Reeling in the big profits of exports

New Zealand's fishing industry is capitalising on huge marketing opportunities, reports IRENE CHAPPLE.

New Zealand's fishing industry has surfed this year's economic turmoil and emerged well above water.

Despite shining star aquaculture being stung by the surprise moratorium on new farms, a five-year economic audit shows seafood is a healthy business.

In 20 years the industry has tripled annual exports to $1.4 billion, including $200 million a year pulled in by aquaculture sales.

While some companies have been rocked by major losses, overall export earnings have shown good returns.

And this is an exporters' game - domestic sales earn only 10 per cent of the industry's income - with seafood our fourth largest exported goods earner, behind dairy, meat and forestry.

A snapshot of the latest figures shows the fishing industry contributes $1.7 billion to GDP, creates the equivalent of 26,620 full-time jobs from 2500 seafood companies and has annual domestic sales of $150 million.

The New Zealand Seafood Economic Review 1997-2001 reports revenue growth of around 7 per cent in the past three years.

The next three are expected to produce tougher trading conditions, depending on what happens to the market downturn that began in late 2000, but the industry thinks it may be able to reach $2 billion in annual exports by 2010. This is despite barriers such as tariffs and subsidies to competitors which, the Seafood Industry Council estimates, cost New Zealand at least $100 million a year in lost income.

Those subsidies are to be discussed as part of the Doha round of World Trade Organisation talks.

In any case, says the council, New Zealand has substantial strengths to lean on: an international reputation for high quality, reliable food safety and, importantly, sustainable management. The latter has been particularly pertinent as European and Canadian fisheries remain vulnerable to collapse.

This offers a huge marketing opportunity for the New Zealand industry, which it is capitalising on in Europe. UK frozen food giant Young's Bluecrest is promoting the New Zealand origin of its hoki, labelling it "fish for life".

The industry has become more sophisticated, moving into branding and marketing the product and away from simply trading in fish. It draws on the Quota Management System, introduced in 1986, for an image to sell overseas.

As of last October, 45 species were controlled by the quota system. The council says this will more than double in five years.

The industry reports that now the "race to fish" has been removed, there have been improved economic returns and it has created an incentive to increase industry investment in research and training.

Out of the $30 million the Government collected for fisheries services in 1999-2000, $13 million was spent on research and $1.1 million on the Conservation Services levy.

As of last October there were 2000 industry trainees. Of those, 25 per cent are Maori and 35 per cent female. Despite this, the industry faces a shortage of skilled workers.

Last year was marked by back-patting for the industry, capped when Peter Talley was made an officer of the New Zealand Order of Merit.

Talley's Fisheries, based in Motueka and run privately by brothers Peter and Michael, has become one of New Zealand's largest fishing conglomerates. This year it bought into the meat industry, adding to its interests in vegetables and dairy products.

Meanwhile, Sir Tipene O'Regan resigned as chairman of Sealord, after a year in which he claimed two defamation victories. Radio New Zealand and Newstalk ZB host Paul Holmes apologised to the former Treaty of Waitangi Fisheries Commission head, paid costs and damages after comments made on air.

The Sealord Group, chaired by Shane Jones from this month, also had a winning year. Last January the $207 million deal to sell half of the company to Japanese fishing company Nissui was cleared by the Government. It had been rejected the year before after the Government moved to block the sale of fishing quota to a foreign owner.

Now Nissui shares beneficial ownership of the deep-water fishery with the Treaty of Waitangi Fisheries Commission, while the quota, about 24 per cent of New Zealand's total, remains with the commission.

Sealord's chief executive, Phil Lough, said the partnership had been beneficial, with a record result of $600 million in total sales and the promised jobs - 700 over five years - on the way. Twenty jobs have been created from technology introduced by its foreign partner.

Still embroiled in debate is Te Ohu Kai Moana (the Treaty of Waitangi Fisheries Commission) which launched its latest attempt to allocate nearly $1 billion of fisheries assets late last year. Views from Maori will be collated after the commission issues four proposals for allocation of fisheries assets. It is hoped the proposals will solve the decade-long debate over quotas, shares and cash which are being held by the commission until a decision over distribution is reached.

Meanwhile, publicly listed fisheries player Sanford took some hits as it again lost out on its foreign exchange hedging.

The company reported net foreign exchange losses of $27.7 million for the August year, compared with a loss of $5.1 million the previous year. Total foreign exchange losses have reached $42.2 million over the last five years. The full-year net profit plummeted 45 per cent, taking profit to $30.19 million from $54.6 million in 2000.

Sanford had relied on a rise in the New Zealand dollar.

Though Sanford's fishing business is strong, the hedging policy was heavily criticised by the New Zealand Shareholders Association at its annual general meeting. However, chairman Douglas Goodfellow said the policy would be continued because directors of the company believed the dollar was emerging from its depths.

A report from ABN Amro says the Sanford balance sheet is built for stormy weather and the company remains an attractive growth proposition.

The final hit for the year was the two-year moratorium on new marine farms. Some in the industry pleaded with the Government for exemption to the new rules while most agreed some control was necessary.

Aquaculture makes up about 15 per cent of New Zealand's seafood exports, worth more than $210 million in 2000, and the Seafood Industry Council estimates this could reach $1 billion by 2020.

World demand is escalating, as the quality of New Zealand produce is recognised.

Last year local oysters were vindicated by Hong Kong authorities, who lifted a ban after checking them when Asian diners suffered stomach upsets. New Zealand oysters were blamed, but a subsequent investigation instigated by local farmers showed the contaminated delicacies probably originated in the Asian market.

The oysters salvaged their reputation and the Hong Kong business was back.

The incident was seen as potentially injuring lucrative markets in Japan and the United States, but oyster farmers report business is booming. Problems for oyster farmers, as with other aquaculturists, lie with the moratorium. Aquaculture farmers found many applications which had chugged for years through the consent process would be caught under the ban.

The moratorium is to halt a speculative rush of applications before legislation controlling the fisheries industry is revamped.

The Aquaculture Council has pleaded that natural justice should allow existing applications, some which have been in the system for eight years, to go through.

So far though, Minister for the Environment Marian Hobbs has been blunt, saying there has to be a cut-off point somewhere.

Submissions on the bill to enforce the moratorium, which applies retrospectively to November 28, will close next month.

This year the industry will continue under the Government thumb, with the oceans policy, aquaculture moratorium and overseas fisheries subsidies seen as likely discussion topics.

But as the fisheries industry leans towards innovative products and slick marketing tactics, the clean green image will continue to win in the export markets.