President Abdulla Yameen has decided to bring the debt-ridden and loss-making state-owned fisheries company under the umbrella of the behemoth State Trading Organisation.
The cabinet’s economic council announced the merger at a press conference Thursday afternoon, citing the canned tuna exporter’s “inefficiencies” and the benefits of combining resources.
Finance Minister Ahmed Munawar said the “synergy” is a first step toward building a sustainable business model for Maldives Industrial Fisheries Company, which was dependent on millions of rufiyaa worth of subsidies annually.
The move is necessary because domestic and foreign banks were unwilling to lend to MIFCO, he said.
He assured that the government would settle the company’s “long overdue” unpaid loans through a debt restructuring process.
Fisheries Minister Dr Mohamed Shainee said the cabinet has also decided to pay from the government’s budget about MVR2 million (US$129,700) that MIFCO owes to local fishermen.
“We have decided to settle the debts and start anew,” he said.
Shainee said MIFCO’s main loss-making component was its expenditure on oil, which is imported by STO.
“At the same time, the dollars that MIFCO earns from exporting fish is very important for STO’s various purposes, such as buying oil,” he said. “So we’re getting a very good synergy here.”
The STO is the country’s primary wholesaler, responsible for importing the vast majority of basic foodstuffs such as rice, flour, and sugar. The government owns an 82 percent stake in the public limited company.
The STO group, with its subsidiaries, joint ventures and associates, also trades in petroleum, cooking gas, construction materials, medical supplies, pharmaceuticals, electronics, supermarket products and insurance.
Describing STO as the most profitable state-owned enterprise, President’s Office Minister Ahmed Zuhoor said restructuring MIFCO under its management would prove beneficial to both the government and fishermen.
“Most of the time fishermen don’t benefit from the subsidy. It is absorbed into the company’s inefficient operations,” he said.
Tourism Minister Moosa Zameer said a ministerial sub-committee considered options and settled upon the merger as the most beneficial.
The government is aiming to complete the hand-over to STO in 45 days, he said, which would include the transfer of employees and assets. STO’s management would then draw up a new business plan, he added.
Shainee meanwhile blamed the previous government’s decision in 2010 to split MIFCO into three companies for creating inefficiencies and nearly “bankrupting” the company.
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 posted a combined profit of MVR65.4 million (US$4 million) in 2011 and 2012.
The canneries Kooddoo Fisheries Complex and Felivaru Fisheries Complex were reintegrated with MIFCO by the current administration in September 2014.
Fish products are the Maldives’ main export and the US$100 million fisheries industry is the country’s largest employer. Reflecting MIFCO’s fortunes, the annual fish catch has been steadily declining since 2006, falling from a peak of about 185,000 to about 70,000 tonnes in 2011.
In October 2011, the Maldives Independent reported that the mass harvesting of fish stocks by foreign vessels in the Indian Ocean was threatening the viability of the country’s tuna fishing industry.
In an interview with the Maldives Independent after the new government came to power in November 2013, Shainee also noted that the fishing industry has felt the adverse effects of climate change caused by the rising temperature of surface waters.