TCP/MAL/4403 TECHNICAL REPORT 2

A REVIEW STUDY OF THE SUNGAI MERBOK
FLOATING CAGE CULTURE PROJECT

FAO TECHNICAL COOPERATION PROGRAMME
ON ASSISTANCE TO FISHERIES DEVELOPMENT
AUTHORITY OF MALAYSIA (LEMBAGA KEMAJUA IKAN MALAYSIA)

DRAFT

Masamichi Hotta

Jahara Yahaya

The designations employed and the presentation of material in this publication do not imply the expression of any opinion whatsoever on the part of the Food and Agriculture Organization of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries.

FOREWARD

The Project entitled “Assistance to the Malaysian Development Authority or Lembaga Kemajuan Ikan Malaysia (LKIM)” was implemented by the FAO from November 1984 to November 1985 under the financing of the FAO Technical Cooperative Programme (TCP/MAL/4403). The Project was based in Kuala Lumpur, Malaysia.

The broad objective of the Project was to assist the LKIM in the preparation of a long-term plan and strategy for the development of a fishermen relocation programme. The issue of surplus fishermen is not a new area of concern in Malaysia. The Department of Fisheries (DOF) already indicated in 1971 that there was a surplus of about 19,300 fishermen in Peninsular Malaysia. The problem of too many fishermen in relation to the capital investment and the resources available has become more serious in recent years. In addition, the lack of institutional arrangements to prevent the inflow of new entrants into the fishing sector has accelerated the enhancement of underemployment, low productivity and income among traditional fishermen. Fishing communities have long acted as a traditional reservoir for the unemployed. Under these circumstances, the Government has launched a programme to combat the problem of surplus fishermen with more careful planning, and realistic and systematic approaches.

The Project has produced four technical reports. This technical report reviews socio-economic, technical, institutional, physical, management and financial aspects of a cage culture resettlement project at Sungai Merbok implemented by LKIM. The project involves 100 fishermen who were previously engaged in gill net or trap fishing in the vicinity of the resettlement area. Malaysia is viewing aquaculture as the primary means of achieving increases in fish supply to overcome constraints that capture fisheries are confronted with. Particularly cage culture has been receiving strong attention in recent years because landownership is not required; investments are generally small; and there are many suitable areas on both the West and East coasts. The study has, however, revealed that the project has been facing numerous difficulties and problems and indicated that unless improved management measures are taken, a new venture may continue to show unsatisfactory performances. A full analysis is given in the report.

The project has led to the design of a new project proposal for continuing support to LKIM with regard to the development of the Fishermen Relocation Programme.

Masamichi Hotta
Team Leader

ACKNOWLEDGEMENTS

The study team members would like to express their sincere thanks to the many individuals and organizations who have assisted them in the course of their work. In particular, they would like to thank Mr. Khalil bin Hassan, the Director-General of the Malaysia Fisheries Development Authority or Lembaga Kemajuan Ikan Malaysia (LKIM) who provided wise guidance and assistance to the study team. They would also like to thank Mr. Tan Cheng Eng, Director of Planning Division, LKIM and Mr. Osman Asit, Director of Aquaculture Division, LKIM for their continual support and critical comments on the draft report.

During their field visits, the Manager and Staff of the Sungai Merbok Cage Culture Project have assisted them by providing data and insights on many different aspects to the Project. We would also like to put on record our appreciations to the field staff of Tg. Dawai/Yan KPN's office for their excellent field work throughout the course of the survey. Mr. Low Tung Wang deserves special thanks for his assistance in computer programming and data-processing.

PREPARATION OF THIS REPORT

The authors collaborated in writing the introductory chapters (i.e. executive summary) and the concluding chapters (i.e. conclusions and recommendations). Of the intervening sectoral reviews, financial aspects and part of marketing were prepared by M. Hotta, and the rest by Jahara Yahaya.

EXECUTIVE SUMMARY

It is envisaged by the Government that in line with the National Agriculture Policy, some 28,000 fishermen should be siphoned off from the fishery sector by the year 2000 and relocate into alternative employment avenues like farming, aquaculture land settlement schemes and others.

The Floating Cage Culture-cum-Fishermen Resettlement at Sungai Merbok, Kedah, implemented by LKIM, represents a step in this direction.

Problems and Constraints

Socio-Economics
The negative attitudes, non-compliance and anti-establishment feelings amongst a few participants have the effect of undermining the overall progress and performance of the Project.
Good rapport, communication and cooperation between Project Staff and participants appears to be generally lacking. Instructions and advice given by Project Staff was often misconstrued as orders and commands by participants, thereby resulting in non-compliance of rules and instructions pertaining to efficient cage culture practices.
Seriously lacking too is initiativeness and self-reliance amongst participants, thus making them increasingly dependent on the Project Management. Paradoxically, this happens amidst LKIM's policies and strategies aimed at advocating self-development and self-reliance amongst participants.
Selection of participants was dictated by political considerations. As a result, unqualified and non-deserving applicants were selected, on account of their political affiliation, at the expense of more deserving genuine fishermen.
The informal Group Leader system introduced by LKIM was found to be ineffective, and thus could not fulfill the role and functions designated to it i.e. to serve as a communication link between Project Management and participants.

Physical
Located in a busy waterway, the present Project site tends to be overcongested. Furthermore, the site is susceptible to flooding and strong currents, particularly during the monsoon season.
The biological problems faced by the Project include predatorship, disease and pests. With the exception of disease infection on the fish, the other biological problems such as predatorship and pests were not too alarming.
What was alarming, however, was the heavy losses of fish caused by poaching and theft. In 1984 for instance, about 23 percent of participants reported that they had experienced loss of fish due to poaching. There were allegations by those who had experienced losses that the poachers were none other than some of the participants themselves.
According to some participants, one defect of the cage design was that it was too low. As result, part of the wooden structure which is supposed to be afloat is submerged in water, subjecting it to rapid deterioration and decay.
Because of its overdependence on imported sources and on relatively few suppliers, the Project is often confronted with not only insufficient but also irregular supplies of fish seeds (fingerlings). Moreover, the existing method of handling and transporting the fingerlings is somewhat crude and inefficient, resulting in deaths and injuries of the fingerling. Mechanical injury sustained by the fingerlings during handling and transportation has often resulted in high post-stocking mortality rate, sometimes as high as 80 percent of total stock. Since the cost of fingerlings accounts for almost 70 percent of total operating costs, high post-stocking mortality rate would only undermine the profitability of the cage culture operation.

Technological and Management

Inferior or mediocre management or husbandry practices is another problem area which has adversely affected the productivity of the operation. Apart from the daily routine of feeding the fish and the occasional cleaning of nets, participants do not undertake more scientific/management practices such as supplementary artificial feeding, stock manipulation and grading, disease control and prevention, etc.

Some of the factors accounting for mediocre management practices include lack of skill, experience and training in cage culture, sheer ignorance and general indifference and disinterest on the part of some of the participants. Proper guidance and assistance from Project Staff could not be dependent upon as they themselves lacked the experience and skill in cage culture. The absence of orientation and intensive training programme for participants prior to project implementation constitutes yet another factor contributing to the mediocre management practices.

Institutional
Limited market outlets and hence limited competition constitutes one of the most serious constraints confronting the Project. Nearly half of the participants interviewed cited limited market outlets as their major marketing problem. As a consequence, the price of fish was not only low but also unstable. Moreover, because of limited outlet, not all the fish harvested after reaching the marketable size, the price fell quite drastically - sometimes by as much as 30 to 35 percent.
The manner in which credit was disbursed to participants was somewhat haphazard and not substantially patterned after any systematic procedures. Furthermore, records and information pertaining to credit disbursement and collection were not properly documented and updated while some were even missing. Another area of serious concern was the unsatisfactory credit repayment performance of participants. It was revealed that credit repayment so far was only 3 percent of the amount disbursed. It is recognized that high loan default by participants could jeopardise the long-term viability of the Project.
One serious shortcoming of the Project concerns the profit-sharing system currently practised. Majority of the participants expressed unhappiness and dissatisfaction over the system. To their minds, they had been “short-changed” on their income since they obtained only 25 percent of gross revenues earned form the cage culture operation. Under these circumstances, there were allegations that some participants resort to illegal selling of fish.
It is apparent from the survey that extension services for the Project were seriously lacking. This could be attributed to a dearth of extension officers trained in cage culture. Furthermore, it could not be clearly established as to whether LKIM or Department of Fisheries (DOF) that is responsible for providing extension services to the Project.
The high degree of illiteracy amongst the participants implies slowness in understanding and accepting new ideas through written media like newspapers, magazines and extension manuals. This was clearly demonstrated by the fact that majority of the participants did and could not utilize the manuals on cage culture management techniques and practices which were circulated to them prior to project execution.
The high institutional membership amongst the participants is no reflection of the active and useful role played by Fishermen's Associations or Persatuan Nelayan (PN) in the cage culture activities. It appears that the large majority of participants became PN members in order to merely gain accessed to government's assistance and subsidies.

Project Planning and Implementation
With the benefit of hindsight, it was realized that the Sungai Merbok Project was implemented hastily without proper and systematic planning and research. The ad-hoc policy decision to change the status of the cage culture operation from part-time to full-time economic activity had resulted in implementation difficulties.
The shift in policy and the higher income target set for the participants imposed tremendous pressure and strain on the Project Staff. In their opinions, it is extremely difficult if not impossible to persuade the participants to leave their old jobs and to concentrate full-time on the cage culture operation. This stems out from the fact that the participants are not convinced that the Project can sustain a decent livelihood for them and their families.
Project supervision and monitoring by high level management was clearly inadequate if not completely absent. As a result, early operational setbacks and implementation problems requiring corrective actions could not be detected.

Financial
The huge loss in 1984 can be attributable to the high mortality and the loss of fish which amounted to $472,000, already exceeding the total sales of fish. There was a strong suspicion that the loss of fish was caused by poaching by the participants themselves. This matter concerns the attitude of fishermen and the lack of supervision by the Project management.
Theoretically, the participants should not have received any income in 1984. However, in reality they received a total of $73,000 (i.e. $295,15l x 0.25). Obviously, this amount can only be distributed out of the treasury of LKIM, which has led to the exploitation of LKIM financial resources.
LKIM should clearly define the objectives of cage culture resettlement schemes whether it is to help poor fishermen with generous financial conditions or to develop cage culture as a sound business enterprise with a rigid application of financial and management system. If the former is the case, cage culture does not seem to be an appropriate option for resettlement schemes.
An application of the same system (sharing) to all participants does not give any incentive to serious and hardworking fish farmers. There is no opportunity for LKIM to foster individual entrepreneurship either if a 25% of the total sales is always guaranteed as their net incomes. In addition, the actual costs incurred were much higher than those deducted by LKIM, which would lead to a continuous outflow of resources on the part of LKIM.
Provision of a micro-computer would considerably improve the efficiency of the Project. Inputs such as sales of fish, stock addition, loss of fish, feed consumption and other expenses will be entered into the system daily or whenever they occur. In addition, the project expenses and other information can also be entered. The system can be expected to process all transactions and come up with desired outputs.

Recommendations
In future there had to be more indepth and systematic planning prior to project implementation. This includes explicitly specifying the project objectives and targets, undertaking a detailed feasibility study; undertaking a socio-economic and baseline survey; and assessing the implementation capabilities and staffing needs.

At the initial stage of project implementation, the number of supervision should be increased by redeploying existing Project's personnels. The present system of grouping the participants into blocks should be retained. The leadership for each block should be rotated so as to instil group dynamics and leadership development. The block leaders should be grouped together to form the “Participant Development Committee” or “Jawatankuasa Kemajuan Peserta” (JKP).

Selection of participants should be more stringent and guided by certain definite criteria. The Merit of Point System should be adopted to ensure fairness and equity in participant's selection. Partisan political intrusion in the selection of participants should be avoided completely, and no fishermen should be excluded from consideration to participate on account of his political affiliation.
Close monitoring of the Project by high level management should be given top priority. The main tools for project monitoring include Quarterly Progress Reports and Annual Review Report. These reports should highlight specific issues such as project performance and effects, the need for jchanges and improvements in project design, problems and constraints faced by the project; and what are the measures and steps that have been taken. Another effective tool for project monitoring is periodic supervision visits by officers from Technical Evaluation and Monitoring Unit (TEMU) at headquarters. The role of the TEMU officer can be likened to that of the Visiting Agent of the plantation sector.
Once the Hatchery Project is established, a Seed Bank should be set up to function as a supply centre of seeds. At the project level, some kind of a depository or collection tank should be constructed. It should function as a transitional tank where, upon arrival, the fingerlings are deposited for conditioning and treatment before distribution to participants. Conditioning and treatment of the fingerling prior to stocking are essential in order to minimise post-stocking mortality.
Under the present circumstances of limited market competition, new outlets have to be explored. In this respect, two potential areas were identified viz. regular consignments to fish wholesalers in Penang, Ipoh and Kuala Lumpur and contractual marketing with restaurants and hotels in major towns like Penang, Alor Star and Butterworth.
Since majority of the older participants are illiterate, education through talks, visits, demonstrations, pictorial illustrations, filmlets, radio and television would be more effective than formal educational programmes through written media. To operationalise these educational extension programmes, it is imperative for LKIM to build up a “core” of trained and competent officers to provide the extension services on a regular and sustained basis.
LKIM should expand and intensify its training programmes specific for the project staff. Particular emphasis should be given to training the “trainers”, particularly the cage supervisors and extension officers, in areas such as cage design and construction, aritificial spawning, handling of fingerlings, management techniques, fish disease and control, maintenances of cages and nets and harvesting methods.
A Production Credit Scheme should be set-up to provide successful participants with loan facilities for the additional procurement of capital items (cages and nets). It is important to bear in mind that the propose credit scheme is designed to help only those successful participants judging from their previous records on production, sales, income and loan repayment.
There is an urgent need to review the existing profitsharing system which would not only provide incentive for participants to increase their productivity but also discourage illegal selling of fish.
The over-dependence of the project on the Government for financial assistance and management generates a broad policy-implication in that LKIM should draw up an elaborate plan for the phasing out of financial and management responsibility from the agency to the Persatuan Nelayan (PN). There should therefore be a conscious and concerted effort on the part of LKIM to strengthen and consolidate the position of PN, both financially and managerially.

xxxvix. Considerations should be given to phase out the present sharing system in five years time and introduce a system which will be based on actual costs in order to improve the financial standing of the project as well as to foster the entrepreneurship of the participants. A full committment to cage culture on the part of the participants is essential to bring forth sound, sustained development and financial improvement. A micro-computer should be installed with the project to improve administrative and financial procedures of the project.

xxxvx. In line with the Government's Privatisation and Malaysian Incorporated Concepts, it is timely that the private sector should be called upon to participate in cage culture development. One possible strategy of involving the private sector is through the “nucleus estate” concept. To encourage private sector's participation in cage culture development, incentives must be made available to them in the forms of subsidised loans, tax holidays, liberalisation of application for State land and water bodies and access to government's extension services, training and research facilities.

FOOD AND AGRICULTURE ORGANISATION OF THE UNITED NATIONS
November 1985

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Chapter

1.1 Background of the Study

1.2 Objectives of the study

1.3 Present Status of Marine Floating Net Cage Culture