Funding Artisanal Fishing License Buy Outs


Background

By 2009, Indonesia had become the world’s largest producer of ‘cottonii’ (Kappaphycus alvarezii) seaweed, with national production of dry raw material exceeding 85,000 MT (metric tonnes). Based on the 2009 value of dried seaweed, this represented on paper an annual value of approximately US$100 million to the Indonesian economy. However, the true value of seaweed farming is in the extraction of Semi-Refined Carrageenan (SRC), otherwise known as E407a; a gel or thickening agent with an enormous range of uses throughout the food (human and animal), beverages, cosmetics and pharmaceutical industries to name a few. A 2009 search through United States Patents revealed 12,491 patents issued containing the term carrageenan or one of its variants, with new uses being discovered constantly. Despite Indonesia dominating raw material production, value added processing remains almost exclusively within the Philippines, where they process 87% of Indonesia’s seaweed production. With the high value of processed carrageenan, this represents a significant and largely unnecessary loss to the Indonesian economy, which has already been highlighted by the Indonesian Government as a key priority for future economic growth.

Meanwhile, seaweed farmers are amongst the poorest members of Indonesian coastal communities, leading many individuals to fish from nearby coral reefs as a source of subsistence or to supplement their small income. Similarly, established fishers are reluctant to exit the fishery and enter the seaweed farming industry while economic rewards remain so low, despite extreme overfishing driving declining catch per unit effort in many areas. The large distances to processing factories mean local farmers are forced to sell their produce to middlemen for farm-gate prices, as opposed to the factory-gate prices they could receive if selling directly to the processing firms.

The Opwall Trust has been working in Indonesia for over 15 years, and for the past decade has been developing a best practice model for Indonesian coastal fisheries management in the Wakatobi Marine National Park which has proved successful in a number of ways (find out more about this project here). However, the age old barrier to conservation success remained: the development and implementation of alternative income streams. After investigating the potential for ecotourism, aquaculture and coral farming, the most likely source of sufficient success was in the form of seaweed farming; an activity already widespread throughout the Wakatobi and much of Indonesia. In addition to the economic barriers to seaweed farming as a viable income stream, we also identified an information barrier, with the process of producing carrageenan not widely known and understood.

Progress to date

The initial challenge was to overcome the lack of available knowledge on the process of producing carrageenan from raw seaweed. To address this, one tonne of dried seaweed was shipped to the UK from Indonesia and an external consultancy firm (Oaklea Ltd.) tasked with investigating how carrageenan processing could be achieved in a sustainable way whilst maintaining economic profitability. The subsequent processing method developed by Oaklea produces a product of high quality which meets rigorous standards for use in human food products set by the European Union (EU).

The processing method also provides a number of key benefits. The most important of these is that the method is simple enough to be performed in a remote setting, making it suitable for local use, thus re-defining the current supply chain to benefit seaweed farmers and removing the need for costly transportation of bulky raw material with a large carbon footprint. In addition, this will provide a distinct advantage over other carrageenan producers due to the freshness of the seaweed and the ability to impose strict quality standards on the members of the cooperative. There will also be significant benefits to the local economy in areas where tax revenues are currently low, which will in turn stimulate increased development of infrastructure and services. Initial tests indicate that the quality of the product can be greatly increased by using raw undried seaweed (impossible unless processing is local), thus reducing processing time and raising interesting potential for a ‘new grade’ of Carrageenan for use in high end products.

A major objection to existing processing plants is the high level of polluting effluent. However, with one modification to the original Opwall Trust method, the process effluent would be liquid NPK (nitrogen, phosphorous, potassium). Many small islands in Indonesia are characterised by extremely low nutrient soils; a major factor in the heavy continued reliance on reef fisheries as agricultural potential is generally low. This high NPK by-product would therefore provide much needed nutrients and greatly boost local food supply and reduce reliance on reef fish.

In addition to offering factory-gate prices to local seaweed farmers in order to increase their income levels, it was also the intention of this project to provide a suitable (and sufficient) alternative income stream to reduce overall fishing pressure. To achieve this, we have developed a shareholding scheme, whereby those seaweed farmers selling their raw seaweed to local, privately owned, processing plants are awarded shares which match in value their gross income from seaweed sales at factory-gate prices. In return for these shares, each farmer would surrender their fishing license, and a reduction in local fishing pressure of approximately 50% be achieved in most areas. High profit margins within the industry would ensure private investors would still make a sizeable operating profit even after the payment of shares, through a ‘doing well by doing good’ approach.

Future objectives

The Opwall Trust processing method has been extensively tested at the laboratory scale in the United Kingdom, and therefore the physio-chemical basis of the process has been conclusively demonstrated. This included the quantification of all chemical reactions, and an assessment of product quality (which met EU Food Grade standards). The next step in developing a process such as this is to demonstrate that the major inputs (chemicals, energy etc.) calculated in the laboratory can be replicated on a larger scale. Providing evidence that all inputs increase arithmetically is a vital stage of the overall project, and vital if investors are to be assured the final, full sized plant would follow pro-rata.

We therefore plan to construct and operate a scale pilot plant, based on 1/40th scale of the pilot plant and a one-hundred fold increase on the laboratory operation. The pilot plant phase would be expected to fulfil two objectives: (1) to provide the previously mentioned evidence that the laboratory-derived carrageenan processing method can be applied at an industrial scale, and (2) to provide a flagship proof of concept installation and a future research and development (R&D) facility to allow continuous improvements on processing methods to be identified and tested. As a functioning plant, we foresee the pilot phase becoming ultimately self-sustaining once the initial six month testing phase is completed, with profits being used in the subsequent R&D process. A special project vehicle has been established in Indonesia to manage this project, and the Opwall Trust are in discussions with several potential partners interested in funding the pilot plant phase of this exciting project.