I. THE PROBLEM WITH FISHERIES: THEORY AND MANAGEMENT OPTIONS 1.1 Introduction

The management of fisheries is the classic natural resource problem. It captures all the beauties of using resource economic concepts and principles to explain the cause of the ‘fishery problem’ around the world. At the same time the 'fishery problem' presents the frustrations and despair of designing policies to manage natural resources given the complex of variables involved, the apparent rational behaviour of stakeholders and the multitude of management objectives. In light of changing circumstances, values and information, it is as J.F.Kennedy stated, "a problem each generation has to deal with anew".

In this paper I am not going to present you with definitive answers to the ‘fishery problem’. The reasons should be obvious, since there is no single answer that fits all situations. How we manage a fishery depends on how much we know about it (its biological characteristics), on the cultural and institutional situation (including technological and social characteristics) of a country and on the objectives we want to pursue. What I want to do is talk about the issues and experiences of others countries (but especially NZ) in dealing, as J.F.K said, with "the raiders and with the scramble to use the [fishing] resource.

1.2 The State of the World fisheries

The Economist magazine in 1994 wrote "overfishing and pollution are exhausting the seas. The decline will be reversed only if governments stop subsidies to fishing fleets, police their waters well, and, hardest of all, persuade fishermen to trust them" (The Economist, 1994).

FAO statistics show the increase in world catch has nearly come to a standstill. World marine fisheries reached 87.1 million tonnes in 1996, but the rate of increase over 1995/1996 was only 0.6 percent per year. Marine capture fisheries account for more than 90% of world capture fisheries production, with the remainder coming from inland water (FAO, 1999). Almost all of the 200 fisheries monitored by the FAO are fully exploited. One in three is depleted or heavily over-exploited, almost all in the developed countries (The Economist, 1994). This stagnating/declining trend in coastal fisheries production observed in much of South and Southeast Asia, is expected to continue as the maximum sustainable yield has been reached or exceeded in the major nearshore fishing areas (Ablaza-Baluyut, 1995). This is of great concern, since we are talking about a fishery which represents nearly 27 percent of the global catch and which employs over 10 million people.

Overfishing is not the only threat to the world’s fisheries, although it is the most severe. Development and pollution are also reducing stocks. The loss of habitat for fish spawning, such as the loss of estuaries and mangrove forests and changing water quality, through increasing salinity of estuaries and pollution from effluent from industry and farmland, affect the growth of young fish and the productivity of fisheries.

As The Economist article, quoted earlier states, ‘it would be wrong, however, to think that "wild’ fish matters only to fishermen." (The Economist, 1994: p24). The decreasing supply and rising prices of fish have had major economic and social consequences. Fish is an important source of income and protein in many countries, especially for the poor. As over-fishing spreads to the developing world, greater numbers of people will be affected in terms of sources of livelihood and nutrition.

While all this has been recognised in the developed world for a long time, today, after nearly 18 years of management, overfishing is worse than ever. Too often, politicians have been reluctant to conserve stocks, for fear of reducing fishers’ income, and managers have been unwilling to follow scientists’ advice. When countries have banned unregulated foreign fleets from their exclusive zones, domestic fleets have expanded to take their place (The Economist, 1994)

1.3 Why manage fishery resources?

Commercial fishing has been aptly described as an industry always in a state of short-run disequilibrium. The changes in supply conditions, reflecting primarily very large changes in the size of spawning groups recruited successively to a commercial fishery, make it extraordinarily difficult to plan fishing operations as a more conventional business operation would. (Crutchfield, 1982. 17). Empirical observations suggests that wherever one looks around the world, this extraordinary difficulty is shown in mature fisheries which show the same depressing patterns, a declining productivity, low returns to all factors of production, and - all too frequently - physical depletion or even extinction of the resource itself.

The analytical reasons for fishery management are that under common property or open-access conditions, the vital link between the level of today’s harvest and the availability of fish in the future is hopelessly ruptured. No individual fisher or group of fishers can control the current rate of harvesting if the fishery is open to any new entrant. Even though the fishers may be well aware that by catching less today future increases will be large enough to make it worth their while to ‘invest in the stock", they also know that any curtailment of current catch simply results in an increase for someone else. Even if all fishermen, actual and potential, were well aware of the fact that additional fishing effort would actually reduce the total catch, it would still pay new entrants to build vessels and enter the race if prices and costs make the potential return sufficiently attractive (Crutchfield, 1982).

Thus, both theory and a long series of industry studies lead to the disheartening conclusion that unlimited entry to a marine fishery will inevitably result in excessive quantities of capital and labour, over-exploitation of the resource, and, in the case of very attractive fish stocks, biological depletion to varying degrees. This, inevitable failure of the system is made worse by the varying availability of fish from year to year. During years of high catches or high prices (or both) new vessels will enter the industry, during the inevitable periods of declining catches and / or low price, fishers will continue to operate their gear as long as out-of pocket expenses can be covered since there is little or nothing one can do with a fishing vessel except fish. The problem is further accentuated by the widespread tendency toward cultural and economic immobility of low-income fishers in scattered fishing communities.

We need to remember however, that this is not happening because fishers are foolish. Their behaviour is rational given the signals they face. Like hunters, fishers will try to take what they can when they can, before anyone else catches it. Conserving fish stock makes no sense if the fisher has no right to the offspring. On the contrary, catching more fish today will increase income. Although there will be fewer fish next year, the cost will not be borne by the fisher alone and will be spread over the entire fleet. It is as William Emerson writes:

"The world’s press regularly carries warnings that over-fishing is emptying the seas of their most important commercial stock ..[and in case of the developing world an important source of livelihood]. Indeed, the economic signals arising from the institutional framework governing fishing encourage fishermen to act apparently logically but in defiance of their own long-term interests -with drastic effects on fish stocks. Radical overhaul appears to be the only solution." (Emerson, 1997, 34)

Management means therefore changing today the incentives that make fishers overfish. Fishery management can be seen as part of a process of re-establishing a socially rational way of exploiting fish stocks (Campbell, 1998)

1.4 Objectives of management

To manage a fishery, i.e. to stop it from being over-fished is a very general objective. Most management programmes translate this objective to maximum sustainable yield (MSY). Apart from the statistical problem of defining exactly what this might mean with respect to a particular fishery, it is not a meaningful goal even in a biological sense; and it becomes hopelessly inadequate if one views the fishery as a means of improving human well being. Even in the narrow sense of physical yield, the implicit assumptions that stock-yield-fishing effort relationships are completely stable over time and that exploitation is directed at single stocks violates what every fisher knows to be true. Maximising the yield from a given fish population leaves open the possibility that shifting fishing effort to a larger or more accessible stock could produce much larger catches. Put in this light, MSY always breaks down to MSY of commercially valuable species. But this simply means that the objective is not really maximisation of physical yield but an improperly specified economic goal. (Crutchfield, 1982:11).

Crutchfield (1982: 11) suggests the following broader set of objectives for fishery management:

1. protection of the productivity of the stocks
2. flexibility
3. correct level of catch
4. the right size (age) composition of the catch.
5. the right number and kind of fishing vessel/gear combinations
6. optimal fleet deployment

In short, in terms of resource economic jargon, the prime objective of fishery management should be to maximise the present value of the fishing operation, subject to rather severe constraints arising from the instability of the target populations and the cost and scantiness of timely data. This, as one will recognise, is an efficiency objective as it talks solely about the efficient use of a resource. Efficiency is a necessary but not sufficient condition for overall social well-being. To maximise social well-being, we are, as with all natural resource management problems, also concerned that income and employment opportunities are distributed in a reasonably equitable manner, this especially so in the developing world where such a large proportion of the total population is dependent for its livelihood on the fishery resource. In the Philippines, for example, this has been spelt out in the Constitution which states:

Therefore in designing our policies and choosing our management programme these objectives should play a major part. However, we always have to be careful that non-efficiency objectives do not become concealed unemployment schemes or welfare handout, at a very high cost to society.

1.5 Property Right Regimes for Common Pool Resources

To understand and resolve the problems associated with common-pool resources of which fisheries are a classical example, one needs to first of all understand the role that property right regimes do and can play.

Property rights are the rules and norms sanctioned by society with respect to use of ‘things’, or as Randall writes, they "specify both the proper relationships among people with respect to the use of things and the penalties for violating those proper relationships" (Randall, 1987, 157). A way to classify property rights is in terms of their characteristics that include exclusivity, transferability, duration, quality of title and divisibility (Devlin and Grafton, 1998). For common-pool resources (CPRs), where yields are rivalrous and exclusion is difficult, a complete absence of property rights, called free or open access, leads to the dissipation of rents - the so-called "Tragedy of the Commons".

To move from the open-access situation to a situation in which the fishery is management, we need to adopt an institutional framework in which this management can take place. Institutional frameworks are based on how property rights are assigned and management. We can recognise three types of property right regimes, they are private, community based and state. These types are summarised in the table below and described further in the following sections.

Source: (Burger and Gochfeld, 1998, 9)

With private right based property regimes, market prices are used for access and harvesting rights over the flow or yield from CPRs to provide signals and incentives to resource users that reflect the scarcity values of resources. Private right-based regimes reflect a decentralised approach, which endeavours to create exclusive, private and transferable rights over the flow (and where possible, the stock) of CPRs. Private ownership permits decentralised decision-making that allows individuals to optimise their use of inputs and outputs at the margin.

Implementation of a quota system however, brings with it a redistribution of wealth and income, which can have major impact on those involved in the industry. A survey to discover the impact of the 1995 Individual Fishing Quota management plan for the Alaska Halibut fisheries, concluded the following "..management policies that may increase net benefits of fisheries do not necessarily make all fishermen - or even a majority of fishermen - better off. This can contribute to strikingly different perceptions of the same management policies among different fishermen." (Knapp, 1997, p. 245).

The success of private rights presupposes that individuals without a property right can be excluded from the CPR at a cost less than the benefits of privatisation. This is an important consideration since exclusion costs for a CPR can, in contrast to private goods, be very high. Enforcement costs are also likely to be high where the new distribution of property rights tends to hurt the former users and the new structure is somehow seen to be ‘unfair’ by users. Or as Baland and Platteau (1996) note: "..the costs of enforcing exclusive property rights partly depend on the way distributed of wealth is affected and also on the perceived legitimacy of the new legal system and authorities by the dispossessed former users." (page 39).

It also needs to be recognised that natural resources may generate benefits over and above those, which can be appropriated by individuals, and thus private decisions may be sub-optimal. Examples of such values are amenity and existence values.

Community right-based property regimes over CPRs have existed for thousands of years and help manage resources such as irrigation systems, grazing lands, forests, groundwater and fisheries. Many case studies have been documented (Baland and Platteau, 1996, Lane, 1998, Ostrom, 1990). These studies, and others, provide a rich source of information that community rights can help resource users "…avoid the conflict, uncertainty, and perceived unfairness of a poorly solved assignment problem, the overinvestment in appropriation efforts involved in adequately solved rent-dissipation problem, or the deterioration or destruction of the resource involved…" (Ostrom, 1990, p.56).

If community rights are to be successful in addressing common-pool problems, the collective interest must be accounted for in the decision-making and behaviour of resource users. Ostrom (1990) identifies the conditions for enduring community rights:

• well-defined geographical boundaries for the resource,
• rules of access and withdrawal that are accepted by the community and which are tailored to the resource and institutions,
• monitoring and enforcement rules with graduated sanctions against transgressors,
• resolution mechanisms for disputes among members
• participation of most resource users in changes of collective rules, and,
• recognition by outside authorities of the collective rights.

Baland and Plateau (1996) from their study of CPR management around the world draw the following conclusion regarding the factors that will help bring about successful CPR management, they are:

• in situations involving conservation, external provision of appropriate economic incentives is required. When resource users are hard-pressed by survival constraints and the rehabilitation of the CPR entails a long gestation period, people need help to participate and survive;
• collective action is more successful with small user groups.
• co-operation is enhanced when small groups live close to well-delineated CPRs and when they are able to lay down access and management rules in their own way.
• large groups may sometimes succeed in carrying out CPR-management schemes. This tends to arise when a large group is made more like a small group because members share common-norms possibly enforced by well-recognised authority, or because they are confronted by a common challenge arising from without,
• Homogeneous groups are often more conducive to collective action than heterogeneous groups.
• past experience of successful collective action is an important ‘social capital’
• Good leaders are essential to perform several critical functions: to help people become aware of the real challenges confronting them; to convince them that they can ultimately benefit from concerted action; to show to others the good example; to mobilize a sufficient number of them for enterprises requiring co-ordinated efforts and to ensure impartiality and fairness in the designing and enforcing of rules and sanction mechanisms. (Baland and Platteau, 1996, pgs 344-345).

Community rights regimes must be flexible and able to adjust with changing institutions, environment and technologies. They also need support from the state to ensure their exclusivity, or as Bruce (1996) states, "Community resource management is often undermined when adequate legal bases have not been provided for common property."

State-based property rights cover a range of structures where the rights are vested in a central-governing authority and the resource users are obliged to follow its management rules. State based rights include regimes where users only have a limited right of access to examples where users have withdrawal rights and may even participate in management decisions.

The view of the state as a sole-owner suggests that, by vesting it with the direct authority over CPRs, the state can overcome (or at least mitigate) the coordination failure inherent in their exploitation. As a sole-owner the state can take into consideration non-market values and also reap economies of size in the processing of information, monitoring and enforcement and other management costs.

These theoretical advantages of the state as a large owner have often not been achieved in reality. Nationalisation by the state of the fishing resource has led to the overriding of community rights and unwillingness to participate, or as Hunt (1998) write about the situation in the Pacific islands:

The state often has also not been able to finance the monitoring and enforcement needed and the result has been a continuing degradation of the resource. Finally, political interference and the presence of corruption have led to few examples where state ownership has led to a successful management regime of a fishery.

Round the world we see various approaches to fishery management. In the developed world there has been a trend to private rights with at the same time greater recognition of community rights and non-market values. Fisheries, which have introduced market mechanisms, have generally fared well, however in the developing world we also have seen successful examples of community based fishery management schemes.

1.6 The How of Fishery Management

In its 1987 report on the environment, "Our Common Future", the World Commission on Environment and Development (the Brundtland Commission) identified three sets of measures which could be employed to improve the way in which we use our environment:

1. regulations (output and input controls)
2. taxes and charges, and
3. property rights.

Output controls set annual quotas on harvest volumes; once the quota has been reached, the fishery is closed for the year. This results normally in a shortening of the fishing season with an extreme example being the British Columbia herring roe fishery which has had a season as short as 15 minutes. What happened here is that although output was controlled, input was not and more and more fishers entered the industry and technology was improved, all to be ‘the’ fisher who caught most of the quota.

Input controls limit the number of vessels that are allowed to fish (by requiring a licence, for example) or other factors of production (size of boat, nets, etc.). Together with this there are also technical measures, which protect undersized fish, or spawning areas, including the specification of minimum mesh sizes which allow smaller fish to escape and grow to a commercial size.

Most of the above measures fail to achieve their stated objectives. From a biological perspective, the state of fish stock has generally not improved following the introduction of such measures; harvest volumes of some species (Atlantic cod and halibut, for example) may, indeed, be reaching a point which recovery is impossible.

Regulations on total catch, effort or catchability increase the unit cost of effort or harvest. The effect of an increase in unit cost of effort will result in fishing costs exceeding the value of harvest and a reduction in fishing. While a lower sustained equilibrium is achieved it comes at a high cost and there are no rents. The fish is caught in an inefficient way.

While it may be fashionable to reject direct regulation as a means of managing a fishery, when enforcement of alternative options (such a property rights systems) is difficult, regulations on when and where fish can be taken may be the cost-effective way of ensuring that the tonne of fish does not consist of juvenile or pre-spawning fish (Campbell, 1998, 25).

Taxes and charges are not a popular management tool (neither with politician or fishers). Taxes on catch or effort are difficult to enforce in a fishery in which there are many ports and points of sale. The New Zealand ITQ system, to be discussed below, got around this problem by assuming for tax purposes that each vessel catches its quota; a royalty per tonne of quota is levied whether or not the fish have actually been caught

The most common type of tax on the fishing industry is a negative tax - a subsidy.

The operation of the private market system fails to result in an efficient allocation of resource to the fishery because of the absence of individual property rights to the fish stock. A direct approach to fishery management is to attempt to create a system of property rights so that the fishery can be allowed to regulate itself by responding to market signals. Two property rights systems of management are in common use; limited entry and individual vessel quotas. A limited entry system changes the property rights structure of the fishery from open-access to common property; only certain vessels are allowed to participate in the fishery and they hold this right in common. Individual vessel quotas, on the other hand, are more similar to individual property rights.

In what follows below, and individual property rights system will be discussed in detail: i.e. how the system operates, how it was implemented, problems encountered, and the current situation.

Keeping in mind the reasons for overfishing (property rights and wrong signals) and the broad set of objectives for management, economic efficiency, biological protection, employment and livelihood, and uncertainty and equity, we will now look at how New Zealand has dealt with all of these.

Today, every textbook on resource and environmental economics has the NZ experience as a case study. Has its fishery management plan really solved all the problems? We will see.

2.1 Fishing till 1982. The boom and bust period

The NZ fishing experience is very much like the experience of other developed countries, a ‘boom’ and ‘bust’ industry, at times constrained and at other times encouraged by the Government. Already in the early 1900’s signs of overfishing were apparent and seasonal closures for all methods of fishing were introduced and Danish seining was prohibited because it was deemed to be excessively efficient. Policies differed for different regions (fishing areas) of the country.

Licensing was introduced in 1936 for the catching, wholesaling and retailing sectors. Further action was taken in 1937 following renewed concern about overfishing (the catch level at that time was 30,000 tonnes, in 1995 the total catch was 654,000 tonnes of fish and other sea food products!).

In 1945 a one-man licensing authority was established which introduced minimum fish sizes, gear restrictions, area closures and non-transferable licences. These licences specified one port for landing fish. Although the sale of licences was technically illegal, the fishing industry appeared to have had little difficulty in finding ways around the law. Old fishermen tell stories of rotten-hulled dingies with a licence number clearly painted on the side being sold for thousands of pounds.

By 1955 the restriction to land into only one port became impractical. Larger vessels with a greater fishing range blurred the boundaries between the different regions. This restriction was removed but limited licensing remained. Enthusiasm for developing the fishing industry and its export potential culminated in open access fishing being introduced in 1963 along with the formation of the Fishing Industry Board. However, a raft of controls was introduced for the Foveaux Strait Oyster Fishery to prevent the explosion of fishing effort. In contrast however, the scallop fishery was not controlled and collapsed within 15 years of having an open access policy. Today this is also a controlled fishery.

In 1965 New Zealand’s fishing zone was extended to 12 miles. Foreign licensed vessels were phased out of this zone and only allowed to operate more than 12 miles offshore by 1970. This changed in 1978 when the 200 miles Exclusive Economic zone was put into effect. Up to now fishing effort has been confined mainly to a depth of approximately 200 metres.

With the declaration of the EEZ, the future looked very promising indeed. NZ controlled the seventh largest EEZ in the world. Before 1978 foreign vessels, mainly Russia, Korea, and Japan, exploited the stocks around New Zealand. Now, with the declaration of the EEZ, the government was suddenly faced with having to develop a plan to manage resources in a very large and unfamiliar territory. The Government from 1978-1984 in the form of low interest and suspensory loans and duty free importation of new and near-new vessels encouraged the industry to expand. The industry did so through expansion of the number of NZ fishers and firms and through co-operative ventures with foreign countries. While the intention was to base fisheries development on the offshore resources, the fishing effort in the prime inshore fisheries also expanded rapidly. Export earnings increased rapidly but so did a renewed concern about over fishing. In fact, by the early 1980s, overfishing of species in these zones and overcapitalisation within the inshore fleets had become a problem.

2.2 The start of management by Individual Transferable Quotas (ITQs)

In light of the concern about overfishing and sustainable fish stocks, the Government decided to start managing the deep-sea fishery on a new basis. In 1983, a limited individual transferable quota system was established to protect the deepwater trawl fishery. Because this fishery was newly developed, allocating the quotas proved relatively easy. Total allowable catches for the seven basic species were divided into individual transferable quotas and were allocated to existing firms on the basis of investment in harvesting equipment, investment in onshore production equipment, and recent onshore production. The rights to harvest were denominated in terms of a specific amount of fish, but were only granted for a 10-year period. In 1985 the government changed this to quotas in perpetuity.

Also in that year, a new Fisheries Act was passed which introduced the concept of fisheries management plans. For the first time in New Zealand’s fishing history recognition was given not only to biological objectives but also to the concept of optimum sustainable yield to maximise the economic rent.

At the same time that the deep-sea fishery policy was being implemented, the inshore fishery began to fall on hard times. Too many participants were chasing fewer fish. Some particularly desirable fish species were being seriously overfished (e.g. snapper). While the need to reduce the amount of pressure being put on the population was rather obvious, how to accomplish that reduction was not at all obvious. Although it was relatively easy to prevent new fishermen from entering the fisheries, it was harder to figure out how to reduce the pressures from those who had been fishing in the area for years or even decades. It was estimated that in 1984, overcapitalisation in the areas where inshore fisheries were most concentrated, had reached about 44% of the existing fishing capacity (FAO, 1999).

The answer was similar to the deepwater industry, a rent-orientated management system based on individual transferable quotas in perpetuity. However, the inshore fishery was not a new fishery fished by only a few large firms. In this fishery there were many small-scale fishers, and part-time and recreational fishers. The government decided not to give quotas to part-time and recreational fishers. Recreational and part-time fishers continued to have access to the sea but there was a bag limit for major species.

Before embarking on the quota scheme for the inshore fisheries, the government went through a long consultative process with all fishing groups up and down NZ. They got the support from the fishers since everybody was well aware of the dangers and consequences of the open slather situation. Quotas were ‘grandfathered’ on the basis of historical catch (1982-1984) and resource rentals were charged. The resource rental needed to be paid irrespective if the quota was caught in any year or not. An Appeal Court was set up for fishers to appeal their quota, and many appeals were granted. The result was that the sum total of the ITQs was high, for some species much higher than the estimated sustainable yield.

The resource rental was used by the Govt to buy back quota so as to bring the total quota level back to a sustainable catch level (TAC or Total Allowable Catch). Selling quotas was voluntary and the Government held several tendering rounds for fishers to offer their quotas to Government at a price they were willing to sell them. The Government ultimately spent $NZ 45 million (present value) to buy out 15,800 tonnes of fishers' case histories (FAO,1999).

The main objectives of the ITQ system are presented below:

1) to achieve a level of catch which maximises the benefit to the nation as a whole while ensuring a sustainable fishery,

2) to achieve the optimum number and configuration of fishers, boats and gear to minimise the cost of taking any given catch,

3) to minimise the implementation and enforcement costs. Before introduction of the ITQ system the enforcement method was a standard game warden approach, apprehending lawbreakers and discouraging illegal behaviour, which was costly. The new role of the authorities is not so much policing but monitoring following product flow from vessels to retailers. Enforcement activity now takes place on land rather than at sea, which is more cost effective and can be carried out by officials who are more auditors than game wardens.

(Kula, 1994: 73)

ITQ management was established for 29 species, including 21 inshore and eight deepwater species. Other species have been included since 1986, and there are now 41 species managed under ITQs. These represent about 85 percent of the total commercial catch from New Zealand's EEZ. The Fisheries Act 1996 provides for additional commercial species to be managed using ITQs.

The introduction of ITQs, together with the financial assistance to restructuring, was designed to reduce fishing capacity. With the adjustment retirement of 15, 800 tonnes of catch came also a dramatic reduction in the size of the fleet. The number of vessels dropped by 22 percent between 1983/84 and 1986/87 and there was a further 53 percent reduction between 1998/87 and 1994/95. As this rationalisation primarily occurred in the country's inshore fisheries, one of its effects was to redirect investment into deep-water fisheries.

While the achievements describes above look good, it has been said that fisheries are exceptionally vulnerable to Murphy’s Law: "if anything can go wrong with a new fisheries management scheme…it will." What according to fishery economic theory could go wrong? Copes (1986) gives fourteen area which are:

1. Quota Busting: catching a larger amount than the individual quota allows.
2. Data Fouling: evasive reporting by fishers by gives fishery managers a distorted view of what is being caught
3. Residual Catch Management. Different fish stocks call for distinctly different techniques and regulation in fishery management. In most the TAC must be determined and the escapement becomes the residual, but with some the escapement becomes the target and he catch the residual (e.g Northeast Pacific salmon).
4. Unstable Stocks. Determining TAC becomes a hazardous undertaking. Only tentative TACs can be set at the beginning of the season and adjust these during the season as information comes in.
5. Short lived species. In some fisheries there is not observable relationship between size of catch and subsequent recruitment. Happens with species of high fecundity. Here setting quotas would be irrational, and all of the fishing capacity should be utilised to secure quickly a catch that will otherwise be lost to natural mortality.
6. Flash Fisheries. With specialised fisheries, as above, a "race for the fish" is a necessity. There is not time to fuss with quotas.
7. Real time Management. When a species need to be continuously monitored and where harvesting is on the basis of quick-response time and area closures or gear restrictions. Also here a quota system would not be suitable.
8. High-grading. Keep only the best quality fish and discard the rest. As the mortality of discarded fish is high this leads to a lot of waste. Discarded fish are also not recorded.
9. Multi-species Fisheries. The by-catch problem.
10. Seasonal Variations. This may lead to concentration of effort and some capital stuffing.
11. Spatial Distribution of Effort. If species are spatially unevenly distributed we get concentration of effort which may lead to over exploitation.
12. TAC setting. Most difficult given scientific uncertainty.
13. Transitional Gains Trap. The first generation after the introduction of ITQ gains.
14. Industry Acceptance. Common property conditions tend to make fishers a particularly individualistic and competitive breed. They tend to be relatively risk-prone, and most affected by the ‘prospector’s syndrome". Having private property rights imposed on them is a major change and requires a major psychological shift. Acceptance by the industry is crucial for success.

2.3 The period 1986-1996

All new management systems have teething problems and this more so if your programme is among the first of its kind in the world. Of the 14 problem areas mentioned above, NZ suffered from many of them and had to learn to deal with them. Quota busting was one of these. However, NZ has an advantage that there are only a limited number of ports where boats can off-load, and hence a reasonable check can be maintained. The penalties for quote busting were high, immediate confiscation of boat and gear. At the same time to stop ‘black marketing’ of fish, a computerised paper trail was set up to accompany all fish entered and sold in shops in New Zealand. Also the by-catch and high grading problems needed time to be resolved.

Besides the issues mentioned above, several others needed to be dealt with, they were customary fishing rights, absolute quotes, recreational and part-time fishers and non-quota species. These four issues needed to be resolved and this happened as follows:

1. As traditional Maori fishing rights were protected under the Treaty of Waitangi, and no quotas were given to Maori in the initial allocation of quotas, the government helped the Maori people to buy one of the larger existing fishing companies, which gave the Maori people 20% of the existing quotas. Of any new quotas, the Maori people would also automatically get 20%.
2. The initial quotas were defined as absolute quantities and as new estimates about the total allowable catch (TAC) were revised down, Government needed to buy back many more ITQs then expected. The cost of buying back quotas became too high, and the Government, after much argumentation reached a compromise deal with the fishing industry. Quotas were to be changed from an absolute amount (you can catch so many tonnes of species A) to a proportional quota (e.g. you can catch .1% of the total allowable catch of species A this year in management area 2). The catch allowed in each year would now vary as the TAC, announced at the end of the previous year, was varied up or down. This change in property right from an absolute to a proportional right lowered the value of the quota and the fishers wanted compensation. They got this in terms of a moratorium for five years on resource rental increases (a large increase had just been planned).
3. Recreational and part-time fishers were not given quotas in 1986. Control in the recreational fishery is in terms of bag limits (the amount a fisher can catch in one day). Over the years an uneasy situation has developed between commercial fishers and recreational fishers. In some management areas the Crown has reduced the TACC for commercial fishers and also the bag limit for recreational fishers. Recreational fishers have supported this move by the Crown and the commercial fishers have fought it in the courts. Commercial fishers think that the reason recreational fishers support a lowering of the TACC has nothing to do with conservation. They think that recreational fishers want to catch more fish each time they go out. They will only be able to do this if the commercial fishers catch less of the fish than they do at the moment. Recreational fishers in return accuse commercial fishers of fishing within the 12 mile coastal zone. The commercial fishing industry wants recreational fishers brought under the QMS. This however is highly unlikely because of high transaction costs. This issue has remained a problem and will be discussed further in the next section.
4. The allocation of the new quotas was first proposed to take place by a tendering process. However Government was on weak legal grounds as they had already promised the rights to those who has invested in developing this new species. Hence 60% of the new quotas were offered to those firms who had invested and they were required to pay a one-off rental, 20% went to the Maori people, and 20% offered on the free market (The Dominion, 23 March, 1993)

With some of these problems to some extent solved was the industry now at the beginning of a new golden era for fishing? The answer is yes and no. The industry over the period 1986-1996 increased significantly and is now New Zealand’s fifth largest export industry (a $2 billion dollar industry). At the same time however there are still problems that need be resolved.

At the bottom of some of these outstanding issues is the setting of the TAC. The TAC problem is a continuing running battle between industry and the government. While the fisheries scientists are continually reducing the TAC, the industry continually creates pressures to push the TAC up. The controversy is the result of not enough data. As Wilson write:

The issue is that on the one hand the recreational and small commercial fishers claim that catches are down which to them is a sign that the fisheries are overfished. On the other hand the large commercial fishers disagree. They claim that they will be the people who will suffer most if this were so. They are a billion-dollar industry employing 8500 people. If the fishery is wiped out, the industry will suffer most. Therefore, the industry has the greatest stake in perpetuating the fishery. In between are fishery scientist and the Ministry of Fisheries. It is as a Recreational Fishing Council spokesman said:

At the bottom of it all is that we really don’t know for sure how many fish there are and what the sustainable yield levels are. Research has been conducted but mainly on high value commercial stock. Right now, nobody knows with any degree of certainty, plus or minus 50 percent, what the sustainable catch levels for different species are. With high grading and dumping, the black market and research an imprecise science at the best of times, a lot of fish is unaccounted for.

As a final note on the implementation of the QMS system, the issue of enforcement (very relevant to Asian situations) is resolved in NZ using modern technology (which is becoming cheaper by the day). NZ is the fist country in the world to set up a satellite monitoring system to control where and when commercial fishing vessels can operate. The ‘spy in the sky’ known as the vessel monitoring system (VMS) was introduced in 1994. The VMS stipulates that all foreign vessels working inside our 200 miles EEZ, all NZ vessels longer than 28m and boats catching orange roughy, scampi, squid and tuna must carry automatic location communicators (ALCs). Signals sent from the vessels are picked up by satellites and beamed to the Ministry of Fisheries’ communications centre. Monitoring staff check to see if vessels are in prohibited areas and compare the information with what fishing companies are saying about where their vessels are operating. The system is working well and there has been widespread acceptance by government and the industry. The NZ airforce also contributes to surveillance, and the planes also can detect dumping at sea, illegal transhipments and area infringements should VMS malfunction. (The National Business Review, 1996).

2.4 The NZ-ITQ 1996 - today

In 1991 a review of the industry started which concluded with a new Fisheries Act of 1996 the implementation of which will take five year.

The overriding purpose of the Act is to achieve an eco-system based management approach. This will be achieved through measures which set a total allowable catch (TAC) which will ensure sustainable fish stock, through restrictions on fishing gear, and controls to limit the accidental death of protected marine species. The Act also introduces greater contestability for a wide range of services, previously done by the Ministry of Fisheries.

Following the passing of the 1996 Act, an internal management team of the Ministry of Fisheries began reviewing the costs and processes for implementing the Act. A range of estimates prepared showed that implementation was going to be enormously expensive.

A full review of the 1996 Act was conducted and the following findings were reported:

"If the Act is implemented in its current form it is highly likely that:

• the purpose of the Act - to provide for the use of fisheries resources while ensuring sustainability - would be undermined;
• significant compliance costs associated with administering the Act would be imposed on commercial fishers, and yet this cost cannot be justified by any additional cultural, social or environmental gains from the Act, and
• the fisheries management regime:
• would be highly centralised and inflexible
• would be contrary to Government’s decision to devolve the delivery of non-core government fisheries services to the fishing industry, and
• would remove incentives for all stakeholders to take a constructive role in the management of the national fisheries resource. (Fishing for the Future, 1998, internet)

The recommendations from the review can be briefly summarised as:

• devolve management responsibilities and purchasing of fisheries services by appropriate fisheries rightsholder groups. The concept of co-management is used here;
• simplify the QMS so that Government administrative costs and industry compliance cost are significantly less than they are now;
• specify and clarify the rights and responsibilities of all fisheries rightsholders;
• allow commercial, recreational and customary fishers to work together to innovatively manage their own fisheries in way that better reflect the day-to-day reality of fishing, while still meeting the principles and purposes of the Fisheries Act of 1996, and
• recognise environmental considerations and statutory obligations under the Treaty of Waitangi. (Fishing for the Future, 1998, internet).

Recommendations of this review are encapsulated in the Fisheries Amendment Bill 1998. This bill, although supported by the dominant fish quota owners, fish processing companies, by influential Ministry of Fisheries officials, the Minister and some other fishers, has many scientists, recreational fishers, Maori, environmental organisations and many small fishers deeply worried (Ecolink, 1999).

Although the bill is not law as yet, the Ministry is preparing for devolution of some of its "non-core" services. This latter terms is used to cover things like the operation of the system of tracking who catches what with what fishing effort, who owns the quota, who leases annual catch entitlements and who has what offsets.

There is considerable scope for self-policing in a fishery. As Runolfsson (internet) writes:

"Large numbers of fishers spend time on the water harvesting their catch. They can and will be enlisted in policing the resource. The incentive for self-policing follows directly from the ownership of quota. Although individuals profit if they exceed their quota (steal fish), it costs them if other quota owners do likewise. If everyone exceeds their quota, the fishery will be overfished, fishers income will fall, and the price of quota will fall. Fishermen themselves will, in time, protect their property rights just like landowners protect theirs." (Runolfsson, internet)

There is concern in NZ however, by a variety of groups, that devolution may place too much power in the hands of the big companies. This is partly countered by the fact that the Minister of Fisheries will retain the power of setting TACC. However with respect to that some groups feel that the marine ecology is poorly accounted for when calculating sustainable harvesting rates. Research literature show sustainable yield models have failed to predict past fisheries collapses. The answer to much of this is two fold, use a precautionary approach to setting TACs (i.e. an insurance policy) and do more research. Both have an opportunity costs (mainly to the industry and those who make a livelihood from fishing).

The 1996 Act also set out the way new quota species will be introduced, and it dealt with the by-catch issue The review calls for implications to both of approaches.

2.5 Has the QMS system be a success?

Perman et al (1999) write:

"the evidence of the ITQ system in operation suggests that, in comparison with other alternative management regimes that might have been implemented, it has been successful both as a conservation tool and in terms of reducing the size of the uneconomically large fleets. The ITQ system has not eliminated all problems, however, The fishing industry creates continuous pressure to push TAC levels upwards, and great uncertainty remains as to the levels at which the TAC can be set without jeopardising population numbers. The ITQ has failed to find a clear solution to the problems of bycatch - the netting of unwanted, untargeted species - and high grading - the discarding of less valuable species or smaller-sized fish, in order to maximise the value of quotas set in terms of fish quantities." (Perman, 1999: 241).

But, nobody really knows for sure if it is sustainable in the long-term. On the one hand, it clearly has brought order to an open-access situation, and today NZ has a very profitable and successful industry. Fishers have started to act like owners and not hunters. They are voluntarily helping to finance the policing of valuable inshore shellfisheries, for example. Trawlers are paying more attention to the quality of their fish, ensuring that those at the bottom of the nets are not accidentally pulped and so squeezing more revenue from each catch.

There is still a nagging concern about sustainable catch levels. There are some, within the industry and outside, who expect the industry to collapse in 4 or 5 years time, while the Ministry of Fisheries and scientists, although acknowledging the teething problem and the special situation of recreational fishers, are confident that the industry is in good shape, with a sound institutional management structure (with one single agency managing the whole fishery) and based on sustainability principles.

Late 1995, an international fishery management expert told a public seminar on World Fisheries Collapses: Lessons from New Zealand, that in terms of stock performance he could not think of a country in better shape, and awarded a B. He said that New Zealand stock assessment work was as good as anywhere, and in terms of allocating fishing resources through the commercial quota system, New Zealand was way ahead of most countries. The outstanding problem was allocation for amateurs. The recreational catch had to be "brought into the equation" as it would grow, increasing pressure on the commercial sector for popular species. An option was to buy commercial quota as required and set that aside for amateur fishing.(Dominion, 15 March, 1995) The question however, is who will pay?

2.6 Lessons learned

The main lesson is that effective regulation will always be difficult and expensive to put in place and that it will be resisted more often than not by fishermen themselves. Managing a fishery means bringing about a philosophical change in the mind of the fishers. The harsh lesson that has to be learned is that the age of unbounded ocean and open access rights is over and that instead of being hunters they need to be farmers. To persuade fishers of this is not going to be easy and calls for an approach that fully allows them to participate in the decision-making and through which central or local government gains their confidence. Without that, fishery management will go the path history as trodden, in which many management systems have been put into place, and nearly all have failed, since fishers felt left out of the decision making process and they didn’t feel that the problem was theirs.

Introducing any fishery management system will always be difficult, but there are a set of principles to will help to assure success:

1. Total catch must be controlled. Sustainability can only be achieved if total fish take is controlled in accordance which the fluctuating sustainable yield of the fishery.
2. Access to the fishery should be controlled. Catch control without access control leads to an inefficient situation with too much effort being applied to the fishery.
3. Decision making should be participatory (bottom-up). Without support from the stakeholders any scheme will fail. If the stakeholders see that the process of decision-making is participatory and all interests are considered, then they more likely will accept the outcome, even if it is not in their favour.
4. Research and monitoring are essential. Without sufficient knowledge of the fisheries, management is like "flying by the seat of one’s pants".
5. Development of a management system should take place in an integrated fashion considering all factors associated with or affected by the system.

In New Zealand this has to some extent be achieved. The objective was to create and efficient fishery and in the process of achieving this it was necessary to treat those who had to leave equitably. However, NZ is a unique country. Its fishery is relatively small, its population is rather homogeneous, decision-making was at the time of the decision very centralised and in the hands of a stable democratic government, and enforcement and monitoring was feasible. All those reasons made the experiment easier to design and police. However, as the latest developments have shown, it is easy for the "market tool" to become a costly and inflexible option.

As Runolfson writes, after a study of both the New Zealand and Icelandic implementation of QMSs, "The New Zealand experience teaches the importance of contestable management of fisheries through management companies formed by quota owners. The quota owners rather than taxpayers, pay the costs of management. Under a company structure, quota owners elect a management board, who in turn appoint a manager to run the fishery. The creation of ITQs is an improvement over standard approaches to fishing regulation, but prospects for more complete privatisation should not be ignored." (Runolfson, internet).

The NZ ITQ case is an ongoing experiment. As the discussion shows, the cost of management the fisheries has led to greater co-management of the fisheries and a greater amount of cost-recovery. It is hard to imagine that the NZ fishery could have achieved its current success without the introduction of the ITQ system. The experience of NZ reflects other experiences with ITQ and co-management elsewhere, or as the FAO review states: " In the developed countries, considerable experience has been built up in the use of alternative fisheries management methods to control fishing capacity. A consensus is emerging in favour of using ITQ management where practicable." (FAO review, 1999).

As you will see I placed a question mark behind the heading. Are there really any lessons that can be learned from the NZ experience? Let's first look at the situation.

The basic issue of the sustainability of the fishery resources is a central issue in many countries. Coastal resources are generally overfished by an overcrowded small-scale fishery sector, where catch rates, fish sizes and quality and, in some cases, fishers' incomes, are declining. At the same time the importance of the fisheries sector the Asian economy is widely acknowledged. Its significance lies in three main areas: 1) as a source of animal protein for human consumption, 2) as a source of employment, and 3) as a source of foreign exchange. Ten out of twenty top world fish producers are Asian, with China contributing about 10 million tons of fish, or 11.9% of the total world catch. These ten countries together account for almost 43% of the world’s fish catch. Ten percent is produced by Southeast Asian countries, including Thailand, Indonesia, the Philippines, and Vietnam (FAO, 1995).

However, as Mustapha and Kuperan (1997) show, fishing capacity has continued to increase. "It appears that Asia may be making the same mistakes Europe, USSR, and North America have made with regard to overcapitalisation in the fisheries. Unless the commercial fishing industry and governments that regulate fishing capacity are prepared to reduce capacity and develop a system of sustainable management for fish stocks, we are heading for a disaster of greater proportion in Asia. (Mustapha, and Kuperan, 1997, P346-347). The reason for the ‘greater’ proportion is the greater number of fishers in Asia, the reliance of so many on fish for their protein supply and the contribution of the industry to the economies.

Management of fisheries resources has been given little systematic attention by Asian countries. Efforts at management were largely exercises in political management and had little basis in the application of the biological, economic or social consequences of management approaches. Or as the FAO report in 1995 stated, "experience indicates that the current centralised state of management systems in many countries are not able to regulate fisheries properly over the widely scattered fishing ground." (pg 96).

In talking about fishery management one need to distinguish between the different contexts of management we are talking about, these are the commercial or industrial and the artisanal fisheries and we can find both of these in the inland and the marine environment. While with the former we may talk about a restricted number of players, in the latter we talk about many players, multiple species and a wide variety of catching techniques.

In the commercial area the concept of ITQ would be feasible if a) the EEZ could be clearly defined b) if there is adequate data on which to base TAC and c) if enforcement is feasible. As is well known, all three conditions are hard to satisfy in the Southeast Asian situation, where we find overlapping EEZs, little research and an inability to enforce. The NZ case study shows that even for a developed country quota management systems can turn into an expensive option to manage. As Hunt states "much lengthy and expensive research is required before Western style management can be effected widely."(Hunt, 1998, p79). Enforcement of regulations is one of the most costly and problematic features of fishery management programs and can account half or more of the expenditures on fishery management. The current review of the NZ Fisheries Act was initiated because of the management cost of the ITQ system.

Western style fishery management may as yet not have much to offer to the situation fishery managers in South East Asia face. A typical statement making this case is the one by MacKay, 1005):

This new paradigm of a decentralised people centred approach, has been taken up by several Southeast Asian countries. Pomeroy (1995) discusses the experiences with community-based management and co-management in the Philippines, Thailand, Malaysia, Indonesia and Vietnam. All these examples show a commitment of governments to policies and programmes of decentralisation and community-based resource management. Other countries are implementing it for their inland fisheries. For example in Bangladesh the Department of Fisheries and NGOs are working as partners to enable local communities, particularly people who depend on fishing for their livelihood, to manage fisheries in more sustainable ways. This include developing alternative and enhanced sources of income for the lean seasons and protecting access to the fisheries for the many poor households who catch small fish for their own consumption. A similar programme has been proposed for the management of the artisanal and family fisheries in the Tonle Sap Lake in Cambodia. The report on the Cambodian fisheries echoed some of the earlier sentiments re western fishery methods:

"The DOF (department of fisheries) has primary responsibility for the management of the Tonle Sap fisheries, but its effectiveness has been undermined by weak institutional capacity, including budgetary constraints and a limited technical staff. Effective management will require greater involvement of fishermen and other local stakeholder groups in management activities. This is particularly important in the small-scale fisheries (family and artisanal) where fishers land their catch at several hundred points, making it unrealistic for the DOF to monitor. A co-management approach would also encourage local support for management activities because it provides the stakeholders with a better understanding of why certain actions have to be implemented and invites their input into decisions affecting the fisheries. " (Draft Working Paper NEP, 1996, P 15).

In 1990, the Philippines embarked on the Philippine Fisheries Sector Program. The program is well described in Ablaza-Baluyet (1995), and the specific plans, project and activities were noted as:

• Fisheries Resource and Ecological Assessment
• Coastal resource management; and integrated community based approach
• Research and Extension
• Law Enforcement
• Credit
• Infrastructure (Ablaza-Baluyet, 1995: 161-162)

The FSP is supported by other national initiatives that promote the co-management of coastal fisheries. Foremost among the other initiatives was the decentralisation under the Local Government Code. This led the way for co-management of the fisheries. To achieve community based management and co-management (of coastal resources and fisheries) is going to take time. Ablaza-Baluyet (1995) write:

That this is so, is obvious from the casual reading of failure and success stories. A discussion paper by Abregana et al. (1996) discusses the legal challenges for local management of marine resources in the Philippines, while analysing a case situation in Bias Bay Negros Oriental. One of the difficulties is the overlapping jurisdictions of government departments. Also the conflict between commercial fishers and their entry into the 15 kms commercial zone is a major problem (which in many ways is not dissimilar to the conflict between recreational and commercial fishers in NZ).

There are successful efforts, for example in the Philippines, where communities together with municipalities are taking things in hand and manage fisheries, such as Banate, and Ajuy and others. But then at the same time we read about the lack of any community support to fight dynamite fishing in Carles. When one then also read the terribly sad story on "The Betrayal of Maqueda Bay" (Penaranda, 1995), it is obvious that there is still a long way to go.

Balland and Plateau (1996) describe several other examples of community based fishery management (e.g. in Japan) and the FAO review (1999) describes an example in Sri Lanka. The Review however concludes: "Most of the other examples of Community Based Management existing throughout Sri Lanka in the past have now disappeared. The contributing factors have included increased mobility of the fishers owing to the motorisation of vessels, the influx of displaced persons from conflict-affected zones in the north of the country, and some loss of cohesion within the coastal communities. Pomeroy et al (1997) describes a quantitative evaluation of community based coastal resource management at six sites in the Central Visayas Regional Project-1. The results show that in the eyes of the fishers, the programmes were a success, and this after all is the most important thing as "this will influence their subsequent behavior; hence the potential sustainability of the project." (p. 113). An interesting finding was that fishers like their occupation and would not necessarily change to another job, suggesting that the development of supplemental, rather than alternative, occupations may be the most effective strategy. "These supplemental activities could be spread over a larger number of fishers, reducing rather than eliminating their fishing activity, and probably having as great an effect, or greater, as trying to attract (or force) fishers to some alternative form of employment." (ibid, p. 118)

This creation of alternative activities to diminish fishing pressure and to protect the remaining natural coastal ecosystems may be very difficult, as McManus (1995) writes:

All of this shows that many individuals and institutions currently in that market have a large stake in maintaining the status quo of unsustainable development. Fishers harvesting their catch from an exploited fishery are loathe to undertake any reduction in harvests, even if the reduction is necessary to conserve the stock and return to population to a healthy level. The traders, the suppliers of dynamite and even law enforcement personnel (the Police in the Philippines or the Navy in Cambodia) all have a stake in maintaining the status quo. The principal of inertia applies to politics as fully as to physical bodies; a body at rest will tend to stay at rest unless a significant outside force is introduced.

From all these examples we can learn that successful CBRM has the following elements (MacKay, 1995: 7):

1. a clear definition of who the community is
2. clear institutional structures of authority and governance
3. specification of use rights
4. rules and regulations re catch and technologies
5. monitoring and enforcement and legitimation

In many ways these elements do not differ much from the principles for success we learned from the NZ experience. This may not mean the introduction of quotas for the inshore fishery. Such a policy appears less suitable in a ‘social’ fishery. However there is no reason why quotas could not be considered for the commercial fishery. Ultimately, however, it is not so much the policy instrument that is going to make the difference but the ability to bring changes in values and attitudes and an ability to enforce and implement whatever the policy instruments chosen.

Partial closure and marine reserves (Holland, 1995), seasonal closures, licences, artificial reefs (Munro and Balgos, 1995), quotas can all play a role in a centralised or co-management fisheries. There is now enough experience with all of them and the role they can play depends on the fishery, the country and the institutional framework that can be put into place and enforced.

There is no single answer to what optimal fishery management implies. The principles mentioned above are very generic. Sustainable fishing must ultimately imply a fishery that will last biologically. If this should also imply economic efficiency is a question each country will have to answer for itself in light of its social and cultural values. For that reason the experience of other countries may/ or may not help in the final definition of what is an optimal fishery management system for Southeast Asian countries.

As a final comment, I have presented this paper on the principle that it is better to have heard about the NZ experience and then decide it to be relevant or not to the SEA situation, then not to have heard it and perhaps lose the opportunity to learn something from the experience of others, however small the lessons may be.

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