I.

Title: INTEGRATED GROUPER CULTURE: AN ALTERNATIVE LIVELIHOOD

PROJECT FOR ILIGAN BAY WATERS

II. Background:

arine fish culture such as grouper is a new undertaking in the Province of Misamis
Occidental. This program is given high priority by the Provincial Government to
provide a sustainable livelihood for the coastal dwellers. Initially, Gata Daku MPC
planned to undertake the grouper project with assistance coming from CATP-ACIAR and
SEAFDEC.

Grouper (Epinephelus spp.) locally known as lapu lapu is a high valued fish with enormous
economic potential. They are valued for their excellent texture and flavor especially in
Chinese cuisines. The demand for grouper in the international market is growing rapidly
particularly in Hong Kong, Japan and Singapore. These are sold as live fish with a wholesale
price of at least P400/kilogram. From about 40 species of groupers widely distributed in
tropical waters, two species (E. coioides and E. malabricus) are popularly cultured in either
ponds or cages. Groupers will also thrive in brackish waters – an environ commonly seen in
the coastal waters of Misamis Occidental.

Generally, the project aims to complement the environment activities and gains from the
implementation of Iligan Bay Coastal Resource Management and Development Program
which received funds from Philippines – Australia Community Assistance
Program (PACAP) under the Focal Community Assistance Scheme
(FOCAS). After the successful participation of fisherfolk associations and
various Peoples Organizations in environment conservation projects, the
implementers saw the maturity of the community to undertake non-
destructive livelihood activities. The stakeholders see the light of the
incoming partnership between the South East Asia Fisheries Development
Center (SEAFDEC) and the Provincial Government of Misamis Occidental on grouper
hatchery. Banking on this partnership, the stakeholders decided to undertake this project.

III. Objectives:
1. To provide sustainable alternative livelihood of fisherfolks in Iligan Bay FOCAS
Area
2. To reduce pressure on fishery and other marine resources.
3. To increase income of fisherfolks in the Iligan Bay FOCAS Area
4. To develop networks and linkages with other institutions focusing on grouper
production and marketing

IV. Outcomes:
a. At least 6 fisherfolk associations will be able to raise grouper for domestic and
international markets
b. Additional annual income of a minimum P 1,000/month/household for at least 300
households starting on the second year.
c. Established networks and linkages both for domestic and international markets
d. Private sector involved in marketing of grouper as product integrator.
V. Organizational Aspect

There will be five (5) CSO proponents who will implement the Integrated Grouper Culture
Project namely: Xavier Agriculture Extension Service (XAES), Misamis Occidental
Employees Cooperative (MOEMCO), Lorenzo Tan MPC (LTMPC), Paglaum MPC and Gata
Daku MPC. Except for LTMPC and MOEMCO all have good tract record with PACAP.
Target beneficiaries shall be the marginalized fisherfolks of Panaon, Jimenez, Sinacaban and
Tudela.

Of the five would-be proponents, XAES is the only organization that is not a Cooperative. It
is an NGO. Under PACAP guideline, technically XAES is required to turn over the project to
Peoples Organizations (POs). After three years of operation and upon evaluation that the
participating POs are mature (based on criteria that will be determined by the Corporation)
XAES shall divest majority of its stocks from the corporation to the said participating POs.

The PACAP Grant Fund will be downloaded directly to the organizations mentioned above.
After which, the CSOs will form themselves into a Corporation and will infuse a capital of
P150,000 per organization. This scheme increases the ownership, or buy in, of the project.
The infused capital and PACAP Grant Fund will form part of the investment of each CSO to
the Corporation. With the Grant Fund and infused capital, the initial capital investment would
be about P10Million.

Each organization/investor will assign their representative to sit as Board of Director of the
Corporation. At least during the project life or until three years, a PACAP representative
shall sit as an ex-officio member of the Board. From among the Board, they will elect a
smaller-member Executive Committee. The ExeCom then will be tasked to oversee the
operation of the Corporation. Among themselves a Treasurer will be elected who will also
temporarily act as the Cashier or Disbursing Officer for the meantime that the Corporation is
not earning yet from the grouper operation. In time, a fulltime Cashier will be hired. They
will hire the personnel and draft policies and guidelines of the Corporation for a start. Figure
1 below shows this structure.

Page 2
 Figure 1. Organization and Management Structure

The Executive Committee will hire 4 core personnel for the project. These are the Integrated
Grouper Project Manager, Nursery Supervisor, Production Supervisor and Bookkeeper.

1. The IGP Manager will be in charged of the overall operation of the project on a day to
day basis. Details of the functions will be outlined later when the ExeCom has drafted
the policies. The IGP Manager reports directly and thus takes directions from the
ExeCom. The IGP Manager will also prepare and submit reports required by PACAP,
be it regular report or as requested, such as the Milestone and Financial Reports. The
IGP Manager will act as the Marketing Officer in the meantime that the corporation is
not earning from the operation yet. He/She takes care of the marketing of live fish and
marketing facilities of the Corporation. When the Cash Flow proves that the operation
is already positive, a fulltime Marketing Officer will be hired.
2. The Nursery Supervisor will be charged on the whole nursery. He/She will manage
workers and laborers of the nurseries. He/She reports directly to the IGP Manager.
3. The Production Supervisor will be charged of the operation of the grow out facilities,
both corporation-ran and facilities extended to Peoples Organizations (POs). He/She
will directly reports to the IGP Manager
4. The Bookkeeper, the finance analyst, assumes the financial accounting systems,
following the PACAP guidelines and generally accepted accounting principles,
records all financial transactions, prepares on time financial report and performs other
functions as required by the project.

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During the project life, the Corporation will set up a nursery and grow-out facilities for
grouper production. The nursery will be exclusively ran by the Corporation while there will
be two schemes in managing the grow-out facilities. The grouper grow-out facilities and
stocks maybe extended to the Peoples Organization via soft loan. Mechanics of which will be
drafted and finalized during project implementation. The Corporation itself may set-up its
own grow-out facility not to compete with the operations of the POs but rather to ensure that
volume and production is maintained as projected.

The Corporation will conduct various capacity building activities on grouper aquaculture, for
the identified Peoples Organizations with the assistance from SEAFDEC.

Annual income, less tax, expenses and other reserves, will be distributed as dividends to the
incorporators relative to the capital they infused only after the third year of operation. For the
five (5) CSOs, the grant assistance extended by PACAP and the cash counterpart they pitched
in will be their capital investment. The dividends awarded to the CSOs will be deposited to a
“reflows” bank account and may be utilized to expand operation in other municipalities, serve
more POs when needed, identify other coastal livelihood activities, market related activities,
research and development relating to coastal livelihood activities, environment protection and
conservation, among others. After three years, they may opt to either distribute the dividends
to their members or utilize it further for development activities relative to environment and
coastal livelihood projects.

In time when the Corporation is in its full operation, a scheme will be developed for the
Peoples Organizations to become shareholders themselves of the Corporation. During that
time the operation will not be limited within the four Municipalities of Tudela, Sinacaban,
Jimenez and Panaon. This Corporation envisions on expanding operation to the whole stretch
of coastal waters in Misamis Occidental.

The Peoples Organization which will undertake the grouper grow-out project may be selected
by the multi-stakeholder committee (aka FOCAS Management Committee) based on agreed
criteria – considering the vast number of interested groups who will undertake grouper
production. In this project, only POs from the Municipalities of Tudela, Sinacaban, Jimenez
and Panaon will be included in the selection. A tenurial right (users’ rights) from the LGU
should be acquired before the implementation. Trainings on the over-all project management
will be conducted. Active participation and cooperation of both beneficiaries and
implementers is also vital for the efficiency and sustainability of the project.

Although the Corporation will loan out capital for the setting up of grouper grow-out facility,
the POs will draft their own scheme on how to manage the facility, including income
distribution thereof. The POs will also provide counterpart, such as labor, and money when
needed. When stocks will grow at the desired size, these will be forwarded to the
Corporation exclusively. The Corporation in turn will aggregate harvests of other POs and
will supply the same to pre-contracted buyers. The Corporation will then deducts payment for
the loan as previously agreed and returns the net profit to the respective POs.

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Capacity Building, Monitoring and Evaluation

It is encouraged that the personnel and officers of the Corporation shall capacitate themselves
in various business management operations. When appropriate, trainings should be
conducted by the private sector.

The project will be monitored and evaluated in three levels. First, the Corporation itself shall
conduct regular monitoring and evaluation of the operation of the project. This exercise will
attune the livelihood operation relative to the standard of grouper industry. It is also required
that the organization shall conduct an annual financial audit on the grouper operation.
Financial audits are not only conducted as a requirement of regulatory bodies. This will also
aid the Corporation in decision making on operational and other matters. From time to time
the multi-stakeholder organizations, such as the Iligan Bay FMC and Misamis Occidental
PSC, shall also conduct a separate monitoring and evaluation activities for the purpose of
learning from this methodology and/or assist in resolving issues and concerns vis-à-vis
running of the project, environment aspects, among others. PACAP will also conduct its own
monitoring, evaluation and audit regularly during the project life and within three years of its
operation.

VI. Technical Aspect

Misamis Occidental is located near the narrow strip of land-linking northwestern Mindanao
to the north Central part of the island. It is bounded on the northeast by the Mindanao Sea,
east by the Iligan Bay, southeast by the Panguil Bay, and west by Zamboanga del Norte and
Zamboanga del Sur. The fact that three of its boundaries are bodies of water makes fishing as
one of its main industries. Fisheries contribute 13% of the total economy of the province in
2004. The fish production from commercial fishing was 6,400 metric tons, 2,000 metric tons
of seaweeds and other crustaceans such as shrimps and crabs.

Although gross domestic product has been steadily rising from P44 million in 2002 to P49
million in 2004, the poverty incidence is still high at 51.60% of total population or about
50,385 families. These are mostly resource-dependent fishers and farmers. The vicious cycle
of poverty is due to low income and lack of employment opportunity and the destruction and
overexploitation of coastal resources. The coastal waters especially Iligan Bay are vital
resources for food and livelihood of fishing communities along the coastal areas of the
province. There is a need to provide alternative livelihood for the fishers through responsible
utilization of resources. Sustainable aquaculture practices are alternate options that can be
introduced among the poor fishing communities.

Iligan Bay is endowed with productive coastal and marine habitats such as coral reefs,
seagrass beds and mangrove forest. There are many opportunities in developing aquaculture
in the marine, brackish, and freshwater bodies in Misamis Occidental. Iligan Bay is suitable
for mariculture of high value species such as grouper, red snapper, sea bass, siganids, bangus,
and abalone.

The Australian Government through the Australian Centre for International Agricultural
Research has supported research and technology generation in grouper culture through the
ACIAR Project FIS/97/73 “Improved hatchery and grow-out technology for grouper

Page 5
aquaculture in Asia-Pacific region”. This was successfully undertaken by the South East
Asia Fisheries and Development Center (SEAFDEC). In the second quarter of 2007, ACIAR
through CATP identified Iligan Bay as the site for modeling of the grouper aquaculture.
During the visit of SEAFDEC to Misamis Occidental in August 2007, Honorable Governor
Leo Ocampos saw the opportunity and was quick to ink out an agreement with the institution
to set up, among others, a grouper hatchery in the Province. PACAP also saw this opportunity
and embarks on the downline industries: nursery and grow out facilities.

Strategic partnership among PACAP, ACIAR-CATP, LGUs and SEAFDEC is necessary to

realize long term goals for the upliftment of the socioeconomic condition of the fisherfolk of
Misamis Occidental. Attachment 1 shows the integrated grouper project implementation plan
assisted by PACAP.

Institutional Capacity Development on Sustainable Aquaculture (Grouper Cage Culture)

The main goal of the project is the sustainable development of Misamis Occidental coastal
resources and amelioration of the socioeconomic condition of the fishers and farmers by
empowering them to become efficient fish growers, active resource managers and prudent
resource users through the enhancement of their knowledge and skills in aquaculture and
coastal resources management. The following technical objectives are drawn from this goal:

1. To train a critical mass of fisherfolk in grouper culture nursery and grow-out systems,
marketing, and business enterprise management.
2. To set-up production facilities such as fish cage structures in the four municipalities and
operate as a viable livelihood ventures for the target beneficiaries.
3. To increase the income of the beneficiaries by not less than 20%, or P1,000, through the
grouper culture business venture.
4. To protect the coastal resources through environment-friendly mariculture practices.

Conceptual Framework and Strategy

The conceptual framework will be based on five elements namely: 1) the socioeconomic
characteristics of the target communities; 2) the bio-physicochemical condition of the coastal
resources; 3) the appropriateness of the aquaculture technology; 4) the market attributes and
value-chains; and, 5) the use rights by the community on the coastal resources.

The overall strategy is to transfer and disseminate verified grouper cage culture technology to
the community and granted use rights by the LGUs through ordinances. The approach will
be participatory and interdisciplinary.

Components

1. Season-long training course

The training design will include lectures and learning-by-doing methods. The topics of
the training course (see Appendix 6) will include start-up activities (actual construction
and installation of net cages), the theoretical aspects such as simple biology of the fish,
cage and farm design, feeds and feeding management, disease prevention and monitoring,

Page 6
 harvest and post-harvest techniques, simple financial analysis, marketing, and enterprise
development and management.

The season-long training will be conducted in 4-5 phases (2-3 days per phase) from start-
up activities up to harvest at the end of the culture period and also marketing of the
grouper.

2. Setting-up of fish nursery and grow-out cage structures

The design, construction and installation of nursery and grow-out cages will be done
using local labor preferably from among the fishing communities under the supervision of
qualified SEAFDEC personnel. The farm site will be assessed and selected by
SEAFDEC scientists in consultation with PACAP, the fisherfolk, and the LGU.

SEAFDEC is proposing to construct four (4) units of nursery cages and ten (10) units of
grow-out cages with outside dimensions of 8x8x3 meters. The grow-out cages will have
the capacity of 4,000 fingerlings. With 80% survival rate and considering 500 grams at
maturity, it has the potential to raise 1.6 tons of live fish. Each grow-out cage therefore
will produce 3.2 tons in 12-month operation.

A single nursery has the potential to serve 3 grow-out cages twice in 12-month operation.
To reiterate, the nurseries will be exclusively operated by the Corporation while the grow-
out cages will either be ran by the Corporation or by the POs.

3. Proposed Production Plan

There will be two production phases: nursery and grow-out grouper culture. Initially, 2-
inch fingerlings of tiger grouper will be sourced out from SEAFDEC or other hatchery-
nursery operators until the proposed Integrated Fish Hatchery of the Misamis Occidental
Aquamarine Park will be capable of supplying the required quality and quantity of
grouper fingerlings. The required quantity of 2-inch fingerlings will be 8,000 pieces
monthly. The nursery phase will be rearing from 2 to 4 inches grouper fingerlings which
will take about two months. The estimated survival rate at the end of the two-month
nursery phase is 75% or 6,000 4-inch fingerlings.

Each grow-out cage will be stocked with 4,000 pcs of 4-inch fingerlings. The excess
fingerling production of about 2,000 pcs per run will be sold to other growers outside
Misamis Occidental. Marketing of fingerlings will be part of the tasks of the Marketing
component of the Project under PACAP.

The grow-out phase will take about 6 months. The projected survival is 80% or 3,600 pcs
with an average body weight (ABW) of 0.5 kg or a total harvest of 1,600 kg. Harvesting
and marketing will start on the 9th month and the succeeding months thereafter. This
Project will set up 4 nurseries and at least 10 grow out cages. (See Attachment 2,
Production Plan).

Page 7
4. Impact Assessment

In order to ensure sustainability of the environment and the financial viability of the
grouper venture as a business enterprise, resource and socioeconomic assessments will be
conducted by SEAFDEC and PACAP staff in collaboration with the LGUs and the target
beneficiaries. The objective of the impact assessment is to measure the economic benefits
in terms of increase in income of the beneficiaries.

If not available, a random survey will be made before the implementation of the nursery
and grow-out facilities. A survey will also be conducted after the completion of the
project vis-à-vis grant fund.

The Southeast Asia Fisheries Development Center (SEAFDEC) will also station a Technical
Assistant, co-funded by CATP-ACIAR, in Misamis Occidental to oversee the day-to-day
operation of the project relative to the commitment of the institution.

VII. Market Aspect

In any income generating endeavor, the study of the market, is imperative. For grouper
production and especially for fully grown ones, national market information is largely
available. However, there is the need to study the local and sub-national market, and even
export, to establish links. Initial phone interviews with potential buyers revealed that little is
known about market integrators (i.e. wholesale buyers) of groupers in the Philippines. Most
of the grouper growers source their juveniles from the wild and sell the final product directly
to restaurants. Greater integration as proposed in this project may require a market integrator
due to the potential large volume of produce – 1.6 tons every month. Unlike Malaysia and
Indonesia which have established market chains to Hongkong and Singapore, there is the risk
of failure if the market chain of this Project is not identified and established prior to the large
production of grouper in 12 months. There is also the risk of failure due to large fluctuation
of the market price. Sri Bisaya Corporation in a phone interview revealed that the buying
farm gate price of a 500 gram live grouper is pegged at P400/kilo at the maximum. Other
would-be buyers said that the price may be lower than P400/kilo. However, a Director of
Gata Daku MPC, who is currently trading prawns, indicated a price of P500/kilo.

The CATP-ACIAR Project undertaken by Gata Daku MPC has funded the study of the
markets in Manila, Cebu and Cagayan de Oro Cities. It will come up with a grouper Value
Chain snapshot and a marketing plan to sell juveniles and live fish. In conjunction with the
project implemented by Gata Daku this project will also seek to find the domestic market at
first. The following activities will then be undertaken:

Networking and Linkaging

The Corporation will actively conduct network and linkaging activities. To name a few,
government agencies such as the Department of Agriculture, Department of Trade and
Industry, institutions like the Palawan Council for Sustainable Development and the private
sector will be tapped during the project implementation and beyond. The Private Sector’s
involvement with this activity will be more on the marketing of the produce. Once identified,
the staff of the Private Sector will also be trained by SEAFDEC on how to handle live fish for

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transport and stocking. The Private Sector may draw a partnership or marketing agreement
with the Corporation. As assurance of compliance on their commitments, both parties may
deposit cash bonds.

Export markets will also be explored. Existing contacts coming from friends and other
networks will be probed. The main purpose in linkaging with the export market will be
finding out the competitive advantage of the Philippines against Malaysia and Indonesia
which already have established markets with Hongkong and Singapore.

Setting up of Market Facility (Holding Area) and Corporate Office

The Corporation will set up a 4 ton capacity holding area for ready to market live grouper.
The 2,500 sq.m. facility will be at Misamis Occidental Aquamarine Park (MOAP), a property
owned by Misamis Occidental Provincial Government. This holding facility will also become
the permanent office of the Corporation. The Provincial Government may opt to donate the
property through a perpetual usufruct agreement or consider the property as its investment to
the Corporation.

The Project will also fund a multi-purpose utility vehicle. The vehicle will be used in
transporting fries, fingerlings, feeds and livefish within Misamis Occidental and its ports.

Market Forum and Trade Fair Participation

As a promotion strategy, the Corporation will participate in market forums and trade fairs at
least twice every year. The purpose of which is to attract live fish buyers coming from within
the Philippines and abroad to market the Project’s future produce.

Live Grouper Fish Trading

The Corporation will sell live grouper weighing from 500 to 700 grams apiece. The very
conservative farm-gate price projection is P350/kilo. At least 1,600 kilos will be sold monthly
to the trade centers of Manila, Cebu and Cagayan de Oro Cities.

The 1.6 ton a month harvest of live grouper will have a weekly scheduled marketing. The
stocking of the grow out cages will be timed so that continued supply will be assured every
month.

VIII. Financial Aspect

The total project cost is P 15,459,470. About P 9,979,470.00 Grant Fund comes from
PACAP. P750,000 are contributed equally by the five (5) proponent organizations to form the
cash counterpart for the project. The rest will come from counterpart in kind of Peoples
Organizations, Provincial Government, SEAFDEC and the CSO Proponents. From the Grant
Fund, P975,000 (less than 10% of the total GF) goes to administrative costs, P915,000 goes
to organizational and institutional activities, P7,028,970 for grouper production to include
SEAFDEC trainings (of about P728,970.00), and P1,000,000 is allocated for marketing
establishment and promotion expenses. About P60,000 is set aside for monitoring and
evaluation. The bulk of the fund goes to the business enterprise. Grant fund cost/beneficiary,

Page 9
based on the direct cost, is P23,429 and project cost/ beneficiary is P32,687.00. Total
counterpart, cash and in kind, is 35.45%. Attachment 3 shows the details of the overall
budget.

The business enterprise is composed of two phases:

1. the nursery phase that will produce grow 2 inch fry to 4 inch fingerlings in one-unit
8m x 8m x 1.5m nursery unit incorporating eight equal-sized cages (2x2x1.5m) and
four equal-sized units (2x4x1.5m);

2. a grow-out phase that will grow the 4 inch fingerlings to 500 grams grouper in a 8m x
8m x 3m meters grow-out unit with four cages of equal sizes (4x4x3m).

Both phases are profit-centres, and either phase can be either “stand-alone” or integrated, as
in the case of the Project. The nursery and grow out set-up will be considered as the “farm
unit” which can be operated one Peoples Organization with at most 20 members.

The product of the nursery phase is the 4 inch fingerlings and will be supplied to grow-out
phase growers either in cages or in ponds. The prevailing selling price of grouper fingerlings
is Php 42.

The products of the grow-out phase are 500-grammers marketable size groupers either live or
fresh. The farm-gate price used here is conservative (Php 350/kg) compared to the initial
market surveys which report prices ranging from Php 400-500/kg.

Indicative financial indicators were estimated for the two phases of grouper cage culture and
are shown below.

Nursery phase (1 inch fry to 3 inch fingerling size)

Table 1: Technical Assumptions on Grouper Cage Nursery

Technical assumptions
Size per cage m3 (8x8x1.5m) - 4 comps. 48
Stocking density/cage 8000
Size of fry 2 inches
Cost of fry PhP20
Days of culture (DOC) 2 months
Survival rate (%) 0.75
Quantity 6000
Fingerling size 4 inches
Selling price PhP42
Feeds
FCR 2
Kgs 600
Cost/kg 56
Number of crops per year 5

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In the nursery phase, stocking density is 2,000 fry/cage or a total of 8,000 fry for four cages.
Although, there will be 12 cages in each nursery unit, the other cages will be used for sorting
and grading to make sure that the fish with the same size ranges are placed in the same cage
to prevent or reduce cannibalism. Estimated survival after two months culture is 75% of 4
inch fingerlings. Five production runs a year are targeted.

Table 2: Investment Requirements of Grouper Nursery Unit

a. Capital Outlay Amount (PhP)
Bamboo Cage frame with drum floats
(8x8x1.5m) 38,000
Nets (including spare, 8 units, labor included 35,000
Moorings 10,000
Floating guard house 25,000
Total 108,000
Annual Depreciation (3 years economic life) 36,000
Depreciation/crop 7,200
b. Working capital for 1 crop
Fry 160,000
Feeds 33,600
Direct labor (man-mos)) 12,000
Marketing expenses 7,000
Sub-total 212,600
c. Total Investment 320,600

Table 2 shows the estimates of the total investment of the nursery phase amounting to PhP
320,600 broken down to PhP108,000 for the capital cost of the structures (bamboo cage with
frame, nets and moorings and floating guard house) and a one-crop working capital P212,000
(cost of fry, feeds, direct labour and marketing expenses).

Table 3: Indicative Cost and Returns of Grouper Cage Nursery

3. Indicative cost and returns
Items Unit Price (PhP) Total (PhP)
Sales 6000 42 252,000
Less:
Fry 8000 20 160,000
Feeds 600 56 33,600
Direct labor (man-mos)) 4 3,000 12,000
Marketing expenses 7,000
Subtotal 212,600
Less:
Depreciation 7,200
Total cost 219,800
Net income/crop before
income tax 32,200
Net income for one year 161,000
Return on investment 50.22%
Payback period (years) 1.63

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Table 3 shows the annual financial returns based on the technical assumptions and market
prices. Annual income for 5 crops is P161,000 return on investment (ROI) of 50.22%,
payback period is 1.63 years. The biggest cost component is fry (73%). Since the projected
production per crop is 6,000 4 inch fingerlings, the 4,000 will be stocked in the grow-out
cages of the “project farm” and the excess will be sold to other grouper growers. The short-
term financial indicators are acceptable considering the short culture period (2 months per
crop) and more cash inflows for the enterprise in short intervals.

Table 4: Projected Cash Flow of Grouper Cage Nursery

4. Three year Cash Amount (PhP)
flow Year 0 Year 1 Year 2 Year 3
Cash in-flow
Revenue 1,260,000 1,323,000 1,389,150
Cash outflow
Capital outlay 108,000
Operating expenses
Fry 800,000 840,000 882,000
Feeds 168,000 176,400 185,220
Direct labor (Mmos) 60,000 63,000 66,150
Marketing expenses 35,000 36,750 38,587.5
Sub-total 1,063,000 1,116,150 1,171,957.5
Total outflow 108,000 1,063,000 1,116,150 1,171,957.5
Net cash flow -108,000 197,000 206,850 217,192.5
Net Present Value 368,383
Internal Rate of
Return 178%
Benefit/cost ratio 1.25

The long-term financial outlook (3 years economic life of structures) is also very encouraging
measured in terms of the net present value (NPV) of P368,383 and internal rate of return
(IRR) of 178% which is much higher that the discount rate of 10% which is the inflation rate.
Benefit/cost ratio of 1.25 shows long-term benefits are much higher than long-term costs.

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Grow-out Phase (fingerling size to 500 grams table size).

Table 5: Technical Assumptions of Grouper Grow-out Unit

B Grow-out Phase
1. Technical assumptions
Size per cage m3 4x4x3m 48
Number of cages/module 4 192
Stocking density/cage 2000 4000
Size of fry 4
Cost of fingerling 42
Days of culture (DOC) 5 months
Survival rate (%) 0.8
Quantity (pcs) 3200
Average body weight (ABW)
kg. 0.5
Total harvest (kg) 1600
Selling price 350
Feeds
FCR 2
Kgs 3200
Cost/kg 56
Number of crops per year 2

The grow-out phase unit is composed of a net structure with bamboo frames divided into four
cages (4x4x3m) with a total module size of 8x8x3m each and moorings (Table 5). Stocking
density will be at 2,000 fingerlings per cage or a total of 4000 fingerlings in two
compartments. Once the fish grow to 150-250 grams ABW, the stocks will be thinned out by
transferring half of the stocks from the two cages to the other two cages to provide more
space as the fish grow up to 500 grams ABW. The expected survival rate is 80%. Therefore,
at 500 gm/fish, the total projected harvest at the end of a 5 month culture period will be 1,600
kg.

With a food conversion ratio (FCR) of 2, total feed consumption is estimated or 3,200 kg
throughout the 5 month culture period. There will be two crops in one year.

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 Table 6: Investment Requirements of Grouper Cage Culture
2.Investment Requirements PhP
a.Capital Outlay
Bamboo Cage frame with drum floats (4X4X3m) 38,040
Nets, 16 units (4x4x3m) 51,080
Moorings 10,000
Floating guard house 25,000
Pump boat 65,000
Total 189,120
Annual Depreciation (3 years economic life) 63,040
Depreciation/crop 31,520
b. Working capital for 1 crop
Fry 168,000
Feeds 160,000
Direct labor (man-mos)) 30,000
Marketing expenses 10,000
Sub-total 368,000
c. Total Investment 557,120

The estimated total investment is P557,120 broken as follows: a) P189,120 for the cage
structures which include cost of bamboos, nets, moorings, floating guard house, pump boat
and labor for construction and installation; and b) working capital of P368,000 for one crop.
For PO operated grow out cages, capital outlay will be extended via rent-to-own or non-
interest bearing loans. While the working capital will be extended with a 12% p.a. interest
rate.

Table 7: Indicative Cost and Returns of Grouper Cage Culture per Cropping
3. Indicative cost and
returns
Items Unit Price Total

Sales 1600 350 560,000

Less:
Fingerlings 4000 42 168,000
Feeds 3200 50 160,000
Direct labor 10 3000 30,000
Marketing expenses 10,000
Subtotal 368,000
Less:
Depreciation 31,520
Total cost 399,520
Net income before income
tax 160,480
Net income for one year 320,960
Return on investment 57.61%
Payback period (years) 1.45

Page 14
The ex-farm price was conservatively pegged at P350/kg for the 500gm grouper considering
that the prices revealed in the Market Survey was P400-500/kg.

In the cost and returns analysis (Table 7), on a per crop basis, the revenue is P560,000 and the
total cost is P399,520 resulting to an income of P160,480 per crop. On an annual basis at two
crops, the financial indicators are: a) net income of P320,960; b) ROI of 57.61%, and; c)
payback period of 1.45 years. The short-term financial indicators are therefore very
encouraging.

Table 8: Projected Three Year Cash Flow of Grouper Cage Culture

Amount (PhP)
4. Three year Cash flow Year 0 Year 1 Year 2 Year 3
Cash in-flow
Revenue 1,120,000 1,176,000 1,234,800
Cash outflow
Capital outlay 189,120
Operating expenses
Fry 336,000 352,800 370,440
Feeds 320,000 336,000 352,800
Direct labor (Mmos) 60,000 63,000 66,150
Marketing expenses 20,000 21,000 22,050
Sub-total 736,000 772,800 811,440
Total outflow 189,120 736,000 772,800 811,440
Net cash flow -189,120 384,000 403,200 423,360
Net Present Value 1,915,032
Internal Rate of Return 199%
Benefit/cost ratio 1.52

On a long term basis (3 years), the projected cash flow (Table 8) shows positive financial
indicators with NPV at P1,915,032, IRR at 199%, and benefit/cost ratio of 1.52.

Table 10. Undiscounted Consolidated Net Cash Flows (3 years)

Consolidated
Cash Flows Year 0 Year 1 Yearf 2 Year 3
Net cash flow
(Nursery) -108,000 197,000 206,850 217,192.5
Net cash flow
(Grow-out) -189,120 384,000 403,200 423,360
Total cash flows -297,120 581,000 610,050 640,552.5

The above financial analysis shows that grouper cage nursery and grow-out culture are
financial viable both as an integrated operation and as individual enterprise.

Page 15
 Table 11. Breakeven Analysis

Breakeven Survival Volume at P350/kilo Farm Gate Price

1. With Infrastructure (2 years depreciation period) 2,374 pieces live fish (60%)
2. Without Infrastructure 2,103 pieces live fish (53%)
3. Assumption for this proposal (80%) 3,600 pieces live fish
Breakeven Price at 80% survival rate
1. With Infrastructure (2 years depreciation period) P309.51/kilo
2. Without Infrastructure P204.44/kilo
3. Assumption for this proposal P350.00/kilo

Table 11 above shows that gains would increase once the infrastructure investments are
already paid back. Considering infrastructure investment cost, volume of fish required, 2,374
(60%), is way below the assumed volume for this proposal which is 3,600 pieces (80%).
Without infrastructure, we need only 2,103 pieces of 500 grammer live fish (53%) to operate
at breakeven. Breakeven prices are also manageable at P309.51/kilo and P204.44/kilo with
infrastructure and without infrastructure scenarios, respectively.

Lending Operation on Grow-out Culture for POs

As earlier discussed, six (6) grow-out cages will be extended via rent-to-own scheme or
simply loaned out at 0% interest rate. The working capital however bears and interest rate of
12% p.a. Even if the grow-out cages will be fully paid after three croppings, the POs still
would receive reasonable income.

Every Peoples Organization (PO) has the potential to earn P213,760.00 granting the grow-out
cage they have will be stock twice in a year. A PO with 20 members has the potential to give
at least P800 additional income per household per month. After 18 months, when the grow
out structure, pump boat and guard house will be fully paid, income from grouper livelihood
will increase to P339,840.00. This means that each household will now have P1,400
additional income. There will be a potential to double the earning if the PO will opt to have
two (2) grow-out cages. (See Attachment 5).

Based on the Corporate Cash Flow (Attachment 4) the Corporation will earn P198,720 from
POs grow-out culture in a 21 month operation.

Page 16
Attachment 1. Integrated Grouper Project Implementation Plan

Page 17
Attachment 2. Integrated Grouper Project Production Plan

Page 18
Attachment 3. Integrated Grouper Project Budget

COUNTERPART CONTRIBUTIONS
ESTIMATED LGU, Proponent Bene- REQUEST
MAJOR BUDGET LINE ITEMS TOTAL SEAFDEC, ficiaries FROM
COST Private PACAP
Sector

I. Administrative Cost (Block Fund) 975,000

2,300,000 200,000 1,125,000
II. Direct Costs
1. Organizational Activities 915,500 915,500
a. Processing for SEC Registration 121,000
SEC Registration Fee 55,000
Documentation 15,000
Travelling Expense 16,000
Professional Fee/Legal Counsel 20,000
Meetings and Consultations (P5,000 per mtg.) 15,000
b. Permits and Licences 30,000
c. Policy Formulation 15,000
d. PO's and BOD Meetings 36,000
e. Personnel 614,500
1 Manager (P12,000 x 16) 192,000
Insurance & Benefits for 15 mos. 23,250
2 Supervisors (P8,000 x 16x 2) 256,000
Insurance & Benefits for 15 mos. 33,000
1 Bookkeeper (P6,000 x 16) 96,000
Insurance & Benefits for 15 mos. 14,250
f. Management Training 23,000
Food & Venue (500 x 15 x 2trainings) 15,000
Training Materials (1000 /training) 2,000
Transportation 2,000
Facilitators Fee 4,000
g. Project Launching 40,000
h. IEC Program & Materials 36,000
Signage 10,000
Brochure 6,000
Meetings/Fora 20,000

2. Grouper Production Activities 9,805,970 1,500,000 712,000 565,000 7,028,970

a. SEAFDEC-facilitated Capacity Building (see
Appendix 6 for details) 2,228,970 1,500,000 728,970
b. Establishment of 4 Nurseries and 10 Growout
Cages (See Cash Flow) * 7,577,000 712,000 565,000 6,300,000

3. Marketing Activities 2,378,000 1,340,000 38,000 - 1,000,000

a. Setting up of Market Facility (Holding Area,
Multicab, Tanks, etc.)
- Holding Area (4 Ton capacity) 98,000 18,000 80,000
- Office (2,500 sq. m. x P500/sq.m.) 1,750,000 1,250,000 500,000
- Multi-purpose vehicle, tanks, etc. 220,000 20,000 200,000
b. Network and Linkaging (P20,000/trip x 3 trips)
- Private Sector meetings 60,000 60,000
Page 19
 COUNTERPART CONTRIBUTIONS
ESTIMATED LGU, Proponent Bene- REQUEST
MAJOR BUDGET LINE ITEMS TOTAL SEAFDEC, ficiaries FROM
COST Private PACAP
Sector

- Participation to Trade Fairs (P25,000/forum x 2

foras x 2 pax) 100,000 100,000
c. Training on Freight and Handling (Private Sector)
at SEAFDEC (P20,000/person x 3 persons) 150,000 90,000 60,000
4. Monitoring and Evaluation/Exit Planning 60,000 60,000
Grand Total 15,459,470 3,040,000 1,875,000 565,000 9,979,470

• 6 Grow-out cages will be loaned out to POs. Capital Outlay will be non-interest bearing while
Working Capital will have a 12% interest p.a.

Page 20
Attachment 4. Integrated Grouper Project Corporation Cash Flow
MONTH 1 2 3 4 5 6 7 8
Cash Inflow:
Grant Fund 3,000,000.00 3,000,000.00
Cash Counterpart 712,000.00
Sales
Live Grouper
Fingerlings 168,000.00 168,000.00 168,000.00 336,000.00 168,000.00
Amortization from POs
Operating Capital
Grow-out Cage
Interest Income
Total Cash Inflow 3,712,000.00 168,000.00 168,000.00 168,000.00 3,336,000.00 168,000.00
Cash Outflow
Cost of Sales and Operation
Nursery Operation 108,000.00 294,300.00 428,600.00 398,900.00 238,900.00 212,600.00 398,900.00 238,900.00
Grow-out Operation 189,120.00 168,000.00 229,120.00 208,000.00 269,120.00 248,000.00 120,000.00
Lending Operation for PO
- Grow-out cages (0% int.) 189,120.00 189,120.00 189,120.00 189,120.00
- Working capital (12%p.a.) 368,000.00 368,000.00 368,000.00
Salaries and wages 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00
Admin Cost 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00
Repair and Maintenance
Total Cash Outflow 207,000.00 582,420.00 695,600.00 727,020.00 735,020.00 1,137,840.00 1,303,020.00 1,015,020.00
Netflow 3,505,000.00 (582,420.00) (527,600.00) (727,020.00) (567,020.00) (969,840.00) 2,032,980.00 (847,020.00)
Total Net Flow 3,505,000.00 2,922,580.00 2,394,980.00 1,667,960.00 1,100,940.00 131,100.00 2,164,080.00 1,317,060.00
Assumptions:
1) Sales/kilo live grouper = P350
2) Projection is limited to 21 mos
3) Interest rate = 12% pa
4) 5 nurseries, 4 corp-run grow-out cages, 6 PO-managed grow-out cages

Page 21
 MONTH 9 10 11 12 13 14 15 16
Cash Inflow:
Grant Fund 300,000.00
Cash Counterpart
Sales
Live Grouper 560,000.00 560,000.00 - 560,000.00 560,000.00
Fingerlings 168,000.00 336,000.00 168,000.00 336,000.00 168,000.00 168,000.00 336,000.00 168,000.00
Amortization from POs
Operating Capital 368,000.00 368,000.00 368,000.00 368,000.00 368,000.00
Grow-out Cage 63,040.00 63,040.00 63,040.00 63,040.00 63,040.00
Interest Income 22,080.00 22,080.00 22,080.00 22,080.00 22,080.00
Total Cash Inflow 728,000.00 336,000.00 728,000.00 789,120.00 1,181,120.00 621,120.00 1,089,120.00 1,181,120.00
Cash Outflow
Cost of Sales and Operation
Nursery Operation 26,300.00 372,600.00 238,900.00 212,600.00 398,900.00 238,900.00 212,600.00 398,900.00
Grow-out Operation 269,120.00 248,000.00 80,000.00 416,000.00 120,000.00 288,000.00 160,000.00 120,000.00
Lending Operation for PO -
- Grow-out cages (0% int.) 189,120.00 189,120.00
- Working capital (12%p.a.) 368,000.00 368,000.00 368,000.00 368,000.00 736,000.00 368,000.00
Salaries and wages 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00
Admin Cost 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00
Repair and Maintenance 36,000.00 99,040.00 72,000.00 63,040.00
Total Cash Outflow 951,540.00 1,276,720.00 785,900.00 763,600.00 1,084,940.00 697,900.00 1,270,640.00 985,900.00
Netflow (223,540.00) (940,720.00) (57,900.00) 25,520.00 96,180.00 (76,780.00) (181,520.00) 195,220.00
Total Net Flow 1,093,520.00 152,800.00 94,900.00 120,420.00 216,600.00 139,820.00 (41,700.00) 153,520.00

Page 22
 MONTH 17 18 19 20 21
Cash Inflow:
Grant Fund
Cash Counterpart
Sales
Live Grouper 1,120,000.00 560,000.00
Fingerlings 168,000.00 336,000.00 336,000.00 168,000.00 168,000.00
Amortization from POs
Operating Capital 368,000.00 368,000.00 736,000.00
Grow-out Cage 63,040.00 63,040.00 126,080.00
Interest Income 22,080.00 22,080.00 44,160.00
Total Cash Inflow 621,120.00 1,456,000.00 789,120.00 728,000.00 1,074,240.00
Cash Outflow
Cost of Sales and Operation
Nursery Operation 238,900.00 212,600.00 212,600.00 398,900.00 238,900.00
Grow-out Operation 120,000.00 208,000.00 416,000.00 120,000.00 288,000.00
Lending Operation for PO
- Grow-out cages (0% int.)
- Working capital (12%p.a.) 368,000.00 368,000.00 368,000.00
Salaries and wages 34,000.00 34,000.00 34,000.00 34,000.00 34,000.00
Admin Cost 65,000.00 65,000.00 65,000.00 65,000.00 65,000.00
Repair and Maintenance 63,040.00 63,040.00
Total Cash Outflow 888,940.00 887,600.00 727,600.00 1,048,940.00 625,900.00
Netflow (267,820.00) 568,400.00 61,520.00 (320,940.00) 448,340.00
Total Net Flow (114,300.00) 454,100.00 515,620.00 194,680.00 643,020.00

Page 23
Attachment 5. Integrated Grouper Project Peoples Organization Cash Flow

MONTH 1 2 3 4 5 6 7
Cash Inflow:
Loan Proceeds 557,120.00
Sales
Total Cash Inflow 557,120.00 - - - - - -

Cash Outflow: Cost of Sales and Operation

Floating Guard House 25,000.00
Pumpboat 65,000.00
Grow-out Cage 99,120.00
Fingerlings/Fry 168,000.00
Feeds 26,666.67 26,666.67 26,666.67 26,666.67 26,666.67 26,666.67
Labor 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
Freight, handling and marketing
Amortizations
Grow-out Cage, Pump Boat, Guard House
Loan Principal
Interest expense
Total Cash Outflow 189,120.00 199,666.67 31,666.67 31,666.67 31,666.67 31,666.67 31,666.67

Netflow 368,000.00 (199,666.67) (31,666.67) (31,666.67) (31,666.67) (31,666.67) (31,666.67)

Total Net Flow 368,000.00 168,333.33 136,666.67 105,000.00 73,333.33 41,666.67 10,000.00
Assumptions:
1) Sales per kilo of live grouper = P350
2) Projection is limited to 2 Production Cycles
3) Interest rate = 12% pa

Page 24
 MONTH 8 9 10 11 12 13 14 15
Cash Inflow:
Loan Proceeds 368,000.00
Sales 560,000.00 560,000.00
Total Cash Inflow 560,000.00 368,000.00 - - - - - 560,000.00

Cash Outflow: Cost of Sales and Operation

Floating Guard House
Pumpboat
Grow-out Cage
Fingerlings/Fry 168,000.00
Feeds 26,666.67 26,666.67 26,666.67 26,666.67 26,666.67 26,666.67
Labor 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00 5,000.00
Freight, handling and marketing 10,000.00 10,000.00
Amortizations
Grow-out Cage, Pump Boat, Guard House 63,040.00 63,040.00
Loan Principal 368,000.00 368,000.00
Interest expense 22,080.00 22,080.00
Total Cash Outflow 463,120.00 199,666.67 31,666.67 31,666.67 31,666.67 31,666.67 31,666.67 463,120.00

Netflow 96,880.00 168,333.33 (31,666.67) (31,666.67) (31,666.67) (31,666.67) (31,666.67) 96,880.00

Total Net Flow 106,880.00 275,213.33 243,546.67 211,880.00 180,213.33 148,546.67 116,880.00 213,760.00

Page 25
Appendix 6a. SEAFDEC Facilitation Activities

Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
1. Socio-Economic Survey
2. Site Selection
3. Cage construction
4. Training (3 sessions)
5. Project evaluation
a. Technical
b. Financial
c. Socioeconomic
6. Deployment of SEAFDEC staff
a. Full-time Technician (12 mons)
b. Visiting experts (54 mandays)

Page 26
Appendix 6b. Season Long Training on Grouper Culture

Expense Item: Total Cost

Phase I. Nursery cage culture
Duration: 4 days
1. Airfares(Iloilo-Cebu); Boatfares (Cebu-Ozamis) of resource persons (round
trip); 6 persons x P6000 36,000.00
2. Per diem of resource persons; 6 x P1290/day x 6days 46,440.00
3. Transportation and driver's per diem (TMS- Iloilo Airport-TMS) 2,000.00
Sub-total 84,440.00
Phase 2: A. Hands-on: Stock sampling; cage maintenance; & harvesting of
fingerlings
B. Grow-out cage culture, feed formulation & feeding; fish health mgt.
Duration: 5 days
1. Airfares(Iloilo-Cebu); Boatfares (Cebu-Ozamis) of resource persons (round
trip); 3 persons x P6000 18,000.00
2. Per diem of resource persons; 3 x P1290/day x 7 days 27,090.00
3. Transportation and driver's per diem (TMS- Iloilo Airport-TMS) 2,000.00
Sub-total 47,090.00
Phase 3: Economics, business planning & management; Hands-on : Harvest &
Post-harvest handling
Duration: 4 days
1. Airfares(Iloilo-Cebu); Boatfares (Cebu-Ozamis) of resource persons (round
trip); 3 persons x P6000 18,000.00
2. Per diem of resource persons; 3 x P1290/day x 6 days 23,220.00
3. Transportation and driver's per diem (TMS- Iloilo Airport-TMS) 2,000.00
Sub-total 43,220.00
Grand Total 174,750.00
Administrative Cost for SEAFDEC 38,000.00

Page 27
Appendix 6c. Details on Cost of Resource Persons

Particular Year 1 Year 2

A. Project
Orientation/Coordination Qty Amount Total Qty Amount Total
Round-trip fares (plane
& boat) 5 6,000.00 30,000.00 5 6,000.00 30,000.00
Per diem - 3 days/trip
for 4 trips) 12 1,290.00 15,480.00 12 1,290.00 15,480.00

Total 45,480.00 45,480.00

B. Farm demonstration
Round-trip fares (plane
and boat) 18 6,000.00 108,000.00 16 6,000.00 96,000.00

Per diem - 3 days/trip 54 1,290.00 69,660.00 48 1,290.00 61,920.00

Total 177,660.00 157,920.00

C. Staff Cost
Resource Person
(Scientists) 44 1,500.00 66,000.00 32 1,500.00 48,000.00

Full-time technician 12 10,000.00 120,000.00

Total 343,140.00 363,840.00

Page 28
Appendix 6d. Total SEAFDEC TA Budget

Budget Item PACAP Grant

(15 months)
1. Staff cost
Honorarium Scientist 44 person-days @ P1500/day = 66,000.00
1500x70 (see Farmdemo sheet)
Technical Assistant (full-time for one year (see Farmdemo 120,000.00
sheet)
Honorarium Lecturers (See Training Sheet) 38,000.00
2. Expendable supplies 12,000.00
3. Local travel (see below)
a) Season long training course (3 Phases) (see Training 174,750.00
Sheet)
b) Farm demonstration and participatory training (see 177,660.00
Farmdemo Sheet)
c. Project Orientation and Coordination (Quarterly for 2 years
- (see Farmdemo-Coordination Sheet) 45,480.00
Sub-Total 633,890.00
4. Other – contingencies, administration (15%) 95,080.00
Total 728,970.00

Page 29