Subsidising plunder Korean Government's support to its distant water fishing industry

2013. 10

Contents

I. Introduction

II. Overview of direct subsidy programmes

III. Available data on subsidies to the Distant Water Fishing industry 1. Direct subsidies

2. Indirect subsidies

IV. Analysis of the support to the Koreas Distant Water Fisheries 1. Bad subsidies

2. A few companies get the lion's share

3. Subsidizing IUU fishing

4. Minor contribution to the national food security

V. Conclusions and Recommendations

Appendix 1 : Distant Water Fisheries Subsidy Status (2010-2012)

Subsidising plunder Korean Government's support to its distant water fishing industry

Author

Jiehyun PARK, Ocean Campaigner

Contributors

Congressman KIM Chun Jin, Democratic Party of Republic of Korea,

Duncan Currie, Eleanor Partridge, Elsa Lee, Helene Bours, Sebastian Losada and

Sari Tolvanen

Design

Creative SAI

publish

2013 October

Cover image Greenpeace/ Paul Hilton / Bluefin Tuna Action in the Mediterranean

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An in-depth audit of public subsidies to the fishing sector in Korea is urgently needed. This report

analyzes public support programs provided to the Korean Distant Water Fishing (DWF) industry and

makes recommendations in order to ensure public subsidy policies support sustainable fisheries.

According to the research conducted by Greenpeace and Korean congressman Chun-jin Kims office

based on data released by the Ministry of Oceans and Fisheries (MOF):

- from 2010 to 2012 direct and indirect subsidies to the DWF industry amounted to approximately

910 billion Korean Won (KRW1) (an average of 303.1 billion KRW per year2), if other indirect

support not quantified by the MOF is added, public support to the Korean DWF industry would

have increased more this three year period;

- just six major fishing companies out of the 46 companies that received support accounted for

80 % of the direct subsidies;

- Five of the six major companies referred above have been involved in illegal fishing activities.

Section 2 of the report provides basic information on seven direct subsidy programmes implemented

by the Korean Government. Section 3 looks into the overall financial support to the DWF fleet, which

is composed of direct subsidies, including low interest loan programs, as well as indirect subsidies. Tax

exemptions on fuel for DWF vessels are the most common form of indirect subsidy in Korea. Section

4 discusses whether those subsidies should be characterized as positive or negative depending on

whether they have the potential to contribute to a more sustainable fishing sector. Most of the

support to the Korean Distant Water Fishing industry would be qualified as bad subsidies and is

highly concentrated towards a small number of very large fishing companies. Companies involved in

or charged with illegal, unreported and unregulated (IUU) fishing were found to have benefited from

these programmes too, even after the IUU incidents took place. In addition the main justification for

the support, which is the DWF industrys contribution to national food security, is highly questionable,

particularly by the tuna industry. Section 5 contains policy suggestions to reform the current support

programmes.

. Introduction

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overnment's support to its distant w

ater fishing industry

. Overview of direct subsidy programmes

What is a fisheries subsidy? Article 1 of the Agreement on Subsidies and Countervailing Measures of

the World Trade Organization defines the concept of fisheries subsidies, as a financial contribution

by the public sector that provides private benefits to the fisheries sector3.

Direct subsidies involve the direct transfer of money from the public to the private sector, including

through low interest rate loans. Indirect subsidies include several forms of support that reduce the

costs of DWF operations, increasing the revenues of the companies.

The following table summarizes the different direct subsidy programmes identified in the data

disclosed by the Korean MOF for the period 2010-2012.

Name Description

DWF Industry Support Fund

Under the national Ocean Industry Development Act4, this programme provides loans at preferential rates. Although the smaller fishing companies or the newcomers are supposed to be the main beneficiaries, it also supports large DWF companies' activities aimed at developing new fisheries and fish exports. The funds available for this program amount to 143 billion KRW for fishing operations and 5 billion KRW to support the establishment of joint ventures abroad (including in the aquaculture sector). The support consists of loans at a low interest rate (3%) for 1 year of loan term. The credit ranges from 40% to 60% of the total cost depending on the amount granted.

Old Vessel Replacement (constuction)

This programme benefits companies operating purse seiners under the Ocean Industry Development Act. It provides low interest loans for the construction of new purse seine vessels. 70% of the cost is covered by the loan and 30% is paid by the company. The program offers a 4% interest rate under the condition of repayment in 7 years, with a 3 year grace

period. The KOFA (Korea Overseas Fisheries Association)5 is in charge of this program.

Vessel Equipment Modernization

Supports the renewal of equipment on board vessels older than 21 years in the trawler and jigging sectors. 100% of the coast is covered by the loan, at a 3% interest rate under the condition of repayment in 7 years, with a 3 year grace period.

Assistance to Promote Exports

Aimed at fishing companies exporting processed seafood. This program provides low interest rate loans to purchase raw materials for export. 100% of loan and payment in 1 year term with the 3 % low rate.

Investment Support for Fishing Facilities

Abroad

It supports companies involved in business abroad in the areas of aquaculture, distribution and processing. 80% of the costs are covered by the loan and 20% by the companies at a 2% interest rate. Repayment is expected in 7 years, with a 3 years grace-period.

Industry Promotion Subsidy

Exploratory fishingThis programme grants money to companies participating in exploratory fisheries abroad.

Foreign Market Development

This is a grant programme that aims to promote seafood exports. It supports promotion and marketing costs such as entry fees to Fisheries International Exhibitions or other expenses related to the promotion of Korean fish products abroad. The grant covers between 50% and 100% of the total cost depending on the content.

Table 1. Direct subsidy programmes benefiting the DWF industry in Korea

Source: KOFA (Korea Overseas Fisheries Association) yearbook 2012

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. Available data on subsidies to the Distant Water Fishing industry

According to the data disclosed by the MOF, from 2010 to 2012, the DWF industry received both

direct and indirect subsidies amounting to approximately 910 billion KRW, or an average of about

303.1 billion KRW per year. When other forms of indirect support not quantified in the data disclosed

by the MOF are taken into account, the overall amount would increase more in this three year period

Year Direct subsidies Indirect subsidies Total

2010 247,634 34,692 282,326

2011 272,615 37,252 309,867

2012 280,883 36,253 317,136

Total (with rounding) 801,132 108,197 909,329

1. Direct subsidies From 2010 to 2012 a total 801.1 billion KRW were given as direct subsidies to 46 DWF companies.

The total amount corresponding to the seven programmes described in the table 3 was 247.6 billion

KRW in 2010, and has increased by about 33.2 billion KRW in 3 years. The biggest part of this

corresponds to the DWF Industry Support Fund, which amounts to 699.2 billion KRW, followed by

the Old Vessel Replacement programme, which received 68.7billion KRW. We note with concern that

subsidies available under Old Vessel Replacement have increased significantly from 2010 to 2012

(74% in two years).

Table 3. Breakdown of direct subsidies to DWF industry of Korea

Table 2. Subsidies to the DWF industry of Korea according to the MOF

Year

DWF Industry Support

Fund

Foreign Market

Development

Old Vessel Replacement (construction)

Assistance to Promote

Exports

Industry Promotion

Subsidy

Investment support

for Fishing Facilities abroad

Vessel Equipment

ModernizationTotal

2010 223,195 28 16,376 5,735 1,400 - 900 247,634

2011 236,387 31 23,904 10,087 506 700 1,000 272,615

2012 239,677 34 28,445 10,327 800 600 1,000 280,883

Total 699,259 92 68,725 26,149 2,706 1,300 2,900 801,131

(Unit: Million KRW)

(Unit: million KRW)

Refer to the Distant Water Fisheries Subsidy Status (2010-2012) in the Appendix 1 for detailed breakdown of direct subsidies

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2. Indirect subsidies Indirect subsidies correspond to government policies (such as tax benefits) or money paid to t