AN INTRODUCTION TO RIGHTS-BASED MANAGEMENT - Chairman: Peter Millington, Fisheries Western Australia, Perth

The Politics of Enclosures with Special Reference to the Icelandic ITQ System - H.H. Gissurarson
Introducing Property Rights into Fisheries Management: Governments cannot Cope with Implementation Alone - T. Craig
The Common Fisheries Policy of the European Union and Fishing Rights - C. Nordmann
The Global Environment Facility: A Partner in the Sustainable Management of Transboundary Fisheries - A. Merla

The Politics of Enclosures with Special Reference to the Icelandic ITQ System - H.H. Gissurarson

H.H. Gissurarson
Oddi House, Faculty of Social Science
University of Iceland, Reykjavik, 101, Iceland
<[email protected]>

1. THE EVOLUTION OF THE ICELANDIC¹ ITQ SYSTEM

¹ I wish to thank my colleagues Ragnar Arnason, Professor of the Economics of Fisheries and Birgir Thor Runolfsson, Professor of Economics, at the University of Iceland, for their encouragement and assistance in preparing this paper which was originally presented in November 1999 and then revised for publication in March 2000.

While Iceland is a country poor in natural resources, the fishing grounds in Icelandic waters are some of the most fertile in the world. The Icelanders are therefore dependent on the fisheries for their recent affluence, with marine products providing more than 70% of total commodity exports. Demersal fish species, accounting for about 75% of the total value of marine products, include first and foremost cod, but also redfish, haddock, saithe, halibut, plaice and some less important species.

Relatively territorial in nature, cod and other demersal species of fish are found in feeding grounds near the bottom of the shallow continental shelf around Iceland. On the other hand, herring and capelin, which are pelagic species, roam in large schools over wide areas of the sea, usually near the surface. In addition to the demersal and pelagic fisheries, there are the small, but productive, scallop, Nephrops (i.e. Norwegian lobster) and shrimp fisheries: these species are mostly harvested inshore in clearly identifiable fishing grounds, although some deep-sea shrimp is also found. When it finally began to be understood in the 20^th century that fishing grounds were not inexhaustible resources, any attempt to limit the access to those in the Icelandic waters was made difficult by the fact that no single country had clear jurisdiction over them. Indeed, during the period 1952-76 Iceland fought four 'Cod Wars' with the United Kingdom for control over those fishing grounds, unilaterally extending Iceland's Exclusive Economic Zone (EEZ), first to 4 nautical miles, then 12nm, then 50nm, and finally to 200nm. Iceland's two main arguments were that those extensions of the EEZ made the necessary conservation of fish-stocks possible and that the Icelanders, unlike other nations in the North Atlantic Ocean, were totally dependent on fishing.

When the United Kingdom recognised Iceland's 200nm EEZ, and the last British trawler sailed out of Iceland's territorial waters on 1 December 1976, the legal prerequisites for the management of the Icelandic fisheries finally were in place - and not too soon, as subsequent events showed.

1.2 Effort quotas, 1977-83

Because of the difference in nature between the pelagic and demersal fisheries, the two respective fishing fleets also differed in composition. Boats of a similar (medium) size harvested most of the pelagic fish, herring and capelin, whereas the demersal fishing fleet was heterogeneous, comprising large freezer-trawlers, mid-size multi-purpose vessels, small boats, even some undecked rowboats. The relative importance of the two kinds of fisheries also varied by regions. Since the most fertile demersal fishing grounds lay in the northwestern part of Iceland's EEZ, fishing vessels from the Northwest, i.e. from the Western Fjords, were better placed to harvest fish there than vessels from other regions. Hence, fishing villages in the Western Fjords relied mostly on harvesting cod and other demersal species of fish. On the other hand, the pelagic fisheries, herring and capelin, being non-territorial, were chased all over the Icelandic waters and even beyond. They were more important to the fishing villages in the East than to those in the Western Fjords.

Another fact undoubtedly had some effect on the evolution of the ITQ system. In the late 1960s, the Icelanders had had a first-hand experience of the dire consequences of over-fishing. After a 'herring boom' of the early 1960s, with annual catches of herring approaching 600 000t, the herring stock collapsed in 1967-8, so that a moratorium was imposed on the herring fishery in 1972 with harvesting resuming on a small scale in 1975. Soon after the extension of the EEZ to 200nm, a special Fisheries Act was passed by Parliament, in 1976 that gave the Minister of Fisheries wide powers to restrict access to the fishing grounds in Icelandic waters, while it was not clearly specified in which ways he should do so.

In 1976 the Icelandic Marine Research Institute (MRI), warned that the cod stock was threatened by over-fishing. Fish mortality was alarmingly high and the spawning stock was weak. The MRI recommended a total allowable catch in cod of 230 000t for that year, while the actual total catch turned out to be 350 000t. Vessel owners in the demersal fisheries now were also beginning to realise that the cod stock, the mainstay of the Icelandic economy, accounting for about 35% of the total value of marine products, was in danger of collapse similar to that of the herring stock a decade earlier, still fresh in their memory. Obviously, access to the demersal fishing grounds had to be restricted. There was much discussion whether such restrictions should be in terms of effort or of catch. Finally it was decided to restrict effort, i.e. allowable fishing time, rather than vessel catch. In 1977, effort quotas in the demersal fisheries were introduced. While entry remained more or less free, and there were no restrictions on the catch of each fishing vessel, allowable fishing days were to be reduced until the desired result in terms of total allowable demersal catch had been reached.

The Minister of Fisheries in 1974-8 came from the Western Fjords, where support for effort quotas was strongest. Because fishing villages in the Western Fjords were closest to the most fertile cod grounds, vessel owners there thought that they would always be at an advantage in competition in terms of unlimited harvesting during a limited period of time. However, it soon became clear that effort quotas were wasteful. This system induced owners of fishing vessels to start a 'Derby', i.e. a competitive rush to harvest as much fish as possible during allowable fishing days regardless of cost. Since entry remained almost free, this meant not only that existing fishing capacity was not utilised economically, but also that there was an incentive to add to it. The already too-large fishing fleet became still larger, while the number of allowable fishing days had to be reduced almost every year. For deep-sea trawlers the number of fishing days declined from 323 in 1977 to 215 in 1981. Moreover, total annual actual catches consistently, and by far, exceeded the total annual allowable catches recommended by the MRI.

Figure 1: Fishing capital and catch values 1945-1997 (index 1960=100).

Source: National Economic Institute

In Iceland, 1978-83 were years of weak governments, political upheavals and uncertainties. But in the summer of 1983 a strong coalition government of the Independence Party (Iceland's conservative party, with 35-40% of the votes) and the Progressive Party (with rural roots and about 20% of the votes) was formed. The new Minister of Fisheries, Halldor Asgrimsson, who came from the Eastern region, was to remain in office for the next eight years. He worked closely with the powerful Association of Fishing Vessel Owners whose leader, Kristjan Ragnarsson, was becoming convinced, with many of his members, that effort quotas did not work. In late 1983, the MRI found that the cod stock was still weakening. The spawning stock was at an all-time low, estimated at only 200 000t; and fish mortality was very high. Even if the total actual catch of cod had gone down from 461 000t in 1981 to 294 000t in 1983, it exceeded that recommended by the MRI by 100 000t. It was also becoming ever clearer that there was massive over-investment in the fisheries. This is shown in Figure 1: in 1945-83, fishing capital increased by well over 1200%, while real catch values only increased by 300%. Thus, the growth of fishing capital exceeded the increase in catch values by a factor of more than four. At the same time as vessel owners in the demersal fisheries could observe massive over-investment there, a sharp reduction in the number of allowable fishing days, and a clear decline in the cod stock, they witnessed the relative success of vessel catch quotas in the pelagic fisheries.

After the herring moratorium of 1972-5, it had been decided to set an annual total allowable catch (TAC), of herring over each year's fishing season, and to divide this TAC equally between the herring boats in operation. This was a simple and non-controversial rule of initial allocation since the herring boats were all of roughly equal size and with a similar catch history. In 1979, those vessel catch quotas had been, at the initiative of the herring-boat owners, made transferable: they had become ITQs. Arguably, this was one of the first ITQ systems in world fisheries. Similarly, in the capelin fishery, vessel catch quotas had been introduced in 1980, at the initiative of the capelin boat owners, to be made transferable in 1986. In both of those pelagic fisheries, such vessel catch quotas had had the effect to reduce boats at the same time as catch increased.

The most vocal support for the introduction of vessel catch quotas in the demersal fisheries came from the East, whereas vessel owners in the Western Fjords continued to favour effort quotas. In 1983 the supporters of vessel catch quotas finally gained the upper hand in the Association of Fishing Vessel Owners, and at the annual meeting of the Icelandic Fisheries Association-a broad collection of interest groups in the fisheries-in December 1983, a resolution was passed calling on the Minister of Fisheries to experiment with vessel catch quotas in the demersal fisheries, especially in the all-important cod fishery. The Minister of Fisheries promptly proposed an amendment to the original Fisheries Act 1976, giving him discretionary power to issue individual quotas for each vessel employed in the demersal fisheries for the year 1984. After much heated discussion, the Icelandic Parliament passed the amendment at the end of December 1983, in the Upper House with a majority of one vote. Consequently, the Minister of Fisheries set a TAC for each demersal species of fish for the year 1984 and issued shares in those TACs to each and every fishing vessel.

The catch vessel quotas were allocated on the basis of catch history over the preceding three years, from 1 November 1981 to 1 October 1983, with exceptions to correct for certain situations, e.g. if a vessel had entered the demersal fisheries during those three years or if it had been under repair for part of this period. New vessels could choose between the new kinds of quotas and the old effort quotas (restrictions in terms of allowable fishing days). The new vessel catch quotas were partly transferable. Transfers of quotas between vessels under the same ownership or vessels from the same port were allowed, but transfers between vessels from different ports were only allowed if they were exchanges (e.g. a quota in redfish for a quota in cod), otherwise such transfers had to be approved by the Minister of Fisheries. Small boats, under 10 gross registered tonnes (GRT), were exempt from the quota system; they could harvest fish at will until they reached a total quota set for this type of vessel.

1.4 A mixed system, 1985-90

It is easy to see why vessel catch quotas were initially allocated differently in the demersal and pelagic fisheries. While the herring and capelin boats were of roughly the same size, making an equal initial allocation of vessel catch quotas between them fairly straightforward², there were vast differences between individual vessels in the demersal fisheries, so the more complicated rule of catch history over the preceding three years had to be adopted, with small boats exempted altogether from the system. At the end of 1984, when the experience of the previous twelve months under a system of vessel catch quota was reviewed, it was generally accepted that this kind of quota had been much more effective in halting over-fishing than effort quotas. It was therefore decided to extend the amendment to the Fisheries Act 1976 for one more year, allowing the Minister of Fisheries to issue vessel catch quotas for 1985. The opposition to vessel catch quotas from the Western Fjords remained strong, however, so, as a compromise, vessel owners were allowed to choose between vessel catch quotas and effort quotas. This meant that a typical vessel owner could either retain the share of the TAC they had received at the end of 1983 and harvest fish up to the limit set by that share; or he could give up his vessel catch quota and try instead to harvest as much as he could in the allowable fishing days, whose number was set by the Minister of Fisheries on the basis of predictions about their contribution to the TAC. This mixed system of vessel catch quotas and effort quotas was in effect for the next six years, until the end of 1990.

² In the capelin fishery, for complicated historical reasons, two-thirds of the vessel catch quotas initially were allocated equally, and one-third on the basis of the vessel's hold capacity.

When the Fisheries Management Act came up for review in the Icelandic Parliament at the end of 1987, difficult negotiations began, extending into the first weeks of 1988. The Icelandic Social Democrats (with about 15% of the votes), in a rather weak coalition government with the Independence Party and the Progressive Party since 1987, now insisted on inserting a declaration into the Act to the effect that the fish stocks were 'the common property' of the Icelandic nation. It was also decided in 1988 to extend the duration of the vessel catch quotas from two to three years, from 1988 to the end of 1990, and to make an extensive review of the system in 1990. Another important change in the Fisheries Management Act 1988 was that it now applied not only to the demersal fisheries. The vessel catch quotas developed in the herring and capelin fisheries from 1975 have already been briefly described. But the Nephrops, shrimp and scallop fisheries were quite unlike the demersal and pelagic fisheries. They were confined to certain well-defined inshore fishing grounds and from their beginning in the 1960s and 1970s they were subject to local entry restrictions. In 1973, a TAC for Nephrops was first set and catch quotas issued to vessels. A year later, two of the seven inshore shrimp grounds were already subject to vessel catch quotas. In 1975, vessel catch quotas were issued in the inshore shrimp and scallop fisheries. Since boats operating in the Nephrops, shrimp and scallop fisheries were all of roughly similar size, vessel catch quotas were initially allocated equally.

Another important change in the 1988 Fisheries Management Act was that it was made difficult, or even impossible, for vessels which had chosen to operate on effort quotas to increase their share in the TAC. A further problem addressed in the 1988 Fisheries Management Act was that of the great increase in the number of small boats, under 10 GRT, which had taken place since 1983-84 in response to their exemption from limits on entry (most of the new boats being just under 10 GRT in volume). It was now decided to subject boats between six and ten GRT to fishing permits and to issue no new permits to new boats of this size, unless they replaced old ones.

1.5 A comprehensive system of ITQs, 1990

When the Fisheries Management Act was revised in the spring of 1990 it was the first time this was done without the threat of an immediate collapse of any fish stock. The discussion therefore centred on the main objectives of fisheries management. Most of those concerned recognised that vessel catch quotas had turned out to be superior to effort quotas. A vessel owner who received a given share in the TAC, in the form of ITQ, could concentrate on harvesting this share in the most efficient way over each season; if he was successful in doing this, he would have an incentive to buy additional quota from other less successful vessel owners. In a book which I published on this issue in the Spring of 1990, while the Icelandic Parliament was discussing the revision of the Fisheries Management Act, I argued that the system of ITQs was reasonably efficient and that it should be developed as far as possible into a system of private property rights (Gissurarson 1990)³. The two Icelandic specialists in fisheries economics, Professor Ragnar Arnason of the University of Iceland, and Professor Rognvaldur Hannesson of the Norwegian Business School in Bergen, also argued, in reports to the Parliament, that the ITQs should be maintained, but that limits on their transferability and duration should be abolished. Perhaps most importantly, the Association of Fishing Vessel Owners, under the forceful leadership of Kristjan Ragnarsson, also supported ITQs and argued for their increased transferability.

³ In September 1980, I had first argued for the development of private property rights in the fisheries, at a conference on ‘Iceland in the Year 2000’, organised by Iceland’s Management Society. In April 1983, almost a year before individual quotas were first introduced in the demersal fisheries, I argued for recognising the traditional and existing fishing rights as property rights and making them marketable (Gissurarson 1983).

In 1990, the Icelandic Parliament passed a new Fisheries Management Act. It took effect in the beginning of January 1991 at which time the fishing season was redefined from 1 September each year to 31 August of the next year⁴. The three important changes in the system were that effort quotas in the demersal fisheries were abolished, their holders receiving vessel catch quotas instead, that the quotas were issued for an indefinite period of time and that they became fully transferable. In essence, a comprehensive system of ITQs now replaced a mixed system of vessel catch quotas and effort quotas. By the Fisheries Management Act 1990 fishing vessels between six and ten GRT were also integrated into the ITQ system, receiving share quotas in place of the effort restrictions under which they had previously operated.

⁴ This was done in order to direct harvesting of fish away from the summer months, when quality suffers more quickly and regular factory workers are on vacation. There are a few exceptions, for instance, in 1999-2000 the fishing season for Icelandic herring is set from 1 September 1999 to 1 May 2000 and for inshore shrimp it is 1 October 1999 to 1 May 2000. In the capelin fishery, the TAC applies from 20 June 1999 to 1 May 2000. Harvesting of herring from the Atlanto-Scandian stock, of oceanic redfish in the Irminger Sea and of deep-sea shrimp on the Flemish Cap is also subject to special regulations set by international agreements.

1.6 Further developments in the ITQ system, 1990-2000

When the new and comprehensive Fisheries Management Act was passed in 1990, it was stipulated that it should be revised after three years. In 1991 a new and strong coalition government of the Independence Party and the Social Democrats was formed with former Prime Minister Thorsteinn Palsson replacing Halldor Asgrimsson as Minister of Fisheries. Palsson was to remain Minister of Fisheries for the next eight years, contributing, like his predecessor, much to the development of the ITQ system. In 1993 the two government parties, supported by the Social Democrats, worked out a compromise over the vocal demands for some form of special taxation of quotas. This compromise was that a small 'service fee' was imposed on quota holders. This revenue was used to facilitate the reduction of the fishing fleet. In the same year a public commission on fisheries management came to the conclusion that the ITQ system worked quite well but that some minor changes would make it more efficient.

The commission recommended the integration of small boats under six GRT into the system and the making of ITQs transferable, not only between vessels, but also to fish processing plants. It also recommended that certain privileges of boats using longlines in winter should be abolished and that holders of ITQs should not be allowed to depreciate quotas that they had bought, since fish stocks were renewable natural resources. The Association of Fishing Vessel Owners opposed the idea that quotas should be transferable to others than vessel owners, and this recommendation was not accepted by the Icelandic Parliament.

The commission's other recommendations, after much deliberation, were mostly accepted. In 1996 the privileges of boats using longline in winter were abolished; but those who had enjoyed those privileges received additional ITQs in compensation. Since 1998, holders of ITQs have not been allowed to depreciate quotas that they have bought. The most difficult political change has been the integration of boats under six GRT into the system. The owners of small boats, mainly live in fishing villages in the countryside and with disproportionate representation in the Parliament they form a strong interest group in Iceland. They managed to extend their adjustment period from 1994 to 1996 when they were allowed to choose between receiving vessel quotas, thus entering the ITQ system, or to remain subject to effort quotas (which became less and less attractive, as the number of allowable fishing days was reduced year-by-year). Another compromise was reached by government and owners of small boats in 1997 further facilitating their integration into the ITQ system. However, some small boats (about one-third of the total fleet of about 1100 small boats) still remain outside the ITQ system.

Some further minor additions and amendments have been made to the Fisheries Management Act 1990. In 1997 two fish stocks harvested by international agreements outside Iceland's EEZ were integrated into the ITQ system: oceanic redfish in the Irminger Sea, southwest of Iceland's territorial waters, and deep-sea shrimp and Flemish Cap east of Canada. Since 1998 two new rules have been applied to discourage speculation in quotas. One rule is that while a vessel may transfer some of her quota between fishing seasons, she will forfeit all her quota if she catches less than 50% of her total quota in two subsequent years. The other new rule is that within each year, the net transfer of quota (i.e. the annual catch entitlement, not the permanent share of the TAC) from any vessel must not exceed 50%.

Another rule has been adopted to try to counter the possible concentration of quotas: no fishing firm may control more than a 10% of the ITQs in cod and haddock and more than 20% of the ITQs in saithe, redfish, Greenland halibut, herring, deep-sea shrimp and capelin. In 1998, after bitter complaints from fishermen's unions that the crew of fishing vessels were forced to participate in quota purchases (i.e. to have the cost of renting quota deducted from the total net revenue shared at the end of the fishing season by the vessel owner, captain and crew), it was decided to establish a special Quota Exchange. It is an institution for recording all quota transactions to ensure that they are transparent and public. All quota transfers have to take place through the Quota Exchange except transfers from one vessel to another owned by the same fishing firm, or exchanges of quotas of the same value (but in different species of fish) or transfers that are deemed by the Minister of Fisheries not to have a market value.

1.7 Legal decisions on ITQs

The ITQ system has further evolved in a series of decisions by the Icelandic courts and other authorities on the legal status of ITQs. One problem arises from the fact that holders of ITQs can either sell their right to harvest a given share in the TAC (their TAC-shares), or they can rent it over a season (their annual catch entitlement, the multiple of the TAC and the TAC-share). How should the incomes and outlays generated by such transfers be taxed? In 1993, the Supreme Court decided that the transfer of a permanent TAC-share should be taxed as transfer of property, but that the transfer of the right to harvest a given amount over one season (the annual catch entitlement) should be taxed as income for the seller and cost for the buyer.

Another problem was caused by the fact that the Icelandic Parliament has not been ready to recognise the use of quotas as collateral, despite proposals to that effect from the Minister of Fisheries. Predictably, banks and other lending institutions have circumvented this problem by writing into contracts with vessel owners that quotas issued to vessels used as collateral cannot be transferred from those vessels without the lenders' consent. In 1996, a district judge decided that ITQs could not be used as such indirect collateral since the fish stocks were the declared common property of the Icelandic nation. The Supreme Court, in two decisions in 1999, did however recognise ITQs as indirect collateral of the fishing vessels to which they were issued. It has also been decided, although not in court cases, that inheritance tax has to be paid on the (market value) of ITQs and that they should also be treated as property in the case of divorce.

These cases were all about clarifying the legal status of the ITQs for purposes of taxation and financial transactions. But opponents of the ITQ system have referred two matters of principle to the courts. In late 1998 the Supreme Court decided that requiring people who wanted to harvest fish in the Icelandic waters to hold not only ITQs but also special fishing permits (which were non-transferable and in effect confined to [owners of] fishing vessels operating in the first years of the ITQ system, in 1984-8, or to their replacements) was indeed unconstitutional. According to the Court, to restrict entry into the fisheries in this way to a mostly closed group of people who happened to operate fishing vessels over a given period of time violated the two constitutional principles of economic freedom and equal treatment under the Law. While the special fishing permits were not an integral part of the ITQ system (and only imposed as a short-term measure to try to control the enlargement of the fishing fleet), its opponents rejoiced at this decision. The government promptly changed the law, so now fishing permits are not confined to (owners of) vessels in operation in 1984-8.

The other case was much more important because it was about the ITQs themselves. In early 2000, a district judge in the Western Fjords decided that the initial allocation of ITQs in the demersal fisheries, on the basis of catch history in 1981-3, had violated the constitutional principles of economic freedom and equal treatment before the Law. According to the judge, this method of allocation unfairly discriminated between the group of quota recipients and other Icelanders. In the spring of 2000 the Supreme Court reversed this decision. It decided that the initial allocation of ITQs, on the basis of catch history, had not included any arbitrary or unconstitutional discrimination against those who did not receive such ITQs.

In the initial allocation, it was, the Supreme Court stated, quite fair and relevant to treat differently those who had a vested interest in continuing to harvest fish in the Icelandic waters, and all the others who had no such clear interest. Moreover, unlike the fishing permits, ITQs were transferable so they were not confined to any narrow group of people in the same way as the fishing permits had been. In the same decision, the Supreme Court stated that the general restriction of access to the Icelandic waters to holders of ITQs did not seem to violate the constitutional principle of economic freedom since this restriction had clearly been necessary in the face of collapsing fish stocks and unprofitable fishing firms.

1.8 Who cares whether the commons is privatised?

The evolution of the Icelandic ITQ system was a process of gradual discovery and difficult bargaining. Initially, politicians, marine biologists and vessel owners were mainly concerned about the conservation of fish stocks. It was only later that they came to realise the economic problem of unlimited access to a limited resource, the 'tragedy of the commons' (Hardin 1968). From an economic point of view over-fishing is similar to pollution: where access to a fishing ground is free, the cost of adding one more vessel (or another unit of fishing capital) to the fishing fleet on the ground is not borne solely by the vessel owner. Its activity has harmful effects on others. The consequences are over-capitalisation and excessive fishing effort. The fishing fleet is much larger than would be most efficient. As an illustration, sixteen boats may be harvesting a lesser catch than that which eight boats could easily harvest.

There is one big difference, however, between pollution and overfishing. Pollution is visible, whereas the economic costs that owners of fishing capital impose on one another are invisible. Those costs can be, and have been, demonstrated by economists (Gordon 1954, Scott 1955), but vessel owners usually come to realise the problem when it is too late-when fishing is exceeding not only the level of highest return on outlays, but also the maximum sustainable yield. Memories of the collapse of herring in the late 1960s may however have facilitated the acceptance by Icelandic vessel owners of what was in effect the enclosure of fishing grounds. Desperation lessens transaction costs (Libecap 1989). Another factor lessening transaction costs is homogeneity.

Because Iceland's pelagic fisheries were relatively homogeneous, with similar vessels, the introduction of vessel catch quotas and later ITQs was relatively easy. The bargaining process was much more difficult in the heterogeneous demersal fisheries. Owners of small boats, some of them working part-time, did not think, for example, that they had much in common with owners of large freezer trawlers. Indeed, as I have noted, some small boats are still outside the ITQ system. And vessel owners in villages close to the most fertile fishing grounds also thought that they had different interests from other vessel owners, and their strong opposition delayed the introduction of a comprehensive ITQ system for many years.

The main lesson to be learned from this process is that the introduction of ITQs in a fishery, however necessary it may seem to politicians, marine biologists and economists, is by no means a simple task. There are all kinds of interests that may oppose it. A commons like the fish stocks in Icelandic waters will only be enclosed if the private interests of those utilising it coincide with the public interest. It was probably crucial for the evolution of the Icelandic ITQ system that the Association of Fishing Vessel Owners repeatedly took the initiative in the process, and that government worked closely with it (Jonsson 1990), although it inevitably led critics to say that government was in the thrall of the Association of Fishing Vessel Owners. The important question is: 'Who Cares Whether the Commons is Privatised?' (Buchanan 1997).

It is difficult to see, for example, how vessel owners in the Icelandic demersal fisheries would have agreed to any other initial allocation of quotas in late 1983 than that which was based on catch history. This was the only way for them to continue using the fish stocks without much disruption. In this way they could maintain the value of their investments and human capital whereas it would have become almost worthless if government had auctioned off individual quotas to the highest bidders as some economists proposed. In essence, the problem in the Icelandic fisheries was the same as in all fisheries using modern technology and operating under free access to fishing grounds: it was, to return to our illustration, that sixteen boats were harvesting even less than eight boats could easily harvest. The task therefore was to reduce the number of boats from sixteen to eight. In theory, this could be accomplished by outbidding the owners of eight excessive boats, by taxation or in an auction of quotas. But in practice, this would have been difficult, if not impossible. In the Icelandic case, what was done was to assign transferable quotas sufficient for the profitable operation of eight boats, to the owners of sixteen boats. Over time, the eight boat owners who wanted to continue harvesting fish would have a great incentive to buy quotas from their eight colleagues who wanted to leave the fishery. Thus, people were not outbid; they were bought out.

2. THE NATURE AND PERFORMANCE OF THE ICELANDIC ITQ SYSTEM

2.1 Enclosure of the Commons

Economists analysing the 'tragedy of the commons'-the over-utilisation of non-exclusive natural resources-generally agree that the tragedy is caused by the absence of private property rights to those resources. In the costly race to extract value from such resources, whether they are plots of land, oilfields, mines, or fish stocks, the rent which could be derived from them is dissipated. 'The business of everybody is the business of nobody.' It was only with the enclosure of land, for example, that the problem of overgrazing was solved, and cultivation replaced simple extraction.

The EEZs which fishing nations have established in the 20th century may be regarded as important steps towards the enclosure of marine resources. At first sight, however, private property rights in areas of the sea or in individual specimens of fish do not seem technologically feasible, at least not in deep-sea fisheries; such rights would require techniques of fencing or branding, either non-existent or difficult to develop. ITQs may however go far to solve the fisheries problem (Arnason 1990) precisely because they have some characteristics of private property rights. They are exclusive, which means that only those who hold them may harvest fish; they are individual so that the responsibility for their utilisation is clearly defined and lies with individuals; they are divisible which enables fishing firms to freely decide how much of them to hold at any given time; they are transferable which means that market forces are allowed to select the most efficient fishing firms; and they are permanent, making long-term planning possible.

ITQs are not too difficult to administer or enforce, either, although the political problem of their introduction and initial allocation should not be minimised. Therefore, it is not surprising that ITQs are increasingly being used in world fisheries. Between 5-10% of world total catches are presently harvested under some kinds of vessel catch quotas. Nevertheless, Iceland and New Zealand are the only two countries to have developed a comprehensive ITQ system although ITQs are also widely used in the Netherlands, Australia and some other countries. Despite some weaknesses, the Icelandic ITQ system does not seem too different from the system described by economists that goes far to solve the fisheries problem.

2.2 Total allowable catches

The two pillars of the Icelandic system are total allowable catches (TACs), and individual transferable quotas. TACs are set annually by the Minister of Fisheries for each of the commercially valuable species of fish in the Icelandic waters, on the basis of recommendations from the Marine Research Institute (MRI). Economic considerations-receiving the maximum return on fishing capital-do not seem to play an important role in the setting of TACs although that may change in the future. In the first few years after the introduction of ITQs in the demersal fisheries, the Minister of Fisheries tended to set somewhat larger TACs than recommended by the MRI, mainly because as a politician he was concerned about adverse effects on the economy by sharp reductions in TACs, especially in the fishing villages scattered around Iceland's coastline. This has gradually changed, especially after 1991. In 1995, government even adopted a special rule about the annual TAC in cod: it is to be set at 25% of the fishable biomass, estimated by the MRI. Thus, the TAC is determined by an annual stock assessment. By applying this rule, marine biologists estimate that the chances of stock collapse are less than 1%. Table 1 reproduces the recommendations by the MRI in 1984-99 for the cod TAC, the decision by the Minister of Fisheries and the actual total catch.

The sharp reductions in TACs for cod in 1994-6 are noteworthy. If the members of the Association of Fishing Vessel Owners had not by then begun to think of themselves as stakeholders in the cod fishery, it is doubtful that such sharp reductions could have been accomplished relatively peacefully in a country as heavily dependent on fishing as Iceland.

2.3 Individual transferable quotas

ITQs constitute the other pillar of the Icelandic fisheries system. ITQs are shares in the TAC of a fish stock. They are issued to each vessel for an indefinite period of time, in the demersal fisheries initially on the basis of catch history in 1981-83. The only vessels partly exempt from the system are boats under six GRT whose owners chose to operate under effort restrictions (a given number of allowable fishing days). However, they harvest only a small proportion of the total demersal catch.

The ITQs are transferable both annually and permanently. A legal distinction is therefore made between two kinds of transferable quotas issued to a vessel: her TAC-share, given in percentages, and her Annual Catch Entitlement (ACE), given in tonnes. The ACE is a multiple of the TAC for the fishery and the vessel's TAC-share. For example, if a deep-sea trawler initially received a 0.1% share of the TAC in cod, and if the TAC in the fishing season 1999-2000 is 250 000t, then the vessel owner may harvest 250t of cod in the given year and expect to harvest 0.1% of future TACs. His TAC-share is 0.1%, and his ACE in 1999-2000 is 250t. He can do one of three things with his quota: (a) he can harvest 250t over the 1999-2000 season; (b) while keeping his TAC-share, he can sell his ACE, or a part of it, to the owner of another vessel, i.e. the right to harvest 250t, or a part of it, over the 1999-2000 season; (c) he can sell his TAC-share, i.e. the right to harvest 0.1% share in the TACs set now and in the future.

Table 1

Recommended and set TACs in cod and total actual catches, 1984-2000 (tonnes)

Year	Recommended TAC (MRI)	Allocated TAC (Ministry of Fisheries)	Actual total catch
1984	200 000	242 000	281 000
1985	200 000	263 000	323 000
1986	300 000	300 000	365 000
1987	300 000	330 000	390 000
1988	300 000	350 000	376 000
1989	300 000	325 000	354 000
1990	250 000	300 000	333 000
1991	240 000	245 000	245 000
1991-2	250 000	265 000	273 000
1992-3	190 000	205 000	240 000
1993-4	150 000	165 000	196 000
1994-5	130 000	155 000	164 000
1995-6	155 000	155 000	169 000
1996-7	186 000	186 000	201 000
1997-8	218 000	218 000	227 000
1998-9	250 000	250 000	N. A.
1999-2000	247 000	250 000	N. A.

Source: Marine Research Institute.

Since the Icelandic fisheries are mixed fisheries, vessels are bound to capture different species of fish on the same fishing trips. The TAC-shares in different fish stocks therefore have to be interchangeable. But species of fish differ in value: one tonne of cod is e.g. worth much more than one tonne of capelin. Cod is used as the common denominator of the system. The term 'cod equivalent' denotes the relative market value of different species of fish, set by regulation every year. The total quota for each vessel having a quota for several species may be calculated in cod equivalents. Quota transfers between vessels are also often measured in cod equivalents. In the fishing season from1 September 1998 to 31 August 1999, the cod equivalent values were, for example: cod 1.00, haddock 1.05, saithe 0.65, redfish 0.70, plaice 1.20, Greenland halibut 2.15, ocean catfish 0.85, witch 1.20, dab 0.65, long rough dab 0.60, capelin 0.08, herring 0.14, nephrops 8.55, shrimp 1.20 and scallops 0.40.

While the ITQs are perfectly divisible, and easily transferable, their use and transfer are restricted as noted earlier: All transfers of TAC-shares (permanent quotas, in percentages) have to be registered with the Fisheries Directorate. Most transfers of ACEs (quotas over a season, in tonnes) have to go through the Quota Exchange. The owner of a vessel will lose his quota, measured in cod equivalence, if his vessel harvests less than 50% of the vessel's total quota in two subsequent years. The net transfer of quota from the vessel in any given year must not exceed 50% of her quota. Moreover, no fishing firm may hold more than a given fraction of quota in each species of fish.

2.4 Harvesting outside Iceland's EEZ

The ITQ system applies, as far as is possible, in those fisheries which either straddle Iceland's EEZ or are outside it. The general rule is that Iceland negotiates with the other countries concerned, a TAC in each such stock, and then Iceland's share of this TAC is allocated as vessel catch quotas. Capelin and herring are migratory stocks that move in large schools over the Northeast Atlantic Ocean. Iceland has negotiated a TAC in capelin with Norway and Greenland, by which Iceland receives the bulk of the TAC (since most of the capelin is found and harvested in the Icelandic EEZ). Iceland's share is allocated to individual vessels, on the basis of catch history.

After its collapse of the late 1960s, the Atlanto-Scandian herring, suddenly reappeared in the Northeast Atlantic in 1994, and since then Iceland has negotiated a TAC in this stock with other members of the Northeast Atlantic Fisheries Commission (NEAFC). As there was no catch history on which to base an initial allocation of quotas, Iceland's share in this TAC (which has usually been about 15%) in 1994-7 was not subject to individual quotas but to effort restrictions: entry was free until Iceland's share in the TAC had been reached. On the basis of this catch history, and vessel-hold capacity, vessel catch quotas or ITQs were then allocated for the period 1998-2000⁵. Iceland has also negotiated within NEAFC a TAC in oceanic redfish which is harvested in the Irminger Sea in international waters southwest of Iceland's EEZ. Since 1997 Iceland's share in the TAC has been allocated as vessel quotas on the basis of catch history (the three best years of the six years in which this fishery had been in operation, with 5% of the total set aside for those who had started the harvesting, a so-called pioneers' quota).

⁵ This was obviously an uneconomical way of allocating the ITQs, since it created an incentive for fishing firms to engage in a ‘Derby’ for a few years, i.e. to undertake 'strategic harvesting' to establish a catch history. The reason the quotas were not auctioned off was probably that there were already loud demands from some opponents of the ITQ system for auctioning off the existing quotas. The Minister of Fisheries may have felt that by such an auction he would only encourage those people. It is ironic if the only impact the of government auctions of quotas had on policy-making was to hinder an auction where it may have been justifiable.

In the Barents Sea fishing grounds of the so-called Loophole between Norwegian and Russian territorial waters, Iceland has had a dispute with Norway and the Russian Federation from 1993, when Icelandic vessels began to fish cod there, until May 1999 when the three countries settled their differences. Iceland agreed to stop fishing in the Loophole in return for small quotas in Norwegian and Russian territorial waters, an option to buy quotas from Russian vessels and the issuing of small quotas to Norway and the Russian Federation in Icelandic waters. During the dispute, Iceland did not try to control the activities of Icelandic trawlers in the Loophole. However, in 1997-8 catches there collapsed, at the same time as the TAC in cod in Icelandic waters was increased. Icelandic vessels have therefore largely ceased harvesting fish in the Barents Sea although they made quite a difference in the difficult 1994-5 period.

2.5 Administration and enforcement

Two government agencies, under the direction of the Minister of Fisheries, are mainly concerned with administering and enforcing the ITQ system. The Marine Research Institute (MRI), investigates the state of fish stocks and makes recommendations about annual TACs of different fish species to the Ministry of Fisheries. The MRI operates research vessels and collects additional information on fishing from vessel skippers. It also undertakes basic research in marine biology. The MRI has a staff of about 170. Approximately one-third of its costs are covered by its own revenues. The Fisheries Directorate (FD) oversees the day-to-day administration of the ITQ system, especially the collection of data on catch and effort. It has a regular staff of about 60 and about half of its budget is covered by its own revenues. In addition, the FD employs observers on vessels fishing in distant waters outside Iceland's EEZ.

The ITQ system is in effect enforced by controlling landings. All marine catch is required by law to be weighed on officially approved scales at the point of landing. Municipal authorities operate the weighing stations and they collect weighing fees from the vessels to cover their costs. The officials of the weighing stations record the landings and verify species compositions. There are 67 such controlled landings ports in Iceland and some major foreign export ports are controlled as well. A sophisticated computer system links the port data systems to the FD enabling the transmission of daily catch data to the FD's computer department. All catch data are transmitted to the FD twice a day and the information is disseminated through the FD's Web pages, through monthly publications and by telephone to skippers and vessel owners who wish to check their catch status. Status reports are sent to vessel owners regularly and upon request. The FD's Web pages of fisheries data show in detail the catch status of individual vessels, quota transfers between different vessels or in different species, quota shares and landings.

A third government agency, The Icelandic Coast Guard, is under the direction of the Minister of Justice and has a staff of about 130. It monitors fishing vessels at sea and enforces regional closures. As noted, extensive nursery grounds are permanently closed to fishing vessels and the spawning grounds of cod are closed for a few weeks in late winter during the spawning period. Moreover, the Minister of Fisheries, on the advice of the MRI, has the right to declare the immediate temporary closure of areas with excessive juvenile fish. There is also a 12nm limit for large trawlers in most areas.

In addition to the surveillance provided by the FD and the Coast Guard, the Ministry of Fisheries itself employs marine observers, some of whom take trips on fishing vessels and some of whom travel between fishing ports. Those observers try to ensure compliance with regulations on mesh size, bycatch, etc. Net mesh size must be at least 135mm and in the shrimp fishery a sorting grid is mandatory to avoid catch of juvenile fish. In the demersal fisheries devices for excluding juveniles are also mandatory in certain areas. The Ministry of Fisheries itself has an office staff of about 20. The Ministry charges holders of ITQs a low fee for the costs of administering and enforcing the ITQ system, with an upper limit of 0.4% of the estimated catch value. The revenue from the fee is about $8-9 million/yr. In addition there is revenue from fishing permit fees of about $2 million/yr. The net costs of enforcing and administering the ITQ-system are less than $30 million/yr, which includes the costs of marine biological research and guarding territorial waters. This does not seem huge in comparison to the value of the catch value in the Icelandic fisheries which, in the late 1990s, was on average about $800 million/yr. Violations of the Fisheries Management Act and the corresponding regulations of the Ministry of Fisheries carry heavy fines, expropriation of catch and gear, and cancellation of fishing permits. While the Ministry of Fisheries has wide discretionary powers in assessing such penalties and a proven willingness to use them, alleged violators have recourse to the courts if the Ministry's decisions are unacceptable.

2.6 Are the Icelandic ITQs property rights?

On land, fencing techniques such as barbed wire have enabled individuals to establish property rights (i.e. to exclude others from the utilisation of land and other immovable objects), whereas branding has enabled them to establish property rights (i.e. to exclude others from their utilisation) over animals and other movable objects. However, fences can hardly be erected around different areas of the deep sea (although some kinds of fencing may be possible in inshore fisheries). It is also difficult to see how individual fish in the sea can be branded (at least the cod, herring and other species of fish that Icelanders harvest). It may be argued therefore that ITQs are substitutes for property rights based on fencing or branding. They are not exclusive rights to the utilisation of particular areas of the sea, or of particular fish, but rather exclusive rights to harvest a given share of a given total catch of a species of fish. They are rights of extraction rather than property, comparable to rights to extract a certain quantity of timber from a given forest, or to harvest a certain number of deer from a given colony (Hannesson 1994).

While such rights provide incentives to cut the timber and to catch the deer in the most efficient way, they may not be sufficiently strong to provide optimal husbandry of the forest or the deer colony. Nevertheless, ITQs as described in fisheries economics literature have many of the efficient features of individual property rights. They are exclusive, individual, divisible, transferable and permanent. Holders of such rights have a clear interest in the long-term profitability of the resource. There would be a crucial difference in the behaviour of two groups of quota holders, where the members of one group each have a permanent quota expressed in a given quantity of fish, e.g. 250t of cod/yr. Members of the other groups would each have a permanent quota expressed in a given share of the total catch, e.g. 0.1% of the TAC for cod. The latter group would be concerned not only with minimising harvesting costs, but also with setting the TAC in such a way that the long-term profitability of the fish stock in question would be maximised.

Arguably, ITQs, as described in fisheries economics literature, come as near to being private property rights as is feasible in deep-sea fisheries. But what about the Icelandic ITQs? Those ITQs are certainly individual and divisible. They are also exclusive although their exclusivity is somewhat reduced by the continuing existence of exemptions from the system for boats, under six GRT. But it is a minor exemption and sooner or later all small boats will probably be integrated into the ITQ system. The Icelandic ITQs are also mostly transferable: the restrictions on quota transfers are not very important. Nevertheless, they are restrictions.

For the system to be more efficient most economists would argue that ITQs should not be issued to fishing vessels, but to individuals and firms and they should be freely transferable. No restrictions should be imposed either on the relative or absolute amount each individual firm could hold, as is now the case. The ITQs should also be fully recognised by the Law as possible collateral that they are not at present. There should not be conditions on their use, such as the rules to discourage speculation in ITQs. More speculation would facilitate transfers in the ITQ market, hasten the reduction of the fishing fleet and enable quota holders to be more flexible in their operations.

The main problem in the Icelandic fisheries is that the ITQs, even if issued to individual vessels for an indefinite period of time since 1990, are not really permanent and secure. As described earlier, a paragraph was inserted in the Fisheries Management Act 1990 to the effect that no assignment of ITQs by this law could constitute any permanent property rights to such quotas or become the ground for compensation if the quotas were taken from their holders. While it is unlikely that the ITQ system would be abolished, or the quotas taken from their present holders especially since in early 2000 only 19% of the quotas are still in the hands of those to whom they were initially assigned. The unwillingness of the Icelandic Parliament to take any steps legally to recognise the ITQs as property rights, even if they are taxed and for all purposes treated as such, has added to the uncertainty facing their holders.

2.7 Non-territorial rights in response to harmful effects

The emergence of ITQs in the Icelandic fisheries has interesting similarities to the emergence of property rights amongst Indians in Labrador, as analysed by Harold Demsetz (1967). For centuries, before the arrival of Europeans, the Indians had hunted beaver primarily for food and the few furs they needed. Since the beaver stock was a non-exclusive resource, the Indians did not have a vested interest in increasing or maintaining it. However, as their needs were small and the technology primitive the negative effects of beaver hunting were insignificant. When European traders arrived, hunting technology improved, and demand for furs greatly increased. The scale of hunting greatly increased so the harmful effects which each hunter had on others by his hunting became significant. Consequently, the Indians divided themselves into several bands in order to hunt more efficiently. Each band appropriated pieces of land, roughly similar in quality, for it to hunt exclusively. By the middle of the 18th century, the privately-allotted territories were relatively stabilised. Thus, the fur trade had encouraged the husbanding of beaver and the prevention of poaching which such husbanding requires. Demsetz tells this tale to illustrate his main point about property rights: they emerge when harmful or beneficial effects of economic activity emerge, enabling individuals to take them into account.

Consider pollution: if I pollute a river in which you swim, or fish salmon, or from where you get your drinking water, with the consequence that you cannot continue your use of the river, it is typically because neither you nor anyone else owns the river, and is able to hold me responsible for my activities. While the pollution I cause harms you, it costs me nothing. The solution would seem to be to define property rights to the river, just as the Labrador Indians established property rights in different pieces of land. Sometimes, however, the definition of property rights is not feasible as the costs of establishing them are higher than the gains. Demsetz points out that the Indians of the Southwest plains who came into contact with the European market at the same time as the Labrador Indians, did not establish new property rights in response to increased demand for the animals they hunted and improved hunting technology. The reason was that the animals of the plains, such as the buffalo, were primarily grazing animals wandering over wide areas. The cost of husbanding those animals (fencing or branding) was therefore much higher (at least until the introduction of barbed wire) than the cost of husbanding beavers in Labrador which were confined to relatively small areas.

The pelagic species of fish in Icelandic waters, herring and capelin, are rather similar to the animals of the Southwest plains described by Demsetz: clearly, any territorial rights to those two fish stocks would have been unfeasible. Neither fencing nor branding would have been possible. On the other hand, cod and other demersal fish are similar to beaver in the Labrador forests in that they are relatively territorial. The fishing grounds where those species are found are known and rather well-defined. Unlike branding, fencing would in theory have been possible in the demersal fisheries (and even more in the inshore shrimp and nephrops fisheries, confined to small and clearly demarcated areas).

The interesting question is then why territorial rights were not established in those stocks. Several answers may be suggested. First, there were hardly any legal precedents or possibilities available to fishing-vessel owners or legislators. While non-territorial fishing rights in the form of ITQs had already been tried in the pelagic fisheries, and seen to work, ideas about property rights in areas of the sea would have been dismissed as pure fantasy. Secondly, demersal fishing grounds are large in scale, creating possible economic inefficiencies of their own as independent units of operations, while vessel catch quotas are perfectly divisible. Third, fencing each fishing ground would have been costly. Instead, under the ITQ system only the Icelandic EEZ is really fenced off. Moreover, the Icelandic fishing fleet includes many multi-purpose vessels so it was economical to have a comprehensive quota system within which a vessel might switch from harvesting one species to another without many problems.

It is also convenient that the quotas are expressed in terms of cod equivalents so fishing vessels can easily solve the problem of bycatch. On the whole, the evolution of the Icelandic ITQ system can be interpreted as the practical response to the problem of vessel owners imposing economic costs on one another by excessive fishing effort and over-capitalisation-costs which should not have been blamed on them, but rather on the lack of property rights and thus the lack of information about those costs (Coase 1960). It amounts to the enclosure of the fish stocks in Icelandic waters-an enclosure not yet completed.

2.8 The performance of the ITQ system

When access to a resource, such as the fish stocks in Icelandic waters, suddenly becomes exclusive, the behaviour of those utilising the resource should be expected to change greatly. When an ITQ system is introduced in deep-sea fisheries the fish stocks in question are taken into custody, so to speak, by the quota holders. Certainly there has been a marked change in the behaviour of Icelandic vessel owners since the introduction of the ITQ system. Even if their rights of extraction from the fish stocks are by no means as clear or certain as they could be, quota holders within the powerful Association of Fishing Vessel Owners have begun to look upon themselves as custodians of the fish stocks, taking a long-term view of their utilisation and supporting a cautious approach to the setting of TACs. Note how Table 1 shows that the TACs set by the Minister of Fisheries have gradually approached the TACs recommended by the MRI. This is not least because of the increased sense of responsibility within the ranks of vessel owners.

Since the introduction of ITQs most stocks in Icelandic waters have slowly increased, in particular the valuable cod stock (at the same time this stock has collapsed in other parts of the world). Harvesting has also become much more efficient, especially in the pelagic fisheries, as can be seen in Figure 2. In the herring fishery, catch per unit of effort is now roughly 10 times higher than it was when ITQs were first issued. In the capelin fishery, the number of vessels has gone down, and fishing effort has been reduced; at the same time there has been no downward trend in their catches. The evidence also suggests that harvesting in the small Nephrops, shrimp and scallop fisheries has become more efficient.

In the demersal fisheries for the first few years after the introduction of ITQs fishing effort and fishing capital indeed increased, but this can be explained by factors such as the unfortunate re-introduction of the effort-quota option in 1985, the partial exemption of small boats from the system, and a structural change in the fisheries, namely the increase in the number of freezer trawlers, in effect moving fish processing from land to sea. Nevertheless, since 1991 when the ITQ system became comprehensive and most exemptions from it were removed, both fishing capital and fishing effort have been significantly reduced, as can be seen in Figure 3. The reason why fishing capital has not gone down as dramatically as fishing effort may be that many vessel owners want to retain their hold capacity in the hope that with stronger fish stocks future TACs will increase.

Figure 2: CPUF for the Purse Seine Fleet in the Pelagic Fisheries 1977-97

Source: National Bureau of Statistics

It was also feared in the first years of the ITQ system that there would be a net transfer of quota from the small fishing villages scattered around the coastline, to the urbanised Southwest of Iceland where the capital city of Reykjavik is located. This has not happened, on the contrary, there has been a net transfer of quota from the Southwest, and especially to the Northeast. In 1984, firms in the Southwest controlled 29.7% of quota, and firms in the northeast 14.9%, but in 1998-99, firms in the Southwest controlled 25.7% of quota, and firms in the Northeast 21.2%. The impact of the ITQ system has indeed been to strengthen the local economy in the small fishing villages.

Figure 3: Demersal Fishing Effort and Capital 1979-1997 (index 1979=100).

Source: National Bureau of Statistics

2.9 Remaining problems

While the ITQ system in the Icelandic fisheries has performed as well as could be expected and without any serious social consequences some problems remain. Some of them are institutional and can be corrected, but probably at a political cost: the partial exemption of small boats from the system; some remaining restrictions on transfers; and the uncertain legal status of the quotas.

A further problem lies in the fact that all quotas have to be expressed in tonnes over the fishing season whereas the values of two tonnes of catch are not always equal, either because they come from different species of fish or because specimens of one species differ in value. Discarding may therefore occur. However, discarding, the throwing away of non-targeted species, is not much of a problem in the Icelandic ITQ system because a quota in one species is easily transferred to a quota in another through their common denominator, cod. Highgrading, the throwing away of specimens of the targeted species, because they are too small to be of much value, is a greater problem, even if its extent is exaggerated by critics of the ITQ system. In a 1993 government commission report it was estimated that highgrading of demersal fish ranged from 1-6% of the total catch volume depending on the type of gear and vessel used (Arnason 1994). Moreover, according to the report there had been no detectable increase in highgrading since the introduction the ITQs. One reason for the relative insignificance of highgrading is undoubtedly the strict surveillance of fishing vessels. It should also be noted that some highgrading occurs because it is difficult to differentiate between specimens of different value during operations at sea. In the future, improvements in fishing gear will reduce this problem.

3. CURRENT CONTROVERSIES ABOUT THE ICELANDIC ITQ SYSTEM

3.1 Transparency of extraction rights

While the Icelandic fisheries present a strikingly different picture from that in many neighbouring countries whose fisheries are unprofitable, heavily dependent on government subsidies or deplete their fish stocks, the ITQ system is still controversial in Iceland. Its most unpopular aspect is the transferability of quotas. Regularly, there is a public outcry when a holder of a quota sells it, even if this can be seen as a positive step, since it means that the seller leaves the over-capitalised fisheries: this is readjustment by trade, not by force. But public debate raises more general philosophical objections to the ITQ system. One common objection is ITQs mean at least partial 'enclosure' of fish stocks. They imply the development of exclusive extraction rights to fish stocks that share important features of private property rights.

It is argued that the initial allocation of quotas at the end of 1983 in the demersal fisheries was unjust because it constituted a gift to their recipients-owners of fishing vessels operating in the three preceding years-excluding all others. The critics of the ITQ system say that the fish stocks in Icelandic waters are the declared common property of the Icelandic nation, and that it is unjust that individual fishing firms should reap the profits from exploiting them. They propose that the quotas should be taken from their present holders and auctioned by government, or that a special tax should be imposed on their holders to capture the rent that can be derived from the resource. This said, opposition to the ITQ system in Iceland has been no stronger than would be expected in a country so dependent on fishing. In Iceland, almost everyone lives close to the fisheries and all events are well reported in the media. In most other countries, fishing is marginal to the economy and is usually given scant public attention. Therefore, less opposition should be expected from the general public in most other countries to the introduction of ITQ systems in fisheries.

3.2 Is the ITQ system unjust?

The arguments against the initial allocation of quotas are directed solely at the allocation of quotas in the demersal fisheries at the end of 1983. But, if that was unjust, so must have been the initial allocation of quotas in the pelagic fisheries in 1975-80 and in the small Nephrops, shrimp and scallops fisheries in the 1970s. It is difficult to see how the demersal quotas could have been allocated in any other way than on the basis of catch history. To return to the illustration in Section 1.8, the task was to reduce the fishing fleet from sixteen to eight boats. In theory, government could do this by taxing, or pricing, eight boats out. But in practice it would be better done by assigning transferable quota sufficient for the successful operation of eight boats to the existing sixteen boats so that the more efficient could, over time, buy out those who wanted to leave the fisheries. In this way the necessary adjustments could occur peacefully. After all, vessel owners had invested in their vessels, gear and practical knowledge (human capital) in the belief that the fishing grounds in Icelandic waters would remain open to them.

When it was necessary to restrict access, it seemed natural to restrict it to those who had made such investments because they were the only ones to lose from the restriction, not those who had made no such investments. It was easier and less costly not to enter the fisheries than to leave them. Put differently, this was the only posssible Pareto-efficient change. A change in institutions is Pareto-efficient if all benefit from some benefit or no one loses (Buchanan 1959). If government had auctioned the quota, it would itself have benefited. Those eight boat owners who would have been able to purchase quotas would have neither benefited nor lost. But those eight who would have been outbid at the auction would have lost because their capital, being specific to the fisheries, would have become worth little. On the other hand, when quota was assigned to the existing owners of fishing capital, and made transferable, as was done, no one lost. Those who remained in the fishery would, over time, have bought quota from the other eight boat owners who then would have gained from the sale of their quota. Even the government would have benefited from the increased productivity in the fisheries and higher tax revenues.

The crew of the eight boats that would have had to leave the fishery would, under an initial assignment of quota to vessel owners, have longer adjustment period than under a government auction. This would have made them redundant overnight. As their skills were not specific to fisheries they could then seek employment elsewhere without losing much of their bargaining power.

The initial allocation of catch quotas on the basis of catch history harmed no one. On the contrary, a system of transaction rules was developed by a group of people who had been imposing economic costs on one another by over-utilising the fish stocks, to end this. Unlike pollution, the harm was invisible: it was benefit forgone, the potential rent from a fertile resource dissipated in over-capitalisation and excessive fishing effort. The ITQ system internalized an externality. Its introduction consisted in assigning responsibility for the fish stocks to individuals and thus enabling them to eliminate the harmful effects that they had previously had on one another.

It is, therefore, misleading to speak about a 'special gift' to the owners of vessels in the demersal fisheries when they received vessel catch quotas at the end of 1983. What government did for them was what it had previously neglected to do, and what is usually regarded as its duty: to define and uphold a system of rules under which people could settle their differences peacefully and to mutual advantage. This system of rules certainly enabled Icelandic vessel owners to create wealth and this is what property is supposed to do.

At this point, opponents of the Icelandic ITQ system may point to the declaration, in the 1990 Fisheries Management Act about the fish stocks being the common property of Iceland. It is an interesting question what this declaration, inserted at a late stage in the evolution of the ITQ system to facilitate a vote in the legislature, precisely means. Legal experts in Iceland answer that the concept of 'common property' is vague (Lindal 1998). They say that this declaration should not be interpreted as if the fish stocks belonged to government as some buildings and cars do. Rather, it should be regarded as a declaration to the effect that Iceland has full jurisdiction over the fish stocks in Icelandic waters and that their utilisation has to serve the long-term interests of the nation. Certainly, they say, legislators did not mean to nationalise the fish stocks by inserting this declaration into the Fisheries Management Act.

3.3 The demand for a resource rent tax

Some Icelandic economists have argued for a special resource-rent tax in the fisheries, on the grounds that such a tax would not have any distortional effects, unlike most other taxes, that the owners of fishing vessels do not deserve the rent from the fish stocks, and that such a tax might make ITQs more acceptable to the general public (Gylfason 1990, Moller 1996). Unlike pollution fees, for example, such a tax would not be corrective (i.e. serve to internalise an externality). The ITQ system has already accomplished the necessary correction by enabling vessel owners to reduce fishing capital and fishing effort in their transactions to the most profitable level. The proposed resource rent tax would therefore be redistributive. While a resource rent tax might seem plausible if it could replace other more distortional taxes, it is quite optimistic to think that it would do so. It is more likely that in the long run it would simply broaden the basis for taxation in Iceland, adding yet another source of income to government. Moreover, there are reasons to believe that such a tax would have distortional effects on operations in the fisheries (Johnson 1995, 1999).

Consider the possibility that government would gradually take the quotas away from their present holders over a period of 10 years or so and rent the quotas again to them, perhaps for 2-3 years. This would mean that the incentives and therefore the behaviour of vessel owners would change. They would no longer think of themselves as having an interest in the long-term productivity of the resource. The responsibility for the resource would lie with government. Therefore, the vessel owners might support higher TACs than would be optimal. Monitoring would also become more difficult. One of the great advantages of a ITQ system is that as the quota holders have a well-defined share in the resource they have an incentive to co-operate and to monitor harvesting. In short, the difference between the behaviour of vessel owners under an ITQ system and under a system of resource rent taxes is that which exists between owners and tenants.

It may be argued that owners of fishing vessels do not deserve the rent that they will, under the ITQ system, be able to derive from the fish stocks in Icelandic waters. Rent from a natural resource is by definition created not by the firms utilising the resource, but by the limited supply of the resource. In a sense, the generation of vessel owners receiving the initial quotas are indeed enjoying a windfall profit. But it is also the consent and active co-operation of this generation which is crucial to the success of the change in institutions. It is difficult to see any others who deserve the rent, either. It may also be quite difficult to isolate the full rent derivable from a resource in such a way that it will not decrease in the process of isolating it, as we have seen. Moreover, if the rent derived from the exclusive access to the fish stocks in Icelandic waters is to be captured by a special resource-rent tax, then it would seem only fair that the rent derived from other resources in limited supply, including land, hot springs, and human talent, should also be taxed. This would however be difficult, both for technical and political reasons. It is by no means certain, either, that a special resource rent tax on the fisheries would make the ITQ system more acceptable to the general public.

The most unpopular aspect of the system is that holders of quota can sell it and leave the fisheries with a large sum of money. As the adjustment process goes on, this is likely to happen less and less frequently. More and more people have also become shareholders in fishing firms. The holders of quotas, although much less vocal than the opponents of the ITQ system, may, in the end, be a much stronger interest group. They have a special interest in the system that is clear and concentrated, whereas the interest of each taxpayer in a small share in the revenue from a possible resource rent is rather weak.

When the evolution of the ITQ system is studied, it becomes clear that it would never have been introduced if it had not been in the interest of owners of fishing capital to accept it. The ITQ system was politically possible, unlike a special resource-rent tax or a government auction of quotas, because it did not work against the private interests of vessel owners. It is no worse for that. Economists since Adam Smith have told us that there is nothing wrong with private interest, if and when it coincides with the common good. It is the great advantage of the ITQ system in the fisheries that it directs the private interest of each vessel owner towards the public interest in profitable fisheries and conservation of fish stocks.

3.4 Possible future developments

If a resource-rent tax were imposed on the Icelandic fisheries it would be a double irony. First, the fisheries problem was that of harmful effects of economic activity. The over-capitalisation and excessive fishing effort, leading to dissipation of the resource rent arose because vessel owners did not operate under an efficient set of rules. The ITQ system enabled them to escape from this 'tragedy of the commons' and to capture the rent previously dissipated. If government would then remove the rent by a tax it would have replaced one set of harmful effects for vessel owners, namely rent dissipation in the form of over-capitalisation and excessive fishing effort, with another, namely the tax. What is the point of legislation if not to remove harmful effects of economic activities possible for those who were, in the first place, affected by those harmful effects? Second, much of the revenue from such a tax would be dissipated through the efforts of interest groups to secure part of it for themselves. Rent dissipation offshore through the costly process of over-investment in the fisheries would be replaced with rent dissipation onshore through the costly process of political redistribution.

Be that as it may, the Icelandic government, in response to the public dissatisfaction with the ITQ system appointed two commissions to make suggestions on improvements of the ITQ system and on other aspects of resource management. The work of these two commissions was delayed by these court cases, first on the constitutionality of the fishing permits, and then of the ITQs. But, after the decision by the Supreme Court in the spring of 2000 that the ITQ system was constitutional, the two commissions started again and should deliver their final reports in late 2000 or early 2001. It is difficult to predict what recommendations the two commissions will make, and also which, if any, of their recommendations Parliament will accept. The evolution of the ITQ system in New Zealand since its introduction in 1986, which in many ways parallels that in Iceland, may offer some guidance.

Initially, the New Zealand system differed from that of the Icelandic in two respects. First, vessel catch quotas were issued in terms of tonnes, not fractions of the TAC for each fish species, the idea being that government would buy or sell quotas to make up for changes in the annual TACs. Second, government imposed a resource rent tax on quota holders. Both those measures were later abandoned apparently because the government felt that closer co-operation with fishing firms was necessary. The quotas became TAC-shares as in Iceland; and a cost recovery charge replaced the resource rent tax (Major 1999). The rule now in New Zealand is that fishing firms bear the full costs of administering and enforcing the ITQ system. This is also a possible, and likely, outcome of the process of reconciling the public in Iceland with the ITQ system.

If a cost recovery charge would be imposed on Icelandic quota holders, presumably they would also get a larger say in the administration and enforcement of the system, which would enhance their sense of responsibility for the resource. It would be an important step towards the self-management of the fisheries and probably also serve to strengthen the rights of quota holders. At present, their rights are imperfect, not only because of the uncertain long-term status of the quotas, but also because those rights are narrow in scope, being by definition rights of extraction rather than property.

In the near future, the two most important tasks in ITQ fisheries systems will be to find ways of setting TACs in different fish stocks to enhance conservation - not at the maximum sustainable yield, but at the somewhat lower level of maximum profitability - and to create incentives to increase the value of the fish stocks. These two tasks can only be undertaken by real stakeholders in the fisheries. One of the main arguments for private property rights is that owners have strong incentives to experiment and innovate in the utilisation of their resources. New techniques in fencing and branding, and in fertilising fishing grounds or genetically improving individual fish, might make fish stocks much more valuable than they are now (De Alessi 1998). Instead of being hunters and gatherers, fishermen might become cultivators. A process of such experiment and innovation in the fisheries is not likely, however, to take place unless ITQs are strengthened into some forms of legally recognised private property rights.

4. LITERATURE CITED

Arnason, R. 1990. Minimum Information Management in Fisheries. Canadian Journal of Economics. 23:630-53.

Arnason, R. 1994. On Catch Discarding in Fisheries. Marine Resource Economics. 9:189-208.

Buchanan, J.M. 1959. Positive Economics, Welfare Economics, and Political Economy. Journal of Law and Economics. 2:124-38.

Buchanan, J.M. 1997. Who Cares Whether the Commons Are Privatized? Post-Socialist Political Economy. Selected Essays, Cheltenham: Edward Elgar. pp.160-7.

Coase, R.H. 1960. The Problem of Social Cost. Journal of Law and Economics. 3:1-44.

De Alessi, M. 1998. Fishing for Solutions. IEA Studies on the Environment No. 11. London: IEA Environment Unit.

Demsetz, H. 1967. Toward a Theory of Property Rights. American Economic Review, Papers and Proceedings. 57:347-59.

Gissurarson, H.H. 1983. The Fish War: A Lesson from Iceland. The Journal of Economic Affairs. 3:220-3.

Gissurarson, H.H. 1990. Fiskistofnarnir vid Island: Thjodareign eda rikiseign? Reykjavik: Stofnun Jons Thorlakssonar.

Gordon, H.S. 1954. The Economic Theory of a Common Property Resource: The Fishery. Journal of Political Economy. 62:124-42.

Gylfason, T. 1990. Stjorn fiskveida er ekki einkamal utgerdarmanna. Th. Helgason and O. Jonsson (ed). Hagsaeld i hufi, Reykjavik: Haskolautgafan og Sjavarutvegsstofnun Haskolans. pp.120-5.

Hannesson, R. 1994. Trends in Fishery Management. Managing Fishery Resources, World Bank Discussion Paper No. 217. E.A. Loyayza (ed).

Hardin, G. 1968. The Tragedy of the Commons. Sci. 62:1243-8.

Johnson, R.N. 1995. Implications of Taxing Quota Value in an Individual Transferable Quota Fishery. Marine Resource Economics. 10:327-40.

Johnson, R.N. 1999. Rents and Taxes in an ITQ Fishery. In R. Arnason and H.H. Gissurarson (eds.), Individual Transferable Quotas in Theory and Practice. pp. 205-13. Reykjavik: University of Iceland Press.

Jonsson, B.B. 1975. Audlindaskattur, idnthroun og efnahagsleg framtid Islands. Fjarmalatidindi. 22:103-22.

Jonsson, H. 1990. Akvardanataka i sjavarutvegi og stjornun fiskveida. Samfelagstidindi. 10:99-141.

Libecap, G.D. 1989. Contracting for Property Rights. Cambridge University Press.

Lindal, S. 1998. Nytjastofnar a Islandsmidum - sameign thjodarinnar. In H.H. Gissurarson et. al. (eds.). Afmaelisrit David Oddsson fimmtugur. Reykjavik: Bokafelagid. pp.781-808.

Major, P. 1999. The Evolution of ITQs in the New Zealand Fisheries. In R. Arnason and H.H. Gissurarson (eds.). Individual Transferable Quotas in Theory and Practice. pp. 81-102. Reykjavik: University of Iceland Press.

Moller, M. 1996. Fyrirkomulag veidileyfagjalds. Visbending. 29 February.

Morgunbladid 2000. 80% kvotans hafa skipt um hendur. 18 March.

Runolfsson, B. T. (1999): 'ITQs in Iceland: Their Nature and Performance'. In R. Arnason and H.H. Gissurarson (eds.), Individual Transferable Quotas in Theory and Practice, pp. 103-140. Reykjavik: University of Iceland Press.

Scott, A. (1955): 'The Fishery: The Objectives of Sole Ownership', Journal of Political Economy, Vol. 63, pp. 116-24.

Introducing Property Rights into Fisheries Management: Governments cannot Cope with Implementation Alone - T. Craig

T. Craig
New Zealand Seafood Industry Council
Private Bag 24-901, Wellington, New Zealand

1. INTRODUCTION

New Zealand's commercial fisheries have been managed under a property rights system - known as the Quota Management System (QMS) - since 1986. The introduction of the QMS was a radical change, from the previous free-for-all competitive fishing regime with some regulatory control, to a property rights system where each fisher has a right to take a defined share of the total catch.

Since its introduction, the QMS has improved certainty and security for all participants in the fishing industry and there has been substantial growth in the seafood processing and marketing sectors. There is a general recognition that the QMS has played a significant role in improving the biological status of the fisheries resource and commercial return to fishers (Annala 1996). Nevertheless, it is questionable whether New Zealand's fisheries management system allows the ecological and economic potential inherent in a rights-based fisheries management system to be fully realised. This paper argues that in itself, a property rights system - although an essential pre-requisite of an biologically sustainable and economically viable fisheries management regime - does not provide all the tools and mechanisms necessary to achieve successful fisheries management. And, that by itself, the government cannot develop and implement reforms to fisheries property rights systems - the direct involvement of the rights holders is essential.

Countries implementing rights-based regimes to address problems such as depleted fisheries resources, excessive fishing capacity, low incomes for fishers, heavy dependence on government support and regulation, and conflict among fishing groups, have watched the introduction, evolution and use of the QMS in New Zealand with interest. The New Zealand seafood industry has identified a number of lessons that can be learnt from the implementation of property rights fisheries management systems. The three main lessons are the need to:

i. define, at the outset, clear, appropriate and enforceable rights and responsibilities for all users of fishery resources

ii. clearly define and separate the roles of the government as sustainability manager from the roles of rights holders as fisheries managers, and

iii. understand that successful property rights management can only be achieved through "bottom up" or local initiatives.

The remainder of this paper explores in more detail these three lessons in the context of the implementation of New Zealand's fisheries management regime and draws some conclusions about the respective roles of governments and fisheries rights holders in the implementation of property rights fisheries management regimes. First however, a brief background on New Zealand's QMS is provided.

2. NEW ZEALAND'S QUOTA MANAGEMENT SYSTEM

New Zealand's 1996 Fisheries Act gives fisheries management the dual purpose of providing for the utilisation of fisheries resources while ensuring sustainability. Under the Act "Ensuring sustainability" means -(a) maintaining the potential of fisheries resources to meet the reasonably foreseeable needs of future generations; and (b) avoiding, remedying, or mitigating any adverse effects of fishing on the marine environment. "Utilisation" means conserving, using, enhancing and developing fisheries resources to enable people to provide for their social, economic and cultural well-being. Most of New Zealand's commercial fishing (85% of the total known fish catch in the Exclusive Economic Zone) occurs under the QMS.

The founding aims of the QMS reflect the dual purpose of the legislation. They include:

i. rebuilding inshore fisheries where required and ensuring that catches are limited to levels that could be sustained over the long term, and

ii. ensuring that catches are harvested efficiently with maximum benefit to the industry and to New Zealand (Luxton 1997).

The QMS currently covers 33 species (over 180 fishstocks) and it is the government's intention to bring more fish into the system over the next few years. To assist in the management of the fisheries, a number of Quota Management Areas (QMAs) have been set up for each species in the QMS. Each QMA corresponds with a particular fishstock - for example, snapper is managed as 6 separate fishstocks in 6 QMAs. A fisher with access to quota for a particular fishstock may harvest the fish anywhere within the relevant QMA unless there are areas, such as marine reserves or areas closed to protect juvenile fish, from which commercial fishing has been excluded. Further discussion of New Zealand's QMS can be found in Clark et al. (1988), Dewes (1989), Memon and Cullen (1992), Sissenwine and Mace (1992).

Many aspects of the 1996 Fisheries Act - designed to refine aspects of the QMS - have yet to be implemented. A recent independent review of the legislation (Hartevelt 1998) found that if this Act were to be implemented in its current form, it would be highly likely that:

i. the purpose of the Act - to provide for the use of fisheries resources while ensuring sustainability - would be undermined

ii. significant compliance costs associated with administering the Act would be imposed on commercial fishers, and yet this cost cannot be justified by any additional cultural, social or environmental gains from the Act, and

iii. the fisheries management regime: (a) would be highly centralised and inflexible, (b) would be contrary to Government's decision to devolve the delivery of non-core government fisheries services to the fishing industry; and (c) would remove incentives for all stakeholders to take a constructive role in the management of the national fisheries resources (Hartevelt 1998).

3. THREE LESSONS LEARNT

3.1 Definition of rights

So, what lessons can the international fishing community learn from the evolution and implementation of a property rights based fisheries management system in New Zealand?

Lesson 1: Define clear, appropriate and enforceable rights and responsibilities for all users of fisheries resources. It is essential that, from the outset of the implementation of the property rights regime, the rights and responsibilities of all fishers are clear, appropriate (i.e. reflect the interests of the fishers, contribute to sustainable use) and enforceable.

In New Zealand's commercial fisheries, although ITQs are relatively well specified compared to the rights of other fisheries stakeholders, the ability of commercial fishers to fully exercise their rights remains restricted. As Copes (1986) notes, rights to the fish stock bestowed by the individual quota - even in the form of ITQ - are still far from fully specified property rights.

Four problems can be identified. First, in spite of the ability of the Total Allowable Catch mechanism to achieve a sustainable level of harvest, many regulations (currently over 4000, many from before the advent of the QMS) governing how and when fishing activity takes place, still exist and restrict the ability of fishers to determine how they will harvest their share of the catch. Second, with a few exceptions, the retention of management rights by the government has prevented quota owners from taking greater responsibility for fisheries decision making, implementation and enforcement. Third, the quota forfeiture provisions of the fisheries legislation mean that ITQ are not the bankable asset that fishers originally anticipated they would be. This has reduced the incentive for fishers to undertake long-term investment in the well being of the fishery. Fourth, ITQ rights are non-exclusive - i.e. other groups of rights holders (e.g. recreational and customary) can harvest fish from fisheries covered by ITQs - and this can create access conflicts between different user groups.

Marine farming rights relate to the occupation of areas of seabed granted under Resource Management legislation in combination with a relatively poorly defined right to harvest farmed fish from the marine farm structures. These marine farming harvest rights are not well integrated with harvest rights for wild fisheries and confusion over the boundaries between Resource Management and Fisheries legislation means that access issues can sometimes arise between marine farmers and commercial fishers.

Customary Maori marine fishers have territorial use rights which are held by the iwi (tribe) occupying the adjoining land. Harvest rules can be developed and observed by the holders of customary rights. However, in most cases these rights are not exclusive and so they are affected by, and in turn affect, extractions from the same stock by other sectors.

Recreational marine fisheries operate as open access fisheries, subject to lightly enforced regulations. These rights are by far the most poorly defined of New Zealand's various fishing rights. Recreational fishers have no certainty about their right to a share of a fishery or the right to access that share. Recreational fishing rights are therefore easily eroded by government and by commercial and customary fishers and other coastal users. And, they are often inconsistent with commercial and customary stewardship regimes, and are poorly enforced. The uncertain nature of the right also means that there is little incentive for recreational fishers to act co-operatively or to invest in the sustainability of the fishery.

Apart from specifying clear, appropriate and enforceable rights where different groups of fishers are active in a fishery (commercial, recreational, customary, marine farming) their rights must also be well integrated. Integration is especially critical in many inshore fisheries where there is competition between fishers for the resources. Integration does not necessarily mean that the rights should be specified identically - for instance, transferability of rights between individuals may not be an issue for recreational and customary Maori fishers. Existing fisheries legislation mechanisms for dealing with integrating different types of rights (e.g. areas closed to commercial fishing), are blunt instruments for dealing with conflict and fail to provide incentives for co-operation between fishers. More often than not they result in an intensification of antagonistic relationships between government and fishers, and between fishers.

In summary then, failure to define clear, appropriate and enforceable rights and responsibilities for all fishers can increase the risk of:

i. Conflicts between different groups of rights holders over their share of a fishery and their ability to access their share. This risk is exacerbated by the absence of incentives and mechanisms to encourage different groups of rights holders to work out durable solutions where conflicts arise.

ii. Gradual erosion of fishers' ability to access fisheries in order to exercise harvest rights through competition for space with both other fisheries activities and non-fisheries activities (e.g., marine reserves and other exclusive uses of coastal space). This risk is related to the non-exclusive nature (in terms of spatial allocation) of most types of fishing rights.

iii. Failure of fishers to develop an ethic of "responsible management" of the fishery resource because they lack the opportunity to collectively manage the fisheries in which they have harvesting rights. Without exclusive rights, fishers have little incentive to curb their actions as they know that their conservation efforts will be ineffective and serve only to swell the catch of other fishers. This problem is exacerbated by the lack of integration of commercial, recreational and customary rights, which means there is limited scope beyond direct government intervention and regulation for mechanisms to bind existing and new fishers to agreements reached between the various groups of fishers.

Lesson 2: Clearly define and separate the roles of the government as sustainability-manager from those of rights holders as fisheries-managers.

New Zealand's fisheries management regime currently entails the government intervening extensively in detailed areas of operational management and enforcement. The result is a highly centralised management system. In part this reflects the old industry structure that emphasises the role of the government as referee, monitoring and enforcing the activities of small fishers. The focus on detailed management means that governmental fisheries management is currently largely input driven and as a result has become distant from the objective of fisheries management - to provide for the utilisation of fisheries resources while ensuring sustainability.

The recent independent review of the fisheries legislation found that these centralised management regimes were becoming increasingly complex, inflexible, unworkable and costly to administer. The reviewer concluded that the regulatory and management principles of the fishing sector need to be aligned with other areas of the economy, based on efficient allocative mechanisms involving both self-management and a less interventionist approach by the government (Hartevelt 1998, p.27).

This view is reinforced by developments within the fishing industry. For instance, the industry's management resources and skills are evolving and the industry is making advances in managing fishing stocks on a sustainable basis, including taking responsibility for avoiding, remedying or mitigating any adverse effects of fishing. Even in the absence of appropriate legislation and devolution of management responsibilities, quota owners have begun to organise themselves into quota management associations and similar fisheries management organisations. For instance, the NZ Seafood Industry Council now recognises 16 commercial fisheries stakeholder organisations and by March 2000 we expect that a further 4 stakeholder groups will establish themselves. Together these groups will represent the interests of 95% of all quota owners. Some of these quota owner associations are already operating successfully on a collective basis and taking on significant management responsibilities. The example of the Challenger group of companies is discussed in more detail below. Responsibility for the management of commercial fisheries registry services (an essential component of the operation of the QMS) is in the process of being devolved from the government to the industry.

Another characteristic of the government's active role in fisheries management has been that it tends to divide stakeholder groups, resulting in conflict between the groups and forcing the government into the role of arbitrator of disputes. This means that fisheries management continues to be subject to intense political input from various interest groups. Both the bureaucratic, inflexible nature of government fisheries management and its susceptibility to political interference increase the risk of unsustainable fisheries management outcomes.

Hartevelt recommended that the government focus on fisheries management outcomes rather than inputs, and have responsibility for:

i. establishing the sustainability and overall management framework for the utilisation of fisheries resources (including continuing to meet Treaty of Waitangi and international obligations)

ii. allocating and ensuring the integrity of fisheries harvesting rights

iii. facilitating and encouraging rights holder-based management

iv. establishing information requirements for the sustainability, framework, co-ordinating the collection and dissemination of relevant information to fisheries management stakeholders, and

v. monitoring and ensuring the integrity of sustainability and fisheries management frameworks and supporting systems and services.

All interests in fisheries will need to change their current attitudes to fisheries management if co-management is to be implemented successfully (Hartevelt 1998, p. 32). The government will have to be prepared to move away from its current micro-management role and focus on an outcome-oriented, framework setting and monitoring role. This has significant implications for the size and structure of the Ministry of Fisheries. Fishers will have to become more pro-active in the development of longer term plans for fishing activity and take increased responsibility for the stewardship of the resource to which they have harvesting rights. They will have to come to terms with a new operating environment and recognise the opportunities and responsibilities associated with ownership of harvest rights and management of harvesting activity. Finally, all stakeholders and interest groups will have to give greater recognition to the rights and responsibilities of customary, recreational and commercial fishers and to the wider interests of society in the sustainable utilisation of the fisheries resource.

The recommended realignment of the roles of the government and fisheries rights holders has been only partially implemented by the recent reforms to the Fisheries Act. Although mechanisms such as fisheries plans, which can be prepared by rights holder groups to facilitate local area-based management of fisheries, are a step forward the government still retains many of the management functions that could be carried out more effectively and efficiently by rights holders. From the industry's perspective, further realignment of roles must continue, including devolution of day-to-day management functions to the rights holders within a wider sustainability framework established by the government. Failure to do this will mean that:

i. fishers will be required to continue to meet the costs of an overly complex and bureaucratic management system

ii. fisheries management will continue to be constrained by the "single-model" approach required by centralised management, and there will be few incentives for flexible, fishery-specific or area-specific management systems to be developed, and

iii. the dual objectives of the fisheries legislation - efficient use and sustainability - may not be able to be met in the most effective manner.

Lesson 3: Successful property rights management can only be achieved through "bottom up", localised initiatives.

Because of the centralised nature of fisheries management in New Zealand, a "one model fits all" approach to fisheries management tends to be applied regardless of the nature of the particular fishery in question. Flexibility of management options and incentives to adopt innovative approaches specific to local areas or particular fishstocks are limited.

The management mechanisms of the QMS tend to operate at a macro level - i.e. on the scale of Quota Management Areas. This scale of management is not suitable for addressing local issues which commonly occur in inshore, mixed species fisheries, such as access arrangements between various user groups. The QMS also generally treats fishstocks on an individual basis - an approach that is not always sufficient for multi-species fisheries. Further, government attitudes to management have not always acknowledged, or built upon, the fact that fisheries management is heavily dependent on the positive and willing involvement of commercial fishers and requires the co-operation of industry both as a source of information about the effectiveness of management initiatives and for compliance with the management regime.

The main lesson to be learnt here is that the establishment of a property rights regime is not the be-all and end-all of successful fisheries management - it needs to be overlaid with, and complemented by rights holder-driven, locally-based management initiatives. In relation to ITQ, Copes (1986) comments that the advocates of individual property probably have made too much of the property rights aspects of the scheme and goes on to say that experience so far suggests that we should be non-dogmatic in our choice of management technique and that we should select from the array of available fisheries management devices the combination that is most beneficial and least deficient in any particular set of circumstances.

It is therefore misleading and limiting to think of the QMS as a single management approach; different fisheries management regimes will suit different fisheries and local conditions - biological, economic, social and cultural. Within the basic framework of the QMS, a flexible, non-centralised approach to the management of particular fisheries is required.

In general, the government is not in the best position to select the most appropriate fisheries management techniques for particular fisheries. This choice is best made, within agreed sustainability specifications set by the government, collectively by the rights holders themselves. Far from being incompatible with an ITQ based management system, collective action is reliant on the allocation of ITQs to help provide a framework within which devolution and decentralisation can occur. As Scott (1993) notes, in many fisheries the ITQ will be less a new instrument of regulation, less a kind of individual property right, than a membership card in a self-governing fishery group.

There is therefore considerable scope for area-based fisheries management planning to supplement the basic QMS regime at a local level, and indeed this approach has been facilitated in the recent reforms to the Fisheries Act through provision for fisheries plans. Fisheries plans provide a mechanism for the various rights holder groups to collectively develop a multi-year approach to managing fishstocks, thereby improving sustainability outcomes and reducing conflicts between stakeholder groups. Ultimately however, until the actual management responsibilities set out in such plans are devolved from the government to the rights holders themselves, fisheries plans will fail to be as effective as they could be in facilitating effective fisheries management.

4. TWO OTHER FACTORS INFLUENCING THE IMPLEMENTATION OF PROPERTY RIGHTS REFORMS

Progress is slowly being made towards improving the definition of property rights and fine-tuning the operation of the QMS. There is also considerable momentum-building for the transition to a "co-management" regime where government and rights holder roles are clearly and appropriately defined. However, two factors are still undermining the implementation and future development of the property rights regime:

i. the susceptibility of government-driven fisheries management regimes to political interference, and

ii. bureaucratic resistance to change.

Another barrier to reforming and implementing fisheries property rights regimes is bureaucratic resistance to change. In particular, the seafood industry needs to be able to convince the government and its officials of the desire and ability of fishers to manage their own interests in the fishery. To do this, the industry needs to demonstrate a high level of organisational and management ability. It also needs to demonstrate that it is capable of assuming the stewardship responsibilities that go alongside its harvest rights.

In the context of resistance to change, it is interesting to note that in spite of the lack of formally devolved management responsibilities, there are already examples in New Zealand of successful, localised, industry-driven collective approaches to the management of inshore fisheries. The most well known of these is the Challenger group of companies in the Nelson-Marlborough area which have responsibility on behalf of the quota owners for the management of all commercial inshore finfish and shellfish quota stocks (with the exception of rock lobster and paua) in Quota Management Areas 7 and 8.

The Southern Scallop Fishery managed by the Challenger Group has been lawfully exempted from the normal sustainability criteria which apply to other similar fisheries. The scallop fishery is now managed under rotational fishing and enhancement programme whereas other similar fisheries are managed by a Total Allowable Catch set at an estimate of the Maximum Sustainable Yield for the fishery. Even in its development phase, when it was faced with high reporting obligations and information requirements, the Challenger group was still able to operate a more cost effective and better targeted management framework than would be achieved if the government had undertaken a centralised and direct management role in the fishery (Harte et al., 1998).

While critics of industry self-management sometimes hold that the Challenger companies are an aberration rather than a model that could be applied more widely to other fisheries, the fishery in QMAs 7 and 8 is in fact more complex than most. It is an inshore multi-species fishery with large numbers of quota owners and significant non-commercial (recreational and customary) interests. It also operates in an area with high natural values and considerable marine farming development. As such, it could be argued that a rights holder-based approach to management could be implemented just as effectively, if not more so, in some of New Zealand's other fisheries where there are fewer quota owners with larger holdings and no, or few, recreational and customary Maori interests (e.g. some deepwater fisheries).

5. CONCLUSION - THE ROLE OF GOVERNMENT

It should be clear from the above discussion that the government cannot successfully implement property rights fisheries management systems on its own - the industry must play a central role, particularly in the development and implementation of day-to-day fisheries management regimes within the broader framework of the QMS and sustainability objectives. It is appropriate for the government (in consultation with all interested parties) to:

i. set the framework for property rights reforms

ii. make a range of appropriate tools available, and

iii. then step back and allow a bottom-up approach, initiated by rights holders, to develop within the established framework.

6. LITERATURE CITED

Annala, J. 1996. New Zealand's ITQ system: have the first eight years been a success or failure? Reviews in Fish Biology and Fisheries, 6, pp. 43-62.

Clark, I., P. Major and N. Mollet 1988. Development and implementation of New Zealand's ITQ Management System, Marine Resource Economics, 5, pp. 325-349.

Copes, P. 1986. A Critical Review of the Individual Quota as a Device in Fisheries Management, Land Economics, 62(3), pp. 278-291.

Dewes, C. 1989. Assessment of the Implementation of Individual Transferable Quotas in New Zealand's Inshore Fisheries, North American Journal of Fisheries Management. 9(2), pp. 131-139.

Harte, M., M. Arbuckle and T. McClurg (in press). Property rights and the evolution of fisheries management in New Zealand. Forthcoming, in Private Rights and Public Benefits: Proceedings of the Environment and Property Rights Conference, Lincoln University, Canterbury New Zealand, November 1998.

Hartevelt, T. 1998. Fishing for the Future: Review of the Fisheries Act 1996. Report of the Independent Reviewer of the Fisheries Act 1996 to the Minister of Food, Fibre, Biosecurity and Border Control.

Luxton, J. 1997. Stakeholder management of recreational fisheries. Address to the Recreational Fishing Council Annual General Meeting, Bay of Islands, July.

Memon, A.P. and R. Cullen 1992. Fisheries policies and their impact on the New Zealand Maori. Marine Resource Economics, 7, pp. 153-167.

Scott, A. 1993. Obstacles to Fishery Self-Government. Marine Resource Economics. 8, pp.187-199.

Sissenwine, M.P. and P.M. Mace 1992. ITQs in New Zealand: The era of fixed quota in perpetuity. Fisheries Bulletin, 90, pp. 147-160

The Common Fisheries Policy of the European Union and Fishing Rights - C. Nordmann

C. Nordmann
European Commission
200, rue de la Loi, Brussels - B1049 Belgium
<[email protected]>

1. EUROPEAN POLICY

The Fisheries Policy of the European Union is one of the few real "common" policies, meaning that competence in this field has been completely transferred to the Union and Member States therefore conserve competence only so far as the Union does not legislate or when it delegates part of its competence expressly to Member States. In addition to that, Member States normally manage the day to day implementation of common rules, as the Union does not have local or regional administrations.

2. DEVELOPMENT OF MANAGEMENT POLICY

Management and conservation of fish resources has been expressly indicated as one of the tasks of the Common Fisheries Policy since the accession to the European Community of the United Kingdom, Denmark and Ireland in 1973. Nevertheless, it took nearly ten years before a complete system could be established at the Community level in 1983. This long period of time shows how difficult it was to find a compromise between the existing national schemes and the diverging interests of the different Member States' fishing industries. The two most crucial problems to be solved (which periodically reappear in political discussions) were the rights of access to waters and the question of allocating catching possibilities among the fleets of the Member States.

3. ACCESS RULES

The Community, with its original Members, France, Germany, Italy, Belgium, the Netherlands and Luxembourg, did not provide for access limitations for vessels flying the flag of one of the Member States. Access was, in principle, free up to Member States' beaches before 1973. In the Accession Treaty of the United Kingdom, Denmark and Ireland, a provision opened the possibility for Member States to restrict access up to 6 miles, to the benefit of the national fleet only, for a transitional period of ten years. In the 1983 Community management scheme, this zone was extended to 12 miles for an additional 10 year period, while guaranteeing the continuation of the historical fishing rights of vessels from other Member States. This regime was maintained under the revised scheme in application since 1992.

4. ALLOCATION OF FISHING POSSIBILITIES

The distribution of catching possibilities has been governed since 1983 by the so-called "relative stability", which consists of a permanent allocation formula applied to stocks under TAC and quota arrangements. This key was determined according to historical catching data. Fishing was free (outside the 12 miles zone) for species or stocks for which no TAC and quotas were established. For some stocks, only TACs were fixed. In this case fishing again was free as long as the TACs were not exhausted at which point the fishery was closed.

The situation in the Mediterranean Sea is quite unique because the European Union's Member States do not claim an EEZ in this area (recently Spain only declared a fisheries protection zone of 50 miles). In addition, the continental shelf is very narrow and the main fisheries resources are inside the zone to which access is restricted to the benefit of the national fleets. A TAC (and as a consequence, quotas) has only recently been established for tuna fishing in accordance with decisions by ICCAT. The main instruments for regulating fisheries in this area are therefore effort-control and technical measures.

5. THE 1992 BASIC REGULATION

The last thorough review of the Common Fisheries Policy took place in 1992, ten years after the adoption of the first comprehensive management system. The next review has been scheduled for 2002, again after a ten year period, as foreseen by the basic fisheries Regulation.

The 1992 reform did not modify the basic elements (access, TACs and quotas, relative stability), but tried to modernise the system, taking into account world-wide developments in fisheries management and to achieve a more coherent and flexible regime.

6. MANAGEMENT OBJECTIVES

The 1992 regulation describes the objectives as follows:

"As concerns exploitation activities the general objectives of the common fisheries policy shall be to protect and conserve available and accessible living marine aquatic resources, and to provide for rational and responsible exploitation on a sustainable basis, in appropriate economic and social conditions for the sector, taking account of its implications for the marine eco-system, and in particular taking account of the needs of both producers and consumers."

With regard to the implementation it is stipulated that:

i. "Management objectives" (may be established) "on a multiannual basis, for each fishery or group of fisheries in relation to the specific nature of the resources concerned. Where appropriate these shall be established on a multi-species basis. Priority objectives shall be specified including, as appropriate, the level of resources, forms of production, activities and yields;"

ii. "for each fishery or group of fisheries where management objectives have been set, management strategies (shall be established), where appropriate on a multiannual basis, to achieve the management objectives including the specific conditions under which exploitation activities shall be pursued."

More detailed specifications state that:

"In order to ensure the rational and responsible exploitation of resources on a sustainable basis,...Community measures laying down the conditions of access to waters and resources and of the pursuit of exploitation activities." (shall be established) "These measures shall be drawn up in the light of the available biological, socio-economic and technical analysis"...

"These provisions may, in particular, include measures for each fishery or group of fisheries to:

i. establish zones in which fishing activities are prohibited or restricted

ii. limit exploitation rates

iii. set quantitative limits on catches

iv. limit time spent at sea taking account, where appropriate, of the remoteness of the fishing waters

v. fix the number and type of fishing vessels authorised to fish

vi. lay down technical measures regarding fishing gear and its method of use

vii. set a minimum size or weight of individuals that may be caught, and

viii. establish incentives, including those of an economic nature, to promote more selective fishing."

8. TACS AND THEIR ALLOCATION

The 1992 regulations also specify concrete measures to be adopted:

i. "shall determine for each fishery or group of fisheries, on a case-by-case basis, the total allowable catch and/or total allowable fishing effort, where appropriate on a multi-annual basis. These shall be based on the management objectives and strategies where they have been established in accordance with paragraph 3;

ii. shall distribute the fishing opportunities between Member States in such a way as to assure each Member State relative stability of fishing activities for each of the stocks concerned; however, following a request from the Member States directly concerned, account may be taken of the development of mini-quotas and regular quota swaps since 1983, with due regard to the overall balance of shares;

iii. shall, where the Community establishes new fishing opportunities in a fishery or group of fisheries not previously prosecuted under the common fisheries policy, decide on the method of allocation taking into account the interests of all Member States;

iv. may also, on a case-by-case basis, determine the conditions for adjusting fishing availabilities from one year to the next;

v. may, based on scientific advice, make any necessary interim adjustments to the management objectives and strategies."

The other instruments in use to regulate fishing effort are the multi-annual guidance programs for the fishing fleets of the Member States which are decided by the European Commission on the basis of objectives set for "re-structuring the Community fisheries sector with a view to achieving a balance on a sustainable basis between resources and their exploitation". These multi-annual guidance programs fix maximum levels for the fishing capacity and/or fishing effort, specific segments of the national fleets have to reach at the end of the program's period, and prescribe intermediate levels of reduction to be respected.

10. IMPLEMENTATION BY MEMBER STATES

The rules Member States apply for the domestic allocation of national fishing possibilities, decided at the Community level, remain the basic responsibility and competence of Member States, but they have to be in conformity with Community law and the Common Fisheries Policy rules. Member States have to inform the European Commission, each year, of their allocation criteria and the detailed rules for the use of fishing possibilities.

In fact, these criteria and rules differ greatly from one Member State to another not only because of the variety of fishing traditions and patterns but also because of the different political and socio-economic options which are not subject to common rules.

The only Member State applying a straightforward ITQ system is the Netherlands. In some other Member States, systems are applied which are quite close to individual transferable quotas in practical and economic terms, as licences are sold with the attached quota allocation, even if there are no legally recognised property rights and no guarantee that the future allocations will follow the existing pattern. The majority of Member States still keep closer to the traditional view of fisheries as a common resource. Others are looking for intermediate solutions.

11. THE 2002 REVIEW OF THE COMMON FISHERIES POLICY

11.1 Present status

In general, the discussion of the possible introduction of individual transferable quotas has only started in the Community and probably will take some time before clear choices are made. The issue is part of the wide consultation process the European Commission has conducted over the last two years in preparation for the 2002 review of the Common Fisheries Policy for which proposals are expected at the beginning of 2001.

These proposals will be based on a report on the fisheries situation in the Community and, in particular, on the economic and social situation of coastal regions, on the state of the resources and their expected development, and on the implementation of the scheme adopted in 1992.

11.2 Consultation process

The consultation started with the issuing of a questionnaire, which was sent to 350 representative organisations and associations with an interest in fisheries in all the Member States of the European Union. The questionnaire contained 33 questions related to the different aspects of the Common Fisheries Policy ranging from access to waters and resources, to resource management and conservation, through to international co-operation, market policy and structural measures. The Commission received 175 replies to its questionnaire which were often critical of the Common Fisheries Policy and highlighted the main concerns of the fisheries sector and of the other interested groups with respect to the future of fisheries in the European Union.

The second phase of the consultation process on the Common Fisheries Policy after 2002 involved the organisation of 30 regional meetings in Member States with an agenda based upon the issues raised in the questionnaire.

11.3 The question of ITQs

The relevant question in the questionnaire was formulated as follows:

"At present quotas are assigned by the Council to the Member States, which make allocations from them to fishermen or their associations. It has sometimes been suggested that quotas should be assigned directly to fishermen's organisations or to the fishermen themselves.

They would then be able to trade them among themselves (ITQ (individual transferable quota) system).

Would ITQs have advantages over the present way of doing things? What would be the main difficulties in setting up the system? If ITQs are introduced who should administer quota transfer and utilisation?"

Most of those who replied or commented during the consultation exercise were against ITQs, their main arguments being:

i. concentration of fishing rights in a handful of enterprises

ii. monitoring problems

iii. difficulty in finding a reliable allocation system not dependent on the authorities of each Member State

iv. impracticability for mixed fisheries

v. incompatibility with Community principles such as "equal access", "shared resources" and "relative stability" and

vi. danger of overfishing.

i. more responsibility put on fishermen

ii. better matching of supply with demand and,

iii. advantages resulting if ITQs were tied to a co-management system.

The general conclusion to be drawn from the consultation process is that it seems unlikely that a majority of Member States will opt for the introduction of individual transferable quotas into the Common Fisheries Policy. Unless major changes occur between now and 2001, the most probable outcome will be that the internal allocation of fishing rights will remain a matter of national choice for the Member States.

The Global Environment Facility: A Partner in the Sustainable Management of Transboundary Fisheries - A. Merla

A. Merla
Global Environment Facility
1818 H Street N.W., Washington, D.C. 20433, USA
<[email protected]>

1. INTRODUCTION

The Global Environment Facility was established in 1990 as a pilot financial mechanism to support global environmental protection in four "Focal Areas": Climate Change, Biodiversity, International Waters, and Depletion of the Ozone Layer. In March 1994 it became a permanent mechanism to forge international cooperation and fund projects addressing global environmental problems. It draws its strength from the commitment of donor member countries, which have so far allocated over 4 billion dollars for GEF financed projects. It builds on the different skills, experience and organizational structures of its Implementing Agencies, the World Bank, UNDP and UNEP, and of a wide range of Executing Agencies: Regional Development Banks, UN Agencies, NGOs, the private sector, national Governments. Recipient countries participate on equal terms to its governing body, the GEF Council, and their commitment to, and ownership of, the GEF is one of the elements of GEF's success.

One hundred and sixty four countries currently participate in the GEF, and the Organization has financed over 500 projects in 120 nations. Leveraged co-financing, from other donors and national Governments, more than doubles GEF allocations. Project eligibility for GEF financing is regulated by its Operational Strategy, approved by Council in 1995, which defines overall objectives, fields of intervention and operational guidance (Operational Programmes).

The issue of fisheries depletion is of growing global concern and is well within the mandate of the GEF. Reversing unsustainable trends in the exploitation of aquatic living resources including fisheries, both artisanal and high seas commercial fishing, is in fact central to GEF Strategy in the International Waters and the Biodiversity Focal Areas. While biodiversity concerns relate to the protection of the diversity of species, the focus of the three International Waters Programmes is on sustainable management of transboundary fisheries, enforcement of international agreements, and removal of barriers to the introduction of environmentally benign technologies and policies. GEF grant financing is currently the only significant financial mechanism available to support developing countries and countries with economies in transition in their efforts to reverse the long term declining trends in fish and fishing.

2. SELECTED GEF FISHERIES PROJECTS

2.1 A strategic programme of actions to address transboundary environmental problems of the Pacific Small Island Developing States ($12.2 million)

The Pacific Small Island Developing States (SIDS) are part of the 200 high relief islands and 2500 low relief islands and atolls spread throughout 38.5 million km² of the South Pacific. Most are entirely coastal in nature, with limited freshwater resources but abundant access to coral reefs, mangrove forests, seagrass beds, and lagoons. These coastal habitats support enormous amounts of biodiversity and are the basis for significant fisheries, both subsistence and commercial. Fishing is an integral part of the economy of these islands, providing the major source of protein for many of their 6.5 million people. Oceanic fishing contributes comparably little to local diets with only 1% of the fish landed entering local economies. A large percentage of the overall tuna catch, 50 to 60%, comes from the exclusive economic zones of the Pacific SIDS, yet only 4% of the dollar value of the catch goes to the local countries. Despite the important role that marine resources play in the ecology and economy of the region, degradation is occurring through the overexploitation of resources, introduction of pollutants, and modification and destruction of critical habitat. A strategic programme of actions has been developed for the Pacific SIDS with the ultimate objective to restore, conserve and manage in a sustainable manner the coastal and oceanic resources of the Pacific SIDS. This ambitious objective will be pursued through demonstration projects, enhancement of transboundary management strategies, assessments of methods to increase domestic benefits from the tuna fishery and its associated bycatch, with the intention of reducing pressure on overexploited near shore resources. National and regional capacities for fisheries management and assessment will be strengthened and lessons learned will be widely disseminated through an active education and information exchange network.

2.2 Biodiversity protection in Lake Malawi, Malawi, Mozambique, Tanzania ($10 million)

Lake Malawi, located at the southern end of the African Rift valley, is one of the largest freshwater lakes in the world. It plays a substantial nutritional and economic role in the riparian communities of the three littoral countries. The diversity in native fish in the lake is unparalleled, with between 500 and 1000 distinct species occurring within its bounds. Fish, which account for the majority of protein consumed by local people, are primarily caught by artisanal means. Because of pressure placed on the ecosystem by over-fishing, sediment and nutrients pollution, species extinction is a pressing concern particularly for the cichlid species. The GEF project complements existing fisheries projects in the area by providing much needed information on the distribution, abundance, and ecology of the rare endemic species. This information will be used in the establishment of protected areas which will potentially serve as reservoirs for the lake's biodiversity. Training provided to local enforcement and technical staff will strengthen the riparian countries' ability to achieve long term sustainable management of the lake. Finally, a review and evaluation of existing environmental legislation in the three littoral countries will provide recommendations for strengthening enforcement abilities, allowing for compatibility of approaches among the three nations.

2.3 Ghana: Coastal wetlands management project ($7million)

In Ghana, a growing concern for environmental issues led the Government to produce a National Environmental Policy Statement and a National Environmental Policy. A broad range of individuals and institutions collaborated in the production of these documents and it was this process that led to widespread awareness on the issues involved and the consensus on a need for action. The major environmental problems identified through this process included soil degradation and erosion, deforestation, and degradation of habitats within the coastal zone. The objective of the GEF project is to mainain the ecological integrity of critical wetland areas through the integral involvement in management of people who earn their livings from these ecosystems. GEF funding provides for the management of five coastal wetland areas that are registered under the Ramsar Convention. An increase of management capacity of both the Government and the local people is achieved through the strengthening of institutions involved with environmental resources management and providing skills to workers in sectorial and local government agencies. Further, the project provides for monitoring of wetland areas and the fostering of public awareness of environmental issues. These actions are coordinated with efforts to provide for the sustainable use of natural resources through improved management practices and community involvement in the minimization of land degradation, all of which contribute to the maintenance of critical nursery habitat for fisheries species.

2.4 Lake Victoria environment project ($35million)

Crossed by the Equator and bordered by Kenya, Tanzania, and Uganda, lake Victoria is the second largest lake in the world and the largest in the developing world. As with the neighboring large lakes to the South, Lake Victoria has been host to a tremendous burst of speciation among fish, particularly cichlids. Lake Victoria is unique, however, in that this change happened more recently and rapidly than in the other instances, and with fewer opportunities for genetic isolation. The lake catchment area provides for the livelihood of one third of the bordering nation's population, who have a high reliance on subsistence fishing and agriculture. The basin provides sources of food, energy, water, transportation, and as a sink for waste of many forms. The diverse users within the system have come into increasing conflict as the population continues to grow at one of the fastest rates on Earth. These multiple pressures have left the lake's ecosystem unstable and have directly contributed to significant systemic changes. Biodiversity and artisanal fishermen are both threatened by overfishing and hypoxic conditions in the lake's deeper regions. More than 200 indigenous species are near to extinction. Human activites are at the root of these problems, through actions such as heavy nutrient inputs and the disastrous introduction of the Nile perch. The GEF Project is designed to contribute to the rehabilitation of the lake's ecosystem, providing both economic and ecologic benefits. In the first stage of work, fourteen pilot zones have been selected in which to restore the local hydrology, decrease nutrient inputs and fecal coliform levels, determine contamination levels in food fish, stabilize the catch of the Nile perch, and reduce water hyacinth densities to more manageable levels. Lake-wide efforts will improve fisheries research, environmental monitoring and enforcement, as well as address pollution issues from industrial and municipal waste. The objective is to use practical, self-sustaining remedies to solve existing problems, while building the capacity of the bordering nations to conduct ecosystem management on a lake-wide scale.

2.5 Argentina: Coastal contamination prevention and sustainable fisheries management ($8.7million)

The Atlantic coast of Argentina is an area in which the demands and impacts of its multiple users are reaching a point of critical conflict. Patagonia is home to coastal ecosystems and habitats that are unique, but the biodiversity and productivity of these areas are at great risk due to anthropogenic influences. Contamination is being introduced into coastal ecosystems from a variety of sources, Most major cities along the Patagonian coast do not have sufficient waste-water treatment facilities. Increasing nutrient levels has caused eutrophication, which has been linked to the disruption of migration patterns of marine species in the region. Inadequate household and industrial solid waste facilities leach materials that cause significant mortality among marine organisms as the contaminants move through the watersheds into the sea. Pollutants are commonly dumped directly into the ocean. Heavy use of coastal areas in the production and transportation of oil has led to repeated oil spills and discharges of oily ballast and bilge waters. Chronic oil contamination has had strong adverse impacts on marine life, including the death of tens of thousands of seabirds. At the same time, Patagonia supports one of the fastest growing fishing industries in the world, the total catch of which has reached 1 million tonnes per year. There is evidence to suggest that the current levels of capture are well beyond the point needed for a sustainable fishery. Overfishing has depleted marine stocks and may be having an impact on population of seabirds and large marine mammals, as well as ecosystem structure and health as a whole. These massive problems will be approached through a series of projects. Baseline efforts will first address coastal pollution through the strengthening of Argentinian capabilities to diagnose and prioritize pollution problems and select optimal solutions both at national and local scale. In a series of subsequent projects, the diagnosis of pollution hot spots will be undertaken and an environmental atlas, including oil spills trajectory modeling will be produced. Monitoring, control, and surveillance functions will be augmented and a network for communication among monitoring networks will be established. Over-fishing will be addressed through the strengthening of authority to preserve threatened stocks, establishing marine fisheries reserves and an improvement of the data collection networks within coastal areas. Finally, electronic navigation systems will be introduced, which will enhance safety, environmental protection, enforcement and monitoring.

2.6 Other activities

A number of other projects including components related to fisheries are under way or in preparation. They address entire ecosystems or water-bodies, such as the Mediterranean Sea, the Black Sea Basin, the Baltic Sea, the Bay of Bengal, the Benguela and Canary Currents, or specific issues, such as reducing the impact of tropical shrimp trawling.

All these GEF efforts are based on an ecosystem approach and share a goal of increasing the recipient country's ability to reverse environmental degradation and effectively manage their own resources in a manner that is sustainable in the long term. Further, the projects specifically utilize and assist the local scientific communities, making use of their talent for monitoring and their regional knowledge in addressing globally significant problems. This approach will allow the Organization to work in concert with the new directions taken by fisheries professionals.

3. CONCLUSION

In recent decades, fisheries management has undergone a significant paradigm shift. Through the integration of ecological principles into planning, fisheries resources are increasingly viewed as part of finite, multi-species, interconnected ecosystems through which cascading effects may flow. Further, there is an ongoing change in long-held perceptions that allows for the viewing of humans as a significant part of an ecosystem, rather then a force somehow above natural processes. These changes are evident in new management approaches such as rights-based fishing which consider long-term effects and are being applied on varying scales to diverse fisheries resources around the world. Local managers and scientists must be supported in the accurate assessments of populations dynamics and for the setting of appropriate total allowable catches. The fostering of linkages between nations sharing transboundary fisheries stocks can facilitate the exchange of information and assist in the development of complementary management approaches in adjoining countries. Projects targeted at specific problems within a region can result in solutions or approaches that can be used in similar systems worldwide.

GEF funds fisheries-related projects in regions as diverse as the Baltic Sea and the Patagonian Shelf, in climate regimes from the sub-Arctic Bering Sea to tropical Pacific Small Island States. Despite this, we realize that we have not yet scratched the surface of global problems such as depletion of fisheries stocks, loss of critical habitat and land based sources of pollution. More needs to be done.

The GEF is attending the Conference in Fremantle as part of an awareness building initiative to inform recipient countries and the fishing community at large that fisheries related projects are eligible for funding by our Organization under the Focal Areas of International Waters and Biodiversity, consistent with our Operational Strategy. We are committed to substantially expand our involvement in the fisheries sector, along with the complementary ongoing and growing efforts to reduce land-based transboundary pollution, primarily from nutrients and sediments, and to facilitate the phase out of persistent toxic substances.

GEF funding is presently available for fisheries projects addressing several key sectors, including:

i. The assessment and testing of new management systems and environmentally benign fishing technologies

ii. The strengthening of the capacity and structures of recipient countries

iii. The facilitation of decommissioning and of access to alternative livelihoods

iv. The introduction of precision electronic navigation and monitoring systems

v. The removal of barriers to the introduction of ecosystem-based sustainable fisheries management and,

vi. The establishment of protected areas and corridors and the enhancement of their long term sustainability.