STO reassures shareholders after merger with debt-ridden fisheries company

The State Trading Organisation, the largest state-owned enterprise and the country’s primary wholesaler, has assured its shareholders that a merger with the debt-ridden state fisheries company will not result in losses.

Managing Director Ahmed Shaheer told the press on Monday that Maldives Industrial Fisheries Company’s MVR300 million (US$19 million) debt will not affect STO as the tuna exporter will operate as a subsidiary company.

“MIFCO will be carried forward separately as a separate company in a manner that won’t impact STO,” he said. “Improving a company in such a state will be a challenge. But this is an experienced team.”

He added that MIFCO’s unpaid loans would be settled through a debt restructuring process, which will be worked out in consultation with the government.

The cabinet’s economic council announced the merger last week, citing the unwillingness of banks to lend to MIFCO and the benefits of combining resources.

Shaheer also reiterated that MIFCO would be a source of foreign currency revenue for STO, which imports and sells oil to the former’s fish purchasing vessels. He said legal procedures for the merger will be finalised by the end of the week, after which STO will decide upon a business model when an ongoing evaluation is complete.

The STO is a public limited company with an 82 percent stake owned by the government. Its other subsidiaries include the Allied Insurance Company, Fuel Supply Maldives, Maldives Gas, Lafarge Maldives Cement, and the Maldives National Oil Company.

MIFCO – which operates three factories and a fleet of carrier and collector vessels – was born out of the “Fisheries Projects Implementation Department” of STO. The company was established in 1993 in the wake of an unprecedented corruption scandal involving the FPID.

Former senior officials of MIFCO who spoke to newspaper Mihaaru after the merger blamed mismanagement and political influence on decision-making for bringing the company to the brink of bankruptcy 23 years later.

“Boats have been sent to some areas to buy fish because MPs called and pressured. They didn’t consider how much the company was losing,” one source was quoted as saying.

The expert sources suggested that millions of rufiyaa worth of investment would be needed from STO for the company to become profitable.

Since the fisheries sector was privatised in 2003, local companies that purchase and process skipjack tuna and yellowfin tuna have caught up with and even surpassed MIFCO, they observed, despite the benefits of government loans and rent-free islands.

Announcing the merger last Thursday, Fisheries Minister Dr Mohamed Shainee meanwhile blamed the previous government’s decision in 2010 to separate MIFCO’s two major business units, Kooddoo Fisheries Complex and Felivaru Fisheries Complex.

According to a 2014 audit, MIFCO made a net accumulated loss of MVR317.4 million (US$20.5 million) before it was split into three companies, which then posted a combined profit of MVR65.4 million (US$4 million) in 2011 and 2012.

“After the split in 2010, MIFCO’s losses amounted to MVR4.1 million [US$265,888] in 2011 and 2012 and Felivaru Fisheries Maldives operated at a loss of MVR19.26 million [US$1.2 million],” the audit report read.

“However, Koodoo Fisheries had a profit of MVR88.8 million [US$5.7 million] in this period.”

The current administration reintegrated the canneries Kooddoo and Felivaru with MIFCO in September 2014.

Fish and fisheries products account for more than 95 percent of the Maldives’ exports. Reflecting MIFCO’s fortunes, the annual fish catch and export earnings have been steadily declining since 2006.

In October 2011, the Maldives Independent explored the threat posed by the mass harvesting of fish stocks by foreign vessels in the Indian Ocean to the viability of the Maldives’ tuna fishing industry.