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PROBLEMS ENCOUNTERED IN JOINT VENTURES IN THE CECAF AREA

Community of interests

34. Many of the problems encountered in the negotiation and operation of fisheries joint ventures in general have been occasioned by a lack of community of interests between the partners or at least a clear understanding and appreciation of each other's basic objectives in the venture. Such lack of community or appreciation of interests may lead to the atmosphere of distrust that is so often a cause of the failure of a joint venture operation.

While it is not possible to give exhaustive lists of objectives that would cover all possible cases and parties, it is perhaps well to point out the basic difference in position between a host government party on the one hand which is often primarily concerned with development and social needs in its country and thus with securing commitments concerning the construction of shore based facilities, training, stimulation of local fisheries activities and related sectors and the provision of low cost food stuffs to the local market, and, on the other hand, a foreign fisheries company whose primary interests will normally lie in access to local fishery resources and/or markets and achieving the maximum return on capital invested.

Finding suitable and reliable partners

35. One of the difficulties experienced by governments and private enterprise in the CECAF area, according to their own account, has been the location and contacting of suitable and reliable foreign partners.

Preparatory studies

36. Another reason often given for the failure of joint ventures is the failure to undertake serious and comprehensive surveys and feasibility studies before embarking on joint venture operations, which sometimes results in over-optimistic estimates of resources availability or market potential and the rate of development progress that may be achieved, as well as of profit opportunities. At times, however, such miscalculations may be occasioned by factors beyond the control of the parties to the venture. Thus one venture, for example, failed because it was predicated upon the existence of an intergovernmental agreement granting fishing rights in the waters of a neighbouring country. The agreement never entered into operation and the venture was starved of access to adequate fishing resources to support the proposed scale of operations.

Infrastructure deficiencies

37. Physical infrastructure deficiencies appear to be an important constraint in a sizeable number of CECAF-area countries and have caused difficulties in reaching or implementing joint venture agreements. References are made to inadequate landing and terminal facilities which have prevented expansion of fishing fleets and created bottlenecks in local distribution. Absence of dry dock facilities and problems in the procurement of spare parts are other frequently heard complaints. In one country, for example, Government efforts to enter a joint venture for the management of a shore plant have been unsuccessful because spare parts cannot be obtained from any source except the country which built the plant and which has shown no interest in becoming a partner. High costs, sometimes connected with high import duties, of fishing equipment and requisites for sea and shore operations such as fuel, plastic cartons, tin cans, etc., also are mentioned as important disincentives for doing business in some countries. Here and there, lack of cold storage facilities in inland areas has been a handicap for development and joint venture formation.

Management

38. Among problems on the manpower side, the relative dearth of entrepreneurial and management talent in the countries of the CECAF area, as in other parts of the developing world, is probably the most serious. This general observation notwithstanding, fisheries development in some of the countries of the area has greatly benefited from the emergence, in recent years, of a number of remarkably competent and successful local entrepreneurs. A few of these have been able to expand the scope of their activities on an intraregional basis, and are being frequently approached by overseas interest desirous of associating themselves with local interests. Not all local associates, however, have the required experience for larger-scale fisheries operations. Where they insist, in such oases, on the strength of their share-participation, in reserving decision-making power in management for themselves, their lack of know-how can have disastrous consequences for a joint venture. Hot all difficulties, however, arise from the part of local associates. In one case the failure of a joint venture in the area was attributed in part to the lack of any localisation of management decision-making by the foreign partner. All matters requiring management decisions or requests for information on the operations of the joint venture had invariably to be referred to the head office of the foreign partner.

Labour and crews

39. Some CECAF area fishery joint ventures claim they had experienced difficulties because local employees were unreliable and because of troubled industrial relations. The latter often have their origin in labour union resistance to attempts to dismiss an unsatisfactory local employee. Occasionally, lack of a common ground for understanding between overseas partners and local people seems to have been at the root of all troubles and has led to discontinuance of an otherwise seemingly quite viable association.

40. Some local laws and customs and peculiar attitudes of the labour force may create serious handicaps for a venture producing products that must compete in regional or worldwide export markets. Paying fishing crews on a monthly basis, enforcing limitations on daily hours of work, and insistence, for social reasons, on crew sizes in excess of actual requirements, thus, may tend to make fishing operations uneconomic and have been serious disincentives to joint venture formation. Another element that is a major drawback for industrial-scale fishing is the reported reluctance of crews, in some CECAF countries, to hire on for trips extending over 40 days in length.

41. The quality of local crews and other staff required for industrial - scale fisheries varies a great deal in the countries of the CECAF area. In some countries, the coastal population has considerable experience in fisheries operations, and foreign assistance requirements are limited to skippers and engineers for the larger, more sophisticated, vessels. Other countries are comparatively lacking in a sea-faring tradition and are in need of training facilities on shore and at sea to make them ready for more active participation in major ventures. In this connexion, drastic statutory limitations on the employment of foreign staff, restrictions on the percentage of earnings expatriate staff are allowed to send home and other provisions reducing job attraction, may work against the coastal countries' best interests and retard the pace of joint ventures expansion if they create serious staff problems. In a different category, and generally acceptable to - often even welcomed by - foreign partners (because of cost economies and opportunities to redeploy key staff elsewhere) are legislative provisions or clauses of individual joint ventures which foresee a rationally phased repatriation of foreign staff, in line with growing possibilities for replacement by newly qualified local employees.

Capital and credit

42. Lack of financing, as has been pointed out on many occasions, only rarely is a handicap in forming new ventures based on the utilization of high unit-value export products. Funds are much harder to obtain for ventures for delivery of products for local markets. In some countries where compulsory “naturalization” of enterprises has been introduced, the shortage of funds for the acquisition of their share of the equity by local interests has become a problem. Where loan funds have not been made available for these purposes, equity ownership has been acquired, in some instances, through some form of hire-purchase arrangements for fishing vessels and other company assets. It is argued, in some quarters, that governments should provide special credit facilities for to “approval” local partners in acquiring a majority equity interest, wherever “naturalization” of enterprises has been instituted by law.

43. Where there is lack of funds for operations for local market consumption, coastal countries are increasingly using the leverage they possess, by virtue of their control over fishing for resources of high unit value, to negotiate joint venture clauses providing for obligatory deliveries to domestic markets of a percentage of the total landings of joint venture vessels. Requirements of this sort usually reduce economic returns from operations and, if considered unreasonable by foreign interests, may lead to termination of joint venture negotiations or to failure of projects in implementation. Some coastal countries, in order to ensure use of local shore facilities, prohibit certain forms of processing at sea in their territorial waters. In other cases, they may administer fish-pricing policies aiming to ensure that supplies are being destined for export rather than domestic markets or vice versa. Price fixing or the establishment of price ceilings also are used, in a few countries, to achieve social objectives or in conformity with general application of central planning. Wherever some form of control over markets is exercised, the social benefits the country seeks to achieve should be weighed carefully against potential disincentive effects on joint venture formation and consequent retardation of the pace of development.

Markets

44. A further constraint, occasionally mentioned in connection with non-fulfilment of growth expectation and failure of joint ventures' expansion, is the alleged lack(or inelasticity)of markets for fish in some CECAF area countries. Allegations of this kind should not be taken too seriously. Very often it is absence of distribution facilities and consequent lack of availability of fish in local markets that is mistaken for lack of consumer interest. At other times, ill-considered pricing policies may lead to temporary flooding of a market with a variety of fish that has been underpriced in relation to other species. Then again, fish prices may have been fixed generally too high versus those of competitive products. Local preference for certain varieties do, of course, have to be taken into account in market planning, and so do changes in such preferences such as the growing shift, in the southern part of the CECAF area, from cured to frozen products. The latter trend appears to have created problems for suppliers of cured products from other parts of the region who find the costs of transport and distribution of frozen products a serious hindrance to the continuation of their traditional trade.

Taxation and customs policies

45. In some countries a great variety of taxes, duty and fee payments have to be made, which often increases the amount of bookkeeping required and the red tape that complicates the existence of joint ventures. In other countries again, the high level of certain duties and fees which squeezes the profit out of operations is a serious complaint. In some instances, there is objection to certain types of levies - e.g. duties on all catches (whether made by vessels of the national fleet or by foreigners), duties on transport for distribution of fish - in other instances, to what appears as an equitable treatment of certain types of operations.

46. A general problem throughout the region is how to deal with landings of frozen fish by foreign operations and by foreign vessels chartered by nationals of the coastal countries. The size of these deliveries and the prices at which the fish are placed on the market may-have a substantial impact on the prospects (of doing a profitable business) of domestic companies, including new joint ventures. A policy of judicious imposition of quotas and levies on the landings of foreign vessels can of course achieve a desired equilibrium between procuring a mass supply of relatively inexpensive fish from freezer trawler landings and new development projects under locally controlled auspices.

Compliance with contract provisions

47. Some governments indicated that they had in some cases difficulties in monitoring and ensuring observance of contract obligations by foreign partners, particularly where construction of shore facilities was concerned.


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