Sunday, November 29, 2009


Prospects for ornamental fish and aquatic plants exports from Sri Lanka

THE art of breeding, rearing and keeping of ornamental fish has developed into a modern business worldwide. This has brought in a great source of wealth and foreign exchange earnings for countries, endowed with the right conditions.
Blessed with both tropical and cold climatic conditions, Sri Lanka took early advantage of this lucrative venture in the 1930s and was among the pioneering countries to enter into the tropical ornamental fish trade.
Sri Lankan exporters commenced exports by collecting marine and freshwater ornamental fish from the wild and soon made its mark in the international arena due to wild fish catching techniques adopted by divers without the use of any chemicals.
However, in the mid eighties, exporters' attention was directed towards production and export of freshwater ornamental fish bred in captivity. This resulted in the advent of a breeder/out-grower system in Sri Lanka, generating self-employment to unemployed rural youth.
Nature's endowment of pure and cool waters cascading from mountainous regions in the hill country and flowing into streams and rivers, formed the ideal resource base for breeding and rearing a wide range of endemic and exotic ornamental fish species and aquatic plants, which our breeders and out-growers have put into good use.
The global industry
The total retail value of the global ornamental fish industry has been estimated at around US$ 3 Bn per annum. The value of total exports is in the range of US$ 200 Mn and Singapore is by far the largest exporter with a market share of 25%.
Around 65% (US$ 130) of this export value goes to developing countries, while Asia contributes more than 50% of the world supply. Imports have been estimated at around US$ 250 Mn. with USA importing 25%, followed by Japan (18%) and Germany (9%).
Exports have recorded an impressive growth during the last two decades starting from around US$ 40 Mn in 1980s to reach US$ 200 by 2000. Since 1985, the average annual growth has been estimated at 14%.
The total output of the industry consists of farmed product (90%) and wild collected product (10%). On an average, freshwater fish contribute 90% of the total output and marine 10% in value. While the marine fish output is largely wild caught, freshwater fish output is mainly farmed.
Usually, unit values of marine ornamental fish are relatively high despite their low volume. Vice versa is true for freshwater ornamental fish.
The demand for ornamental fish originates mainly from the developed industrial countries.
As an industry for hobbyists, ornamental fish is usually associated with high living standards and is considered a non-essential luxury commodity. Therefore, the market for ornamental fish reacts quickly to trends in world economy, fluctuating with economic booms and recessions.
The trade is highly competitive with a large number of small and medium scale entrepreneurs playing an important role. In the face of increasing competition, the established players attempt to maintain their competitive edge by investing on sophisticated technology.
Therefore, high competition acted as an incentive and a catalytic force, for the development of technology in breeding, culture techniques and quality improvement, in the ornamental fish and aquatic plants export trade.
The situation in Sri Lanka
Species: Today, Sri Lanka is renowned for the export of both marine and freshwater ornamental fish and also aquatic plants. Freshwater fish varieties exported are mainly exotic species imported to Sri Lanka some time in the past, and cultured and bred in captivity in farms and out-grower systems. Certain endemic varieties caught from the wild and some bred in captivity are also exported with a permit.
Markets: Among the major buyers of Sri Lankan ornamental fish are, the USA, Japan, Germany, UK, France, Italy and Netherlands. Figure 1 indicates the distribution of Sri Lanka's ornamental fish exports among major buyers, from which it is evident that Sri Lanka's export market for ornamental fish is concentrated on major developed countries with quality conscious buyers.
Export performances
In the year 2004, Sri Lanka earned Rs. 745.2 Mn (US$ 7.5 Mn. approx.) as foreign exchange from this industry, the high and lows being US$ 8.0 Mn. and US$ 5.0 Mn. respectively, during the last decade, securing a 3-5% market share in the global trade.
Figure 2 indicates that Sri Lanka's performance in ornamental fish trade during the last 10 years, showing that the industry has experienced a slight decline recently, although enjoying a healthy growth in the long run.
Assessment of the current situation
Singapore, which is by far the foremost exporter of ornamental fish, aquatic plants and accessories in the region, enjoys a market share of around 25% of the global trade. She has been able to achieve this through continuous research and development on breeding new varieties of ornamental fish and aquatic plants and making them available to breeders and producers for mass scale production and export.
Also, an efficient national carrier which flies to almost all the important destinations in the world, with a relatively short turn around period and concessionary airfreight rates offered to exporters by the government of Singapore, have all played significant roles towards achieving that end.
An efficient marketing chain within the trade has been another factor, which has enabled Singapore to be the market leader in the ornamental fish and aquatic plants export trade.
In Sri Lanka, the industry has always remained as a total enclave of a few determined exporters, collectors, breeders, aquarium plant growers and input suppliers. The peculiar structure of the industry as it has evolved in Sri Lanka has had some unfavourable outcomes on the development of the ornamental fish trade.
Presently, a few exporters, largely dependent on a number of small-scale breeders, out-growers, collectors and retailers, dominate the industry. Given the difficulties, which are naturally associated with exporting live products, the industry is largely built on trust between the breeder/out-grower/supplier and the local exporter.
On most occasions, this trust has eroded between these two groups due to the failure on the part of the exporter to buy back the produce from the former or due to the reluctance on the part of the former to part with their produce due to low prices being offered by the latter. Many breeders/out-growers/suppliers have fallen by the wayside due to this reason alone.
Despite these setbacks, those who have successfully accessed the global market, attempts to maintain their status quo by catering to the demand of their established customer base overseas, without making a reasonable effort to expand the product range. This has been as a result of the following reasons.
1. Dependence of the established exporters on conventional 'much in demand' popular varieties that are easy to breed. The so-called 'Bread & Butter' fishes. Our competitors sometimes also produce these varieties, with better colour and quality.
2. Inability of the producers to expand the product range and their dissatisfaction among small-scale producers with regard to price paid for their produce. When Sri Lankan exporters export the same varieties that our competitor countries are producing and exporting, naturally the international prices tends to come down, based on the demand and supply process.
With profit margins being maintained by the exporters for their products, what is paid to the producer tends to come down.
This has brought about disillusionment among the producer, who feels that they are being exploited by the exporters. This may have created a disincentive among producers to expand their product range for the export trade.
3. Even though there is a large base of small producers with a capacity to produce more, they are restrained in producing in quantity, due mostly to the absence of a product range.
The Export Development Board was the premier organization, which assisted the small, and medium scale producers to export to overseas destinations during the eighties and early nineties. This organization, through their market development and promotion process and loan schemes have helped the present day exporters to become competitive in world trade.
However, there was one thing lacking in this developmental process. That has been the research and development component, which was essential to increase the product base of the producers and the exporters.
The National Aquatic Resources & Research Agency, which was mainly involved in conducting training programs in ornamental fish culture for small-scale producers, has recently succeeded in breeding endemic varieties in captivity, to be introduced to the trade.
Strategies for the future
The above facts help us to recognize a few important points. Firstly, developing the aquarium fish industry in Sri Lanka needs a multifaceted approach that addresses various drawbacks.
Secondly, cooperation among different players, especially between the government and private sector is an essential pre-requisite for the successful implementation of any development program in the sector.
Finally, major players of the industry should develop strategies with a long-term vision that are mutually beneficial to each other. With this basic understanding, we attempt here to outline a few of the potential strategies that can help the aquarium fish industry in Sri Lanka to attain its true potential.
Development of Genetic Stocks: A competitive edge in global ornamental fish industry largely depends on the development of new varieties, which attract the attention of international buyers. The best source for developing uniquely attractive varieties for international markets from Sri Lanka is species, which are endemic to Sri Lanka.
However, endemic genetic resources are scarce and valuable and are vulnerable to excessive exploitation from wild stocks. Hence, Sri Lanka should adopt a strategy for developing new strains by hybridisation of local endemic species with genetically compatible exotic species, simultaneously taking measures to conserve the wild stocks too.
This strategy will allow for phasing out the collection of endemic species from wild stocks, simultaneously helping to use local genetic resources bred in captivity for commercial purposes. The ongoing research projects conducted by NARA for breeding endemic species in captivity is a good starting point for this.
Research and Technology Development: The ornamental fish and aquatic plants trade have gradually transformed into high-tech industries and modern developments in biotechnology, culture techniques, and packing methods etc. play a major role in maintaining a competitive edge in global markets.
Given the fact that a large number of local producers are small-scale, they have limited capacity to develop their own research and development needs.
Therefore, government organizations such as NARA, NAQDA and Universities should come forward to help the local entrepreneurs by conducting research and development programs to improve the product base in the country. Technologies developed by government organizations should be transferred to local producers with necessary skills through training and publications.
Training of Aquaculture Entrepreneurs: Training should be provided to potential entrepreneurs as well as employees of the private sector organizations currently in business, to enhance their skills on necessary technical, marketing and managerial aspects. Content of the training programs should be oriented according to the requirements of private sector.
In addition to training programs, relevant government organizations such as NAQDA, EDB and NARA should organize conferences, seminars, symposia and trade exhibitions to expose the local entrepreneurs to global trends in the industry and to open up new market opportunities for them.
Implement suitable incentive schemes: The government can help to boost the industry by providing incentives in following areas.
Concessions in airfreight
Tax concessions for imported inputs and genetic materials
Especially, concessions in airfreight are quite important, as many of the competitive countries have already provided this incentive to their exporters. Hence, to keep a competitive edge in international markets, our exporters also should be provided with suitably designed incentives, which are compatible with the ones available to their competitors.
Role of NAQDA
The subject of ornamental fish and aquatic plants export industry, was not included in the programs of the former and now abolished Inland Fisheries Division of the Ministry of Fisheries & Aquatic Resources (1975 to 1991), as the Division was mainly concerned with the production of inland freshwater and brackish water food fish for human consumption.
Another reason being that, the ornamental fish export industry was a lucrative business earning valuable foreign exchange to the country, initially depending heavily on the export of wild caught marine and freshwater fish that were available in the coastal seas and inland rivers and streams.
With the voicing of concerns of various worldwide wildlife conservation groups in the early eighties on the export of wild caught ornamental fish varieties, both freshwater and marine and with the increasing demand for freshwater ornamental fish varieties from overseas buyers, the exporters commenced large-scale production of freshwater ornamental fish varieties through farming practices.
The final outcome of this process was the entry into the scene of a third player, now termed the out-growers. Today, the out-growers play a major role in the production of freshwater ornamental fish for export.
Some of the breeders of ornamental fish who were being mainly employed by the exporters in their farms, ventured on their own and have now turned farmers, producing the much needed varieties of ornamental fish for the exporters.
In the late 90s, after the creation of NAQDA by an Act of Parliament, the development, promotion and extension activities of the ornamental fish and aquatic plants sector was taken under its control, with NARA attending to research and development and training activities.
In order to assist producers, especially the small-scale producers to market their products, NAQDA organized 'Min Visithuru' ornamental fish and aquatic plants exhibition in the years 2002 and 2004. The main objective of this activity was to bring the small-scale producers in contact with exporters in order to introduce their products for the export market.
This year NAQDA goes one step further with the organizing of 'Min Visithuru' 2005 on an international scale, so as to enable the small-scale producers/potential exporters to come in contact with actual overseas buyers.
The most important strategy that is required to increase Sri Lanka's share in global trade, is to increase the product base for exports as mentioned earlier. At present Sri Lanka exports around 40 species of ornamental fish. Each species have a range of varieties, which are popular in the export markets.
The target should be to identify the particular variety/s of species, which are hitherto not exported, and to produce such varieties in quality and quantity for export. This is easier said than done, as the breeders except for big timers in the export trade, do not have the capacities and resources to undertake the development of such varieties.
This is especially true for exotics as well as for endemics. In this respect, NARA and NAQDA have a major role to play in developing brood stock of such identified varieties and making them available to producer/exporters for production and export.
NAQDA will be inaugurating its first ever Ornamental Fish and Aquatic Plants Production and Training Centre in Sri Lanka at Rambadagalle in the Kurunegala district today (27) under the auspices of the Minister of Fisheries and Aquatic Resources Chandrasena Wijesinghe.
The main functions of this centre will be to: (1) Develop brood stock of identified varieties with export demand. It is a near impossible task for the producers of ornamental fish to know the real requirements of the end consumers in overseas markets.
It is the intention of NAQDA to utilize the Centre at Rambadagalle to collect data on ornamental fish, possibly at the end consumer level, and with the assistance of NARA to carry out research and development for the production of such varieties.
These varieties so produced will be made available to Sri Lankan breeders/producers for the enhancement of the product range for the export market; (2) In the second stage the centre will promote an out-grower system whereby fry of the varieties produced at the centre will be distributed for growing to marketable sizes for export.
The centre will also co-ordinate marketing activities between the breeder/out-growers and the exporters; (3) In the final stage, the centre will assist the breeder/out-growers to commence exporting to overseas destinations by developing a buyer-seller link up through participation in international trade fairs.
NAQDA firmly believes that this is one way by which the product cum exporter base could be increased in order to achieve a higher market share for Sri Lanka in the global ornamental fish and aquatic plants trade. This centre will then act as a model for such future endeavours in other districts as well.