ICELAND: has the massive national bailout resulted in a fisheries subsidy?

According to Iceland's government website massive loans (compared to the size of this nation's economy) have been received from various sources. Here are the main funds received:

On November 19th the IMF approved Iceland’s request for a two year stand-by arrangement. Iceland will receive USD 2.1 billion from the IMF. Additional loans of up to USD 3 billion have been secured from Denmark, Finland, Norway, Sweden, Russia, and Poland. The Faroe Islands have announced that they would lend Iceland USD 50 million.

Another dramatic move by Iceland's authorities was to take control of the troubled banks , in particular of GLITNIR (before ISB), LANDESBANKI and KAUPTHING.

For the aforementioned banks a Norwegian study identified, back in 2005, the assets they held in Icelandic fishing companies.

I copy here the extracts of the studies detailing the stakes in fishing companies.

Landsbanki shareholding in Icelandic companies and financing in the fisheries sector

Landsbanki is still the major owner of the Icelandic Group seafood marketing company, which has a market value of about ISK 23 billion. The largest listed owners in the Icelandic Group (June 2005) are:

1. Burdaras hf. 20.8%
2. Landsbanki Islands 18.1%
3. Straumur Investment Bank 12.4%
4. Sund ehf. (Blue Ice Group) 12.3%
5. Landsbanki Luxemborg S.A. 9.3%

Burdaras is 50% owned by Landsbanki and Straumur Investment Bank is also partly owned by Landsbanki, as shown earlier.
It is generally perceived that Landsbanki does not plan large-scale involvement in the Icelandic Group as a long-term investment.
Landsbanki is indirectly the largest owner of Marel (Processing machinery), through Burdaras which owns 36.3% in Marel, but the bank also has a direct share of 4.1% in Marel.
Landsbanki is actively involved in financing a number of Icelandic fisheries companies, such as:

1. Brim hf - Fishing and processing. Large scale loan to new owners when Landsbanki sold this company.
2. Saeplast - Plastic tubs manufacturing. ISK 750 million financing in conversion of public to private company.
3. Visir - fishing and processing. ISK 4 billion loan for refinancing.
4. Lysi - cod liver oil processing. ISK 1,100 million financing of a new plant.

ISB Fisheries interests

The Bank’s international Seafood Industry Team is part of the Investment Banking Division and consists of corporate financiers, industry analysts, credit officers and dealers with many years’ experience. Fifteen specialists are currently listed on the team with a focus for different geographical areas, such as the US West Coast, South America, Scandinavia, and the United Kingdom.

The London Branch forms a part of the ISB Investment Banking Division. The principal business is corporate finance, which provides advice to clients when undertaking mergers and acquisitions.

The primary focus of business is the food sector - advising companies on transactions in the fisheries, food ingredients and packaged foods sectors.

1. Sig. Agustsson - ISB provided consultancy service on the acquisition of Hevico and arranged the financing when Sig. Agustsson in Iceland bought the Danish company recently. Hevico specialises in the manufacture of smoked trout and is the largest company in its field in Europe.
2. Eskja - ISB arranged for ISK 1,500 million leveraged buy-out and public to private conversion for Eskja (whitefish and pelagic fishing and processing).
3. Samherji - The bank arranged refinancing of Samherji (undisclosed amount)
4. Þorbjörn Fiskanes - The bank arranged leveraged buy-out for the company management (undisclosed amount).
5. Marel - The bank arranged refinancing of Marel (undisclosed amount).
6. Fram Foods - The bank provided ISK 500 million working capital for Fram Foods (Roe products and herring marinades).
7. HB Grandi - the bank provides long-term financing of HB Grandi.

Kaupthing Bank and the fisheries

Kaupthing is not involved in foreign fisheries companies but has large interests in Icelandic fish industry companies. It is a major shareholder in a few fish industry companies, most notably in the SIF Group and HB Grandi.
The five largest shareholders of the SIF Group (June 2005) are the following:

1. Vending Holding (formerly Ker) 28.70%
2. Kaupthing Bank 24.81%
3. Samvinn Pension Fund 5.81%
4. Arion nomine account 4.76%
5. Pension funds (Public employees) 3.95%

Olafur Olafsson, Chairman of the Board of SIF Group is a major owner of Vending Holding. Kaupthing thus owns a quarter of the shares in SIF directly but it was also the provider of EUR 280 million to SIF on the acquisition of the Labeyrie Group in France in late 2004. (It may be noted that the Chairman of SIF is also a significant owner of Kaupthing Bank through Egla Holding).

Kaupthing Bank is also a 30% shareholder in the fish-roe producer Fram Foods, which split off from Bakkavor Group in 2003 (see also under Landsbanki).
The bank is a significant shareholder in HB Grandi (14.4%) and recently financed the purchase and technical modification of the company’s pelagic-processing vessel, which is the largest in the fleet.

Kaupthing Bank was a major provider of finance for Samherji on acquisition of the seafood processing company Pickenpack Hussmann & Hahn in Germany.

Just lately, Kaupthing Bank has refinanced Iceland Seafood International, which was split from the SIF Group and is now only in minority shareholding (45%) of SIF.

The text of the Norwegian report can be found at the following link:

http://www.fiskerifond.no/files/projects/attach/icelandic_bank_report.pdf

NORWAY: more subsidies for cod

The Norwegian Minister for Fisheries and Coastal Affairs, Ms Pedersen, announced on 21 March 2009 more subsidies to support marketing efforts for cod. An additional NOK 5 million (USD 734,000) to the NOK 11.5 million (USD 1,7 million) that was granted in in February 2009.

The funds will be entrusted to the Norwegian Seafood Export Council.

The official announcement (in Norwegian) can be found in this webpage:

http://www.regjeringen.no/nb/dep/fkd/pressesenter/pressemeldinger/2009/ytterligere-okning-i-markedsforingsinnsa.html?id=550523

USA: Ron KIRK (new USTR) on fisheries subsidies

Here are the written answers provided by Ron Kirk, the new US Trade Representative, to the "FINANCE COMMITTEE QUESTIONS FOR THE RECORD" put at the confirmation hearing held on 9 March 2009:

Questions from Chairman Baucus:

Question 23:

Global fisheries are being rapidly depleted, and environmentally harmful subsidies in many countries contribute to their decline. The United States has been a leader in the WTO negotiations aimed at ending harmful fishing subsidies. Will you continue to take a leadership role in these negotiations?

Answer: Yes

Questions from Senator Grassley :

Question 14(ii):

The President’s Trade Policy Agenda also states that we need to ask how trade policycan address the depletion of fisheries. The World Trade Organization is already addressing the issue of fisheries subsidies in theDoha Development Round trade negotiations, and the United States has been an activeparticipant in those negotiations for many years. Do you have additional ideas for how the Administration could address the fisheries issue?

Answer: My understanding is that WTO negotiations have made some progress on this issue. I will be reviewing the fisheries aspects of those negotiations and will look forward to working with you to consider other approaches as well.

When reading these replies I was struck by two things: the first is the "laconic" reply to the question by Senator Baucus. The second is the very intriguing end of the second sentence to Senator Grassley's question. What does Mr Kirk mean by "[...] and will look forward to working with you to consider other approaches as well."?

Here is the link to the document with the written answers:

http://finance.senate.gov/hearings/testimony/2009test/031109QFRs%20for%20SubmissionRK.pdf

NORWAY: subsidies for vessels hunting for seals

On 4 March 2009 the Norwegian Ministry for Fisheries and Coastal Affairs announced the allocation of NOK 13 million (USD 2 million) among the 4 vessels still active in the seal hunt.

Here is the link to the official announcement (in Norwegian):

http://www.regjeringen.no/nb/dep/fkd/aktuelt/nyheter/2009/nye-ordninger-for-norsk-selfangst.html?id=547911

Interesting to note is that, according to "Statistisk sentralbyrå" (Statistics Norway), the total number of seals hunted by Norwegian vessels amounted to 14,043 individuals, for a total value of NOK 2,542,000 (USD 400,000). This would mean that seal hunting receives 5 times the value of the production.

Hereunder is the link to a table (in Norwegian) from the 2008 Statistic Yearbook showing the figures on seal hunting in Norway:

http://www.ssb.no/aarbok/tab/tab-375.html

NORWAY: hundreds of millions of krona for fisheries specific infrastucture

The Norwegian Ministry for Fisheries and Coastal Affairs announced on 13 March 2009 a large and generous investment plan to improve fisheries infrastructure.

According to the press release by the Norwegian government, a total amount of NOK 2 billion (USD 314 million) will be spent for fisheries’ infrastructure projects over the period 2010-2019.

More information on the programme, including the detailed breakdown of expenditure per fishing port, can be found at the following web pages (in Norwegian):


http://www.regjeringen.no/nb/dep/fkd/pressesenter/pressemeldinger/2009/kraftig-satsing-pa-sjotransport-og-marit.html?id=549156

http://www.regjeringen.no/nb/dep/fkd/tema/sjotransport_og_kystforvaltning/ntp-2010-2019---fylkesvis-fordeling-av-f.html?id=549166#

BRAZIL: more subsidies to fisheries and aquaculture

This is how you could translate into English the new programme “Mais Pesca e Aquicultura” ("More fisheries and launched last year by President Lula da Silva. The objective is to boost fish production in Brazil. The initiative integrates explicit targets to be reached by 2011, such as the increase of fish production by 40%, i.e. from 1 million tonnes in 2008 to 1.4 million tonnes in 2011, or the construction of up to 20 landing facilities for fishermen.

This initiave is a framework that includes, or will include, a number of subsidy programmes to help the Brazilian fisheries and aquculture industries. Examples are: fuel subsidies for 18 million Reales (USD 7.8 million) for 2.230 vessels or financing, in cooperation with the Ministry of Transport for the construction of fish landing terminals.

Other instruments that the Brazilian governement will use to channel the funds to fishermen are:

• the "MODERAGRO" programme (CUSTEIO PECUÁRIO TRADICIONAL) providing funds for purchase of fuel, lubricants, ice, bait, nets, hooks, labour-costs, insurance, taxes, freight, or maintenance and modernisation of vessels. Through this programme beneficiaries could receive up to 300.000 Reales (USD 131,000) aid.
• the "FUNDO CONSTITUCIONAL DE FINANCIAMENTO DO NORTE – (FNO)"
• the "FUNDO CONSTITUCIONAL DO NORDESTE – (AQÜIPESCA)"

More information on the above initiative and programmes can be obtained at:

http://tuna.seap.gov.br/seap/html/Plano%20de%20Desenvolvimento/plano_desenvolvimento.html

USA: fisheries subsidies negotiations in Mr Obama's 2009 Trade policy Agenda

Here-under is the extract of the "2009 Trade Policy Agenda and 2008 Annual Report of the President of the United States on the Trade Agreements Program" where the new Administration set out its priorities for the year 2009:

Prospects for 2009

In 2009, the United States will continue to pursue an aggressive affirmative agenda building upon the U.S. proposals submitted thus far with respect to, inter alia, preserving the effectiveness of the trade remedy rules; improving transparency and due process in trade remedy proceedings; and strengthening the existing subsidies rules. Concerning fisheries subsidies, the United States will continue to press for an ambitious outcome and work to further improve and refine many of the provisions included in the Chair’s draft text. (p. 14)

Ii is interesting to see how nuanced (and moderate) the text is, in tone and in content.

The full text of the document can be found at the USTR's website.

http://www.ustr.gov/Document_Library/Reports_Publications/2009/2009_Trade_Policy_Agenda/Section_Index.html

MALAYSIA: more subsidies to fishermen

As part of its second economic stimulus package the Mlaysian government has decided to help fishermen affected by disasters at sea by setting-up a Fishermen's Welfare Fund with an initial allocation of RM2 million (or USD .54 million), which would be managed by Lembaga Kemajuan Ikan Malaysia (the Fisheries Development Authority of Malaysia).

Here are links to news articles on this Fund:

http://www.nst.com.my/Current_News/NST/Wednesday/National/2501685/Article/index_html

http://www.bernama.com.my/bernama/v3/news.php?id=395159

http://thestar.com.my/news/story.asp?file=/2009/3/11/minibudget/20090311074124&sec=minibudget

USA: NGO reactions to the report on US subsidies to fisheries

In some of the post in this blog I have discussed reactions from NGO’s to important events and/or documents related to fisheries subsidies.

As mentioned in my previous post, a few days ago a substantive report was released by the Lenfest Foundation at the Pew Charitable Trust on the subsidies provided by public authorities to the fisheries industry, in the United Sates.

I find most surprising that two prominent US NGO’s, WWF and OCEANA, have not said a word on this report.

USA: "fifty-six percent of fishing industry direct subsidies in the U.S. could be considered harmful to fisheries"

This is a quote from the press release by the Pew Charitable Trust that presents the main findings of a study by Renee Sharp, director of Environmental Working Group's California Office and renowned fisheries economist Ussif Rahid Sumaila, director of the Fisheries Centre at the University of British Columbia. The study also found that subsidies amounted to 21 percent of the $31 billion U.S. commercial fish harvest between 1996 and 2004.

Concerning fuel subsidies the study suggests that 44 percent of federal and state subsidies support fuel costs.

The Environmental Working Group (EWG) has also published a summary of the study on its website.

Here are the links to the Pew Charitable Trust's press release and to the wepage of theEWG's California Offfice:

http://www.pewtrusts.org/news_room_detail.aspx?id=49752

http://www.ewg.org/fishing-subsidies