GOVERNMENT PERSPECTIVES

A Minister’s Perspective on Managing New Zealand Fisheries - D. Kidd
Managing Fisheries with Rights in Namibia: A Minister’s Perspective - A. Iyambo
Canadian Experience with Individual Transferable Quotas - D. L. Burke and G. L. Brander

A Minister’s Perspective on Managing New Zealand Fisheries - D. Kidd

Speaker of the New Zealand House of Representatives
New Zealand Minister of Fisheries 1990-1996
Parliament House, Wellington, New Zealand

My political involvement in fisheries began with my appointment as opposition spokesman in 1984. I continued in that role for five of the following six years until I was appointed Minister in late 1990. I held the fisheries portfolio, amongst others, for six years until I became Speaker and I have maintained my interest since.

Prior to 1984 I had had a brief period of involvement when the Government consolidated the Fisheries Act which had been largely unchanged since 1910. The 1983 Act made little significant change other than to propose a system of fisheries management plans which contemplated a move to a prescriptive system which owed more to the planning developed for the new towns of England than anything to do with fisheries management. I am pleased to say the system was never implemented.

In the latter part of the 1970s, including my first term in Parliament, I was a partner in three Greenshellä mussel farms in the sheltered seaways of the Marlborough Sounds at the northern end of the South Island. Whilst not one of the original pioneers, there were less than 50 farms at that time. There are now nearly 500. From nothing in the early 1970s, Greenshellä mussel exports are now our second largest seafood export species.

My professional background as a partner in a provincial law firm brought me in contact with the rudimentary fishery law of the time but it was not a significant item of business. Perhaps more relevant to much of what will unfold in this address was my upbringing and personal involvement in dairy farming, plantation forestry, the wine industry and marine farming.

It is worth recalling that the phrase ‘sustainable management’ was not in common usage in the early 1970s. We were still a frontier society in terms of our engagement with natural resources. Whether it was in terms of wool, meat, dairy products, timber or fish, the nation’s salvation was seen in terms of producing, or extracting, more.

New Zealand has gone through all the experiences, including the worst, that other nations have experienced as part of their engagement with fisheries. Over-extraction, over-capitalisation, ever-increasing input controls and ever-declining stocks were as much a part of our experience as any other country.

I can say that as a result of changes over the last 15 years we have largely turned that around. The process has been painful, fraught with fear and conflict but in the end successful almost beyond imagination, if viewed from the early 1980s. More than a few mistakes were made on the way; most have been corrected and above all valuable lessons can be learnt.

I read widely among fishery publications and while I see encouraging signs and progress in a number of countries, the outlook for the world’s fisheries must be one of profound concern. I am not here to offer the New Zealand model as a panacea for all the world’s problems. I am the first to acknowledge that our system is not yet perfect. My hope is to stimulate thinking and acceptance of the notion that there can be, indeed must be, a better future for the world’s fisheries.

After several years of skirmishing, the government of the day introduced the Quota Management System (QMS) in 1986. At its heart was the concept that fisheries might better be managed by output-controls in contrast to the purely input-control system which preceded it. The core feature of the QMS was the total allowable catch (TAC), fixed each year by a scientifically-based assessment process which limited the tonnage of any individual species which could be harvested in any particular management area. That TAC was in turn subdivided into individual transferable quotas (ITQs) held by individual fishers and companies. The original allocation of ITQ’s was based on eligible catch-histories coming through from the old system. It was a very untidy and litigious process, but it got the system underway. At the time I became Minister 33 species were being managed in the QMS. They constituted the great bulk of fish landed, both in tonnage and value. The great failing of the system was in the definition of the property right - it was not clearly defined. Perhaps more importantly it was not proportional. This led to TACs being blown out by the granting of absolute ITQs under the catch-history appeal system. A considerable element of the conservation and sustainability-gains hoped for by the system were not initially achieved.

In order to obtain a measure of acceptance for the initial move, the law provided that if TACs were to be reduced the Government would compensate fishers for the reduction of their ITQ and on the other side, if the TAC was increased fishers would pay for the additional ITQs. When TACs had to be reduced the Government baulked at paying out and sought change.

The system did enable an important objective to be progressed and that was the restructuring of the industry. Under the old regulatory system when a fisher died or retired they had nothing to sell other than their boat. With the advent of ITQs a fisher could sell their catching right in a market, which had quickly developed, and exit the industry. Many did so and in some fisheries the over-capitalisation problem was resolved or reduced. Today the Government has no role in deciding who goes fishing except in respect of foreigners. All that is needed is the catching right which is obtained in the quota market. Nor does the Government have any role in what size, or power, of boat is used, although a few restricted areas are closed to large vessels. A few minimum sizes remain for crayfish¹, some molluscs and a few fin-fish. Seasons are still regulated for a few species. All these controls have at least some biological purpose. Over time some will become obsolete.

¹ The common New Zealand name for rock lobster.

I sought to get industry to own the problems and commit to solutions. I sought to mobilise their self-interest. Despite all the evidence, I retained my belief that people will act reasonably if an environment is created in which the parties can work things out. I fell back on one of my grandmother’s adages that “the longest way round is often the shortest way home”.

I was faced with the Ministry locked into the ‘we must manage’ attitude and industry dug in on ‘we should manage’. Mâori (New Zealand’s indigenous people), who were also in a litigious mood, sought to strike down the whole management system as a breach of the Treaty of Waitangi which had provided the basis for European settlement when it was signed in 1840. Conservationists sought to virtually lock up the fisheries. The very substantial recreational lobby (around a million New Zealanders fish at least once in the sea each year) were up in arms, asserting that their fundamental citizenship right was being brought to nought by the actions of the Ministry and the efforts of the industry.

It seemed to me that the authoritarian ‘only Government can manage’ attitude would maintain a state of rebellion and litigation even where the Government view was soundly based. I took the view that flexibility rather than rigid authority, and working towards newly found shared goals, was the path forward. Clearly change was required to the legislative and regulatory environment but massive and sudden change clearly would not succeed. Incremental change consistent with the goal of biological sustainability started to see progress made.

An important element in building relationships and making progress was a truly enormous amount of consultation and listening - involving both the great and the small all around the nation and not just at the seat of Government. An important early realisation was that one must not promise more than one can deliver and one must deliver everything that one promises. Making progress on one topic increasingly built confidence to enable progress to be made on other unrelated topics. Intense focussing, issue by issue, and attention to detail built the way forward.

An important early example related to our very important Orange Roughy fishery. This fishery was the cash cow of the New Zealand industry and it provided the basis for New Zealanders to move into fishing the deep-water stocks of our economic zone. Initial catches were huge, based on the scantiest of scientific knowledge of the stock. By the time I became Minister the fishery was clearly heading into serious trouble. Industry was dug in against further quota reductions and my Ministry advisers were emphatic that they must be put in place. Litigation clearly would not resolve the future of the fishery. Amidst all the uncertainties surrounding the stock I had to make decisions. Clearly one needed alternative incentives. In the end I agreed to leave the TAC in place but secured agreement to informally subdivide the critical management area and distribute the catch in new ways. The most intensively fished area over the previous decade was closed and a vast unexplored area was allocated a significant part of the quota. This responded to the industry’s view that there was huge untapped potential in the management area. That was the basis of their argument against reducing the TAC. On the other hand, by adopting their argument, I put them to the test to prove up the fishery. The quota-holders organised themselves into the Orange Roughy Management Company and entered into agreements between themselves as to how the exploratory area was to be fished. Over succeeding years huge quantities of information were obtained as to the nature and extent of the fishery, new grounds were identified, the original hard-hit core stock was protected and there was no litigation. The management company got into the business of sidescan sonar charting of the seabed to identify likely fishing grounds and the hydrographical knowledge of our large EEZ leapt ahead in a few years.

The shifting of incentives, and move to ever greater self-management almost certainly saved this fishery though there remain risks around it due to the uncertainty of the life expectancy of Orange Roughy. That argument has not yet been conclusively settled but what we did was address the requirement that decisions had to be taken despite the uncertainties and having got everyone committed to a vision for the fishery, to adjust it as we moved forward building on the step by step accumulation of knowledge and confidence. The whole experience has had another enormous gain. New Zealand companies acquired knowledge and perfected skills which have enabled them to venture thousands of kilometres beyond our EEZ to discover and operate Orange Roughy and other deep water fisheries to the point where I think I can safely assert that New Zealanders are world leaders in deep-water fisheries techniques and operations, especially deep-water pinnacle fishing.

Let me now move to the opposite extreme and relate the experience with the inshore scallop fishery in Tasman Bay at the north end of the South Island. When it was first discovered something of a goldrush took place. At its peak there were up to 300 small vessels dredging the fishery. You would not be surprised to know that it collapsed. A very prescriptive input-control system centred on licensing of fishermen and even the daily take was put in place. The fishery rebuilt slowly and catches settled way below what some thought was its optimum capacity. Not long before my time we were the happy recipients of a little foreign aid and technology transfer from Japan which introduced the notion of enhancing and managing the fishery by collecting spat and seeding areas which would then be closed until the scallops were grown and the whole fishery might be farmed on a rotational basis. But the whole exercise was just too difficult to make progress. To break out of the inflexible regulatory system, clearly we needed to get all interests to sign up to a shared vision for the fishery. The licence holders had great difficulty in making progress, recreationalists saw any change as a plot to deprive them of their citizenship rights to harvest scallops and by this time Mâori were in assertive mode and capable of preventing any progress unless their interests were accommodated. I set out to sell a vision of a much bigger fishery capable of meeting the reasonable needs of all participants and one in which they all were directly involved in its organisation and management, within the QMS.

I started meetings with individual groups and gradually walked them together. At this point I realised that my own Ministry was part of the problem and for a host of reasons what I wanted was unlikely to happen. However, there was a solution at hand. As a result of radical reform of our public service we have a system whereby the Minister enters into a performance contract with the Chief Executive of each Ministry each year. I insisted on the successful inclusion of what we by then were calling the Challenger Scallop Fishery in the QMS as a term of the contract. Given that pay and future job prospects were now on the line, the impossible became possible.

The Challenger Scallop Company is now effectively managing that fishery within the QMS. Mâori tribes are substantial shareholders; recreationalists enjoy a 50 scallops per day bag-limit without fee or licence; the company has its own special-purpose vessel for collectively organising the spat-catching and bed-seeding operation and the Ministry’s role is essentially to keep an eye on things. Mike Arbuckle, Manager of the Scallop enhancement company provides a paper on this fishery.

But these triumphs need to be tempered by the fact that not every initiative has been so successful. In the northern part of New Zealand (to the east of our major city of Auckland) lies the major Snapper (Chrysophrys auratus) fishery of the country. It is by far the longest intensively-fished fishery in New Zealand. With over half of New Zealand’s population seeking access to the fishery for recreation and being in an area with the highest Mâori population in the country, and a very old culture and traditional fishery who knew nothing other than input-controls, the fishery was heading for trouble. My scientific advisors recommended a substantial reduction in quotas. I was convinced that this most researched of all our fisheries had to be scaled back. I acted boldly and ended up in court. How did I go wrong? There was no doubt the fishery had declined over the many years before my administration. Clearly the scientific evidence pointed to a fishery that had the potential to collapse quite quickly. The vast Auckland and surrounding population and Mâori interests were hugely frustrated that their expectations of the fishery were not being met and as they saw it being defeated by commercial interests. Being a politician one knows that in the end people will have their way if sufficient of them are of a particular point of view. The status quo did not seem to me to be an option.

I challenged the industry, recreationalists and Mâori to come up with an agreed plan to restore the fishery, but they could not make progress. As I saw it, the old conflicts could not be resolved so I took action to reduce the catch significantly to the level I thought prudent in light of the scientific advice. I broke my own rules, not having secured ownership of the problem by the participants and had not moved incrementally believing I could not wait any longer before acting.

Here also is a lesson for Ministers and other decision-makers. Even in fisheries where there is a long history of good catch data and scientific surveys, there is a danger in focussing too narrowly on the science. It appeared to me that there was something important missing in the advice I received. To cut a long story short, it boiled down to this: when Snapper eggs hatch they have very tiny mouths and are only able to eat a limited range of algae in the first critical days before they move on to the likes of brine shrimps and that particular algae only bloom in a 2°C water temperature range. Enter my early acquaintance with the impact of El Nino/Southern Oscillation on fish stocks. I sought advice linking water temperatures at spawning with recruitment to legal size several years later. There was nothing of any use. We set out to fill the gaps. However, by the time my decisions were in court we did not have the information to prove my hypothesis. My successor has subsequently been able to put modest quota reductions in place and I can only hope that they are sufficient to secure the future of the fishery.

There is a post-script to that experience in that scientific effort has led to a huge increase in understanding of the connection between spawning and recruitment success and changes in ocean temperatures however driven. It was with great pleasure that I recently sat in on a scientific symposium to hear the Chief Fisheries Scientist pronounce with certainty, what several years ago were merely the intuitive prognostications of a Minister, that the oceanic conditions which lead to successful spawning of Snapper are bad for Hoki and Gemfish and vice versa. This example confirms my view that we must take a more holistic, multi-disciplinary and ecosystem-approach to fisheries management. Such is now required by our 1996 Fisheries Act.

Nearly my last word on Snapper fisheries relates to a smaller fishery than the one I have described. I had before me a paper from officials recommending some new regulatory measures to support the QMS. My antennae vibrated, so I picked up the phone to a long-established fisher operating out of a tiny fishing port. The lass who answered the telephone could not believe it was the Minister and ran shouting down the wharf that the Minister was on the line. He thought a prank was being played on him and came sceptically to the phone. After I convinced him it was the Minister I asked him a number of questions, thanked him and sent the paper back marked ‘No’. Experience counts. Knowing who really knows is as important as knowing yourself.

But occasionally you just have to find out for yourself. For a number of years industry had argued for a quota increase in the blue cod fishery east of Wellington. Recreationalists opposed every move. Unable to resolve the matter I decided to do a bit of stock assessment myself. I agreed industry could choose the day and the location. My final decision would depend on the result. Come the day, we launched from the open beach and were soon fishing. Despite moving from position to position along the coast hardly a blue cod did we catch. The subject was never raised with me again.

I now mention briefly the explanation for the considerable success of our number one fishery, Hoki. Although the fishery has been heavily fished within the quota management system and its predecessor for nearly 20 years, the fish stocks are considered to be at least as large as when the fishery was first taken up. A number of incredibly favourable spawning years led to my scientific advisers recommending large increases in quotas and the industry opposing them. The tendency towards increasing intensification and frequency of El Nino/Southern Oscillation events has been hugely beneficial to these fish stocks. Here again, industry came together in what is now the Hoki Management Company comprising all, or nearly all, the quota holders and this fishery is now largely self-managed and, among other things, has moved from being largely a surimi operation using foreign chartered vessels to a white fillet fishery largely fished by modern New Zealand owned vessels. It is a classic case of a property rights based fishery providing the right incentives to take a long term view of fish stocks and providing the confidence to invest enormously in the catching, processing and marketing sectors.

Here I want, on behalf of New Zealand, to express our profound thanks to the several northern hemisphere governments whose destructive fisheries policies have been instrumental in developing our fishing industry. In order to keep their shipyards in work they subsidised the building of vessels to fish further their ever-depleting fish stocks. Then, confronted by the parlous state of their fish stocks they have had to subsidise the removal of vessels to reduce effort. This has brought to the international market over the last decade what is now the New Zealand-owned mid and deep-water fleet. In some years our companies have been the only buyers. Needless to say, prices have been attractive, made more so, in some cases, by the governments where the vessels were flagged with subsiding loans to our companies to buy them. The taxpayers of such governments paid twice for bad policies! In other cases shipyard and loan subsidies have led to fine new vessels being built for our companies.

We do not offer subsidies, grants or incentives to our fishing, nor any other industry. Indeed, fishing is a user-pay industry but that is a story in itself. For a brief period, about 25 years ago, we did encourage expansion of our fleet to fish out of sight of land and to encourage local shipyards. That programme was directly responsible for depleting a number of our fisheries and helped create the pressure for change which led eventually to the introduction of the QMS.

Ministers and managers have to squarely face the fact if fish stocks are not healthy the communities dependant on them cannot be either. In short, the fish came first, the people second. But people have votes, fish do not. Those simple but profound statements mean that Ministers are subject to fearsome pressures. No fishery in its natural state needs any management. What we are all trying to do is manage the people in relation to their impact on their fisheries.

I now describe a fishery which is of great interest in Western Australia. One of our oldest commercial fisheries around the New Zealand coast has been the Spiny Red Rock Lobster. Historically it was fished for the tails which were frozen and earned premium prices in the United States’ market. It was surrounded by a surfeit of regulations but over the decades the fishery declined from boom periods, now 30 years ago. As is the case with all declining fisheries a huge effort was made by the industry to try and maintain the right to catch and even greater effort to actually take the catch. The species had just been brought into the quota management system as I took office. There had been significant reductions in the catch limit but these gains were eroded by appeals. After a huge amount of consultation and in the process getting to understand better the dynamics of the fishery I made a series of major decisions. On the coast adjoining my own electoral district I put in place the biggest catch reductions, which were so severe as to force some people out of the fishery. Industry leaders had recognised that something had to be done and the process of building support for the vision of a better fishery was already established.

One of the measures put into effect was a move from tail-length measure to tail-width. Previously fishers had squashed down lobsters on their measuring boards to try and make them reach the legal length and of course in the process severed the spinal cord, of many which were undersized which were either thrown back dead or went into the illegal trade. The use of the tail-width measure with callipers which is incapable of being exaggerated became an important conservation measure but it meant that many of the fish, which had previously been taken, were now under-size.

Around the various management areas the industry worked many issues through including enlarging and standardising escape-gap sizes in pots, recruiting and paying for technicians to monitor and research the fishery over and above the research undertaken by Government and generally taking ownership of the fishery and its future. The rock lobster fishing is now increasingly self-managed.

I can best summarise the changes between the early 1990s and today with this story. Some of the fishers on my coast argued to me at length that the rock lobster in their area had always been small - it was just the nature of the fishery. I had enormous pleasure recently to have the same fishers come and acknowledge with big grins that they had been wrong and I was right and the fishery was now in wonderful condition. The fish indeed will grow if given a chance.

What these measures and the quota management system has done is a textbook case of the benefits of a property rights-based system. With confidence in the fish stock, fishers moved to optimise their harvest to obtain maximum market prices. In effect this meant moving to a winter fishery to get the highest prices in key export markets. Under the old system, with the stock under stress, fishers typically had huge numbers of pots and worked the fishery most months of the year. Now most fishers catch their quota in a period of two months or so, securing optimum prices with typically half or less of the pots used under the old system. One of the great advantages of this response to market signals driven by property rights is that there are few fishers operating over the summer months when New Zealanders descend on the coast with the few pots they are allowed and they too are enjoying far more successful fishing. One of the great conservation gains of the new system is that there is not the endless hauling up and throwing back of undersized fish and the accompanying substantial mortalities. We now have a fishery much better attuned to nature, various participating interests and the marketplace. Over the same period dramatic progress has been made to move from an essentially frozen-tail fishery to one where close to three quarters are exported live to increasingly more distant markets. The magnitude of the change is rather like the change in the hoki fishery from surimi to prime white fillet.

I well remember a number of discussions at meetings on both sides of the Tasman Sea arguing the case between managing a fishery by pot-limits against managing it by a property-rights output-control system. I am here today to assert the success, the almost brilliant success of the path we have followed. How are you getting on here in Western Australia?

When I took up the matter of seeking a vision for the rock lobster fishery one thing leapt out at me as being the fundamental requirement. We needed more eggs in the water. We have always had regulations prohibiting the taking of berried females and stripping had been a long-established type of offending. The combination of actions and the response to correct incentives has led to a huge decline in the catching of lobster that have not bred and the fishery being operated at a time of year when females are not in berry.

On the same theme, one good thing at least seems likely to come out of the problems I described earlier with the northern snapper fishing. I met a man who believed we could eliminate the substantial mortality of undersized fish in both the recreational and commercial sector with a new kind of hook he was developing. I directed my Ministry to give him a little money to develop his work, the only time I ever did so, and have recently helped persuade my successor to do likewise. Extensive trials now up to full longline scale are showing dramatic results. Millions of fish might be saved to recruit at legal size and reproduce to support the biomass. This is but a variation on my “more eggs in the water” philosophy. It is also another example of my view that there is a place for supplementary measures to support and enhance the property rights based system. The Paul Barnes hook may yet become world famous.

All this goes back to a concept which I had been developing by observation across the whole natural resource based sector prior to becoming Minister, that a better environment and a sounder economy are compatible. We have a strong tradition of environmental activism feeding off our previous extractive, almost mining approach to natural resources and it was as soundly based as it was irritating to those whom these actions came to bear upon. A key success of our system has been to increasingly reduce, and in some cases end, that tension and conflict. It is to the great credit of our fishing industry that they have moved further and faster than their opponents who in some cases are unable to accept the enormity of the shifts and gains which have been made in the last 15 years. In a few fisheries they still have a point, but in large measure it is time to move on from the entrenched positions of the 1970s and 1980s.

Mentioning the imperative to have more eggs in the water leads me to another one of those instinctive propositions which drove my approach to fisheries management. It is that if there are to be truly sustainable fisheries then the fish stocks must be able to enjoy a successful sex life. Nowhere was this better illustrated than in our Foveaux Strait dredge oyster fishery. What are known as Bluff oysters are something of a national icon. Some years ago they were overwhelmed by the Bonamia virus. If you think of it in human terms it is a mortifying thing. What it does is, right at the point where an oyster matures sexually, it attacks and destroys the gonads. Why it struck our fishery remains a matter of speculation but here again there is some suggestion that it may have been due to changes in the environment and/or nutrient supply. Old timers in the fishery pointed to earlier collapses which may have been due to the same or a similar virus.

Fishers argued to me all sorts of reasons why they should be able to continue fishing in what was at that time a licensed fishery, rather like the scallop example I mentioned earlier. They pointed to there being unfished beds to the west of the Strait and here again, like the Orange Roughy case, I put them to the test, subdividing the fishery into a series of paddocks and sending them off to catch those fish which they claimed would be their salvation. The reality was rather different and soon we were back confronting a biologically-collapsing fishery. Straining all my scientific advice and background, I decided to make decisions based on the hope that some of the oysters would be immune and we must close the fishery to allow them to multiply. The town of Bluff was thrown into economic decline and this weighed very heavily on me. Here again I can report a wonderful success story. The fishery has recovered, it has been introduced to the quota management system and all seems well.

One of the things which has been at the centre of controversy in New Zealand since the mid-1980s when we took to massive economic restructuring has been whether the pain was worth the gain. I am certain that what was done had to be done. All that could be argued was the sequencing and timing of the changes. In fisheries management, coming out of the old politically-dominated input-controlled systems, the pain has been considerable but the gains have been huge. Before the gains could be achieved a vision of what the fishery might be had to be developed and agreed upon. Those involved had, in large part, to take ownership of the problems and build the solutions, with the Minister and officials being facilitators and encouragers but leaving no doubt that the status quo was no longer an option and that everyone had to move forward. I can vouch for the truth of the adage that managing change is as important as the changes themselves.

Our fishery law has long been written around the Minister having a very big stick. Increasingly it is not so much behind the Minister’s back as in the cupboard. The protection of the balance sheet value of the property right, the sense of ownership and commitment to the fishery have led us largely from an industry of hunter gatherers seeking to beat each other for the last fish to an industry of seagoing farmers. The instincts I brought from my farming and forestry background of sustaining the land, applying science and passing it on in better condition to the next generation is becoming the culture of our seafood industry.

In all this enormous change and transition we have achieved something that few other similar nations have managed. That has been to bring our indigenous people, Mâori, into our fishing industry both as major participants in the commercial fisheries and in terms of giving meaning and effect to the customary fishing right for non-commercial purposes. Like everything else it started with monumental litigation in our courts, strengthened by landmark reports from the Waitangi Tribunal set up to investigate historic Treaty grievances, and culminated in massive negotiations leading to the Mâori Fisheries Settlement of 1992. Today, Mâori through the Treaty of Waitangi Fisheries Commission (Te Ohu Kai Moana) own, or control, or direct nearly half the commercial fishing quota of the country. Their representatives are in place in all the structures and organisations of the industry on a fully inclusive and participating basis and they play a leading role in the industry.

But despite the settlement having been achieved nearly eight years ago Mâori have yet to settle upon the basis for allocating the quota amongst their tribes. This has been a new source of endless litigation between tribal groups seeking the property right in their own name on the one hand, and representatives of urban Mâori on the other seeking greater provision for the benefit of their people. What is all too often overlooked in these cases is that what the Government settled were claims relating to issues in the nature of property rights, settled (as lawyers use the word) virtually on the courthouse steps. Whilst the settlement was for the benefit of all Mâori, it proceeded, and could only have proceeded, on the basis of being Treaty-based with Mâori able to benefit and develop through Iwi (tribal) ownership and use of fishing quotas to create jobs and build investment.

At the very heart of the quota management system is this concept of an ownership stake in the fishery and its future, shown now to be absolutely fundamental to securing the commitment of all participants to sustainable management, which I prefer to express in simpler terms: we must leave better fisheries for our grandchildren.

Whatever the short comings of my administration, I get a real thrill as I go around New Zealand to be told by individuals and groups in the industry that they would be happy to have me back as their Minister. After some of the things I did to some of them and after some of the things I persuaded them to do to themselves I am both humbled and proud to hear such expressions. But one cannot return to the well. What I could be tempted to do is to help turn around someone else’s fisheries. Maybe, somewhere out there in the world of depleting fisheries there are managers so desperate that they might be interested in our approach. Whatever its faults, it has one thing going for it - it works.

Managing Fisheries with Rights in Namibia: A Minister’s Perspective - A. Iyambo

Minister of Fisheries and Marine Resources
P. O. Box 13355, Windhoek, Namibia
<[email protected]>

1. INTRODUCTION

Fishing rights are a central element in the Namibian fisheries management regime. The new Sea Fisheries Bill puts it simply, in this way:

“No person shall in Namibia or in Namibian waters harvest marine biological resources for commercial purposes except in terms of a right,”

2. BACKGROUND

2.1 Pre-Independence fishing

Before Namibia’s Independence in 1990, the inshore resources off Namibia were managed by the South African illegal occupation regime; and the offshore resources were supposed to be managed through international collaboration under the International Commission for South East Atlantic Fisheries (ICSEAF). In practice, neither of these regimes was effective and Namibia found itself at Independence with a heritage of systematically depleted fish stocks. In addition, these stocks were exploited by fishing fleets that were heavily dominated by foreign interests thus providing relatively little economic benefit to Namibia; and the little participation of Namibians was dominated by a small group whose position had been established under a system of racist privilege.

2.2 The economic and social setting

In 1990, the new Namibian Government faced the challenge of promoting socio-economic development in a land in which people were deeply divided by the practices of apartheid and the effects of a long and bitter struggle for liberation. The 5% of the Namibian population that was white accounted for over 70% of national income; and 55% of the population in rural areas accounted for less than 5% of national income. Access to social services was just as skewed. Unemployment was in the range of 35-40%.

3. BUILDING A FISHERIES MANAGEMENT REGIME

3.1 Policy goals And strategies

Fisheries policy formulation in Namibia had literally to begin from scratch in 1990. The first step was to lay out policy goals and broad strategies for achieving those goals. A 1991 White Paper on Fisheries Policy (Government of Namibia 1991) laid out the goals of sustainable utilization and development of Namibia’s fisheries resources. The policy is based on four main strategies:

i. rebuilding stocks

ii. building a national industry

iii. Namibianization, to ensure that the benefits of rebuilding stocks and building a fishing industry in Namibia accrue substantially to Namibians and

iv. empowerment, to ensure an equitable balance of participation among Namibians, particularly by those previously excluded.

From the start, it was planned that the new fisheries-management regime should be based on a system of fishing-rights. This drew both on previous experience in the management of Namibia’s inshore fisheries, and emerging international trends and experience. The rights-system would have to address several major objectives. As a starting point, there had to be effective limits to the amount of exploitation of fish stocks.

Against the background of the systematic destruction of Namibia’s fish stocks before Independence, there was no argument about the need to limit fishing mortality. The stocks had been depleted by over-fishing - that had to be stopped; and catches had to be lowered in order to rebuild stocks to levels that would sustain higher levels of yields in the long-term. This meant there would have to be long-term arrangements for limiting fishing mortality.

Nor was there any argument about the need to limit entry. On the one hand, the destructive effects of unlimited entry were clear - unlimited entry led to excess capacity, which undermined the economic sustainability of the fishery and increased tendencies to irresponsible fishing. On the other hand, the government also had clear ideas about the directions in which it wanted to restructure the ownership, control and pattern of operations of fishing in ways which could not be achieved if anyone could fish.

The system also had to address several other objectives:

i. it had to avoid encouraging over-capacity
ii. it had to extract revenues
iii. it had to be cost effective and
iv. it had to be simple.

4.1 Scope

The application of rights in marine fisheries in Namibia is comprehensive. Rights apply to all commercial harvesting. No person can take fish, or other marine resources for commercial purposes from the wild except under the terms of an explicitly-granted right. To do otherwise is an offence. Rights to exploit apply to all living marine resources - including seaweed, seals and guano. There are no exemptions for small-scale fishing, but the system of rights does not apply to subsistence and recreational fishing where catches are not traded.

4.2 Levels of fishing

Rights limit the number of participants in commercial fishing, but levels of fishing are managed by output-controls (TACs/quotas) or input-controls (vessel numbers and capacities). Output-controls by TACs and quotas are the major method, covering over 90% of landings. With one exception, quotas are allocated to individual enterprises or persons holding rights, so that the system is essentially an Individual Quota (IQ) system.

4.3 Duration

The duration of rights is generally a major issue in the establishment of any rights-based system. There are broadly two points of view on this issue. The first is that rights should have the longest possible term in order to strengthen the incentive within a rights-system for fishers to take a long-term view especially in relation to stock sustainability, and to provide the security needed to support large investments. Following this approach rights might be granted in perpetuity or for relatively long-terms such as 25 or 50 years.

The alternative approach is to grant rights for shorter periods, largely for the purpose of providing the opportunity to measure the performance of right-holders against broader policy objectives.

The position taken on this issue will often depend on three critical factors:

i. The feeling in the community about the validity of the claims of rights-holders. If a rights-scheme is being applied in a mature, fully-developed fishery where the pattern of participation has been fairly stable over a long period, a community might reasonably feel that the fishing opportunities form part of the heritage of those who have been involved, and there might also be a general concensus about the basis for the granting of rights and connected fishing opportunities. In other cases, the community involved might be broadly indifferent about who the rights are granted to - for example in a new fishery, especially a high-technology fishery where there are few potential participants, there might be broad acceptance that rights can be tendered to the highest bidder for long-terms. Or, in a rights-scheme where rights are fully transferable, there might reasonably be a view that anyone can participate on the same basis as the next person by bidding to buy rights. In these cases, there is a strong case for rights to be granted for long-terms, mirroring as far as possible the same kinds of rights that might be in place in many societies for land or other forms of private property rights over natural resources. But often these conditions will not hold, and there will be controversy about the basis for granting rights. In these cases, these is a basis for looking to shorter-term rights, not just because this gives an opportunity for others to press a case for participation at some point, but because without the safety valve of a structured, periodic review of the pattern of participation, simmering discontent over the pattern of participation can lead to pressure at the political level to undermine the whole rights-system;

ii. The importance of external values in assessing right-holder performance. In some cases, there might be an acceptance that the pursuit of self-interest by the right holder is also socially optimal, and that right-holders can be left to exercise their rights as they see fit and for relatively long-terms. But in other cases, there might be important external values in terms of investment, or employment, or involvement in the fishing operations, which as a matter of policy are expected of rights-holders. In particular, communities have often had trouble with the idea that an individual or business could be granted a right, and simply rent that right out, without any direct involvement in fishing operations; and as a consequence that the right-holder should be held to account for their actual level of participation in the fishery. Shorter-terms of rights provide explicit opportunities for judgement of rights-holder performance against such standards.

iii. Economic viability, including the level of capital that needs to be committed, and the rates of return. At a minimum the terms of rights need to provide sufficient time for investors to recover their investments with reasonable returns. This pay-back period will vary widely between fisheries. For a fishery that requires no onshore investment and where vessels can easily be transferred to other fisheries, an annual right may be sufficient for this purpose; but where there are committed investments longer terms will be necessary. The pay-back period will also vary with the rates of return. Where there is a 50% rate of return, the period of rights that may be needed to secure investment will be a lot less than if annually returns are only 10%.

The key issues in deciding on these terms were the problems associated with deciding on who should exercise the rights; and the related problem of measuring the performance of rights-holders. The position in which the Namibian Government found itself at Independence was that there was no historical basis for the granting of rights. Most rights-based systems elsewhere have been able to start with an assumption that those previously involved had some claim to participating in any rights that might be established. But most Namibians would have regarded those involved in fishing before Independence as having the least right to participate in a new rights-regime; because they were either foreign interests who should never have been there in the first place; or they were whites whose opportunities for participation in the past had been granted by the racist occupation regime that excluded most Namibians from participating. Basing the allocation of rights on historical patterns of participation would have perpetuated the exclusion of the majority from economic opportunities that was a cornerstone of the apartheid regime; and would have denied opportunities to the new participants that most Namibians wanted to see taking part in the fisheries sector.

The identification of participants in rights in Namibia therefore, had to be based on a set of criteria related to the contribution that a particular party might make to Namibia’s social and economic development. In practice, that meant the granting of rights was based on an administrative selection process in which the public was invited to apply, and all applications were judged against criteria. It followed that in order to be able to sustain this approach there had to be a process of evaluating over time the performance of right-holders against the criteria on which they were awarded rights.

Initially, there were some fairly strong expressions of concern that the relatively short terms would discourage investment and encourage operators to take a short-term view and fish irresponsibly. In practice, the results have been satisfactory. There has been more than $150 million invested in the sector in the last seven years, and there continues to be a strong interest from others to enter. Probably, there is relatively little real beneficial impact from extending rights beyond 10 years because even the far-sighted businesses appear to attach little weight to events beyond such a term. Of course, having shorter terms does raise complications at a later point, in that a business does have real concerns about its future when it is the eighth year of a ten-year right, and managing these transition periods becomes an issue at that point.

As for the impact of shorter terms on responsible fishing and compliance, the Namibian fishing industry even with its shorter-term rights does not appear to be any less responsible or compliant than industries operating with longer terms of right. There are at times healthy differences between the industry, government scientists and managers about stock productivity and status, and desirable TAC levels, but they also do not seem to be any more prevalent in Namibia than where rights are granted for longer terms. As for compliance, there is by all accounts, a high degree of compliance with fishing laws in Namibia. Indeed, the certainty that compliance records will be taken into account when rights expire and are reallocated, seems to have, not surprisingly, a highly positive effect on compliance.

4.4 Transferability

4.4.1 Namibian policies and practices

The option to make rights transferable has become important following the successful introduction of Individual Transferable Quota (ITQ) systems in countries such as Iceland and New Zealand. The benefits of transferability are well known. They include the efficiency gains that follow from the competitive transfer-process favouring more productive operators; the better use of capital provided by allowing capacities to be better adjusted to the fishing opportunities available; and the increased incentives to operators to maintain and enhance the productivity of the resources because they know that a share of the benefits from a higher value resource will accrue to them in the form of higher catch values, higher rents for their quotas or capital gains that can be made if they sell their rights.

But, to be comfortable with the outcome of full transferability of rights, a community or a government has to be broadly indifferent to who holds the rights. That may not seem like a major limit, but even the strongest systems of transferability all seem to have limits, for example on right-holding by foreign interests. In other cases, the holding of rights is limited to vessel owners or to particular communities, or to participants in particular sectors of a fishing industry. An alternative to specifically limiting who can hold rights is to provide some form of preferential arrangements that allow particular communities or businesses preferences in the acquisition of rights that are available for transfer. Establishing limits or preferences for transfers can be attractive options, but can also make the system complex to implement and monitor.

In Namibia, rights and quotas are not transferable - at least not in the sense that rights can be freely sold or leased as in systems like Iceland or New Zealand. To this extent, the system might be considered to be an INTQ (Individual Non-Transferable Quota) system.

The reasons for the decision to make rights not-transferable are that transferability might seriously undermine the progress made in the goals of Namibianization, and especially national empowerment. It made at the time little sense to have gone through a somewhat painful restructuring of the industry in the direction of Namibian control and broader participation only to see rights and quotas revert to the previous holders through trading. More specifically, setting up a transferable system where new participants could only enter by buying rights would have closed off opportunities for new entrants from previously disadvantaged groups who generally lacked the capital to be real competitors in bidding for rights.

Despite the characterisation of the Namibian system as an INTQ, there are some elements of transferability, since:

i. new rights-holders without vessels are able to charter vessels to catch their annual quotas for up to three years, while they accumulate capital to make a significant investment. The nature of these transactions is generally such that the rights-holders effectively earn an annual rent

ii. all right-holders are able to charter vessels to catch some of their quota if necessary, and again the nature of many of these transactions is that other boat-owners simply pay a rent for the quota used and

iii. most rights in Namibia are held by equity companies, in which shares are traded. The trading in these company shares is not directly controlled but may have implications on the terms of rights, and levels of quotas and quota fees. Share prices reflect the value of rights and quotas held by the company and thus involve an element of transferability.

Even with the perception that competitive ITQ systems would not develop rapidly, the Namibian authorities were still concerned to look for ways to make Namibia’s INTQ system more competitive - and one starting point was to identify apparent areas of weakness in the existing competing ITQ systems. Three were identified - openness to foreign participation, its simplicity and/or complexity; and the extent of concentration and competition.

4.4.2 Openness

It seems that an almost inevitable result of introducing a transferable quota system is that there will be tight limits on participation by foreign interests in rights-holding companies. This will be necessary to overcome the concern that without such a limit, all the quotas will be bought up by foreigners. Indeed, it is a matter of irony that some of the states with ITQS and who in other economic sectors are the keenest to promote liberalising trade and investment flows under the banner of globalization, are at the same time the keenest states to apply tight limits to foreign participation in fisheries. In many fisheries, excluding foreign participation may not have any real impact. If local operators are the most efficient ventures in a fishery, as they might well be in a local lobster or shallow-water trawl fishery, then it is likely that excluding foreign participation in an ITQ scheme does not make any real difference. But that is not likely to be the case in industrial offshore fisheries. To the extent that limiting foreign participation takes out potentially efficient participants, it clearly reduces the efficiency gains from transferability

Namibia’s fisheries management regime is relatively open to foreign participation, in that there is no maximum limit on the level of foreign participation in a right-holding venture. But there is a price, in that the terms of rights and levels of quotas and fees are less favourable when ventures are not Namibian-controlled. This approach has been sufficient to ensure a high degree of Namibian control while allowing foreign participation where foreign investment can contribute to improving efficiency. Of course, Namibia’s position in respect of foreign investment is different to many countries because there is an open investment code set out in the Foreign Investment Act; and there was a relatively great need when the fishing industry was initially developing for capital, skills, technology and market access. But it is also likely that the relative openness to foreign investment is one of the reasons why the Namibian non-transferable quota system seems to have performed relatively well, even in comparison with systems involving greater transferability.

4.4.3 Simplicity/complexity

Having a simple fisheries management system was a necessity for Namibia because of its institutional and human-resource constraints. But it was also designed to be a virtue. Theoretically, rights should be as complete as possible to be fully effective. In fisheries, this has been taken to mean that rights should cover as many components of the catch as possible, especially in terms of species; and some rights-systems have gone a long way in applying rights and quotas to a large range of stocks. In Namibia, we have gone in the opposite direction. Seeking to avoid the complexities that arise when there is more than quota required to fish, quotas are applied only to the one major target-species in each fishery; and catches of other less important species in the catch are managed by taxes only. This system has been very effective. But the success in part reflects Namibian conditions where there are few significant species in the catches; and it would also not work without the full observer coverage of the Namibian system.

4.4.4 Concentration and competition

Managing concentration and maintaining competition may also be an area in which there can be advantages in non-transferable systems. In almost all discussion of transferable rights systems, the potential for, and effect of, greater concentration is a major topic. Greater concentration, as reflected in a smaller number of participants in a fishery, will usually be part of achieving the economic gains from rights-based management, especially where there is transferability, since an essential part of addressing over-capitalization is to reduce vessel capacity - and to that extent is a desirable outcome. The danger is that transferability might create new, artificial effects favouring scale. Managing rights and quotas may become so demanding that a company’s success in acquiring the right quota-mix might become a more important determinant of its success than the efficiency of its fishing operations; or larger and more diverse quota-holdings might reduce the risk of severe penalties or costs associated with having to adjust quota-holdings to changes in the pattern of fish availability that also introduce a new advantage for scale. If these effects become major and reduce competition, then there can be real economic losses. Concentration limits can avoid extreme concentration developing, but there might be reduced competition well before the limits are reached. In Namibia, we attach great importance to maintaining strong competition; and we deliberately manage rights and quota-allocations to maintain a highly competitive setting. While it is difficult to measure the real benefits of enhanced levels of competition, we are encouraged by the successes that have resulted from the vigorous, outward looking attitude of the Namibian industry to continue with this commitment to strong competition.

4.5 Security

To be effective, rights have to be secure, both in the sense that right-holders meet responsibilities associated with the exercise of their rights; and that those without rights are not able to exercise the opportunities that belong to right-holders.

There are a number of approaches to ensuring the security of rights and the scope for alternative approaches is increasing with gains in technology, especially in information handling. In Namibia, a very high priority is attached to surveillance and enforcement of the rights-regime. There are dedicated air and sea fisheries patrol services; there is 100% observer coverage (except on a few smaller vessels); and there is 100% physical monitoring of landings and transhipments. This system seems to have worked well in securing rights both by deterring illegal fishing by unlicensed vessels, and by achieving a high degree of compliance by vessels licensed to rights-holders.

5. OTHER ISSUES ASSOCIATED WITH RIGHTS-BASED MANAGEMENT

5.1 Equity

Surely, the most basic question that has to be faced in any rights-based approach is that of fairness. The issue of fairness arises at two main levels. First, there have to be limits on who can participate. But, is that fair in itself, and what is a fair basis for deciding on who can participate in fishing? And second, to the extent that there are different levels of access through quotas, or some other form of process of allocating, there are questions about the fairness of the relative allocations among participants.

These questions are always difficult to deal with. Even in the simplest cases where there might be a stable mature fishery with clearly defined patterns of participation over time which might be taken as a basis for establishing rights, there will still be a range of difficult questions. Will rights be allocated only to the vessel owners - what about crew; or processors, or those employed in processing? What about the interests of others dependent on the exercise of the rights - in a particular community or sector of the industry? Recalling that many offshore fisheries conducted in the EEZ do not have long histories of stable operations, since they have only been in place in their present form for 20 or 30 years during which time many have gone through major restructuring, it will often, and perhaps usually, be the case that there will not be a clear basis for determining a historical pattern for participation in rights.

5.2 Wealth

Related to fairness is the issue of high earnings in the form of profits, income and wealth. Well-managed fisheries, (and rights-based management is one way to secure a well-managed fishery) can generate extraordinary profits, and therefore individual incomes and wealth, that can be sustained over long periods. This can be apparent at a local level within communities heavily dependent on fisheries; or at a regional or national level in regions or countries where fisheries is important. Certainly, in Namibia, at present, the high level of earnings of individuals associated with the industry is reshaping attitudes to wealth. The new wealthy are not, as before, those with major investments in mining, farming or trade, but now increasingly include those with investments in fishing. The perception of high earnings is not tied only to the owners of the businesses; skippers of even relatively small boats have earnings that make fishing a serious alternative as a career to (for instance) law.

These high earnings have many positive impacts apart from the benefits of increased investment and spending in the economy. They attract both capital and people. Indeed one of the most satisfying features of Namibia’s fisheries development is the way the industry is mobilising domestic capital both from institutions and private individuals, whereas in its early days it was heavily dependent on foreign sources. The sector is also attracting some of Namibia’s most capable people to work in it.

But these high earnings also bring problems in several ways, especially at the political level, and especially if, as in Namibia, the income distribution across the community is already highly and inequitably skewed. First, they bring increased pressure for access. When the pie is fat, more people want a share; and there is inevitably more force to the arguments for allowing large participation, and more vigour to the efforts of individuals and businesses to secure rights to participate. Second, the higher returns increase the attractions of non-compliance. Third, the higher returns can lead to huge disparities in earnings between those in the private and public sectors. Among other effects, this can lead to problems in retaining capable staff in the administration, and maintaining the integrity of surveillance and enforcement services.

The effect of high earnings is clearly strengthened where there have been problems in defining the basis for the pattern of participation. Indeed, the combination of high earnings, alongside widespread, deeply-felt concerns about the fairness of the pattern of participation is perhaps the most serious threat to the successful operation of a rights-based management system.

The appropriate response will vary widely. In Namibia, there are three important elements to coping with the pressures caused by high earnings.

The first is to extract some of the earnings for State Revenue. Making rights-holders pay a significant price for the exercise of their right and using those clearly-measurable revenues for public purposes (which in Namibia largely means the health and education services which are a major focus of public spending) can in the Namibian experience go a long way towards addressing the pressures caused by high earnings accruing to rights-holders.

The second important element in Namibia is to secure contributions to broader development-goals from individual companies. High earnings are more acceptable when the public perceives that the earners are creating jobs for others.

And the third is to see the benefits widely distributed. Policies which encourage job creation; and labour market conditions which see a fair share of increased earnings passed on to workers both in earnings and working conditions also contribute towards increasing acceptance of high earnings.

5.3 Compliance

The effectiveness of rights-based management depends on securing a high level of compliance. The effect of a rights-based approach on attitudes towards compliance is mixed, but from the Namibian experience, generally positive. First, with a rights-based system, there is a real incentive to rights-holders to be self-regulating and to be particularly cooperative in deterring non-compliant behaviour by others since that behaviour will generally be seen as damaging the value of the right. In Namibian experience, high levels of fees for fishing seem to have had a particularly positive effect on self-regulation - no fishing company wants to see a competitor taking for free, outside a rights regime, catches that a right-holder has a stake in, and is having to pay dearly for.

5.4 Discarding/dumping/highgrading

A particular problem with quota-systems is dumping or high-grading. This happens because a quota-holder might be able to maximise profits by discarding some of the lower value forms of catch covered by quotas in order to maximise landings of higher value forms. Namibia has two particular problems in this area. One is the dumping of large purse-seine catches where catches are made up of a mix of pilchard (caught under quotas) and other pelagic species, in such a way that the catch is only good for processing into fishmeal, rather than canning, for which pilchard landings are much more valuable. The other is the dumping of small hake, in order to maximise landings of larger, more valuable hake. There are various options for dealing with these problems. The Namibian approach is a total ban on discards of marketable fish, including all quota species. In Namibian experience however, this can only be effectively enforced with full observer-coverage, and was initially the main reason for the establishment of the observer programme in Namibia.

There are reasonable grounds for arguing that some measure of discarding/dumping/high-grading are in fact optimal - that it does not pay in economic terms to go to the expense of retaining and landing some lower-value components of the catch; and that an efficient fisheries management system should allow this to take place. That may be true - but it seems just as true that with public, and especially consumer-attitudes to responsible fishing developing as they are, fisheries management systems that create incentives for dumping and allow it, are going to come under increased scrutiny and pressure for change. Certainly in Namibia, we are not contemplating any change to our “no discards” rule.

5.5 Overcapacity

From the beginning, the Namibian Government was concerned about the potential problem of overcapacity. While one of the strengths of a rights-based system is that it should not promote overcapacity, there was still a deep concern that in the position where the Namibian fleet was small to begin with, some explicit effort should be made to avoid excess capacity developing. This concern was enhanced by a rush of investment in vessels in the period before the introduction of the new system of rights and by a concern that the introduction of many new small businesses might also lead to over-investment in vessels. In response, the 1991 White Paper proposed to tie rights and quotas to vessels, with principles that were taken up in the introduction of a vessel-quota system in the demersal fishery in 1994, which was proposed to be extended to other fisheries. In fact, the vessel-quota system in the demersal fishery was later scrapped for the reason that it was cumbersome, and the Ministry lacked the administrative capacity to sustain it. Today, there is almost no direct regulation of capacity in the Namibian fisheries sector; and no plans to introduce it. Nor is there any evidence of major problems with the development of long-term excess capacity - although there are pockets of long-term excess capacity associated with two fisheries (rock lobster and pilchard purse-seining) which remain at historically depressed levels.

5.6 Subsidies or taxation

In Namibia, the fishing industry is not subsidized and Namibia is opposed strongly to the subsidy policies of other nations, both on the grounds that subsidies cause over-capitalization which leads to over-fishing, and because subsidies distort trade unfairly. Some say that our differential quota-fees are a form of subsidy to some components of the fishing industry such as the Namibian-controlled companies and those that process onshore. That might be a matter of definition, but what is clear is that the Namibian fishing industry as a whole is not subsidized. Instead it is taxed, especially through the quota-fees. This must be one of the real attractions of a rights-based system. On the one hand, the application of a rights-based management should lead to healthier stocks, improved compliance and a more efficient industry that can earn healthy profits. And on the other hand, the limiting of access and definition of defined levels of fishing for each participant provide a basis for extracting some of the profits.

How high should the profits be? This will vary with the productivity of the resources, the efficiency of the technologies used and the market values. But, it seems that today if one takes the prevailing and increasing high prices for fish, (especially demersals and crustaceans, but increasingly also for pelagics), and the increasingly cost-efficient harvesting and processing technologies, then it should be possible in any well-managed fishery to generate profits in the range of 20 to 50% of revenues.

How much should the government extract? This can vary widely. At one extreme, some argue that the Government can extract rents until profits fall to “normal” levels that are attracting only the level of capital needed to harvest the allowable catches, while at the other extreme is the view that since the profits are the result of the exercise of property rights, profits from fisheries should not be subject to any greater extraction of revenues than in other sectors. Between these limits there is a wide range of opportunities for extracting revenues for the government. In Namibia, we were initially extracting over 15% of landed value in fees and charges. Over time we have not adjusted the fees and charges vigorously, in part because of the difficult conditions faced by the Namibian industry in 1996 and 1997 because of adverse environmental conditions. So, at present, fees and charges amount to around 8% of landed value. Certainly, in most substantial modern fisheries, there should not be any real problem in extracting through rights-based arrangements, at least 10% of the landed values, whether for management costs or additional revenues.

5.7 Industry/Government relations

Industry and government relations are an important component of rights-based management systems. By definition, if one moves to rights-based management, one encourages a serious strengthening of interest among participants in the fishery in the way the fishery develops and is managed. By limiting and defining who can participate in a fishery and what the pattern of participation will be, rights-based management both encourages those in the fishery to work more closely together among themselves, and encourages a closer working relationship between government and industry. We have found that this has led to the emergence of a well-organized structure of consultative bodies within the fishing industry. In Namibia, this is based largely on formal Industry Associations for each fishery with a looser industry-wide umbrella committee.

Of course, this is not always comfortable for a Government. It is one thing to have the benefit of an effective, and sometimes almost cosy, relationship with the industry to discuss issues of common interest and to get the inevitable benefits that come from getting a better understanding of each other’s experience, interests and points of view. It is another thing to be faced with industry structures that are well-funded and have the resources to present highly effective opposition to ideas and decisions that it does not perceive to be in its interests. Without opening up the whole discussion on co-management, Namibian experience suggests however that there are major gains from working within more cooperative arrangements between industry and government.

6. PERFORMANCE OF THE NAMIBIAN FISHERIES MANAGEMENT SYSTEM

6.1 Responsibility and efficiency

Arguments for rights-based management usually depend on two major benefits - responsibility and efficiency:

i. responsibility, in the sense that creating a feeling of ownership by those fishing encourages fishing practices which are more sensitive to the impact of fishing on fish resources and

ii. efficiency, especially in the sense of reducing over-capitalisation or the risk of over-capitalisation, and thus creating higher profits and economic rents.

6.2 Stocks

Perhaps, the key measure of whether rights-based management has led to more responsible fishing is the impact on fish stocks. At this point, there are limits to the measurement of the performance of the Namibian fisheries-management system in terms its effect on stocks because of limitations in the available scientific information. In addition, the assessment of the impact on stocks of fisheries since Independence is complicated by the occurrence of major environmental changes during this period, particularly a sustained period of adverse conditions that led to reductions in TACs in most stocks from 1994 to 1997 causing a decline in landings over that period (Figure 1).

Generally however, it seems that most of the major stocks are now in a stage of strong growth. More specifically, we consider that of the six major stocks on which our research efforts are focused since Independence;

i. horse mackerel and monk are now in a healthy condition

ii. hake and rock lobster are apparently recovering strongly, but are not yet fully recovered

iii. deepwater crab, remains uncertain after a long-term decline

iv. pilchard, is clearly still at a low level.

6.3 Namibianization and empowerment

Relating rights, quotas and quota fees to achievement of broader policy objectives such as Namibianization and empowerment has proven to be highly successful in achieving these objectives. Table 1 sets out some indicators of performance in Namibianization.

Table 1: Some indicators of namibianization performance

Quotas	Effective Namibian share of control of quotas
	(1989)	(1999)
Hake	16.5%	71.7%
Horse mackerel	13.7% (1990)	72.6%
Pilchard	37.2%	82.2%
Vessels	Namibian vessels as proportion of licensed fleet
	(1991)	(1998)
	50.5%	83.8%
Crew	Proportion of Namibian crew
	(1994)	(1998)
	41.5%	66.0%

6.4 Financial performance

With the Namibian fisheries policies having been in place for a relatively short period, it is not completely clear how successful the building of a really viable industry has been, but the signs are encouraging. The adverse fishing conditions in 1996 and 1997 were reflected in poor returns for the industry in those years so that in 1997, for example, the annual rate of return on assets before interest and quota fees was only 19.9 %. There was a strong recovery in 1998 for which provisional stimates across the industry as a whole show that rate of return on the value of fixed assets before interest and quota fees to be around 40% despite continuing losses in the small pelagic sector. After quota-fees and interest this left net profits of around 24% before tax, which is still lower than is desired. However, a substantial further improvement is expected in 1999 to a level of earnings that should represent annual rates of return on fixed assets before interest and quota fees in the range of 50-60%. If this can be sustained in the longer term, this will be deemed satisfactory.

Figure 1: Landings (1990-1998)

6.5 Stability

One measure of the performance of a policy is its stability. While it is important that policies should be flexible enough to be refined as conditions change, it is also important that the broad policy-framework should be fairly stable over long periods, especially where it affects investment. In this respect, the Namibian policy has been successful. There is a healthy ongoing debate in Namibia about major aspects of the fisheries-management regime, but the essential elements of the system have been little changed since they were introduced over a two year period from 1991 to 1993 and there is no real pressure for basic changes.

6.6 Cost-effectiveness

Limiting access and fishing mortality is inevitably an expensive exercise because of the additional effort needed to provide a credible scientific basis, more rigorous monitoring, surveillance and control and more full developed processes of consultation with the fishing industry. There are a number of ways to reduce these costs. But whatever approach is used, it is important to avoid dissipating the potential benefits of rights-based fishing in administrative costs to the government, or in the cost burden on the fishing industry. At present, the full cost to the Namibian government of fisheries management, including the full cost of all fisheries and aquatic science, and all maritime surveillance control and including the cost of full observer coverage and full monitoring of landings and transhipments represents 6.1% of landed value, and 4.3% of the final value of fish production. We believe this is within reasonable limits by comparison with the costs of other comprehensive fisheries-management regimes.

6.7 Economics

The economic performance of the sector is summarised in Table 2.

The economic gains for Namibia from its fisheries management system have been encouraging. Since 1990, the value of fisheries output including processing has grown from $N500 million to $N2,2 billion. (Currently US$1 = $N6.1). Following this growth, the contribution of fisheries to GDP has grown from 5.4% in 1990 to 10.0% in 1998, making fisheries the second largest economy-sector, about 20% below mining. Fisheries products earn around 20% of export receipts. On current trends, fisheries might reach a level broadly equal to mining in 3 or 4 years. Interestingly, the contribution to GDP of fish processing is higher than that of fishing, with Namibia currently creating more jobs and earning more income from processing fish than from catching it. With a lot of scope still for increased value adding this margin is likely to increase further.

Within the total value of production, the demersal fishery mainly based on hake, makes up nearly half of the total output of the sector. Looking ahead, with scope for moderate increases in catches, an outlook for firm prices in main markets, scope for further value adding, and further Namibianization, the value of sector-output and the contribution to GDP could roughly double over the next five years. This pattern offers the prospect of substantial improvements in the economic welfare on many Namibians. However, the table also shows the effects of changes in environmental conditions, especially the adverse effect on earnings in 1996 because of low pilchard-landings.

7. CONCLUSIONS

In Namibia, we have concluded that rights-based fisheries-management is the right way to manage fisheries. There are a number of very difficult problems associated with rights-based fisheries-management, and therefore the appropriate form of rights-based management may vary widely, but any rights-based management system must have the essential elements of effectively limiting the fish that are taken, and who may take them.

In Namibia’s case, we think that we are achieving in large measure the gains that we were looking for from rights-based management, especially in the following respects:

i. we have a responsible industry - and stocks are improving

ii. we have a profitable industry - and it is investing and creating jobs and increasing incomes and

iii. we have an industry that is developing in ways that meet our objectives of Namibianization and empowerment.

Table 2: Fisheries contribution to the economy (1990-1998)

	1990	1991	1992	1993	1994	1995	1996	1997	1998
Catch (t)	407 901	591 658	654 006	789 133	647 996	568 634	524 007	511 412	605 854
Value of production ($Nm)
Landed Value	329.9	519.8	617.3	708.9	881.8	937.3	1220.7	1292.6	1558.0
Final value	500.0	643.9	853.1	1086.7	1364.9	1453.0	1509.2	1706.2	2226.6
Contribution to GDP ($Nm current prices)
Fishing	128.5	182.6	243.0	291.2	349.0	376.4	476.5	491.1	616.1
Processing	167.8	130.2	229.8	350.0	493.9	550.2	354.2	525.4	861.2
Total fisheries	296.3	312.8	472.8	641.2	842.9	926.7	830.7	1016.5	1477.3
Total GDP	5479	6223	7215	7612	9381	10278	11861	13136	14845
Contribution to GDP (%)
Fishing	2.3	2.9	3.4	3.8	3.7	3.7	4.0	3.7	4.2
Processing	3.1	2.1	3.2	4.6	5.3	5.4	3.0	4.0	5.8
Total fisheries	5.4	5.0	6.6	8.4	9.0	9.0	7.0	7.7	10.0
Value of exports ($N$m)
Fish products	394.9	446.6	674.3	900.8	1184.6	1280.1	1237.4	1461.7	2033.8
Total exports of goods and services	3157	3656	4224	4971	5608	6288	7485	7942	8875
Contribution to exports (%)
Total fish	12.5	12.2	16.0	18.1	21.1	20.4	16.5	18.4	22.9

8. LITERATURE CITED

Government of Namibia 1991. Towards responsible development of the fisheries sector. 65 pp.

Canadian Experience with Individual Transferable Quotas - D. L. Burke and G. L. Brander

Policy & Economics Branch, Dept. of Fisheries & Oceans, P.O. Box 1035
Dartmouth, NS, Canada B2Y 4T3
<[email protected]>

1. INTRODUCTION

The appearance and growth in use of individual quotas (IQs) in Canadian fisheries has not been the result of a formal national policy to move fisheries in that direction. Rather, the early programmes were experimental in nature and cautious in the freedom given to holders of fishing licences who participated in the programmes. Although IQs have been in use for 25 years, and are currently in place in over 40 fisheries or fishing fleets, there is no government plan to expand their use into the remaining fisheries. When new IQ fisheries develop, it will be at the instigation of the licence holders. The policy on IQs has been to permit them to develop as extensions of the fishing licence, where a significant proportion of licence holders in a fishing fleet requests to have IQs and where they can reach agreement on a sharing arrangement and a fishing plan.

There has been an ad hoc development of IQ programmes and the design and even the nomenclature used reflects this development. The following terms are commonly used in Canada to describe variations on individual quotas. The term IQ in this paper refers to any, or all, of these variants:

IQ	individual quota
ITQ	individual transferable quota
IVQ	individual vessel quota
EA	enterprise allocation (a quota allocated to a company to use on any of its licensed vessels)
QE	quota entitlements (Lake Winnipeg).

One by one, groups of fishermen numbering from a few dozen to a few hundred have opted for individual quota management for their fleets. Every programme is different in its origins, its allocation base, and its rules of operation. The birth rate of new IQ programmes has accelerated from the 1970s to the present. This paper attempts to briefly explain the success of IQs in Canada.

Individual quota programmes have not generally been put in place because they were deemed to be superior to some functioning alternative. They have replaced dysfunctional fisheries management systems, or systems which could no longer be afforded. Fishermen, or fisheries managers, have sought relief from overfishing, endless quota or catch allocation disputes, overcapitalisation, low incomes, non-competitiveness in markets and so on. One or more of these conditions frequently preceded the introduction of an IQ programme in a specific fishing fleet, and the IQ has been expected to play a remedial role. These are not the ideal conditions for developing a whole new management regime in a fishery, but the IQ programmes have proven resilient.¹

¹ Fisheries closures have put some IQ programmes on hold pending stock recovery. In addition to closed groundfish fisheries in Newfoundland, the Gulf of St. Lawrence, and eastern Scotian Shelf waters on the Atlantic coast, the Pacific abalone fishery has been closed to harvesting since 1990. Abalone fisheries in the U.S. Pacific without IQ management have also been closed.

The federal government has jurisdiction over the management of marine and inland fisheries resources. The provinces have jurisdiction over property rights and all matters of a private or local nature. The federal Fisheries Act assigns the powers to issue licences and to make allocations to the Minister of Fisheries and Oceans. The Act does not prescribe how fish or licences are to be allocated, nor does it prevent a considerable degree of variation, experimentation and adaptation to changing circumstances. As a result, fisheries access and allocation have largely been issues of administrative policy.

The term “fishing rights” is not legally accurate in commercial fisheries in Canada. The licence is considered a means of controlling fisheries, not a grant of fishing rights. The term “fishing privilege” is used by management authorities in formal documents. There are no significant differences in law between a licence with various conditions attached (e.g. regarding gear or seasons), and a licence that, in addition, proscribes an upper limit on catch.

Both non-IQ and IQ fisheries, however, share some characteristics of property rights² despite the lack of recognition of such rights in legislation. There is a degree of exclusivity in the licences which is enhanced by the issuance of an individual quota. Virtually all Canadian commercial fishing licences are limited in number, effectively barring the vast majority of citizens from commercial fishing. Although the Minister has authority to issue new licences, that authority is not used except where new effort is justified in a new fishery (e.g. sea urchins) or when a broader distribution of income is deemed desirable in an expanding fishery (e.g. shrimp, crab). By the nature of the resource, no fisherman can be insulated from the effects of others fishing the same stocks.

² For a discussion of the characteristics of a property right, see Scott (1996).

Another property-like characteristic is the transferability of licences and of quota. Formally and legally, a fisher planning to get out of a fishery must surrender his licence to the government which then has the option to retire the licence or reissue it to a qualified recipient. However, policy also provides that the licencing authority will abide by the advice of the departing fisher as to who should benefit from the reissue of his licence or quota - assuming qualifications stated in policy are met. Thus a directed transfer may occur where no sale is legally possible.

This example of how transferability works in the fisheries is illustrative of the environment in which Canadian fisheries policy has developed. Real property rights in fishing have not been granted through legislation. However, formal administrative rules have been systematically applied through licencing policy and management plans. In a later section of this paper, other property-like characteristics will be discussed as specific design features of certain IQ programmes.

3. EVOLUTION OF IQs IN CANADA

3.1 Context

Canada is a large federation with fisheries on three oceans and in inland waters. There is a wide diversity of economic and social circumstances among and within fishing communities. There is an equal diversity of views on how to manage fisheries. Fisheries have evolved in different directions with regulations best suited to each set of circumstances. In this environment, it would be difficult to prescribe a management regime suitable to all fisheries. The policy on IQs, therefore, has been to allow them to develop in fisheries where a clear majority of licensed fishers support such a change. IQ programmes have been dealt with case-by-case, usually in response to serious fish management, or incomes, problems. There are now more than 40 IQ programmes in Canada (Appendix 1) of various sorts, accounting for over half of the value of fish landings. Most quota-managed fisheries have moved to IQs. The major non-IQ fisheries currently are Pacific salmon and Atlantic lobster, neither of which is managed by a Total Allowable Catch (TAC) or quotas.

There were some tools of fisheries management used in many fisheries that have gradually paved the way for the transition to individual quotas. In most cases, IQ schemes evolved from limited access competitive quota fisheries. This, and the experience with the licensing system, gave fishermen a degree of comfort in entering IQ management that would have been absent if the base management regime had been more sudden and unrestricted.

3.2 Limited entry

Limited entry began to be imposed on commercial fisheries in the 1960s. Up to that point access was relatively unrestricted to anyone wishing to pay a nominal fee for a licence. This began to change when the ease of entry brought too much fishing power into the industry and low incomes began to stand in stark contrast to other post-war Canadian industries. Beginning in 1967 with lobster fisheries on the Atlantic Coast, followed closely by Pacific salmon fisheries and eventually in all important fisheries, the number of licences permitted in the fishery was frozen.

Limiting the number of licences meant that commercial access to the more lucrative elements of the public fisheries resources would only be available to a small part of the population. Initially the licences were non-transferable, although with special rules governing transfer of the licence to sons and daughters of licence holders. Over time, the practice emerged that DFO would reissue licences from one fisher to another upon request of the two parties involved - a retiring fisher and a new entrant - providing the new fisher met the qualifications for entry. There inevitably developed a market for these privileges. In fisheries where a licence could earn a significant income, the payment for a licence might be well over $100 000, even in inshore fisheries. Once a fisherman had paid a substantial sum for a licence, he had a great interest in maintaining the value of his investment. While this created financial barriers to entry in some fisheries, the value was derived from the earnings power of the licence. This market allocation process was and still is generally preferred by fishers over an alternative which might involve transfers through selection by a committee or board, or simply by lottery (which is often used to select entrants to new fisheries).

3.3 Catch quotas

Total Allowable Catches in many fisheries are set at the species-stock level as a conservation measure. The TAC is then broken into fleet quotas primarily for allocation purposes. The first quotas in major fisheries in Canada were instituted through ICNAF (International Commission for the Northwest Atlantic Fisheries) in the 1960s as a means of allocating groundfish fishing effort to the many nations fishing the banks along the Atlantic Coast. Over time, Canada began to divide out the domestic allocations among the domestic fleets: first simply by inshore-offshore; later by vessel-length class, gear-type and geographic area. The fleet shares were broken down more and more over time, to resolve various disputes or to remedy imbalances among groups as a result of fishing power, or proximity to resource or ability to fish in bad weather. Most recently, in one management region, the groundfish quota allocated to the large group of inshore fixed-gear fishers has been broken into community quotas based on counties along the coast.

Long annual debates over fleet shares have abated over time. The DFO has been less willing in recent years to revisit fleet allocations in response to pressure from fishermen or other interest groups. The resulting stability has led fishermen in most fleets to focus on management problems within the fleets rather than to seek solutions through larger shares of the TAC. This experience of Canadian fishermen with the incremental breaking down of stock-based TACs into manageable fleet quotas has meant that the additional step into individual quotas has been a relatively minor one. This transition has been further facilitated by the acceptance of historical catch as one of the major determinants of individual shares.

3.4 Industry participation in management

Industry’s role in management has evolved since the 1960s. When formal management plans were first introduced, licence holders organised for consultation. Annual fishing plans provided an important forum where licence holders, managers and researchers met and discussed allocation and management measures. Fishermen could influence the direction of management, provided consensus could be reached. Consensus developed most quickly in fisheries with relatively few participants or where the participants were like minded. In fisheries where the geographical scale, or number and diversity of interests of participants prevented consensus, they tended to stratify over time into more homogenous groups. If the fishery was controlled by catch limits, each group would receive a sub-allocation of the TAC or be assigned specific stocks. These decisions were reflected in subsequent management plans.

Once a fishery reached the stage where a like-minded group was formed, the licence holders could pursue changes to the management system that would benefit them. Many advocated use of IQ systems. A new IQ fishery could be introduced once a consensus was reached and appropriate management controls were in place.

IQ systems often demanded a greater level of management attention than the fishery was receiving. This required that the participants augment certain management functions, either through paying for them or through the direct participation in the function. The most common functions provided by licenceholders included monitoring, enforcement, and research along with a greater involvement in management planning. Co-management agreements were developed to formalise industry participation. The level of licence holder participation in the management of IQ programmes is generally greater than in non-IQ programmes.

3.5 Summary of key steps

The following were all important factors in the gradual strengthening of interest in quasi-property rights in Canadian fisheries:

i. Fishermen and the public had become accustomed to the exclusivity of fishing privileges through the limited entry licence and of the value of this near-property as an investment.

ii. The industry had learned the advantages of letting a market develop to handle the distribution of licences after the initial issue.

iii. TACs in fisheries, together with fleet and sometimes community quotas and associated monitoring systems, had familiarised fishermen with the idea of stable catch shares and with the basic controls necessary for IQs.

iv. Fishermen and managers had learned that parts of fisheries, parts of fleets could develop different rules and regulations that did not necessarily negatively affect other fishers.

4.1 Initial allocation

The initial allocation of IQ shares in most programmes was time-consuming and difficult, but in no case did it present an impossible hurdle. Many fisheries, as stated before, were well on the way to IQ allocation as a result of TACs, established fleet shares, and limited entry licences. The limited licences set the boundaries for whom was to be considered for quota shares. When an IQ programme was proposed by licence holders in a fishery, the Canadian approach was to allow these licence holders, or a representative group of them, to devise a sharing system which would be acceptable to all or almost all members of the group. This has proven to be a highly successful means of achieving agreement, and well worth the time and effort involved in reaching a compromise. The DFO offered services such as data analysis and other support.

There was widespread use of historical catch (by vessel, by licence, or by fisherman) as one major factor for allocation of IQs, though often tempered by other criteria as well. Use of catch history was intended to allow fishing patterns in the immediate future to proceed more or less as they would have in the absence of IQs, although this is not always acceptable to everyone. Other factors such as level of investment (capital or vessel size) or equal shares per licence were sometimes factored in with a specific weight along with the catch history. In all cases, a well-defined formula was applied to all eligible licence holders to determine individual shares of the fleet’s quota. Provision of a minimum share to inactive licence holders in at least one IQ case helped secure their agreement with the programmes. A benefit of having relatively small numbers of fishers entering any one of these programmes at a time is that there was a certain amount of peer pressure within the fleet to develop a satisfactory formula and set of rules and then to accept them.

4.2 Characteristics of the shares

One major programme design issue was whether shares were to be tradable or not. This is often an important point to persons outside the IQ group and even outside the fisheries. There continues to be a fear that independent fishers will be swallowed up by ‘corporate interests’ in a transferable system. Occasionally this fear has been felt strongly enough within a new IQ group that the programme has been established with non-transferability as a key feature. In many cases, the restriction has been removed after a couple of years of operating with non-transferable quotas. A common transitional move has been to allow temporary transfers within the fishing year only, so that the next year’s allocation of quota will revert to the original quota holders. The realisation has tended to develop quickly among fishermen that many of the benefits of IQs cannot be achieved without some transferability. Among the programmes listed in Appendix 1, half currently have permanent transferability of quota, although often with many conditions attached. Interestingly, even where non-transferable quotas are preferred, no Canadian IQ fishery has ever sought to prevent transferability of licences, which means that a fisher can transfer quota so long as he transfers the licence as well.

The Enterprise Allocation programmes on the Atlantic Coast in offshore groundfish, shrimp, scallop and clam fisheries represent a unique application of IQ principles. Companies (not individuals) were allocated EAs (quotas) to be harvested with their own licensed vessels. Thus transferability could be achieved within the company if it owned more than one fishing vessel. Inter-company transfers of quota are either prohibited or extremely limited. The EA programmes were among the earliest IQ initiatives in Canada, and were largely responsible for resolving major economic adjustment problems in the offshore groundfish and scallop fisheries in the 1980s.

Divisibility of shares has developed in various ways across IQ programmes. In some cases, e.g. the multi-species Scotia Fundy groundfish mobile-gear and the Pacific groundfish trawl IVQ programmes, there is near-infinite divisibility down to small fractions of percentages of the fleet quota for any of the groundfish species involved. This facilitates very small trades, which are frequently used to cover accidental bycatches or over-runs when the fisher has insufficient quota. Such post-trip trading is permitted in these fleets to reduce the incentive to discard. In other cases (e.g. Pacific Geoduck, Sea urchins), there is no divisibility of quota and “stacking” is the only way of accumulating quota. This means that another fisher’s entire quota and licence must be acquired and added to the buyer’s quota.

There are other characteristics of shares that are less controversial and generally do not vary greatly among Canadian programmes. Many of these have already been discussed in Section 2 Legal and Policy Context above. The IQ shares are essentially catch limits which are specified in licences, hence the durability of the shares is the same as the durability of the licences. Licences authorising the individual quota must be issued by the Minister for a limited term up to nine years³, although to date the term has usually been just one year. Even licences issued for one year are automatically renewed giving them an indeterminate lifespan, although they may be suspended at the Minister’s discretion at any time.

³ Fisheries Act of Canada, Sec. 7(2).

The various characteristics of IQ shares in Canadian fisheries have grown out of the country’s very limited legal recognition of fish harvesting privileges, out of the management practices that preceded IQs, and out of the accepted norms of the fishers themselves. Although revision of the terms of an IQ programme would be relatively easy with consent of the relevant licence holders, in fact the rules in most programmes have been quite stable over the years they have been in existence.

5. IMPACTS OF CANADIAN IQs

5.1 Large scale resource changes

Generally, there has been such dramatic change in so many Canadian fisheries in the past ten years that it is impossible to isolate the effects on resources of a change in management practices such as IQs represent. While the offshore EA fleet has been accused of hastening the collapse of the northern cod fishery, similar declines have occurred in some Pacific salmon stocks where there has been no quota management at all. There is no consensus in the scientific community on the causes of the stock collapses, but there is mounting evidence that changes in the environment have drastically impacted productivity and survival of groundfish and salmon stocks. On the positive side, East Coast shrimp and crab stocks have experienced unimagined growth in recent years. Both species are under IQ management. Where there were identifiable gaps in research, in catch monitoring or compliance with gear regulations, or any other observable weaknesses in management related to conservation or the sustainable use of the resource, IQ fleets have shown initiative and a willingness to co-operate to resolve problems.

5.2 Catch monitoring and enforcement of regulations

The most dramatic change in enforcement under IQ management has been the result of mandatory dockside monitoring of catches. Some of the earlier IQ fisheries did not set up accurate catch monitoring systems, choosing instead to keep the traditional voluntary reporting systems supplemented with purchase data from buyers. This was soon recognised to be inadequate. Since about 1990, most if not all of the IQ fisheries have implemented dockside monitoring systems to weigh catches and identify species at the point of landing. The monitoring is performed by independent companies and paid for by fishermen. In addition, in many fisheries, hails (radio reports) from vessels at sea are required to enable more complete monitoring of fishing activities. The DFO enforcement staff are improving their skills in forensic auditing and related data-tracking activities.

It is believed that the level of compliance with dockside monitoring is high, but enforcement staff acknowledge that dockside control of landings does not address at-sea violations such as discarding or highgrading. This has been resolved to varying degrees in the different fleets by use of on-board observers. Technologies such as on-board cameras have been developed, but are not in widespread use to date. GPS positioning technology is in use in the offshore scallop fishery on the Scotian Shelf and Georges Bank to help enforce a system of fishery bank-specific IQs. The satellite reporting system gives precise location information on each vessel in the fishery. It is a reasonable alternative to observers in cases where confirmation of area of catch is required.

It has been difficult to track the impacts of IQs on the cost of fisheries enforcement. It would require an accounting system capable of distinguishing enforcement costs on a fleet-by-fleet basis, due to the complicating reality of fisheries being partially IQ and partially non-IQ. There are still substantial inshore fisheries on both east and west coasts that are outside the IQ domain. Many enforcement activities (including land, sea, air patrols) are multi-tasked, covering a number of fisheries at once and are also intertwined with search and rescue and international boundary patrols.

Frequently, in Canada, IQs have replaced more complex and more expensive management schemes, which sometimes involved catch limits by species and by area for each fishing trip. IQs in other situations have created more difficult enforcement problems than they replaced. In general, there is no evidence that IQ management has led to increased enforcement costs compared to the cost of managing previous competitive-quota regimes.

5.3 Economic impacts

5.3.1 Capacity rationalisation

Normally a reduction in numbers of active fishing vessels is expected some time after the introduction of individual quota management with a quota transferability feature. This is often one of the primary purposes of implementing IQs in fisheries with excess capacity. Most transferable IQ fisheries in Canada have experienced such an effort reduction. Where TACs have been dramatically reduced for conservation reasons, as in Atlantic groundfish, the capacity adjustments by the IQ fleets have been swift and required no government intervention to determine which licences (if any) could continue to fish.

The IQ fisheries which have shown the least adaptation of fleet capacity to resource levels have been those where there were serious constraints on adjustments. The well-documented case of the Scotia-Fundy herring purse seine fleet (Stephenson et al. 1993) may be the best example of a poorly-designed IQ plan. Quota in the initial ten-year herring IQ plan was not tradable except where the seller was exiting the fishery permanently. Further, this fishery had a defined ten-year lifespan with no plan for what would occur at the end of its term. Another key element was the lack of adequate monitoring of catches. Under these conditions, few licence holders were willing to leave the industry and few fishers were prepared to buy quota if catch limits would not be enforced. At the end of the ten-year plan, there was still excess capacity in the fishery. In the absence of a new long-term agreement, some modifications were made in the IQ shares and the fishery has operated by ‘rolling over’ the old plan on a year to year basis.

There have also been cases where fleet reduction was not necessary, such as the Quebec North Shore scallop fishery (Nadeau 1994), with only nine licence holders. A non-transferable IQ, or a plan limiting transferability, can work well in such circumstances, providing it allows participants the flexibility they need.

There has been some adjustment of the size of vessels used in the IQ fisheries. This effect is not always easy to isolate as quotas are usually allocated to fleets based on the size of vessels in the fleet (e.g. 45-65ft groundfish fixed-gear). The vessel replacement rules that restricted licence holders in competitive fisheries have been slow to change with the introduction of IQs. There is some evidence that inshore and offshore groundfish IQ holders are converging on what may be the most efficient vessel size for their fisheries.

5.3.2 Market impacts

Over time, there has been a general improvement in handling procedures on fishing vessels. There is a trend in all fisheries to the delivery of fresh product and this market demands higher quality. Vertical integration - by fishermen moving into marketing as well as processors establishing contractual links with fishermen - has spurred the use of refrigeration and better on-board fish handling. Integration of harvesting, processing and marketing and the growth of IQs have been complementary developments. IQs have created a fishing environment which rewards planning and organization, and integrated firms are more likely to recognise these benefits of IQs and to promote their use in fisheries.

Even IQs without transferability have been effective in relaxing the race for catch. Seasonal price differences and catch rates obviously enter the decision-making process, so there has not been a total smoothing of monthly catches over the year on any particular stock. When IQs were introduced in the Atlantic offshore groundfish fishery in the 1980s, there were immediate changes to monthly fishing patterns, yet overall some seasonal differences remained (Gardner 1988). One great benefit of IQs for this fleet was the elimination of “gluts” of cod in offshore plants early in the quota year, when, coincidentally, catch rates were high.

In the Pacific halibut fishery, the independence of timing which the individual quota programme provides, enables fishermen to supply the more lucrative fresh fish market over a longer part of the year. Previously the competition for catch resulted in large volumes of halibut being frozen because of the short duration of the fishery opening. And, due to higher prices, the IVQ provides greatly improved earnings to fishermen (Turris and Sporer 1994).

5.3.3 Employment and community impacts

Where there have been too many boats in a fishery prior to IQs, that number has decreased in cases where the programme rules have permitted quota transfers. With the decline in vessels, fewer individuals are employed although those that remain tend to be employed for longer periods of time, and earn better incomes. There have been no compensation for crewmen who lose jobs as a result of such changes.

Fleet rationalization is sometimes accompanied by changes in landing ports and of processing establishments. This can cause the displacement of processing workers, although it is presumed to be a dislocation of employment and not an overall loss. The national Employment Insurance (EI) programme supports seasonal workers when they are not working. For this reason, community leaders often promote “jobs” in fishing or processing over full-time employment. From this viewpoint, there can be a loss of jobs even when the amount of work is the same.

5.3.4 Concentration

Critics of IQs have observed a tendency for tradeable quota to become concentrated in the hands of a few companies. Where there is excess harvesting capacity in a fleet, introducing transferable IQs can quickly reduce capacity. A degree of concentration of ownership of IQs is the natural result of this fleet-capacity reduction. With fewer vessels fishing, fewer licence holders harvesting the quota. There is also evidence that processing companies have invested in IQs to a greater extent than they previously invested in licences. They are presumably attracted by the better profit-earning potential of IQ fisheries, by the security of supply for processing and marketing, and by the ease of matching capacity to quota through trades.

Licensing policy in Atlantic Canada prohibits the acquisition of licences for fishing vessels under 65ft in length by processing companies. But, the policy is difficult to enforce. It can be circumvented when a company has a private contract with a licence holder that may dictate how he manages his licence and quota. Obviously there may be many variations on such an arrangement, from a simple fish-delivery contract, to loans or assistance with collateral, to more complete control of the operation. These contracts among fishermen and others are private and outside DFO’s jurisdiction. There is no evidence that quota concentration has led to price-fixing in dockside markets.⁴

⁴ While the offshore lobster fishery has only two quota holders, this is a small part of the whole lobster fishery, which is highly competitive in both buying and selling.

5.3.5 Licence fees

In 1996, Canada introduced a much larger licence fee for access to commercial and recreational fisheries. Compared to the competitive fisheries, fees on the IQ fleets proved to be relatively simple to determine. Each licence holder’s fee was based on his allocation and was weighted by the landed price of the species. The rate was set at 5% of the average landed value of the species over a period of years though later modified somewhat at the lower end of the earnings scale.

5.3.6 Resource rent and profitability

The initial allocation of individual quotas has been free to those who received the quota. This may have resulted in a missed opportunity to seize some of the resource rent for the Canadian public, which owns the resource. However, the transition from common-pool fisheries to IQs would not likely have been achieved if the quotas had been offered on tender. Fishermen had held their licences since the 1960s/1970s, and were in many cases already financially insecure at the time IQs were introduced⁵. Realistically, there was no opportunity for rent collection at that point. There may have been an exception in new fisheries such as the sea urchin fishery in the Bay of Fundy. However, the current view of fishermen is that the licence fee more than compensates the public for its ownership of the resource.

⁵ Original licence holders had received their licences for a nominal fee, but after limited entry began, fishermen acquiring licences from other licence holders sometimes paid substantial amounts.

In response, temporary licences and IQs have been issued to fishermen in a number of crab and shrimp fisheries. The TAC is divided such that original IQ participants receive a quota based on historic shares up to a set threshold. Above the threshold, the original participants receive a small share with the balance allocated to the temporary IQ participants. There were fears among quota holders that, once in the fishery, the temporary participants would refuse to leave. However, temporary participants were removed from the Gulf of St. Lawrence crab fishery when stocks fell below the threshold in 1999.

5.3.7 Reduction in other forms of regulation

Much of the “micro-management” or minute levels of control on sea fisheries prior to IQs was in the form of conditions on licences, which varied by fishery as well as from year to year. Many of these have become unnecessary. Many IQ fisheries have seen a reduction in this type of control. For example, trap limits were dropped in the offshore lobster fishery once the IQs were established. There has been a virtual end to seasonal closures in groundfish fisheries where IQs are used.

One form of regulation which has been slow to disappear is the vessel replacement rules, which govern the size of boats permitted in various fisheries. With permanent IQ rights, such regulation should be unnecessary. These rules have been relaxed in some fisheries. However, because Canadian IQs do not enjoy any long-term guarantees, the changes have been slow in coming.

6. CURRENT DEVELOPMENTS IN THE FISHERIES

6.1 Emerging IQ programmes

IQ regimes are now often used whenever species are brought under management for the first time, e.g. sea urchins on both Atlantic and Pacific coasts. Where limited information is available to set a TAC, a low cautionary limit is set and the participants get access guarantees for a period in exchange for participation in the stock assessment process.

As time passes, the creation of new IQ programmes becomes less and less a significant event. The division (1998) of inshore Scotian Shelf groundfish quotas into community quotas⁶ allowed relatively small groups of fishermen to form management boards and to design their own fishing plans. Some boards opted for individual quotas. These were set up and administered by the community management group (i.e. the fishermen) with minimal input from DFO.

⁶ These community quotas are allocations of groundfish to fleets based firstly on the coastal region in which they reside. In one such region, groups have split out, based essentially on their preferred method of management.

6.2 Fishery of the future

A new “vision” has been adopted to guide Canada’s ‘Fishery of the Future’. It places conservation and environmental sustainability as the paramount priority. Next, aboriginal and treaty rights are to be satisfied, and the importance of recreational fishing is acknowledged. The vision calls for a commercial fishery that is economically viable, self-reliant and self-adjusting, and for resource users to take greater responsibility for managing the resource. The vision is broadly consistent with the emerging international agenda for managing oceans and living marine resources, an agenda that Canada supports. The results obtained in IQ fisheries can be used to develop the vision.

6.3 Legal and policy developments

Legal and policy developments in Canada relevant to the fishery include the passage of the Oceans Act (1997). This Act provides the legislative framework to apply the principles of sustainable development, the Precautionary Approach, and the integrated management of ocean and coastal activities and resources. The Act raises the standard for fisheries conservation and requires the inclusion of ecosystem considerations and objectives in fisheries management. It broadens the scope of issues that have to be considered in the planning process and extends the stakeholder base to include other ocean resource users, environmentalists, and the general public. There are widely differing levels of support among these groups for the creation of secure property rights in fisheries as a way of improving the management of oceans use.

A Bill to revise the Fisheries Act was advanced in 1999. It contained provisions to authorise the Minister of Fisheries to enter into long-term legally-binding partnering agreements with groups of commercial, aboriginal, recreational fishers, and other users. These agreements were presented as the logical next step in the evolution of fisheries co-management. They are to offer longer term security of access to groups willing to accept responsibility for management. They would not create property rights in the resource. Most IQ license holders supported the Bill, but other stakeholders were suspicious that this was an indirect way to privatise the resource and the Bill did not proceed.

Policy reviews are underway on both coasts. On the Pacific, a recently released allocation paper reinforces the position that the salmon fishery will be managed as a common property resource. A review of Atlantic fisheries is also underway with a report due next year. It aims to clarify current policies, particularly those related to economic and social goals and includes public hearings. The advantages and disadvantages of IQs and property rights are also discussed.

Thus, IQs have established themselves and enjoy strong support among the groups that hold them. However, there is little likelihood that the policy and legal changes now under consideration will elevate IQs to the status of property rights as in New Zealand or Iceland.

6.4 Opposition to IQs

There are a number of people both inside and outside the fishing industry who oppose the development of individual quotas. Much of the concern arises from the transferability aspect of IQ programmes. And, there are broader concerns about changes in direction in the fisheries:

i. ‘Privatisation’ of the common property fisheries
ii. Vertical integration of fishing and processing
iii. Concentration of ownership of licences
iv. Accumulation of wealth (relative to others in the community).

i. Concern about the consolidation of seasonal jobs into fewer year-round jobs
ii. Concern about depopulation of small communities.

6.5 Advantages and disadvantages of the Canadian approach to IQ management

The cautiously permissive approach towards IQs has had both advantages and disadvantages compared to alternative policies. These points are summarised below.

Advantages:

i. The approach matches the diverse nature of Canadian fisheries and the varying systems of management in use. The approach allows a natural outgrowth of previous management experience.

ii. Fishermen have gradually come to recognise the benefits of IQs, often from observing the results in fisheries that have them. Fishing groups have been able to adopt some of the features of IQs and to use them for awhile before opting (or not) for a more complete package.

iii. The initiative to implement IQs in most instances has come from the licence holders.

iv. Many of the fisheries have converted to IQs without the need for a major political battle to achieve an all-or-nothing resolution. Those who want IQs are generally able to.

v. Many of the benefits of full property rights have been achieved without the upheaval associated with trying to change laws to permit property rights in fishing.

i. The diversity in approaches results in more complexity and higher management costs.

ii. It has complicated the production of a clear policy framework and legal certainty for licence holders.

iii. Quota licence holders want more security for their allocations. Without that, fishermen’s long-term decisions must always include an element of speculation which results in some inefficiency and sub-optimal behaviour.

iv. Without permanent allocations and the closure that would bring, the government is still vulnerable to lobbying for new, or greater, shares in some situations.

Many of Canada’s IQ programmes arose in situations where a solution to a pressing economic, catch allocation or conservation problem had to be found. In most cases, IQ programmes were introduced with the agreement of the majority of fishermen involved. Twenty years after the initial IQs, many fishermen now perceive these programmes as a sensible starting point for new fisheries or a logical way to improve incomes and reduce capacity in established fisheries where no crisis exists. Many lessons about implementing IQs were learned over the years.

There is abundant evidence in Canada that IQs can be developed piecemeal, e.g. parts of fisheries, parts of fleets at a time. Within a fishery, some licences can operate with IQs without unduly hampering the affairs of the others providing there is a TAC with fleet shares. IQs for species in mixed assemblages is possible, preferably with provisions for allowing (and reporting) accidental catch. There are examples where IQ programmes have added features over time, e.g. including new fish stocks. Transferability of quota can be introduced years after the programme begins and some benefits can be achieved without transferability. IQs are possible without enabling legislation, so long as there is no legislation specifically prohibiting such development.

For simplicity of adjustment to changing resource levels, percentage shares of a TAC or fleet quota are essential - not guaranteed tonnages. This has been confirmed by experience in other countries. A quota allocation must recognise the inherent variability of fish populations over time. Another lesson is the importance of involving the affected licence holders at all levels of design and implementation of the programme. This brings a level of acceptance without which few IQ management programmes could function.

In setting up an IQ programme, an effective enforcement and monitoring plan must be developed before implementation. New requirements should not be loaded on top of existing regulations.

Where it is a controversial issue, there is no need to focus on the private property aspects of IQs. An individual quota is essentially a level of division of the TAC among users. Legal security of tenure is a desirable but not an essential feature of a successful IQ programme, provided there is confidence in the practice of not undermining the shares held. The licence and its associated allocation of quota must be renewed at regular intervals in Canadian fisheries, though there is no guarantee that it will be.

It has been observed that fleets with IQs are more willing and better able to participate in management and to pay for science, monitoring and other management functions.

There are some weaknesses of IQ programmes that do not have solutions. To some critics, the incentive to high-grade catch is a critical flaw in IQs and reason enough to abolish them. All catch-limiting management plans have to deal with discarding of fish caused by fishermen trying to maximise incomes or simply to comply with the fishing regulations. The problem would not be resolved by getting rid of IQs.

It is difficult to say whether the long evolution from open fisheries to IQs, which worked quite well in Canada, might be a path worth considering elsewhere. Catch limits and licence limits were steps along the way. Subdividing large fleet groups into smaller ones and forcing a degree of self-management upon them seems to be constructive.

The interpretation and application of these lessons to a particular situation in another part of the world is best left to those on the scene.

8. LITERATURE CITED

Fisheries Act, Revised Statutes of Canada. c. F-14, s. 1.

Gardner, M. 1988. The enterprise allocation system in the offshore groundfish sector in Atlantic Canada, Marine Resource Economics, 5(4), 389-454.

Liew, D. 1994. The Scotia-Fundy inshore dragger fleet ITQ programme. Unpublished DFO working paper, pp11.

Nadeau, J.M. 1994. Scallop (middle north shore), in Experience with Individual Quota and Enterprise Allocation (IQ/EA) Management in Canadian Fisheries 1972-1994, unpublished report by a working group of Department of Fisheries and Oceans, 181-183.

Scott, A.D. 1996. The ITQ as property right: where it came from, how it works, and where it is going, in Taking Ownership - Property Rights and Fishery Management on the Atlantic Coast, Atlantic Institute for Market Studies, 31-98.

Stephenson, R.L., D.E. Lane, D.G. Aldous and R. Nowak 1993. Management of the 4WX Atlantic herring (Clupea harengus) fishery: an evaluation of recent events. Can. J. Fish. Aquat. Sci. 50:2742-2757.

Turris, B. and C. Sporer 1994. Halibut IVQ programme, in Experience with Individual Quota and Enterprise Allocation (IQ/EA) Management in Canadian Fisheries 1972-1994, unpublished report by a working group of Department of Fisheries and Oceans, 75-88.

APPENDIX 1: Individual Quota/Enterprise Allocation Programmes existing in Canada

Area Species	Fleet or fishery	Year adopted	Permanent transfers
Atlantic
Groundfish	Mobile gear <65 ft 4T (Gulf/Laurentian.)	1989	Yes
	Mobile gear <65 ft 4VWX+5 (Scotia-Fundy)	1991	Yes
	Fixed gear 45-65 ft (Scotia-Fundy)	1997	Yes
	Fixed gear cod <65 ft, 3Ps Area 10	1998	No
	Fixed gear cod <65 ft, 2J3KL	1999	No
	Mobile gear <65 ft 4RS3Pn (Nfld)	1984	Yes
	Mobile gear cod <65 ft, 3Ps	1998	No
	Offshore Groundfish EA	1982	Noa
	Midshore Groundfish EA	1987	Noa
Pelagic	Herring Seiners >65ft 4RSTVn (Gulf, Nfld)	1983	Yes
	Herring Seiners 4WX+5 (Scotia-Fundy)	1976	Yes
Shellfish	Snow Crab Areas 18/19, 25/26 (Gulf)	1979	Yes
	Offshore Clam EA	1987	Noa
	Midshore Snow Crab - Zone 12 (Gulf/Laur)	1990	No
	Snow Crab Area 13-17 (Laur/Nfld)	1992	No
	Snow Crab (Nfld)		No
	Snow Crab Areas 20-24 (Sco-Fundy)	1994	No
	Offshore Scallop EA (Sco-Fundy)	1986	Noa
	Scallop Mid. N.Shore (Laurentian)	1991	No
	Bay of Fundy Scallop	1998	Yes
	Offshore Lobster (Scotia-Fundy)	1977	Yes
	Shrimp 4RST (Gulf/Laurentian)	1991	Yes
	Northern Shrimp EA	1987	No
	Shrimp 4VWX (Scotia-Fundy)	1996	Yes
	Shrimp 4R (Nfld/Laurentian)		No
	Sea Urchin (Scotia-Fundy)	1995	No
Lake Fisheries	All commercial freshwater fisheries in Ontario	1984	Yes
	Lake Winnipeg Quota Entitlement	1972	Yes
	Cedar Lake IQ	1982
Pacific
Groundfish	Sablefish IVQ	1990	No
	Halibut IVQ	1991	Yes
	Groundfish Trawl IVQ	1997	Yes
Pelagic	Herring Spawn on Kelp IQ	1975	No
Shellfish	Geoduck IVQ	1989	Yesb
	Red Sea Urchin IQ	1994	Yesb
	Green Sea Urchin IQ	1996	Yesb
	Sea Cucumber IQ	1996	Yesb
	Abalone IQ Programme (closed)	1980	No

^a EA quota may be fished by any vessel within a company, but is not transferable between companies. In-season temporary trades between companies are permitted in some EA programmes.

^b Quota is not transferable, but licences may be “stacked” on a single vessel.