rapid analysis of VMS strengths and weaknesses needs to be done by the Seychelles to inform TOR for an independent study

Issue – Contributions to the domestic economy

Contributions to the domestic economy


Port visits and Local landings

Tuna seiners shall participate in supplying tuna to the Seychelles cannery at the international market price (Annex, Chapter VII) Masters landing in Seychelles ports will allow and facilitate inspection by Seychelles inspectors (Annex, Chapter IX)

Common across all FPAs dependent on country circumstances

This clause is adequate. Port infrastructure quality etc is not satisfactory and needs to be improved with assistance from the EU – funding needs to be sought under the appropriate EU funding window, probably under 10th EDF. Other sources as well? African Development Bank, European Investment Bank etc

Local crew on‐board

• Comprehensive scheme for taking local crew on board

(Annex, Chapter IV)


This clause is satisfactory Note that the deletion of crew criteria from EU rules of origin makes the inclusion of this clause in FPA all the more important if GoS wishes to encourage Seychellois toi take up crewing positions The major issue is up‐take of this employment opportunity by Seychellois, but this is an internal issue for GoS.


Vessels shall endeavour to get all their supplies, fuel, etc. in Seychelles; Seychelles authorities shall lay down in agreement


This clause is adequate. Port infrastructure to be improved as per appropriate EU funding window (see above). EU vessels could be more firmly encouraged to purchase

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with vessel owner the conditions for use of port equipment, and if necessary supplies and services (Annex, Chapter VIII)

more supplies in Seychelles (rather than being brought on board reefers), especially basic chandlery.

Issue – Joint ventures

Joint ventures Seychelles‐EU 2005‐2011 Other EU FPAs Consultant comments Parties shall encourage the setting‐up of

joint enterprises in their mutual interest; these must of course comply with relevant legislation; Agreement, Article 8

This clause is present in most other FPAs

This clause does not require attention until Seychelles has fully articulated a new policy towards joint venture enterprises (JVEs). It is worth noting that the EU will never be able to make a firm commitment on JVEs, not least because it cannot force its private sector to engage and/or it is unlikely to provide a system of incentives to EU firms to operate in the Seychelles in addition to the existing tuna preference.

Issue – IUU Fishing

IUU issues Seychelles‐EU 2005‐2011 Other EU FPAs Consultant comments Article 12

Termination This Agreement may be terminated by either Party in the event of serious circumstances such as …. failure to comply with undertakings made by the Parties with regard to combating illegal, unreported and unregulated fishing. Also Seychelles promises in Article 1 to address IUU issues

This clause is present in all other FPAs

This clause is both positive and negative for Seychelles. It need not be changed Negative IUU issues can be introduced by EU under the fisheries policy and reform provisions – Article 7 discussed in detail above and will most probably be introduced in this way very soon and puts pressure on Seychelles. This clause strengthens the option for the IUU to sanction Seychelles if it does not control IUU fishing as set out in the IUU Regulation Positive IUU and piracy are currently the biggest threat to both Seychelles and EU interests in the Indian Ocean. Significantly EU increased assistance is required in the IUU and piracy area so Seychelles can meet its obligations under Article 12. Role of EU naval fleets e.g. offer of French Navy assistance

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6.4 EU Access Agreements Strategy The EU currently seeks access to the waters of Third States through so‐called Fisheries Partnership Agreements (FPAs) with interested States an integral part of the Common Fisheries Policy (CFP). Before changing to the FPA approach, the EU maintained a system of Compensation for Access Agreements (CFA) for resources in tropical waters and a system of reciprocal access for resources in temperate waters. The focus from 2002 until now has been on the FPA as a new approach to agreements. As the discussion at 6.6 demonstrates, there is now an interest in once again changing the external aspects of the CFP with consultations under way between now and 2012. 6.4.1 The Common Fisheries Policy (CFP) The Common Fisheries Policy (CFP) is one of the arenas in which the EU has full powers or competence and therefore acts for all the Member States in most matters. The CFP is based on Articles 32‐38 of the EC Treaty and initially had the following objectives:

to increase productivity, stabilise markets; ensure security of supply of fish resources to EU markets; ensure reasonable fish prices to the consumer.

Over the years the following extra objectives have been added to the initial goals of the CFP:

sustainable exploitation of resources; protection of fish stocks and the marine environment; food security and social cohesion;

Fisheries agreements have a relationship to all the pillars of the CFP as shown by Figure 6. 1 below. The key features are:

conservation and sustainable management of fish stocks to protect fishery resources – this is linked to access agreements because some States like Spain are restricted in what they can fish in the EU zone – access agreements are necessary to compensate them for giving up rights to fish in Europe;

market organisation to match supply and demand – imports are often needed to supplement fish caught under access agreements;

structural policy to help the fishing and fish farming industries adapt to changing conditions resources – structural policy operates through subsidies and monetary assistance, including monetary assistance to enter into joint ventures and exploratory voyages under access agreements;

international relations with non‐Community countries and international organisations, through negotiation of access agreements and conservation measures for deep‐sea fishing.

The discussion at 6.6 assesses the extent to which the proposed new directions under the 2009‐2012 reform are likely to influence recommendations for change set out in this report.

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Figure 6.1: Current interaction between sub‐components of the CFP and the EU access agreements regime

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6.4.2 Structure of the EU purse seine fleet The EU purse seine fleet is the largest in the world of this gear type. EU capital controls 84 boats of a global purse seine fleet totalling c.450 vessels of >500GT.75 The EU‐Seychelles FPA (2005‐2011) allows for 40 purse seine licences, although not all of these are actively used. Based on FFA licence data this totals 17 French and 23 Spanish flagged boats, plus 2 French owned boats flagged by Mayotte and 12 Spanish‐owned vessels flagged by Seychelles. Around 70 percent of total EU flagged purse seine catch is extracted from the Western Indian Ocean. Box 6.1: The EU purse seine fleet at a glance76 The EU purse seine fleet

– 55 vessels: 33 Spanish + 21 French + 1 Italian

– 14 in the Atlantic, 37 in the Indian Ocean, 4 in the Pacific

– (+29 vessels under Spanish interests. The majority of non‐EU flagged purse seines are Spanish‐owned and flagged by the Seychelles or by Latin American countries. French vessels are all flagged by France except for two vessels flagged by Mayotte.)

EU purse seine tuna catch – About 370,000mt, with 265,000mt in the Indian Ocean, 75,000mt in the Atlantic and

30,000mt in the Pacific

Economic interests – Over €400 milllion turn‐over – Around 2,000 crew (half from ACP countries) – Linkages to the EU‐ACP‐GSP+ canning sector

The various owners of the French purse seine fleet are represented by one producer organisation – ORTHONGEL (Organisation des producteurs de thon congelé). The company Cobrecaf (and its financial subsidiary Cobrepeche) control the vast majority of the French purse seine fleet and the trade of its fish is carried out on reefers owned by Sovetco. Only Saupiquet‐owned (a French fishing and canning firm) purse seiners do not generally trade using services offered by Sovetco.77 The French presence in Seychelles is led by Cobrecaf via CMB management (see Figure 6.2). Until 2008 MW Brands held 36% ownership of Cobrecaf. It divested this minority shareholding because of ‘insufficient flexibility’ – as MWB was not a majority it could not drive price or a cost plus formula for supply. Nonetheless, MWB maintains a 5‐year supply contract with Cobrecaf vessels. This provides MWB with first refusal on price negotiations, with a one year get out clause. However, MWB have stated that it would like to have its own boats and ‘it is ready to jump into another formula if the appropriate situation arrives’. Representation of the Spanish fleet is divided into two producer organisations: OPAGAC (Organización de productores asociados de grandes atuneros congeladores) and OPTUC (Organización de productores de túnidos congelados), which is generally known as ANABAC (see Figures 6.3 and 6.4). The reason for this division is simple: there was disagreement

75 The average EU purse seiner has an average 2,099 GT and 3,191 KW average power. “Study on the European External Fleet”, Contract FISH/2006/02, Final Report, January 2008 76 Goujon and Riva 2009. 77 Multiple interviews, 2006 and 2009; Guillotreau and Le Roy 2000.

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between owners and some splintered off to form OPAGAC.78 The basic difference between the two is that some OPAGAC members also own processing facilities and approach the business in a more ‘modern’ way, whereas ANABAC members tend to be more ‘traditional’ and only own boats. However, membership of both is dominated by family‐owned firms.

78 Multiple interviews, 2006 and 2009.

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Figure 6.2: Organisational structure of the French purse seine fleet active in Seychelles79

79 Sources: SFA and IOTC databases and interviews 2006 and 2009. Some vessels included in these diagrams may have shifted to other oceans since early 2008.

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Figure 6.3: Organisational structure of the Spanish purse seine fleet ‐ ANABAC80

80 Sources: SFA and IOTC databases and interviews 2006 and 2009. The number of vessels are based on 2008 licence data. It is believed that the following firms have shifted vessels to other oceans in 2008: 2 from Albacora to the Eastern Atlantic and 1 from Inpesca to the Eastern Atlantic.

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Figure 6.4: Organisational structure of the Spanish purse seine fleet ‐ OPAGAC

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6.4.3 Implications for the Seychelles There are seven core implications of the structure and ownership of the EU purse seiner fleet for the Seychelles:

1) The WIO is by far the most important fishery currently exploited by the EU flagged purse seine fleet. The Seychelles is at the epicentre of this fishery (see sections 2.1 and 9.1). In sum, these elements provide GoS with substantive bargaining power, but at the same time the EU fleet and the European Commission are also well aware of the profound socio‐economic importance of the activities of this fleet to the Seychelles. However, interviews in January 2009 indicated that Seychelles had lost around 9 purse seiners in the last 18 months because of poor fishing in the WIO in 2008 and far better catch in the Eastern Atlantic. In addition, the serious actual and potential threat of piracy has deeply impacted the EU fleet and forced it to question its current activities in the WIO. These factors serve to highlight the high level of vulnerability of the Seychelles to forces well outside of its control in its intersections with the tuna sector.

2) Linked to the first point, EU flagged vessels receive a permit from the European Commission to fish in specific oceanic regions (a Temporary Fishing Permit, or TPT). These permits are currently limited to the Indian and Pacific oceans, not the Atlantic.81 Therefore mobility is now very limited, making the vessels relative captives to the Western Indian Ocean fishery. This element provides GOS with additional bargaining power.

3) The French fleet represents, in principle, a more serious long term partner for GoS because of its high degree of corporate integration. In addition, the fishing strategy of French‐owned boats tends to be more risk adverse than the Spanish equivalent, possibly making this fleet a more stable partner. However, at the same time, the French fleet has closer ties with IOT than most of the Spanish so GoS would have to take this into account if considering a strategy of playing these two interests off against each other. In fact, a tie‐in between MWB and other investors for the purchase of purse seiners and, in turn, with GoS (which would include equitable and sustainable access to Seychelles EEZ) might offer a future strategic and mutually beneficial relationship (i.e. given that MWB have stated that it would like to have its own boats).

4) As long as ANABAC and OPAGAC remain divided – which is believed to be a long‐term split – the Spanish fleet will be politically relatively weaker than it could be. Notably, Spanish interests were also far less cooperative in consultations for this study, perhaps indicating weakness, but also perhaps due to suspicion because of the recent dispute over tonnage payments and under reporting of catches. Nonetheless, the main Spanish firms are obviously the dominant players in the European purse seine sector and while the majority of Spanish investment has been in Latin American countries (to benefit from the EU’s GSP+ trade preferences, see Section 8), there are possible candidates for for future investments and/ or forms of partnership with GOS. These include Albacora, the largest tuna fishing fleet in Europe; Inpesca which has a very positive reputation as a responsible and efficient player; maybe Echebastar but it has investments in the Mauritius‐based loining

81 ICCAT (the International Commission for the Conservation of Atlantic Tunas) is currently working to stop additional fishing pressure in its area of jurisdiction and the Spanish government is supporting this by not issuing new TPTs for this oceanic region.

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plant, Thon des Mascareignes; and possibly the huge integrated fishing‐processing firm Calvo, but it recently moved all of its boats from the WIO.

5) GoS should never underestimate the power of the EU fleet because, while distant water tuna fisheries (and the European canned tuna sector in general) are minor in the wider context of the EU economy, It is important to appreciate that, while economically minor, fisheries policy in the EU is of great political and social importance. Decisions are based on a diverse range of interests at the national and even local level. In fact, it is at the local level, through close‐knit regional identities, that fishing interests make their (otherwise relatively very small) voices heard, such as those who claim Breton or Basque heritage.82 In short, the EU fleet’s political punch is well above its economic weight.

6) At the same time, the tuna industry and European fishing sector in general is under an unprecedented degree of scrutiny from European political institutions and civil society, including the European Parliament, media (newspapers, documentaries) and environmental and developmental NGOs. The Seychelles Ambassador to the EU has already made very good use of these connections such as his diplomacy with the European Parliament and NGOs such as the Coalition for Fair Fisheries Arrangements (CFFA). Such networks should be built upon, including making clear linkages with the new OCEAN2012 coalition of NGOs and related organisations. OCEAN2012 will be launched in Brussels on June 8 and will be coordinated by the Pew Environment Group – the conservation arm of the very well financed Pew Charitable Trusts, an NGO working to end overfishing in the world’s oceans. OCEAN2012 states it is committed to shaping a CFP that:

o Enshrines environmental sustainability as the overarching principle, without which economic and social sustainability is unobtainable;

o Reduces the fleet based on environmental and social criteria;

o Makes public funding available to smooth the transition to more sustainable fisheries;

o Makes access to fisheries resources and public aid for fishing conditional on environmental and social factors;

o Makes available public access to fisheries data from member states, such as catches, fleet figures and compliance; and

o Commits decision‐makers to following scientific advice.

There are clear overlaps with Seychelles interests here and GoS should work to establish effective relations with this new coalition, probably via existing good relations with one of its members, CFFA.

7) Similarly, the all‐ACP meeting of Fisheries Ministers in Brussels 2‐3 June 2009 will provide an important starting point for Seychelles to use South‐South cooperation to put pressure on the EU to improve FPAs and its other fisheries‐related external relations. The proposed reforms to the CFP (see below) offer an excellent opportunity for the ACP to coalesce to improve appropriate collective organisational development and capacity enhancement in ACP‐EU fisheries relations.

82 Lequesne 2005: 353‐4 and 358‐9

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6.5 Options for increasing net benefits from the Seychelles‐EU framework

Applying the options discussed by Section 3, the consultants are of the view that the following approaches can be applied by Seychelles to its EU FPA relationship. The Conclusions provide a prioritised statement from the point of view of the consultants. The table immediately below discusses the options more broadly and sets out opportunities and constraints for each suggested approach/option.

Table 6.6: Overview of Options for increasing net benefits from the Seychelles‐EU framework

Access fee type

Explanation Applying this approach to the Seychelles‐EU relationship – opportunities and usefulness

Constraints in applying this approach to the Seychelles‐EU relationship

An improved rate of return (ROR) fee

Raising the access fee by increasing the percentage of the ex‐vessel price that is paid to the Seychelles

This approach is immediately applicable and can be developed significantly for the 2011 FPA negotiations

The key constraint is bargaining ability as a quickly established and effective Fisheries Industrial Intelligence & Analysis (FIIA) unit at FFA can undertake all relevant analytical work Key preliminary work has been done in this report

Price indexed Fees

Indexing the Seychelles access fee to changes in global prices. This is an approach which also captures a part of the rent It can be done at a basic or sophisticated level and can be added on to a ROR approach

• A simple price index approach can be developed within the next 24 months.

• It is not dependent on access to EU fleet data as it can be based on global price data; IOT data and other data available to Seychelles. Recent use of this approach in relations between FFA States and the US under the multilateral US tuna treaty also provides a model which can be quickly adapted to create a WIO relevant model

• It would require analytical work to be done by the proposed FIIA

• A more sophisticated version which can be developed over a 536‐48 month period could for example closely relate Seychelles financial claims to the relationship between tuna price indices, vessel fuel indices and other relevant and acceptable indices

Absence of a dedicated FIIA Unit and modelling/analytical capacity within SFA and related economic institutions and agencies.

Vessel day fees

This option charges fleets

1. The current operation of a VDS by FFA States provides an

1. Treaty and other restrictions on

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for access on the basis of vessel days purchased by the fleet. This approach is now active in the South Pacific – the Vessel Day Scheme (VDS). It more closely reflects catch activity, fleet strategies and the value of the zone to a particular fleet. This approach captures some of the rent.

excellent opportunity to understand EU fleet behaviour and tactics in response to such a system.

2. This is a medium term approach. Policy work on such an approach could be completed within the next 24‐36 months

3. Seychelles would need to make a commitment to understanding how this system works in the South Pacific

4. It would be necessary to review the Seychelles VMS system to assess whether it can cope with the demands of a VDS

5. Seychelles would have to be prepared to invest in the enforcement and institutional infrastructure to implement a VDS

6. In the long‐term, Seychelles could promote a regional WIO system using VDS

Recent proposals in the EU’s 2009 Green Paper on CFP Reform suggest that the EU may be considering supporting approaches which more closely analyse and track fishing effort

accessing information from the South Pacific States

2. The absence of adequate enforcement & the large size of the Seychelles EEZ

3. The absence of regional co‐operation on VMS and MCS as this would significantly improve Seychelles ability to monitor the outer reaches of its EEZ

4. Whether Seychelles has the analytical and infrastructural capacity to operate such a system and adapt it to the Seychelles and Western Indian Ocean context.

RoR fee with hypothecated environmental levy

This is a two‐tier fee and would add a responsible fisheries component to the base ROR access fee charged by the Seychelles seeking to compensate Seychelles for ecological impacts of withdrawals from its waters

This approach is applicable in a preliminary or pilot way within 24‐36 months at the most. The principal constraint is current absence of a suitable methodology adapted to Seychelles Such a methodology with robust calculations and economic valuations can be developed

The principal constraint is current absence of a suitable methodology adapted to Seychelles. This could be developed within the next 24‐48 months

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6.6 Seychelles‐flagged Spanish Owned Purse Seine Fleet 6.6.1 Reasons for up‐take of Seychelles‐flag by Spanish purse seiners There are 5 main reasons for the use of the Seychelles flag by Spanish‐owned purse seiners:

First and foremost the European Commission allocates the EU fleet with a limited quota of vessel capacity (based on horse power/kw of engine). The use of flags of convenience allows companies to by‐pass this quota invest in productive capacity.

EU flagged vessels are highly regulated by the European Commission ranging from labour rights to complex environmental requirements. The regulatory requirements associated with the Seychelles flag are less stringent and thus less expensive to meet.

All competent authority activity (e.g. ship inspections) is done by Seychelles authorities, this allows vessels to deal with such elements more quickly. When under an EU Member state’s flag, inspections must be done by the EC. In addition, some industry interviewees claimed that Seychelles‐flagged vessels receive priority treatment from Competent Authority (e.g. for veterinary certificate), but others didn not think this was true.

A heavy discount on licence fee to Seychelles EEZ (see Section 6.5.3).

According to industry interviewees, tax breaks are available, supposedly of 5‐years. The consultants thought that vessels had always received tax free status (even pre‐SITZ), so this point is unclear.

6.6.2 Benefits to the Seychelles from flagged Spanish‐owned purse seiners

The major benefit to the Seychelles is if IOTC shifts to a quota based system in the allocation of catch rights. This approach is under consideration by other Regional Fisheries Management Organisations (RFMOs) such as the Western Central Pacific Fisheries Commission (WCPFC). Quota allocations to IOTC Members will be based upon historical catch statistics; Spanish owned Seychelles flagged purse seiners (and East Asian owned longliners flagged by Seychelles) will thus provide a substantial allocation to Seychelles.

A number of interviewees noted that once a vessel has taken on a non‐EU flag (excluding overseas territories like Mayotte which has now become an integral part of France with the status of a department like Réunion) it cannot re‐flag to the EU. This means that Seychelles flagged vessels are, at least temporarily, ‘captive’ to the WIO.

Similarly, in order to fish in the jurisdiction of a different RFMO than IOTC, the vessel must, in principle, fly the flag a Member of the RFMO in question.83 This shift is a costly and time consuming process and thus disincentivises Seychelles flagged vessels from leaving the WIO.

83 This was recently put to the test by two Seychelles‐flagged Calvo owned purse seiners which shifted to the Western Central Pacific Ocean‐ the jurisdiction of the WCPFC. SFA and MENRT followed this issue very closely and relatively firmly.

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6.6.3 Rate of return (ROR) on value of catch by Seychelles‐flagged purse seine

fleet Discussion on the RoR method and other notes on interpreting Table 6.4 are provided above in Section 6.1.2. The following points are apparent from analysis of the data in this table:

This table demonstrates that Seychelles is doing reasonably well from access‐related revenue capture from the Seychelles‐flagged purse seine fleet. Based upon a 6% RoR on fob value of the actual catch, Seychelles returns have been higher for 3 of the 6 years detailed below (i.e. 2005, 2006 and 2008).

However, at the same time, the fact that for 50% of the period 2003‐08 Seychelles’ return was lower than 6% suggests that there is room for licence increase. (See the next section for recommendations here.)

This suggests that other purse seiner licences provided by Seychelles also provide a strong RoR because non‐Seychelles flagged licences are 33% higher in price (i.e. Iran and Mayotte, see Table 6.5 below).

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Table 6.4: Actual rate of return to Seychelles from locally flagged Spanish‐owned purse seine vessels compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2008 (all in US dollars unless otherwise specified)

Year SKJ/BET catch (mt)

YFT catch (mt)

SKJ/BET Price

(USD/mt) fob

YFT Price (USD/mt)

fob*

SKJ/BET catch value

YFT catch value

Total value of EU catch

ROR at 5% of value of

catch

ROR at 6% of value of

catch

Licence fees

2003 3,069 7,574 691 948 2,120,679 7,181,597 9,302,276 465,114 558,137 449,985 2004 2,964 10,503 871 1,199 2,581,644 12,596,368 15,178,012 758,901 910,681 577,500 2005 3,706 3,802 781 1,199 2,894,077 4,557,529 7,451,606 372,580 447,096 600,000 2006 3,125 6,155 893 1,391 2,790,365 8,564,521 11,354,886 567,744 681,293 855,000 2007 4,102 5,608 1,326 1,391 5,438,568 7,803,385 13,241,953 662,098 794,517 720,000 2008 2,076 3,510 1,671 1,391 3,467,958 4,884,073 8,352,031 417,602 501,122 660,000

Sources: SFA databases, confidential private sector sources (SKJ/BET fob price data), Globefish (YFT price data), and all Euro to USD conversions were done using annual average exchange rates for each year using: http://www.oanda.com/convert/fxhistory

Key: SKJ = skipjack; BET = bigeye tuna (caught as by‐catch, usually juveniles); YFT = yellowfin tuna.

* This fob price was arrived at generating an annual fob‐cif differential using SKJ price. That is, the difference between the confidential private sector price data for WIO SKJ price and Globefish Spain landed price for SKJ. This differential was applied to Globefish landed Spain YFT price to provide an estimate of WIO YFT fob price. Note that all of the price data are only indicative, not only because they only represent the average and they also do not take into account potential quality differentials (e.g. Spain landed fish might be larger thus equating to a better recovery rate in processing).

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6.6.4 Comparing licence fees for Seychelles‐flagged purse seiners with those applied by selected Pacific Island Countries

Table 6.5 compares licence fees paid by distant water purse seine vessels to the Seychelles and to Pacific Island Countries (PICs). These licences are either arranged directly with vessels (‘direct’ licences) or through access agreements with industry associations (‘assn’ licenses). All Seychelles arrangements with purse seines are direct licences, except of course for under EU FPA (see above on this). Several points must be taken into account in interpreting Table 6.5:

While the licence data for PICs is fully anonymised for reasons of confidentiality, all of them have rich EEZs.

The PIC data does not include discounted licences for locally‐based vessels, which is an incentive mechanism used by PIC governments to benefit more from the purchase of local goods and services.

The PIC data does not include additional known fees, such as those for onboard observers, admin, etc.

Table 6.5: Comparing Seychelles and Pacific Island Country purse seine licence fees, in US dollars (all licences for 2007 unless otherwise stated)

Coastal state–purse seine fleet 1 year 6 months

3 months

Seychelles ‐ Mayotte flag* 90,000 N/A N/A

Seychelles ‐ Iran flag 90,000 N/A N/A

Seychelles ‐ Thailand flag* 60,000 N/A N/A

Seychelles flag Spanish‐owned* 60,000 30,000 15,000

PIC 1 ‐ Assn 1, 2 & 5 18,000 + 6% top‐up N/A N/A

PIC 1 ‐ Assn 3* 14,000 + 5% top‐up N/A N/A

PIC 2 ‐ Assn 1 & 2 80,000 N/A N/A

PIC 2 ‐ Assn 3 90,000 N/A N/A

PIC 2 – Direct 85‐90,000 N/A N/A

PIC 3 ‐ Assn 1 16,000 + 6% top‐up N/A N/A


PIC 3 ‐ Assn 3* 8,000 + 5% top‐up (1‐17 PS)

16,000 + 5% top‐up (18‐34 PS)

N/A N/A

PIC 3 ‐ Assn 5 22,000 = 5% top‐up N/A N/A


PIC 4 – average licence 130,000 N/A N/A

PIC 5 – average licence 185,000 N/A N/A

Sources: SFA databases and confidential

* Licences for 2008

** Good and services (G&S) agreement or similar arrangement plays a role in discount here

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Five sets of recommendations can be made based upon an analysis of the data in Table 6.5:

1) The purchase of direct licences should only be available for one year periods. Moreover, ideally, purse seine fleets should enter into formal access agreements with GOS for periods of no less than 2 years and no more than 3 (see Section 7 for the same recommendation for longliners). This would allow:

a) Greater predictability in GOS revenue flows as vessels would be tied‐in for 2‐3 years.

b) Improved GOS‐industry relations, including the possible development of longer‐term strategic partnerships.

c) Less time spent by GOS personnel on administering and tracking new licences each year.

d) Far improved non‐financial terms and conditions for access.

2) Seychelles should drop any differentiation or special treatment made available to Seychelles flagged purse seiners unless it looks seriously likely to push them away (i.e. not just standard but vague ‘threats’ to relocate). Seychelles flagged foreign owned vessels already have advantages through the use of the Seychelles flag (see above). Therefore, a flat non‐discriminatory licence fee should be applied across the board at a minimum of USD90,000 per vessel and ideally more.

3) It is unknown to the consultants as to why Thai flagged vessels were receiving discount compared to Iran and Mayotte flag. This is a very odd decision. Again, a flat rate should be applied.

4) Compare PIC 3 and 5 and note: 1) the enhanced risk of a % top‐up fee compared to guaranteed ‘flat’ licence income. Thus if Seychelles were to go for a top‐up fee in the medium term, (i.e. when suitable MCS and economic intelligence capacity is in place), it may be logical to aim for a lower percentage top‐up (e.g. 5 rather than 6%) but a higher baseline licence fee; 2) there are additional admin and MCS costs associated with a top‐up, but also higher gains during good fishing years – however, it is highly dependent on effective VMS, MCS and FIIA84 checking of reported ROR price and volume; 3) finally, and related, it must be made explicit that the top‐up approach provides additional incentive to under‐report (witness behaviour of Spanish vessels vis‐a‐vis FPA tonnage payment) thus need for FIIA to check with alternative databases.

5) For the medium term, we are recommending a high baseline licence plus RoR 5% top‐up fee for ‘direct’ purse seine licences because the complexity and commitment associated with a price index scheme (our medium term recommendation for the future EU FPA) is too high for a one year licence. However, if a Vessel Day Scheme is eventually applied (see below and Section 3) then this would replace all other purse seine licencing systems.

84 A core proposal of this report is the creation of a dedicated Fisheries Industrial Intelligence & Analysis (FIIA) Unit to be based at SFA.

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6. 7 The IUU Regulation, Access Agreements and Non‐Complying Coastal State Status –

Impacts on Seychelles A key plank of the EU’s current framework for importing fish into its markets and also influencing the States in whose waters EU fleets fish is the now well known but as yet untried IUU Regulation. Section 8. ? of the report discusses the IUU Regulation in the context of trade, markets and value‐adding. In this brief overview, we profile the IUU Regulation as an instrument with an indirect effect on access agreements inasmuch as it has the potential to sanction States which do not meet the rather onerous new requirements of the EU in this arena. 6.7.1 The IUU Regulation85 The objectives of the IUU regulation are essentially to 1) to prevent IUU caught fish from entering the EU market; 2) eliminate IUU fishing activities by EU operators.; 3) provide a framework of sanctions to motivate countries and fleets to halt IUU fishing. The Regulation covers all maritime waters, i.e. community waters, third country waters and the high seas. Inland waters and freshwater fisheries products are explicitly excluded. The Regulation directly impacts on all States engaged in exporting fisheries products – chilled, frozen or processed – to the EU market. On the basis that it has the right to do so under international law, the EU as market State or importing territory is using the Regulation to set out a number of pre‐conditions that would‐be exporters have to comply with in order for their products to be eligible to enter the EU market. 6.7.2 Fundamental elements of the Regulation The Regulation is based on four pillars:86

1) The first is a proposed catch certification scheme targeting the flag State of the vessel catching EU‐destined fish with a Community port State control system validating the IUU status of fish being imported into the EU. The scheme covers transhipment, direct and indirect imports, processed products, etc. Under this aspect, the flag State has responsibility for certifying the veracity of the catch declarations made by its vessels, whilst Community port State authorities where the fish is landed are required to undertake a minimum number of inspections based on risk assessment and random selection to verify/validate the certifying actions of flag States. A key sanction is the power to refuse access to EU ports as stipulated in the FAO 2001 International Plan of Action on IUU Fishing. Provided a Coastal State is not not the flag State of the fleet catching and exporting the fish, the Regulation imposes no obligations on Coastal States from which the fish originates. Responsibility only occurs where fish is landed, transhipped or processed onshore.

85 See for extensive discussion, Martin Tsamenyi, Mary Ann Palma, Ben Milligan and Kwame Mfodwo, 2009. Fairer Fishing? The Impact on Developing Countries of the European Community Regulation on Illegal, Unreported and Unregulated Fisheries ; Giles Hosch, Personal communication to Kwame Mfodwo, on IUU Regulation, April 17th 2009. 86 This section builds on a recent summary provided by Hosch to Mfodwo for review in the context of an ongoing ACP Secretariat project responding to IUU Regulation challenges for ACP States.

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2) The second principle is the establishment of an EC IUU vessel list covering vessels from all over the world. This list will include vessels listed on RFMO lists. The EC will only place vessels on this list where flag States have not taken appropriate enforcement action against their flagged vessels, after wrong‐doing has been established, and enforcement action demanded by the Commission has not resulted in “immediate enforcement action” (required of third States) and “timely enforcement action” (required of Community members). (art. 27.1). Vessels on this list face a whole range of potential sanctions, including the possible suspension of fishing authorizations. Community vessels can be placed on this list with the terms mildly biased in favor of Community vessels.

3) The third major level of action targets Non‐cooperating third countries – or States of non‐compliance. The EU intends to identify and list such States and will do so where the State in question fails to discharge the duties imposed upon it under international law as flag, port, coastal or market state and also fails to take action to prevent, deter and eliminate IUU fishing activities. The listing of such states will be based on a number of considerations and factors, including the measures each State is currently taking to combat IUU fishing, the level of participation in RFMOs, the level of cooperation with the EC on enforcement matters, the extent of ratification and effective implementation of major international fisheries instruments, as well as action with respect to other indicators. States identified and listed as non‐cooperating will face sanctions the essence of which will be restrictions or prohibition of fisheries relations between the EU (and its nationals) and entities from listed countries;

4) The fourth and final element of the Regulation is the system of controls over EU nationals. The principle here is that no nationals under the jurisdiction of an EU member State should engage or be associated in any form or manner with IUU fishing activities, whether inside or outside waters under EU jurisdiction. Where established infractions constitute serious infringements, they are to be sanctioned under the Article 44 of the Regulation. Article 44 even envisages prosecution under criminal law.

6.7.3 Implications for Seychelles as an access granting State Where the Coastal State (Seychelles) merely 1) grants access to foreign fleets under fisheries agreements; 2) no fish is landed in the ACP coastal State – but is rather directly transhipped and/or exported from the fishing grounds – the Coastal State (Seychelles) will have no additional administrative part to play under the scheme. Under such a scenario, and in the particular case of FPAs, EU vessels will harvest the fish, and the EU Member States whose flags are flown will also certify the legality of the catches. There is currently no requirement that the Coastal State (Seychelles) exercise control over flag State certification. 6.7.4 Implications for Seychelles as a potentially certifiable State of non‐

compliance Although Seychelles will have no obligations as an access granting State, it will have obligations as a Coastal State and will be required to effectively combat IUU fishing through the putting in place of effective MCS mechanisms, adoption and effective implementation of relevant RFMO regulations at the national level, etc..

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Seychelles will therefore have to significantly improve its MCS and enforcement (how realistic – huge EEZ very expensive, vessels, aircraft, satellite radar etc so as to avoid listing as a non‐cooperating third country. The threat to access agreements is in effect indirect as a listed non‐co‐operating country cannot enter into or continue its agreements with the EU. 6.8 The 2009 Green Paper on Reform of the CFP – Implications for the Net Benefits

Programme The recently published Green Paper on further reforming the CFP foreshadows a period of change in access arrangements as follows:

The current architecture of our agreements should … be revisited in order to explore alternative forms of arrangements with third countries that would better meet the needs of our industry and those of our partners. The introduction of regional forms of cooperation may be worth exploring in this regard especially at a time when regional integration is being promoted as a tool for development.

As Box 6.2 below demonstrates, the Commission appears open to accommodating different rationales for a 21st century CFP – thus for example it is suggested that responsible fishing it might replace supply of Community needs as the raison d’etre of the CFP.87 Paraphrasing the relevant sections of the Green Paper, the following issues are clearly of relevance to Seychelles. They are therefore highlighted for the attention of GoS:

The Green Paper states that segments of the EU fishing industry – especially the distant water tuna fleet – have expressed ‘a strong interest’ in extending fisheries access arrangements so that they can better follow the fish. This raises the questions of whether the EU fleet may be interested in entering into regional agreements. Relevant ACP states should examine possibilities here (i.e. coastal West Africa, states on the Western Indian Ocean and the Pacific islands). The only example of a regional fisheries access agreement in practice is the US multilateral tuna Treaty with the Pacific island countries (1988‐to date).88 ACP countries should look to the US Treaty as current international best practice if a regional approach is taken to the EU fleet.

The Green Paper goes on to ask whether EU fleets should alone pay for fisheries access (i.e. without additional payments from the European Commission). This development should probably be seen in the context of a range of pressures on the provision of fisheries subsidies, including in Doha Round negotiations at the WTO. ACP states should assess the real value of FPAs (including in ecological terms, such as ensuring full cost is recovered through as eco‐system impacts) and compare them where possible with different existing and potential models of access arrangements.

The Green Paper also asks how investment promotion and employment generation in the fisheries sector in third countries (e.g. joint ventures, transfer of technology

87 The caution of course is that that these are merely suggested new directions and will be subjected to robust negotiations and compromise over the next 36 months. The consultation on the directions set out in the Green Paper will close at the end of 2009 and the Commission will then sum up its results in the first half of 2010. After further consultation with stakeholders, the Commission will then prepare an impact assessment report and develop a proposal for a new basic regulation. This would then be presented to the European Parliament and Council early in 2011, with a view for adoption in 2012. 88 The full name is the Treaty on Fisheries between the Governments of Certain Pacific Island States and the Government of the United States of America. Information and analysis on the Treaty is provided by Campling, Havice and Ram‐Bidesi 2007 and Havice 2007.

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and know‐how) can be pursued. Here ACP states should attempt to develop cooperative strategies to interact with the EU on these potentials.

Key to all of this is the obvious strength of a regional approach to access arrangements. This is already well developed in the Pacific ACP in their relations with external distant water fishing interests (e.g. the role of the Forum Fisheries Agency and the various initiatives of the Parties to the Nauru Arrangement).89 In addition, several West African coastal states are taking forward minimum terms and conditions for fisheries access.

Box 6.2: The 2009 CFP Green Paper ‐ Issues for public consultation 90 The questions that the Commission wishes EU civil society and governments to discuss are:

Should the future CFP aim to sustain jobs in the fishing industry or should the aim be to create alternative jobs in coastal communities through the IMP and other EU policies?

Is there any reason why the external dimension of the CFP should not be driven by different objectives – say ecologically responsible fishing ‐ rather than the current approach of emphasizing raw material supply to community markets and maintaining employment and regional cohesion?

How can the EU cooperate with its partners to make RFMOs more effective?

Contrary to the current free access principle in international waters, should fishermen pay for the right to fish in the high seas under the governance provided by RFMOs?

How can objectives such as investment promotion (creation of joint‐ventures, transfer of know‐how and technologies, investments and capacity management for the fishing industry), creation of jobs (on vessels, in ports, in the processing industry) or promoting good maritime governance be pursued in the framework of future international fisheries agreements?

Are the FPAs the best instrument to achieve sustainability beyond EU waters or should they be replaced by other forms of cooperation?

Should the regional perspective be explored and either substitute or complement a streamlined bilateral one?

How could we make scientific research to assess the sustainability of fish stocks and the control of the fishing activity more transparent and efficient?

How can the EU assure better cooperation and compliance with new regulations in developing countries?

Should EU operators cover all the costs of their fishing activities in third country waters or should the Community budget continue to support part of these costs?

How could the EU contribute to increasing the fisheries management capabilities of developing countries, e.g. through targeted assistance?

How could the potential of small‐scale fisheries in third countries for sustainability, ecological and social benefits be enhanced?

How can the future CFP best support initiatives for certification and labelling?

How can traceability and transparency in the production chain be best supported?

89 For overviews and analysis see Havice 2007 and Havice and Campling (forthcoming). 90 European Commission, 2009. Green Paper. Reform of the Common Fisheries Policy, Brussels COM(2009)163 final http://ec.europa.eu/fisheries/cfp/review_en.htm 10

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Whilst many of these statements in the Green Paper merely recycle old arguments, there are some new elements, some of which support the options set out in this report, namely that Seychelles:

1) Undertake a more rigorous economic valuation of the returns it gets from foreign fleets and demand payments in accordance with those more precise assessments;

2) Insert a much more ecologically focused and appropriately monetized element into its agreements.

6. 9 Conclusions and Recommendations – Applying net benefits options to the

relationship with the EU 6.9.1 Financial recommendations

Based upon our analysis of the current situation with the EU the consultants recommend the following actions in the financial components of the agreement. The context within which these measures are proposed is that Seychelles needs to be sensitive to the issue of maintaining the EU fleet in Seychelles as far higher inflows come from goods and services purchased there than from the payment of access fees.

6.9.2 For immediate action Seek an increased tonnage payment from Euro 25/mt. This might include differentiation because of the higher yellowfin yield in the Seychelles EEZ. The EU may however be reluctant as this will set a precedent for other FPAs. The high and more valuable yellowfin to skipjack ratio can be used to effectively justify this claim. Timing ‐ Within the next 12 months through the avenue of the Joint Committee meeting 6.9.3 Short term recommendations 2009‐2011 – for development and

subsequent tabling during the 2011 FPA renegotiations

Continue to refine the current Rate of Return (RoR) approach developed in this report.

Develop and model a cash performance bond scheme and request post 2011 EU commitment so as to guarantee that the EU fleet meets all its core obligations – this seems appropriate and is politically defensible given the recent disputes between Seychelles and the Spanish fleet. Such a bond scheme if well designed would provide a strong incentive to comply which would help to offset the disadvantage of current weak enforcement capacity

Start analytical work to enable Seychelles table a RoR request based on a high baseline fee and a relatively simple price‐based top up procedure which will become effective once a trigger price level is reached – on this see Section 3 on Options

If within Seychelles capacities and conditional on timely and effective establishment of proposed Fisheries Industrial Intelligence & Analysis (FIIA) unit to be based at SFA, GoS to table a very basic price‐indexing top‐up proposal as set out in Section 3 on Options.

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In any case irrespective of the 2011 deadline, it is suggested that work be initiated by the FIIA unit on a price‐indexing approach as soon as the unit is established. This will permit the price‐indexing approach to be developed and tabled when Seychelles is confident that it is well developed enough to be implemented in Seychelles conditions. Parallel use of the price‐indexing approach within FFA‐US Tuna treaty arrangements will provide a reference point for the FIIA to further fine tune its price‐indexing work. Section 3 expands fully on the price‐indexing option for increasing net benefits from Seychelles EEZ.

Timing – start within the next 12 months with objective of meeting 2011 negotiations deadlines 6.9.4 Medium term actions

FIIA unit to undertake/continue analytical work to develop a sophisticated price index based approach to access fees, either fully replacing current ROR method or supplementing it

FIIA unit to undertake analytical work to establish a Vessel Day Scheme (VDS) using FFA/WCPFC scheme as a reference point

FIIA to initiate analytical work to develop core elements for imposing a hypothecated environmental levy – once developed this can be added on as a top‐up /addition to other methods

Timing – approaches to be developed as flexible options to be applied in appropriate combination by GoS within the next 36‐‐48 months – ideally these new approaches would be ready for implementation within the framework of the FPA following what is renegotiated by the 2011+ FPA and in time to take advantage of any favourable conditions arising from a new CFP.

Sequencing of the above proposals therefore would be:

2009‐2011 – High priority

Increased tonnage fee

Immediately (2009/2010) through the Seychelles‐Joint Committee framework seek an increased tonnage payment from Euro 25/mt.

High priority Immediate SFA


During 2011 FPA renegotiations Seychelles to request an improved rate of return (RoR) fee based on annual average at 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations

High priority over next 18 months

SFA/FIIA




SFA/ FIIA

Deploy very basic price‐index

Develop basic elements and deploy if risk analysis demonstrates that basic work done is sound – if not, defer beyond 2011 renegotiations


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SFA/ FIIA

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Beyond 2011 ‐ Focused medium level priority

ROR + price‐indexed top up


SFA/ FIIA

Environmental levy /natural resource depletion levy


SFA/ FIIA/ MNRET

Ministry of Finance/National Bureau of Statistics

Vessel day scheme


SFA/ FIIA

A full price‐index scheme replacing the current ROR method


SFA/ FIIA

Continue and further refine the compliance bond procedure

See compliance bond discussion at 3.6 below SFA/ FIIA /

Attorney‐General’s Office

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6.9.5 Non‐financial aspects – recommendations

Issue Recommendation and rationale for recommendation Likely impact of Green Paper on this issue

Validity and duration of fishing rights

Seychelles should in its negotiations seek to change the duration of the framework to 3 years as 5 years is much too long; In addition, the tacit renewal clause for 5 years in many FPAs makes capture of Seychelles policy even more likely as we are in principle now talking about 10 years.

The Green Paper does not clearly address this matter

Transhipment Recommendation VMS has a significant role to play in regulation of transhipment Seychelles should therefore request funds and technical assistance from EU to deepen its VMS capacities on transhipment and related activities. Comprehensive study required of transhipment issues in Seychelles EEZ and adjacent areas and ports so at to be able to better respond to EU IUU Regulation challenges Rationale Seychelles long term interest is to maximise transhipment and landing in Port Victoria as to secure maximum value‐added The position on transhipment between the EU and Seychelles is generally satisfactory as most EU vessels land their product to supply IOT The real issue in transhipment is LL transhipment exemption for Asian LL fleets EU and Seychelles have a joint interest in higher control over Asian longline transhipments and a regime of port rather than at‐sea transhipment The Commission has a clear interest in strictly enforced transhipment regime following the IUU Regulation in a strict transhipment regime Seychelles for its part needs to thoroughly review and better understand how VMS contributes to future regulation of transhipment and IUU activity

The future directions set out in the Green Paper and the IUU Regulation all strengthen Seychelles negotiating position of seeking assistance to: 1. conduct a

comprehensive study of transhipment activity;

2. upgrading the VMS and enforcement generally

3. A good study will allow Seychelles to persuasively argue that there are loopholes in current IOTC observer system of control over longliners at sea

Institutional aspects and dispute settlement

• The Seychelles should seek to have an arbitration clause re‐inserted into the FPA to bring an independent element into the framework should there be a major dispute

• Arbitration can also internationally expose EU malpractice and therefore the threat of recourse to arbitration in certain contexts can be a useful political and strategic tool

• Arbitration procedures should be undertaken in a European venue where attention will be to paid to arbitration outcomes by key European NGOs – probably Netherlands or Brussels

• The Green Paper provides no direction on this issue

• Arbitration and dispute settlement is a likely area of interaction and conflict between the EU and Seychelles especially in light of IUU Regulation

Role of Recommendations of IOTC and other international

• Issue is how IOTC recommendations can be better integrated into EU‐Seychelles practice

• Can financial payments be sought to implement IOTC requirements explicitly in Seychelles practice especially given the importance of applying IOTC provisions to all

The Green Paper supports this approach as per the following general principle: … scientific analysis and

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organizations fleets fishing in the Western Indian Ocean? • Seychelles should consider incorporating the views of the

Scientific and Technical Committee rather than Recommendations as the views at the scientific level are much more stringent and follow the precautionary principle more closely

• Seychelles should propose this to all fleets and stick by this principle in negotiations

research capacity should be reinforced to better assess the conservation status of the stock and determine sustainable catch levels… This might suggest that the precautionary principle be applied to EU (and other) fishing vessels given the scientific evidence on stocks.

Fisheries policy, conservation and responsible fishing

Recommendations: • The current clause is highly interventionist and gives the

EU considerable scope to intervene in Seychelles fisheries policy – the wording should be changed

• In further implementation of this clause, Seychelles should ask for substantial financial assistance from the EU to establish an effective enforcement and MCS system, including a revamped VMS system to better support responsible fishing as the current financial contribution does not adequately support VMS and enforcement requirements

Issues that need to be addressed internally by Seychelles for with respect to this provision are: • What are the practical impacts of the EU financial

contribution to fisheries policy under the Agreement? • How are the anticipated annual and multi‐annual fisheries

policy requirements met? • This provision has the potential to significantly limit

Seychelles fisheries policy autonomy – thus significant sums of money should be given by the EU in return for Seychelles agreeing to this clause

The Green Paper would support a much more interventionist approach to fisheries policy on the part of the EU This would not necessarily benefit Seychelles


This is a very important provision which Seychelles should be seeking to further implement Seychelles should be asking the EU to co‐operate further to study and use the biological recovery provisions and see how they can be used technically with respect to tuna

The Green Paper provides in principle support for an ecological access fee (environmental taxes and levies) and also ecologically oriented measures.

At sea reporting and

VMS

• Closer calibration of VMS and this type of report will be required in the context of EU IUU controls

• Seychelles should raise issue of increasing VMS automatic reporting frequency to desired level (i.e. SFA noted the option of increasing to every 15 minutes)

The Green Paper argues for a significant strengthening of compliance at both regional and national levels

Port reporting Recommendations • Establish an inter‐agency task force to review current

Seychelles use of port procedures and look at ways of deepening enforcement value of port catch reports with closer matching to VMS and at sea reports?

As immediately above – strengthening of enforcement

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• A review of international best practice, matching current developments to the needs of the Seychelles could also be useful as a next step as it would meet both value added and improved enforcement objectives

VMS • VMS system needs to be significantly strengthened and improved to meet challenges of IUU fishing and also the requirements of the EU IUU Regulation

• EU vessels must meet all VMS requirements • VMS issues also crucial to dealing with piracy issues • Increased financial contribution is needed for all these

purposes. • This contribution could be made under EU commitment in

Fisheries Chapter Article 32 (b)(2) of ESA‐EU Interim Economic Partnership Agreement (EPA).

• EU should fund an independent study of the VMS needs of the Seychelles in light of international best practice as a matter of urgency so that can confidently address the new overall situation in the Western Indian Ocean

• Internal issues for Seychelles in improving implementation of this clause include:

1. What is the actual VMS reality? 2. What is VMS information used for by the Seychelles? 3. What sense is there of the anomalies for each fleet

detected by VMS over the last three years? 4. How does VMS origin information inform negotiations (i.e.

JC meetings; Seychelles fisheries policy)? 5. Has any detailed analysis been done of VMS data to

provide fleet profiles? 6. Are there plans to seriously build on VMS data to support

an extension of Seychelles enforcement activity? 7. Have there been any prosecutions driven by VMS

information? 8. An internal rapid analysis of VMS strengths and

weaknesses needs to be done by the Seychelles to inform TOR for an independent study

As immediately above – strengthening of enforcement VMS and MCS funding is also available under the EPA window as discussed in Section 8

Joint ventures This clause does not require attention until Seychelles has fully articulated a new policy towards joint venture enterprises (JVEs). It is worth noting that the EU will never be able to make a firm commitment on JVEs, not least because it cannot force its private sector to engage and/or it is unlikely to provide a system of incentives to EU firms to operate in the Seychelles in addition to the existing tuna preference.

Green Paper sets out a strong interest in joint ventures

IUU Fishing The current clauses on IUU fishing in the agreement are both positive and negative for Seychelles. Negative IUU issues can be introduced by EU under the fisheries policy and reform provisions – Article 7 discussed in detail above and will most probably be introduced in this way very soon and puts pressure on Seychelles. This clause strengthens the option for the IUU to sanction Seychelles if it does not control IUU fishing as set out in the IUU Regulation Positive IUU and piracy are currently the biggest threat to both Seychelles and EU interests in the Indian Ocean. Significantly

The Green Paper encourages this type of clause

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EU increased assistance is required in the IUU and piracy area so Seychelles can meet its obligations under Article 12

6.9.6 Recommendations for other purse seine fleets (including Seychelles

flagged)

1) The purchase of direct licences should only be available for one year periods. Moreover, ideally, purse seiner fleets should enter into formal access agreements with GoS for periods of no less than 2 years and no more than 3 (see Section 7 for the same recommendation for longliners). This would allow:

a) Greater predictability in GoS revenue flows as vessels would be tied‐in for 2‐3 years.

b) Allowance for fluctuations in catch rates, world tuna prices and other parameters

c) Improved GoS‐industry relations, including the possible development of longer‐term strategic partnerships.

d) Less time spent by GoS personnel on administering and tracking new licences each year.

e) Far improved non‐financial terms and conditions for access.

2) Seychelles should drop any differentiation or special treatment made available to Seychelles flagged purse seiners unless it looks seriously likely to push them away (i.e. not just standard but vague ‘threats’ to relocate). Seychelles flagged foreign owned vessels already have advantages through the use of the Seychelles flag (see above). Therefore, a flat non‐discriminatory licence fee should be applied across the board at a minimum of USD90,000 per vessel and ideally more.

3) It is unclear to the consultants as to why Thai flagged vessels were receiving a discount as compared to Iran and Mayotte flag. Again, a flat rate should be applied.

4) For the medium term and if sufficient capacity is in place (i.e. FIIA unit and improved use of MCS/VMS), we are recommending a high baseline licence plus RoR 5% top‐up fee for ‘direct’ purse seine licences because the complexity and commitment associated with a price index scheme (our medium term recommendation for the future EU FPA) is too high for a one year licence. However, if a Vessel Day Scheme is eventually applied then this would replace all other purse seine licencing systems.

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SECTION 7 AGREEMENTS BETWEEN SEYCHELLES AND EAST ASIAN LONGLINE FLEETS AND STATES 7.1 Overview and objectives for this Section of the Report This section of the report reviews the access arrangements for freezer longline fleets active in the Seychelles EEZ and adjacent areas. The principal fleets in this regard are the fleets of Japan, Taiwan and China (the ‘East Asian longline fleet’ for short). This node of the industry feeds into a completely different value chain to the purse seine fleets and they tranship and/or land their catch elsewhere – Mauritius, Japan, Taiwan, China, Hong Kong, Singapore, Korea, Indonesia, Philippines. Rather than being linked to the Seychelles economy, they are integrated into those parts of the global tuna economy focused on sashimi grade and related product from yellowfin and bigeye. The activities of the East Asian longline fleet are supported by an exemption specifically for longliners to the IOTC ban on transhipment at sea. As such, sashimi grade catch is rarely transhipped from onshore in the WIO region (let alone landed); this is even the case for the main longline base in the WIO, Port Louis, although the Mauritian economy does benefit from the provision of goods and services to these vessels when they come into port for other purposes, including the transhipment and landing of canning‐grade albacore. Mauritius benefits from cold storage, vessel repair facilities for Asian longliners and marketing connections with Asian markets for tuna. Therefore, there appear to be limited opportunities for upgrading into the provision of longline landing and processing facilities in the Seychelles until:

1) the IOTC exemption for longline transhipment is dropped and the associated economics of the sector change. Transhipping at sea (normally on the high seas) and the on loading of fuel and other provisions to/from reefers/supply ships allows longliners to reduce loss of fishing time and avoid incurring costs from the additional fuel and port dues of sailing to local ports (see Sections 2 and 9 on ‘steaming days’);

2) dynamics in other ports change (e.g. a clamp‐down in Port Louis because of the EU IUU regulation);

3) the Seychelles Competent Authority develops appropriate systems and the confidence to allow these vessels to freely tranship/ land.

In addition even if Seychelles invested considerable sums in improving port infrastructure including ultra cold storage facilities, dry docking and other facilities it is not certain that Asian longliners would come. Even if the transshipment at sea exemption is lifted, Mauritius may be a more cost effective hub for them. (For more on this, see section 9.4 on investment and upgrading in the sashimi chain.) Understanding the extent to which these agreements reflect international best practice and the extent to which they constrain or offer opportunities to the Seychelles is central to the objective of improving net benefits to the Seychelles economy. This section of the report therefore analyses the access agreements of Seychelles with Japan, Taiwan and China, through a review and discussion of the following matters:

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A summary statement of the key features of the most recent access agreements in force between Seychelles and each of these countries. For more detail see Appendix 7.A, which provides a systematic comparative review of agreements between Seychelles and the East Asian fleet countries, Appendix 7.B on Seychelles relations with Japan, Appendix 7.C on relations with Taiwan, and Appendix 7.D on relations with China.

Analysis of the extent to which these most recent agreements accord with international best practice in the access agreements arena – the instrument used for this analysis is a text‐based gap analysis procedure

An assessment of the general strategic importance of access agreements policy to the three countries and the implications of their relatively different policy approaches for the Seychelles

The implications for Seychelles of the institutional arrangements used by these countries to implement their access policies and agreements

An assessment of the importance of these longline access agreements within the overall access agreements policies and strategies of these countries.

7.1.1 Gap analysis of agreements against international best practice Access agreements now typically cover the following issues: validity and duration of fishing rights; information on fleet aspects and vessel types; transhipment; institutional and dispute settlement arrangements, including joint commission and arbitration clauses; and the role of international organizations such as FAO and IOTC, in particular, the use to be made of their scientific and other recommendations in the negotiation and implementation of access agreements. Other matters typically covered by contemporary access agreements are: technical conservation measures; biological recovery periods; the rights duties and privileges of scientific observers; by‐catch control and usage requirements; bio‐diversity and ecological protection; VMS and non‐VMS aspects of monitoring control and surveillance; support for the local economy, including port visits, local landings and use of local crews as well as local services; interaction between foreign and domestic fisheries; joint ventures; and various types of development assistance. However, practice is continually evolving with changes occurring in agreement language as well as mechanisms deployed by Coastal States. To help increase net benefits from its fisheries, Seychelles needs to address the extent to which non‐financial provisions in its current agreements reflect international best practice. The gap analysis of each of the agreements assesses the most recent agreements in light of current international best practice and emerging trends in practice in order to identify crucial gaps which would need to be addressed as part of a programme of increasing net benefits. The methodology for this section was based principally on desk top reviews of the relevant agreements and other studies together with identification and translation of key documentation from the relevant languages – Japanese and Chinese. Although the textual content of the agreements with Japan and Taiwan are virtually identical, the relationships with the two States are quite different. So also are fleet strategies deployed by the ‘national’ fishing companies. Accordingly, gap analysis and recommendations for both States are addressed separately despite significant areas of overlap. The situation of China is

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not currently similar to that of Japan and Taiwan. Application of the current Japan/Taiwan access agreement framework to any future negotiations with China would benefit from including the changes for Japan and Taiwan recommended here. 7.1.2 Rate of return to Seychelles from current arrangements and comparison with

Pacific island licence fees Table 7.1 details actual licence payments paid to GoS by each of the longline fleets and provides the theoretical percentage rate of return (RoR) on the gross value of reported catch. The RoR method is discussed in detail in Section 3. The use of 5 and 6% RoR is based upon accepted practice in other regions, including several Pacific Island countries. The consultants do not have catch data for 2007 and 2008 for any of the three countries detailed in Table 7.1 because of severe delays on the part of these fleets in reporting to SFA (SFA’s data on licence fees paid to GoS is available for these years). This is an unacceptable practice on the part of these fleets. The recommendation for a compliance bond (see below) is intended to target the incidence of such and similar behavior through an effective disincentive. In addition, in order for a top‐up fee based on a 6% rate of return to function (another recommendation of this chapter), SFA will require regular and timely reporting of catch data. Table 7.1 on the face of its suggests that there is a limited disparity between licence payments and the rate of return for declared catches for Asian longliners. However this must be seen in the context that compared to the EU purse seiner fleet. On these terms the Asian longliner fleet brings limited value added to the Seychelles economy in terms of in port expenditure by vessels including transhipment payments, vessel services and supplies and onshore processing.

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Table 7.1: Actual rate of return to Seychelles from longline licence payments compared to a theoretical rate of return of 5 and 6 percent on the value of the catch, 2003‐2006 (all in US dollars unless otherwise specified)

Total reported catch (in tonnes) Price (USD/mt) Value (USD)

Longline fleet BET YFT BET YFT BET YFT

Total value

Rate of return on declared

catch at 5%

Rate of return on declared

catch at 6%

Licence fees paid

2003 2,476 1,907 5,375 3,430 13,304,932 6,542,984 19,847,916 992,396 1,190,875 1,756,728

2004 3,418 1,833 6,127 3,908 20,939,883 7,161,742 28,101,625 1,405,081 1,686,097 1,408,200

2005 3,935 1,671 5,628 3,745 22,145,945 6,259,011 28,404,956 1,420,248 1,704,297 1,834,500

Taiwanese 2006 2,360 785 6,201 4,618 14,633,476 3,623,100 18,256,576 912,829 1,095,395 850,030

2003 633 1,556 5,375 3,430 3,402,125 5,337,854 8,739,979 436,999 524,399 549,124

2004 820 2,411 6,127 3,908 5,024,082 9,421,400 14,445,483 722,274 866,729 832,631

2005 1,542 3,487 5,628 3,745 8,678,301 13,058,115 21,736,416 1,086,821 1,304,185 1,056,891

Japanese 2006 777 1,472 6,201 4,618 4,818,126 6,797,745 11,615,870 580,794 696,952 904,973

2003 277 133 5,375 3,430 1,488,765 456,256 1,945,022 97,251 116,701 197,242

2004 233 171 6,127 3,908 1,427,575 668,212 2,095,787 104,789 125,747 134,847

2005 96 98 5,628 3,745 540,283 366,990 907,274 45,364 54,436 133,219

Korean 2006 119 45 6,201 4,618 737,911 207,811 945,723 47,286 56,743 151,519

Sources: SFA databases on catch volumes and licence payments; Forum Fisheries Agency (FFA) database on fish prices.

Notes: BET = bigeye tuna; YFT = yellowfin tuna

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The following table compares actual licence fees contained in access agreements and domestic legislation (e.g. ‘direct’ licence fees, those that are purchased without an agreement) for the Seychelles and four Pacific Island countries (PICs). Several points must be taken into account in interpreting Table 7.2:

While the licence data for PICs is fully anonymised for reasons of confidentiality, all of them are assumed to have rich EEZs.

The PIC data does not include discounted licences for locally‐based vessels, which is an incentive mechanism used by PIC governments to benefit more from the purchase of local goods and services.

The PIC data does not include known fees, such as those for onboard observers, admin, etc.

The data on PICs do not cover those existing arrangements where longline fleets pay a baseline licence plus a 5% top‐up based upon estimated value of the catch. These were not included because data on actual returns from the top‐up mechanism is not available. This is however, a major recommendation of the consultants in relation to future longline access agreements (see below).

Table 7.2: Comparison of longline licences applied by the Seychelles and selected Pacific Island Countries (licences for 2007 unless otherwise specified)

Category of vessel

1 year 6 months

Seychelles ‐ China (2006) <499 GRT

>500 GRT

12,500

14,500

10,500

12,500

Seychelles – Japan*

N/A 22,000 14,500

Seychelles – Taiwan (2008)**

N/A 24,000 17,500

PIC 1 – East Asian associations

N/A 20,000 N/A

PIC 2 – East Asian associations and direct licences

<200 GRT

>200 GRT

22,000

26,000

N/A

N/A PIC 3 – East Asian associations <200 GRT

>200 GRT

5,000

7,000

N/A

N/A PIC 3 – Direct licences <200 GRT

>200 GRT

9,700

14,900

N/A

N/A PIC 4 – East Asian associations <100 GRT

>100 GRT

9,000

11,000

N/A

N/A

Sources: SFA and confidential.

* Excludes; 1) Admin fee: US$ 500 per vessel; 2) Payments under Goods & Services agreement; and, 3)Other ‘decoupled’ aid (i.e. OFCF)

** Excludes 1) Admin fee: US$ 500 per vessel for 6 months and 1 year licenses; 2) Observer programme: US$2,000 per vessel till Assn agrees to take Seychelles observers on board; 3) Seychelles seamen training: US$1,000 per vessel until Assn agrees to take Seychelles seamen on board of its vessels

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The data depicted in Table 7.2 has various implications for GoS in its relations with East Asian longline fleets.

1) All PICs covered in this survey only include 12 month licences. This is for two main reasons:91

a. One year licences allow for improved monitoring, control and surveillance (MCS) b. One year licences are easier to administer, especially if the licence period is

aligned with the financial reporting period.

2) Most PICs apply a non‐discriminatory approach to different East Asian associations. The main exception detailed here is PIC 3 which differentiates in its treatment of government‐industry association licences compared to government‐direct licences, with the latter paying considerably higher. Presumably this is because the government‐industry association licences are granted in the context of a wider arrangement, such as a Goods & Services agreement where additional payments are made, which is an approach applied by Japan in its access arrangements with the Seychelles (see next section). Note in particular that PIC 2 charges the same licence fee to all foreign longline vessels regardless of the access arrangement and it charges a higher rate than the Seychelles. The provides additional support to our recommendation (below) that Seychelles apply the same flat (non‐discriminatory) licence fee to all foreign longliners regardless of whether additional payments in cash or kind are provided (e.g. Japan’s Goods & Services Agreements).

3) PICs provide a far lower cut off point in GRT in licence fee differentiation. It is not known why Seychelles cut off is so high (i.e. 500 GRT). SFA should assess whether any advantage may be sought in lowering this threshold.

91 Appendix 7.E. details Seychelles allocation of longline licence fees by flag and duration, and by number and duration. This is useful for readers if they wish to better understand up‐take of different licence types by different longline fleets.

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7.2 The Seychelles‐Japan Access Agreements Relationship 7.2.1 Evolution and types of fisheries agreements between Seychelles and Japan Seychelles currently has two types of agreement with Japan. There is the principal agreement – a harvest or fishing access agreement which sets out the terms and conditions under which Japanese vessels can fish in the EEZ of Seychelles. There is also another type of agreement under which Japan provides goods and services (G&S) to Seychelles.92 The latest of the harvest/fishing access agreements entered into force in 2007. Prior to this 2007/2008 agreement Japan and Seychelles had negotiated agreements with each other every 1‐2 years. The G&S agreement type is less elaborate than the access agreement and fits within the pattern of development assistance intersecting with access arrangements that is central to Japanese access agreements strategy as shown in further detail below. Appendix 7.B reviews the evolution and content of agreements between Seychelles and Japan since the first one was signed in 1990.93 7.2.2 The Seychelles‐Japan fisheries access agreement of 2007‐2009 Table 7.3 demonstrates that the Japan‐Seychelles agreement of 2007‐2009 covers all key issues typically addressed by the text of most access agreements at the present time.

92 See in Appendix 7.B. section titled Goods and Services Agreement 93 See in Appendix 7.B. , section titled Evolution of Terms and Conditions over the period 1990‐2007; Japan‐Seychelles Agreements ‐ pre‐2007 and post‐2007 agreements.

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Table 7.3: Main Characteristics of Seychelles‐Japan 2007‐2009 Agreement

Length of Agreement Date of Entry into Force

1 May 2007

Length of agreement

The agreement commences on 1 May 2007 and ends on 30 April 2009 (Article 14)

Financial compensation Total Compensation

Licence fee US$22,000 for 1 year; $14,500 for 6 months; $4,500 for each additional 30 days following the 6 month period; in the event of circumstances beyond the parties’ control upon which the Agreement is extended for a period of 3 months or less, $4,500 for each 30 day period Annex 1, 2.2(6)‐(9) & 2.3

Paid to Treasury Yes – not to SFA Contributions to development of Seychelles fisheries capacity

Yes – but to be found in companion Goods and Services Agreement

Fishing opportunities and rights Maximum Number of vessels

Number of fishing opportunities under this agreement: 80 surface longliners, Annex 1, 1

License Fees Duration of license

1 year; 6 months; 30 days at varying rates

License Fee As above under financial compensation Additional Fees VMS; training levy; seamen’s levy

Other Elements Joint Committee & Dispute settlement

Requirement for Joint Committee (meet yearly, comprising members and officials as determined by both parties) functions incl. monitoring the performance, interpretation, etc. of the Agreement, providing liaison, reassessing level of fishing opportunities and other functions (Article 6.2); Disputes to be settled by Joint Committee; if no consensus reached then dispute will be settled by arbitration in accordance with Article 6.2:

MCS Vessels shall, whenever in EEZ, report every 3 days to SFA by fax or email on their position and particulars of effort and catch (Annex 1, 10); Vessels shall notify of any entry/exit 12 hours before the event (Annex 1, 10); When in Seychelles waters a vessel’s VMS device will automatically communicate their position at least every hour in the prescribed format (Appendix 4); Other MCS tools used; Penalties apply (Annex 1, 10)

Observers � Parties to agree as to when observers shall board � Take 1 or 2 observers � SFA to forward to Association list of vessels to take observers and list of observers � Japan Tuna (JT) will make payments of US$2,000 per vessel licenced for 1 year or 6

months under this Agreement to SFA which will go towards the training of Seychellois observers

Seamen � JT will make payments of US$1,000 per vessel licenced for 1 year or 6 months under this Agreement to SFA which will go towards the training of Seychellois seamen

� JT will fully fund 3 scholarships on a yearly basis for Seychellois students in maritime fields to study in Japan

Trans‐shipments / Landings

Vessels shall endeavour to land and tranship fish in Port Victoria except as otherwise authorised by SFA or in accordance with IOTC rules, Annex 1, 3


Vessels shall comply with measures and recommendations adopted by IOTC re: fishing gear and technical specifications and all other technical measures re: fishing (Annex 1, 5)

Confidentiality clause

VMS – monitoring data shall be intended exclusively for control, management, monitoring and enforcement by Seychelles of the agreement; such data cannot be communicated to other parties except with vessel owner’s written consent or by Seychelles court order (Appendix 4, 12)

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7.2.3 The Seychelles‐Japan Goods and Services Agreement of 2003 – main features Under the Japanese development assistance window, goods and services are typically supplied as adjuncts to the main access agreement. This agreement type is typified by the Agreement of 2003 between the Seychelles Fisheries Authority and the Federation of Japan Tuna Fisheries Co‐operative Associations on the supply of goods and services for development of the fisheries of Seychelles. (Appendix 7.B provides further information on the evolution of this type of agreement.)

Table 7.4: Typical content of Seychelles‐Japan Goods and Services Agreements

Article Theme Article I Federation together with the Overseas Fisheries Cooperation Foundation, shall supply to the

Authority goods and services equivalent to Yen 2 million [USD20,000] over the period of the agreement

Article II The exact content of the goods to be supplied is to be decided by SFA in consultation with the Federation and in accordance with the internal procedures and laws of Seychelles

Article III Federation must supply by a specified date unless a later date is hereafter agreed

Article IV Goods and services will be exempt from customs duties, internal taxes and other levies

Article V Approval from the Government of Japan shall be promptly obtained by the Federation who will ensure its continued validity

Article VI Problems shall be resolved by mutual consultation

These goods and services are a significant contribution to the resources and capacity of SFA. However, given the easing of foreign exchange shortages they are now reduced in importance as they were previously a strategic life line for SFA’s essential foreign exchange needs. Instead, GoS should consider focusing more on the value of licences rather than various add‐ons or ‘decoupled’ aid flows associated with Japan’s access arrangements. 7.2.4 The evolution of licence fees in the Seychelles‐Japan relationship Licence fees have shown a fluctuating trend during the relationship as shown by the Table 7.5 below. The ‘theoretical fees’ are calibrated simply by adding together actual fees for 90 days plus additional 30 day licences for periods 6 months and 1 year respectively. These are ‘theoretical’ because vessels would not take out licences in this manner because the tuna is not in the Seychelles EEZ for the entire period. It is also to be noted that goods and services supplied clearly supplement access fee payments but both the actual monetary value of these goods and their full economic value to Seychelles is not transparent.

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Table 7.5: Evolution of licence fees in Seychelles‐Japan Access arrangements, 1989‐2005

Vessel licensing fee in Japanese Yen (Annex 3, 3)

Theoretical fees by period in US$

Year

90 days Additional 30 days

6 months 1 year*

Goods and Services Supply

Pre‐1989

516,000 189,000 7,890 16,160 Supplements access fee payments but actual monetary value and full

economic value to Seychelles not transparent

1990 800,000 253,000 10,740 21,200 As above 1991 650,000 208,000 9,440 18,680 As above 1993 518,000 185,000 9,670 19,690 As above 1994 607,000 219,000 12,370 25,230 As above 1995 607,000 219,000 13,620 27,790 As above 1998 835,360 295,120 13,070 26,530 As above 1999 1,039,094 363,031 18,600 37,630 As above 2000 867,723 305,908 16,620 33,710 As above 2002 1,131,209 393,736 18,450 37,300 As above 2005 919,356 323,119 17,300 35,050 As above

* Note that this is a theoretical figure as vessels never extended licences in this manner. The objective is to demonstrate the changing value of total licences and related access payments over time based upon a standard measure (i.e. 6 and 12 month periods). Currency conversions done for each year using annual average Yen/US$ exchange rate, available at: http://www.oanda.com/convert/fxhistory Table 7.6: Licence Fees in Seychelles‐Japan 2007 Agreement*

Vessel licensing fee in US Dollars (Annex 1, 2.3)

Average payment per vessel Agreement Type

Year

1 year 6 months

Additional 30 days (only for 6 month licences)

Goods and Services Supply 1 year 6 months

New

2007 22,000 14,500 4,500 Not transparent

Not transparent

Not transparent

* There is also a fourth category of fee where in the event of circumstances beyond the parties’ control and where as a consequence the Agreement is extended for a period of 3 months or less, then US$4,500 is payable for each 30 day period.

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7.2.5 Gap analysis Table 7.7 provides a gap analysis of the current Seychelles‐Japan agreement. A more detailed analysis is provided by Appendix 7.B. The Japanese agreement is compared with other agreements by Appendix 7.A. Table 7.7: Gap‐analysis – Japan‐Seychelles Agreement 2007/2008

Issue/Theme Is the issue

covered? International Best Practice (IBP) Standards/Trends

Are there gaps in the current agreement?

Agreement type, zonal coverage, beneficiaries

Yes Detailed coverage No visible gaps – Seychelles practice is satisfactory

Agreement (months/years)

Multi‐annual for agreement – Trend towards a 2 year period

Best practice would appear for agreement length to be for 2 or 3 years with a clear revision clause – very few countries have revision clauses

Meets IBP. However, Seychelles needs to more precisely establish the most advantageous length for a fishing agreement: currently, EU agreement period too long and longline agreement periods too short.

Licences (months) Yes – covered currently in periods of 3‐12 months

The trend in the Pacific is towards the use of vessel days. This provides a much more accurate assessment of effort and the value of fishing rights to fishing fleets

Does not meet IBP ‐ major gap. Seychelles needs to more precisely establish the most advantageous way of granting fishing rights

Information on fleet aspects and vessel types

Yes – covered at a very basic level

Trend is for more detailed information to combat IUU activity and to, a lesser extent, better understand economic dynamics of vessels

Does not meet IBP. Information provided is not detailed enough to meet the requirements of FAO Capacity Reduction Plans of Action and currently would not meet EU IUU Regulation requirements.

Transhipment Yes – in agreement text

Pacific Island States are developing a much tighter regulatory framework over transhipments within the framework of WCPFC arrangements

Does not meet IBP . Significant gaps in agreement texts and also in enforcement/supervision at sea of transhipment requires a detailed case study of activity in EEZ and in adjacent areas


Yes – Joint Commission & arbitration clause

International best practice is to have a joint commission and access to arbitration

No visible gaps – meets IBP. However, in recent dispute between EU and Seychelles this formula appears not to have been followed with the dispute becoming politicised. Unclear whether in a similar Japan‐Seychelles situation the procedure in the agreement would be followed

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Issue/Theme Is the issue covered?

International Best Practice (IBP) Standards/Trends


Role of recommendations of international organisations – IOTC/FAO etc

Yes – fully recognised but not extensively used as reference point in agreements

IBP is to fully recognise recommendations and tailor their use to specific purposes in agreements on a case by case basis and also use recommendations as a reference point for new policy directions

No visible gaps – meets IBP in terms of text. Unclear whether these recommendations have much impact in practice

Biological recovery period No IBP is to have such periods in non‐tuna agreements. There is an argument for extending them to tuna agreements. The EU is the only country which currently accepts them in its agreements

Does not meet IBP. Their use by other countries and in agreements for other species needs to be investigated, especially applicability to the tuna context and impacts where other countries in the migration path of tuna do not use a recovery period. Having such a clause would be in accordance with Seychelles moving towards a more ecological approach in its agreements

Fishing zones Yes IBP requires their use No visible gaps – meets IBP Scientific observers Yes – covered by

agreements with reasonably detailed clauses

IBP is extensive and tends towards detailed regulations and more use of observers

Does not meet IBP. Significant gap in terms of Seychelles ability to deploy observers. EU IUU regulations may increase need for observers

By‐catch

Yes – covered by clauses

IBP would suggest more detailed clauses given the variety of by‐catch impacts

Does not meet IBP – significant gap. Much more detailed clauses needed and also enforcement


Yes – covered by environmental laws

IBP is for closer integration between fisheries, environment and biodiversity laws, institutions and enforcement activity

Does not meet IBP due to low enforcement capacity and activity

Use of Performance Bonds

No IBP is moving towards such bonds as providing an incentive for compliance and also reduce enforcement costs

Does not meet IBP – a major gap exists given the low level of actual surveillance capacity in the Seychelles. Study of this issue is required and examples from PNG and other countries should be studied


Yes – fully covered IBP is for detailed reporting on all activity No gap in agreements. But significant gap in enforcement practice and capacity

Port catch reports Yes – covered IBP is for detailed reporting when vessels come to port

Significant gap as LL fleets rarely use ports in Seychelles

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Issue/Theme Is the issue covered?

International Best Practice (IBP) Standards/Trends


VMS Yes – covered in detail

IBP is for detailed provisions and sophisticated analysis of information, especially in the Pacific

Significant gap in analysis and use of data to support negotiations. Training in all aspects of VMS required including analysis of data

Other aspects MCS and enforcement

Yes – probably adequate clauses

IBP is for detailed clauses, tight enforcement and high level of training for officials

Does not meet IBP – very large gap in enforcement capacity

Specific regime of control over large fishing fleet and auxiliary vessels etc

Yes – addressed in a piece‐meal way

IBP is for detailed clauses directed at fishing fleet as a whole not just individual vessels or support vessels – PNG has useful clauses in this regard

Does not meet IBP – significant gap exits. PNG for instance has clauses directly targeted at control of supply vessels


Yes – covered in agreement

IBP is for clear obligations and incentives to encourage port visits and privileges for locally‐based vessels

Does not meet IBP – significant gap. LL do not visit Seychelles and incentives to encourage visits are lacking. No power to compel local landings to support local food security or onshore development objectives

Local crew on‐board Yes – covered in agreement

IBP is for clear obligations and also employment to ILO standards

Unclear the extent to which a gap exists as Seychelles appears to have difficulty sourcing nationals to serve on board vessels




Significant gap – LL do not visit Seychelles and incentives to encourage visits are lacking.

Support for development of domestic fisheries and manpower including training levy

Yes – support provided through Goods and Services Agreement

IBP is for support to be provided. However there is no clear standard. Agreed that there must be coherence so that domestic sector is encouraged/ not distorted by support

Gap exists. A much closer evaluation of the use of Japanese aid and suitability is probably required and also complementarity between foreign and domestic fleets

Protection of domestic fishing areas

Yes – adequately covered

IBP requires clear demarcation of such areas and clear prohibition of foreign fleet activity

No visible gap

Development assistance – goods and materials, technical assistance and institutional support


IBP is for support to be decoupled from grants of access and to be geared towards supporting FAO Code of Conduct objectives

Whether a gap exists is unclear. A much closer evaluation of the use of Japanese aid and suitability is probably required and aid supplied would need to be directed to supporting improved net benefit objectives

Confidentiality issues Yes – but clause badly drafted

IBP is for confidentiality to protect legitimate commercial objectives only

Does not meet IBP. Clauses must be drafted to permit information to be used to support MCS – current clause is badly drafted

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7.2.6 Japanese access agreements strategy Japan is the world’s second largest importer of fish and fish products after the European Union Around 50 percent of all domestic consumption is imported with the main suppliers being fleets from Taiwan and Korea. Key product groups imported are: fresh/frozen fish and fresh/frozen crustaceans and molluscs. The rest of Japanese consumption is caught by Japanese vessels in Japan’s EEZ and under access agreements and joint ventures with countries from all over the world. Some of the catch under access agreements supplies processing chains in other countries. The emphasis however is on fish supply to meet domestic consumer needs. It is a fundamental principle of Japanese national policy that Japan should aim towards food self sufficiency as well as maintain a large food stockpile.94 Japan has an active programme of food diplomacy and a comprehensive intelligence gathering system to support securing access to food. Japan’s food diplomacy is part of a strategic commitment to ensure Japan has firm access to essential raw materials, particularly petroleum. The rationale is Japan’s poor natural resource base, its large population and highly developed industrial infrastructure. Food self‐sufficiency policy is not viewed as domestic self‐sufficiency. It includes a right of access to food resources around the world. It is argued by Japanese diplomats that this includes:

the right to access fish resources in foreign EEZs through access agreements;

the freedom to fish on the high seas without interference by other countries or environmental NGOs;

the freedom to import fish from anywhere in the world subject to Japanese quality and health standards;

the use of the strong Japanese yen to encourage exporters to direct exports to Japan.

Finally, the government manages a huge food stockpile backed by a crisis management system. The objective is to secure a stable supply of food to meet any emergency including interrupted imports. Access agreements are clearly part of a well formulated and fundamental national policy framework. In terms of access negotiations, the maintenance of a large food reserve provides Japan with considerable flexibility, strength and options as Japan can afford to walk away from any negotiation knowing it has a large food reserve under highly efficient management. The high level of imports into Japan also provides a strong back‐up position for both the Japanese associations and the government during negotiations. Failure to secure access to a particular set of waters can in principle be compensated for by importing more fish from elsewhere or that specific region. With respect to the Indian Ocean specifically, Japanese fishing fleets and the fisheries authorities have a detailed knowledge of Indian Ocean waters – this is another area of advantage. Implications for Seychelles

The Seychelles‐Japan agreement is a central part of the system for supplying Japanese markets as the Indian Ocean continues to be important to Japan and the Seychelles is in the middle of

94See The Basic Law on Food, Agriculture and Rural Areas http://www.maff.go.jp/soshiki/kambou/kikaku/NewBLaw/BasicLaw.html; Fred H. Sanderson, Japan's food prospects and policies (1978).

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the migration path for Indian Ocean tuna. However, this major strategic advantage for Seychelles is counter‐balanced by the large Japanese food stockpile and the Japanese ability to easily substitute lost catch opportunities in any specific EEZ, even critical EEZs, with imports or alternative access agreements. There is a significant information imbalance between Japan and the Seychelles when it comes to negotiations. Even so, Seychelles is in a position to counterbalance some of this advantage through effective use of information on Japanese vessel movements and strategies currently available through the VMS requirements set out in the latest access agreements. Subject to the limitations on sharing data with third parties set out in the Agreements it may well be possible for regional co‐operation with other Indian Ocean States to lessen the leverage that Japan has in its relations due to its long‐standing experience and knowledge of Indian Ocean resources and fish movement patterns etc. 7.2.7 Japanese Tuna Industry Associations and their relations with the Japanese

government and financial sector95 Fisheries cooperatives/industry associations are fundamental to the organisational structure of fisheries in Japan. They group together both large and small fishing firms as well as companies which import fish purely for trading purposes. The industry associations provide many services including assistance with licensing and securing fishing inputs, taking part in negotiations and securing both national and international political support for the Japanese fleet and its interests. There are three major tuna industry associations. All are important in access agreement negotiation and implementation. The three associations and their major activities are outlined below. Table 7.8: Key Tuna Associations/Co‐operative Organisations (mid‐2000s)96

Nikkatsu Japan Tuna Fisheries Cooperative Association

Nikkatsu has traditionally been the largest and most influential of the tuna industry associations. It represents mainly longliners fishing offshore and internationally. However, while in 1992, Nikkatsu represented more than 770 vessels, in 2006, the organisation represented only 270. This change has driven a 2006 restructuring of the organization of the functions and responsibilities of Nikkatsu. The restructuring created a liquidation company and a single cooperative with two main branches:

� administration: focusing on coordination with the government and banks � international division: to maintain international fishing grounds both on high seas

and within EEZs. In addition, Nikkatsu provides fuel, bait, gear and crew to vessels operating in the far seas and helps to maintain shipping agency contracts so that vessels can visit ports in other countries. It is also active in RFMO negotiations, particularly focusing on IUU fishing, reducing capacity and implementation of upper limitations on catches.

Kaimaki Japan Far Seas Purse Seine Fishing Association

Kaimaki has 23 members that represent 35 purse seine vessels. The association mainly supplies skipjack to the Katsuobushi market, but is also exporting product to the international market. Exports go mainly to Bangkok, but there is interest in reaching markets in the ‘West’ as well. The main services that Kaimaki provides include:

� facilitating license registration with Coastal States

95 Havice, 2007, 31; Barclay and Koh 2008 96 Campling, Havice and Ram‐Bidesi 2007; Havice, 2007

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� partaking in the multilateral and bilateral negotiations � facilitating access payments

Kinkatsu National Offshore Tuna Fisheries Association

Kinkatsu represents the smaller classes of longliners and pole and liners. In 2006, the association represented 420 vessels: 80 pole and line and 340 longliners. The main services Kinkatsu provides include:

� representing the fleet in access negotiations � facilitating local agents in distant water fishing areas � administrative assistance for regulatory work � administrative assistance for hiring foreign crews � facilitating domestic licensing scheme from the federal government

There is a very close relationship between the Government and the private sector in Japan. Different kinds of associations all relate closely to key government Ministries and organizations. The relationship is a two‐way one: Guidance and information/intelligence flows from the government agencies to the private sector, whilst the private sector provides intelligence/information on its operating environment and those of its global competitors. There is also very tight co‐ordination between Japanese fishing companies and official government negotiators before, during and after negotiations. Finance for fisheries ventures is available from many sources including:

Agriculture, Forestry and Fisheries Finance Corporation (Nôringyogyô Kinyû Kôko), Fisheries Resources Development Corporation (Suishigen Kaihatsu Kôdan)

Nôrinchûkin Bank (Nôrin Chûo Kinkô) with the assistance of MAFF provides financial services to agriculture forestry and fisheries employees and businesses

For high risk projects that the Nôrinchûkin Bank or other financial organizations cannot fund, low interest capital is provided by Agriculture, Forestry and Fisheries Finance Corporation. This organisation is in turn subsidised by the central government through the main MAFF budget, and through another arrangement called the Government Affiliated Agencies budget, as well as through the Fiscal Investment Loan Program (FILP). Implications for Seychelles

Japan’s industry associations have historically made maximum use of collective bargaining power. For example, if a coastal state refuses to negotiate with one, they will all pull out. This was demonstrated in relation to PNG in 1987, as longlining is reserved for locals only, Nikkatsu refused to negotiate a purse seine agreement and there was consequently no Japanese flagged vessels fishing in PNG’s EEZ for almost twenty years. In the context of the scramble for access in the WCPO in the mid‐2000s, Nikkatsu split from the other associations and recently negotiated a purse seine‐only access agreement. There are three implications for Seychelles here: 1) Seychelles has not had to face this problem because of the weakness of the Japanese purse seine fleet in the WIO; 2) but if Japanese purse seiners did wish to re‐enter the WIO fishery, it would use several means at its disposal to pressure Seychelles to allow it, but which, in turn, may be countered by sources of pressure from the EU (which has held a virtual monopoly over the fishery since it began); 3) however, the example of PNG shows just how sensitive strategic access to tuna resources has become, and thus may indicate a shift in relative power to coastal states. Given that Ministry of Foreign Affairs (MOFA) officials are usually present in access negotiations, industry associations are backed by the additional political‐economic weight of Japan. There thus appears to be little scope for Seychelles to play off government against the private sector due to the tight co‐ordination relationships between government and industry. It

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is likely that financing arrangements for fishing vessels may also limit the ability of individual companies to pay higher access fees. Such arrangements may influence the tipping point at which access fee payments become uneconomic. Current financial arrangements may fall into the category of WTO affected subsidies. A successful post‐Doha treaty may thus significantly affect the financing arrangements currently underpinning Japanese fleets active in the Indian Ocean. This is an issue worth keeping track of in coming years. It is unclear at this stage whether subsidy issues offer a threat or opportunity to the Seychelles. 7.2.8 Relations between Japan’s processing, retailing and catching sectors There is a degree of conflict between the interests of the processing sector which is always interested in the best quality but lowest priced fish throughout the year. Japan’s catching sector alone cannot meet the needs of processing and the retailing sector, hence the level of dependence on imports. However, conflicts are managed within the framework of the various organisations detailed above. There is virtually no open conflict of the type that is seen in the EU between the catching sector, the European Commission and the processing/importing sector. Implications for Seychelles

On the face of it, there appears to be limited scope for Seychelles to be able to play off competing interests against each other in negotiations. However this is an arena where GoS should pay close attention to developments in Japan as per the proposed FIIA unit and other sources of information. This is because the previously tightly knit relations between government and the private sector have been loosening significantly, albeit at a much slower pace in the fisheries sector than others.97 7.2.9 Japan’s cold chain system There is an extensive global cold chain system by which fish is sent frozen, fresh or chilled to Japan by sea or by air. Virtually all catch harvested under Japan’s access agreements returns to Japan by sea or air through this cold chain system. This cold chain system plays an important role in ensuring that Japan is able to valorize and eventually appropriate a significant portion of the rent available from its fishing sector. This sector requires further study as there is virtually no research on it.

Implications for Seychelles

Transhipment from harvesting vessels to fish carrier vessels are absolutely vital to the Japanese system and are a core part of the Japanese value chain. Much of the transhipment occurs on the High Seas immediately outside the Seychelles EEZ. Some of it may also occur in the Seychelles EEZ. Currently transhipment by longline fleets are permitted under IOTC rules. These rules may change. Developing an understanding of the geography, economics and other aspects of the Japanese global cold‐chain system, including fuel supply via supply and reefer vessels and

97 See generally, Barclay and Koh 2008

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transhipment arrangements in the areas close to and within the EEZ of Seychelles and in the Indian Ocean generally could prove useful for Seychelles in the following ways:

1) it would provide a basis for more accurately regulating transhipment

2) it would provide a basis for determining whether some form of control over the cold chain (to the extent that this is possible) could contribute to the objective of raising net benefits

Currently a sound understanding of the dynamics of the cold chain in areas adjacent to the Seychelles is lacking. This is a knowledge and policy gap which needs to be rapidly filled to improve leverage in negotiations and also to improve the enforcement provisions currently set out in the Japanese‐Seychelles access agreement. 7.2.10 The role of Japanese Official Development Assistance Government fisheries assistance is central to the Japanese fisheries access system and is implemented through bilateral Goods and Services Agreements or more general development assistance channels. It can provide virtually all that is necessary for small scale coastal fisheries development (fishing nets, small fishing boats, outboard motors, conventional freezing plants, ice‐making equipment, refrigerated trucks, etc.), fishery training vessels, and the construction of fishery training/research facilities (laboratories, aquaculture facilities, and fishing ports). To make the point explicit, Japan very rarely supports developing country development of fishing capacity that will directly compete with Japanese interests (e.g. tuna longlining). A principal organisation providing Japanese fisheries aid is the Overseas Fishery Cooperation Foundation (OFCF). Founded in 1973, its official purposes are:

to implement economic and technical cooperation which contributes for development and promotion of overseas fisheries as well as management of fish resources;

to secure overseas fishing grounds to contribute to the stable development of fisheries industry of Japan;

to ensure safety of operations of Japanese fishing vessels.

OFCF instruments supporting access activity by Japanese companies are:

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Table 7.9: OFCF Financial instruments

Modality Explanation Interest bearing loans

OFCF extends interest‐bearing loans to Japanese fishing companies and organisations to cover all or part of their costs in establishing fisheries joint ventures overseas

Low‐interest loans

OFCF extends low‐interest loans in Japanese yen or US dollars to Japanese fishing companies and organisations to cover the costs of overseas investment in equity holding, forming fixed tangible assets or establishing joint venture fishing companies.

Non‐interest loans

OFCF extends non‐interest bearing loans to Japanese fishing companies and organisations when they carry out technical cooperation projects that are classified as constituting:

� transfer of installations, equipment or materials to foreign governments

� contributions to the promotion of fisheries development research

� contributions to international management of living marine resources.

OFCF also conducts investment climate surveys for Japanese companies with presentations to explain investment surroundings in countries of interest held throughout all Japanese localities using the structures of the Fisheries Associations at local and regional level. OFCF also provides individual consultation sessions to companies and individual investors. OFCF also finances surveys and exploratory fishing operations in countries of interest. Credits or loans for fisheries purposes are only one category of economic development assistance within Japan's ODA programme general budget account. Although, like all ODA, fisheries credit is administered by the Ministry of Foreign Affairs (MOFA), the Fisheries Agency of Japan (FAJ) plays a key role in the allocation process. FAJ effectively controls both fisheries aid policy and grants, because of its role in developing fisheries projects and its veto power over applications for fishery grants‐in‐aid. To maximise controls the Japanese government, usually provides fisheries assistance on a bilateral, year‐by‐year basis, rather than on a long term or multilateral development basis. This allows the aid to be withdrawn should the particular country not satisfy Japanese objectives in some way. In addition, the government employs only Japanese consultants and contractors in administering aid projects. Japanese Government grant assistance (including fisheries aid) is implemented by the Japan International Cooperation Agency (JICA). JICA provides the technical expertise for feasibility studies and planning of all aid projects. FAJ is consulted and has veto power over all fisheries aid projects. This gives FAJ effective control over all fisheries aid. Implications for Seychelles

Aid is a key part of the Japanese access agreements framework. The issue however is whether it offers value for money. One approach would be to more precisely value the aid offered by Japan and compare it with other options. However, it is unlikely that the costs of doing this would match any benefits from demonstrating the relative lack of value of this

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assistance. It would be more useful for the Seychelles to receive the monetary value of the aid supplied and purchase needed goods from a variety of sources rather than, for example, relying on the procurement rules of the Japanese government. Current aid granted to Japan plays a significant role in the Seychelles’ fisheries development, especially in SFAs extension work. Dependence on such aid is a significant constraint on the bargaining power of the Seychelles. Since aid would be cut off if Japan opposes any attempt to introduce new access fee methods by the Seychelles (i.e. OFCF funding and technical assistance is only provided to countries which maintain access agreements with Japan). The dependence of Seychelles in this area needs to be clearly understood and fallback options prepared to hedge against the eventuality that assistance would be cut. JICA fisheries grants are fairly small, but have been used effectively in the past. Again dependence in this area constrains Seychelles bargaining power. 7.2.11 Flag of convenience (FOC), IUU and traceability issues Officially there are no FOC fishing vessels in Japan. This is because of the highly regulated and effective licensing system and the Japanese system of global fisheries patrols of Japanese distant‐water vessels, especially tuna vessels. The increasing profile of IUU issues is likely to have an impact on Japanese access agreement frameworks as product entering Japanese markets will likely soon have to be certified that they are non‐IUU products. However, currently beyond official opposition to IUU fishing, Japan has not yet established an IUU control system of the type recently announced by the EU. Japan’s highly regulated fisheries catch and marketing sector would however be able to effectively and rapidly implement any IUU certification system adopted by the Japanese government. It should be noted in this regard that in recent years, Japan has introduced country of origin labelling, a type of traceability. The main laws on country of origin labelling are:

Article 19 of the Law Concerning Standardization and Proper Labelling of Agricultural and Forestry Products (Law No. 175 1950);

Quality Labelling Standard for Processed Foods (Notification No. 513 of the Ministry of Agriculture, Forestry and Fisheries of March 31, 2000)

Implications for Seychelles

Japan is similar to the EU in its strong position against IUU fishing. Given the institutionalization of the EU’s IUU regulation from 1 January 2010, the Japanese DWF may be a solid non‐EU partner because it would not threaten the stability of the EU import market. In addition, Japanese vessels already (or can easily) gain EU SPS certification and thus are another potential source of supply for exports to the EU (and, of course, elsewhere). 7.2.12 Increasing net benefits – overall evaluation of the Seychelles‐Japan

relationship The most significant cost to Seychelles from this agreement is the fact that the Japanese fleet effectively operates completely externally to the Seychelles economy and its regulatory system. The absence of enforcement capacity means that Seychelles is not in a position to effectively

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monitor the activities of the Japanese fleet. Although VMS data is supplied, the overall VMS relationship between Japan and the Seychelles is passive. Information is received, noted and effectively archived. There is no evidence that is used proactively in securing enforcement or informing strategies of proactive control over the fleet. The links to the economy are also minimal due to the exemption from transshipping in port which currently applies to the Japanese and other longline fleets. The benefits to Seychelles come from the payment of an access fee and the supply of ‘goods and services’ under each agreement in turn. Due to the absence of data on the economic operations of these fleets, it is not possible to assess whether the returns that the Seychelles gets from this agreement are fair and reasonable. However, it is possible to assess the basic value of the catch relative to the licence payment (see Section 7.1.2 above for analysis of rate of return on gross value of the catch). In addition there are sometimes delays in SFA receiving catch and other data from Asian longliners. These delays should be penalized. A good way to do it would be to require a compliance bond from the foreign fleets (see Section 3.6 discussion of compliance bonds). Failure to supply the required information would lead to forfeiture of all or part of the bond. Table 7.10 below sets out our assessment of the applicability to the Seychelles‐Japan access relationship of the options for increasing access revenue detailed in Section 3. An implementation schedule for suggested policy changes, centred critically around the creation of the Fisheries Industrial Intelligence & Analysis (FIIA) unit at SFA for the purposes of this report are provided in Section 4.1 and 4.8.

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Table 7.10: Options for increasing net benefits from the Seychelles‐Japan Access framework Access fee type Explanation Applying this approach to the Seychelles‐Japan

relationship – opportunities and usefulness

Constraints in applying this approach to the Seychelles‐Japan relationship


Raising the licence fee based upon a perceived value change in the context of inflation and rising prices

This approach is immediately applicable. It does not however, capture a significant proportion of the profits made throughout the value chain

The key constraint is Seychelles bargaining power and ability to persuasively argue in the absence of compelling data and information

An improved rate of return (RoR) fee


This approach is immediately applicable. The trend is for South Pacific countries to seek a higher rate of return and for Taiwan to grant this higher rate of return

The key constraint is data and ability to make a compelling argument. South Pacific trend is towards a 6% RoR

Price indexed

fees

Indexing the Seychelles access fee to changes in global prices. This is an approach which also captures a part of the rent.

It can be added to a RoR approach as a top up

This approach is applicable after probably 36 months and is dependent on an effective FIIA. It would require further analytical work to be done. It is not as highly dependent on access to Japanese data as it can be based on global price data and other data available to Seychelles. Recent developments between FFA States and the US under the multilateral US tuna treaty also provide a model

Given the lack of understanding of the dynamics of the Japanese fleet and its lack of connection with the Seychelles, only a very basic price index to top up the basic fee appears prudent

Absence of a dedicated FIIA unit and current lack of understanding of the dynamics of the Japanese fleet as well as its lack of connection with the Seychelles

It is applicable in the future provided enforcement has been strengthened and is targeted towards selected hotspots

Hypothecated environmental levy + RoR fee

This is a two‐tier fee and would add a responsible fisheries/environmental component to the base RoR access fee charged by the Seychelles

This approach is applicable after probably 36 months and is dependent on an effective FIIA. It would require further analytical work to be done. It should probably be extended to Japan after initial trial in EU context

Absence of suitable methodology and FIIA non‐existence

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7.3 The Seychelles‐Taiwan Access Agreements Relationship 7.3.1 Evolution and types of fisheries agreements between Seychelles and Taiwan Taiwan and Seychelles currently have an agreement entered into in 2008 for a 1 year period. Previously there had been agreements on a two‐yearly basis from 1997. Appendix 7.C traces the evolution of these agreements in detail. Unlike the Japanese framework there is no provision for Taiwan to supply goods and services to Seychelles. Given Seychelles recognition of the One China Policy it is highly unlikely that development assistance will be given to Seychelles by Taiwan in the years ahead. 7.3.2 The Seychelles‐Taiwan Fisheries Access Agreement of 2007‐2008 The latest agreement between Seychelles and Taiwan came into force in 2008. Its principal features are summarized below. Table 7.11: Main characteristics of Seychelles‐Taiwan Agreement 2008

Length of Agreement Parties Republic of Seychelles; Taiwan Deep Sea Tuna Boatowners and Exporters

Association (TDSTBA) Date of Entry into Force o

The agreement shall commence on the date of the signature and unless determined, continue for a period of 12 months; within six months of the end of this period the parties may extend the agreement for any further agreed period (Article 8)

Length of agreement 1 year

Financial compensation Total Compensation US$17,500 for 6 months, US$24,000 for 12 months, US$5,500 for each additional

30 days (also in case of events beyond the control of parties and where the agreement is extended to 3 or less months) (Annex 1, 2.3)


None

Fishing opportunities and rights Maximum Number of vessels

120 surface longliners (Article 3, Annex 1, 1)

License Fees Duration of license 1 year or 6 months; 30 day extension period License Fee As above

Other Elements Joint Committee & Dispute settlement

Requirement for Joint Committee, functions include monitoring the performance, interpretation, etc. of the Agreement, providing liaison, reassessing level of fishing opportunities and other functions (Article 6.1); Joint Committee also a forum for resolving disputes re: Agreement; if no consensus is reached, then arbitration (Article 6.2)

MCS Vessels to be equipped with a VMS transmitter, either an Immarsat‐C or ARGoS transmitter; vessels shall be monitored without discrimination (Annex 1, 11);

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Admin fee of US$500 is to be paid to SFA for each licence issued for six months or one year

Observers Provisions on observers (Annex 1, 6). Payments to be made by Association to SFA toward observer program – US$2,000 per vessel licensed until association agrees to have an observer on board its vessel (Annex 7)

Seamen Association shall pay US$1,000 per vessel licensed for 1 year or 6 months to SFA; this will go towards training Seychelles seamen; this will be paid until such a time that the Assoc. agrees to take Seychelles seamen on board vessels Annex 7

Trans‐shipments / Landings

Fish shall be landed or transhipped in Port Victoria unless otherwise authorised by SFA; all other transhipment shall be prohibited in the EEZ and penalties will apply; There is no requirement for parties to agree on a schedule; vessel masters shall allow and facilitate inspection of operations by SFA (Annex 1, 3); Vessel owners shall make their by‐catches available to Seychelles at a negotiated local market price (Annex 1, 3 & Annex 3)


Seychelles may take immediate steps to enforce measures re: management and conservation of living resources, based on scientific evidence and/or IOTC measures (Article 5.4); Vessels shall comply with measures and recommendations adopted by IOTC re: fishing gear and technical specifications and all other technical measures re: fishing

Confidentiality clause Parties cannot divulge the content of this Agreement to a third party without permission (Article 12)

7.3.3 Seychelles‐Taiwan fisheries agreements: licence fee changes, 1997‐2008 Table 7.12 shows access fee trends over the last 12 years. Importantly, there were significant increases in the latest agreement (2008). However, when one compares the possible maximum fee paid in 1997‐99 it is clear that the 2008 arrangements do not necessarily represent an improvement in GoS rent capture, at least in theoretical terms. In other words, in this scenario access payments have not even increased with inflation over this 10‐year period! While SFA’s strategy is to incentivize longline fleets to take‐up 12 month licences so as to maximize MCS coverage, the outcome has been to provide a significant discount. An obvious alternative is to simply ban all licences at less than 12 months and set a firm precedent, while this would represent a loss of revenue, it would:

1) probably only be in the short term;

2) allow collection of much improved MCS data (i.e. through VMS when close to the Seychelles EEZ)

3) ensure that Seychelles develops more medium‐term relations with fleets and discourages opportunistic fishing (i.e. those using one‐month licences), which means that these fleets will have an incentive for better cooperation with GoS over resource sustainability.

The consultants recommend that Seychelles should aim to develop a longer more complete relationship with the Taiwanese fishing association to ensure more continuity in reporting, marine resource management and scientific collaboration.

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Table 7.12: Seychelles‐Taiwan access fee trends

Vessel licensing fee (per vessel in US$) Total payment per active vessel

Agreement

Type of vessel

1 month 6 months 1 year

Additional 30 days

Other fees (per vessel in US$)

for 6 months (in US$)

Total payment per active vessel

for 12 months (in US$)

Vessel of GRT of 499 or less

5,000 N/A N/A 2,500 12,505 (1 month + 150 additional

days)∗

32,500 (1 month + 330 additional

days)*

1997‐1999

Vessel of GRT of 500 or more

6,000 N/A N/A 3,000

None


days)*


days)* Vessel of GRT of 499 or less

5,000 10, 000 N/A 2,500 10,000

25,000 (6 months + 180 additional

days)*

2000‐2002


6,000 12, 000 N/A 3,000

None

12, 000 30,000 (6 months + 180 additional

days)* Vessel of GRT of 499 or less

5,000 10,500 12,500 3,000 11,000 13,000 2003‐2005


6,000 12,500 14,500 3,500

Admin fee payable to SFA – 500 for licenses of 6 months or 1 year.

13,000 15,000

2008 None 17,500 24,000 5,500 (also in case of events beyond the control of parties and where the

Agreement is extended to 3 or less months)

Admin fee payable to SFA – 500 for licenses of 6 months or 1 year. As per Annex 7: Memo of Understanding Observer programme: US$2,000 per vessel licensed till TDSTBA agrees to take Seychelles observers on board of its vessels. Seychelles seamen training: US$1,000 per vessel licensed till TDSTBA agrees to take Seychelles seamen on board of its vessels

21,000 27,500

∗ Note that these are theoretical estimates for comparative purposes only. It is unlikely that vessels would obtain licences in this way.

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7.3.4 Gap analysis Table 7.13: Gap‐analysis Seychelles‐Taiwan Agreement 2007‐2008

Issue/Theme Is the issue covered? International Best Practice (IBP) Standards/Trends Are there gaps in the current agreement? Agreement type, zonal coverage, beneficiaries

Yes Detailed coverage No visible gaps – Seychelles practice is satisfactory

Agreement (months) Multi‐annual for agreement – Trend towards a 2 year period

Best practice would appear for agreement length to be for 2 or 3 years with a clear revision clause – very few countries have this

Generally, two year period meets IBP. EU agreement period too long and Japanese agreement periods too short. Current agreement is however for one year only.

Licences (months) Yes – covered currently in periods of 3‐12 months


Does not meet IBP – major gap. Seychelles needs to more precisely establish the most advantageous way of granting fishing rights


Yes – covered at a very basic level

Trend is for more detailed information to combat IUU activity and to, a lesser extent, better understand economic dynamics of vessels (capital and operating costs per tonne or per effective fishing day)

Does not meet IBP information provided is not detailed enough to meet the requirements of FAO Capacity Reduction Plans of Action and currently would not meet EU IUU Regulation requirements

Transhipment Yes – in agreement text

Pacific Island States are developing a much tighter regulatory framework over transhipments within the framework of WCPFC arrangements

Does not meet IBP – significant gaps in agreement texts and also in enforcement/supervision at sea of transhipment requires a detailed case study of activity in EEZ and in adjacent areas


Yes – Joint Commission & arbitration clause

International best practice is to have a joint commission and access to arbitration

No visible gaps – meets IBP . However in recent dispute between EU an d Seychelles this formula appears not to have been followed with the dispute becoming politicised. Unclear whether in a similar Japan‐Seychelles situation the agreed procedure would be followed

Role of recommendations international organisations IOTC/FAO etc

Yes – fully recognised but not extensively used as reference point in agreements

IBP is to fully recognise recommendations and tailor their use to specific purposes in agreements on a case by case basis and also use recommendations as a reference point for new policy directions

No visible gaps ‐ meets IBP in terms of text. Unclear whether these recommendations have much impact in practice

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Issue/Theme Is the issue covered? International Best Practice (IBP) Standards/Trends Are there gaps in the current agreement? Biological recovery period

No IBP is to have such periods in non‐tuna agreements. There is an argument for extending them to tuna agreements. The EU is the only country which currently accepts them in its agreements

Does not meet IBP – their use by other countries and in other agreements needs to be investigated as also applicability to the tuna context & impacts where other countries in the migration path of tuna do not use a recovery period. Having such a clause would be in accordance with Seychelles moving towards a more ecological approach in its agreements

Fishing zones Yes IBP requires their use No visible gaps – meets IBP Scientific observers Yes – covered by

agreements with reasonably detailed clauses

IBP is extensive and tends towards detailed regulations and more use of observers

Does not meet IBP – significant gap in terms of Seychelles ability to deploy observers. Seychelles appears to be able to tailor current observer requirements in agreements. EU IUU regulations may increase need for observers

By‐catch

Yes – covered by clauses

IBP would suggest more detailed clauses given the variety of by‐catch impacts

Does not meet IBP – significant gap. Much more detailed clauses needed and also enforcement


Yes – covered by Seychelles environmental laws, which are adequate in terms of text but not well enforced

IBP is for closer integration between fisheries, environment and biodiversity laws, institutions and enforcement activity

Does not meet IBP due to low enforcement capacity and activity

Use of Performance Bonds

No IBP is moving towards such bonds as provide an incentive for compliance and also reduce enforcement costs

Does not meet IBP – a major gap exists given the low level of actual surveillance capacity in the Seychelles. Study of this issue is required and examples from PNG and other countries should be studied


Yes – fully covered IBP is for detailed reporting on all activity No gap in agreements. Significant gap in enforcement practice and capacity

Port catch reports Yes ‐ covered IBP is for detailed reporting when vessels come to port

Significant gap as LL fleets do not significantly use ports in Seychelles

VMS Yes – covered in detail

IBP is for detailed provisions and sophisticated analysis of information, especially in the Pacific

Significant gap in analysis and use of data to support negotiations. Training in all aspects of VMS required including analysis of data

Other aspects MCS and enforcement

Yes – probably adequate clauses

IBP is for detailed clauses, tight enforcement and high level of training for officials

Yes – very large gap in enforcement capacity

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Issue/Theme Is the issue covered? International Best Practice (IBP) Standards/Trends Are there gaps in the current agreement? Specific regime of control over large fishing fleet and auxiliary vessels etc

Yes – addressed in a piece‐meal way

IBP is for detailed clauses directed at fishing fleet as a whole not just individual vessels or support vessels – PNG has useful clauses in this regard

Does not meet IBP – a significant gap exits. PNG for instance has clauses directly targeted at control of these fleets




Does not meet IBP – significant gap. LL do not visit Seychelles and incentives to encourage visits are lacking. No power to compel local landings to support local food security objectives

Local crew on‐board Yes – covered in agreement

IBP is for clear obligations and also employment to ILO standards

Unclear the extent to which a gap exists as Seychelles appears to have difficulty sourcing nationals to serve on board vessels




Significant gap – LL do not visit Seychelles and incentives to encourage visits are lacking.

Support for development of domestic fisheries and manpower including training levy

Not applicable IBP is for support to be provided. However there is no clear standard. Agreed that there must be coherence so that domestic sector is encouraged not distorted by support

Not applicable



No visible gap

Development assistance – goods and materials, technical assistance and institutional support

Not applicable IBP is for support to be decoupled from grants of access and to be geared towards supporting FAO Code of Conduct objectives

Not applicable

Confidentiality issues Yes – but clause badly drafted

IBP is for confidentiality to protect legitimate commercial objectives only

Does not meet IBP – clauses must be drafted to permit information to be used to support MCS – current clause is badly drafted

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7.3.5 Taiwanese access agreements strategy Taiwan currently participates in international fisheries relations with its own special status – that of ‘fishing entity’ rather than as a State.98 Its access agreements are an important part of the foreign policy of Taiwan. In addition to demonstrating Taiwan’s premier role in the global fisheries economy, they are important in international relations terms as they provide a way of demonstrating Taiwan’s international profile in its ongoing competition for international recognition with China. In domestic terms, distant‐water fisheries are a way of taking pressure off overexploited Taiwanese resources by deploying excess capacity overseas. In 2007 Taiwan had access agreements with 28 countries, including Seychelles.99 Compared to Japan, where fish caught overseas primarily supplies the domestic market, Taiwan plays much more of an intermediary role in the global fisheries economy harvesting fish and supplying it to markets other than its own. Taiwanese trading companies are major suppliers of tuna to canneries in Thailand, American Samoa and other canneries of global importance (i.e. FCF and Tri Marine, the latter is 50 percent owned by Taiwanese citizens), whilst sashimi‐destined tuna goes principally to Japan. China itself is a large and increasing market for Taiwanese products. The proposed fisheries intelligence unit will be able to establish much more precisely what Taiwanese global chains actually are. This is important because differences between Japan and Taiwan logically means that Seychelles can adopt different negotiating strategies as their strengths and vulnerabilities would objectively be different. At the moment very little is known about Taiwanese global value chains and how countries like Seychelles fit into these networks.100 7.3.6 Taiwanese companies and fishing fleets Companies engaged in distant‐water fishing are organized through four industry associations

Kaohsiung Fishing Boats Commercial Guild (KFBCG)

Keelung Fishing Boats Commercial Guild (KEFBCG)

Taiwan Deep Sea Squid Boat‐owners & Exporters Association

Taiwan Deep Sea Tuna Boat‐owners & Exporters Association

The Taiwan Deep Sea Tuna Boat Owners and Exporters Association is of the most importance to the Seychelles. Its membership is confined to those companies registered in Taiwan and which catch tunas, billfish and sharks in distant waters for export. This group currently has 569 members controlling 629 vessels, including purse seiners. There is significant diversity of ownership ranging from large conglomerates through to individually owned vessels.101 In

98 See Hu 2006. 99 Republic of Argentina; Marshall Islands; Brazil; Mauritius; Ascension (U.K.); Mozambique; British Indian Ocean Territory; Nauru; Myanmar; Oman; Falkland Islands; Palau; Federated States of Micronesia; Papua New Guinea; Fiji; Russia; India; Seychelles; Indonesia; Solomon Islands; Kenya; Somalia; Kiribati; Tanzania; Madagascar; Vanuatu; Maldives; Peru. 100 See Campling, Havice and Ram‐Bidesi 2007 for the best (known) information on these issues. 101 Havice and Campling forthcoming.

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theory, distant‐water fishing is currently tightly regulated (see next section), which is a significant departure from previous approaches to Taiwanese long‐distance fishing activity by the Taiwan government. 7.3.7 Regulation of the Taiwanese distant water fleet102 Following significant international pressure brought to bear on Taiwan by NGOs and also Japan,103 Taiwan has now established an extensive set of rules regulating distant‐water fishing activity. Controlled under Articles 36‐40 of the Taiwan Fisheries Act 2002 and also by other regulations, distant‐water fishing is, on the face of it, now highly regulated. The key regulations are:

Regulations for External Fisheries Cooperation

Regulations on the Management of Fishing Vessels and Crew in Foreign Fishing Bases

Regulations for Fishing and Vessel Building Permit and Fishery License Issue

‘The Management Regulations for Fishing Boats and Fishermen to Operate in Overseas Fishing Bases’

It is however difficult to determine whether in fact these rules are strictly applied. 7.3.8 The overseas fisheries support bases system A unique feature of the Taiwanese access agreements system is the so‐called overseas support bases network.104 In 2003, 71 ports were used by Taiwanese fleets as overseas fishing bases recognized by Taiwan. The countries in which these bases are located are given priority in Taiwanese foreign policy. Use of these bases by Taiwanese vessels is governed by ‘The Management Regulations for Fishing Boats and Fishermen to Operate in Overseas Fishing Bases’. Overseas bases are used for transhipment, re‐provisioning, crew exchange, rest and recreation for crew and boat maintenance. This network of bases has been central to Taiwanese success in the global fisheries system. It is also the Taiwanese government’s policy to appoint Taiwanese companies or individuals to act as agents for the government in these overseas base ports. Such companies and individuals in overseas bases provide market intelligence on operating conditions in the country and adjacent region. There are fisheries sector specialists in all overseas bases or ports. The Taiwanese offshore bases system is central to Taiwan’s ability to ship sashimi grade tuna to Japan daily from around the world.

102 Gullett 2004. 103 For a brief history of Japanese efforts, see Takase, 2004 104 Overseas Fisheries Development Council (Taiwan) http://www.ofdc.org.tw/englishversion/eINDEX.htm

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7.3.9 End‐markets for Taiwanese catch105 Japan is the principal market for Taiwanese‐caught fish. Other important markets for Taiwan are: the US, Thailand, Hong Kong and Singapore. Japan is the only significant market for Taiwanese‐caught sashimi tuna. Using ultra‐low temperature (ULT) vessels, Taiwanese fleets are the principal suppliers of ‐60°C frozen tuna (principally yellowfin and big‐eye) to Japan. Korea is a close second. Taiwan supplies at least 30% of the Japanese sashimi tuna market, whilst Japan takes close to 99% of Taiwanese high quality tuna catch. The Taiwanese fleet is thus highly dependent on the Japanese market. Taiwanese tuna fleets are also significantly affected by price movements on the Japanese market. There is currently a quota system, coordinated by the Organization for the Promotion of Responsible Tuna Fisheries (OPRT), to manage the quantity of Taiwanese products entering Japanese markets – the tight controls under this system also allow Japan to contribute to regulation of IUU activity by Taiwanese vessels.106 Even so, is still alleged to be a significant level of IUU product entering Japanese markets from Taiwanese vessels (see below). The highly valuable southern bluefin tuna (SBT) fishery is also targeted by longliners in the Indian Ocean which move south after completing fishing for albacore.107 Lower quality tuna catch is sent to canneries in Thailand, American Samoa and elsewhere. The domestic market consumes squid, mackerel and shark with tuna consumption increasing. 7.3.10 Crewing arrangements The ability to source low‐cost crew from China appears to be a significant competitive advantage for Taiwanese fleets and may well constitute a source of profitability compared to Japanese and Korean fleets.108 Crew from China are officially employed through the Fishery Labour Co‐operation Co‐ordination Committee for the Two Sides of the Straits. Other crew on Taiwanese vessels come from all over Asia, including Indonesia, Bangladesh and the Philippines. 7.3.11 IUU Issues and global regulatory patrols Taiwan has started building up capacity to undertake global supervision of vessels flying its flag as well as vessels owned by members of Taiwanese industry associations but flagged to other States. There is thus reportedly a global VMS reporting system under which Taiwanese longline tuna vessels as well reefer vessels around the world report to the Overseas Fisheries Development Council, as often as four times a day.109 Information on the operations of the Taiwanese patrol system is currently not available in languages other than Chinese. Although as

105 This section (including the comments on the Japanese quota system for controlling imports from Taiwanese and Korean fleets) relies on Wu 2007; Haward and Bergin 2004. 106 Takase 2004 107 Haward and Bergin 2004. 108 For background, see Council of Agriculture (Case No. 0880702838); See generally, Xinhua News Agency, 2006; AFP/Taipei Times 2002 109 See Section titled, Vessel Monitoring System OFDC (Taiwan) Website http://www.ofdc.org.tw/englishversion/eINDEX.htm

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shown above, significant efforts appear to have been made by the Taiwanese authorities to establish a regime of control over vessels flying the Taiwanese flag, a significant number of Taiwanese vessels are reported to be still engaged in IUU activity. A recent authoritative 2005 report110 confirms both the use of FOC vessels and also a high degree of contribution to IUU fishing by Taiwanese fleets. Unless there are significant improvements in regulation of Taiwanese associated vessels, in the medium‐term Taiwanese fleets and countries which have access agreements with Taiwan can expect to come under increasing pressure on this issue, particularly from the EU. The question of the conditions of work of crew on Taiwanese vessels is also an area where restrictions may be placed by the EU and other like‐minded countries. 7.3.12 Overall implications for Seychelles Dealing with Taiwan offers quite different challenges from dealing with Japan. Fisheries issues are not as central to high diplomacy. However, Taiwanese firms are also not as tightly controlled as Japanese firms are. Additionally, the One China policy complicates matters for Taiwan. At this stage, Seychelles should merely seek to increase the access fee whilst progressively gathering information about the Taiwanese fleets and seeking to better understand the operations of the Taiwanese in the Indian Ocean. Once a fisheries intelligence unit is established and therefore Seychelles can more closely monitor Taiwanese activity, efforts should be made to assess whether it is possible to enter into second generation agreements with Taiwan. 7.3.13 Increasing net benefits – overall evaluation of the Seychelles‐Taiwan

relationship Table 7.14 below sets out our assessment of the applicability to the Seychelles‐Taiwan access relationship of our range of options for increasing access revenue. An implementation schedule for suggested policy changes, centred critically around the creation of FIIA unit for the purposes of this report are provided in Section 4.X on capacity development at SFA. Costs and Benefits to Seychelles

The most significant cost to Seychelles from this agreement is the fact that the Taiwanese fleet effectively operates completely externally to the Seychelles economy and the regulatory system of Taiwan. All the comments made about the relationship with Japan apply. However given the extensive evidence that Taiwanese vessels have in the past engaged in IUU activity and that this activity probably continues, the costs to Seychelles from the Taiwan agreement are likely to be much higher than the costs from the Japan agreement. Vessels legally permitted to fish in Seychelles waters and IUU vessels may well be closely linked and operating with effective synergy. For example, in laundering of fish via at sea transhipment: It is hoped that the IOTC observer programme on longline reefers will, in part, mitigate this practice, although the

110 See Gianni and Simpson 2005.

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capacity of this IOTC programme to counter stop longline‐to‐longline vessel transshipment at sea (a major assumed method in laundering of IUU‐caught fish) is at question.

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Table 7.14: Options for increasing net benefits from the Seychelles‐Taiwan access framework

Access fee type Explanation Applying this approach to the Seychelles‐Taiwan relationship – opportunities and usefulness

Constraints in applying this approach to the Seychelles‐Taiwan relationship


Raising the licence fee based upon a perceived value change in the context of inflation and rising prices

This approach is immediately applicable. It does not however, capture a significant proportion of the profits made throughout the value chain

The key constraint is Seychelles bargaining power and ability to persuasively argue in the absence of compelling data and information

An improved rate of return (RoR) fee


This approach is immediately applicable. The trend is for South Pacific countries to seek a higher rate of return and for Taiwan to grant this higher rate of return

The key constraint is data and ability to make a compelling argument. South Pacific trend is towards a baseline fee with a 5 or 6% RoR top‐up, or, far rarer, a straight 5 or 6% RoR fee.

Price indexed

fees

Indexing the Seychelles access fee to changes in global prices. This is an approach which also captures a part of the rent.

It can be added to a RoR approach as a top up

This approach is applicable after probably 36 months and is dependent on an effective FIIA. . It would require further analytical work to be done. It is not as highly dependent on access to Taiwanese data as it can be based on global price data and other data available to Seychelles. Recent developments between FFA States and the US under the multilateral US tuna treaty also provide a model. Given the lack of understanding of the dynamics of the Taiwan fleet, only a very basic price index to top up the basic fee appears applicable

Absence of a dedicated FIIA unit and current lack of understanding of the dynamics of the Taiwan fleet as well as its lack of connection with the Seychelles

Hypothecated environmental levy + RoR fee

This is a two‐tier fee and would add a responsible fisheries/environmental component to the base RoR access fee charged by the Seychelles

This approach is applicable after probably 36 months and is dependent on an effective FIIA. It would require further analytical work to be done. It should probably be extended to Taiwan after initial trial in EU context

Absence of suitable methodology and FIIA non‐existence

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7.4 The Seychelles‐China Fisheries Access Agreement relationship The latest agreement between Seychelles and China came into force in 2006. It is currently no longer in force. Its principal features are summarized below. A gap analysis is provided by Table 7.16. Table 7.15: Main Characteristics of the Seychelles‐China Agreement

Duration and entry into force Date of Entry into Force

2006

Length of agreement

1 year

Financial Compensation Total Compensation Vessels of 499 tonnes or less:

� Option 1: US$5,000 per month and an additional US$3,000 for each additional 30 days within the licence period starting from 1 June of each year to 31 May the following year

� Option 2: US$10,500 for a consecutive licence period of six months � Option 3: US$12,500 per annum Vessels of 500 tonnes or more: � Option 1: US$6,000 per month and an additional US$3,500 for each additional 30 days

within the licence period starting from 1 June of each year to 31 May the following year � Opt ion 2: US$12,5000 for a consecutive licence period of six months � Option 3: US$14,500 per annum


None specified

Fishing Opportunities and rights granted Maximum Number of vessels

Number of fisheries opportunities granted under this agreement: 35 longliners (Article 3)

License Fees Duration of license 1 year or lesser period of up to six months License Fee As above Additional Fees Fees for VMS

Other Elements Joint Committee No

MCS elements � Vessel shall every Tuesday and Friday report to SFA by radio or telex position and particulars of efforts and catch as per Appendix 1 form (Annex 1, 4).

� Vessels to complete a catch report regardless of whether fish were caught or whether the catches occurred in EEZ; the Association shall ensure the reports are forwarded to SFA on arrival at Port Victoria or after the vessels finish their operations in EEZ (Annex 1, 5).

� Vessels to be monitored without discrimination by VMS, with attendant charges borne by the Company; admin fee of US$500 to be paid to SFA for each licence of six months or one year (Annex 1, 6)

Observers No Seamen No Fishing Zone Closely defined

Transhipments / Landings

No operative framework as suspended by an MOU under the Agreement

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Table 7.16: Gap‐analysis – Seychelles‐China Agreement 2006

Issue/Theme Is the issue covered? International Best Practice (IBP) Standards/Trends Are there gaps in the current agreement? Agreement type, zonal coverage, beneficiaries

Yes Detailed coverage No visible gaps – practice is satisfactory

Agreement (months/years)

One year agreement Best practice would appear for agreement length to be for 2 or 3 years with a clear revision clause – very few countries have this

Does not meet IBP – a period of 1 year is too short

Licences (months) Variety of licences envisaged under agreement. Reflecting diversity of vessel types – would be difficult to administer


Variety of options reflecting diversity of Chinese tuna fleet but in reality would be difficult to administer


Yes – basic clause but the diverse forms of the Chinese fleet also poses a particular problem

Trend is for more detailed information to combat IUU activity

Does not meet IBP. Information required is not detailed enough to meet the requirements of FAO Capacity Reduction Plans of Action and currently would not meet EU IUU Regulation requirements

Transshipment Original clause suspended by an MOU under the agreement

Pacific Island States are developing a much tighter regulatory framework over transhipment within the framework of WCPFC arrangements

Significant gap as transhipment framework suspended by a Memorandum to the Agreement.


No joint committee International best practice is to have a joint commission and access to arbitration

Major gap as there is no joint committee

Role of recommendations of international organisations – IOTC/FAO etc

Not covered IBP is to fully recognise recommendations and tailor their use to specific purposes in agreements on a case by case basis and also use recommendations as a reference point for new policy directions

Major gap here as no reference to IOTC or other organizations

Biological recovery period

No IBP is to have such periods in non‐tuna agreements. There is an argument for extending them to tuna agreements. The EU is the only country which currently accepts them in its agreements

Does not meet IBP

Fishing zones Yes IBP requires their use No visible gaps – meets IBP Scientific observers Nil IBP is for detailed clauses Major gap By‐catch Vessel owners at the request of

Seychelles shall sell on agreed conditions such amount of their by‐catch as Seychelles may request (Annex 1, 2). But Memorandum of Understanding dated 12 May 2006 suspends this, thus no requirement

IBP requires detailed clauses Major gap

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Issue/Theme Is the issue covered? International Best Practice (IBP) Standards/Trends Are there gaps in the current agreement? Bio‐diversity and ecological protection

No IBP is for closer integration between fisheries, environment and biodiversity laws, institutions and enforcement activity

Major gaps exist


Detailed clause IBP is for detailed clauses Meets IBP

Catch reports Too much discretion to Chinese partner

IBP is for detailed clauses supported by bonds or guarantees

Major gap

VMS Clause falls short of provision in Taiwan and Japan agreements

IBP is to have detailed clauses A major gap

Other aspects MCS No detailed clauses IBP is for detailed clauses, tight enforcement and high level of training for officials

Yes – very large gap in enforcement capacity

Port visits and Local landings

Fish caught to be landed in Port Victoria unless otherwise authorized by SFA

IBP is for detailed reporting when vessels come to port Significant gap as LL fleets do not significantly use ports in Seychelles

Local crew on‐board Nil IBP is for detailed clauses Significant gap Use of local services Vessels shall endeavour to get all their

supplies, fuel, etc. in Seychelles IBP is for detailed clauses Significant gap as LL fleets do not significantly use

ports in Seychelles Use of Performance Bonds

Nil IBP is moving towards such bonds as provide an incentive for compliance and also reduce enforcement costs

Does not meet IBP

Support for promotion of domestic fisheries

Nil IBP is for detailed clauses Major gap


Adequate IBP is for detailed clauses Major gap

Awards for training and studies


Participation in international meetings


Scientific and technical support


Studies and technical assistance


Confidentiality issues Nil IBP is for detailed clauses Major gap

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7.5 The East Asian Longline Fleet – Overall Conclusions and Recommendations Each of the East Asian agreements has been analyzed separately in terms of international best practice aspects.111 The fact that Seychelles is in a particularly weak position with respect to the East Asian longline fleet as their activities are supported by an exemption to the IOTC ban on transhipment at sea for longliners has also been noted. Until this strategic weakness is removed, there appears to be limited opportunity for effectively exercising control over these fleets and applying sophisticated rent extraction procedues to them. Apart from removal of the IOTC exemption, some other trends might indicate an improved position for Seychelles. An example would be a change in the dynamics of other ports (e.g. a tightening of conditions in Port Louis because of the EU IUU regulation) such that Port Victoria looks more attractive. In the final analysis, the consultants have made extremely limited recommendations because in this area Seychelles faces very strong constraints and its room for action appears to be very limited. 7.5.1 Financial recommendations – general observations The consultants are of the view that the following methods/options can be applied by the Seychelles to increase financial and economic net benefits. However, most of them are medium term and require considerable analytical work. It would also be wise to trial them in the EU context first before seeking to extend them to the East Asian fleet given its current extremely weak linkages with the Seychelles economy. 7.5.2 Financial aspects – specific recommendations for immediate action Based upon our analysis of the access strategies of the two main countries and also on, the current economic downturn (including recession in Japan and to a lesser degree in Taiwan) and the Seychelles context, the consultants recommend the following:

That Seychelles request an improved rate of return (RoR) fee based on annual average 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fees using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations). This should be a non‐discriminatory fee (i.e. apply across the board to all longline licences)

Japan – simplification of the G&S Agreement so as to provide GoS with greater flexibility for SFA to utilize financing (i.e. the effective ‘decoupling’ of this financing). Given that GoS should be applying an across the board fee, Japan may object arguing that it pays a top‐up through the G&S Agreement. The consultants believe that the best approach would be to charge higher flat‐rate licence fees as this would reduce negotiation space for Japan interests and GoS would simply be able to apply the fee that it deems reasonable. If the G&A

111 Appendix 7.A. provides a comprehensive comparative overview of the relationship between Seychelles and the fleets variously of Japan, Taiwan and China. Appendix 7.B. provides more detail on Japan‐Seychelles agreements, Appendix 7.C. on Taiwan‐Seychelles and Appendix 7.D. on China‐Seychelles.

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Agreement is subsequently dropped by Japan GoS should allocate equivalent financing to SFA to replace necessary inflows.

Introduction of a flat fee rather than the current gradations – i.e. fees in lieu of observers; Seychellois seamen on vessels etc., G&S Agreements, or decoupled aid payments – including OFCF

7.5.3 Negotiation of future access agreement with Japan and Taiwan – after 36 months from now approximately

Hypothecated environmental levy to be applied after analytical work on this issue completed by the proposed FIIA unit.

Seychelles introduce a baseline licence fee plus an annually calibrated 6% RoR top‐up fee. The top‐up fee kicks in if the percentage rate of return on gross value of catch exceeds the up‐front payment – this is a simple price index approach.

If and when IOTC exemption for longline transhipment at sea is lifted, GoS could limit all licences to ‘locally based’ vessels (not necessarily flagged due to OPRT restrictions).112 This would be based on a commitment to tranship in Port Victoria for c.50% of the year (SFA would use VMS data to track compliance as a condition of access would be VMS to be switched on and transmitting an operationally viable frequency – say every 15 minutes – throughout the year). This component would include a concession to allow longline transhipment in‐port operations to source supplies from reefers and supply vessels. However, vessels would be compelled to purchase fuel from SEPEC. Eventually, in principle, this would provide an incentive for locally based firms and foreign investors to set up infrastructure and goods and service provision in Port Victoria for specific longline requirements.

7.5.4 Non‐financial aspects – recommendations

The gap analysis demonstrates that both the Japan and Taiwan agreements can be strengthened in the following non‐financial areas:

A much more detailed set of clauses covering information on vessel and fleet characteristics;

It seems appropriate to move permanently to longer agreements – probably a maximum of three years and a minimum of two, with revision clauses in the agreement providing flexibility. These agreements should be with associations only so as to tie‐in and build in coherent long‐term relations;

A much more rigorous transhipment control regime pending removal of the exemption for longline fleets, although this would probably require action at the level of IOTC to avoid the Seychelles being penalised for implementing best practice vis‐a‐vis other WIO Coastal States;

More extensive controls over ecological issues, including by‐catch; a biological recovery period; ecosystem approach and ecological impacts

112 As noted in Section 7.1.2, the Pacific island Country (PIC) data does not include discounted licences for locally‐based vessels, which is an incentive mechanism used by PIC governments to benefit more from the purchase of local goods and services

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The strategic use of compliance bonds to complement and strengthen the low level of actual surveillance capacity in the Seychelles – this approach should be applied to both the Japanese and Taiwanese agreements as soon as possible and as set out in the Options segment of the report ,could be based on payment of a compliance bond to guard against non‐compliance with reporting requirements. The bond could be kept by GoS where the fleets do not supply required data. Both Taiwanese and Japanese fleets are familiar from such a bond due to its use in PNG. See Appendix 3B for text of bonding procedures as set out in PNG‐Taiwan agreements.

Confidentiality clauses for both agreements must be re‐drafted to permit information to be used to support MCS – the current clause is too broad in its coverage

Basing compliance with IOTC requirements on the consensus findings of the IOTC Scientific Committee rather than on IOTC recommendations. The precautionary principle supports States adopting higher and scientifically justifiable standards. There are of course risks that this higher standard might lead to circumvention (i.e. IUU fishing) or that tighter ecological regulations might lead to low take‐up of licences. However, given the strong position of the Seychelles in terms of the desirability of access to its zone and the very limited actual and potential financial benefits received by GoS through longline licences (unlike the EU purse seine fleet’s use of Port Victoria and associated purchase of local goods and services), this approach is worth trying. It would also significantly raise Seychelles profile internationally as an ‘environmentally responsible state’.

7.5.5 Recommendations for the Seychelles‐China relationship The consultants recommend that the agreement with China when re‐negotiated should have the same elements as set out above. 7.5.6 Recommendations on matters for SFA to review It is suggested that SFA review the provisions related to monetary payments to provide scholarship support and also in lieu of meeting observer and domestic crewing obligations. It appears better to get a higher flat fee. Also every effort should be made to decouple fee payments from aid payments. Japan for instance should not pay a lower fee because it provides development assistance as this provides a basis for other countries to argue for lower fees, when there is little comparison‐based costing of the value of aid packages from Japan versus for example those from China.

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8. MARKET ACCESS ISSUES IN FISH EXPORTS FROM THE SEYCHELLES – CROSS‐CUTTING ISSUES Section 3.1 provided an overview of the export‐orientated fisheries sector. This section expands on that preliminary analysis by providing a detailed analysis of the fish products sector – a sector which in 2007 accounted for SR 1.347 billion or 96.1 percent of commodity exports from the Seychelles.113 The focus is mainly on prospects and issues for canned tuna exports. The other important value added products – fish ‘fillets’ and whole fish (frozen and fresh) (Oceana/Sea Harvest are also discussed where relevant is provided in Section 2.1. This discussion notes that canned tuna is the main commodity export from the Seychelles and that the other main value added product is fish ‘fillets’ and whole fish (frozen and fresh) (Ocean/ Sea Harvest), albeit at a very secondary level of general socio‐economic importance. The EU remains the core market for canned tuna products. In general, fish and fish products accounted for SR 1.347 billion or 96.1 percent of commodity exports in 2007.114 The discussion provides analysis of: a) the conditions of this trade in terms of tariffs and trade preferences; b) detailed trade data by principal market (EU and Japan) and by key products (differentiating the NSB data cited in Section 2.1); and, c) the major regulations – existing and emerging – that facilitate or act as barriers to Seychelles’ export of fish and fish products (hereon ‘fish’). Policy implications and specific recommendations are suggested at the end of each sub‐section. 8.1 Trade preferences and market access for Seychelles fish exports Table 8.1 clearly demonstrates the principal markets where Seychelles‐based exporters currently enjoy a competitive advantage – the clear advantage coming from trade preferences. It provides simplified data by Harmonized Commodity Description and Coding System (HS)115 code for a selection of unprocessed and processed tuna and fish fillets focusing principally on markets supported by preferential trade agreements – the three principal markets of the EU, Japan and the US. The preference schemes detailed in Table 8.1 are:

Trade preferences for fish under the East and Southern Africa (ESA) grouping’s Interim Economic Partnership Agreement (IEPA) with the EU (and the Lomé/Cotonou preferences before it).

The three schemes of the EU Generalized System of Preferences (GSP) regime: 1) the ‘standard’ GSP which is available to almost all states that are self‐declared as ‘developing countries’; 2) the Everything But Arms initiative (EBA) which is only available to countries that are categorized by the UN Development Committee as Least Developed Countries (LDCs); and, 3) the Generalized System of Preferences Plus (GSP+), which is available to countries that are categorized by the EU as ‘vulnerable’ according to its level of export‐orientated economic diversification and that have ratified and implemented 27 conventions on good governance, the environment and human

113 National Statistics Bureau (2008). Seychelles in Figures 114 National Statistics Bureau (2008). Seychelles in Figures 115 This is the international standard for the classification of commodities for customs purposes, including for the application of tariffs. Each commodity is uniquely categorized by its own (at a minimum) 8‐digit number. This was developed and is maintained by the World Customs Organization. See: http://www.wcoomd.org

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rights.116 Importantly, the latter two schemes offer duty‐free market access for fish and fish products identical to the IEPA.

Japan’s ‘standard’ GSP and GSP for LDCs. The United State’s GSP and special GSP for LDCs, and African Growth and Opportunity

Act (AGOA).117 Table 8.2 also details ‘MFN’ (Most‐Favoured Nation) applied tariff rates.118

Two caveats must be noted in relation to the data in Table 8.1. First, for the sake of simplicity and readability the products and their associated HS codes are only detailed at the 4‐digit HS code. Readers interested in specific products are advised to check the exact tariff code for the product with the importing country’s original tariff schedule (the websites for doing so are provided in the bibliography). Second, it should be emphasized at the outset that all preferential tariffs detailed here are subject to rules of origin (RoO) specific to the preferential scheme and thus the final result may be different from that set out here(Rules of origin dictate which countries are permitted to supply inputs to a product that is exported under a preference scheme.) RoO for fish and fish products under the proposed Interim EPA are discussed below in Section 8.4.1.

116 Note that the GSP+ is a ‘closed list’ and that countries wishing to benefit from the scheme from 2009 onwards had to apply by 31 October 2008. See Council Regulation (EC) No 980/2005; European Commission April 2008; European Commission IP/08/1192; 117 For details see: http://www.agoa.gov 118 Contrary to its literal meaning, the Most‐Favoured Nation principle stipulates that WTO Members have to offer the same treatment in terms of tariffs and similar charges on goods to all other WTO members. This principle is also known as non‐discrimination. Preferential (i.e. non‐MFN) tariffs can be offered to certain categories of countries under certain conditions.

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Box 8.1: A guide to interpreting product types and tariff systems Table 8.1 The following points help with analysis of Table 8.1, as tariff systems are often difficult to interpret:

The EU differentiates between whole tuna imported for industrial processing under ‘1604’ (i.e. canning) and whole tuna imported for other uses (i.e. portioning into other product types such as steaks, sashimi, etc). This is known as ‘tariff escalation’: it provides an incentive to domestic processors or manufacturers by keeping tariffs low for raw materials used by industry (e.g. frozen tuna) thereby keeping input costs at a minimum, but by applying higher tariffs for imported finished products (i.e. canned tuna at 20.5 to 24 percent). The high tariff rate on whole frozen tuna for other uses is probably applied to protect EU tuna fishing vessels from lower cost imports impacting on their high value catch (i.e. catch higher than canning‐grade).

The category titled ‘fillets’ (0304) is a complex one. In the Seychelles context, this product type is exported by Oceana and Sea Harvest, but it is seldom really ‘fillets’ properly defined. Instead, under HS code 0304, in the Seychelles context the term ‘fillets’ refers to vacuum packed fresh chilled tuna loins for eventual portioning into steaks or for lower quality sashimi cuts. This is a very different product type from the ‘tuna loins’ under HS 1604, which are pre‐cooked, vacuum packed and frozen for re‐processing via insertion into cans. (For more detail on the problems in categorizing ‘fillets’, basic market trends in the EU and competing supplier countries, see Campling, Hamilton and Batty 2008.)

‘Tuna loins’ under HS code 1604 refers to frozen pre‐cooked vacuum packed tuna loins. The ‘logic of loining’ is driven by the international division of labour between high and low cost sites of production. Canneries based in high cost sites of production such as the EU, Japan and the US are currently protected by tariff peaks. These are however not always high enough to provide sufficient levels of competitive advantage given their higher costs of production (especially labour). As a result, factories based in these countries import frozen pre‐cooked tuna loins from labour‐intensive low cost sites of production, which they then simply defrost and insert in their high cost capital‐intensive canning processes. Because the cleaning, loining and initial cooking of the fish totals around 80 percent of total labour costs in a tuna cannery, importing loins from lower cost sites of production in the developing world is a sensible commercial survival strategy employed by firms in high cost locations. (For details on market trends in the EU for loins, see Campling, Hamilton and Batty 2008.)

MFN treatment for canned tuna imports (1604) for all three principal markets follows a system of ‘tariff peaks’. This is the application of high tariffs on imported canned tuna to protect domestic industry from low cost imports. Note that the US system uses particularly high tariff peaks on canned tuna in oil, but lower tariffs on canned tuna in water.

Tuna in pouches (1604) refers to pre‐cooked tuna inserted into soft aluminum packages. This product type has not yet been significantly successful in EU markets, but it is an important segment in the US, typified by better quality product and higher levels of profitability to processors (see Campling, Havice and Ram‐Bidesi 2007).

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Table 8.1: Simplified Tariff Structure for Tuna, Fish Fillets and Tuna Products for EU, Japan and USA EU Japan USA HS Code/ Product Description IEPA/

GSP+/ EBA

GSP MFN LDC GSP WTO LDC AGOA GSP MFN

Chapter 3 0302 and 0303: Fresh chilled or frozen tuna for production under 1604

0%

0%

0%

0%

0%

3.5%

0%

0%

0%

0%

0302 and 0303: Fresh chilled or frozen tuna for uses other than production

0%

18.5%

22%

0%

0%

3.5%

0%

0%

0%

0%

03041: Fresh chilled fillets (most species of fish, including tuna)

0%

11.5%

15%

0%

0%

3.5%

0%

0%

0%

0% or 6%*

03042: Frozen fillets (most species of fish, including tuna)

0%

14.5%

18%

0%

0%

3.5%

0%

0%

0%

0% or 6%*

Chapter 16 1604: Tuna loins to be processed

0% 20.5%

24%

0%

6.4‐7.2%

9.6%

0%**

0%

1.1¢/kg or 6%

1.1¢/kg or 6%

1604: Canned tuna products, in oil 0%

20.5%

24%

0%

6.4‐7.2%

9.6%

0%

0%

35%

35%

1604: Canned tuna products, not in oil

0% 20.5% 24% 0%

6.4‐7.2%

9.6%

0%

0%

6% to 12.5%***

6% to 12.5%

1604: Tuna in pouches**** 0% 20.5% 24% 0% 6.4‐7.2% 9.6% 0% 0% 12.5% 12.5% Source: EC TARIC (August 2008): Japan's Tariff Schedule as of April 1 2008; Harmonized Tariff Schedule of the United States 2008 * 6% applied if in bulk or in immediate containers weighing with their contents over 6.8 kg each ** 1.1¢ for tuna loins in bags over 6.8kg each (HS code 1604.14.40). ‘Other’ = 6% (1604.14.50). *** U.S. duties for canned tuna in water depend on a quota that limits imports from any single country to no more than 4.8% of the total tuna in air tight containers consumed in the previous year. The tariff rate for canned tuna ‘not in oil’ (e.g., in brine or spring water) shifts from 6 to 12.5% when the tariff quota is full. **** Prior to August 2002, tuna in pouches was not separately provided for in the US HTS, they are now coded under 1604.14.51/59/91/99.

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Implications for the Seychelles Four matters are thrown into sharp relief by the data in Table 8.1:

1) The EU, Japan and the US all continue to apply relatively high tariffs on processed tuna (‘tariff peaks’) to better protect their domestic industry. Unprocessed fish does not encounter significant tariff barriers in any principal market, except for the EU for whole fresh or chilled and frozen tuna that is not imported for canning/ industrial processing.

2) The EU offers an important margin of preference to the Seychelles under the IEPA for a wide range of fish products, not just canned tuna and tuna loins. Other product lines effectively encouraged by this preference margin are those exported by Oceana and Sea Harvest: whole fresh‐chilled or frozen tuna which is not for canning, all types of fish fillets.

3) Under AGOA, the United States’ appears to offer commercially significant preferences to Seychelles‐based exporters for canned and pouched tuna, and a more minor preference for pre‐cooked frozen tuna loins. However, these are severely constrained by: a) strict rules of origin (RoO); b) the generally lower value US market for canned tuna (see Figure 8.1 and Section 8.2.2 below).

4) Japan does not in reality offer a significant margin of preference for canned tuna from the Seychelles. This is because, even though Seychelles could access the Japanese market under Japan’s GSP, lower cost sites of production (i.e. Thailand and other processors based in Southeast Asia) also enjoy GSP access. Seychelles is therefore not as competitive in the Japanese market

5) Given the weak position of Seychelles in the Japanese and US markets, the EU preference for canned tuna and tuna loins (HS 1604) and for fresh chilled and frozen fish ‘fillets’ (HS 03041/2) offers the greatest commercial advantage in terms of the tariff regime. That opportunity of course, depends on whether Seychelles can meet other EU requirements relating to: a) fisheries RoO; b) sanitary and phytosanitary measures (SPS); and, c) the new regulation to control IUU fishing; each of which is assessed in turn below. EU trade preferences, combined with availability of RoO/SPS compliant tuna and relatively high prices in the EU, serve to explain why the main direction of Seychelles processed fish exports is to the EU and accounts for the very existence of IOT.

8.2 Trends in Seychelles fish exports to the EU and the US The following offers short overviews of Seychelles trade of fish and fish products to the EU and, to a far lesser extent, towards the US. Given Seychelles limited economies of scale and related high production costs, the focus is on available trade preferences. An overview of recorded Seychelles exports to Japan is provided in the Section 9.4 Investment and Upgrading in Sashimi‐grade Value Chain. Other markets, such as within COMESA (particularly Mauritius and Madagascar), Reunion, the Middle East and wealthier East Asian countries (Hong Kong and Singapore), are not considered here because: a) reliable trade data is not available; b) these markets are based almost entirely on price alone and as such as commercial decisions to be made by operators rather than having implications related to trade policy.

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8.2.1 The European Union The vast majority of Seychelles fish exports go to the EU. Table 8.2 provides a break‐down of exports to the EU by key product group in euro. Of these, canned tuna remains the dominant item, contingent as explained upon preferential market access (see above).119 Several products have experienced a sharp decline in value in recent years, including fresh‐chilled and frozen fillets (Oceana/Sea Harvest), prawns and shrimp (which have collapsed since the closure of Coetivy), tuna loins (produced by IOT), and whole frozen tuna both for industrial processing and for other uses (‘exported’ by Seychelles‐flagged purse seine and, to a lesser extent, Oceana/Sea Harvest). These declines can partly be explained by the drop in supply due to poor fishing years in 2007 and 2008, probably due to a minor El Nino, but also by reduced fishing opportunities due to the impact of Somali piracy. Table 8.2: Total Seychelles export of fish and fish products to the EU27, 2003‐08 (in million euro)

Item 2003 2004 2005 2006 2007 2008 Canned tuna 163.5 141.5 145.8 161.9 138.7 150.5 Frozen tuna for other uses

5.1 29.7 29.8 20.7 9.8 7.9

Frozen tuna for industrial processing

16.6 10.9 10.0 8.4 4.2 3.1

Frozen prawns and shrimp

8.3 8.9 5.5 4.5 2.3 1.9

Fresh or chilled fillets 0.9 0.5 1.3 0.9 0.9 0.7 Whole fresh or chilled fish

1.2 1.1 1.2 1.1 0.9 0.7

Tuna loins for industrial processing

4.7 1.8 1.7 ‐ 1.3 0.5

Non‐tuna whole frozen fish

8.5 4.9 2.8 1.1 1.0 0.1

Frozen fillets 0.6 0.4 0.1 0.1 0.02 0.04 Crustaceans and squid/cuttle fish

2.1 3.2 0.7 <0.01 <0.01 ‐

Total 211.5 202.9 198.9 198.8 159.2 165.7

Source: EU import data: Eurostat; detailed Tariff descriptions: TARIC

Notes: Total search of all fish and fish products imported into EU from the Seychelles. Some items removed from totals because insignificant values (i.e. fish meal) or anomalies (e.g. Carp) and insignificant values. Full datasets are in Annex X. The EU will continue to represent a higher value market for canned tuna than the US in the medium to long term (see Figure 8.1). It is also clear that overcapacity in global purse seine fisheries and canned skipjack tuna production has made prices highly competitive, with prices declining since 1999, except for from mid‐2007 to end‐2008 when high fuel prices and more limited availability of tuna led to a temporary price increase (compare Figure 8.1 and 8.2). The price drop from end‐2008 onwards can be explained by the impact of the onset of recession and the associated price

119 Detailed data on itemized by individual product type for 2003‐8 are provided in Annex 2.A: Seychelles Exports to the EU27 by Detailed Tariff Classification and Principal Market.

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adjustment to attract consumers. EU prices have been (almost) permanently higher than the US since 1994 to date. While Figure 8.1 makes clear that price trends in the EU and US markets for canned tuna are intimately linked, no discernable casual relationship is apparent in terms of one market price consistently affecting the other (i.e. since 2000, at some points US prices appear to reflect a shift in the EU, and at other points, the EU price appears to follow the US).120 In the long‐term, it is possible that prices will return to the highs of circa mid‐2007 because of the biological limitations on tuna supply, increased demand due to demographic growth and health concerns, and the certainty that oil prices will increase again when the world economy recovers from its current downturn.121 Figure 8.1: EU and USA canned tuna prices, origin Thailand (carton 48x6.5oz), June 1983‐March 2009

Source: database provided by FAO

120 Canned skipjack is probably best conceived of as a truly global market with the Bangkok price acting as the international benchmark, although important product and quality differentiation factors must be taken into account. Canned yellowfin is a very different market segment and is dominated by EU‐centred considerations. Canned albacore must, again, be differentiated, and is dominated by US‐centred factors. 121 Campling 2009 FFA Price trend report, unpublished mimeo [available on request]

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Figure 8.2: Annual average landed price for whole frozen skipjack and yellowfin for canning, Bangkok and Spain, 1995‐2007

Source: annual average prices calculated from database provided by FAO

Notes: Bangkok cif prices for skipjack 4‐7.5lbs and yellowfin <20lbs. Spain data origin EU fleet, but fish size not specified in. Data represents broad trends not only because of the reliability of the original sources (i.e. they are far from corporate data‐bases/ intelligence), but because of the quality differential between sources of supply. Tuna processing firms balance‐out their annual input costs based upon know seasonal fluctuations (including the factoring‐in of discounts/category promotion, etc). Therefore, the use of annual average price data is a sufficient indicator. Table 8.3 details IOT’s export of types of canned tuna (differentiated by species and packing medium) to principal EU markets. The first two rows depict the core trends. The UK is by far the most important market for IOT, supplying John West and UK supermarket brands, closely followed by supply to Petit Naivre (France). It also supplies the Netherlands (and Ireland) where John West is a leading brand is. In addition, MW Brands (MWB) is focused on expanding its market share of the Mareblu brand in Italy: this is a major strategy to expand shareholder value for eventual sale of MWB.122 IOT supply to Germany is limited because: a) it is a lower value/quality market which is generally supplied canned skipjack by processors based in Southeast Asia and Ecuador;123 b) MWB does not maintain a brand presence there. The most important product exported by IOT to the EU is basic ‘commodity’ canned skipjack (packed in oil or water). Section 9.2 offers analysis of investment and upgrading potential in terms of IOT:

1) Processing more canned yellowfin

2) Producing more ‘value added’ items

This point is raised here because if a product is higher in value the relative importance of the ESA EPA tariff preference (c.24 percent) increases, which would make IOT product more competitive vis‐à‐vis higher value product from countries that export under MFN treatment (e.g. Thailand).

122 Interviews, Seychelles 2006 and France 2008 and 2009. 123 Campling 2008 [ComSec study]; Campling, Havice and Ram‐Bidesi 2007

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The EU market for whole tuna for canning is in decline in terms of both absolute (i.e. total imports) and relative (i.e. compared to tuna loins and finished canned tuna) flows. Most processors (especially in France and Italy) are switching almost exclusively to production using pre‐cooked frozen loins. The rationale here is to reduce labour costs (which are very high in the EU) in the face of competition from developing countries. Currently, production of pre‐cooked frozen tuna loins in the WIO only occurs in significant quantities in Kenya and Mauritius.

• Kenya‐Wananchi Marine Products Ltd has an annual raw material production capacity of c.20,000mt. It focuses on yellowfin tuna loins and has a processing agreement to supply Tri Marine (a tuna trading company). Much of its product probably goes to the Bolton Group.

• Thon des Mascareignes (TDM) was established in 2005 and is the main Mauritius‐based firm for this product type.124 It has an annual raw material production capacity of 55,000mt for albacore, skipjack and yellowfin loins (90 percent of total production) and it also processes minor amounts of canned and pouched tuna. Direct employment is around 750. It is 75 percent owned by IBL and 25 percent by Pesqueras Echebastar (Spain). Confidence in the high demand from the EU is reflected by the fact that 25 percent of TDM is owned by Echebastar. TDM focuses its production for the EU market on yellowfin loins because: 1) this is the largest market, as most canning in Spain and Italy uses this species; 2) the higher price paid for yellowfin.125 Thon des Mascareignes also produces albacore loins for the Los Angeles based Bumble Bee cannery – supply of this species is provided by the longline fleet based in Port Louis. There are however, doubts over the survival of TDM as it is reported to have been recapitalized twice in recent years.126

As is clear from Table 8.2 above, IOT export of tuna loins has dropped substantially between 2003 and 2008, by almost 90 percent (see also Table 8.4). Almost all IOT produced loins were exported to France (Table 8.3), probably to the MW Brands‐owned processing facility in France. The economic problems faced by TDM in Mauritius and the decline in IOT’s production of tuna loins indicate that it is difficult to achieve profitability in this segment in the WIO island states. This is despite the EU tariff preference of 20.5 to 24 percent on these products and clearly high levels of demand in the EU (for example, EU‐based processors and the EU purse seine fleet reached a compromise in 2006 to allow import of 10,000mt of tuna loins at 6 percent duty for the period 2007‐2009 that was not country‐specific (known as an autonomous tariff quota).127 The failure of IOT to take advantage of this market is probably because of the relatively higher cost of labour transformation in the Seychelles (i.e. for canned, labour costs account for around 40 percent of the importers price; while for tuna loins, the labour cost is around 60 percent of importers price). Thus, given Seychelles undeniably relatively high labour costs,128 the production of loins is probably unprofitable. However, at the same time, the Exclusivity Clause within the IOT Shareholders Agreement may have been a factor deterring investment in loining facilities.

124 Company information is available here: http://www.iblgroup.com/thon‐des‐mascareignes/ 125 Campling 2008 [ComSec study] 126 Person. Comm., France and Mauritius, 2009 127 EC COM (2007) 289 final, 4 June 2007. 128 This report does not address comparative cost structures. For details see, Callairt and Henry 2008; Campling and Doherty 2007; Campling, Havice and Ram‐Bidesi 2007; various IOT/ MW Brands benchmarks.

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Table 8.3: EU27 import of Seychelles canned tuna and tuna loins and distribution by principal market, 2004‐08

Distribution by principal market Product (HS Code) Year EU27 (in million euro) UK France Italy Netherlands Germany

2004 34.5 30% 6% 41% 18% 1% 2005 49.9 27% 3% 41% 26% 1% 2006 48.4 30% 4% 51% 12% >1% 2007 38.3 45% 5% 36% 14% 1%

Canned tuna or skipjack in vegetable oil (1604.14.11)

2008 55 30% 4% 37% 25% 1% 2004 106 56% 34% 2% 6% >1% 2005 95 58% 30% 2% 7% 1% 2006 112.2 54% 35% 2% 6% 1% 2007 97.1 46% 44% 2% 2% 4%

Canned tuna or skipjack in brine or spring water (1604.14.18)

2008 92.4 46% 47% 2% 2% 2% Canned non‐skipjack tuna, packing media not specified (1604.19.39)*

2008 1.4 ‐‐ 100% ‐‐ ‐‐ ‐‐

2004 1 ‐‐ 95% ‐‐ ‐‐ ‐‐ 2005 1 ‐‐ 100% ‐‐ ‐‐ ‐‐ 2006 1.4 ‐‐ 100% ‐‐ ‐‐ ‐‐ 2007 3.4 ‐‐ 33% ‐‐ ‐‐ ‐‐

Canned tuna or skipjack, packing media not specified (1604.20.70)

2008 1.7 ‐‐ 83% ‐‐ ‐‐ ‐‐ 2004 1.8 ‐‐ 100% ‐‐ ‐‐ ‐‐ 2005 1.6 ‐‐ 94% 6% ‐‐ ‐‐ 2006 ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 2007 1.3 3%** 97% ‐‐ ‐‐ ‐‐

Tuna or skipjack loins (1604.14.16)

2008 0.5 91%** 9% ‐‐ ‐‐ ‐‐ Tuna loins, probably yellowfin (1604.19.31)

2005 0.01 ‐‐ ‐‐ 100% ‐‐ ‐‐

Source: EU import data: Eurostat; detailed Tariff descriptions: TARIC Notes: * Probably yellowfin, but could be albacore under automatic derogation (i.e. it is known that IOT imported small quantities of ALB from South Africa) ** No processing plant in UK thus re‐exported or fresh chilled loins sold as pre‐cooked frozen

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Table 8.4: Extra‐EU15 import of canned tuna by major supplier (in million Euro), 1998‐2007 Preferenc

e scheme 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Ecuador GSP+ 41.6 46.9 46.1 58.5 73.9 79.3 91.9 137.3 153.2 194.9 Seychelles IEPA 66.6 94.8 127.0 144.8 177.0 163.2 140.9 145.2 161.5 138.3 Thailand GSP 107.6 77.1 56.3 69.8 93.8 85.1 72.6 109.6 146.5 128.9 Cote d'Ivoire IEPA 176.1 97.9 105.9 97.2 148.1 115.0 123.4 82.4 88.5 112.8 Mauritius IEPA 35.9 38.2 40.8 67.7 70.8 59.9 67.2 67.2 90.5 103.3 Philippines GSP 76.6 66.8 53.6 49.7 78.8 63.2 50.2 65.6 79.0 91.8 Ghana IEPA 67.8 62.2 69.1 76.7 67.4 69.5 56.2 60.9 59.9 69.7 PNG IEPA 3.7 4.7 4.4 6.3 13.0 23.9 25.7 37.2 26.2 33.8 Colombia GSP+ 17.8 7.2 6.7 14.9 18.1 18.4 24.9 30.7 25.6 33.5 Madagascar IEPA 34.2 25.2 20.2 24.9 37.2 48.1 42.9 40.1 37.4 31.3 Guatemala GSP+ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ 12.8 19.5 Indonesia GSP 26.2 19.2 15.6 14.0 19.0 12.7 10.9 16.9 11.8 16.8 Vietnam GSP ‐‐ <0.01 0.04 0.9 2.0 1.2 0.9 3.1 7.7 10.6 Maldives EBA 19.0 7.7 12.4 12.1 12.0 9.6 10.9 12.3 8.6 8.9 Kenya IEPA ‐‐ ‐‐ ‐‐ 0.1 0.2 0.1 2.6 2.2 2.7 3.3 From the original country search, the following were deleted from the table: Iran and Mexico because they are insignificant, China because exports are very minor, El Salvador, Turkey and Costa Rica because their exports are relatively minor and these countries do not hold any strategic significance to the Seychelles, and Fiji and the Solomon Islands because they dropped off from 2000. Source: Eurostat

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8.2.2 United States The US is the only other market that appears to offer the Seychelles a significant trade preference (i.e. under AGOA). As is clear from Table 8.5, the US market for Seychelles’ exports is very limited. The highest point in this sample data was in 2003 when Seychelles‐based firms’ air freighted USD 1.9 million of fresh chilled fish to the US. The other item of interest is the limited volumes of ‘fillet’ exports in 2005‐06. However, none of these exports benefitted from AGOA preferences because they are MFN duty‐free items (see Table 8.1 above). It is assumed that the reason for this decline is a result of the change in ownership of Sea Harvest. Even so, it is crucial to note that US niche markets for fresh‐chilled fish do represent an opportunity; especially via wholesalers in California (the East Coast tends to offer lower prices). In the medium‐term (i.e. when the recession ends), fresh‐chilled prices on the US market are likely to return to their 2006‐08 highs as the upper‐middle classes return to their health‐conscious, prestige‐consumption (including in top‐end restaurants).129 However, Seychelles capacity to supply this market appears to be limited and the reasons for this would be worth exploring. This is because for example in 2006 US buyers of fresh‐chilled tuna were having supply problems.130 Official US import data in Table 8.5 show that Oceana and Sea Harvest were unable to tap into this demand. The reasons are not clear but could be a mix of possible issues, which could be progressively addressed, including logistical limitations on air freight links and/or weak marketing channels into the US and/ or weak exchange rates to the US dollar and/ or higher prices paid elsewhere.

129 Campling 2009 FFA Price trend report, unpublished mimeo [available on request] 130 Multiple interviews, US wholesalers, Los Angeles and San Diego, 2006.

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Table 8.5: Total US import of fish and fish products, 2003‐8 (in US dollars) Product (HS Code)

2003 2004 2005 2006 2007 2008

Yellowfin tuna whole fresh or chilled (0302.32.00)

658,000 ‐ 12,000 ‐ ‐ ‐

Bigeye tuna whole fresh or chilled (0302.34.00)

830,000 ‐ 61,000 ‐ ‐ ‐

Other, whole fresh or chilled fish (0302.69.20.49)

397,000 ‐ ‐ ‐ ‐ ‐

Other, whole fresh or chilled fish (0302.69.40.40)

‐ ‐ 25,000 13,000 ‐ ‐

Snapper whole fresh or chilled (0302.69.50.58)

‐ ‐ ‐ ‐ 5,000 ‐

Fish fillets and other fish meat (whether or not minced), species not specified, fresh, chilled or frozen (0304.10.40.99)

‐ ‐ 40,000 160,000 ‐ ‐

Fish fillets and other fish meat (whether or not minced), 'other', fresh, chilled or frozen (0304.19.00.73)

‐ ‐ ‐ ‐ 51,000 ‐

Frozen King crab, Crustaceans, (0306.14.40.10)

‐ ‐ ‐ ‐ 213,000 ‐

Frozen Crabmeat (0306.14.40.20)

‐ ‐ ‐ ‐ 1,095,000 ‐

Total 1,885,000 ‐ 138,000 173,000 1,364,000 ‐

Sources: Actual data (based on tariff codes) are from http://dataweb.usitc.gov (Data on this site are compiled from tariff and trade data from the U.S. Department of Commerce and the U.S. International Trade Commission) Tariff descriptions are from http://www.usitc.gov/tata/hts/bychapter/index.htm

Notes: Search included all fish products (e.g. live, canned, fish meal, pet food) In terms of trade‐related competitive advantages, AGOA appears to provide the only known advantage for Seychelles‐based exporters. However, AGOA rules of origin (RoO) are difficult to satisfy, explaining the weak level of canned tuna exports from Africa generally to the US, despite the huge tariff preference of 35 percent for canned tuna in oil (see Table 8.1). Combining AGOA difficulties with IOT’s concentrated marketing focus on the EU, explains why the Seychelles has not exported canned tuna in oil to the US (see Table 8.5). The AGOA RoO problem is acute in Mauritius as it structurally limits TDM’s export of albacore tuna loins.131 To address this problem, it is likely that Mauritius will soon be making representations to the US government arguing that AGOA fisheries RoO are unusable because of the difficulty of meeting the 35 percent value added criteria (i.e. because the most expensive inputs, fish and cans, are imported).132 If GoS is interested in enabling domestic firms to export canned tuna in oil to the US, Seychelles could join with Mauritius to make this case. There will however, be at least three possible barriers to success:

1) Such a representation would meet severe opposition from American Samoa home to two canneries focused on the US market) and Bumble Bee (the last remaining US‐owned national brand, with a cannery located in Los Angeles). These firms focus primarily on canned tuna in oil because of the relative protection against lower cost imports offered by the 35 percent tariff peak.

131 See Annex X for a short overview on AGOA RoO. 132 Personal communication, 2009.

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2) Even if AGOA RoO were made more workable, the opportunity to progressively and decisively enter the US market is currently barred to the Seychelles because of the Exclusivity clause in the IOT Shareholders Agreement.

3) Even if MW Brands decided to export to the US, which is highly unlikely, the US market would be non‐economic for standard ‘commodity’ products such as canned tuna in oil because of the very high degree of price competition.

Implications for the Seychelles/ Summary Points

The US market for fresh‐chilled tuna is growing. While it will probably never offer quite the same high prices paid by Japan for sashimi‐grade, prices are steady and wholesalers are always looking for new sources of supply (particularly in California). The clean green mid ocean location could offer a significant marketing advantage once issues with Somali piracy disappear.

Despite the serious barriers to the US market for canned tuna products, if AGOA RoO were reformed, there are higher‐value market niches in the US for ‘boutique’ processing facilities (i.e. very high quality, probably eco‐labelled, product). To succeed this would require an investor with serious marketing linkages.

8.3 The Impact of Preference Erosion on Established Competitive Advantage for Seychelles Processed Fish Exports EU tuna preferences are essential to the commercial survival of IOT and, to a lesser extent, Oceana and Sea Harvest. They have more flexibility as they also export high value demersal species – fresh and, to a lesser extent, frozen. The maintenance of the EU preference for canned tuna was a major motivation behind the Seychelles initialling an interim Economic Partnership Agreement (IEPA) with the EU in November 2007.133 As against major competing sites of production, the eventual signing of a comprehensive EPA will provide Seychelles with a 20.5‐24 percent margin of preference. This will last for as long as the EU implements a system of high tariff peaks for processed tuna products. Even so, various forms of preference erosion do affect the competitive advantage afforded by the EU tuna preference.134 It is important for policy‐makers to pay attention to the trends in this area. Already‐existing forms of preference erosion take the form of EU tariff quotas on tuna products and the EU Generalized System of Preferences (GSP) regime. Future direct threats and more indirect impacts on the preference come from the Doha Round at the WTO and also from the rise of Free Trade Agreements (FTAs) involving competing sites of production. We summarize each of these challenges in turn.

133 Seychelles is no longer able to apply for the GSP+, which provides similar duty free access for tuna to non‐LDCs, because the application deadline for doing so was 31 October 2008. 134 For detailed analysis of ACP preference erosion for canned tuna and tuna loins, see Campling (2008a) – COMSEC study

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8.3.1 EU tariff quotas on canned tuna and tuna loins The EU currently maintains two tariff quotas on canned tuna and tuna loins, each of which represents a direct form of preference erosion for the ACP as they are open to and utilized by the lower‐cost more efficient competing regions:

1) In early 2003 a quota of 25,000mt of canned tuna and 4,000mt of tuna loins at 12 percent duty was awarded to Thailand, Philippines and Indonesia as part of a compromise for their support for the Cotonou waiver at the WTO. (The ‘Cotonou compromise’ quota.). This quota ended in December 2007 and it will not be renewed. Southeast Asian canned tuna interests are now focusing on an FTA with the EU to deepen their market penetration (see below).

2) Pressure from Thailand contributed to an additional tariff quota for canned tuna at 0 percent duty from March 2006 as compensation for the compulsory tariff increases of the 10 new EU member states when they joined on 1 May 2004.135 (The ‘EU enlargement’ quota.)

3) EU‐based processing firms pushed for an annual tariff quota for 10,000mt of tuna loins at 6 percent for the period 2007‐2009 that was not country‐specific.136 This was because EU canneries were unable to obtain a sufficient supply of tuna loins from ACP and GSP+ countries.137 (The loin quota.)

In terms of efficiency and market responsiveness, interviews with EU and Thai tuna industry representatives, shows that the Cotonou compromise quota (12 percent) and the EU enlargement quota (0 percent) were filled within days – the product was reportedly warehoused prior to the opening of the quota and was pushed through customs on the day it commenced.138 The important point here is that buyers within the EU preferred to purchase Southeast Asian canned product at a 12 percent tariff under the ‘Cotonou compromise’ quota. This means that IOT exports would probably not be able to compete should the EU tariff be eroded to a lower level. Importantly, Southeast Asian exports under this tariff quota were not subject to EU rules of origin for fish; thereby allowing beneficiaries to source the lowest priced tuna on the international market and increase the profitability of the final product. Therefore, despite the EU policy of tariff peaks, in the 2000s both Thailand and the Philippines were able to expand penetration of the EU market in value terms for both canned tuna and tuna loins. 8.3.2 The EU’s Generalized System of Preferences (GSP) regime As with the Lomé/Cotonou preference for the ACP, the EU’s GSP regime was a major commercial incentive driving the development of tuna processing facilities in the Andean and Central American countries (under the prior ‘Drugs Arrangement’ and subsequent GSP+).139 This was a significant challenge to the Seychelles because a major assumption

135 Delegation of the European Commission to Thailand 2006. 136 EC COM (2007) 289 final, 4 June 2007. 137 Interviews, EU industry representatives, 2007 and 2009. 138 Multiple interviews with EU and Thai tuna industry representatives, 2006. See also Josupeit 2007. 139 The Drugs Arrangement countries were Bolivia, Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, Pakistan, Panama, Peru, El Salvador and Venezuela. All of these Latin America countries listed here graduated to the GSP+. They were joined by Georgia, Sri Lanka, Republic of Moldova and Mongolia (EC December 2005), of which only Sri Lanka had a significant tuna sector.

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behind the Lomé preference was that European technology and capital would flow to certain ACP coastal and island states to take advantage of preferential market access, cheap labour and strategic access to tuna fisheries. However, with the setting‐up of the initial Drugs Arrangements, European interests – predominantly from Spain – transferred to sites of production within the GSP+ countries, especially Ecuador.140 For example, Eurothon estimated that its members had created 35,000 jobs in fishing and processing industries in Latin America, sparked primarily by the preferential market access incentives made available under the GSP+. By 2006 Eurothon members had built four processing plants and were involved in the activities of another 30 in GSP+ countries.141 8.3.3 Non‐Agricultural Market Access negotiations at the WTO Doha Round Fish and fish products are classified at the WTO as industrial goods and thus fall under the Non‐Agricultural Market Access (NAMA) negotiations as opposed to being considered as an agricultural good.142 In the context of the Doha Round, the objective of NAMA is to reduce bound MFN tariff rates on all industrial goods. On 8 February 2008 the Chair of the NAMA negotiations released his second draft text summarizing debates and areas of consensus. The current EU bound rate for canned tuna and tuna loins is 25 percent (only 1 percent more than the current applied MFN rate). If the range of the Swiss Formula co‐efficient that was most recently under negotiation is applied to this, the post‐NAMA EU bound tariff for canned tuna and tuna loins will be reduced to between 6 and 7 percent. From the completion of the Doha Round, this tariff reduction will take place over a 5 or 7 year period. It is unlikely that the Doha Round will be concluded until 2010 at the earliest. In short, the EU tuna preference will become commercially far less valuable and will probably be insufficient as a competitive advantage to the Seychelles unless domestically‐based firms have achieved effective levels of ‘competitiveness’ prior to this eventuality. 8.3.4 The indirect impact of free trade agreements The rise of free trade agreements (FTAs) involving non‐ACP tuna exporting countries has had an indirect effect on the ‘competitiveness’ of ACP‐based firms, including IOT.143 The political‐economic tensions and stalls of Doha Round negotiations at the WTO since 2001 led to the emergence of a ‘new bilateralism’ in international trade relations; a trend that has only deepened with the collapse of the Doha Round in July 2008. The key point here is that, while the Seychelles has been focusing on maintaining existing access to the EU market through EPA negotiations, competing producers were lobbying their states to include market access for canned tuna in FTA negotiations with principal markets. The result is that lower cost non‐

140 For example, the Drugs Arrangements/the GSP+ provided an incentive for large‐scale investment by the Spanish tuna firms Grupo Calvo and Isabel‐Garavilla in Venezuela and Ecuador respectively (Oceanic Development 2005: 114), and Spanish processors (including Grupo Calvo) invested over Euro 200 million in canning plants in Guatemala and El Salvador (Cartwright 2004: 10; ‘Grupo Calvo Invests $39 Million in El Salvador’, Proesa, 9 May 2002). 141 Eurothon 2006: 2. 142 The coverage of this section draws upon Campling, Havice and Primack 2007 143 FTAs offer countries the opportunity to negotiate improved market access for goods and services on a bilateral basis, which is a lot less complex and thus more immediate than attempting to achieve ‘consensus’ at the WTO, especially on highly sensitive topics such as agricultural subsidies and market access for industrial goods. However, the recent failure of the multilateral approach also means that the negotiation platforms of individual developing countries in discussions with developed countries are considerably weaker than in the context of South‐South alliances at the WTO (despite the latter’s tensions and contradictions).

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ACP producers (especially Thailand144) are deepening their firm‐ and cluster‐level economies of scale through the increased capture of absolute global market share. As a result they have made their product more competitive on the world market relative to Seychelles and, in turn, contributed to the downward trend in US canned tuna prices and relative stagnation of EU prices (see Figure 8.X above). The general effect of this trend is a form ‘slow‐drip’, indirect erosion of the competitive advantage afforded by the Cotonou preference, not least given that EU and US buyers use the Thai price as a competitive benchmark.145 The EU‐ASEAN FTA offers the greatest threat to the relative status quo in EU markets for tuna products. It is not yet clear whether this FTA will be ASEAN‐wide or only be between individual members (the Philippines and Thailand are both likely to go bilaterally in the latter scenario). EU industry is aware that the current tariff peak of 24 percent on canned tuna and tuna loins will be a central target for liberalization on the ASEAN side. EU industry is relying heavily on the role of fisheries RoO in limiting ASEAN production centred on EU markets under a future FTA.146 Of course, this will be a highly politically contentious negotiation and EU tuna interests might be the victim of horse trading in favour of, for example, EU automobile and/ or service industries in striking a deal. In addition, EU purse seine fleets could always switch their supply to ASEAN processing facilities (i.e. to allow them to meet FTA RoO) from their current focus on ACP and GSP+ countries, such as IOT, if ASEAN processors are able to offer more competitive prices. 8.3.5 Summary points

The erosion of EU tuna preferences to commercially non‐valuable levels is inevitable. It is only a question of the form that this preference erosion takes (i.e. NAMA or FTAs) and over what time period (probably within 8‐10 years).

Therefore, the question facing GoS in its policy development on onshore fish processing is how to prepare for and mitigate this eventuality. Some recommendations are suggested below in the sections on upgrading and investment (section 8.3 and 8.4).

The major implication of the GSP+ is that Spanish capital (mainly OPAGAC members) is already heavily (maybe over) extended in the Central American and Andean countries, meaning that it is unlikely that it will turn to invest substantially in additional sites of production such as the Seychelles.

144 As the Chair of the Thai Tuna Packers’ Group made publicly clear: ‘Apart from fleet development, our strategy to maintain our number one position in the world is FTAs. The WTO is quite slow, therefore we have entered into FTAs’. Speech by Chanintr Chalisarapong (Chairman, Tuna Packers’ Group, Thai Food Processors Association) at the INFOFISH Tuna 2006 conference. 145 Multiple interviews, EU, US and Thai industry representatives, 2006. 146 Interview, EU industry representative, 2009.

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8.4 Fisheries Rules of Origin in ESA‐EU Economic Partnership Agreement 8.4.1 Rules of Origin in ESA‐EU Interim Economic Partnership Agreement (IEPA)147 The initialling of the ESA‐EU EU Interim Economic Partnership Agreement (IEPA) in end‐2007 simply maintained the status quo of IOT and Oceana/Sea Harvest preferential access to EU markets. The only change was in the area of fisheries rules of origin (RoO), which were slightly modified. The ESA‐EU Interim EPA contains liberalised RoO relative to those applied under the Cotonou Partnership Agreement (CPA).148 There are three components of core relevance here: the definitions of ‘wholly obtained’ fish and of ‘sufficiently worked or processed fish products’, and the extent of the ‘automatic derogation’ provided. ‘Wholly obtained’ fish products in EU RoO

There is little substantive change in the definition of ‘wholly obtained’ fish in the IEPA initialled by ESA compared to the original text of the CPA. It is still determined by the European Community’s definition of “qualifying vessels”, which details criteria on vessel flag, registration, and ownership.149 The only differences between CPA and the ESA IEPA definitions of ‘wholly obtained’ fish are in the requirements on: a) crew nationality; b) vessel ownership; c) the leasing/chartering of vessels; and d) aquaculture. a) Crew requirement: The major change from the CPA is the deletion of the requirement for a vessel’s crew to consist of 50 percent nationals of the parties to the agreement. The EU DWF has long pushed for this deletion as it would give “the EU fleet greater flexibility without compromising any of the other benefits of the current RoO”.150 It is also beneficial to processors as they are no longer required to undertake checks on crew to ensure RoO compliance (e.g. by making copies of passports, etc). In some cases it may also be of benefit to Seychelles boat owners; for example, Seychellois owners of locally‐owned and flagged boats often complain that there is a lack of qualified nationals who are interested in employment as crew. However, in terms of providing an incentive to EU boat owners to employ Seychellois crew, it is certainly a disadvantage. b) Vessel ownership: There is a very slight simplification of the criteria on vessel ownership by companies. A company now only has to have ‘its head office and … main place of business’ in a party to the agreement, rather than the additional component under the Cotonou Agreement that the Chairperson and board members must all be nationals. Regardless, 50 percent of ownership must still be held by an entity based in one of the parties to the agreement. However, the EU needs to confirm that the RoO text does not prevent a company from having its statutory registered office in one country and its main place of business in another, as long as such countries are either ESA or EU States.

147 This section draws from Campling (2008b) ‐ ICTSD 148 For a systematic comparative overview of RoO and other fisheries elements of IEPAs, see Campling 2008c 149 Inland fisheries and those within the territorial waters (12 mile zone) of an EPA state still automatically qualify as originating. An additional change is the new reference to aquaculture. Simply to note that this is expanded by adding the following sub‐condition not present in CPA: “products of aquaculture, including mariculture, where the fish is born and raised there” (Naumann, 2008: 7. Emphasis added). Note that the EU RoO‐compliant aquaculture development in the Seychelles will therefore be limited to the clause with added emphasis. 150 Oceanic Development‐Megapesca 2007: 52

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c) Leasing/chartering of vessels: Under Cotonou, the ACP state first had to offer the EU the option of an access agreement; if it refused, the ACP state could then apply to ACP‐EC Customs Cooperation Committee. The text of the interim EPA seems to suggest that the ESA EPA state could lease/charter if EU fishing interests have been offered and refused the opportunity to lease or charter first.151 This is potentially an important change as it offers an opportunity to overcome the most difficult condition of meeting the wholly obtained criteria – the ownership condition. In spite of this, the major practical limitation of the leasing/chartering clause – even if Seychelles‐based firms were able to apply it – is that it blocks the extent of targeting of commercially valuable highly migratory or straddling stocks by limiting operations to that country’s EEZ (i.e. ESA leased/charted vessels would not be able to ‘follow the fish’). d) Aquaculture: An additional change is a new reference to aquaculture. This is expanded by adding the following sub‐condition not present in CPA fisheries RoO: ‘products of aquaculture, including mariculture, where the fish is born and raised there’ (cited in Naumann, 2008: 7. Emphasis added). Note that EU RoO‐compliant aquaculture development in the Seychelles will therefore be limited to the added emphasis in this clause; that is, for example, Seychelles could not import broodstock for marine shrimp aquaculture from countries other than those within the EU and ESA regions. Sufficiently worked or processed fish products

In cases where insufficient wholly obtained fish are available, the ESA IEPA RoO Protocol provides a ‘concession’ of up to 15 percent value tolerance (ex‐works) for non‐originating inputs of fresh or frozen fish (HS Chapter 3) in the manufacture of fish products. For example, a manufacturer of canned fish may use non‐originating fish to a maximum value of 15 percent of the total value of the fish that is canned, while applying the post‐processing (ex‐works) price. All other inputs – such as the can, packing material (e.g. oil or water) – may be non‐originating. It should be noted that a separate – but very similar – value tolerance provision under the CPA was so complex that only two firms throughout the ACP were ever able to successfully apply it, Princes Tuna, Mauritius and Conserverie des Cinq Océans, Madagascar.152 (See below for Seychelles proposals on this rule in the context of negotiating a Comprehensive EPA.) Automatic derogation

Under the terms of the RoO protocol of the ESA Interim EPA, the ESA region was allocated the same volume of automatic derogation for canned tuna (8,000mt) and tuna loins (2,000mt) as that awarded to the entire ACP group under the Cotonou Agreement.153 This was an important concession on the part of the EU as this volume of derogation was

151 Oddly, this provision in Annex II, Article 3 of the Council Regulation (EC) No. 1528/2007 of 20 December 2007, on Rules of Origin is different from that detailed in all of the IEPA texts. The conditionality for the allowance of leasing or chartering in Council Regulation 1528/2007 is that ‘the ACP State offered the Community the opportunity to negotiate a fisheries agreement and the Community did not accept this offer’, which mirrors the original conditionality applied under Cotonou. The reason for this difference is unclear, but it is assumed that the text of the IEPAs will hold legal sway as that is what ACP states signed. 152 Formerly Pêche et Froid Océan Indien (PFOI). 153 This was to be distributed only among ESA signatories, in effect Madagascar, Mauritius and the Seychelles as they are the only ESA countries with tuna processing facilities. See ESA‐EC IEPA, Protocol 1, Article 42. See also Council of the EU General Secretariat (30 November 2007).

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previously shared by the entire ACP group of 79 countries. However, until the IEPA is signed Council Regulation 1528/2007 acts as the bridge between Cotonou RoO and those eventually agreed upon in the IEPA RoO Protocol. Under Regulation 1528/2007, the IEPA derogation has to be applied for by ESA states before becoming active.154 The RoO Protocol in the Interim EPA will only come into force when the Agreement is signed. From then on it will be up to the ESA countries to decide on the national allocation of the automatic derogation quotas and to communicate their decision to the EC. 8.4.2 Fisheries Chapter of ESA‐EU IEPA155 The Fisheries Chapter in the ESA‐EU Interim EPA is dominated by several sets of very ‘soft’ legal language on vaguely defined areas such as the promotion of sustainable development and management of fisheries, etc. The Chapter does, however, provide for some legal commitments, including for as detailed in Table 8.5. Table 8.5: Selected elements of the ESA fisheries chapter (Articles 25 to 35) Key component Discussion The “precautionary approach shall be applied in determining levels of sustainable catch, fishing capacity and other management strategies to avoid or reverse undesirable outcomes such as over‐capacity and over‐fishing, as well as undesirable impacts on the ecosystems and artisanal fisheries.” (Article 32 (a)(1))

The precautionary approach is adopted as a mandatory component in determining the core elements of fisheries management. This is a more cautious science‐ and information‐based approach to fisheries management, especially where reliable data are not available. It is already supposed to be applied to the high seas and into EEZs for highly‐migratory species and straddling stocks under Article 6 of the UN Fish Stocks Agreement (1995). There is some ambiguity as to whether the precautionary approach under this IEPA chapter would apply to other stocks or whether these would fall under the more general norms of Article 5 of UNCLOS (1982). Despite this, importantly the text does make reference to negative impacts on ecosystems and the artisanal sector (the latter point may prove useful in cases where there is evidence that industrial fisheries, for example, are registering deleterious effects on local fishers livelihoods). The problem here is putting the adoption of a precautionary approach into practice when coastal states generally lack the means to do so. This serves to re‐iterate the importance of sustainable development issues, co‐operation and fisheries‐related investment in the negotiation of comprehensive EPAs. This provision does however offer a very strong argument in support of the proposed ecological access fee option detailed at ???

“A Vessel Monitoring System (VMS) will be set up for all ESA coastal and island States, and all ESA states will use a compatible VMS. Those ESA states which do not have a VMS will be assisted by the EC Party to set up a

This element makes the implementation of regionally compatible Vessel Monitoring Systems (VMS) a mandatory requirement. Importantly, the EC is obliged to provide assistance (presumably technical and financial) to any ESA state that currently does not comply with this requirement. The net benefits objective depends critically on significant upgrading of Seychelles enforcement capability – this is a useful

154 Council Regulation (EC) No 1528/2007 of 20 December 2007 155 This section draws upon Campling (2008b) – ICTSD. See this report for a direct comparison between ESA and Cariforum Fisheries Chapters.

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compatible VMS”. (Article 32 (b)(2). Emphasis added)

provision to support negotiations with the EU for dramatically improved assistance and support.

“[A]ll ESA coastal and island states, in conjunction with the EC Party, will develop other mechanisms to ensure effective Monitoring, Control and Surveillance (MCS) and the EC Party will support ESA states to put such an agreed system in place and assist in implementation”. (Article 32 (b)(3). Emphasis added)

Additional areas of Monitoring, Control and Surveillance (MCS) are asserted here and, as with VMS, the EC commits to support ESA states to set‐up and implement such mechanisms. Although, problematically, any initiatives here must first be agreed with the EC, which may be an infringement upon ESA state sovereignty in the application of MCS. ACP states should make sure that the scope of these mechanisms remain non‐discriminatory (i.e. that it applies equally to EU and other country vessels). This is another area of significant opportunity for Seychelles

“Discards reporting shall be compulsory. Priority should be given to avoid discards through the use of selective fishing methods. ... As far as possible, by‐catch shall be brought ashore. (Article 32 (b)(8) Emphases added)

The most important aspect here is the emphasis on the promotion of selective fishing methods. In addition, discards/by‐catch reporting appears as a mandatory requirement, which is important in improving scientific data for fisheries management, but in terms of the supply of by‐catch to local markets for human (or other) consumption the text is more ambiguous (i.e. this should occur “[a]s far as possible”). However, supplying by catch to local markets is far from necessarily a positive component in terms of sustainable development. Often, because they are cheap, by‐catch landings disrupt local markets. Also, when by‐catch are not reported by species (which is the case, for example, with non‐commercially valuable by‐catch made by EU vessels for landing in ACP countries), the coastal state does not know exactly what has been caught, which affects the quality of data and, at a later stage, management. Finally, by‐catch landed for local markets are often very poor quality (they have not been kept well refrigerated because space is prioritized for targeted species and more commercially valuable by‐catch), although it is known that Oceana has communicated well with EU purse seine crew to ensure that this wastage is normally avoided through better post‐harvest handling.

8.4.3 Coverage of other fisheries issues in ESA‐EU IEPA In addition to the key components of the ESA fisheries chapter, it is worth noting the fisheries aspects of Article 38, which is part of the General Provisions on Economic and Development Co‐operation. Several areas of co‐operation relevant to fisheries development are outlined under Article 38(2), including notably: (a) “Regional cooperation and integration to ensure trans‐regional coordination”; (f) “Research and development, innovation and technology transfer”; and (j) “Mainstreaming of environmental issues into trade and development”. The targets of these areas of co‐operation include “Private Sector Development, particularly Industrial Development, Micro‐enterprises, Small and Medium Sized Enterprises” (Article 38(3)(a)); and, more specifically, “Fisheries” (Article 38(3)(e)). These elements are simply outlined here as this study does not examine investment‐related aspects of IEPAs. An additional innovation in the ESA IEPA text is the annexing of a development matrix (Annex IV), including (among other productive sectors) fisheries. This outlines a set of suggested projects for EC funding that serve to: “Promote, and ensure sustainable utilization

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of fishery resources including fish farming development and market technical standards requirements”. Article 52 of the ESA‐EC IEPA on “Financial Undertakings” states that: The EC Party shall put at the disposal of the ESA financial assistance to contribute to implement the programmes and projects to be developed under the areas of cooperation identified in this Agreement and relevant chapters and under the detailed Development Matrix. (Emphasis added) As pointed out in a study commissioned by the UN Economic Commission for Africa (ECA), Article 52 is not “an unequivocal legal obligation on the EU to provide adequate resources; it is scaled down to an obligation to contribute resources towards implementation” (Mangeni, 2008: 33. Emphasis added). Despite this, it remains an important obligation both in terms of the general provisions of the agreement (including the development matrix) and the fisheries‐specific elements. The ESA development matrix has not yet been properly costed, perhaps because the as the EC wanted to hold‐back bargaining chips for comprehensive EPA negotiations. Moreover, it is not known whether or not the EC will (or is able to) commit funds other than those available under the European Development Fund. (EDF financing will flow to ESA – and all other ACP – countries under the terms of the CPA regardless of whether or not they sign an EPA.) 8.4.4 Fisheries rules of origin negotiations in ESA‐EU Comprehensive EPA By far the most controversial fisheries aspect of an ESA negotiation position for a Comprehensive EPA with the EU is rules of origin. Since it became public that the Pacific ACP were provided ‘global sourcing’156 RoO for processed fish products under HS code 16.04 and 16.05, which includes canned tuna and tuna loins, certain Mauritius government officials has been pushing for similar treatment within ESA for a Comprehensive EPA. The Mauritius position is probably inspired by the following factors:

1) Global sourcing RoO will reduce the dependence of Mauritius‐based processors on tuna supply from: a) transshipment flows from Port Victoria; and, b) the EU purse seine fleet in general.

2) This, in turn, will allow Mauritius‐based processors to secure the lowest ‘international’ price for their most expensive input, the tuna itself. It is widely reported by tuna industry representatives that the EU purse seine fleet charges a price premium on its tuna because it knows that the RoO equates to a captive market in the form of processing firms in ACP and GSP+ countries, without which they cannot utilize the EU tuna preference.157

3) It will allow Mauritius‐based processors to secure fish from other oceanic regions during low fishing seasons in the WIO, such as from the Western and Central Pacific tuna fishery which does not experience serious seasonality constraints.

4) It may encourage direct foreign investment in additional fish processing capacity in the Mauritius Seafood Hub as foreign capital will have an enhanced incentive – the

156 Otherwise known at the Change in Tariff Heading method, this allows PACP‐based firms to source fish from anywhere – regardless of vessel ownership, vessel flag/ registration, etc. 157 For overviews of this controversy, see Block and Grynberg 2005; Campling, Havice and Ram‐Bidesi 2007, see the latter as well on the positions developed by the PACP to support its push for global sourcing.

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EU trade preference, but without the restrictive RoO under the current terms of the Interim EPA.

5) Given the inevitability of preference erosion (see above), Mauritius would probably like to use the flexibility associated with global sourcing RoO to develop processing capacity to a sufficient level of firm‐ and, importantly, cluster‐level economies of scale so as to remain competitive in a post‐preference future.

There are, however, several problems with the position of Mauritius on this issue, both in general and specific to Seychelles interests: By far the most important is that the EU will simply not offer it. There are several reasons for this statement:

1) Global sourcing RoO were provided only and specifically to the Pacific ACP because: a) it was openly a ‘deal breaker’ in their IEPA negotiations; b) the PACP have historically (i.e. since Lomé I in 1976) been unable to source RoO‐compliant tuna, not least because the EU DWF is relatively inactive in their region; c) DG Trade considered that increased PACP processing capacity ‘would not have a significant impact on the EU processing industry. Existing capacity constraints in the Pacific will restrain exploitation of the opportunities’.158

2) The revised text of the PACP Interim EPA released at the end of 2008 includes caveats that implicitly limit its application to other EPA regions, including reference to compliance with the Western and Central Pacific Fisheries Commission (WCPFC). This legal ring‐fencing limits other EPA regions from applying the MFN clause contained in EPAs to push for global sourcing (the MFN clause in EPAs allows like‐for‐like treatment of all EPA regions vis‐à‐vis the EU).

3) Global sourcing RoO will erode the logic of the EU’s tuna trade regime (including preferences), as one of its most important commercial policy objectives is to provide support to the EU DWF. This is because EU purse seine ownership (and professional crew) originates from ‘disadvantaged’ and/or politically sensitive regions/towns within France (Concarneau and Brittany in general) and Basque Country (Bermeo), both EU Objective 2 regions; this is why the political punch of these interests is well above their economic weight. It should be noted that EU‐based fish processing employment is less and less important politically due to the outsourcing of labour intensive processes, including tuna loining. Therefore, if ESA were to obtain global sourcing – which it will not – then the reason for obtaining it – preferential market access – will probably itself disappear. Therefore, in this scenario, ESA would be faced with the paradox of being able to produce more RoO compliant fish products but without a preference to make them competitive in the EU market!

4) The extension of global sourcing RoO to another EPA region, such as ESA, will deepen the precedent set by the Pacific IEPA in EU trade negotiations with third countries, such as an ASEAN FTA. Similar to point 3, such a precedent would mean that an EU‐ASEAN FTA would completely undermine the existing competitive edge afforded to ESA‐based tuna processors. EU industry is aware of this issue and as such will lobby very hard indeed to block global sourcing for ESA.159

5) Even if global sourcing were provided, it would not significantly expand eligible source of supply. This is because: a) the EU fleet entirely dominants the WIO purse seine fishery; b) those Japanese purse seine that do fish in the Indian Ocean may not

158 DG Trade, July 2007: 2 159 Interview, EU industry representative, 2009.

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be able to supply ESA countries because of a historical ‘understanding’ between the Japanese DWF and the Japanese government that they will land their catch in Japan; c) many tuna fishing fleets – including purse seine and longline –have medium‐ to long‐term supply contracts with trading firms and thus are legally unable to supply ESA‐based processing facilities

In sum, even if ESA could agree on a common position on global sourcing, the political capital expended on seriously pushing for it will be entirely wasted, unless it is used as an aggressive forward position, which is eventually relinquished, so as to achieve a second objective. The Seychelles main proposal on reform of fisheries RoO within the Comprehensive EPA is:

1) An increase in the quantities available under automatic derogation. The exact quantities need to be decided and justified.

2) An increase in the value tolerance provision from 15 to 20 percent, including support for an EC proposal on the simplification of the notoriously complex value tolerance provision (see above).

To ensure that these proposals are sufficient to meet Mauritius needs, and thus achieve a consensus position, GoS should encourage Mauritius to assess its requirements within these parameters at least as a fall‐back position. It is however, likely that Mauritius will demand more. In light of this eventuality, GoS could start to analyze and test new methodologies that come as close to a win‐win as possible, and at a minimum assess the relative merits of a significantly increased automatic derogation and liberalized Value Tolerance provision. 8.4.5 Summary points and recommendations:

The deletion of the crew requirement in EU fisheries RoO means that Seychellois boat owners are able to utilize foreign crew if necessary. It also erodes the incentive for employment of Seychellois on EU purse seine vessels, but the terms of the EU‐Seychelles Fisheries Partnership Agreement (FPA) continue to assert employment of Seychellois. GoS should be careful to ensure that this clause is maintained in future FPAs so as to provide a mechanism for the up‐skilling of Seychellois crew.

The leasing/chartering clause may allow EU RoO‐compliant Seychelles fleet development without the expensive (and highly risky) purchase of vessels. GoS should investigate the practical applicability of this clause with European Commission authorizes (i.e. DG TAXUD and DG MARE).

The extended automatic derogation for canned tuna under the Interim EPA provides significantly increased flexibility over the prior allocation under the Cotonou Agreement.

The Fisheries Chapter under the Interim EPA appears to provide a firm commitment by the EC to support VMS and MCS capacity in ESA states. Considering the dual threats of IUU fishing in the WIO (mainly tuna longline) and incursions by sea pirates in and around Seychelles EEZ, a strong case can be made for serious levels of EC financial and technical support to the development of improved MCS capacity on the part of SFA and the Seychelles Coastguard (and perhaps the SDF, although this might be more controversial). Note that the same set of commitments are included in the EAC EPA Fisheries Chapter, which could be used to establish VMS on a sub‐regional level (i.e. along the lines of the FFA regional VMS model).

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GoS should continue to oppose global sourcing RoO as an ESA position in Comprehensive EPA negotiations.

GoS proposed simplification of the value tolerance provision, its expansion from 15 to 20 percent and an increase in the automatic derogation in the Comprehensive EPA. This will provide an important flexibility for the utilization of non‐originating fish during low fishing seasons for both IOT and processed fish produced by Oceana/Sea Harvest.

GoS needs to be prepared to sustain an evidence‐based case against Mauritius demands for global sourcing (several points are provided above to support this case).

Given Mauritius aspirations to expand its seafood processing capacity, GoS needs to be prepared to discuss alternative fisheries RoO methodologies that come as close to a win‐win as possible.

GoS urgently needs to develop and test proposed improvements in RoO beyond the value tolerance provision that will specifically benefit high value segments of fish processing (e.g. Ocean / Sea Harvest). To do so, some form of focused workshop might be necessary. It is proposed that the consultant take part in such a workshop when in Seychelles to present this report.

8.5 EU Sanitary and Phytosanitary (SPS) Measures A negative FVO inspection report in 2004 found serious deficiencies with Seychelles compliance with EU SPS measures. A follow‐up visit in 2006 was positive.160 The trade‐related importance of Seychelles meeting SPS requirements cannot be over‐emphasized. Several countries have been banned from exporting fish and fish products to the EU as a result of failings in inspections by the Food and Veterinary Office (FVO) of DG SANCO, most recently Fiji and Malaysia. The Fish Inspection and Quality Control Unit (recently transferred to sit under SFA) provides a professional and invaluable service. A detailed overview and analysis of the existing situation and proposed reforms to the Seychelles regime of fish inspection and certification of fish products for export was carried out in 2008. This was funded by the Strengthening Fishery Products Health Conditions in ACP/OCT Countries programme.161 Prior studies of the uneven application by the EU of SPS measures for fish – comparing Mauritius/the Seychelles and Thailand – are also available.162 Given the profound importance of meeting EU SPS measure, the recommendations put forward by Goulding and follow‐up SFP missions should be closely interrogated and implemented. In addition, it is understood that there is a new sectoral policy matrix in the pipeline (if not already implemented), for the measures to be implemented under the budgetary support terms of the EC‐Seychelles Fisheries Partnership Agreement (FPA). This matrix was not provided to the consultants, but it is believed that it covers sanitary measures amongst other things. The following points are not intended to contradict recommendations or developments included in these other sets of consultancy

160 Campling and Doherty 2007; Doherty and Campling 2007. 161 Goulding 2008 (under SFP project 59/03/07/SEY). Information on SFP is available here: http://www.sfp‐acp.eu/EN/index.htm 162 Campling and Doherty 2007; Doherty and Campling 2007.

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work. Six points are highlighted as urgent SPS concerns to be considered at a level high in GoS:163

1) The swordfish controversy 2002‐04 has had a profound influence on the thinking and behaviour of the Seychelles Competent Authority (CA), making it very conservative/risk adverse – for some, ‘More EU, than the EU’, for others, comparatively highly professionalized and very effective. Either way, it is certain that the Competent Authority is exercising extreme caution in meeting EU SPS requirements, which given the importance of fish exports to the EU is certainly an advisable strategy. However, despite increase in the minimal risk level (MRL) of cadmium in 2005 to 0.3ppm from 0.05ppm in swordfish imports by the EU (a six‐fold increase), the majority of the Seychelles semi‐industrial longline fleet continues to target other species (especially shark fishing and finning for export to Asia164) or is inactive. The highly negative outcome of this episode is that only two of twelve longliners continue to target tuna and TLS as a full time commercial operation (three of the vessels have been scrapped). (For analysis of investment and uprgrading options in this high value segment, see Section 9.3.)

2) Seychelles Bureau of Standards (SBS) is tasked as the official laboratory for the

testing of fish and fish products to meet EU SPS measures. Without the effective functioning or accreditation of SBS, Seychelles will not be able to export fish products to the EU. The main problem facing the SBS laboratory’s accreditation to the EU is the need to accredit tests to ISO standard 17025 on Competence of Testing and Calibration Laboratories – this requires the purchase of heavy metal testing equipment.165 This process has to be completed by 31 December 2009. The EU announced this coming need in 2005 so Seychelles has had plenty of time to comply. Funding to facilitate this has been committed by the European Communities and the South African National Accreditation Service (SANAS) will visit Seychelles to accredit the SBS lab with ISO17025. The problem is that the SANAS visit cannot take place until the EC funds have been provided to pay for necessary equipment, but these funds may not be available until the latter part of 2008.166 Therefore, after consultation with the SBS CEO, the relevant agency of GoS – probably the Ministry of Foreign Affairs – should approach relevant EC representatives to ensure that these funds are dispersed swiftly. If they are unlikely to be in place in time, Ministry of Finance should advance financing for the purchase of essential equipment.

3) A major challenge facing the Fish Inspection and Quality Control Unit (FIQCU) is

ensuring compliance with EU SPS measures by artisanal vessels. (FIQCU is already undertaking annual inspections of the domestic semi‐industrial longline fleet.) The FIQCU currently has a list of around 50 artisanal vessels that supply Oceana/ Sea Harvest and it is preparing an annual inspection programme. It is not know if FIQCU will have the capacity to undertake this important role as it is currently attempting to coordinate with fishers, which is a very difficult task in itself as not all fishers are members of the Fishing Boat Owners Association (FBOA). However, if it does

163 The following is based on consultant interviews, Seychelles 2009; Goulding 2008: 13 164 In addition, in January 2009, one vessel was fishing under a sea cucumber licence and another had been working on the JICA‐funded bait fish project since 2007. 165 This equipment will allow SBS to easily comply with EC standards of detection levels using Atomic Absorption Spectroscopy (a technique that assesses the concentration of a particular metal element in a sample). 166 The need for this equipment for SBS accreditation was identified in a COMESA‐funded consultancy by the German Federal Institute of Meteorology (PTB).

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transpire that FIQCU requires additional inspectors, GoS should ensure that funding is allocated to do this. If not, some fishers will not be able to export to the EU. Given the socio‐economic importance of artisanal fisheries to the Seychelles and the centrality of export markets in earning foreign exchange, this is an eventuality that must be avoided. Similarly, GoS should investigate a support programme with Development Bank Seychelles to allow fishers to upgrade their vessels to meet EU requirements if necessary (e.g. separating fish from fuel, compliance with food contact surface/ fibre glass decks).

4) FIQCU should start to charge a cost‐recovery user fee for provision of health

certificates of consignments of fish from foreign‐owned vessels (i.e. French and Spanish owned purse seiners, including those flagged by Seychelles). Representatives of these vessels have already been approached by FIQCU and they agreed to a user fee. A fee of USD50 per certificate was suggested, which seems highly reasonable, but FIQCU should first briefly assess whether or not this would provide for full cost recovery for its activities. Ideally, the fee should be higher than at cost so as to part‐ subsidize FIQCU activities with locally vessels.

5) Similarly, FIQCU should assess actual costs its annual renewing of approval and

inspection of Seychelles‐flagged purse seiners with a view to ensuring full cost recovery. The fee charged here (via vessel agents) is currently USD1,000. The consultants do not have comparative data on Competent Authority user fees in other countries, but the current FIQCU fee seems low. This is because of the advantage that these vessels have in flagging locally (and not steaming to the EU for inspection there). This recommendation combined with 4) may allow FIQCU to function without subventions by the Ministry of Finance.

6) It is believed that there are internal discussions on the possibility of moving FIQCU to

fall under the auspices of SBS. The rationale for this is unknown, but given the importance of responsive action by FIQCU to the specific needs of fisheries sector and the possibility that tying the two might encourage rent seeking (i.e. to maximize testing revenue), it is logical that it remain within the remit of SFA.

8.6 EU regulation to combat imports of IUU‐caught fish On 30 September, the EU Agriculture and Fisheries Council adopted the Regulation establishing a Community system to prevent, deter and eliminate IUU fishing.167 This will apply from 1 January 2010. In short, Seychelles exports of fish and fish products to the EU must comply with this regulation and GoS, vessels and processors firms have just over six months to prepare to implement the extensive measures detailed in this regulation. SFA is tasked with ensuring compliance of Seychelles exports with this Regulation.168

167 For a detailed overview, see EU Council, press release, 30 September 2008. Available at: http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/agricult/103161.pdf The full text of ‘EC Council Regulation 12083/08 establishing a Community system to prevent, deter and eliminate illegal, unreported and unregulated fishing’ is available at: http://ec.europa.eu/fisheries/cfp/external_relations/illegal_fishing/pdf/regulation_en.pdf 168 It recommended that relevant GoS officials read a comprehensive legal review of the IUU Regulation, commissioned by the Commonwealth Secretariat. See Tsamenyi, Palma, Milligan and Mfodwo (2008), available here: http://www.thecommonwealth.org/document/159719/184808/ec_iuu_report.htm

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One of the main tools of the regulation is the establishment of a certification scheme covering all imports of fishery products. The objective is to stop IUU caught fish and fish products entering into the EU. EU firms importing fish products will have to submit a statement issued by the processing company of the exporting country. This will have to provide traceability information linking the processed products and the fish used as raw material. This raw material will have to be accompanied by catch certificates validated by the flag state of the fishing vessel. The number of the health certificates and the approval number of the processing plant will be included on the statement to ensure a link with – and the implementation of – existing EU sanitary and phyto‐sanitary (SPS) measures. See Annex X for a practical guide to the regulation from the perspective of a very experienced tuna industry representative. If effectively enforced the IUU Regulation is likely to temporarily increase imported fish price in the EU because:

1) The downward impact on international prices of IUU supply to the EU will be taken out of the system (i.e. IUU fish is probably cheaper because vessels do not have the same level of operating costs as their non‐IUU equivalent);

2) Countries suspected of flagging or supporting the activities of IUU vessels and that are therefore unable to ensure flows of non‐IUU caught fish are likely to be taken out of supply chains until their certification process is up‐to‐speed.

On the latter point, it is likely that this Regulation will become, in effect albeit it not in design, a temporary form of discrimination (i.e. a non‐tariff barrier). This is because of the combination of two sets of factors:

1) Several governments and their domestically‐based exporting firms will not be sufficiently prepared to meet the requirements and it is likely that the EU will specifically target those countries/firms that are suspected of IUU activity and/or that represent important commercial competition for EU interests;

2) Representatives of the EU fish industry have indicated that EU Member states themselves may not be able to meet the highly complex certification requirements, but it is unlikely that the Regulation will be enforced so strictly in their case.169

Recommendations:

1) It is essential that GoS – led by SFA – undertake immediate measures to ensure that certification systems are in place for all vessels supplying the export‐orientated industry in the Seychelles.

2) The greatest challenge of this regulation will be providing compliant certification to artisanal vessels in the Seychelles. Given the constraint of time of only several months before the enforcement of the IUU Regulation, it is logical to prioritize SPS and, in turn, IUU certification of those artisanal vessels that have a record of exporting to the EU; the second level of priority should be applied to those vessel owners who express an interest in supplying EU‐centred supply chains and that have a realistic potential of doing so in the medium term; SFA can then proceed with certification of remaining vessels.

169 Interview, EU industry representative, Paris, March 2009. An example of a major EU state was given whose government agencies were reportedly not willing – or able – to take on the regulatory requirements inherent in the Regulation.

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SECTION 9 REVENUE GENERATION, UPGRADING AND INVESTMENT

This section does not address options for additional revenue generation from fishing access arrangements (e.g. fishing licences), these are detailed in Section 6 for purse seiners and 7 for longliners. Instead it focuses on onshore relationships. It divides the Seychelles export‐orientated fishing sector into four categories; the first three are already‐existing activities and are sketched in Section 2.1:

Section 9.1 is on the Port Victoria complex. This impacts all other elements of the fishing industry in the Seychelles as it is the first contact point for fish landings. We outline proposals for increased revenue generation from activities at the Port, but also for necessary investment for the purposes of upgrading the Port.

Section 9.2 is on IOT. It is the only large scale tuna processing facility in the Seychelles, and based upon the legally binding terms of the IOT Shareholders Agreement, it is likely to remain the only such facility. Therefore, analysis here focuses on how GoS can improve revenue generation from IOT and recommends areas where GoS can put pressure on to better ensure the economic survival of IOT.

Section 9.3 is on opportunities and constraints for the development of a high value fish processing (i.e. Oceana and Sea Harvest), which is intimately linked to the local fishing fleet.

For Section 9.4 a new issue is introduced, the sashimi‐grade value chain. This is introduced as a forward looking, potential area for development in the Seychelles. Much of this is speculative and depends upon actions taken by IOTC Members on ending the current exemption for longliners from the ban on transhipment at sea.

9.1 Revenue Generation, Investment and Upgrading in Port Victoria: Maintaining Status as the

Western Indian Ocean Purse Seine Hub 9.1.1 Enhancing revenue generation at Port Victoria – determining revenue

opportunities from the purse seine fleet using a centre of gravity model The attraction of other regional ports depends on the infrastructure and services provided as well as the distance from key fishing areas. While a port may have excellent facilities and offer good prices for tuna, if the port is some distance from fishing grounds at that time of the year then vessel owners will have to look at steaming costs and the loss of fishing effort time as well as port dues and bunkering costs, transhipment and licence fees. It should be noted that in addition to the costs of steaming time to regional ports there will be other costs to vessel owners. These include the opportunity costs of fishing days lost plus the additional costs of unloading and bunkering in regional ports, and any demurrage costs. These cost are not know, thus to avoid any risk of hitting the tipping point – which may lead to the displacement of the EU purse fleet from Port Victoria – GoS must err on the side of caution in considering greater rent extraction. The centre of gravity (or ‘barycentre’170) model indicates the additional costs over and above using Victoria, Seychelles as the main base for the EU purse seiner fleet. These data are based on information provided by SFA.171 Figure 9.1 illustrates the point. It uses logbook data for fishing

170 The point between two objects where they balance each other. 171 For an overview of the methodology applied see Lucas and Assan 2009.

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effort and catches submitted by the EU purse seine fleet averaged over the six‐year period 2001‐06. The modelling plots this data according to the centre of gravity (barycentre) of effort and catch by each quarter and overall. This period was chosen because it excludes El Nino events (e.g. 1997/8), which lead to fish migrating eastwards and would thus skew the results away from ‘normal’ fish flows. The basic point is that overall for this period, the barycentre for fishing operations was 192 miles northwest off Port Victoria, the second closest port being Diego Suarez in Madagascar at 599 miles.172 Figure 9.1: Centre of gravity model for Western Indian Ocean purse seine fishery – average quarterly and annual catch and effort barycentre across 2001‐06

Source: SFA

The consultants have complemented SFA’s work here with a set of economic assumptions on vessel steaming days. This measures (a) the additional costs in relation to fishing effort and (b) the additional costs in relation to catch location. The additional costs are based on the following assumption on the operations of the EU fleet: Steaming speed/day (nm) 312 Vessel cost per steaming day (€) 13,000 EU vessels 48

172 Lucas and Assan 2009: 1

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The costs per steaming day are based on typical average steaming costs per day for a French purse seiner. These costs are likely to be higher for the larger Spanish purse seiner vessels given that they tend to be larger and thus consume more fuel and that the higher purchase cost of these vessels (often called super seiners) means that returns need to be higher to pay off loans and depreciation costs are higher. Table 9.1 demonstrates that Victoria is the closest port to the barycentre for overall purse seine catch and effort and for the first, third and fourth quarters. The table also makes clear that the diversion costs if vessels do not use Victoria are negative/ insignificant in the second quarter averaged over the period 2001‐ 2006. This is because the centre of gravity for both catch and effort by EU purse seiners is concentrated in the outer northern periphery of the Mozambique Channel at the furthest distance from Seychelles. This explains why Diego Suarez is the second most important purse seine transhipment port in the WIO (see Section 2.2 for data on this). Nonetheless, it is clear that the main foci of fishing catch and effort by EU purse seiners, with the exception of the second quarter, is west and north west and north of Seychelles. Table 9.1: Estimated additional costs in steaming days of EU purse seiners using regional ports in the Western Indian Ocean

Total additional costs for EU fleet ‐ Effort (€)

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual (€)

Annual

(USD)

Dar es Salaam 1,322,000 44,000 1,126,000 1,662,000 4,066,000 5,569,863

Diego Suarez 650,000 418,000 894,000 1,142,000 2,268,000 3,106,849

Mombasa 1,286,000 2,000 990,000 1,556,000 3,830,000 5,246,575

Port Louis 1,588,000 910,000 1,866,000 1,884,000 6,248,000 8,558,904

Victoria ‐ ‐ ‐ ‐ ‐ ‐

Total additional costs for EU fleet ‐ Catch Location (€)

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Annual (€)

Annual

(USD)

Dar es Salaam 982,000 364,000 1,092,000 1,406,000 3,116,000 4,268,493

Diego Suarez 488,000 514,000 910,000 1,066,000 1,950,000 2,671,233

Mombasa 930,000 302,000 940,000 1,270,000 2,838,000 3,887,671

Port Louis 1,548,000 842,000 1,878,000 1,904,000 6,172,000 8,454,795

Victoria ‐ ‐ ‐ ‐ ‐ ‐

Source: SFA (2009) and industry interviews

As noted, these centre of gravity calculations are based on data provided by SFA and the average steaming costs were provided by an industry representative. There are some limitations. A more rigorous analysis which is beyond the scope of this study would compare port, demurrage and other costs as well as factors such as port efficiency, security and other factors of other regional ports when compared to the current base port for most EU purse seiners of Port Victoria. The following are overview points on competing ports:

Diego Suarez: the best competitor in geographical terms (i.e. barycentre), good natural harbour, dry dock, but poor infrastructure, wrecks in harbour, repeated political crises in 2000s.

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Dar es Salaam: low cost but inefficient tuna transhipment capacity, port congestion, the presence of IUU longliners thus there are market access issues regarding compliance with EU IUU regulation from 1 January 2010, proximity to no‐go zone due to Somali piracy problem, no significant domestic tuna processing capacity.

Mombasa: low cost but inefficient tuna transhipment capacity, the port is terribly congested, only space for one purse seine on quay serving the loining plant, IUU issues (as in Tanzania), seriously impacted by Somali piracy.

Port Louis: way off main barycentre of catch and effort and thus not a serious contender for purse seine transhipment, but relatively low cost tuna transhipment capacity, Mauritius Seafood Hub means high fish demand and price from one cannery and one loining facility (e.g. Princes Tuna Mauritius consistently pays a higher price than IOT even with freight differentials) and investment incentives and infrastructure, including substantial fish cold store capacity.

Port Victoria’s geographical luck at the barycentre of the fishery, its (albeit expensive) efficiencies such as turnaround times on vessels, political stability, combined with the transaction costs of the fleet relocating to other ports, means that the Seychelles continues to be in a solid position. Another limitation to the values detailed in Table 9.1 is that there is no evidence included on the proportion of days at sea (steaming days) that are actual fishing days. If these were included then the costs of diversion would be even greater. However, calculating actual earnings lost to vessels through the inclusion of lost fishing days is methodologically very difficult for various reasons and it is thus not a base for sound evidence‐based policy analysis. The annual totals in Table 9.1 depict minimum annual costs to the EU fleet of relocating to alternative ports in the region. Given the profound importance of this fleets’ activities to the Seychelles economy, to be on the safe side these values should be seen as a ‘tipping point’ – i.e. the maximum additional level of revenue extraction. In addition, while there are possibilities for increased revenue generation from EU purse seiner activities in Port Victoria, the consultants believe that this should be set firmly in the context of:

1) The negative effects of piracy on EU purse seiner profitability due to reduced fishing opportunities (the extent of the WIO that can be safely traversed) and increased insurance costs.

2) Maintenance and extension of port quays available to the tuna fishing industry so as to maintain and enhance Port Victoria as the premier tuna transhipment port in the WIO with its profoundly important spin‐off benefits to the economy (i.e. the provision of goods and services to purse seiners and reefers, and fish supply to IOT). The rationale being to ensure the long‐term and sustainable intersection of the Seychelles with the EU fleet.

3) Improvements in onshore efficiencies, including better government‐industry relations, resolving disputes around Land Marine’s monopoly over the Commercial Port.

4) More effective and/or competitive provision of goods (e.g. chandlery) and vessel services (e.g. marine electronics).

9.1.2 Revenue generation option at Port Victoria – Tuna transhipment/landing fee One of the most straight forward mechanisms for extracting additional revenue from the tuna industry is to increase and extend the current fee applied by Seychelles Port Authority (SPA) on volumes of fish transhipped through Port Victoria. At present this fee works as follows:

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Fee basis and cycle Fee

1st 30,000mt of fish transhipped US$ 3 per mt

2nd 30,000mt of fish transhipped US$ 2 per mt

3rd 30,000mt of fish transhipped US$ 1 per mt

Upon reaching the volume limit of the 3rd tranche (i.e. a total of 90,000mt), the charge starts from the beginning of its cycle (i.e. at US$3/mt). Previously, a flat fee of US$2/mt was charged, this was then raised to US $4/mt in order to pay for improvements at Tuna Quay No. 2. Reportedly, IOT failed to consistently pay this last fee and the EU purse seine fleet strongly objected. Consequently, the fee was changed to the US$3‐2‐1 system outlined above. Our recommendation for reform of this system has three components:

1) Extend the fee to both transhipment and landing of fish by foreign‐owned boats.173 A short discussion on negotiation issues with IOT on this proposal is provided below in Section 9.2.2.

2) Increase the fee in two stages: to US$4/mt for the first year only and US$6/mt from then onwards. GoS must be clear that the US$6/mt fee will be frozen for at least five years to ensure investor security and facilitate financial planning by purse seine companies (these firms normally plan over a 5‐year cycle). The staging (from US$4 to 6) is to allow the fleet to recover from poor fishing years in 2007/08 and to provide a year to improve on the reducing the incidence of piracy in the WIO. Given that the centre of gravity (barycentre) model shows that this increase (compare Tables 9.1 and 9.2) is no way near the purse seine fleets’ ‘tipping point’ (i.e. a financial push to fleet relocation), we consider this proposal to be safe in that regard.

3) 50 percent of the transhipment fee should be dedicated exclusively (hypothecated) to port improvement to the primary benefit of the operations of the industrial tuna fleet and IOT. We use a clear percentage‐based system for hypothecation so as to exclude any possibility of dispute regarding allocation. If the 50 percent proposed hypothecation results in minor loss of GoS revenue it will have a positive impact because: a) it shows to industry that GoS is serious about port improvements; b) it demonstrates a degree of cost sharing on behalf of GoS. Discussion on the administration of this hypothecated fund is provided below in the section on investment and upgrading (9.1.4).

This entire process should be openly and transparently announced to all industry players (i.e. IOT and EU purse seiner fleet).

173 We define foreign‐owned as less than 51% ownership by Seychellois nationals resident in the Seychelles for at least 5 years. Note that this explicitly does not include Seychelles‐flagged vessels owned by foreign interests.

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Table 9.2: Tuna transhipment/landing fees – actual and potential using flat fee and higher rates 2005‐07174

2005 2006 2007

Actual tuna transhipment fees collected by SPA (in SR)* 5,997,134 2,980,117 2,520,855

Actual tuna landing fees collected by SPA (in SR)*175 545,965 N/A N/A

Total actual fee collected (in SR) 6,543,099 2,980,117 2,520,855

Total actual fee collected (in US$)** 1,176,816 542,826 375,686

Actual volumes of tuna transhipped and landed in Port Victoria (in mt)***

338,925 369,012 220,845

Estimated revenue if flat US$4/mt fee applied to landing/ transhipment (in US$)

1,355,699 1,476,048 883,380

Gain on actual fee (in US$) 178,883 933,222 507,694

Gain on actual fee (in %) 15% 63% 57%


1,694,625 1,845,060 1,104,225

Gain on actual fee (in US$) 517,809 1,302,234 728,539



2,033,550 2,214,072 1,325,070

Gain on actual fee (in US$) 856,734 1,671,246 949,384


* Based on SPA income statement for the years ending 31 December 2006 and 31 December 2007 (2008 was not made available to us). ** Converted using annual average SR‐US$ exchange rate (SCR/US$ 5.56 in 2005; 5.49 in 2006; 6.71 in 2007) *** SFA database

Notes: a) It is not known why the actual fee collected is 2005 is so close to the estimated total flat fee for 2005 at US$4/mt. This may be because the prior US$4 flat fee was applied in that year. b) The 2007 drop in transhipment fees collected is due to very poor fishing in that year (i.e. reduced total volumes of fish transhipped). But it is not known why 2006 fees declined so severely when total volumes transhipped were similar, it is assumed that this was when the US$3‐2‐1 system was implemented.

9.1.3 Revenue generation option at Port Victoria – Port dues The Seychelles Port Authority has recently proposed an across the board 60 percent increase in all port dues.176 Despite repeated requests by the consultants, we were not provided with an SPA strategy document that justified these increases, as such we can only assume that the increases are arbitrary and recommended without consideration of their potential impacts on economic activity.

174 Note that the consultants repeatedly requested SPA to provide additional disaggregated records on its administration of the tuna transhipment fee. These requests were not followed through. As a result we cannot estimate what % of the fees collected fell under which heading of the US$3‐2‐1 system. We recommend that Ministry of Finance formally investigate SPA systems to see if actual fee payments correspond with volumes transhipped. 175 Note that tuna landing fees were collected by SPA from IOT in 2005. However, based upon the low values and interviews it is believed that not all were collected and/ or the 3‐2‐1 system was introduced in 2005? 176 Lt. Col. Andre Ciseau, ‘Revision of port and harbour dues and introduction of new dues’, PowerPoint presentation, October 2008

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This is problematic as GoS should be pursuing a joined‐up strategy in its relations with the EU purse seine fleet, not least given the importance of this fleet to the inflow of port dues, see Table 9.3. Note that this table does not provide the full range of dues paid by purse seiner‐related activity (i.e. total purse seiners, reefers and supply vessels calling at Port Victoria). This is because of the use of different headings across the two SPA databases made available to the consultants; at a minimum it excludes Pipeline Dues and Maritime Safety Dues. The table does however capture a large majority of dues collected via purse seine‐related activity, the data demonstrates the importance of the tuna fishing fleet to SPA income. Most important, port dues should not unnecessarily contribute to a ‘tipping point’ (i.e. the point at which there is vessel diversion to other ports) for purse seiner activities in Port Victoria. While port dues are very low – having declined in recent years, despite the rise with inflation and/or devaluation – it is thus imperative that SPA only increase them having fully considered all implications. In addition, SPA has not provided any information on how this increased revenue will be spent. Once again this raises the need for the establishment of a Fisheries Industrial Intelligence & Analysis (FIIA) Unit within the SFA, which would assess various GoS (and other) actions that impact the export‐orientated fishing and fish processing industry. In other words, a coherent and joined‐up policy approach is essential. The consultants recommend SPA to identify dues that are not specific to the purse seiner fleet so as to mitigate against discriminatory practices (i.e. dues with disproportionate effects on the industrial fishing sector). Instead, the focus should be on increasing revenue from dues that are applied to all types of vessels in the port. Given the lack of information supplied to the consultants we are able to provide more specific points on port due increases beyond five broad recommendations:

1) Port dues are currently very low and there is certainly scope for increases.

2) GoS should ensure that port due increases do not disproportionately penalise the EU fleet (including reefer and supply vessels), because these activities are the singularly most important contributor to SPA income generation.

3) Linked to point 2), the extent of port due increases should not penalise purse seiners for staying in port longer (i.e. time‐based charges). This is because it is not in the economic interests of these vessels to stay in port, their interests are the precise opposite (i.e. to maximise days spent at sea

4) SPA should consult more extensively with port users in policy development as this will better allow the identification of opportunities and constraints.

5) In the context of the prior four points, SPA needs to be able to justify precisely why and which dues should be increased.

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Table 9.3: Identifiable purse seine‐related dues collected through tuna landing/transhipment activity as % of SPA total, 2005‐07* Year Activity Port dues Berth dues Pilotage Towage Berthing/

unberthing Hire of

motor boats Total Total SPA

revenue** Total SPA income from dues (in SR)

3,341,842 ‐ 2,775,107 6,054,935 1,132,250 671,900 13,976,035 55,235,204 2005

% dues from estimated PS activity

37% 100%*** 27% 23% 44% 42% 49%

Total SPA income from dues (in SR)

3,373,005 3,823,134 2,899,471 7,609,387 1,065,500 678,200 19,448,697 51,436,430 2006


42% 70% 30% 19% 52% 42% 37%

Total SPA income from dues (in SR)

3,203,511 3,181,645 2,429,779 5,311,423 865,250 432,000 15,423,608 50,240,899 2007


35% 67% 27% 22% 50% 46% 37%

Source: SPA income statement and SPA port dues database

* Reefers and supply vessels assumed to be servicing purse seiners rather than longliners, although this may result in slight over‐estimates where, for example, service vessels occasionally come in to port as part of longliner operations. ** This column is included here for comparative purposes only. We do not show calculations for % of purse seiner‐related activity to total SPA revenue because we are unable to isolate all dues paid by purse seine‐related activity (e.g. pipeline dues). ***Anomaly: SPA Income Statement has no entry for berth dues in 2005, but the item is recorded in a separate SPA database on dues collected by vessel type.

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9.1.4 Investment and upgrading in Port Victoria – a hypothecated fund for port

maintenance and development If the system of a flat US$4/mt fee had been maintained and effectively applied, GoS would have extracted an additional US$1.6 million in revenue for the period 2005‐7 (this would have totalled US$2.5 million if a US$5/mt fee had been applied). As noted in the last section, we recommend that GoS applies hypothecation to 50 percent of all transhipment/landing fee income for exclusive use in essential port improvements. In order both to provide the payers of this tax a degree of ‘comfort’ (and compensation) and to ensure that port improvements benefit the fishing sector (and are not captured or manipulated by other vested interests), this hypothecated fund should be managed by a committee consisting of public (50%) and private (50%) sectors. It could include representatives of SFA, SPA, SEPEC, Ministry of Finance and of, for example, IOT, ORTHONGEL, ANABAC, OPAGAC, Land Marine and Hunt Deltel. Each committee member may have one other person present for technical inputs. Given the focus on fishing, the SFA representative would chair the meeting. His or her vote would be casting in the event that a consensus could be achieved. The rationale for having a small committee representing 50% public and 50% private foreign interests is to: a) encourage consensus building around actual needs of the export‐orientated sector; b) keep the committee effective and highly professionalised. This committee would decide upon allocation of hypothecated funds for port improvement for the first 10 years of the implementation of the proposed flat fee. After which, GoS will allocate the (still strictly hypothecated) fund without compulsory foreign private sector inputs. This will allow GoS policy space when the most important port improvements relevant to IOT and the EU purse seiner fleet have been decided upon (i.e. GoS might want to allocate part of the fund for domestic fleet, other forms of processing and/or a longline quay). Based upon extensive discussions with government and industry in 2006 and 2009, the priorities for Port Victoria would probably be: a) construction of new quay space for purse seines; b) repair of the existing industrial port quays. If this was agreed to, work would probably be scheduled in this order (i.e. construct new quay, then repair existing) so as to minimize disruption to activities at the port. The fee could possibly be used as leverage on a loan to undertake this construction; it is believed that this was the approach used for Tuna Quay No. 2. The main risk associated with this entire proposal is if the EU fleet shifts en masse to another ocean due to the incidence of piracy as this might leave GoS with a commitment to pay loans for port improvements. Note that it is widely recognised by industry and several government representatives that the 2006 Integrated Port Development Plan was overly ambitious and ignored the realities of the sector. A major reason for this failure appears to have been poor consultation with industry representatives by the second ‘executive’ committee, which overrode the work of the initial port development committee (which did include private sector representation). Government bureaucrats in any country generally do not have the knowledge or experience to plan such huge developments alone; however, of course, GoS must always ensure that any major infrastructure project of this scale is undertaken in the sustainable development interests of Seychelles. 9.2 Revenue Generation, Investment and Upgrading in Canned Tuna Production Section 2.1 provided an overview of the ‘IOT Production Complex’ and Section 8 highlighted several cross‐cutting issues that affect access for IOT products to the EU market. This section addressed areas where GoS can make interventions to improve net benefits to the Seychelles in its relationship

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with MW Brands. The focus is on policy options to improve IOT productivity, maintain and increase employment of Seychellois, and increase revenue to GoS. Policy options are complemented with analysis of negotiation issues, especially possible reactions by MW Brands and suggested responses by GoS. It is very important to note that one major aspect that the Caillart and Henry report (2008) failed to account for were indirect benefits to the economy – including the volume and frequency of ocean‐going sea freight and the use of IOT (i.e. Heinz then Lehman Brothers) in the leveraging of loans to GoS through the provision of letters of comfort. 9.2.1 GoS‐MW Brands relations This report does not provide recommendations on how GoS could or should develop lines of negotiation with MW Brands (MWB) regarding settling prior disputes (i.e. the GoS ‘reconciliation’ process led by the Ministry of Finance). These discussions and associated GoS positions are already well evolved. It is known that GoS has put its relationship with MWB under serious critical scrutiny. The findings of the confidential report commissioned by the World Bank (Caillart and Henry 2008) were controversial, these include:177

A generous labour subsidy: Unemployment Relief Scheme rebates to employ Seychellois workers, costing roughly €2 million per year.178

Discrepancies in claims by IOT for the URS rebates.

Unfavourable contractual arrangements for advance payments by IOT for future supply of electricity by PUC usage. This Agreement was problematised due to very high oil prices in 2008, and cost an estimated €3 million per year.179 MWB’s position is that this Agreement committed PUC to supply an agreed volume of kw based on the value of its advance to GoS. GoS position is that the arrangement was concluded when PUC supplied the value in kw of MW Brands loan.

A highly controversial and wholly inappropriate one‐off ‘competitiveness rebate’ awarded by GoS to IOT based on the evidence of an in‐house IOT (i.e. MWB) benchmarking exercise. The benchmarking exercise was reported by Caillart and Henry (2008) as being faulty in the favour of MWB. In fact, they concluded that ‘under the price and tax conditions prevailing in 2007, IOT products are economically competitive with Thai products without GoS subsidies’.180

The consultants’ discussions with MWB raised the issue that Caillart and Henry’s findings may have been inaccurate and that several areas of their analysis were the business of MW Brands and not covered by GoS shareholding of IOT. It should be emphasised that this report has generated a high degree of bad feeling on both sides. As such, if GoS still desires to pursue reconciliation, it is recommended that it sits down with representatives of MWB to discuss the accuracy of the data on which the GoS reconciliation position rests.

177 Various official meeting minutes and correspondence; Caillart and Henry 2008; Tomkinson and Nasse 2007. 178 Note for SFA review: Have GoS contested ‘over payments’ been paid back? GoS still pursuing it? 179 Note for SFA review: Was an agreement reached re: Afif’s letter stating that the MWB loan was paid off with the value of the electricity, rather than MWB argument that the volume of KW was the agreement? 180 Caillart and Henry 2008: 6.

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From the view of the consultants, it will be considerably more productive for GoS to focus more on what can be developed in the future rather than emphasizing extraction of perceived losses because of prior negative agreements and outcomes. Our rationale for this point is seven‐fold:

Continued attempts by GoS to draw‐back prior payments, claim unpaid ones and/or renegotiate the electricity agreement will be a drawn‐out affair costing valuable personnel hours, money (e.g. legal advice) and diplomatic capital. All of which probably only for limited gains. Our recommendations for new revenue streams could be implemented now (see below and above).

Negative outcomes from prior GoS arrangements with IOT do not all appear to hold MW Brands legally culpable. Instead they represent the highly unequal structure of negotiations between ‘partners’, with MWB (a profit‐driven entity) unsurprisingly trying to extract as high concessions as possible from GoS.181

A high level dispute with MWB may result in additional or alternative investors turning away from the Seychelles (including in the tuna industry) and may even lead to media reports on politically highly sensitive information.

MW Brands is one of the main players in EU canned tuna markets, with ownership of major brands in multiple import markets. It is highly unlikely that GoS will find a serious alternative player to replace MWB’s marketing power in the highest value canned tuna market in the world (the EU).

Therefore, GoS should return to viewing MW Brands as an essential ‘partner’, but one that must be effectively monitored within the context of a system of regular review and checks and balances to avoid re‐occurrences of prior unfavourable arrangements. In other words, GoS emphasis on relations with IOT/MWB should focus on transparency and the laying of a foundation for ‘a new start’.

Finally, and perhaps most important in terms of the future, given the non‐equitable outcomes of GoS‐MW Brands negotiations in recent years, MW Brands will be keen to start afresh, not least to avoid negative publicity (NGOs, etc) and to ensure smooth running of a highly strategic factory and probably reasonably profitable (i.e. IOT). Therefore, GoS may have a minor advantage in that MW Brands might be willing to accept reasonable GoS demands so as to draw a line under prior problems and current poor relations (i.e. tuna landing fee and SSF contributions).

GoS must try to ensure, as far as it is able, that IOT is prepared to survive economically when the erosion of the EU tuna preference occurs. This will require constructive and progressive relations between GoS and MW Brands, which continued disputes are likely to sour further. Preference erosion is inevitable, probably within the next ten years. Therefore, GoS policy focus should be on the facilitation of the survival of IOT (or a processing arrangement with an alternative investor) in the ‘post‐preference’ future. This should not include provision of additional subsidies to IOT’s operations, unless there is a proven need.182

181 The major lessons from these outcomes are: a) that GoS should not rely so heavily on individual opinions within its various government agencies (however politically senior); b) instead, negotiations of such importance to the country should be discussed among a range of informed GoS ministers and senior officials (e.g. various evidence seen by the consultant indicates that several GoS staff working on IOT were not provided the full picture, thereby impeding the efficiency of their work); c) short‐term crisis management (i.e. cash advances to Ministry of Finance in the case of the PUC electricity deal with IOT) must be set in the context of medium‐ to long‐term consequences. 182 A needs analysis would require the availability to GoS of fully audited accounts of relevant MW Brands operations; that is, not just IOT accounts and certainly those of ‘MW Brands Seychelles’, a subsidiary of MW Brands (France) that is believed to play a central role in facilitating transfer pricing from Seychelles. These accounts would be used with a range of other

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Instead, where government action is desirable and feasible, GoS should focus on facilitating IOT’s economic survival. For example, through reacting quickly and effectively to mediate any new barriers or problems that face the factory (e.g. the new EU IUU regulation) or to reduce existing ones (e.g. in Port Victoria). Also, as 40 percent shareholder, it should challenge IOT to improve its levels of ‘competitiveness’ in preparation for the post‐preference future (see below).

In December 2008, government owned shares in IOT were transferred to Société Seychellois d'Investissement (SSI) a newly formed, 100% owned government parastatal. SSI is a holding company set up to coordinate GoS participation in enterprises with public ownership such as IOT. SSI will thus place a key strategic role in GoS relations with MW Brands over IOT. As such, the SSI Chairmen and Directors are faced with an important work programme and a critical set of decisions. If a SSI board member has possible conflicts of interest, such as through the provision of goods and services directly or indirectly to IOT, then these should be openly acknowledged and considered in decision making by all other board members. In short, GoS cannot afford to repeat the mistakes of the recent past wherein the most powerful GoS personnel in the room pushed through arrangements that were not necessarily in the best interests of the Seychelles. Evidence‐based decision‐making should be an essential component of SSI’s work in relation to IOT. Negotiations with IOT/MW Brands As MW Brands makes clear in an overview of its company culture and strategy: ‘companies that are more flexible, more opportunistic, and more mobile will flourish’ in the current recessionary period. This is in the context of MWB’s long‐term strategy of providing ‘the best products at the best price to our consumers as well as on delivering the best financial performance within the global business categories to our shareholders’.183 The implications for IOT are clear and unsurprising: unless it is a profitable enterprise MW Brands will not be able to justify its involvement to its shareholders and relocation will become inevitable. If this were to occur, a new investor would be sought to buy‐out MW Brands’ 60 percent share of IOT – this would be an important element for MWB because it would want to maximize returns on investment. Table 9.4 outlines MWB’s self‐summarized company strategy184 and provides implications for GoS interests.

sources to inform GoS decisions through analysis of costs/ benefits, net foreign exchange gains/ losses, employment generation, and wider socio‐economic impacts (e.g. on sea freight costs and frequencies). 183 Taken from http://www.mwbrands.com/company‐culture‐and‐strategy 184 Taken from http://www.mwbrands.com/company‐culture‐and‐strategy

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Table 9.4: MW Brands company strategy and implications for Seychelles

MWB Company Strategy Implications for Seychelles

Optimize our cash flow management. This is vital during a recession and it will ensure our longevity.

GoS has played an important part in helping MWB to achieve this objective through several sell to lease‐back arrangements. This allows MWB to maximize cash flow and reduce the incidence of debt in its internal accounts.

Become a successful team through mastering aggressive cost controls, which is made possible through the use of efficient tools and good processes.

GoS has already had firsthand experience of this strategy (i.e. electricity agreement). But this could also be turned to GoS advantage through requesting IOT management to produce a Ten‐year strategic plan (see section 9.2.5).

Reinforce our organic growth, which relies on our demand for the best quality and on our innovation policy.

IOT has not been the focus of product MWB innovation except for the new ‘no drain’ can. GoS should work with IOT management to facilitate the production of higher value product types (see section 9.2.5).

Continuously improve our ability to produce at the lowest cost within our industry through our integrated production model.

Given that MWB recently sold its 36% shares in the Cobrecaf purse seine fleet, it is unclear how MWB is pursuing this element in relation to fishing in the WIO. (But it does own vessels operating off West Africa which supply its Ghana factory).

However, IOT is obviously a central component of MWB’s integrated model through the ability to procure a regular flow of high quality canned tuna for its various brands.

Implement a workplace and policies that attract and retain the talent that we need. We capitalize on team work and entrepreneurship.

IOT has provided a reasonable level of training to its workers to date. GoS should request IOT to show how it intends to improve this for Seychellois line workers and technical/ management staff (see section 9.2.5).

Expand our geographic presence through acquisitions or through new partnerships.

Seychelles is already an important component here. GoS should be cognisant of the importance of IOT’s location to its ‘global oceans’ sourcing strategy (i.e. it currently procures product from throughout the world, which allows MWB to: a) shift production capacity depending upon relative fish price; b) ensure supply in case one factory/country suffers problems).

Maintain a steady high level of performance. Our company has gone through a period where the cost of raw materials increased dramatically. This has highlighted the need to anticipate future events and make sure we act with responsibility and with concern for our environment.

This again implies that IOT is a central component of the MWB company strategy. IOT’s location allows it to procure fish at a low price as it pays a fob rather than a cif price. (In fact, IOT’s low price is a common compliant of purse seiner representatives.)

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9.2.2 Enhanced revenue generation from IOT185 Our following recommendations on extraction of additional revenue from IOT’s activities are based upon the following:

We assume that IOT is a profitable factory, at least when it is producing close to capacity, and that transfer pricing allocates the majority of profits to MWB in Paris.

The full renegotiation of the Shareholder’s Agreement would be too lengthy and complex. Besides, GoS will always be on the back foot because it will not have access to same range and quality of information as MWB.

Therefore, we recommend three main incremental gains – implementation of a tuna landing fee, simplification of shareholder dividends formula, and IOT payment of employer SSF contributions. Before moving to these proposals, a note on IOT‐MWB transfer pricing. A note on transfer pricing

According to MW Brands, the purpose of MW Brands Seychelles (and Heinz Seychelles before it) was to facilitate the €34 million loan advanced by H.J. Heinz to IOT for the 1997 Diamond Project.186 As a shareholder, GoS became responsible for paying off 40 percent of this loan. However according to calculations in the most detailed report on IOT to date, 187 the entity also serves as a transfer pricing mechanism.188 It is assumed that the workings of this arrangement have been understood by GoS for many years and that it was a negotiated concession by GoS in 1995. The consultants believe that transfer pricing is at the centre of the IOT production model. We also believe that should this option be removed, MW Brands’ perception of Seychelles as a ‘competitive’ site of production will decline substantially. Caillart and Henry point out that the MW Brands factory in Ghana is probably not involved in transfer pricing. This may be the case (although better evidence would be required to demonstrate it), but it does not take into account the structural costs of Seychelles diseconomies of scale, relatively expensive labour (although this has reduced since the floating of the Rupee, see below), and more expensive fish and freight costs when compared to Ghana. 9.2.3 Enhanced revenue generation from IOT – tuna landing fee Section 9.1.2 outlined our recommendation for improving steady GoS revenue generation from IOT and the EU purse seine fleet through the implementation of a flat transhipment/landing fee per ton of tuna. A flat fee of US$4 (rising to US$6) per ton should be charged for all fish transhipped and landed by vessels that are not 51% or more owned by Seychelles nationals. This can be justified to IOT based upon external pressure from the IMF and the EU because the current arrangement could be considered as an indirect export tax (i.e. goods exported receive less favourable treatment). Note

185 This study does not address the Tuna Logistics Service Agreement with IOT because the arrangement is highly opaque and insufficient reliable information was available. 186 Investments associated with this project increased IOT’s daily production capacity from 100 to 350 metric tons of whole tuna. 187 Caillart and Henry 2008 188 Transfer pricing has been a common theme in the literature on multinational corporations since the 1970s at least. Transfer pricing is historically very common in joint ventures in developing countries, and also in the developed world, but there it is more commonly used as a tax avoidance tool. The IOT‐MW Brands Seychelles model is certainly a textbook case of transfer pricing in its form.

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that a ban on export taxes is a key EU demand and point of contention in ESA EPA negotiations and should in fact be resisted by ESA. Nonetheless, GoS could cite this as a source of pressure for the implementation of a landing fee. The proposed landing fee was informally raised in an interview with MW Brands CEO. This was framed in conversation by the consultant as a ‘win’ for MW Brands because the landing fee would be hypothecated for investment in port Victoria (thereby speeding‐up the fleet and IOT’s efficiency and turnaround times, see above). The consultant then stated that this was also a probable demand by the IMF and/or the EU in the wider context of economic liberalization reforms. The CEO’s response was surprisingly non‐hostile. The consultant’s interpretation was that this response indicated that GoS implementation of a landing fee might be accepted without significant dispute. 9.2.4 Enhanced revenue generation from IOT – simplifying IOT Shareholder dividends The IOT Shareholders Agreement calculates annual ‘profits’ to be paid to signatories using a complex method using a statistical equivalent case (SEC) formula. Tomkinson and Nusse (2008: 16) provide a succinct and accurate explanation of this method:

IOT sells numerous different products. [Therefore] to establish a simplified and uniform way of determining the aggregate number of product sold, IOT introduced the concept of SEC. A SEC is defined as a case of 48 cans each containing 185 grams net weight and 135 grams fish fill – the difference being products such as olive oil, vegetable oil or brine [or other species189]. The number of SEC sold will form the basis of IOT’s “notional” profit. IOT makes use of SEC in order to quantify a wide range of different products by using one unit to express its volume sold. In terms of management accounting, this is an acceptable way of quantifying output.

The SEC method first appeared in a 1998 Amendment to the original 1995 Shareholders Agreement. The GoS imperative at the time is believed to have been to limit public exposure to risk should IOT be non‐profitable. As such, within the arrangement capped dividends (or ‘guaranteed profits’)190 paid to all shareholders based on SEC are €1.75 million. As 40 percent shareholder GoS consistently receives (a capped) €0.7 million.191 Profits and retained earnings are used to service the Diamond Project loan, which will probably not be repaid until 2017. The SEC dividend formula is overly complicated and should be simplified to reduce the potential for disputes in the future. Moreover, the formula should better reflect actual market value through species differentiation (i.e. percentage of canned yellowfin) and sales of innovative products if successful (e.g. perhaps the new ‘no drain’ canned tuna). Internal government discussions for reform have included the possibility of the removal of the guaranteed profit mechanism so that both shareholders benefit from what a GoS official perceived as the ‘real profit’ (i.e. actual turnover less actual costs). A problem with this proposed formula is that it ignores the fact that MW Brands is an integrated company of which IOT is only a component part. It’s ‘real profits’ must therefore take into

189 Note for SFA review: Yellowfin covered in SEC agreement? Upon reviewing available documentation, it wasn’t clear. 190 This was introduced within the IOT Fish Requirement Agreement (1995). 191 The SEC dividend was US$ 0.50 in 1998. It was agreed to be revised upwards to US$ 1.2 per case in 2003. Payment was converted to Euro (€1.2 per case) in 2005, this benefitted Shareholders because of the strengthening of the Euro to the US dollar, but the actual reason for the shift was because shifted its working currency. (Multiple interviews 2009; various official meeting minutes and correspondence; Tomkinson and Nusse 2008; Caillart and Henry 2008.)

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account a wide range of factors, including costs incurred from the 2006 take‐over,192 advertising and product innovations. An expectation for a large firm like this to sell to itself at market price is unrealistic, not least because an economic strength of MWB is its integrated nature. In addition, even if the sharing of ‘real profit’ were agreed to, the terms of any such agreement would also of course involve risk sharing. Thus GoS could be exposed to losses should IOT become unprofitable (note recent negative trends such as the 2007‐08 shift in production from IOT to MWB’s plant in Ghana, and the current economic impacts of piracy on supply and IOT production). Economies of scale are a central component of profitability in the food canning industry globally.193 If there is a shortage of tuna supply, IOT would not be able to run profitably because of reduced production volumes.194 From a business perspective, MWB would probably absorb these losses (i.e. cross‐subsidizing between its activities in other countries) if it perceived the supply shortage as being temporary. This is because of IOT’s strategic significance within MWBs’ business model, sunken investment in the Seychelles and other relocation costs. Therefore, rather than opening this issue up for complex negotiation, it is suggested that GoS request that the SEC method incorporate higher value products (thus raising the €1.20 per SEC) and better reflect actual sales based on information relating to credits and charges between IOT and MWB Seychelles.195 MWB should report annually to the IOT Board with its entire line of product exports and the percentage profit margin +/‐ relative to current SEC. If this is below the value of a ‘capped’ SEC, then the SEC is paid; if it is above this value then a percentage margin relative to the SEC paid. To ensure that a new SEC provided commercially ‘fair’ returns to IOT shareholders would be very difficult to prove. While GoS should ensure that a new SEC method is sensitive to actual IOT production, the reality of accurately measuring it is highly complex; for example, IOT is already producing canned yellowfin but the method would have to take into account that this fish a more expensive input,196 and innovative products may also require higher value inputs (e.g. pouched tuna requires higher labour input, but has cheaper packaging).197 This is why we recommend that GoS rely on IOT to provide the data itself without GoS further investigating and monitoring its finances. This will have two effects:

1) GoS will have a minor increase in revenue in the medium‐term and a far improved one if IOT moves to higher value products (see below);

2) GoS has an incentive to assist and pressure IOT to achieve product innovation (see below).

While this additional return to GoS accompanying this recommendation is small, it must be viewed in the context of a range of external challenges facing MW Brands (EU recession, fish supply, piracy) and additional proposed sources of new GoS revenue generation (application of SSF payments and landing fee). 9.2.5 Enhanced revenue generation from IOT – Social Security Fund contributions

192 In interviews with tuna industry executives in 2006, it was widely rumoured that the Lehman Brothers‐led purchase of Heinz European Seafood at €425 million was at above market rates. IOT and MW Brands representatives have denied this in subsequent interviews. Regardless, it will probably take some years for MW Brands to recover this cost. 193 See Campling and Doherty 2007 on the centrality of economies of scale in the canned tuna industry. 194 Note that existing EPA rules of origin do not allow IOT to source tuna from non‐EU owned boats. Given that those EU boats that operate in other oceans (mainly the Eastern Atlantic and Eastern Tropical Pacific) already supply ACP or GSP+ processing facilities in West Africa and Andean and Central America, rules of origin supply from other oceans may be unavailable or very expensive. 195 Tomkinson and Nusse 2008: 17 196 Yellowfin represents 20 to 25% of IOT activity (MW Brands interview, Paris 2009; Caillart and Henry 2008: 6). 197 Such as the new ‘no drain’ can. In future it may produce more and a wider range of higher value products.

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Since the November 2008 liberalisation of the exchange rate, IOT’s wage bill as a percentage of its total euro sales would certainly have reduced substantially. Comparing 2007 and 2009, we estimate that exchange rate liberalisation will produce a 50 percent decrease in the real IOT wage bill for Seychellois workers alone. This is based on the following assumptions and calculations:

� Total IOT employees = 2,300

� IOT Seychellois employees = 1,300.

� Average monthly Seychellois salary = SR2,500 in 2007 and SR3,000 in 2009.

� Estimated total salary bill for Seychellois = SR39 million in 2007 and SR46.8 million in 2009.

� Applying an annual average exchange rate of Euro/SR 0.114 in 2007 and Euro/SR 0.047 in 2009 (1 Jan to 1 May),198 the total wage bill in Euro = €4.4 million in 2007 and €2.2 million in 2009. This is a 50 percent decrease.

Due to the legal framework of the SITZ, GoS is not in a position to impose a minimum wage increase on IOT. In addition, it must be recognised that IOT (and Impress) increased their minimum wage from SR2,500 per month to SR3,000 in 2008, thereby following the government’s lead (it provided the same minimum wage increase for public sector workers). An alternative and fully justifiable mechanism for extracting some of IOT’s gains from exchange rate liberalisation is to increase its contributions to the Social Security Fund. Currently IOT receives an indirect subsidy in the form of only very partial payment of SSF contributions for its workers. For example, IOT paid less SSF contributions than SFA in 2008! IOT employs around 1,300 Seychellois, all of whom are entitled to the full range of social policy interventions, including free health care at‐point‐of‐use. This means that all other contributors to the SSF are subsiding Seychellois IOT employees, and this, in turn, represents a subsidy to IOT’s operations. It is also not known why IOT does not pay expatriate contributions if they are also entitled to some of the benefits of the welfare state.199 SSF employer contributions are now set at a flat rate of 20% of salaries.200 However, according to SSF representatives, IOT is currently only paying an employer contribution of 5% of salaries. This is the result of an arrangement between GoS and IOT (although the consultant has not seen supporting documentation): a condition of SITZ exemptions on SSF employer contributions is the provision of private medical insurance to employees. IOT apparently refused to provide this and negotiated a 5% SSF employer contribution as an alternative. However, 5% of Seychellois IOT employees is certainly insufficient to cover these workers’ medical coverage; hence the argument that IOT is receiving a subsidy. Therefore, it is recommended that GoS approach IOT with an agreement that it start making higher SSF contributions. We recommend that GoS should push for the standard rate of 20%, but we do not recommend a red line for a GoS negotiation position (i.e. the lowest % contribution it is willing to accept). Table 9.5 provides an overview of actual IOT contributions for 2007 and 2008 and estimated ones based on payment of 5% and 20%. If successfully negotiated, this recommendation would have three positive implications:

GoS would capture an increased revenue benefit (see Table 9.5 for estimated values at 20%).

198 Average exchange rates taken from: http://www.oanda.com/convert/fxhistory 199 SFA review: Fact check – is this the case or not? If it is the case, then GoS should demand SSF employer contributions for expat workers too, for the same justification (i.e. GoS medical subsidy to MW Brands). 200 They were previously based on a progressive scale of 10% on first SR1,000 of salary; 20% on SR 1‐10,000; 40% on SR>10,000. It is not known why the less equitable flat rate 20% was introduced.

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It would not seriously impact IOT competitiveness as the additional cost would be far less than gains from exchange rate liberalisation (minus IOT’s mirroring of the SR500 per month wage increase implemented by GoS in 2008). In other words, even if it were to pay the full 20% contribution, IOT would still have gained 30% through the real (euro) value of its wage bill (see above).

It would be a neat way for GoS‐IOT to reconcile and draw a decisive line under the current acrimony in their relations.

Note that the actual IOT employer SSF contribution in 2007 in Table 9.5 is almost identical to our estimated payment based on our working assumptions. Therefore, it is not known why IOT actually contributed 44% less than our estimated payment for 2008 as the actual payment implies that IOT only employed around 55,000 Seychellois on SR3,000 per month in that year. This possible underpayment requires investigation by Seychelles Revenue Commission, if Ministry of Finance does not already know why it occurred. Table 9.5: IOT actual and estimated employer SSF contributions (in SRs)

2007 2008 Actual employer payments by IOT 1,980,211 1,101,755 Estimated payments for employer contribution for Seychellois staff at:*

5% 1,950,000 2,340,000 20% 7,800,000 9,360,000

Estimated payments for employer contribution for all staff at:**

5% 3,450,000 4,140,000 20% 13,800,000 16,560,000

* Assumes 1,300 staff on SR2,500 p/month 2004‐7 (total salary bill SR39 million per annum) and SR3,000 p/month in 2008 (total salary bill SR46.8 million)

** We are using 2,300 for total employment due to the non‐availability of full data for each year, but it is known that the number was considerably higher in some years (e.g. 2,630 in 2006). Assumes 2,300 staff on SR2,500 p/month 2007 (total salary bill SR69million) and SR3,000 p/month in 2008 (total salary bill SR82.8 million). If MW Brands does not agree to this voluntary arrangement, then GoS has two options: a) it should consider a review of SSF contributions by all SITZ companies; or, b) more controversially, make it known that GoS will inform canned tuna buyers that it believes MW Brands practices regarding SSF contributions may not meet their ethical trading policies, which is major component of the UK, IOT’s principal market.201 This would probably require a concession for SMEs (i.e. employing <50 people) so as to encourage start‐ups. This approach would allow government to claim that this is a non‐discriminatory move to generate essential revenue in the context of urgent external pressure for debt repayments to the IMF and to Paris Club members, and is not designed to target IOT in particular. However, this recommendation would require the enactment of an amendment to the SITZ Act, which may meet legal a challenge by IOT. The other downside to this approach is that it

201 Note that all major UK supermarkets comply with the Ethical Trading Initiative (ETI) Base Code: http://www.ethicaltrade.org/Z/lib/base/index.shtml SSF contributions could be considered to fall within the ETI Base Code because a ‘living wage’ includes access to health care. Even if contravention of the ETI could not be demonstrated the issue is a clear ethical concern and would certainly concern some buyers in case it were reported in the media (note that a BBC Newsnight programme did a report on poor treatment of workers in a canned tuna factory in Indonesia in May 2009).

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may deter other investment in the SITZ because of perceived unpredictability in the investment climate, especially if IOT challenged an amendment. Given that SITZ‐based investment has been consistently dominated by IOT and that there are no other major investments currently being implemented, this is unlikely to have a significant impact. Besides, to counter the problematic of perceived threats to investor security this option would be presented as a strictly one‐off measure in the context of the current economic adjustment. In addition, it is morally more difficult for companies to vocally criticise governments for requests for minor social contributions (or, from a different angle, continue to demand healthcare subsidies for their employees). 9.2.6 Investment and upgrading at IOT

Request IOT to explain how it intends to expand production into higher‐value product ranges

Section 8.2.1 noted the fact that IOT primarily produces basic canned skipjack products to the UK and France. If IOT can secure sufficient supply of yellowfin from the EU fleet, Spain and Italy may become market opportunities in the medium‐ to long‐term. Seychelles did export <1% of exports of canned skipjack in brine and in vegetable oil to Spain in 2003 and €1.4 million of canned yellowfin to France in 2008 (Table 8.3. above).202 (It is believed that around 20‐25% of IOT raw material is yellowfin, but the trade data do not allow this to be independently confirmed as the tariff codes group skipjack and yellowfin together.) The deep economic recession in Spain combined with a prior general decline in competitiveness as a site of canned tuna production (i.e. the shift to importing loins) may represent a huge market to IOT. In addition, since the mid‐2000s, Spain has also been supplying the majority of Italy’s demand for canned yellowfin.203 The high ratio of yellowfin to skipjack in the WIO purse seine fishery is central here.204 Importantly, given that canned yellowfin is a more expensive product, the relative commercial importance of the EU tariff preference rises (i.e. 24% of the cif value of the product). Therefore, canned yellowfin and other higher value items offer a greater potential for IOT’s competiveness when the EU preference is eventually eroded (e.g. to 6‐7% if the Doha Round is concluded, see Section 8.3.3). As also detailed in Section 8.2.1, IOT primarily processes basic ‘commodity’ products (i.e. canned tuna in oil or water). While the new ‘no drain’ can launched in the UK under the John West brand is an important counter to this trend, the market success of this innovative product is not yet known, and it may be that the timing of its launch was not opportune because of the on‐set of recession in the UK (i.e. consumers may be willing to drop convenience for lower prices). IOT production of tuna in pouches c.2004/5 (which included tuna mixed with olives, etc.) was another counter to this trend, but tuna in pouches have not meet with consumer demand in the EU, unlike their relative success – and high levels of profitability – in the US.205 Regardless, MW Brands procures its main supply of ‘value added’ products under co‐packing agreements with Thailand‐based firms and ‘in‐house’ from the MW Brands‐owned Et Paul Paulet processing facility in Douarnenez (France).206 This raises two strategic questions for GoS:

1) Why does MW Brands not invest in higher value added production in IOT?

2) What can be done by IOT (including GoS facilitation) to expand into these product types?

202 This data probably does represent the totality of IOT exports of canned yellowfin to the EU, but it is the only data specified in EU import statistics. Table 8.3: EU27 import of Seychelles canned tuna and tuna loins and distribution by principal market, 2004‐08 203 Campling 2008a 204 See Figure 2.2: Tuna catch by species in the WIO, 1950‐2005 205 See Campling, Havice and Ram‐Bidesi 2007. 206 For a short overview, see: http://www.mwbrands.com/

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The answer to the first question is a combination of factors, but primarily the lack of packing materials within the Seychelles (e.g. fresh vegetables for tuna salads, additional packing media such as mayonnaise, spices, etc), which would all have to be imported. Answers to the second question are more difficult and would require consultation with IOT management and MW Brands. Demand a ten‐year strategic plan from IOT management

GoS should leverage IOT through its 40% shareholding and ask management for a Ten‐year strategic plan. This plan should account for probable erosion of the EU tariff preference and focus on IOT competitiveness in EU markets should the preference be reduced to 6 or 7%. Key areas for consideration include:

1) Details of investment in process technology to improve ‘recovery rates’ (i.e. the volume of canning‐grade meat butchered from the fish). Currently the average recovery rate for skipjack stands at 40%, this could be increased to 42%. Given that each recovery point equates to a 2.5% increase in fish price savings, and that fish constitute around 40% of the final manufacturing price, this is an important area for advancement. Concrete methods to improve recovery rates include: technology to reduce over cooking in the pre‐cooking stage of the production process (currently around 15% of the fish is lost at this stage); technology to avoid oxidation of the fish flesh so as to reduce the need for fish cleaners to remove this ‘waste’.

2) Intensify investment in worker training programmes. For the first option to succeed, workers on the fish gutting and cleaning will probably require greater skills. Labour productivity and absenteeism are issues that could perhaps be addressed through the provision of improved incentives for workers. Note that to undertake polices that negatively affect wages and other worker benefits will dissolve one of the main socio‐economic gains from having processing facilities based locally (otherwise why not just focus on transhipment and benefit from revenue generated here and the provision of goods and services?). In short, GoS should ensure that workers’ wages and benefits are protected and improved as much as possible where possible.

3) Invest in the mechanisation of production to reduce labour costs. Given that around 40% of workers are expatriates, this will not necessarily serious impact the Seychelles economy assuming that Seychellois will work night shifts, which given the current economic climate, they will probably increasingly be willing to do. While partial mechanisation would certainly negatively impact air transfers and worker accommodation, etc, for expatriates (see Section 2.1.2 for the linkages here), the improved possibility that it would assure IOT’s survival after erosion of the EU preference is probably a trade‐off worth making (i.e. allowing IOT to compete with far lower sites of production in Southeast Asia).

4) Improved valorisation of by‐products would also increase fish price savings.207 Currently around 60% of by‐product is transformed into low‐cost fish meal. An important existing innovation here since 2005 is Ocean Product Seychelles Ltd. It produces high grade fish oil from tuna heads procured from IOT and is situated in a small unit next to the fishmeal plant at IOT. It exports this product to a subsidiary of Nestle in Switzerland to be used in dietary supplements and other pharmaceuticals; it also exports to Belgium, Australia, China and Korea.208 (Note, for example, Mauritius where higher value products are already being manufactured. These include fish oils and aquaculture feed)

207 See Campling and Doherty 2007 for an overview of tuna by‐product issues. 208 Goulding 2008: 49.

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5) Increases in IOT volume of production should, at a minimum, return to 2005/6 highs (i.e. compared to the decline in the last two years). IOT management should also show how they intend to increase volume to new highs and demonstrate to GoS how this will increase current levels of shareholder dividends (see above on reforming the SEC formula).

9.3 Investment and Upgrading in High Value Fish Processing 9.3.1 Status of the high value fish processing sector Seychelles has a number of value added fish based products. The production of canned tuna by IOT is the most significant products in terms of volume and total value and is the most important commodity export from Seychelles in value terms. While there has been a discussion in the past to export sashimi grade tuna there has to date been no concrete interest or investment (see 9.4 below). On a smaller scale there are the operations of Oceana Fisheries Co. Ltd. and Sea Harvest. Oceana Products produces high value demersal species which are exported fresh and frozen as well as selling on the local market. The main species are tuna, bourgeois, swordfish, kingfish and dorade and they also produce smoked marlin and sailfish, mainly for the domestic market. Oceana is looking for joint venture partners to expand its production. The other small scale producer of fish products is Sea Harvest which markets fresh and frozen fish on export and local markets including dorade, trevally, wahoo, trevally, vacuum packed chilled tuna loins and other high value demersal species. Sea Harvest have plans for expansion, including sourcing fish from a small fleet of foreign‐owned longliners. 9.3.2 Opportunities for the high value fish processing sector The high value fish processing segment is far less important to the economy than IOT or the interactions between the EU purse seine fleet and Port Victoria. Nonetheless, the current status of high value fish processing in the Seychelles represents a missed opportunity because it has not reached capacity for domestic fisheries development and, given the threat of EU preference erosion, it is logical to promote the sector now while the competitive advantage of EU market access remains. This missed opportunity can be expanded on at least five counts:

1) There is huge global demand for high‐value fish products (e.g. fresh‐chilled vacuum packed loins, frozen fish steaks, etc). This demand will only expand in the medium‐ and long‐term. (The effects of the current recession may temporarily reduce demand for expensive fresh‐chilled product, but this demand is likely to return if global growth is restored.) Processing can add value to resources found in Seychelles EEZ209 and it generates employment.

2) The processing of fresh‐chilled and frozen fish products locally generates demand for catch by Seychellois fishers and can thus act as an incentive for the further development of a locally‐owned or foreign‐owned but locally‐based fishing fleet (e.g. tuna longliners).

3) It is possible that IOT will close, the timing of this possibility is impossible to predict, but GoS should be closely investigating and facilitating investment in high value fish processing as an important alternative pillar of the economy. This would be a strategic planning function of the proposed Fisheries Industrial Intelligence & Analysis (FIIA) Unit.

209 Note that the processing of fish does not always add value. For example, sashimi grade whole fresh‐chilled or frozen fish reaches far higher prices than when processed. Value is ‘added’ to sashimi grade fish through expert post‐harvest handling.

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4) Seychelles boasts a rich EEZ in terms of marine resources and, with sufficient investment and innovation, would be able to adopt forms of niche branding (an option being investigated by a team at SFA).

However the development of a high value seafood hub in Seychelles would require substantial public and private investment, including the attraction of foreign capital and expertise.

There has been a review of the potential for seafood product development that was carried out by Id Mer.210 This report looked at the possibility for producing a number of value added products including:

Octopus

Brochettes

Marinated products

Soups and other fish based products with a distinct Seychelles branding

The analysis and findings of this Id Mer report are considered by the consultants to be weak and SFA should look into commissioning a more wide ranging and detailed study on the potentials here. There is a possibility that Seychelles branding (a project already being undertaken at SFA) together with an accreditation for sustainable fisheries could bring a premium value to exports of fish and fish products. This will need further investigation, including in relation to third‐party eco‐labelling schemes such as the Marine Stewardship Council. Marine Stewardship Council – third‐party eco‐labelling

Apart from the Earth Island Institute’s ‘dolphin safe’ label, the most important eco‐label is that provided by the Marine Stewardship Council (MSC). There are however, barely any developing country MSC certified fisheries.211 This is primarily due to the cost and complexity of certification, including the need for very effective fisheries management of the target fishery. In the developed world, some tuna fisheries have been certified, such as the albacore troll and line fishery in the USA (see Table 9.6). This has proven highly profitable and led to new investment in very old fishing capacity (some boats are over 30 years old). At the same time, this means that the high cost of MSC fish can be too high for some retailers (20% higher in this case), meaning that any attempt to investigate MSC certification in the Seychelles must start with serious consideration and identification of market opportunities. Table 9.6: Non‐MSC vs. MSC canning‐grade albacore cost, 2008

Item Non‐MSC Fish Costs

MSC Fish Costs

Cost of fish $1,900/short ton $2,260/ short ton

Unloading and freight to customer $ 350/ short ton $ 350/ short ton

MSC certificate sharing fee N/A $ 200/ short ton

Total cost $2,250 per short ton $2,810/ short ton

Metric conversion $2,480/mt $3,100/mt

Source: Carvalho 2009

210 Id Mer 2007. 211 A map of MSC certified fisheries is available here: http://www.msc.org/track‐a‐fishery/certified/certified‐fisheries‐on‐the‐map

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‘Food miles’ and ultra‐low temperature product

There is a rise in public concern in northern European states over the idea of ‘food miles’ in supply chains. A far better term is carbon footprints, which is used more because of its methodological and conceptual precision, i.e. total omission of greenhouse gases (GHG) in a product’s transportation rather than merely distance travelled. A report by Seafish (the industry authority in the UK) calculated that:212

air‐freighting one ton of product created 3.12kg of GHG per mile

seafreighting a one ton shipment produced 0.017kg of GHG emissions per mile

However, the situation is not quite so simple: while air‐freighting product clearly generates substantially higher GHG emissions than sea freight, seafood is very often (exclusively in the case of Seychelles) placed in the cargo‐holds of passenger planes leading to a more efficient utilisation of aircraft carrying capacity. The biggest problem facing the industry in this debate is the very high GHG emissions created by fishers themselves. The study found that the activities of fishers (and fish farmers) generally account for up to 80 percent of the GHG emissions of any seafood product, while the activities of processors and packers constitutes only 10 percent. It may be that the fuel intensity of fishing may become more of a ‘green’ issue, as well as being a core economic element. One of the major issues facing the retail of fresh tuna and other tropical fish products is seasonality. The super‐freezing of fish products to ‐60°C is an important technological innovation to overcome this issue (otherwise known as ultra low temperature – ULT – treatment). The other major related benefits of ULT tuna are that it significantly reduces the loss of product through spoilage, it offers a solution to the problem of predictability/ consistency of supply, and it allows specified cuts and portion sizes to be consistently perfected.213 Because standard frozen product does not offer the same quality as fresh‐chilled fish, quality differentials will probably continue to spur demand (and price) for air‐freighted product; that is, unless ULT frozen product is deemed sufficiently comparable by buyers to compete against fresh‐chilled on quality and that necessary ULT infrastructure is in place in the Seychelles and EU markets. In global terms, there is an increase in interest in ULT tuna products, not least in the face of the rapid rise in oil prices in 2008 which negatively impacted the economics of air‐freighted fish. However, the technology was initially developed for the high‐value Japanese market, where heavy investment in the cold chain – from super freezer longliners to ULT containers and cold stores, and the ability to effectively defrost the fish pre‐sale – was justified because of the higher price of tuna relative to the supply chain costs. One of the constraints in the EU is that only one shipping firm – Maersk214 – is able to supply ULT containers for the transportation of the fish, which makes the transportation of product expensive and subject to the availability of containers. (Product can be held in containers until defrosting, providing a medium‐term mechanism to overcome the lack of ULT cold stores.) Some ultra low temperature (ULT) product is finding its way to the EU market (including from the Seychelles, using Maersk containers),215 which is defrosted and retailed fresh, although the

212 Stromsta 2008. 213 Stavros Tripis 2008, ‘Superfrozen ULT‐Tuna’, paper presented at the Tuna 2008: Tenth INFOFISH World Tuna Trade Conference and Exhibition 28‐30 May 2006; Ben DiPietro, ‘Economics of super‐frozen tuna’, IntraFish.com, 11 August 2008. 214 Maersk’s fact sheet on its ULT containers is available here: http://tinyurl.com/6guack 215 This is supplied by new vessels in the Spanish purse seine fleet, which have a ‐60°C hold for the storage of yellowfin (which is gutted and bled on board by trained crew). This ‐60°C product is called ‘purse seine special’ grade in Japan, and

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packaging makes it clear that it was originally frozen. ULT cold stores are being created in the UK and the market potential is currently small but it is building (apparently there is a similar situation in Belgium).216 Reportedly ULT infrastructure is already in place in Holland and Spain.217 While establishing a ULT cold chain is a highly complex and expensive, the commitment by upper‐end UK food retailer M&S (Marks & Spencer’s) to end procurement of food supplies via airfreight might provide an important incentive to investment in the development of a ULT market in the UK, and, in turn, in the Seychelles. Investment incentives

We do not propose extended or new streams of GoS revenue extraction from Oceana and Sea Harvest or local fishers. This is because this local sector is considered to be a development priority by GoS. Vessel owners and Oceana and Sea Harvest benefit from a range of supports made available in the Agriculture and Fisheries (Incentives) Act 2005.218 Interviews indicated that Oceana and Sea Harvest were both utilising these incentives and they were not vocal on a need for additional incentives. Revisions to this Act were drafted in 2008, but GoS was waiting for responses from the IMF on this draft Act before taking it forward. The IMF may raise objections because the Act may contravene the WTO Agreement on Subsidies and Countervailing Measures (ASCM) definition of an allowable subsidy (i.e. it is ‘government revenue that is otherwise due [that] is foregone or not collected’, subsidy is specific to a sector and it confers a benefit).219 If this is the case GoS should investigate alternative but comparable mechanisms to provide incentives to the fisheries sector. Local fleet development

A local fishing fleet and locally based fishing fleet exists in Seychelles which operates with relatively few small longliner vessels. The development of this fleet will depend on investment by the local private sector and this in turn may require government backed loan guarantees. The local fishing fleet currently supplies fish to the local market and to export markets via the storage and processing facilities of Oceana and Sea Harvest. There is a demand for high quality, high value demersal and pelagic species on the local and export markets and there is therefore a potential for the development of this fleet in the medium to long term. The success of such development will however depend on a number of factors including: a) Investment in fishing vessels whose structure, technology and maintenance meets EU of other sanitary standards; b) The training of skippers and crew with experience of inshore and offshore fishing; c) access to credit and other sources of funding for the acquisition, maintenance and running costs of such a fleet including vessel gear and equipment. GoS, through SFA, is formulating the details of a fund to help investors establish credit. This will almost certainly not be enough. The biggest constraint at the moment is the interest on loans – the commercial banks are moving slowly to respond to drops in rates by CBS.

was one of the major reasons for profitability in the Japanese fleet in recent years. See Campling, Havice and Ram‐Bidesi 2007. 216 Person. Comms., 2008 ; Henk Brus 2008, ‘European market for non‐canned tuna products: Trends and issues’, paper presented at the Tuna 2008: Tenth INFOFISH World Tuna Trade Conference and Exhibition 28‐30 May 2006. 217 Person. Comm., 2008 218 Detail on all the concessions available to the fisheries sector are available here: http://www.sib.gov.sc/pages/invsey/FisheriesIncentives.aspx 219 The ASCM text is available here: http://www.wto.org/english/docs_e/legal_e/24‐scm_01_e.htm

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All artisanal fisheries are either commercial or recreational. There is limited potential for expansion of this sector, including development of low volume, high value deep water shrimp and snapper fisheries, development of outer island reef fisheries (currently constrained by unfavorable operational cost/revenue ratio and logistics) and development of small pelagic bait and fish meal fisheries. Local fleet development is beyond the scope of this report. There are a number of constraints which may delay the development and expansion of the local fleet these include the need for investment funds and the perceived risk for the private sector and the lack of experience skippers and crew. A major policy issue facing GoS on the development of local or locally‐based longline fleet is the extent to which it continues to protect the – in effect – failed semi‐industrial fleet of two vessels actively targeting tuna and tuna‐like species. There has been considerable serious interest by Sea Harvest and other firms in establishing a locally‐based but foreign owned fleet. If this were to occur it may seriously impact the competitiveness of the Seychelles‐owned semi‐industrial and artisanal fleet because of competition on price in local markets (e.g. hotels, restaurants). This issue needs substantial more study on top of the existing materials available at SFA. However, if GoS decided to bring in a foreign longline fleet, licencing conditions and payments would have to clearly stated – they currently are confusing and often change. Aquaculture/mariculture

Aquaculture/mariculture has had very limited development in Seychelles and the experience of prawn culture at Coétivy has highlighted the problems and risks associated with aquaculture. As recently as 2009, overseas investors (Asmak) have expressed interest in yellowfin tuna ranching in the Seychelles. Asmak which is based in Abu Dhabi has signed a Memorandum of Understanding with the Government of Seychelles. Yellowfin tuna may not be the best fish for aquaculture because of its very high feed‐conversion ratio and its limited value compared to other tuna species, such as bigeye. Instead, other species of fish (such as yellowtail) have been recommended as a potential option for mariculture in a 2009 scoping study on the sector.220 The Commonwealth Secretariat is funding a sector study for aquaculture/mariculture development in Seychelles. A recent scoping study was undertaken in Seychelles for the development of mariculture.221 This study identified 15 sites around the inner islands with a total area of 52km2. A preliminary estimate was made of the potential yield from mariculture with a total projected yield over 10 per cent of the area of 15,043 tonnes of gilled and gutted fish with a total value of USD105.3 million. Assuming that the value added from this production was 30 per cent of gross value this would mean that such production would be equivalent to 3.4 per cent of 2008 GDP at current market prices.222 The consultants find these estimates to be highly optimistic as they assume that an additional +/‐ 50% would be added to the current NSB estimates of fisheries and associated sectors contribution to national GDP. GoS and the private sector are now fully behind and getting organised to develop this sector, with the recent Cabinet endorsement the approval needed to proceed with the master plan. The sector is also high risk. However, if successful it could generate employment in mariculture, transport, provision of goods and services, etc.

220 Enviro‐Fish Africa 2009 221 Enviro‐Fish Africa 2009 222 NSB 2009

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9.4 Investment and Upgrading in Sashimi‐grade Value Chains While oil prices have dropped with the onset of the global economic downturn, it is inevitable that they will rise again, albeit perhaps not to the highs of 2008. The obvious implication is the huge importance of fuel costs to the profitability of the tuna longline industry. The industry response to this issue has been to adopt an organisational model that keeps vessels at sea close to fish resources and freezer reefer vessels come alongside to offload so as to maximise fishing effort and, thus, returns to investment by vessel owners (for more on ‘steaming days’, see Section 2.1). At present, this model of transhipping at sea is permitted under the IOTC. Several IOTC members (including Seychelles) have attempted to end this IOTC exemption to the ban on transhipment at sea, but those members with longline interests have opposed this move. The implication for GoS is:

1) This exemption will eventually be lifted and the Seychelles location at the centre of longline fishing grounds for a large part of the year makes it a potential longline transhipment base (with associated provision of goods and services).

2) Port Louis is currently the main longliner port in the WIO. But with increasing attention on IUU fishing, Port Louis has been under negative scrutiny. It is reported that it has since addressed this issue. Some IUU longliners are now reported to be using East African countries as a base.

3) Seychelles must avoid any intersection with IUU vessels and do all that it can to activity combat them, especially in its waters, but also through use of port state controls. Therefore, Seychelles should consider preparing to develop core longline infrastructure (goods and other services will follow) to attract vessels with good reputations.

4) Infrastructure development here should expressly not involve large investments. But instead focus on: a) with the aid of private sector experts, identifying and ear‐marking quay space for this longliners when considering investment and upgrading of Port Victoria; b) identifying and informally discussing with reputable longline firms to gauge the extent of any future interest when the full ban on transhipment at sea is introduced, noting that GoS has identified space for a longline base. This will allow GoS to ascertain the extent to which vessel owners might seriously consider Seychelles as a suitable longline base. It is unlikely that Port Victoria will ever seriously compete with Port Louis as a longline base (i.e. air freight volume and frequency, sophisticated and responsive provision of goods and services at relatively competitive prices, and so on). But it could offer a seasonal base and, for dedicated investors with interests in developing onshore infrastructure (e.g. ‐60°C cold storage capacity), a permanent hub.

Japan is the most important market in the world for high‐grade fresh chilled and frozen tuna.223 Most longline activities in the WIO are centred on supplying this high‐value market. Little is known about the specific dynamics of Seychelles exports to Japan, but it is known that these flows are minor. Table 9.7 details all imports officially recorded by Japan. Given the relatively high values and volumes of some items (especially frozen whole bigeye and yellowfin) it is suspected that this data includes product supplied by the Seychelles‐flagged East Asian‐owned longline fleet that is transhipped at sea.224 If this is the case, the Seychelles does not capture any value from this trade

223 For a detailed overview of the structure and organisation of Japan’s market, see Campling, Havice and Ram‐Bidesi 2007. 224 It is also believed that Taiwan used to export fish caught in (or even just near) the Seychelles EEZ as originating from the Seychelles (Interview, international fisheries expert, 2006), but it is obviously very difficult to corroborate this point – one method would be to subtract volume of domestic Seychelles exports and catch of Seychelles flagged longline to assess any obvious gaps<< do this!).

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except for revenue generated through access arrangements (see Section 7) and very minor incidents of longliners calling into Port Victoria. Note that Table 9.7 includes very low volume/value trade – this is to assist readers in identifying the range of export opportunities open to the Seychelles and to offer a data set for fisheries managers to better assess trade data against reported catch data. Consistency of supply and volume are structural barriers facing Seychelles‐based firms in the solidification of supply contracts to Japan. But given Seychelles very small economic size, this is less of an issue as relatively small trade volumes could contribute to Instead, Seychelles‐based firms should focus on cultivating working relationships with smaller specialized trading and/or importing firms based in Tokyo. One firm fishing‐processing firm in Fiji engaged in high level upgrading in 2005/6 to become the first company in the world outside of Japan to supply the Japanese market with pre‐cut pieces of sashimi grade tuna using a high‐tech method of sealing the product for airfreight to Japan. This involved a high level of technical innovation in terms of process and packaging technology, but it does demonstrate how a relatively small firm (albeit the largest in Fiji in this segment) can engage in serious upgrading, albeit with investment and strong marketing links. 9.4.1 Recommendations on intersections with foreign tuna longline industry To prepare for the possibility of an end to the IOTC exemption allowing longline transhipment at sea and to better develop intelligence and analysis to feed into future access agreement negotiations with them (Section 7), the following is recommended as a starting point:

1) SFA should undertake full barycentre (centre of gravity) analyses of all available longline catch and effort data in the WIO (including that supplied by the Seychelles flagged longline fleet and IOTC). This analysis should include aggregate activity and for individual fleets separately by flag and by ‘national’ ownership. It will allow a far better picture of the economic activity and associated relationships of key players. This analysis would have to be complemented by work on the ownership structure of these players and their linkages to supply chains.

2) From an MCS perspective, this data could be adopted to assess:

a) current/projected patterns of single‐handed enforcement activity by Seychelles

b) steaming time and other distance related costs for enforcement vessels

c) enforcement aircraft flight times and related information

d) estimated evasion times for a standard or representative fishing vessel for a particular fleet, such a vessel seeking to exit the Seychelles EEZ at maximum speed from each of these pivots of activity.

This work would be an ongoing side project of the FIIA unit in collaboration with the Manager of Fisheries Research and the Manager of MCS at SFA.

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Table 9.7: Seychelles fish exports to Japan (Chapter 3 of HS), 2003‐08 (in Mt and USD)

2003 2004 2005 2006 2007 2008

Product (HS code) Mt USD (1,000)

Mt USD (1,000)

Mt USD (1,000)

Mt USD (1,000)

Mt USD (1,000)

Mt USD (1,000)

Yellowfin, fresh or chilled whole (0302.32.00)

72.5 491 ‐ ‐ 505 4 ‐ ‐ ‐ ‐ ‐ ‐

Bigeye, fresh or chilled whole (0302.34.00)

38.8 264 0 0 0 0 0 0 0 0 0.5 3

Yellowfin, frozen whole (0303.42.00)

945.6 3,147 2,490.3 8,974 5,811.9 18,819 2,704.5 10,742 1,729.9 7,481 576.4 3,138

Bigeye, frozen whole (0303.44.00) 2,292.5 11,695 4,009.9 23,192 4,457.6 22,530 3,378.2 18,924 3,614.2 19,445 3,950.6 27,149

Swordfish, frozen whole (0303.61.00)

‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 215.9 978 213.8 1,049

Dogfish and other sharks, frozen whole (0303.75.00)

23.3 26 6.2 7 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐

Marlin, frozen whole (0303.79.091 ) 32.7 105 59.5 151 43.3 87 46.1 98 2.9 7 31.5 101

‘Other’, frozen whole (0303.79.099)*

117.7 402 253.7 1,078 453.5 2,526 195.8 957 10.1 20 ‐ ‐

Frozen livers and roes 'other' (0303.80.090)

‐ ‐ ‐ ‐ ‐ ‐ 1.6 3 ‐ ‐ ‐ ‐

Swordfish fillets frozen (0304.21.00) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21.2 119 10.3 85

Tuna fillets frozen, excl. Bluefin (0304.29.91)

‐ ‐ ‐ ‐ ‐ ‐ 1.0 4 1.5 23 19.3 131

Marlin fillets frozen (0304.29.93) ‐ ‐ ‐ ‐ ‐ ‐ 7.1 38 ‐ ‐ 1.8 7

‘Other' fillets frozen (0304.29.99)** 5.4 22 ‐ ‐ ‐ ‐ 25.2 212 2.4 7 ‐ ‐

Swordfish meat frozen (0304.91.00) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1.7 14 18.7 105

Shrimps and prawns, frozen (0306.13.00)

40.9 364 97.8 857 138.7 1,246 68.7 643 32.8 278 ‐ ‐

TOTAL 3,569mt 16.5m USD

6,918mt 34.3m USD

10,906mt 45.2m USD

6,428mt 31.6m USD

5,633mt 28.4m USD

4,823mt 31.8m USD

Sources: Tariff data (Country by Commodity search): http://www.customs.go.jp/toukei/srch/indexe.htm; tariff descriptions: http://www.customs.go.jp/english/tariff/2009_4/index.htm; average annual exchange rates (OECD Factbook 2009: Economic, Environmental and Social Statistics http://stats.oecd.org; and Oanda for 2008: http://www.oanda.com/convert/fxhistory)

* Includes data for some frozen whole fish (HS code 0303.79.098), but code not defined in tariff descriptions. Values have been integrated here under ‘Other’.

** Includes data for some frozen fish fillets (HS code 0304.20.096), but code not defined in tariff descriptions. Values have been integrated here under ‘Other’.

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SECTION 10 CONSOLIDATED RECOMMENDATIONS ON INCREASING NET BENEFITS

10.1 Recommendations – Action‐Reaction‐Response Tables The following tables summarise the core recommendations addressed in more detail throughout this study. Each recommendation is accompanied by the sector number(s) where it is addressed in more detail in the main body. A prioritised timeframe for actions is then provided, including which GoS agency or agencies should take action. Where appropriate this is followed by our thoughts on potential impacts on and reactions by stakeholders, and, possible responses by GoS. These tables are divided into the following four themes:

1) Institutional/Organisational recommendations (Table 10.1), such as the development of analytical and strategic capacity at SFA, and several market access issues to maintain and enhance exports to the EU.

2) Revenue/Financial recommendations (Table 10.2), such as reform of the tuna transhipment/landing fee, port dues, and IOT SSF employer contributions. Coverage of enhanced revenue generation through fishing access arrangements are addressed in Table 10.4.

3) Commercial/Infrastructure recommendations (Table 10.4), such as port maintenance and upgrading, IOT upgrading and competitiveness, and development of the high‐value sector fish export sector.

4) Fishing access arrangement recommendations (Table 10.4). These are subdivided according to specific arrangement, including EU FPA, direct licences to purse seiners (including Seychelles‐flagged Spanish owned boats), and agreements and licencing of East Asian longline fleets.

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Table 10.1: Institutional/Organisational Recommendations – Action‐Reaction‐Response

Absolute Priority ‐ Establish a Fisheries Industrial Intelligence & Analysis (FIIA) Unit Issue/ Organisation

Recommendation/Rationale/Impacts Implementing organisation

Priority

Strengthen SFA institutional capacity

Establish a Fisheries Industrial Intelligence & Analysis (FIIA) Unit

1. The consultants recommend the formation of an industrial fisheries intelligence unit to better integrate economic and MCS intelligence and analysis into negotiations.

2. The unit would constantly monitor trade and market information and, as far as possible, include comparison with access agreements involving other countries.

3. The Unit would be the primary source of technical information for negotiations

4. The Unit would produce post‐mortem reports after the conclusion of each negotiation for discussion amongst all relevant GoS players.

5. Liaise with Forum Fisheries Agency and other important actors to exchange experiences on scope of tasks required

6. Industry may initially be suspicious of GoS intentions. But generally probably positive if GoS makes clear that FIIA unit is intended also to transmit industry concerns to GoS.

SFA, MNRET, Cabinet,

High – immediate

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Establishing FIIA ‐ Action‐Reaction‐Response & other aspects

Action (and report section number)

Priority, action timeframe and responsible GoS agencies

Impacts on stakeholders and potential reactions

Strategic and tactical responses ‐ GoS

Ensure effective FIIA inter‐institutional relations. A contact point for professionalS working in GoS agencies must be established (section 4.8)

High priority when FIIA established ‐ Responsible agencies: SFA, SPA, Ministry of Finance, Ministry of Foreign Affairs, Attorney‐General’s Office, NSB, CBS.

Limited impact. But an additional necessary burden on time of GoS personnel.

Maintain support for FIIA

Establish FIIA advisory committee Purpose‐ to provide an informal and open forum for transmission of views and concerns in the export‐orientated fisheries sector. Should meet two times per year, but members to provide ad hoc advice to FIIA as and when requested. (section 4.8.)

High priority when FIIA established ‐ responsible agencies: representatives of the GoS agencies detailed above (where required), SEPEC, Hunt Deltel, Land Marine, CMB, local OPAGAC rep, local rep from relevant ANABAC vessels, IOT, Chamber of Commerce, Oceana, Sea Harvest, Fishing Boat Owners Association.

Positive impact. Will further demonstrate seriousness of GoS commitment to the sector, including consultative reforms. To be effective advisory committee meetings must be informal and open – this requires careful facilitation by FIIA.

Maintain support for FIIA

Delegation of duties by SFA Managing Director to assistant MD and section managers (section 4.5.5)

High priority Immediate action required by MENRT and SFA

Will improve GoS responsiveness to policy challenges and ongoing strategy development, as well as government‐industry relations.

Not applicable (N/A)

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Net benefits changes ‐ other institutional aspects

Recommendation/Rationale/Impacts Implementing organisation

Priority


The Managing Director to delegate responsibility for developing and calculating approaches to access‐related revenue generation to FIIA Unit.

SFA, MNRET High – immediate

SCG enforcement capacity

Urgently seek increase in naval assets suitable for fisheries enforcement – this may be pursued in the context of current concerns with piracy

SFA, SCG, MNRET, Cabinet, MoF

High – immediate

Improvements to VMS system and use of VMS data to support negotiations

• Significant capacity building capacity required in area of applying VMS and other fleet information to negotiations and also to any new approaches to revenue raising (e.g. insertion of environmental taxes into access regime or national legislation)

• Urgent training programme in area of VMS improvement (e.g. send students to dedicated training centre at University of Wollongong, Australia)

• Internships with FFA, US, Canada, Australia required as these are all countries which use VMS to enforce rules over large sea areas

SFA, SCG, MNRET, Cabinet,

High – immediate & pre‐condition for success of net benefits programme

Negotiations Institutionalise pre and post negotiation analysis. Post negotiation analysis and evaluation should be a formalised and systematic process with a key role for the industrial fisheries intelligence unit

SFA, SCG, MNRET, Cabinet,

High – immediate

Databases SFA should formalise the integration of its existing databases and other information into its preparations for negotiations. Currently, these databases are often in a poorly organised state and very difficult to utilise. It is recommended that the FIIA Unit take responsibility for this process.

SFA, SCG

High ‐ immediate

Negotiations Formalisation of team composition and inclusion of high‐level technical officials is a priority for reform. Consistency of team is a priority for: a) institutional knowledge/ memory; b) experience of tactics and strategies; c) development of expertise in knowledge of data and

SFA, MNRET, Cabinet,

High – after Establishment of FIIA unit

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trends Table 10.2: Revenue/Financial Recommendations – Action‐Reaction‐Response

Action (and study section number)

Priority and responsible GoS agencies



Increase port dues but do not penalise fishing vessels or reefers for staying in port (section 9.1.3)

High priority SPA, SFA, MoF Needs careful formulation of a pricing formula.

Higher transaction costs in port. Probably accepted by DWF fishing companies if linked to more efficient port handling and storage procedures.

Would welcome extra revenue but SPA needs to justify increases on each specific port due. SPA needs to show how it will utilise this revenue or be clear that it will be paid to MoF as part of annual dividend

Increase transhipment fees per tonne to US$4 (for the first year) and then US$6 (from then on). (section 9.1.2)

High priority SFA, SPA, MoF

Higher costs for EU purse seiner fleet it will object and lobby GoS. But probably financially acceptable to EU fishing companies. Needs consistent application to EU and Seychelles flagged purse seiners.

GoS response to objections of EU fleet: a) fee imposed by IMF (GoS needs to repay loans); b) flat fee applied to IOT as well; c) 50% of revenue to be used to improve port

Apply same transhipment fee to landed tuna as well (section 9.2.3)


Higher fish costs for IOT – it will object and lobby GoS.

GoS response to IOT objections: a) an easy method for reconciliation and taking the Shareholders’ relationship forward; b) fee imposed by IMF; c) 50% of revenue to be used to improve port

50% of transhipment/landing fee to be hypothecated for Port Victoria maintenance and development fund (sections 9.1.2 and 9.1.4)


If stakeholders see GoS immediately serious on hypothecation, reactions will be less hostile

GoS to establish fund administration (i.e. bank account, responsible officers)

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Establish a 50/50 GoS/private sector committee to decide on allocation of Port Victoria fund (section 9.1.4)

High priority Various GoS agencies and private sector representatives

Positive response but only if GoS serious about taking their interests on board

GoS must act quickly to establish this committee in parallel with announcement of increase in transhipment/landing fee

Table 10.3: Commercial/Infrastructure Recommendations – Action‐Reaction‐Response

Action




Maintain and upgrade Port Victoria using hypothecated transhipment/landing fee fund (sections 9.1.2 and 9.1.4)

High priority MoF, SPA, SFA

Positive impact for all fisheries sector except for temporary disruptions. SPA may want to maintain exclusive management functions. Land Marine and SEPEC may demand their needs be prioritised

Emphasis should be on maintaining and enhancing Port Victoria’s position as Indian Ocean’s premier tuna transhipment port. The interests of SPA, SEPEC and Land Marine are secondary to Seychelles wider fisheries‐related development

Commission outside investigation on the efficiency and effectiveness of the Land Marine monopoly over the Commercial Port

High priority MoF, SPA

Will be opposed by Land Marine and its shareholders

The Port is Seychelles’ main point of intersection with the global seafood industry. Efficiency and effectiveness must be maximised.

Demand a ten‐year strategic plan from IOT management (section 9.2.6)

Medium priority Société Seychellois d'Investissement (SSI) and MoF

IOT management will probably welcome this request

Enhancement of IOT’s chances of economic survival when EU tuna preference is eroded SSI and MoF to develop system to monitor performance by IOT in meeting its strategic plan. If serious levels of underperformance, GoS to re‐negotiate Shareholders Agreement to cancel exclusivity clause so that new processing investment can be attracted

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Table 10.3 (cont.]: Commercial/Infrastructure Recommendations – Action‐Reaction‐Response

Action (and study section number)




Simplify method for calculating IOT Shareholders capped dividend (section 9.2.4)

Medium priority

MoF, SSI MW Brands will firmly resist revision to Shareholders Agreement

Scope and depth of GoS demands here to be minimal as IOT payment of tuna landing fee and SSF contributions are better mechanisms. GoS will have a minor increase in revenue in the medium‐term and a far improved one if IOT moves to higher value products (see below). GoS has an incentive to assist and pressure IOT to achieve product innovation and increases in production volumes

Maintain Fisheries (Incentives) Act (Section 9.3.2)

Medium priority

MoF, SFA IMF may request reform to ensure that incentives are WTO compatible

If reform is imposed, GoS to investigate equivalent alternatives

GoS request IOT to expand production into higher‐value product ranges (section 9.2.6)

Low priority SSI

IOT management may state that Seychelles is not the right location for these products (i.e. everything is imported)

Higher value products will improve IOT’s chances of economic survival when EU tuna preference is eroded GoS to ask IOT management for ways in which it can facilitate this.

If IOT does not respond positively to majority of recommendations, GoS should reconsider the agreement with IOT and test MW Brands’ resolve on exclusivity clause

Only to be considered if relations seriously deteriorate MoF, SSI

MW Brands may initiate legal action or informal campaign against Seychelles reputation, thus vs. other investment Competing cold store will impact IOT price negotiation with EU fleet to benefit of sub‐regional and international competition in terms of availability of supply. Other processing facility (e.g. loining plant)

GoS would welcome an open and transparent negotiation with IOT. If there is a serious impasse with negotiations with IOT, GoS could investigate out other potential investors, but this is a crisis measure only If MW Brands pursues legal action, GoS needs careful legal advice in English company law.

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will impact IOT price negotiation ability Table 10.4. Access agreements and relationships – Action‐Reaction‐Response Purse seine fleets – EU ‐ Financial Recommendations

Action




Immediately through the Seychelles‐Joint Committee framework seek an increased tonnage payment from Euro 25/mt. (Section 6.7.)

2009/2010 through Joint Committee – SFA

High priority

EU may be reluctant as sets precedent for other FPAs.

GoS should be firm and should clearly demonstrate that this is reasonable given catch mix in which more valuable yellowfin predominates

During 2011 FPA renegotiations Seychelles to reques return (RoR) fee at 6% of gross value of the catch integrated into a ‘flat’ licence fee using average RoR based on price and catch over past 5 years (Section 6.7. 2)

2010‐2011 SFA; Seychelles negotiating team; recently established FIIA if possible

High priority

EU likely to be reluctant • Demonstrate to EU that this is fair as 5 year period takes into account price/ catch fluctuations

• Demonstrate the high ROR providedto PIC by US fleet

• PIC ROR is trending towards 6%

Develop and model compliance bond scheme and further refine over period 2010‐2012

(Section s 6. 7.; 3.6, 5.12.2 and Appendix 3.B.)

2010‐2011 – policy work 2011 – table during negotiations SFA; Seychelles negotiating team

High priority

EU fleets likely to react negatively

EU officials may be supportive as demonstrates commitment to responsible fishing and fits in with trend in EU policy‐making to explore increasing level of fleet owner contributions

• Demonstrate to EU that bond procedure is responsible; & is a legitimate response to enforcement weakness of Seychelles

• GoS must point out that it is already in use & is a legitimate response to Seychelles obligations under IUU Regulation and international law and accords with Seychelles developing country status and limited resources; recent disputes show Seychelles must

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take effective action on enforcement front

• Seek support from environmental NGOs Develop and model alternative options for beyond 2011:

• ROR + price‐indexed top up • Environmental • Levy /natural resource depletion

levy • Vessel day scheme • A full price‐index scheme replacing

the current ROR method (3.12‐3.15, 3,21, Boxes 3.3, 3.3., 3.4‐3.7.

Table 3.7)

SFA; FIIA; Bank of Seychelles; Ministry of Finance

High priority

2010‐2013/14

Resistance to new proposals likely from both EU and fleet owners Support likely from environmental movement in Seychelles and EU

• Present well developed policy positions locally and internationally, EU, Southern Africa, United States

• Be prepared to break‐off negotiations to secure some minimum defined elements of these changes

• Demonstrate to international financial institutions that proposals financial sound and seek support

• Seek support from international NGOs

• Explain Seychelles position domestically and locally and emphasise environmental responsibility aspects of all proposals

Other Purse Seine ‐ Financial Recommendations

Action (and report section number)




A flat non‐discriminatory licence fee should be applied across the board at a minimum of USD90,000 per vessel and ideally more (section 6.6)

SFA

High priority

Negative fleet reaction Seychelles flagged foreign owned vessels already have advantages through the use of the Seychelles flag

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Seychelles should drop any differentiation or special treatment made available to Seychelles flagged purse seiners unless it looks seriously likely to push them away (i.e. not just standard but vague ‘threats’ to relocate). (section 6.6 and 9.1.1)

SFA High priority

Negative fleet reaction Seychelles flagged foreign owned vessels already have advantages through the use of the Seychelles flag

Longline fleets ‐ Financial Recommendations

Action




That Seychelles request an improved rate of return (RoR) fee based on annual average 6% of gross value of the catch. This will simply be integrated into a ‘flat’ licence fee using the average RoR based on price and catch over past 5 years (thereby taking into account price/ catch fluctuations). (section 7. 5. 2) Apply to Japan, Taiwan and then where relevant (e.g. China)

SFA, FIIA, High priority

Fleet reaction likely to be negative

Need to hold firm to position as without securing these changes, further changes will be impossible to achieve

Develop and model a comprehensive compliance or performance bond scheme to be applied after 2011 to ensure Seychelles is able to meet its EEZ management obligations under the EU IUU Regulation as well as general international law (section 7. 5. 2. Apply to Japan, Taiwan, China and all others

SFA, FIIA

High priority

Fleet reaction likely to be negative Government stakeholders may support this principle as shifts financial responsibility more on to the private sector

GoS to point out that proposal is not radical and in use in the Pacific More robust use in Seychelles justified by size of EEZ and absence of policing support from others

275

Seychelles eventually introduce a baseline licence fee plus an annually calibrated 6% RoR top‐up fee. The top‐up fee kicks in if the percentage rate of return on gross value of catch exceeds the up‐front payment – this is a simple price index approach. (section 7. 5. 3. ) Apply to Japan, Taiwan and where/when relevant to China, etc

SFA, FIIA High but medium‐term


GoS must be firm on this point

Hypothecated resource depletion/environmental levy applied to each agreement as a top up to compensate Seychelles for the depletion inherent in fisheries removals and other environmental impacts (section 7. 5. 3.) Apply to Japan, Taiwan initially & then all relevant fleets (e.g. China)

SFA, FIIA

High but medium term


Permitted under international law and is ecologically responsible

Table 10.5: Access agreements and relationships – Review of Legal Regime

Action


Impacts on stakeholders and potential reactions Strategic and tactical responses ‐ GoS

Fund a comprehensive analytical review of current VMS strategies and tactics should then logically lead on to

SFA, SCG Very high

Not likely to be discernible EU likely to show at least lukewarm interest

Not required

Development of a more comprehensive VMS Strategy.

SFA, SCG Very high

Fleet reaction negative EU likely to show lukewarm interest given stated interest in and commitment to regional VMS

Not negotiable and justifiable in light of piracy threat

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ANNEX 1.A TERMS OF REFERENCE

Study on Policy Options and Implementation mechanism to double the Net Benefits of the

Fisheries Sector 1. Background Fisheries and tourism are the main two pillars of the Seychelles economy. The island state of Seychelles has a large Exclusive Economic zone (EEZ) of 1.4 million square kilometres but a small land mass of 455 square kilometres and a population of only 83,000. It has no known mineral resources, fairly difficult terrain and poor soils limiting agricultural development. Fortunately, it has great natural beauty, a favourable climate and rich marine resources. The fisheries sector has always contributed substantially to the nation’s socio‐economic development, generating national income and most importantly has been indispensable to the nutritional needs and food security of Seychelles. The strategic position of Seychelles and the abundance of tuna in the region have resulted in the development of industrial fisheries in the early 1980’s, with increased use of Port Victoria over the years by tuna purse seiners operating under fishing licences from Seychelles. Most of these vessels have licences under the fisheries access agreement signed, for example, with the European Union. Port Victoria is also the most important tuna transhipment port in the world, transacting over 350,000 MT per year. About 80,000 MT of the tuna is destined to the cannery in Seychelles while the rest is distributed to canneries in the region and in Europe. The foreign tuna longliners have fished in the Indian Ocean since the early 60’s but licensing of these vessels only started after the enactment of the Control of Foreign Fishing Vessels Decree in 1979. This was made possible by the declaration of the Seychelles Exclusive Economic Zone under the Exclusive Economic Zone Order 1978. They, however, rarely use Port Victoria. The tunas caught by the longliners are usually shipped directly to Japan and the by‐catches landed in the other ports in the region, mainly in Port Louis, Mauritius. However, in spite of some revenue generated through licence fees and the cannery, Government has realised that it is not receiving the full benefits of the fisheries access agreements and also the benefits generated downstream through fish processing and via other activities in the port. 2. The Tuna industrial Fisheries Value Chain In the broadest sense the tuna industrial value chain segments consist of harvesting, transhipment, processing (marketing and consumption). The tuna purse seiner fishery is a high capitalized fishery and is the single most important fishery in Seychelles in terms of value. Catch is harvested year round by vessels of two main categories: Purse seiners and long liners. Over the past decade the total annual catch in the Western Indian Ocean by purse seiners have ranged between 350,000 and 400,000 tonnes. This catch is sold frozen in brine. The utilization of the catch is mainly for canning. The total Indian Ocean catch of longliners is difficult to estimate but the estimated catch from by longliners in the Seychelles EEZ is around 20,000 MT per year. The Seychelles EEZ in total yields around 100,000 MT of tuna. The total value of the tuna harvested from the Seychelles waters is estimated at 200 M US$. The direct revenue to Seychelles through licences fees/access agreement in 2006 was US $ 10 M. This represents about 5% of the total value of the resource.

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The Government would like to raise this percentage to at least 15 % and this relates to an additional 20 M US$ in terms of licence access fees. With regard to transhipment and port activities which involves bunkering, port dues, and other agency fees, the estimated net benefit is 31 M US$. The port dues, which include the transhipment levy, is a direct revenue to Government and is estimated at 1 M US$ per year. The proposal is to increase this direct return on transhipment and other dues paid by fishing vessels by 10 %. The cannery, the third segment of the value chain has an estimated net benefit of 32 M US$ to the country. The cannery produced in the 2005/2006 financial year, 5.6 M cases of tuna (268,800,000 cans). The total retail value of the production (average retail price of US$ 2 per can) is estimated 537.6 M US$. What is essentially retained in the economy, when compared with the total retail value of the canned tuna is only 6 % Government would like to raise this figure to 12.5 % of the total retail value of the canned tuna. 3. Terms of Reference The Government’s overall objective is to maximize the economic returns from the fisheries sector in the Seychelles Islands in a manner consistent with the sustainable utilization of the resource. The current estimated net benefits of the fishing industry to the Seychelles economy is about 73 M US$. The Government of Seychelles, as part of its short‐term strategy, expects to see this net benefit reaching over 100 M US$ which would represent 18.5 % of the retail value of the canned tuna. The Seychelles Government through the Seychelles Fishing Authority provide a counterpart to the consultant during the term of the Consultancy The purpose of the study is to

• Analyse each segment of the value chain and estimate the net return to Seychelles. • Evaluate this against what we are currently earning and identify reasons why we are

presently not earning as much. • Identify the constraints and opportunities of moving up the value chain. • Review all our fisheries agreements and propose a new framework including joint

venture arrangements and options for calculating licence fees • Identify the policy changes required to achieve the desired goal. • Evaluate the taxes and royalties presently obtained by the industry and propose

amendments. • Make recommendations and evaluate different scenarios of policy change. • Review the regulatory framework and commercial agreements in the industry and

make recommendations. • Develop key actions that need to be implemented to achieve the above goals with a

specific timeframe. • Evaluate institutional capacity to implement policy change and recommend changes

or adjustments. Specifically it will be necessary to look at the following

1. Provide a concise summary of taxes, duties and other financial charges that should be paid under the current regime from the various elements of the fishing tuna sector;

2. Assess the overall contribution to the economy, and the financial contribution to Government revenue of domestic/IBC fishing companies and the foreign fleet, to as full an extent as possible. This to include disclosure of employment as well as amounts paid under taxes, duties, license fees, and all other charges levied on the fishing sector (on both inputs and exports).

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3. Analyze the demand and supply of tuna in the Indian Ocean, prices and future trends, in relation to tuna processing and other services.

4. Analyze the activities of the Seychelles flagged industrial vessels and propose measures how Seychelles can increase it benefits from these vessels.

5. Assessment of the annual catch by type of fishery, including an assessment of the catch of foreign vessels by gear type in Seychelles Islands. Comment on the productivity of the Seychelles fisheries (EEZ) compared to adjacent fishing areas, in particular tuna fisheries;

6. Compare the amount actually collected in terms of Government revenue to that which should “in theory” be collected under the current taxation, duty and charges systems. Carry out such audit procedures as may be reasonable and feasible;

7. Assess the reasons for the divergence between what should theoretically be collected and what actually is collected under the current institutional/licensing arrangements;

8. Review and evaluate the scale of the benefit arising from the current agreements, EC, Japan, Taiwan, China and Mauritius. This should also include any spillovers of these agreements and net benefit.

9. Access the ability of the Seychelles Fishing Authority’s capacity in relation to the implementation of the agreements.

In light of the findings the consultant will recommend:

• The appropriate percentage of the value of catch per tonne caught that might be sought;

• The means of determining what has been caught and the collection of taxes or other amounts due (resource rent with options);

• Propose alternatives methods to the current fee calculation methods and develop an appropriate rationale for the financial/licensing regime applying to fisheries;

• Consider the issue of environmental tax and how this could be applied; • Recommend negotiating parameters for foreign fishing agreements and a new

framework agreement to be negotiated by Seychelles with thirds parties. • Recommend actions to move up the value chain in each of the segments as per the

set target. • An appropriate regime of taxes and other fees (licences etc.) and charges for each

part of the fishing sector. • Increased benefits from the Seychelles flagged vessels and licensing regimes; • The means of implementing any such system recommended including the agencies

responsible (including the possibility of outsourcing functions), the mechanisms of enforcement, structures to ensure co‐ordination between relevant bodies and the need for further technical assistance, or external support.

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ANNEX 1.B

LIST OF PERSONS CONSULTED Institution and Email Person and Position

Anthony Savy de St. Maurice, General Manager [email protected]

Aquarius Shipping Agency Claude Robert,

Accountant Hilda Palconit, Economist [email protected]

Central Bank of Seychelles Caroline Abel

Head of Division, Monetary Analysis and Statistics [email protected] Frederic Rivalain [email protected] Bertrand Monpert [email protected]

CMB (Ets Chevannes‐Merceron‐Ballery),

Jean‐Yves Labbe, President, Concarneau, France [email protected]

Consultant to Spanish govt

Juan Jose Areso Spanish Fisheries Office [email protected]

Department of Legal Affairs Ronny Govinden, Attorney General Gaetan Pierre, Inspector [email protected]

Echebastar/ Hartswater Ltd. Itxaso Echevarria [email protected]

Fishing Boat Owners Association Beatty Hoaureau,

Member Hunt, Deltel & Co Ltd [email protected]

Edmond H. Houareau, Managing Director

IFREMER

Patrick Berthou, Responsable du programme SIDEPECHE [email protected]

Impress [email protected]‐group.com

Danilo A. Banga, Plant Manager Alain Olivieri, General Manager [email protected]

Indian Ocean Tuna (IOT) Ltd Cecile Holtzhausen,

Quality Manager IOTC Alejandro Anganuzzi,

Executive Secretary Island Development Company Ltd (IDC) [email protected]

Glenny Savy, Executive Chairman

Hughes Adam

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[email protected] Land Marine David Monthy

Gerry Adam, Managing Director [email protected]

Mahe Shipping Co. Ltd., Joe Morin,

Operations Manager [email protected] Marine and Engineering Works

Charlie Marzocchi Sitna César Head of Budget, Melanie Stravens, [email protected] Michelle Tomkinson [email protected] Jacqueline Pierre Steve Jardine Commissioner of Taxes [email protected]

Ministry of Finance

Ronald Cafrine Director General, Policy and Strategy Division, [email protected] Philippe Michaud, Technical Advisor

Ministry of Foreign Affairs

Vivienne Fock‐Tave Ministry of Natural Resources, Environment and Transport

Joel Morgan, Minister Gaëta le Colleter, Group Quality Manager

MW Brands

Adolfo Valsecchi, CEO, Paris, France [email protected]

National Statistics Bureau (NSB) Laura Ah Tim Director

Naval Services (1994) Ltd [email protected]

Captain Morgan, Managing Director Joseph Tirant, Managing Director [email protected]

Oceana Fisheries Co. Ltd. Jean Claude Houareau,

Quality Assurance Manager Piriou Pascal Piriou,

President du Directoire, Concarneau, France President’s Office Rolph Payet,

Special Advisor on Environment to the President Saupiquet, Concarneau, France [email protected] ORTHONGEL, Concarneau, France [email protected]

Yvon Riva, Fleet and fishing dept manager (Saupiquet) President (ORTHONGEL)

Sea Harvest Eugene Albert,

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Managing Director [email protected] Sea Harvest

Evans Mellon, Quality Assurance Manager [email protected] Amy C. Quatre, CEO [email protected] Andy Ally, Manager Msd‐[email protected] Mohit Kamble, Senior Standards Officer

Seychelles Bureau of Standards (SBS)

Mariam Kante, Principal Chemist

Seychelles Chamber of Commerce and Industry (SCCI)

Nicole Tirant‐Gheradi,

Seychelles Electronic Maritime Co. Ltd (SEYCMI) [email protected]

John R. Tregarthen, Executive Chairman [email protected]

Seychelles Electronic Maritime Co. Ltd (SEYCMI) [email protected]

Allen Houareau, General Manager

Sherin Renaud, CEO

Seychelles Investment Bureau (SIB)

Maria Morel, Promotion Development Officer Michael Walletamby, CEO Francis Carota, Financial Controller

Seychelles Licensing Authority (SLA)

Robert Daymyre, Manager Licence Processing

Seychelles Petroleum Company (SEPEC)

Guy Adam, CEO

Lt Col. Andre Ciseau, CEO [email protected] David Biamchi, Economic and Finance Manager [email protected] Captain Percy Laporte, Harbour Master

Seychelles Port Authority (SPA)

Franky Laporte Project Manager [email protected] Rondolph Payet, Managing Director Vincent Lucas, Juliette Dorizo [email protected]

SFA

Florian Giroux,

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Fisheries Technical Adviser [email protected] Veronique Herminie, Chairperson Michel A. Marguerite, Project Manager Jan Robinson Carol Low Senior Fish Inspector, Fish Inspection Unit, [email protected] Jean‐Marc Perrin Consultant [email protected]

Société de Contrôle d’Expertise Maritime et Pêche (SOCOMEP) Isabella Lablache,

Operation Director [email protected] Southern Ocean Shipchandlers (Pty) Ltd.

Albert Gonzague d’Offay Director [email protected]

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INCREASING THE NET BENEFITS FROM FISHERIES AND ASSOCIATED SECTORS IN SEYCHELLES

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