Stimulating investment in pearl farming in Solomon Islands - Aquatic

285 Pages·2012·8.07 MB·English

Stimulating investment in pearl
farming in Solomon Islands

FINAL REPORT

August 2008

Prepared by:

The WorldFish Center, Solomon Islands,
and
The Ministry of Fisheries and Marine Resources, Solomon Islands

Supported by funds from the European Union

Ministry of Fisheries and
Marine Resources
CONTENTS

1 THE PROJECT...............................................................................................1
2 INTRODUCTION..........................................................................................2
2.1 Pearl farming in the Pacific.............................................................................2
2.2 Previous pearl oyster exploitation in Solomon Islands...................................4
3 THE PEARL OYSTERS................................................................................5
3.1 Suitability of coastal habitat in Solomon Islands............................................5
3.2 Spat collection and growout............................................................................6
3.3 Water Temperature.........................................................................................8
3.4 White-lipped pearl oyster availability.............................................................8
3.5 The national white-lip survey.........................................................................8
3.6 Water quality.................................................................................................13
3.7 Natural disasters............................................................................................14
4 DOING BUSINESS IN SOLOMON ISLANDS..........................................15
4.1 Security of investment..................................................................................16
4.1.1 Governance and law......................................................................................16
4.1.2 Land and land lease issues............................................................................17
4.1.3 Physical Security...........................................................................................18
4.1.4 Security of profits.........................................................................................18
4.2 Taxation and incentives................................................................................19
4.2.1 Tax structure.................................................................................................19
4.2.2 Incentives......................................................................................................19
4.3 Labour ...........................................................................................................20
4.4 Environmental impact assessment................................................................21
5 POLICY, REGULATION AND MANAGEMENT GUIDELINES............21
5.1 Policy ...........................................................................................................22
5.2 Legislation.....................................................................................................23
5.3 Licencing.......................................................................................................25
6 INVESTOR VISITS.....................................................................................26
6.1 Investor Feedback.........................................................................................27
6.2 Commercialisation and Financing................................................................28
6.3 Investor’s recommendations for next steps...................................................30
7 CONCLUSION.............................................................................................31
Appendix I Past research and development on black-lip pearl oysters in
Solomon Islands.
Appendix II Suitability of habitats in the Solomon Islands and other regions of
the Pacific for growth of black-lip and silver-lip pearl oysters.
Appendix III Water temperature and cyclone frequency in the Solomon Islands
and other key regions of the Pacific: implications for pearl
farming.
Appendix IV Abundance, size structure and quality of silver-lip pearl oysters in
Solomon Islands.
Appendix V Solomon Islands: the investment climate for pearl farming.
Appendix VI Pearl farming policy and management guidelines.
1 The Project
The overall objective of the project is the reduction of poverty in rural areas of Solomon
Islands through creation of livelihoods based on sustainable aquaculture. This fits within
the over-arching goals of the WorldFish Center in the Pacific to reduce poverty and
hunger in rural communities, and with the Ministry of Fisheries and Marine Resources
(MFMR) to stimulate rural development and to develop aquaculture. It has been
recognised that the nature of the pearl farming industry means that a high chance of
success requires a long term investment from an established pearl farming organisation.
This project has been specifically designed to compile the elements of a pre-feasibility
study to provide offshore pearl companies with sufficient information to investigate the
potential for long-term investment in pearl farming in Solomon Islands.

The overall output of the Project was intended to be decisions by pearl farming
companies in the region to invest, or not to invest as the case may be, in Solomon Islands,
though these decisions are beyond the ability of project staff to influence. Throughout,
staff have been admonished to provide unbiased, factual information free of weighting
either for or against investment. The direct outputs leading to the decisions concerning
investment are:
1. Documentation of past research and development on black-lip pearl oysters in
Solomon Islands likely to be of interest to investors.
2. A national survey of the location, abundance and quality of white-lip pearl oysters
in Solomon Islands.
3. Analysis of climatic and habitat comparative advantages of Solomon Islands for
pearl farming.
4. A summary of the investment climate in Solomon Islands.
5. Policy guidelines for sustainable investment in aquaculture and pearl farming
supporting small-holder community involvement.
6. High-level contacts within the offshore pearl companies most likely to consider
investing in pearl farming in Solomon Islands.
7. Presentations to potential investors on the pearl oyster resources of Solomon
Islands, results of research on culture methods and the advantages and risks of
investment, and policies for development of aquaculture and pearl farming in
Solomon Islands.
8. Recommendations to government concerning the licensing conditions for pearl
farming to provide opportunities for small-holders to supply large farms, and to
ensure that the industry operates in an environmentally sustainable way.
9. A synthetic report covering all project activities.
Each of these elements has been completed and this report represents the ninth of them.
Rather than repeating the information contained in the individual consultants’ reports, it
will provide a broad narrative report synthesising the information obtained from the
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various project elements to describe current conditions in Solomon Islands with respect to
investing in pearl farming. For ease of reference, the individual reports accompany this
draft report as appendices. It is encouraging to note that interest from pearl farmers was
positive, with half of those contacted requesting more information. Ultimate success lies
in landing one interested investor however, and it has emerged that there are other
activities that might assist this process. At the end of this report we highlight the areas of
ongoing research that the investors consider will overcome the remaining barriers to
investment in Solomon Island pearls.

2 Introduction
Solomon Islands is a tropical, maritime country. Comprising more than 900 islands and
covering an area more than 900 x 250 km, the two parallel archipelagos that make up the
geographical spine of the country run from 6.5o to 11oS. Outlying islands increase the
area of the country still more. There are a myriad of undeveloped and unspoiled bays and
semi-enclosed lagoons ranging from very small to the world’s largest double-reef lagoon
system at Marovo Lagoon. One of the planet’s largest atolls, Ontong Java, is also found
in Solomon Islands. For generations, Solomon Islanders have based their lives around the
sea; today seafood still provides the bulk of dietary protein, fishing is part of a way of life
for most rural Solomon Islanders and living away from the coast is a rarity.

As islanders’ lifestyles have undergone steady monetisation, the sea has continued to
provide, with trochus shell, beche-de-mer, shark fin and fish constituting important cash
commodities. Mother of pearl (MOP), from black-, white- and brown-lipped pearl
oysters has historically been an important cash commodity, although severe stock
depletion led to the imposition of an export ban since 1994. With the hope that the ban
has allowed stocks of pearl oysters to replenish and anecdotal evidence that this has been
the case the Solomon Islands Government (SIG) has raised the question as to whether
pearl farming, which contributes to the economies of some other Pacific countries, could
be effective in Solomon Islands. This is a poor time to be entering the pearl farming
community, especially black pearls. Pearls have become increasingly competitive in
recent years and scope for a new player in the market may be limited. However,
competition has caused some operators to move offshore to cut labour and overhead
costs, to work with new stocks that may have marketable differences to traditional areas
and escape the strict regulatory environment in some jurisdictions. Solomon Islands
certainly has the right conditions for growth of pearl oysters and plenty of space for farm
establishment, but crucially it may offer advantages in these economically important
areas.

2.1 Pearl farming in the Pacific
Several species of pearl oyster (family Pteriidae) occur in the Pacific Islands region,
including Solomon Islands. Two, the black-lip pearl oyster, P. margaritifera, and the
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white-lip pearl oyster1, Pinctada maxima, are widely used in commercial production of
farmed pearls, and both of these occur naturally in Solmon Islands. P margaritifera is the
smaller of the two species, and is found throughout the Pacific Islands region, as well as
in the Atlantic and Indian Oceans. P maxima has a more limited distribution, and is only
found naturally in the western Pacific in high-island countries west of Fiji, although
attempts have been made to introduce it to Palau, Kiribati, Tonga and other countries.
Commercial farming of white-lip pearl shell originally developed on the northern and
western coasts of Australia. In recent years some Australian operators have moved
offshore, as a result of which new farming operations have spread to Indonesia Vietnam,
Cambodia, Philippines and Myanmar. Indonesia has now overtaken Australia as the
world’s largest producer of P. maxima pearls in terms of volume, although not yet in
terms of value. A single white-lip pearl farm has been operating in Papua New Guinea
since about 1995, but there are no others in the Pacific Islands region. Pearls from white-
lip pearl oysters are generally more valuable than those from black-lip because of their
gold-to-white coloration and larger sizes.
Pearl farming using the black-lip pearl shell has been the domain of the Pacific Islands
region in the central Pacific. It has developed primarily in French Polynesia and Cook
Islands, of which French Polynesia is by far the most prominent. In recent years black-lip
pearl farming has spread to Melanesia and Micronesia, particularly to Fiji, where
spectacular and unusually coloured pearls are being produced. Pearl farming went
through a 25-year development phase in French Polynesia, and continues to be the
biggest employer and export earner for the country. However the industry has declined
significantly in recent years, mainly due to problems of overproduction and poor pearl
quality (discussed more later). In 1998 French Polynesia produced around 5 tonnes of
pearls worth over US$ 150 million; in 2002, it exported over 11 tonnes, worth about the
same amount. Average pearl prices have fallen from around US$ 35/ gramme to about
US$ 14/ gramme in the past ten years.
Pearl farming has contributed enormously to the French Polynesian economy, both due to
the revenues it generates, and because it can be carried out in remote areas and thus
contribute to rural earnings and livelihoods. In its heyday the development of the pearl
industry was accompanied by a reversal of the trend towards urban drift, with many
residents of the capital, Tahiti, returning to their original homes in the outer islands to
take up pearl farming. As a result of falling pearl values, however, the social benefits
being derived from the industry are also in decline. Between 1990 and 2008 the number
of pearl farming concessions fell from 2,700 to around 700, with larger producers buying
out many of the smaller family farms during that period. Around 7,000 people are now
thought to be employed in the industry, down from more than three times that figure 15
years ago. There are new signs of population drift from outer islands to the capital and
other urban centres, and concerns over the social problems this may engender.

1 P. maxima is commonly referred to as white-lip, gold-lip and silver-lip. It is not known for certain
whether only one or both these varieties occurs in Solomon Islands. The term white-lip is used here to
include both varieties.
3
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CCooookk IIss
PPNNGG
FFiijjii
VVaannuuaattuu FFrr.. PPoollyynn

Figure 1. Google Earth image of the South Pacific showing pearl farming regions
referred to in this document. Australian sites from the NW coast, through Torres Straight
to southern Queensland are approximated.

2.2 Previous pearl oyster exploitation in Solomon Islands
Pearl farming in Solomon Islands is not a new idea (see Appendix I). Coincident with
the first modern pulse of MOP harvesting in 1968-1972, attempts were made to establish
a pearl culture industry, but this was not successful and closed with the commercial MOP
fishery when stocks were so depleted that fishing became uneconomic. A second pulse
of MOP harvesting occurred between 1987 and 1994, when an export ban came on in
response to stock depletion. Shortly after the ban, an experimental black-lip pearl farm
was set up near Gizo in Western Province. By 2000 pearls were produced and sold, but
the experimental farm did not attract commercial investment and ceased to produce pearls
in 2003 when research funds ran out.
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Pearling is not new to Solomon Is. In 2000-

2003 black pearls were successfully produced

at an experimental farm in Western Province.

The period 2000-2003 was a poor time to be seeking investments in Solomon Islands.
The country was wracked by civil strife from 1999 to 2003, when an Australian-led
international intervention force, the Regional Assistance Mission to Solomon Islands
(RAMSI) arrived. With order restored and the economy growing, the government is
attempting to promote overseas investment, particularly in the rural areas. As part of this
process, it has been assisted by the European Union’s STABEX fund to produce a
comprehensive portfolio of information to disseminate to companies and investors
potentially interested in pearl farming in Solomon Islands.

3 The pearl oysters
3.1 Suitability of coastal habitat in Solomon Islands
Both species of pearl oyster that are currently used in the Pacific for cultivation of pearls,
Pinctada margaritifera (the black-lip pearl oyster) and P. maxima (the white or gold-lip
pearl oyster) are native to Solomon Islands (see appendices II and IV). Both have nation-
wide distributions, although the preferred habitat for adult white-lip pearl oysters is more
patchy than that of black-lip. Reef structure in Solomon Islands is akin to that in other
Melanesian countries (Papua New Guinea, Fiji, Vanuatu) with reefs fringing islands,
where they can form complex lagoon structures, but with atolls rare (e.g. Figure 2).
Black-lip pearl oysters are usually associated with hard substrata in the shallower parts of
such reefs, while adult white-lips tend to occur more in fast flowing channels amongst
islands and reefs than on the reefs themselves.

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Figure 2. Typical coastal habitat for much of Solomon Islands. Fringing reefs, a mix of
high and low-lying islands and freely exchanging lagoon structures prevail. Closed or
semi-closed atolls are rare.

The prevalence of fringing reefs rather than atolls contrasts with the situation in the Cook
Islands and French Polynesia, where black pearl farms are typically based in atolls where
black-lip pearl oyster reach their maximum abundance. Growth rates of oysters within
these nutrient-poor lagoons are, however, less rapid than outside of the lagoons. Good
results of grow-out of black-lip pearl oyster in Fiji and Solomon Islands confirm that,
provided the requirement for high-quality water is met, fringing reef lagoons and
embayments can be suitable sites for cultivating black pearls. We note that Solomon
Islands has one of the world’s largest atolls, Ontong Java, at 5oS latitude, but there is no
information on the status of pearl oysters there; it may be too far north and too warm for
black-lip pearl oyster culture.
3.2 Spat collection and growout
Previous research programmes targeting pearl farming have yielded a good deal of
information on the black-lip pearl oyster in Solomon Islands. As this research was
targeted at modifying techniques in use in French Polynesia for Solomon Islands, the
differences between the countries were investigated in detail. A feature of the atoll
lagoons where pearl cultivation has been developed in Polynesia is that they facilitate
collection of spat by trapping eggs produced within the lagoon. Spat is a key element of
black-lip pearl oyster cultivation and spat collection in Solomon Islands is more difficult
than in these Polynesian farms due to the more open reef structures and greater
movement of water. However, research by the WorldFish Center has shown that spat can
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be successfully harvested from close to Solomon Island reefs throughout the country.
Experimental spat collections have been made from Guadalcanal to Shortland Islands and
most regions had broadly similar spatfalls. Of the areas where high collections are most
frequent, Western Province (see Figure 3 for locations) stands out, though even here the
yield per spat collector can be low (an average of 1-12 per collector deployment) and is
variable between locations and years.

Choiseul Manning Straight
Shortland Kia
Islands
Waghina
Western Santa Isabel
Gizo Malaita
Noro
Russell
Marovo Isalndsl
Lagoon
Guadalcanal
Honiara
100 km
Makira

Figure 3. Map of Solomon Islands marked with provinces and main locations referred to
in the text. The scale bar represents 100 km.

A significant issue in Solomon Islands has proved to be the high predation on young spat,
which led the experimental pearl farm to amend the traditional protocols for spat
collection and grow-out. Rather than leaving spat on collectors until they reach a size
large enough for hanging from grow-out line, as dine in French Polynesia, spat were
harvested from collectors at a small size (~10 mm) and an intermediate grow-out phase
was introduced until they reached the size for transfer to hanging culture. The labour cost
of this extra operation may be offset by the low labour costs in Solomon Islands (US$ 5-7
per day for semi-skilled workers compared to US$ 50 per day in Tahiti – see later
sections). Once established, however, grow-out of oysters can be rapid at Solomon
Islands, with spat able to reach 100-120 mm in one year. This is six months faster than is
typical of atoll farms in Cook Islands. Preparing the report summarising the information
on black-lip pearl oysters allowed Patrick Mesia from the Aquaculture section of MFMR
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