10 secrets of Henry Sy’s success

ZAMBOANGA CITY — If a sample of people was asked to identify one product that cuts across all socio-cultural groups in the Philippines, canned sardines would most likely be on the top of everyone’s list. Practically all Filipinos — from the health-conscious, laptop wielding yuppies in Makati, to the robust middle-class segment of Cebu, to the low-income families in Surigao — love sardines because of their rich flavor, affordable cost and nutritional value.

But while nearly every-body loves sardines, very few people know that the canned sardines which find their way to the shelves of the neighborhood sari-sari stores or favorite supermarkets are most likely produced in Zamboanga City. Through the years, this city has been the country’s leading producer of canned sardines, and is home to eight of the nation’s canning factories, which employ around 10,000 workers. Zamboanga’s sardine industry generates over P3 billion in revenues annually for the local economy.

Similar to the thriving tuna industry in General Santos City, Zamboanga’s sardine industry has be-come a major pillar of the city’s economy. Thus, de-velopments affecting its operations create a signifi-cant impact on the area’s fiscal health and conse-quently, on the economic life of its residents.

Crisis begins

Though it has enjoyed robust growth over the years, Zamboanga’s sar-dine industry is facing a potential crisis, according to an assessment conduc-ted by USAID’s Growth with Equity in Mindanao (GEM) Program at the request of the Mindanao Economic Development Council. MEDCo reques-ted the study to clarify the reasons underlying a five-month shutdown of the industry by local canners in 2005; an action that severely affected the liveli-hoods of residents who were directly or indirectly involved in the industry’s operations, including fi-sherfolk, cannery workers and providers of various ancillary services.

The situation, the GEM assessment explained, was due to the escalating opera-ting costs of producers, even as fish prices re-mained relatively constant. Fuel prices jumped from P17 per liter in 2004 to P34 per liter in 2005, while daily wages rose from P165 to P196 when fish handlers were reclassified as non-agricultural workers. Can-ning operators could not significantly increase the buying price of fish be-cause of the increasing cost of imported tin cans and consumer resistance to retail price increases. Wage and fuel increases severely eroded the profits of fi-sherfolk since about 80 percent of their catch is sold to local canneries. From 2004 to 2005, the price of fish sold to canneries remained unchanged at P11 to P12 per kilo.

At least two canneries experienced a slump in sales towards the end of 2005, when the price of a 150-gram can reached P9.75. According to the University of Asia and the Pacific, lower-income fa-milies began to replace sardines with the lower-priced noodles as their staple food. This shift in buying habits may have negative ramifications for family health since canned sardines are the most affor-dable source of protein available to most families.

Overfishing

Even more alarming, the GM assessment re-vealed that the local sar-dine fleet might be fishing beyond sustainability le-vels. The Sulu Sea is the primary fishing ground of fleets coming from Zambo-anga Del Norte, Zambo-anga City, Basilan, Sulu and Tawi-Tawi.

Based on a National Stock Assessment Program conducted by the Bureau of Fisheries and Aquatic Resources (BFAR) for the period 1999 to 2005 exploi-tation rates for the Indian sardine — the main species used for making canned sardines — were calculated at 0.60 to 0.70, which meant that over 60 percent of the actual biomass of thee fish was already being caught. Experts say that an exploitation rate beyond 50 percent endangers the sus-tainability of the fish stocks.

The industry’s fishing fleet consists of 61 commer-cial purse seines and ring-net vessels and 36 large municipal bancas (outrig-ger boats) using the ringnet and bagnet systems. Each of these commercial ves-sels is supported by two carriers and two lightboats.

Figures provided by the Southern Philippines Deep Sea Fishing Association (SOPHIL) for the period 2002 to 2005 showed that the group’s 16 purse seine vessels recorded catches of 10.6 to 12 metric tons per fishing set. Yearly sardine catches of these vessels averaged 215,000 metric tons, which comprised 70 percent of the fleet’s total catch for all species. The 36 commercial bancas caught an average of one metric ton of fish daily. Based on 200 fishing nights per year, the banca fleet produced 7,200 metric tons yearly. Finally, the municipal sardine fleet’s 200 large bancas caught an average of 0.5 metric ton per day. The fleet had a combined annual catch of 20,000 metric tons.

Industry concerns

To address these issues, the GEM Program, in part-nership with MEDCo and BFAR, conducted a sardine industry workshop atten-ded by 42 key representa-tives from the sardine industry and government agencies. The workshop provided an opportunity to validate GEM’s assess-ment and to formulate re-commendations to address crucial concerns affecting the operations of the industry’s various sectors.

Among the major pro-posals made during the meeting was the creation of a “Sardine Management Plan” which will contain an integrated set of regulations based on the maximum sustainable yield (MSY) and total allowable catch (TAC) to be set by BFAR. The proposed management plan, which is being prepared with as-sistance from GEM, would also include limitations on fishing effort, seasonal closure during peak spawning periods, minimum size limits and area closures.

In the area of market and product development, it was suggested that mem-bers of the processing sector dedicate a portion of their production to develop higher-priced products for the high-end export market, allowing processors to achieve higher profits, enabling them to pay higher prices for fish supplied by the local fishing fleet.

Another important re-commendation made du-ring the workshop was for vessel owners to increase the quality of their fish catch to meet strict export standards. Although redu-cing operating costs is a primary concern of boat owners, they should also adopt an integrated system of fish handling that will improve fish quality from the “fishnet to the plant.”

Workshop participants likewise pushed for a com-prehensive industry road-map that includes a mar-ket-based policy-agenda, a regulatory framework and a market development program that will ensure the Zamboanga sardine industry’s sustainability in the coming years.

In response, MEDCo is working with the Depart-ment of Agriculture and the Department of Trade and Industry to identify potential export markets for Zamboanga’s sardine products. GEM will also help in this effort by providing industry stakeholders with time market information and with information on the latest production technologies to enhance the sector’s global competitiveness.

SOPHIL is encouraging its members in the fishing sector to improve their fish handling methods to further enhance product quality, while sardine processors are studying the possibility of consolidating their cargoes to achieve economies of scale.

Despite the crucial issues now confronting the sardine industry, its leaders are confident that these problems will be addressed with the full and united support of industry members. With the continued assistance provided by its partners in government, the private sector, and GEM, the industry can look forward to a bright and more stable future. — GEM Program