planning and implementing a fish auction market

Sharing few Guidelines and lessons learned from a feasibility study for the operationalisation of defunct Electronic Fish Auction Market (FAM) project in Mauritius

By S. Sweenarain (1)

Summary

This article is a synthesis of a feasibility study for the operationalisation of a misconceived/defunct fish auction

market infrastructure in Mauritius. The guiding principle of this work has been to reaffirm the “value for money“

of the investments and to mainstream the Fish Auction Market into national seafood hub and the regional

landscape of fish trade. Far from being a “one size fits all” solution, the guidelines and lessons learned from this

assignment can be useful in promoting appropriate market architecture in the fisheries sector as a promising

pathway for market driven sustainable fisheries management in developing coastal and island economies.

Market imperfections are contributing significantly to the over-exploitation of fish resources and the degradation

of marine habitats in developing countries while information asymmetry is the root cause that exacerbates the

lack of fairness, transparency in fisheries governance and inequitable distribution of accrued benefits through the

supply chains of fish and fish products. Therefore, market and value chain development can potentially enhance

resource productivity and ecological integrity through informed conservation, sustainable uses and equitable

sharing of benefits by a reduction in seafood waste. This can be a multiple dividends initiative indeed as it helps

improve the livelihoods and well-being of the fisher communities, while contributing to the sustainable

development goals (SDG) through inter-alias, food security, eradication of poverty and more resilience to effects of

global warming and biodiversity loss.

Declining prices and accessibility Information –Technology –Communication (ITC) aided innovations in Fish

Auction Market (FAM) can improve tremendously the performance of physical and virtual market places by

connecting primary producers to a large number of potential buyers, while making market information available

at quasi real time. This can be, if well planned, a charismatic mechanism to improve market efficiency and

effectiveness in progressing informed management of the natural capital and ecosystem services. Fish Auction

Markets can be used as a transmission belt to convey, both upstream and downstream private market driven and

government regulatory measures across the seafood business. This includes environmental and social norms,

product specifications, quality standards, traceability procedures and best practices in accordance to the local-

global dynamics of the fisheries.

The most subtle and yet, prominent role of FAM lies in its capabilities for accessing real time data - as opposed to

historical statistics - which is much needed for effective monitoring and control of fishing activities in the process

of sustainable fisheries management. It can boost achieving transparency and economic efficiency by providing

trading platform Individual Transferable Quotas (ITQ) and a strong tool to combat Illegal, Unreported and

Unregulated (IUU) fishing. Beside the negative impact of toxic subsidies and in the fishing industry, market prices

of seafood distort their actual social and ecological cost because of the unaccountability of the carbon footprint

incurred during harvesting, processing, marketing and especially, international trade. The FAM can be a centre

point for creating awareness on the carbon footprint of seafood supply chains and to consider introduction of

differentiated carbon tax regimes.

All said, the successful operationalisation of a market infrastructure will depend on the political will and the

effectiveness in mobilizing a multi-stakeholder partnership (MSP) among relevant Institutional, Social, Research,

and Business stakeholders of the domestic and international supply chain ecosystems in the fisheries sector.

1 Fisheries Economist and Fish Market Professional

This study was sponsored by the IOC – EU/FAO SMARTFISH Programme and the study report can be found at: http://commissionoceanindien.org/fileadmin/projets/smartfish/Rapport/OPERATIONALIZATION_OF_FISH_AUCTION_MARKET_FEASIBILITY_STUDY.pdf

http://commissionoceanindien.org/fileadmin/projets/smartfish/Rapport/OPERATIONALIZATION_OF_FISH_AUCTION_MARKET_FEASIBILITY_STUDY.pdf

Planning for an Electronic Fish Auction Market

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1.0 The need for a Fish Auction Market (FAM)?

The global landscape seafood markets and trade is diverse and dynamic. Demand for seafood is increasing

steadily but at the same time, there is a widespread concern about the sustainability of the current

exploitation patterns to prevent over-exploitation of fish stocks. Such fast changing and unpredictable

environment has a direct impact on the commercial dynamics of the fish industry and it is difficult to

prescribe the right commercial model to guarantee future profitability of the industry.

With regard to the introduction of an electronic auction market in the seafood sector, nobody - whether

someone with extensive experience in the use of such technology or a new user – can make reliable

prediction about its outcome. What will eventually give a comparative advantage to this sector is the

capacity/business acumen of the enterprises to identify and respond to opportunities and threats. Also, it

depends on the associative capabilities of businesses can come together in a group for the benefits of all

group members. In the seafood sector, all stakeholders in spite of their individual rivalries need have to

come together to promote a common brand and broader commercial interest to enhance the

competitiveness of the industry over its competitors worldwide. Knowing when to work collectively and

when to work alone will be a crucial skill to do business in the present global environment. If enterprises

constituting the cluster of the seafood industry are poorly managed, have poor understanding of the

market mechanisms in which they operate and are unable to identify underlying opportunities and

threats then introduction of advanced technology such as the FAM is likely to weaken rather than

strengthening their competitive position. Therefore the first thing to do is to ‘assess the future’ of the

industry.

The following changes are affecting and influencing the seafood sector of Mauritius and the rest of the

world as well:

Market pressure to increase commercial harvest of marine fish

Market pressure to increase commercial harvest through improved marine aquaculture

technologies.

Commercial and regulatory pressure to reduce waste in the production (by-catch, discarded catch

and miscellaneous fish) and distribution chains (such as spoilage and poor quality).

Greater participation of fisher communities in fishery policies and management.

Fishing rights are specifically allocated to individuals, individual vessels, individual fleets and to

fisher communities on the basis of historical/customary rights and the commercial trade in such

rights might be regular payment of access fees.

Increase in access right will lead to a shift from ‘hunting of fish’ toward a more planned mode of

exploitation.

Shift from fishing for ‘Volume’ to fishing for ‘quality’

Higher price penalty on poorer quality of fish brought about by a combination of consumers’

preference, control of upstream cost and stiff international competition.

Knowing where and how the fish has been caught, handled and processed will be an increasingly

important component of quality of the fish as it passes along the supply chain (traceability).

Streamlining and reduction of excessive cost due to inefficiencies on account of increasing

exposure to international competition.


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Maintaining low operation cost by creation and use of flow of information within the industry and

taking full advantage of all what information and communication technology (ICT) have to offer.

The power of the industry will shift from upstream traders, processors, distributors to those that

have secured access to the resources, the primary producers.

Responsible and sustainable practice in respect of resource exploitation.

Greater and more balance recognition on the market of the positive features of each scale and type

of fishery – industrial, small scale / artisanal, inshore, offshore , mobile or static gears…

Appropriate use of modern information and communication technology systems to alleviate many

of the scale and geographical penalties typically in remote / peripheral fisheries and fishing

communities, allowing them to compete more effectively on main stream and niche markets.

Any one of the above determinants will have an effect on any enterprise in the fishing sector and

obviously, some major decisions have to be taken promptly to secure its comparative advantage in the

industry. Every response to any of those directions will impact on how the primary sale of fish is

organized and how to engage into an electronic fish auction market. This response will also address the

changes that need to be brought in the mindset of the stakeholders and in respect of industry practice.

2.0 Planning for an FAM

The fisheries sector may be somewhat confused as to who is deciding about the introduction of an

electronic fish auction market in the industry. It is also understandable that some stakeholders might feel

alienated and threatened by the arrival of this new system. From an industry perspective, three key

questions need to be answered when considering the auction system to serve the interest of the industry.

Do the industry and its constituent firms know their respective position in the market – who are

their existing and potential customers and who are their competitors?

Does the fishing sector as a whole have a strategy for improving/maintaining safety and quality of

the fish it handles –the way that the fish is preserved, sorted, graded, weighed and described?

Does the fishing sector have a strategy to reducing cost and existing inefficiencies within the

supply chain?

If the answer to any one of the above questions is negative the decision making body in the industry needs

to acknowledge that it is not in an informed position to decide on the introduction of an electronic fish

auction market.

The following check-list can be helpful in gathering information on the status of the fishing sector, and on

the initiatives to take advantage of market opportunities and also, to protect it against real or potential

threats.

Fisheries Master Plan - prepare a detailed fishing sector development strategy with both local and

national and regional perspective;

Market Survey - look upstream the supply chain to obtain information on customer requirements;

Participatory Approach - encourage stakeholder participation in decision making and in working

group such as strategy development and technical considerations;


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Flexibility & Adaptability - maintain flexibility in facilities development and management, including

selling systems to take advantage of market opportunities;

Strategic Alliances - identify the opportunities in establishing strategic alliances with fishing sector at

regional and international levels;

Financing - as a matter of priority explore the possibilities for financing the development cost of any

strategy or strategy component;

Value Addition - explore the options available for the sorting, grading, weighing of fish prior to

primary sale;

Safety and Quality Standards - develop rigorous codes of practice (COP) for market operation with

emphasis on food safety and quality improvement;

Enforcement / Voluntary Compliance - strictly implement these codes of practice;

Market Information - install or improve existing market information and quality systems;

Post Harvest Handling - encourage a coordinated response to deal with restructuring of post harvest

activities;

Capacity Building - encourage a co-ordinated response to training and re-skilling to exploit new

business opportunities in sector support services.

The idea that all harvested catch will be sold through the electronic fish auction market is unrealistic.

Sometimes, fisheries administrators may require that specific fish landings be sold through auction, as

much for the purposes of monitoring or for achieving the best prices (e.g. discharge of by-catch and

miscellaneous fish by licensed and visiting foreign long line vessels and carriers at Port Louis harbour).

Even where auction is considered as a common practice, fish are sold through a variety of methods such

as direct sale and negotiated contracts. Vertically integrated enterprises do not need to go through

primary sale to transfer the catch to their processing unit and/or distribution network. In the future,

however, maintaining a flexible approach to selling systems is likely to prove most productive and

electronic fish auction system could be one of them. There is a variety of first hand sale methods employed

within the fishing sector namely:

Sale by fixed price – by price list or by previously negotiated contract;

Internal transfer of production within a vertically integrated – catching – processing – distribution;

Sale by direct negotiation – either face to face, by phone, fax and/or email;

Sale by shout auction (there exists a range of bidding systems);

Sale by electronic auction (stand alone, linked or hub);

E-commerce (catalogue sale, competitive bidding) ;

Forward sales and futures in fish trade.

In most of the fishing sectors, a number of such sale methods are employed side by side and at times

competing with each other.

Introduction of an electronic fish auction system will not resolve specific problems in the fishing sector

but will certainly introduce the advantages of good trade practice. Without addressing the issues of good

trade practice in the fishing sector the cost of distribution and marketing is likely to increase due to

inefficiencies in the supply chain and wastage of resources.


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3.0 Choosing an appropriate system

In examining what type of electronic auction might suit a particular environment, a number of options at

various scales are available:

Physical display & Bidding - Simple shout auction practices taking place adjacent to each lot of fish

with all bidders present on the market (it exists locally in primary sale of vegetables and agricultural

produce);

Remote display and Physical Bidding - Slight modification of the above system by moving the bidding

process to a separate bidding area, where bidding is undertaken on the basis of a catalogue of lots

(including basic standard descriptions of the product offered for sale) and prior inspection of the lots

in a display area (information can be displayed on a single display screen or on individual computer

screens where additional information can be called up);

Remote Display and Bidding - Further development of this system to allow remote bidders to

compete for lots, where remote bids are made on the basis of detailed lot specification, rather than

direct inspection of the lot, and where various procedures are in place to ensure that the lot

description accurately reflects the quality of the product delivered to the buyer;

E-commerce & inter-linkage of auction markets - Extension of this system to allow bidding on a number of markets (each market is administered separately, but is linked to other markets through a common network, or port markets join together in a more explicitly hub-system, where product is sold more or less as if it were on a single market).

Fish Exchange & Futures - It is also possible to integrate such systems with a variety of forms of information provision (catch and landing trends, previous bidding records, performance on this and other markets), other sales systems (notably Internet mediated systems that allow for the advance sale of catches), and other forms of service (logistics) provision (such as transport, insurance, packing, part-processing, inspection and quality control).

In each of the above systems it is possible to link the bidding process to various forms of automation, from automated billing and credit management, to consolidation of information on sales volume and prices, and the management of fishing quotas. Some fairly simple rules will govern which sort of development is most appropriate to a given environment, notwithstanding the fact that the system can be upgraded in a evolving or progressive way. 4.0 Implementation Strategy

Gain broad consensus from fishing sector that a strategy should be developed and establish a

consultation mechanism by which inputs from all stakeholders can be accommodated and differences resolved.

Identify which market and market segments the auction system is best able to service and where it might expect to develop comparative advantage for suppliers to those markets.

Decide how to deal with issues regarding safety and quality, product specification and traceability. Determine how to meet buyers’ needs and thus what production is likely to play a major role in future

operations of the auction market. Determine the critical size and location of the fish auction facility.

Identify the requirements for trader, merchant and processor facilities within the area of the fish auction market.


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Assess the physical constraints of the fish auction market and determine how to deal with these constraints.

Assess the impact of tighter specification of products on sale systems employed. Identify whether remodelling/relocation of fish port infrastructure is required. Where relocation or modelling is required, whether it is economically justifiable and where the

necessary financing can be raised. Evaluate after all whether this strategy is likely to ensure comparative advantage in regional and

international context. 5.0 Operationalization options A fish auction is traditionally a public utility infrastructure. It is a major component of any fishing port facility while its activities are diffused at all levels of the supply chain. Its economic viability may not be assessed adequately in term of profitability or return on investment because the diffused socio-economic benefits to the fishermen and fishing community at large are tremendous.

A fish auction is a producer platform to obtain a fair price for their production. It has to be located at the fish dock and associated with a variety of back-up services provided to fishermen and boat owners.

Basically there are two main concepts for ownership and operationalization of fish auctions. Firstly a public body owns, operates and manages the entire operation. Secondly a public body owns and maintains the facilities while a producer organisation manages the operations such as selling of fish and associated services.

Changes taking place in the fishing sector have serious impact on the operationalization of fish auctions. The main concern has been to balance the books and it has become increasing difficult to maintain revenue stream to cover costs of oversized /over capitalized fisheries facilities. Usually in mixed ports (merchant shipping and fishing fleet using the same port facilities), priorities are given to merchant vessels. Sea-port efficiencies are assessed in terms profitability and Return on Investments. Much of port property is leased off for business development, food processing and industrial uses. The fishing industry is marginalized in a mixed port and is considered as a nuisance. Therefore it is imperative to develop a dedicated fishing port to promote the fishing industry and the seafood hub as a major cluster of the national economy.

It can be concluded that a fish auction market has to be located at the fish dock to serve as an effective market platform. The chances for its success in a mixed port are high compromised. In the 1980s provision for a fish auction market was made at the fish dock of Fanfaron but was never implemented. The ownership and operationalization options for an electronic fish auction market are summarized below:

Given the evolution of fish auction, remote bidding, and the establishment of auction networks and strategic alliances, it is becoming more appropriate to put auction ownership and operation in private hands. One such way is to license such operation to a company, where the exact ownership of the company is immaterial to the issuing of the licence.

The other way is to issue the license to a company formed specifically for the task, co-owned by representatives of most parts of the fishing industry. This structure may prove to be more beneficial, particularly in the early stages of operation because the industry may be somewhat reticent in adopting such a new sales system, but is reassured by the cross-industry ownership of the operating company. Where such cross-industry ownership is established, it is crucial that an operational distinction is drawn between the role of the Board in establishing operational guidelines, and the role of independent management in implementing day to day decisions.

A Public-Private Partnership may be an appropriate alternative to own and manage an electronic fish auction. This concept has to be reviewed in light of the specific launching situation and the medium,


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long-term objectives of the auction system. There should a right balance between the business and social objectives while planning for the operationalization of the facility.

A major impediment in the evaluation of the operational management structure of the fish auction is the absence of a pre-feasibility study and business plan. The project carries some major weaknesses that could have been eliminated at the conceptual stage to ensure its commercial viability.

6.0 Sensitive factors associated with the FAM. Some aversions associated with the introduction of electronic fish auction market systems are:

Agents of change / Innovation: The role of the promoters who have set the ball rolling must have the conviction to follow ideas through;

Resistance to innovation: The fishing sector is naturally resistant to changes/ innovations but primarily because it alters the balance of interest in the sector;

Comfort factors: Removing such resistance may induce the promoter to include comfort factors that may be contrary to the rationale underlying such innovations and may eventually undermine the goals and performances of the new system;

Technology is not a limiting factor: Defining the most appropriate system for a particular set of situations may be a limiting factor;

Adherence: Co-operation of all stakeholders in such a project is difficult to achieve, but essential for its success;

Comparative advantage: The sector participates in such development primarily on the basis that it will enhance efficiencies and comparative advantage over others – competitors or more distant targets;

Local opposition: Participation in systems that share the advantages with too many people, more particularly, local people, may meet with strong opposition;

Individuality: Power and the control of information appear to be at the root of people’s interest in, and fear of, such marketing technologies.

7.0 Resistance to change / innovation

Slow beginnings: At start the biggest hurdle is to convince suppliers and buyers of the benefits of a fish auction system. In some instances, despite in-depth consultation, detailed planning, system demonstrations and the like, the initiative came to nothing. In others, the market system have been easily accepted and upgraded regularly.

Recognition of benefits: The fish auction market is installed to enhance the commercial status of fishing sector, its fleet, its traders and its processors, and to give them with comparative advantage over their competitors. Only when these benefits are realized by the majority of fishermen and merchants that the auction is recognized as a step forward.

Close structure of fishery communities: The fishing industry is particularly complex and is strongly, albeit informally structured. The hunting and personal danger dimensions of fishing have tended to set fishermen and their families apart from the rest of society, and have encouraged the development of tight and self-reliant communities. These communities have their own ways of doing things, are deeply suspicious of outside influences, and are strongly resistant to changes. They do not share information easily. It is not just a matter of convincing fishermen and buyers of the benefits of such fish sale systems, but in convincing them that their trading model is no longer viable.

Resistance to "widening the circle": The strength of these traditional structures and practices should not be under-estimated. Sometimes there is continuing pressure from the local community to maintain some form of trade protection in favour of local operators.

Financial benefits difficult to prove: It is not easy to prove that fish auction systems have benefited fishery businesses. There is logic to the efficiency gains that the use of such technology can offer. It remains very difficult to quantitatively prove that such systems offer commercial benefits. Fish


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trading takes place within a highly competitive and dynamic market place, and no trader, whether dealing in fish, vegetables, cars, or furniture, wishes to disclose the details of his or her trading strategies.

Fear of job losses: There may be a belief that the introduction of an electronic fish auction market will automatically lead to job losses. In general this has lead to the redefinition of some jobs.

Improvements in prices achieved at market: The argument that would convince most fishermen of the benefits of electronic auctions would be the fact that their introduction leads to the payment of higher prices for their fish. This is difficult to evidence. Also, that if electronic auctions lead to more buyers bidding for fish, the price paid for that fish is more likely to be a fair reflection of the "market" price for that fish, under the market conditions obtained at that particular time. Thus fish auction is more credible and transparent sale mechanism. Coupled with improved on-board handling, and better sorting, grading, weighing and product description, a more transparent first hand sales mechanism is likely to reward the effort put into the production of such high quality product.

8.0 Conclusion In the words of Charles Darwin ‘It is neither the strongest species that survive, nor the most intelligent, but the ones most responsive to change’. There are very few situations where the introduction of electronic auctioning in fish trade is a wise commercial decision. However binding electronic auction market system into an overall development strategy can form a highly effective business tool. The fish auction market must be only an array of first hand sales mechanism and must be prepared to alter selling strategies as a response to changing market conditions and to offer comparative advantage over its competitors.

planning and implementing a fish auction market

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