Trends in the Blue Bioeconomy: A Faroese Case Study. Dr. Unn Laksá Arc>c Bioeconomy: Focus on West- Nordic Countries. Reykjavík, 11 November 2014

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1 Trends in the Blue Bioeconomy: A Faroese Case Study Dr. Unn Laksá Arc>c Bioeconomy: Focus on West- Nordic Countries. Reykjavík, 11 November 2014

2 Faroese Blue Bioeconomy Resources The building blocks of the Faroese economy consist of u>lisa>on of marine resources, mainly within Salmoid Aquaculture Fisheries Fish and salmon products cons>tuted approx. 95% of Faroese exports in 2013 Issues rela>ng to sustainability and societal benefits from industry Opportuni>es for the future, e.g. Macroalgae cul>va>on

3 Aquaculture Produc>on of Atlan>c Salmon 3 producers: Bakkafrost, Hidden\ord, Marine Harvest EBITDA: DKK 254,5 mio 62,174 tonnes (SW) in 2013 Export value: DKK 1.8 billion in 2012, 2,5 billion in 2013 Best biological results in terms of feed/conversion rates and mortality rates. No use of an>bio>cs

4 Sustainable aquaculture Gone from 63 licences in 1980s to 3 producers Stringent and comprehensive aquaculture veterinarian legisla>on introduced in 2003, following an outbreak of ISA, ( all in, all out strategy) Rigid internal and external quality control integrated ver>cal chain, excellent traceability Salmon from the Faroe Islands concept Faroese salmon highest prices globally for about 5 years Research and innova>on in produc>on process (for instance, avoiding stress during slaughtering) and branding Scarcity higher demand than supply bou>que produc>on MAJOR GLOBAL CHALLENGE: How to combat salmon lice developing resistance to drugs NON- MEDICINAL ALTERNATIVES IMTA: mussels or macroalgae, or even lumpfish

5 Pelagic industry Value of landings 2013: DKK 1,4 billion Catch (tonnes) 2013: 386,798 EBITDA 2012: DKK million 11 vessels Rising average prices

6 Value Crea>on in Pelagic Industry Move from using catch for fishmeal only to increased processing 3 processing plants two new plants last 2 years Varðin Pelagic and Pelagos in addi>on to Faroe Pelagic (value- added products: Whole round, H/G, flaps, fillets and byproducts) New fully automa>c processing plants with newest cooling technology and highest hygiene standards. Ver>cal integra>on with excellent traceability. Total control from fishing to market. Varðin Pelagic, Tvøroyri Pelagos, Fuglafirði

7 Demersal fisheries Demersal fisheries (Value) Demersal fisheries (Tonnes) Salary costs Number of jobs in fisheries Source: Faroese Economic Council 2013 and Sta>s>cs Faroe Islands 2013 Demersal fisheries tradi>onally very central to Faroese economy

8 Fish Processing 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 EBITDA for Fish processing plants 85,634 71,748 72,700 59,296 59,873 46,973 50,604 24,599 19,232 24, Source: Sta>s>cs Faroe Islands Reduc>on in number of jobs and EBITDA Source: Faroese Economic Council and Sta>s>cs Faroe Islands

9 Sustainable Fisheries? Fishing days Cod Landings Growing importance of eco labels The demand for sustainably produced fish products is increasing. On the area of pelagic fisheries and fisheries in the overseas areas, several Faroese businesses have received MSC- approval. The demersal fishery in Faroese waters is however yet to receive an official label marking the fishery sustainable. According to recent informa>on, the factory trawlers Gadus and Vesturvón have received MSC- approval for their cod and haddock fishery in the Barents Sea. In order for Faroese businesses to receive eco labels for demersal fishery and thereby gaining access to important western markets, the future development of the administra>on and sustainability of Faroese fishery is crucial (Faroese Economic Council 2012). MSY Consistently higher landings than the Maximum Sustainable Yield QuesBons concerning management system

10 Sustainable Fisheries? Current system of Fishing days as opposed to a quota based system. Economic Council (2012) recommends a revision of the current system of fishing. Growing importance of eco labels and sustainability concerns on market. In order for Faroese businesses to receive eco labels for demersal fishery (in Faroese Waters) and thereby gaining access to important western markets, the future development of the administra>on and sustainability of Faroese fishery is crucial (Faroese Economic Council 2012).

11 Resource Rent and Fleet Efficiency for Opera>ng revenue all costs (excl. salaries and capital costs) = VALUE ADDED Trawlers Demersal Fisheries Value added normal salaries and normal return on investment = RESOURCE RENT Long liners Current and opbmal fleet size Source: Faroese Economic Council 2014 Trawlers Long liners Number of vessels Current (2010) Op>mal Current (2010) Op>mal Number of vessels Change - 66% - 68%

12 Macroalgae Cul>va>on Ocean Rainforest, established in 2007 Cul>va>on of macroalgae on open ocean. Currently expor>ng macroalgae for cosme>cs, and food, gourmet (seasoning) European leaders in terms of growth rates But s>ll many challenges ahead in making the cul>va>on of macroalgae commercially viable

13 Feed Produc>on Havsbrún, only producer of fish feed, fish meal and fish oil Total ProducBon ProducBon (Tonnes) Total Turnover of product DKK Fish Feed , Fish Meal Fish Oil

14 By- products Faroe Marine Products, establish 2001 dried fish heads and backs from mainly cod, haddock and saithe. Receive supplies from the fish processing plants across the Faroe Islands Gross profit of 18 million in 2013 Salmon Proteins u>lising waste from salmon Gross profit of 2.95 million in 2013 There have been some auempts in recent years, but it has proved difficult to achieve success.

15 Shiv in Importance of Species Fish and salmon represented 95% of Faroese exports in 2013 Tradi>onally, the Faroese economy has been largely based upon the export of demersal species, but these have declined in importance in recent years rela>ve to salmon and pelagic species

16 Export value of fish products Aquaculture Pelagic Mackerel Demersal Other species Source: Faroese Economic Council 2013 and Hagstova Føroya 2014

17 Shiv in Importance of Species Fish and salmon represented 95% of Faroese exports in 2013 Tradi>onally, the Faroese economy has been largely based upon the export of demersal species. Salmon aquaculture and pelagic fisheries currently contribute the most to the economy

18 Resource Rent (Pelagic) The vast success of the pelagic industry in par>cular has prompted discussions concerning the distribu>on of wealth created from the fisheries. Pelagic Trawlers Opera>ng revenue all costs (excl. salaries and capital costs) = VALUE ADDED Value added normal salaries and normal return on investment = RESOURCE RENT Real resource rent of Pelagic Trawlers (source: Faroese Economic Council 2014)

19 Reforms Introduc>on of taxes for pelagic industry in 2011 (DKK137 million extra tax budgeted for 2015). (Currently 7% of profits above 1 million). Licence tax for the en>re fishing industry: DKK15 Million Aquaculture taxes: DKK55 Million for 2015 Currently these amounts get paid into the state treasury. Major reform of fisheries legisla>on due to be introduced in There are no fishing licenses valid beyond that, so there is need for policy discussions on the features of the reform.

20 Conclusions Discussions about sustainability and the management of the stocks Societal debate about how society can benefit more from our marine resources rather than profits being lev with a few players. White fish industry has somewhat lacked behind in innova>on both in marke>ng and processing largely whole, round export rather than value added products Aquaculture industry has been well managed and has been very innova>ve both in terms of management plans, produc>on processes and marke>ng More research into how to minimise waste of our biological resources More research on how to best sustainably exploit and derive value added products from our marine resources.

21 Trends in the Blue Bioeconomy: A Faroese Case Study Dr. Unn Laksá Arc>c Bioeconomy: Focus on West- Nordic Countries. Reykjavík, 11 November 2014