Pre-Feasibility Study

Sea Food Processing Plant

Small and Medium Enterprise Development Authority

Government of Pakistan
www.smeda.org.pk
HEAD OFFICE Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756 Helpdesk@smeda.org.pk
REGIONAL OFFICE PUNJAB Waheed Trade Complex, 1st Floor, 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore. Tel: (042) 111-111-456 Fax: (042) 5896619, 5899756 helpdesk@smeda.org.pk REGIONAL OFFICE SINDH 5TH Floor, Bahria Complex II, M.T. Khan Road, Karachi. Tel: (021) 111-111-456 Fax: (021) 5610572 Helpdesk-khi@smeda.org.pk REGIONAL OFFICE KPK Ground Floor State Life Building The Mall, Peshawar. Tel: (091) 9213046-47 Fax: (091) 286908 helpdesk-pew@smeda.org.pk REGIONAL OFFICE BALOCHISTAN Bungalow No. 15-A Chaman Housing Scheme Airport Road, Quetta. Tel: (081) 2831623, 2831702 Fax: (081) 2831922 helpdesk-qta@smeda.org.pk

July, 2013

Pre-feasibility Study

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a general idea and information on the said area. All the material included in this document is based on data/information gathered from various sources and is based on certain assumptions. Although, due care and diligence has been taken to compile this document, the contained information may vary due to any change in any of the concerned factors, and the actual results may differ substantially from the presented information. SMEDA does not assume any liability for any financial or other loss resulting from this memorandum in consequence of undertaking this activity. Therefore, the content of this memorandum should not be relied upon for making any decision, investment or otherwise. The prospective user of this memorandum is encouraged to carry out his/her own due diligence and gather any information he/she considers necessary for making an informed decision. The content of the information memorandum does not bind SMEDA in any legal or other form.

DOCUMENT CONTROL
Document No. Prepared by Approved by Issue Date Issued by Revised Date PREF-12 SMEDA-Balochistan Head of Department September, 2008 Library Officer July, 2013

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Contents
1 2 3 Introduction to smeda ................................................................................................. 1 Purpose of the document ............................................................................................. 2 Project Profile ............................................................................................................. 2 3.1 Project Brief ......................................................................................................... 2 3.2 Sea food A definition ......................................................................................... 3 3.3 Opportunity Rationale .......................................................................................... 4 3.4 Market Entry Timing ............................................................................................ 5 3.5 Proposed Business Legal Status ........................................................................... 5 3.6 Proposed Product Mix .......................................................................................... 5 3.7 Project Capacity ................................................................................................... 5 3.8 Project Investment ................................................................................................ 5 3.9 Recommended Project Parameters ....................................................................... 6 3.10 Recommended Locations ................................................................................. 6 3.11 Key Success Factors ......................................................................................... 8 3.12 Strategic Recommendations ............................................................................. 8 Market ......................................................................................................................... 9 4.1 Target Customers ................................................................................................. 9 4.2 World Fisheries Trade and Production: ............................................................... 9 4.2.1 Major Players .............................................................................................. 10 4.3 Pakistan Market .................................................................................................. 11 4.3.1 Target Markets of Pakistan Fisheries:......................................................... 11 4.3.2 Local Sea Food Market ............................................................................... 11 4.3.3 Supply Chain of Fisheries in Pakistan: ....................................................... 12 4.3.4 Regional Distribution .................................................................................. 12 4.3.5 Fish Exports of Pakistan ............................................................................. 13 4.3.6 Problems faced by the sector ...................................................................... 13 4.4 Balochistan ......................................................................................................... 14 Regulatory Procedures .............................................................................................. 16 5.1 International Quality Certification, HACCP: ..................................................... 16 5.1.1 HACCP Certification .................................................................................. 16 5.1.2 FDA Certification: ...................................................................................... 17 5.2 Sea Food Product lines: ...................................................................................... 17 5.2.1 Quality and Product line: ............................................................................ 17 5.2.2 Product Grade ............................................................................................. 17 TECHNICAL ANALYSIS ....................................................................................... 19 6.1 Fish Spoilage: ..................................................................................................... 19 6.1.1 Four Phases in Fish Spoilage: ..................................................................... 19 6.2 Chilling Process.................................................................................................. 19 6.3 Freezing: ............................................................................................................. 20 6.3.1 Types of Freezers ........................................................................................ 20 6.4 Packaging of Frozen Fish: .................................................................................. 22 6.5 Process Flow Chart............................................................................................. 23 6.6 Raw Material / Marine Fish Catch: .................................................................... 23 Project Inputs ............................................................................................................ 24 7.1 Machinery and Equipment ................................................................................. 24 7.2 Maintenance Costs ............................................................................................. 24

7.3 Vehicle ............................................................................................................... 25 7.4 Other Office Requirements ................................................................................ 25 7.5 Human Resource Requirement........................................................................... 25 7.6 Land and Building Requirement ........................................................................ 25 7.7 Utilities Requirement ......................................................................................... 26 7.8 Recommended Mode.......................................................................................... 26 8 Project Economics .................................................................................................... 27 8.1 Project Cost ........................................................................................................ 27 8.2 Project Returns ................................................................................................... 27 8.3 Project Financing................................................................................................ 27 9 Key Assumptions ...................................................................................................... 31

Pre-feasibility Study

1 INTRODUCTION TO SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was set up in Oct, 1998 with the objective to provide impetus to Small &Medium Enterprise (SME) development in Pakistan.1i Initially, SMEDA adopted sectoral SME development approach and selected few priority sectors on the criterion of SME presence. In depth research was conducted and comprehensive development plans were formulated after identification of impediments and retardants. The all-encompassing sectoral development strategy involved recommending changes in the regulatory environment by taking into consideration other important aspects including finance, niche marketing, technology upgradation and human resource development. SMEDA has so far successfully formulated strategies for sectors including, fruits and vegetables, Marble and Granite, gems and jewelry, marine fisheries, leather and footwear, textiles, surgical instruments, urban transport and dairy. SMEDA aims at intensive coverage and enhanced penetration of its areas of operation for SME development. Along with the sectoral focus of SMEDA, a broad spectrum of business development services is also offered to the SMEs. These services include identification of viable business opportunities for potential SME investors. In order to facilitate investors, SMEDA provides business guidance through its help desk services i.e. Over the Counter (OTC) as well as development of project specific initiation documents. These documents consist of information required to make well-researched investment decisions. Prefeasibility studies and business plan development are some of the services provided to enhance the capacity of SMEs to exploit viable business opportunities in a better way. This document is in the continuation of such effort to enable potential investors to make well-informed investment decisions.

For more information on services offered by SMEDA, please visit our website: www.smeda.org.pk

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2 PURPOSE OF THE DOCUMENT

The scope of the present study is to bench mark the potential entrepreneurs in project identification for investment. The project pre-feasibility may form the basis of an important investment decision and in order to serve this objective, the document/study covers various aspects of project concept development, start-up, and production, finance and business management.

3 PROJECT PROFILE
The project involves processing of Seafood, including fish, shrimps, lobsters etc. for domestic and international markets. Processing of fish involves primarily the application of preservation techniques in order to retain quality and increase shelf life of the product. It may also deal with value-adding to produce a variety of products. The quality production will ultimately increase the product demand of sea food in Pakistan as well as in international markets. The project also entails particularly to elucidate the strengths and week areas of fish processing industry which is the major player in exporting fish to global markets. The major scope of processing activities will include post fish catch activities i.e. precooling/icing, grading, cutting and cleaning, packing, and freezing. Sea food processing unit can also provide processing services on rental basis to other exporters of sea food in terms of provision of processing facility, provision of cold storages and transportation service up to the port of exit. Beside this, local fish suppliers, dealers, contractors and boat owners will also be the potential rental costumers of the plant, where they can get processing services for their catch through paying a service charge as a rent. 3.1 Project Brief The project is about a Processing Plant which will process / freeze sea food (Fish and shrimps etc.) The final product will be supplied to the food markets of major cities of Pakistan that include Karachi, Quetta, Lahore, Sialkot, Rawalpindi/Islamabad, Peshawar, Gujranwala, Faisalabad. Export quality products will be shipped to the international sea food markets of Middle Eastern Countries, European Union, Japan, USA, and Russia. Beside this, restaurant chains and five star hotels across the country are also one of main consumers of the sea food. The processing plant would be used to process the sea food catch mainly coming from the Arabian Sea through fishing boats, launches and international fishing trawlers. As a source of white meat, consumption trend and level of fish is very low as compared with chicken. The prime reason for this low consumption is the scarce supply, low quality and less availability of fish in the meat markets of major cities in Pakistan. Effective supply chain of fishery products in domestic markets can increase the demand of fish in local markets.

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The process would include undertaking value-added activities, which will increase the quality and shelf-life of sea food for the national and international market. The plant should be located at the coastal area of Pakistan ideally near a fish harbor. Pakistani sea food products have significant demand in the international market; however, the export of sea food products is far less as compare to the available potential. It has been observed that in order to increase the international export markets size, good quality sea food production will require adequate physical infrastructure facilities like modern processing units, cool chain, and other supply related logistics. Attaining international quality standards and getting quality certificates is a mandatory requirement in Sea food processing industry 3.2 Sea food A definition Fish represents a valuable source of proteins and has a significant nutrient value in the daily diet. Fish is an important part of the daily food intake of most of the countries in the world and its importance in contributing to food security is rising significantly. The total food supply available from fisheries in live weight terms is estimated to be slightly higher than 16 kilos per year for each of the world's inhabitants. Fisheries and aquaculture make an important contribution to the animal protein supplies of many communities in both the industrialized and developing worlds. Significant supply of fish exists along the Balochistan and Sindh coast. During current studies, situation analysis of the growth in the fish processing sector in Balochistan was carried out and it was found that during the past several years there has been an increasing tendency of investing into new/branch of fish/shrimp/lobster/ cuttle fish processing plants in Balochistan. Some of the species with major production along Pakistan coast are as follows, Table 1: Fisheries Varieties in Balochistan Sr.# Name Sr.# Name 1 Flat fish 14 Travelly 2 Sardinals 15 Dolphin fish 3 Other clupieform 16 Grunter 4 Wolf hairring 17 Large croaker 5 large makral 18 small croaker 6 Small makral 19 Emperor 7 Tuna 20 King soldier (Sea Bream) 8 Sea cat fish 21 Pomferets 9 Eels 22 Hair tall 10 Barracuda 23 Sharks 11 Marline 24 Rays 12 Mullets 25 Guitar fish 13 Thread fin fish 26 Shrimp Source: Directorate Fisheries dept of Balochistan
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Sr.# 27 28 29 30 31 32 33 34 35 36 37 38

Name Large Grouper Small Guorper Cobias Scad Indian mekral Quean fish kiddi Crabs Ivory shel Lobster Cuttle fish Jelly fish

Pre-feasibility Study

Fish is a major component of the sea food that provides a source of vitamin-rich diet. Fish is very perishable food commodity that requires proper handling and preservation to increase its shelf life and retain its quality and nutritional attributes. The principal components of the fish muscle - water, fat and protein - must be preserved with little or no changes. Fish and fishery products represent a very valuable source of protein and essential micronutrients for balanced nutrition and good health. In 2009, fish accounted for 16.6 percent of the world populations intake of animal protein and 6.5 percent of all protein consumed. Globally, fish provides about 3.0 billion people with almost 20 percent of their intake of animal protein, and 4.3 billion people with about 15 percent of such protein. Differences among developed and developing countries are apparent in the contribution of fish to animal protein intake. Whereas the fat content varies widely from species to species and from season to season. It can be as low at 0.5 percent in lean starved fatty fish and can reach over 20 percent in some species. In lean fish the bulk of the fat is stored in the liver and not in the muscle. Water is the main constituent, with considerable variations, typically 80 percent in lean fish and 70 percent in fatty fish. Carbohydrates, minerals, vitamins and some water extractable components are examples of other minor substances present2. 3.3 Opportunity Rationale Sea food is an excellent source of white meat with low-fat, high protein, vitamins and minerals. It is used from traditional to modern variety of dishes all over the world. Canned fisheries & products are also on the increasing trend and fetching good revenues. Fish are recommended medically healthy and full of nutrient enriched diet; it is also helpful in immunity development, disease resistant, and cholesterol control. Fisheries are the third larges sector in Balochistan, followed by Minerals and Agriculture, due to the vast coastal belt with Arabian Sea. It provides a significant supply of the sea food to the country with a potential to play an important role in international sea-food market especially in China, Japan, US, and EU countries etc. The global demand of fishery products is increasing and new markets are emerging; several new fishery products from Pakistan are receiving good response in abroad. Additionally, lifting of export Ban of EU Markets for Pakistani products also open a good opportunity for exploring the potential of said sector. Establishment of Sea Food Processing Plant on modernize standards will not only help in the economic uplift of the area but will also help in exploring the food markets at both National and International level. Furthermore development of fishery can also play an important role in provision of employment and growth opportunities to many small and middle sized communities along the coastlines.

The State of World Fisheries and Aquaculture-FAO 2012

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3.4 Market Entry Timing Fish processing operations continues through out the year however it is recommended that plant should be ready for operation during the months of July to March so that it can avail full fish catch of the sea. As the peak fishing season starts from the months of September. 3.5 Proposed Business Legal Status The business can be started as sole proprietorship or partnership. Comparatively fewer complications are involved in forming, administering and running the sole proprietorship or partnership businesses. 3.6 Proposed Product Mix The sea food processing plant is designed to house and process the fish catch for export market. In order to facilitate the fish suppliers on regional and national level, the plant also has the capacity to provide processing facility on rental basis. Major operations of this processing plant will be grading, washing, cutting, blast freezing and packaging of fish catch from Balochistan and Sindh coastal areas. The final product will be supplied through a cool chain to national and international markets. Rental value of the plant is one of the main contributing factors to the revenue. The plant can offer its production and processing services to the local fishermen and investors on rental basis. The plant can charge production charges on per kilogram of the final product. Project will also be facilitated through an internet website. The website of the company will facilitate the national and international buyers in selecting the fisheries product of their choice and will enable them to streamline the supply of consistent product to the end users/exporters in a given time frame. 3.7 Project Capacity The plant will store the fish catch and process the same in the same cycle. The plant will be able to handle approximately 60 tones of fish catch of varying varieties in 24 hours. It will have a wider cold storage facility. Cold store of the project will be 10 times the size of the processing plant i-e it should have the capacity to store the product order of 10 days as such the cold storage of the plant will be of 600 tons capacity. 3.8 Project Investment The total project investment is Rs. 120,521,267 which includes capital cost of Rs. 91,416,722 and working capital of Rs. 29,104,545. It is assumed that the project would be partially equity financed (50%) and partially debt financed (50%).
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3.9 Recommended Project Parameters Table 2: Project Parameters Human Capacity Resource 60,000 tons/year 15

Technology/Machinery Imported / Local Made

Locations Gwadar, Pasni , Ormara, Jiwani, Damb, Karachi, Korangi,Gharo.

NPV

Financial Summary
Project Cost IRR Pay Back Period

Rs. 88 m

41%

4.1 Years

Rs 100 m

3.10

Recommended Locations

The proposed location for the establishment of such a facility could be the areas with in the proximity of Balochistan and Sindh coastal belt. If the project is closer to a fish harbor it will have an added advantage of being nearer to the raw material supply. The harbors and main landing points with their provincial location and relative importance are as follows:

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Table 3: Harbors in Pakistan NAME PROVINCE Karachi Sindh 2 Korangi Sindh 3 Ibrahim Haidery Sindh 4 Shams peer Sindh 5 Hawks Bay Coast Sindh 6 Lath Basti Sindh 7 Manjhar Sindh 8 Sonari Sindh 9 Mubarrak Village Sindh 10 Kaitee Bandar Sindh 11 Shah Bandar Sindh 12 Kharo Chaan Sindh 13 Jatthi Sindh 14 Jhungi Sur Sindh 15 Badeen Sindh 16 Gwadar Balochistan 17 Pasni Balochistan 18 Ormara Balochistan 19 Gaddani Balochistan 20 Bunda Wari Balochistan 21 Beroo Balochistan 22 Sonmiani Daam Balochistan 23 Surbandar Balochistan 24 Pishukan Balochistan Legends: * meets local users requirements ** Important *** Very important **** Most important H = Fishing Harbor

Relative Importance **** H ** * * * * * * * ** ** ** ** ** ** *** H *** H *** ** * * ** * *

There are four fish harbors which are under different administrative control. However, recommendation can also be made on the basis of availability of the nearest sea port. Gwadar Port: With the operation of Gwadar port. The locations associated with Gwadar port are recommended for establishing sea food processing plant. These areas are Pasni, Ormara and Surbendar. Karachi Port and Port Qasim: The locations associated with Port Qasim and Karachi Port is recommended for establishing sea food processing plant in Sindh. The areas are Korangi Fish Harbour (Ibrahim Haydery) and Gaddani. The investor should determine before
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hand that the port is heavily congested and the cost to establish plant will be very high because of already established market. Another factor is that of a good location to build the processing plant. 3.11 Key Success Factors Availability of vast range and variety of fish and marine food in Arabian Sea waters along the Pakistan coast. Proposed areas for the processing plant have quite considerable number of skilled fishermen and boat owners. Significant number of suppliers exists for the production. Large and established world markets Growing trend in sea food consumption nationally and internationally. Rehabilitation in Afghanistan. 5-Stars hotels and restaurant chains are in continuous need of quality sea food supply. Improved technological changes available. Ample opportunity for exports. International recognition of the plant will boost the export orders. 3.12 Strategic Recommendations

The location plays an important role, as the facility should easily be accessible to the nearest port and towns. Effective supply and cool chain will increase the market accessibility. International quality certifications i-e HACCP, ISO can increase the product credibility internationally. Emphasizing on excellent quality standards and producing quality assured products and timely order fulfillment. New machinery should be purchased in order to increase the efficiency and lower the maintenance cost. Adapt to the rapid, social, economic and technological changes. Well-trained/experienced staff adding in the efficiency of the facility.

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4 MARKET
4.1 Target Customers The target customers for a Sea food processing Plant mainly include: International Export Markets of European Union, USA and Japan. The processing plant can also exploit the growing consumer market of Afghanistan. Sea food supply market of Pakistan. 4.2 World Fisheries Trade and Production: Inline with data provided in FAO publication3, the world total capture is 154.0 million tons inclusive of 90.4 mt of capture and 63.6 mt of aquaculture for year 2011 as compare to its human consumption of 130.8 mt. The world Capture fisheries and aquaculture supplied the world with about 148 million tonnes of fish in 2010 (with a total value of US$217.5 billion), of which about 128 million tonnes was utilized as food for people, and data for 2011 indicated increased production of 154 million tonnes, of which 131 million tonnes was destined as food. With sustained growth in fish production and improved distribution channels, world fish food supply has grown dramatically in the last five decades, with an average growth rate of 3.2 percent per year in the period 19612009, outpacing the increase of 1.7 percent per year in the worlds population. Of the 126 million tonnes available for human consumption in 2009, fish consumption was lowest in Africa (9.1 million tonnes, with 9.1 kg per capita), while Asia accounted for two-thirds of total consumption, with 85.4 million tonnes (20.7 kg per capita), of which 42.8 million tonnes was consumed outside China (15.4 kg per capita). The corresponding per capita fish consumption figures for Oceania, North America, Europe, and Latin America and the Caribbean were 24.6 kg, 24.1 kg, 22.0 kg and 9.9 kg, respectively. Although annual per capita consumption of fishery products has grown steadily in developing regions (from 5.2 kg in 1961 to 17.0 kg in 2009) and in lowincome food-deficit countries (LIFDCs, from 4.9 kg in 1961 to 10.1 kg in 2009), it is still considerably lower than in more developed regions, although the gap is narrowing. A sizeable share of fish consumed in developed countries consists of imports, and, owing to steady demand and declining domestic fishery production, their dependence on imports, in particular from developing countries, is projected to grow in coming years.

The State of World Fisheries and Aquaculture-FAO 2012

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Table 4: World Fisheries Production & Consumption Description 2006 2007 2008 Production (Million Tonnes) Capture Inland Marine Total Capture Aquaculture Inland Marine Total Aquaculture Total World Production 9.8 80.2 90.0 31.3 16.0 47.3 137.3 10.0 80.4 90.3 33.4 16.6 49.9 140.2 10.2 79.5 89.7 36.0 16.9 52.9 142.6

2009

2010

2011

10.4 72.2 89.6

11.2 77.4 88.6

11.5 78.9 90.4 44.3 19.3 63.6 154.0

38.1 41.7 17.6 18.1 55.7 59.9 145.3 148.5

Human Consumption (Million Tonnes) Non-food Uses (Million Tonnes) Population (billion) Per Capita Food Fish Supply (kg) 4.2.1 Major Players

Utilization 114.3 117.3 23.0 23.0 6.6 6.7 17.4 17.6

119.7 22.9 6.7 17.8

123.6 21.8 6.8 18.1

128.3 20.2 6.9 18.6

130.8 23.2 7.0 18.8

As per USDA, the table below describes all major producers, importers, exporters for the year 2011-12 and 2012-13. Peru and Chile stands as the major producer and exporter of Meal fish Whereas, China and EU stands as the major importers in the world. The details are depicted in table as follows: Table 5: Major Players Producers 2011- 2012Importers 12 13 Peru 1,400 1,400 China Chile 523 520 European Union Thailand 455 465 Japan European 400 420 Norway Union United States 330 330 Taiwan Japan 305 305 Indonesia China 220 220 Chile Iceland 130 150 Turkey Russia 135 140 Russia Norway 130 130 Canada Other 611 617 Other Source: United States dept of Agriculture
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2011- 2012- Exporters 12 13 1,249 1,220 Peru 466 450 Chile 255 250 183 102 62 61 49 50 184 260 European Union 245 United States 180 Iceland 102 Mexico 62 Ecuador 55 Thailand 52 South Africa 52 Russia 185 Other

2011- 201212 13 1,375 1,400 335 340 195 142 126 107 88 55 61 42 141 185 135 125 100 90 65 55 50 141

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4.3 Pakistan Market Pakistan has a total coastline of 1,090 km. Pakistans fishing waters are termed as highly rich in marine life with a vast variety of species having commercial value. However, this potential is not reflected in the export earning from fisheries sector. Fishery plays an important role in Pakistans economy and is considered to be a source of livelihood for the coastal inhabitants. A part from marine fisheries, inland fisheries (based in rivers, lakes, ponds, dams etc.) is also very important activity throughout the country. Fisheries share in the GDP although very little but it adds substantially to the national income through export earnings. During (July-March), 2012-13 a total of 103,822 mt of fish and fishery products were exported earning US $232.4 million against a total of 90,087 mt of fish and fishery products were exported earning US $222.6 million corresponding period last year showing an increase of 15.3 percent and 4.4 percent respectively4. 4.3.1 Target Markets of Pakistan Fisheries: European Union countries, Japan and U.S.A are some of the big export market for sea food. Pakistan fisheries exports ultimate aim will be to capture a bigger percentage in EU and US markets. However, the quality standard and restrictions for these markets are very stiff. In order to meet EU and US quality standards, processing plants and supply chain management of Pakistan sea food products should be up to these standards. 4.3.2 Local Sea Food Market Pakistans domestic consumption is termed as one of the lowest in the world, at 1.6 kg per person per year (compared to world average of 16.2 kg per person per year). This figure indicates a huge potential for sea food sector in Pakistan. Quantity of processed sea food consumption in Pakistan is negligible. Frozen sea food supply to local markets of Pakistan cannot only increase consumption trends but also have the potential to bring new business ventures in the supply chain. Karachi, Lahore, Islamabad, Quetta and Peshawar are some of the markets which show a potential for sea food supply. At present, only the Karachi markets have availability of fresh sea food in terms of variety and quality because of existing supply chain and production. Lahore, Quetta, Peshawar and Islamabad can be target market if a cool chain system is attained. 5-Star Hotels and restaurant chain owners in the said cities are also a potential market for local sea food supply. The supply can be increased through an effective cool chain and consistent production of variety of sea food product.

Economic Survey of Pakistan 2012-13

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4.3.3 Supply Chain of Fisheries in Pakistan: Focusing on Sea Fishing Supply Chain, Pakistan Sea Food distribution is similar to other countries or Sea Ports in which following stakeholders are involved: Sea Food Supply Chain can be categorized into three different types: 1. Sea Food distribution to different areas of Balochistan and Sindh from Harbor. 2. Sea Food processing in Gwadar and Karachi for Export Market. 3. Sea Food exports from Gwadar and Karachi port. Role of Stakeholder Following are the stakeholders in the seafood supply: Fishermen Middlemen Local Mandi/ Market Processing Plant owners Transporters Middlemen Karachi Exporters Retail Shop keepers End User

4.3.4 Regional Distribution More then 30,000 people are associated directly with fisheries sector employing about 6200 fishing boats. All boats are wooden with inboard mechanized engines. Gwadar district annual production of fishery is more than 107,568 metric tons. The province wise distribution of fisheries is described in the table as follows: Table 6: Provincial Fish Production: 2009 2010 (000) Tonnes (000) Tonnes Description Inland Marine Inland Marine Punjab* 85.5 0.0 86.2 0.0 Sindh 125.0 340.0 128.0 342.0 KPK** 4.0 0.0 5.0 0.0 Balochistan 0.0 140.0 0.0 143.0 Pakistan 214.5 480.0 219.2 485.0 *Includes Mangla Dam **Includes Gilgit Baltistan Source: Agriculture Statistics of Pakistan 2010-11

2011 (000) Tonnes Inland Marine 85.4 0.0 131.0 343.0 6.0 0.0 0.0 145.0 225.4 487.0

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4.3.5 Fish Exports of Pakistan In accordance with Trade Development Authority of Pakistan, the total exports of fish and fish preparation stood at $0.32 billions for the year 2011-12, with a value change of 8.04% as compared to 2010-11. Table 7: Fish Exports of Pakistan Description Fish & Fish Preparation Source: TDAP July-June Change 2011-12 2010-11 VALUE % 320,008 296,182 23,826 8.04 July-June 2011-12 2010-11 1.35 1.19

4.3.6 Problems faced by the sector Lack of Processing Plants and technology: There are quite few processing plants in the Balochistan and Sindh coastal belt. The existing processing plants also face problems of attaining quality production certificates and technological up gradation. Most of the processing units in the country are equipped with local versions of the processing machinery with little or no calibration, high electricity consumption and low quality production. These plants are most of the times incapable to process large fish catch and cannot facilitate large orders placed by the importing firms. This situation was mainly attributed to unorganized nature of private sector, lack of focus in Government policies and little institutional investment (in public and private sector projects) in this sector. Incapability of meeting cool chain system: As there is no proper cool chain established, therefore, there exists a parallel distribution system for the fresh fish reaching the processing plants. As an industry practice, the processing units acquire fish catch supplies either, directly from the boat owners in small lots, or from the auction hall. This results in spoilage and degradation of fresh fish: a loss in value chain activities. As a result, the final product fails to attain its target price. International Certifications: As part of the food product, export of sea food to international market is subject to the rules and international certifications. Most of the sea food processors in Pakistan either do not have the knowledge to get international certification or do not comply meeting the certification requirements. Therefore the final export product is sold at lower than the market rate. Extensive Costs related to Value Chain Value Chain processes if delayed can add costs in the final price of the product. Value Chain Analysis (VCA) shows that many identified improvements are too minor to reverse the fortunes of the industry, in the face of high overhead costs and declining fish stocks. In this way, the value chain losses amount from fish-catch to the final product to be sold in markets.
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Lack of Training and Development for Fisheries Sector: Fishing practices and processing is an interdependent process. The processing plant cannot convert a fish catch of low quality into acceptable quality grade. The processing industry suffers as a whole due to lack of training and development for the fisheries sector. Product hygiene training for fishermen is a must for good quality processing. Lack of skilled work force for sea food processing plant is also another issue that pose problems for the processing industry. Organizational Challenges due to Structure SPS (Sanitary and Phytosanitary) related authorities are divided across several government agencies, including the Ministry of Agriculture, the Ministry of Livestock and Dairy Development at the Federal level and provincial fisheries departments of Sindh and Balochistan at provincial level. Other agencies are involved with trade related aspects of SPS issues as well. In order to manage the complexities of addressing import requirements of trading partners, the present organizational structure of the government, particularly within and in between various ministries need to be evaluated and may be back mergence of the two federal ministries of MINFA (Ministry of Food and Agriculture) and MoLDD (Ministry of Livestock and Dairy Development, would help to improve efficiency in expanding market access opportunities. Likewise the efficiency of Fisheries departments in Sindh and Balochistan can be bifurcated into two ministries each with a clear mandate fore focused approach in fisheries development. Institutional Capacity Pakistan needs more assistance to strengthen Sanitary and Phytosanitary (SPS) regulatory systems, in particular to provide or strengthen the institutional capacity to support exports. These needs include quarantine, eradication, surveillance, diagnostics (including laboratory infrastructure and training), and risk analysis. Another particular area of concern is the national ability to stay up to date with the import requirements of importing countries. These capacities are needed to help reduce the threat of pest and disease establishment in the country and to provide the government with the capacity to manage pests and diseases to address requirements of importing countries, and to enable competent authorities /other authorities to engage with their counterparts in negotiations over market access issues. 4.4 Balochistan A glimpse over the fish industry of Balochistan is detailed by the table 8 as under:

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Table 8: Glimpse Over Balochistan Fisheries Local consumption and exportable surplus of fish for the year of 2011 Year Total Consumption Exportable % Ave of total Quantity % Ave Surplus Quantity production of Ton 2011 135115.638 10645.141 7.87 124470.494 92.12 Number of fishing craft of Balochistan coast for the year of 2011 Year Mechnized Motorrized Boats Life Boats Boats with outboard with inboard with inboard Engine Engine Engine 2011 1831 5144 211 Fishermen Population of Balochistan coast for the Year 2011 Year Full time Part time Occasional Fishermen Fishermen Fishermen 2011 33255 13144 6413 Total Total Production

7186 Total 52812

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5 REGULATORY PROCEDURES
5.1 International Quality Certification, HACCP: Export to international market is dependent on the Quality and safety assurance certifications. These certifications legitimize the export process of the processing plant. The certifications will help in getting market share to the EU, US and Japanese sea food market. These certifications are issued after thorough inspection of the processes involved in the sea food processing plant. These will help in assuring product hygiene i-e the final product is free from all Becterias and viruses. HACCP certification is the most important certificate for the sea food processing plant. In order to get a share in EU, US and Japanese markets following are some of the important quality certifications that help in attaining a product share in the said markets. 5.1.1 HACCP Certification The HACCP system was introduced in the United States in 1971 by the Pillsbury Company in collaboration with the National Aeronautics and Space Administration (NASA) and the US Army Natick Research and Development Laboratories. These agencies had the initial responsibility for designing and manufacturing food products and hardware which were to provide 100 percent assurance that either the food products would not be contaminated with pathogens, bacteria or viruses which could cause illness or that the equipment would function with zero defects. The HACCP system has become the internationally recognized system for the management of food safety for all companies involved in the production, transformation, storage and distribution of food for human consumption. It has been adopted by the European Union (EU) for all food processors and the Codex Alimentarius Commission as the principal food safety system (EU Directive 93/43/EEC; Codex Alimentarius Alinorm 93/131, 1993) The HACCP process involves the identification of specific hazards throughout the entire process involved in the production of a food product and focuses on the preventative measures for their control to assure the quality and safety of the food. This includes analysis of raw material sources and usage, processing equipment, operating practices, packaging and storage, together with marketing and conditions for intended use. There is less reliance on the traditional system of end product testing and food safety is built into the product from conception through design and distribution. HACCP shifts the responsibility to the food producer to ensure that the product is safely consumable. The following is a list that is included (at a minimum) in the hazard analysis:

Ingredients and raw materials: source, composition, handling, transportation, and storage Activities conducted in the process and handling system: steps identified on the flow diagram Equipment used in manufacture and processing: specific parameters important to controlling, reducing, or preventing hazards
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Equipment and facility sanitation Food product distribution: transportation, delivery, wholesale/retail practices, and intended use

Documentation of the hazard analysis includes a written summary providing relevant scientific references. In addition, the information should be summarized in a narrative statement and listed on appropriate forms. Annexure I of the report gives the addresses of the HACCP certification issuing authority and associated certifications for HACCP qualification. 5.1.2 FDA Certification: The U.S. national regulatory authority for public protection and seafood regulation is vested in the Food and Drug Administration (FDA). The FDA operates an oversight compliance program for fishery products under which responsibility for the product's safety, wholesomeness, identity and economic integrity rests with the processor or importer, who must comply with regulations promulgated under the Federal Food, Drug and Cosmetic (FD&C) Act, as amended, and the Fair Packaging and Labeling Act (FPLA). 5.2 Sea Food Product lines: Sea food product lines mainly include frozen fish and shrimp products. Shrimps are categorized as headless and head-on according to the market demand. Frozen shrimps are mostly packed into paper boxes and weight ranges from 2- 4 kg packs. Frozen fish is packaged according to the international requirements. Mainly the fish product is packed into 10kg cotton boxes with names and company brand on it, whereas for national supply fish is packed into bags of weight ranging from 2 kg to 10 kg packs. 5.2.1 Quality and Product line: Sea food is a delicate and perishable food item. The quality of the product is defined by its Appearance. Freshness. Packaging. 5.2.2 Product Grade Table: 5.5.2.1 Market Segmentation According to Grade and Quality Preference Grade AA Description The products in this grade signify the best sea food in terms of its Size, quality, packaging and freshness. The species in this Grade are marked to
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Target Market AA grade products are marketed and get easy accessibility to EU, USA, Japanese markets with good price.

Pre-feasibility Study

get highest product price. The products in this grade are termed as the best in terms of quality and freshness. The species in this Grade are marked to get an acceptable export product price. The buyer of the product makes some compromise on the quality. The fish catch with a change in color or lacking some freshness comes in grade. The final price of this product is comparatively low; therefore the plant owner makes effort to save the catch from turning into B Grade.

A grade products are exported to the said markets with comparatively lower prices those AA products. However good packaging and timely order delivery can increase the final price. Export market will be focused for the B grade products however rates competitive to the exports market also exists locally for the B grade products.

Improper handling of the fish catch at An effective cool chain after the processing sea or mismanagement in keeping the can make an H grade product highly cool chain makes the fish turning into H acceptable to the local market. Local retail grade. This grade has less chances of markets will be the target market for the H getting accessibility for the export. grade. Whereas local fish markets of Pakistan is supplied mostly with H grade fish. Most of the H grade is also converted to the fish meal that is treated as a wastage. (Source: Industry analysis and experts opinion)

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6 TECHNICAL ANALYSIS
6.1 Fish Spoilage: As soon as a fish dies, spoilage begins. Spoilage of fresh fish is a complex process and is caused by a number of inter-related systems, some of which are suppressed by others. The factors which principally contribute to the spoilage are the degradation of protein with a subsequent formation of various products like hypoxanthine, trim ethylamine, development of oxidative rancidity and the action of micro-organisms. The first obvious way to avoid spoilage and loss of quality is to keep caught fish alive until cooking and consumption. Fish begins to spoil immediately after death. This is reflected in gradual developments of undesirable flavors, softening of the flesh and eventually substantial losses of fluid containing protein and fat. By lowering the temperature of the dead fish, spoilage can be retarded and, if the temperature is kept low enough, spoilage can be almost stopped. 6.1.1 Four Phases in Fish Spoilage: The four phases of fish spoilage are as follows, Phase I (Autolytic changes, caused mainly by enzymes) Fish just caught is very fresh and has a sweet, seaweedy and delicate taste. There is very little deterioration, with slight loss of the characteristic odour and flavour. In some tropical species this period can last for about 1 to 2 days or more after catching. Phase II There is a significant loss of the natural flavour and odour of (Autolytic changes, fish. The flesh becomes neutral but has no off-flavours, the caused mainly by texture is still pleasant. enzymes) Phase III The fish begins to show signs of spoilage. There are strong off(Bacteriological flavours and stale to unpleasant smells. Texture changes are changes, caused significant, flesh becoming either soft and watery or tough and mainly by bacteria) dry. Phase IV Fish is spoiled and putrid, becoming inedible. (Bacteriological changes, caused mainly by bacteria) 6.2 Chilling Process Chilling is the process of cooling fish or fish products to a temperature approaching that of melting ice. The purpose of chilling is to prolong the shelf-life of fish, which it does by slowing the action of enzymes and bacteria, and the chemical and physical processes that can affect
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quality. Reducing the temperature at which the fish is kept lowers the rate of deterioration. During chilling the temperature is reduced to that of melting ice, 0 C/32 . All species of fish, when properly chilled, will stay fresh for longer periods than those that are not preserved in any way. The use of chilling techniques such as ice, therefore, effectively prolongs the length of time of the catch. Products brought to market in a wellpreserved condition will generally command higher prices, both at wholesale and retail levels, and thus give better returns to the fishing operation. Most effective method employed for chilling process is a combination of ice and water. Ice is widely used for the purpose. For the purpose of fish handling, flake ice recommended for chilling process as the physical shape of the flake ice favors fish. 6.3 Freezing: Freezing and frozen storage of fish can give a storage life of more than one year. It has enabled fish processing plants to keep the product for long periods. Freezing allowed the stockpiling of fish during periods of low demand and high catching rates, as well as widened the market for fish products of high quality. 6.3.1 Types of Freezers The three basic methods of freezing fish are: Blowing a continuous stream of cold air over the fish - air blast freezers. Direct contact between the fish and a refrigerated surface - contact or plate freezers. Immersion in or spraying with a refrigerated liquid - immersion or spray freezers

6.3.1.1 Blast Freezers This is the most efficient and effective method of freezing. The method recommended in this pre feasibility is Blast freezers. In this method, the use of air to transfer heat from the product being frozen to the refrigeration system is probably the most common method used in commercial refrigeration. The natural convection of the air alone would not give a good heat transfer rate, therefore, forced convection by means of fans has to be introduced. To enable the product to be frozen in a reasonable time the air flow rate should be fairly high. Batch air blast freezers. Batch air blast freezers use pallets, trolleys or shelf arrangements for loading the product. The freezer is fully loaded, and when freezing is complete, the freezer is emptied and reloaded for a further batch freeze. Apart from this difference in mode of operation, the batch freezer gives rise to bigger fluctuations in the refrigeration load than continuous or batch-continuous freezers. Because of compatibility and efficiency in the present industry structure, freezing technology recommended for the proposed project will be batch air blast Freezers.
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6.3.1.2 Plate Freezers: Plate freezers and air blast freezers are the types of freezer most commonly used for freezing fish in industrial countries. Plate freezers do not have the versatility of air blast freezers and can only be used to freeze regularly shaped blocks and packages. Plate freezers can be arranged with the plates horizontal to form a series of shelves and, as the arrangement suggests, they are called horizontal plate freezers (HPF). When the plates are arranged in a vertical plane they form a series of bins and in this form they are called vertical plate freezers (VPF). 6.3.1.3 Spraying with a refrigerated liquid ( Liquid Nirtogen / carbondioxide): In this freezer, the product is brought into direct contact with the refrigerant.

The fish on the stainless steel conveyor belt initially come into contact with the counter current flow of nitrogen gas at a temperature of about -50C. Alternatively liquid carbondioxide can also be sparyed on the fish as refrigerant at a temperature of about -50 C. As the fish progress through the precooling stage of the freezer, the gaseous nitrogen partially freezes the fish and up to 50 percent of the product heat is extracted. The product then passes below the liquid spray where freezing is completed by the boiling liquid. The last stage in the freezer provides a few minutes for the fish temperature to reach equilibrium before the fish are discharged.

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This method is considered the most advance and expensive practice in freezing technology. This method is employed in those countries which have regular supply of liquid nitrogen or liquid carbon dioxide 6.4 Packaging of Frozen Fish: After fish has been frozen, it can be subjected to many forms of deterioration between production and eventual consumption. Contamination from humans, animals, insect and atmospheric sources are possible. To prevent or reduce losses in product quality, it is essential that the frozen product is packaged in such a way as to provide an effective barrier with sufficient impact and compression strength to prevent damage. The packaging material must have adequate barrier properties to reduce losses due to dehydration and pick-up of taints. The range of packaging material for frozen fish is very wide and is dependant on the form of the product being packed. For the export market in fisheries sector, primarily plastics and Cartons are employed for packaging frozen fish products. However for local supply across Pakistan, the fish product can be packages in Bags as well. A brief of the packaging material is as follows, 6.4.1.1 Plastics: The primary package in contact with the frozen product is generally a plastic derived from a natural hydrocarbon source. The choice of which plastic wrapper is dependant on the type of barrier required, and if the product is to be cooked or heated in the container 6.4.1.2 Cartons: Cartons are also regarded as primary packages when used as a protective sleeve to the product. The boards for the cartons can be made of : Kraft boards. These are frequently used for packaging frozen foods and are usually made from fully bleached materials. They are strong, of good appearance and are suitable for direct contact with food. Folding box boards. These usually have one fully bleached side which is suitable for direct contact with food.

6.4.1.3 Bags: Due to its availability and cost effectiveness, frozen fish and shrimps can be packed directly into bags made from materials with good gas vapor and moisture barrier properties. The level of sophistication can range from manual weighing and loading to a highly sophisticated form-fill-seal technology where a specified weight, volume or count of product is filled into a formed bag which is heat sealed. Such equipment can be used for packing peeled shrimp and fish fingered.

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6.5 Process Flow Chart The process flow chart for the Sea Food Processing Plant is given below

Fish Catch from Auction Hall /Boats

Receiving and Weighing in Plant

Icing /washing and Segregating into AA,A,B and H Grades

Processing Hall. Grading and Packaging

B L A S T F R E E Z I N G

Transportation

Packaged Product Lots into Cold Store

Processing Hall Re-Packaging and Grading

6.6 Raw Material / Marine Fish Catch: Fresh fish of the sea can be termed as the raw material for the processing plant. The sea food processing starts from the fishing boats. Fresh fish catch from small boats operating on daily basis along the sea are one of the major suppliers of the fresh fish for processing plants. Whereas deep water fishing vessels and trawlers also supply considerable amount of fresh fish for the processing plant.

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7 PROJECT INPUTS
Following are the basic machinery requirements for Sea food processing plant. 7.1 Machinery and Equipment Machinery / Description / Specifications Flake Ice Machine Capacity (25 T / 24 Hours) Storage Bin , Capacity ( 12 Tons) Blast Freezers , Capacity (2T / 8 Hours) 30 C Bitzer 2 Stage Condensing Units. 2 Low Temperature Cooling Coils with Control Panels Cold Store , Capacity ( 250 T , 50x 50x 15) -30 C Unit Capacity 4 x 2 Stage Condensing Unit. 4 Cooling Coils with Control Panels. Individual Quick Freezing Machine (IQF Plant), Per Hours Capacity, 500kg Shrimp/Fish @ -35 C Central Air conditioning System Processing Hall Tables and Racks Tube Well, Transformer & water pump etc. Generator Machinery Installation Cost Total Cost Quantity 2 2 Unit Price/Rupees 6,800,000 525,000 Total 13,600,000.00 1,050,000.00

1,800,000

7,200,000.00

2,240,000

8,960,000.00

14,000,000

14,000,000.00

800,000

800,000 8,000,000 1,800,000

1 1 1,400,000

1,400,000 2,500,000 55,510,000

7.2 Maintenance Costs Machine maintenance would be an on going process and is calculated to be Rs 50 per ton processed. Since the machine is locally manufactured therefore availability of spare parts is not an issue.

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7.3 Vehicle Detail Quantity Unit Price Truck 2 4,000,000 Refer container 2 1,500,000 Hyundai Shehzore 1 965,000 Office vehicles cost 11,965,000 Registration fee 1% 119,650 Total Office Vehicles cost 12,084,650 7.4 Other Office Requirements Office furniture cost Rs. 1,216,500 and Office Equipment costs Rs. 800,000 and would include a
computer, a fax, a telephone, and the intercom system.

Total 8,000,000 3,000,000 965,000

7.5 Human Resource Requirement The manpower required for operating the Warehouse is as follows: Description Manager Accountant Office Assitant Store Keeper Generator Operator /Oiler Compressor Operator Helper Drivers Watchman Production Hall Supervisor Packaging / Loading Foreman Cold Store In charge Janitors No. 1 1 1 1 2 2 5 3 2 2 3 2 2 Salary 40,000 20,000 12,000 15,000 10,000 10,000 8,000 8,000 10,000 12,000 12,000 12,000 Total Monthly Salary 40,000 20,000 12,000 15,000 20,000 20,000 16,000 24,000 20,000 24,000 36,000 24,000

7.6 Land and Building Requirement Detail Land Management building Factory Godown Area in Sq.Ft. 1,000 8,000 2,000
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Rate/Sq.ft. 800 800 800

Total Cost 800,000 6,400,000 1,600,000

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Labour Quarters Boundry Wall Water Tank Cold Store Cafeteria Pavement/driveway Grounds Total

900 300 4,000 600 2,500 3,800

800 350 1,200 800 350 150

720,000 105,000 120,000 4,800,000 480,000 875,000 570,000 16,470,000

7.7 Utilities Requirement The machinery setup will require electricity and ample water supply. A transformer and a tube well with a water pump and water tank is already mentioned in the capital cost details. 7.8 Recommended Mode It is recommended to acquire/buy the total land required as most of the machinery required needs fixed installation and cannot be moved easily once installed.

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8 PROJECT ECONOMICS
8.1 Project Cost
Capital Investment Land Building/Infrastructure Machinery & equipment Furniture & fixtures Office vehicles Office equipment Pre-operating costs Total Capital Costs 2,460,000 16,470,000 800,000 1,216,500 12,084,650 57,310,000 1,083,519 91,424,669

Working Capital Equipment spare part inventory Raw material inventory Upfront insurance payment Cash Total Working Capital 79,063 26,881,250 644,233 1,500,000 29,104,545

8.2

Project Returns
Equity IRR Payback Period (yrs) Total Project Investment 46% 4.37 120,529,214 Project 38% 4.19

8.3

Project Financing
Initial Financing Debt Equity Rs. 60,260,633 60,260,633

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Sea Food Processing Plant

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Sea Food Processing Plant

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Sea Food Processing Plant

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Marble &Granite Warehouse

9 KEY ASSUMPTIONS
Table 13-1 Direct Costs/ Ton Cost/Ton in Rs. Description Direct Labor Cost Machine Maintenance Cost Direct Electricity Cost Direct Water Cost Direct Fuel (Tractor Diesel) Cost Total Direct Cost/Ton Table 13-2 Revenue Assumptions 60,000 40,000 46,000

Facility capacity Price charged per Ton in year 1 (from Exports) Price charged per Ton in year 1 (Local market) Weighted average sale price

Table 13-3

Production Related Assumptions 50% 8% 95% 34,000 8.0% 100

Production capacity utilization Production capacity utilization growth rate Maximum capacity utilization Cost of goods sold 1 Cost of goods sold growth rate Operating costs 2 (machinery maintenance)

Table 13-4

Economic Related Assumptions 6% 10% 6% 6% 6% 6%

Inflation rate Wage Growth rate Electricity Growth Rate Water Price Growth Rate Vehicle Price Growth Rate Office Equipment Price Growth Rate Table 13-5 Expense Assumptions

Administration Benefit Expense Traveling Expense

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10% of Admin Expense 30% of Admin Expense

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Marble &Granite Warehouse

Communication Expense Office Expense Promotional Expense Machinery Insurance Rate Vehicle Insurance Rate Professional Fee (Legal, Audit etc) Bad Debt Expense Pre-Operational Expense Table 13-6 Depreciation Rates

40% of Admin Expense 20% of Admin Expense 2% of revenue 5% 5% 1.5% of revenue 5% of revenue Rs. 68,530

Building/Infrastructure Machinery and Equipment Furniture & fixtures Vehicle (tractor) Office equipment Table 13-7 Cash Flow Assumptions

5% 10% 10% 20% 10%

Accounts Receivables Cycle (In Days) Accounts Payable Cycle (In Days) Cash on Hand

60 30 Rs. 500,000

Fish are caught from October to June, the peak being March to May. Ribbon fish, croakers, sole and some other species are exported to South Korea and China. Indian mackerel are exported to Thailand, Malaysia and Indonesia, while chilled fish are exported to Singapore and the Middle East.

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