ASSESSING THE IMPACT
OF AQUACULTURE REGULATION
ON INVESTMENT DECISIONS
Susana Gabriel - CIIMAR & CEF.UP – Portugal
Galway, 21st October 2014
1. Introduction
2. Aquaculture sector in Portugal and in the Atlantic Arc
3. The Portuguese regulation on Aquaculture
4. An investment on Aquaculture
5. Some conclusions
RELEVANCE
- With a coastline of 1860km, Portugal has the best environmental resource
for the practice of aquaculture
- Portugal is the biggest consumer of fresh fish in the EU (60kg/pc/y)
importing 20% of it
- Portugal is the lowest aquaculture producer in the Atlantic Arc
MOTIVATION
- Why aquaculture in Portugal is not a significant sector?
- Could regulation explain the discouragement on aquaculture investments?
- What is the role played by the regulation costs?
AIM OF THE STUDY
Assessing the importance of regulation costs on aquaculture in Portugal.
SOME INTERNATIONAL DATA
Turnover (€)
900,000,000
FR
800,000,000
700,000,000
600,000,000
UK
500,000,000
ES
400,000,000
300,000,000
200,000,000
IE
100,000,000
0
2007
PT
2008
2009
2010
2011
PT
Production (tonnage)
300,000
ES
250,000
UK
200,000
FR
150,000
100,000
IE
50,000
0
2007
Source: MARNET data base
PT
2008
2009
2010
2011
SOME NATIONAL DATA
(€)
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2005
2006
2007
Gross value added
2008
2009
Production value
2010
2011
Turnover
Production tonnage by Portuguese Region
5,000
4,000
3,000
2,000
1,000
0
2005
2006
Norte
2007
Algarve
2008
Centro
2009
Lisboa e Vale do Tejo
2010
Alentejo
2011
THE LICENSING PROCESS FOR AQUACULTURE ESTABLISHMENTS
- a Licence to use water resources
- an Environmental Impact Statement
- an activity licence composed of the Installation and the Operating Permit
LICENSING AUTHORITIES AND MAIN TASKS:
- the Regional Hydrographic Authority (ARH)
- the Portuguese Environment Agency (APA)
- the General Directorate of Fisheries and Aquaculture (DGPA)
- the Regional Directorate for Agriculture and Fisheries (DRAP)
ON THE WAY
FORWARD
the case of an aquaculture establishment
with an intensive production system and
in the water public domain
STAGE
– THE LICENCE TO USE WATER RESOURCES (165 DAYS)
the application
is submitted
the file and the
licence is received
15 days
45 days
the announcement
is posted
30 days
The licence
is granted
45 days
the file is analysed and
an opinion is made individually
15 days
ARH
documentation is
checked and sent a positive global
decision is issued
to the
Consulting Body
Consulting Body
DGPA/DRAP
ST
15 days
1
Members of the ConsultingBody:
- the Harbour Authority
- the Maritime Authority
- the Port and Maritime Transport Institute
- the Nature and Biodiversity Conservation Institute
STAGE –THE ENVIRONMENTAL IMPACT ASSESSMENT (180 DAYS)
the Environmental Impact
Statement is granted by
a ministerial regulation
15 days
40 days
a non-technical summary and the
environmental impact assessment
are submitted
documentation
is examined by
the Evaluation
Committee 30 days
a positive decision
is issued and the
declaration of
conformity
is granted
a public
consultation
is taken 40 days
40 days
Consulting Body
APA
DGPA/DRAP
ND
15 days
2
the file is analysed and
an opinion is made by
an Advisory Committee
the Evaluation Committee
provides a final technical
advice and the APA
proposes the Environmental
Impact Statement
Members of the Evaluation Committee:
- the Portuguese Environment Agency
- the Portuguese Water Institute
- The Coordination Commission for Regional
Development
- the Portuguese Institute of Archaeology
- some technical experts
AND THE
- activity permits are request
- the maritime signaling project is drawn
DGPA/DRAP
The project
promoter
- THE INSTALLATION
30 days
60 days
15 days
Consulting
Body
the maritime
signaling
a public
project
notice is
is sent to
posted
the
Consulting Bodies
OPERATING PERMIT (330 DAYS)
the facilities are built
and checked by
Business
some members of
start-up
the Inspection Body
an opinion is made by
the Maritime Authority
90 days
STAGE
RD
3 years
3
a decision on the
place of business the Installation the Operating
is issued by the 60 days permit
permit
Inspection Body
is granted
is granted
Members of the inspection body:
- the Local Authority
- the Maritime Authority
- the Regional Hydrographic Authority
- the Portuguese Environment Agency
- the General Directorate for Health
- the General Directorate of Veterinary
- the Research into Fisheries and the Sea Institute
- the Nature and Biodiversity Conservation Institute
THE REALITY ON THE LICENSING PROCESS
the length of the procedure in law is 22,5 months and in practice is 36 months
CAUSES FOR THE DELAY ON THE LICENSING PROCESS
- two different Ministries legislate on the same subject
(M. of Environment, Spatial Planning and Energy & M. of Agriculture and Sea)
- some members belong to different Consulting bodies and
are asked for an opinion on the matter repeatedly even when they have
different responsibilities on the several stages of the licensing process
(e.g. the Maritime Authority, the Nature and Biodiversity Conservation Institute, the ARH and the APA)
CONSEQUENCES OF THE DELAY ON THE LICENSING PROCESS
- the project is abandoned by the promoter
(in 2012, APA have granted two EIS but none of these business have started)
- the project faces lower profitability than it could be initially anticipated
This loss of profitability
can be a measure of the regulation costs on aquaculture
THE PROJECT DATA
- quantity produced/year: 50.000 kg
- average sales price: 7,5€
- investment period: 10 years
- annual turnover: 375.000 €
- annual raw material cost: 187.500€
- annual supply and services costs: 40.000€
- annual labour costs: 60.000€
- equipment investments: 625.000€
(80% contribution by PROMAR)
- licensing fees: 10.000€
THE FINANCIAL ANALYSIS
Real Scenario:
3 years for the Licensing Process
Payback
5 years
Internal Rate of Return
24 %
Net Present Value
235.000 €
Scenario A:
2 years for the Licensing Process
Payback
4 years
Internal Rate of Return
26%
Net Present Value
295.000 €
Scenario B:
1 year for the Licensing Process
Payback
3 years
Internal Rate of Return
27%
Net Present Value
357.000 €
ASSESSING THE REGULATION COSTS ON AQUACULTURE INVESTMENTS
Real Scenario versus Scenario A:
- 1 year on the Licensing Process
Payback
+1 years
Internal Rate of Return
- 2%
Net Present Value
-  60.000 €
(10% of Total Investment)
Real Scenario versus Scenario B:
- 2 years on the Licensing Process
Payback
+2 year
Internal Rate of Return
- 3%
Net Present Value
-  122.000 €
(20% of Total Investment)
!
These results show clearly the loss of efficiency
in a small aquaculture business caused by
delays and time-consumer procedures
My work’s implications for economic policy are
Ø
Ø
in the present
the urgent need to meet the legally deadlines by the licensing authorities
in order to not compromise the project revenues
in the near future
the need to simplify the current process by the licensing authorities
in order to attract more investment to the aquaculture sector
by allowing its growth in Portugal.
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Partner responsible:
CIIMAR
Title: Assessing the impact of Aquaculture regulation on investment decisions
Description:
¡  a picture of the aquaculture sector in Portugal and in the Atlantic Arc
¡  identification of the main procedures in the Portuguese regulation on aquaculture
¡  assessment of the regulation costs on an aquaculture investment in Portugal
¡  discussion of the results
¡  conclusions
Objectives:
¡  reasons to better understand the insignificance of aquaculture sector in Portugal
¡  the role played by the regulation costs on aquaculture investment discouragement
TO BE PRESENTED LATER ON