Management Infrastructure for Rights-based Fishing - D. L. Burke
Legal Planning for Management of Fisheries Using Property Rights - W. Palmer
The Administration of Fisheries Managed by Property Rights - M. Edwards
Administration of Enforcement Mechanisms for Rights-based Fisheries Management Systems - S. Crothers
Fisher Participation in Rights-based Fisheries Management: The New Zealand Experience - M. Harte
Policy & Economics Branch, Dept. of Fisheries &
Oceans, P.O. Box 1006
Dartmouth, NS, Canada B2Y 4T3
The commercial exploitation of fishery resources must be carefully managed if sustainable outcomes are to be achieved. This can be done through regulatory measures or through the use of appropriate access rights and the use of market forces. The infrastructure needed to enable management to be effective must perform a number of essential functions. In general the functions are similar whether the management regime is based primarily on governmental regulation of the fisheries, or if the functions depend on an appropriate regime of access rights and market forces. However, the nature of the functions and the infrastructure needed to implement them differs between (a) regulatory and (b), rights based systems (See, e.g. Christy 2000).
This paper describes the generic functions of a fisheries management system and the infrastructure required to implement, and support, a rights-based management system using individual transferable quotas (ITQs). This paper should be read in association with those of Edwards (2000) and Crothers (2000).
2. THE FUNCTIONS OF A FISHERIES MANAGEMENT SYSTEM
The infrastructure needed to support fisheries management must undertake seven distinct high-level, but interrelated, service functions. Figure 1 shows these functions in a networked view that demonstrates the main functional relationships between them. The boxes are labelled with the names of the management functions. The arrows describe the main services that are exchanged between the service functions. The arrows indicate the direction in which the services flow.
This description of fisheries management focuses on function rather than on organisational form. Subsequent consideration can be given as to where and how the functions are actually provided. The seven functions are described further as follows:
Strategic Policy Planning: This function establishes the policy and planning parameters within which the fisheries will be conducted. This includes the development of legislation and regulations, the creation and support of institutions and the objectives and strategies to be applied in fishery management plans.
Fishery Operational Planning: This function supports the development of seasonal harvesting plans for each fishery. A plan can apply to one or more stocks, one or more fleet sectors and the licence or rights-holding fishers who have access to them. It defines quotas, specifies catch quantities in terms of total allowable catches (TACs), fishing seasons, fishing areas, input controls, reporting requirements and other parameters and administrative requirements related to the harvesting activity.
These two planning functions are informed by two main research activities; one of these functions focuses on the human aspects of the fishery, the other on the marine ecosystem and more specifically on the condition of the fishery resources targeted for exploitation.
Socio-Economic Research and Analysis: This function conducts research on the performance of fishing enterprises and the industry as a whole. It addresses all aspects of the economic, social and business climate, in the country and abroad that could affect the fisheries at a strategic or fishery-specific level. Thus, it should provide timely and accurate analysis of the consequences of the different management options.
Resource Research and Analysis: This function is responsible for undertaking research on marine resources and their ecosystems to develop an understanding of the dynamics of ecosystem, how the operate the and methods used, and needed, to assess the status of the fisheries resources. It provides regular evaluations of the status of marine resources (stocks), makes recommendations on amounts that may be harvested and assesses the impact on the resources of various fisheries management and conservation measures.
The last three functions are operational in nature.
Fishing Entitlements: This function supports the requirements of the need for fishers and vessel owners to register and be licensed for entitlements to fish and receive fishing rights or allocations in accordance with seasonal harvesting plans. This includes transfers of those rights or entitlements and any resulting revocation or suspension of entitlements.
Catch and Effort Monitoring: This function provides timely, accurate data related to the use of entitlements and the fulfilment of harvesting plans.
Protection and Enforcement: This function monitors compliance with the country's legislation and management plans and takes necessary action against violators. It includes the adjudication of guilt and the imposition of penalties.
Figure 1: Service functions of fishering management system
All of the functions are required for an effective management system. Some of the functions have organisational implications but this is not to say that they need be provided by any particular single organisation or by the public sector. Some of the functions will be performed in whole or in part by public agencies, some by private companies, or by the fishers/right holders themselves.
3. IMPLICATIONS OF ITQ MANAGEMENT FOR THE FUNCTIONS
3.1 Strategic policy planning
This function involves the ultimate responsibility for management of marine resources. It lies at the interface between rights-holding harvesters, other stakeholders, the political process that must approve the management regime and the infrastructure that delivers the other management functions.
Strategic Policy Planning must articulate the objectives for management and secure consensus on those objectives from all stakeholders with an expressed interest in the protection or use of resources. It must also develop the legal base (legislation and regulations) needed to pursue the objectives. Once that is in place, the function must approve a framework of policies and practices to guide operational planning and must, as a minimum, guarantee the integrity of the remainder of the management system. It must also insure that the management infrastructure is adequately funded from general taxes, directed taxes or cost recovery so as to perform its tasks.
The political, socio-economic, and resource characteristics determine the management complexities that this function must address. The most straightforward situations are found in unitary states solely that manage resources within their EEZ. Here, a single level of government has clear and undiminished jurisdiction and control. Administrative and management complexity increases when the state is involved in the management of stocks shared with other management regimes such as straddling stocks. Further, federations with national and provincial levels of government often share jurisdiction over resources, and other areas of law, affecting resource management such as taxation, safety, trade etc. This results in more complex consultative and decision-making processes with consequential longer time frames needed to ensure management actions.
ITQ systems are seldom adopted in a theoretically pure form. Many choices are made to tailor the systems to fit the conditions of the resources and the broader socio-economic and political realities of the fishery. The policy choices made in design will depend on the objectives selected for management. Generally, the strongest form of property rights with the fewest constraints on the operation of markets will maximise the long-term economic productivity of the fishery. Access rights that most resemble other forms of real property best serve to integrate fisheries into the national economy. This facilitates the ability to raise capital, to organize fishing enterprises in the most efficient manner, and to transfer responsibility and cost of management to industry. A system with weaker, or stinted, access rights supplemented with regulations to achieve certain social or demographic objectives will operate at a lower level of efficiency. For example, while unfettered transferability maximises the benefits of ITQs, some control or limitations are often placed on quota markets to limit concentration of quota ownership, to restrict foreign ownership or to place geographical limits on trade of the rights. These constraints may reduce the efficiency in achieving other desirable outcomes.
Many of the policy issues are discussed in other papers presented in this volume. They include the characteristics of the access right - Duration (perpetuity or limited term), Exclusivity (freedom from interference), Quality of title (security), and Transferability (freedom to lease or sell), the taxing of resource rents, the recovery of management costs and the manner of denomination of rights, in fixed tonnage or proportional shares.
The legal framework provides the authority to implement policy. Authorities are required to create property rights, to recover costs or collect rents and to make regulations or operational policy. Legislation also clarifies the delegation of responsibility and authority for management to a department, a management agency or right holders as required. Fish rights are, in reality, access rights rather than allocations of physical property. They are defined quantitatively and are dependent on information to define their limits and quantify their use. The effectiveness of an ITQ management system is dependent on the integrity of the information systems that support it. There is an overriding requirement for data (including commercially sensitive data) that are accurate, complete, and are made available in a timely manner for management purposes. This obligation must be specified in legislation. The legislation must also describe the nature of the enforcement regime and the roles of enforcement officers, the judiciary and any special tribunals.
ITQs are typically used to manage commercial fishing, but in some fisheries the interests of other groups have to be considered. Aboriginal or indigenous peoples may have a customary or food claims. Artisanal, or traditional, users may have longstanding dependencies that require protection. A broader public right to fish, which often takes the form of the recreational access, is a feature in many fisheries. Though possible, it is usually difficult to accommodate these other users with individual quotas. Large numbers of low intensity users can tax, and exceed, the administrative capacity of ITQ systems. To overcome this, shares of the TAC can be allocated to these groups or to co-operatives that represent them. These shares must be subtracted from the TAC leaving the remainder as a Total Allowable Commercial Catch (TACC) for ITQ holders.
The decision rules required for setting annual total allowable catch (TACs) limits should be enshrined in policy. This usually involves the use of a limit reference point that constrains the minimum level permitted for the biomass of the stock. A conservation policy can specify target exploitation rates that vary depending upon the resource status. It could include re-building measures for overexploited stocks, contain principles to be applied to protect associated or dependent species, and contain principles to be applied to protect habitats. Many jurisdictions are now making efforts to incorporate the use of ecosystem objectives and to applying the precautionary approach when setting exploitation limits.
ITQ systems require a high level of support from the participating rights holders. Most jurisdictions that now use ITQ management have applied a gradual approach to their introduction beginning first in fisheries that have a high likelihood that this management approach would be successful. Single species fisheries with relatively few vessels that are easily monitored are good candidates to begin with. Success with these fisheries provides a base for extending the system. The policy and legal framework should provide for this approach by, for example, identifying ITQ management as the preferred, or even the recommended, system but not the only one. Experience suggests that the imposition of an ITQ system on a fishery increases the risk of management failure.
Most jurisdictions that manage fisheries will have much of the institutional capacity to support the strategic policy planning function in a department or ministry. They would also draw on the two research functions described below. But, other relevant stakeholders must be involved. The introduction of a rights-based management system requires leadership and a considerable investment of political capital to make the main policy choices and support them with appropriate legislation and regulations. This process can take several years depending on circumstances and complexity of the fisheries. Many of the rights-based systems currently in place were initiated in times of crisis when the need for fundamental change in management rose to the top of the political agenda and considerations of administrative costs were accorded secondary importance.
A structured approach should be taken to consultation with stakeholders. It is best to separate the policy and governance issues from operational issues in so far as is possible. Broad stakeholder involvement is appropriate for the governance issues that must be resolved at the strategic level. Operational issues should be referred to the operational planning function where rights holders and local, or immediate, stakeholders can resolve them. Separating issues this way allows meaningful agendas to be set so the protagonists can bring value and closure to the topic. Separation also promotes efficiency and reduces transaction costs.
While it is best to have a comprehensive policy framework in place prior to implementation of ITQ systems, it is not uncommon to launch an ITQ program with many policy issues unresolved. The policy function will require a greater infusion of resources when a new system is being introduced but there is an ongoing requirement for the function to maintain a relevant strategic perspective and policy framework over time.
3.2 Resource research and analysis
Fisheries management requires a biological understanding of the targeted populations, their relationship with the environment, and the impacts of fishing upon them. This information is especially critical where the level of exploitation is high. Many countries maintain an appropriate institutional capacity in the marine sciences and invest in acquiring the information needed for research. Some countries use input control systems that do not require the setting of catch limits, but the need for such information remains.
The focus of research is typically on understanding the biological and environmental processes and the results of applying input controls. If global, or olympic (i.e. those involving a rave among the participants to maximize their share), quotas are used in management, analytical stock assessments are required to produce TACs. ITQ systems make analytical assessments essential, indeed they often increase the demand for assessments by requiring TACs to be set for new fisheries or updated more frequently in established fisheries.
Stock assessment is that part of marine biology which focuses on the dynamics of exploited populations. It includes studies of biological and population processes such as growth, reproduction, recruitment and mortality. Stock assessment describes the past and present status of fish stocks and forecasts future trajectories of stocks under different exploitation scenarios. In addition to its direct applications for fisheries resource conservation, stock assessment sheds light on population processes and provides information on key components of marine ecosystems for incorporation into broader management models so contributing to the broader scientific endeavour. Stock assessment primarily focuses on the individual population, but complete understanding of populations requires that they be considered in a broader context: meta-population structures, species interactions (predation, competition, etc.) and variations in conditions in marine environments (water temperature, primary productivity, water current changes, etc). While the focus is generally on exploited populations, the techniques of stock assessment can be applied to non-exploited populations, for example in work on endangered species.
Stock assessments are the result of teamwork. These teams bring together scientists from a variety of disciplines, from fishing gear experts to biologists, geneticists to statisticians. Fishermen, the harvesting industry and other interested stakeholders can also play an important role in data collection, facilitating scientific fieldwork, undertaking research, data interpretation and decision-making. In this way, the broadening of stock assessment science modifies practices, and opens new communication channels for discussing assessment results.
Stock assessment and related research includes a wide variety of initiatives aimed at monitoring fisheries and fish stocks, at evaluating the status of marine resources and at assessing the impact of human activities (in particular, harvesting) on these resources. Typically, stock assessment initiatives include:
i. fundamental research on biological characteristics (e.g. stock unit definition), fish growth, migration, recruitment processes, etc., and research on new approaches or survey techniquesITQs place demands for quality in stock assessments that affect the scientific advisory process. Scientific advice is by nature uncertain. It must be made as credible and understandable as possible through the scientific advisory process. If there is a cost recovery policy as part of the ITQ system, there will be an increased interest by the fishing industry determining the nature of the activities, setting the research priorities and stock assessment methods and results. There is a need to ensure that the essential long-term monitoring functions are supported, and that the appropriate balance between generating new knowledge and the provision of timely assessment advice is maintained. The scope of investigation with respect to biological research has to be focused, while maintaining an ecosystem perspective. The science administration function may also have to be strengthened. There would may also be a need to tighten research management controls and to define the true costs of research and monitoring activities. A defensible policy on recoverable and non-recoverable research costs will be required.
ii. the monitoring of resources through various survey techniques
iii. the sampling of commercial catches
iv. an assessment function, which includes such activities as analysing data, constructing and running models of population dynamics, conducting risk analyses and writing scientific and technical reports on resource status
v. scientific peer review, which includes a well-defined process to review scientific data and analyses, and to communicate results or conclusions
vi. an advisory function, which includes providing information on specific questions related to the management of resources either on demand or through participation in committees or regular meetings of advisory bodies and
vii. an administrative function.
In conclusion, ITQs are likely to affect the resource research and analysis function in a number of important ways. Improved linkages between research, management and the fishing industry will develop. Industry will increasingly contribute to stock assessments and participate in peer reviews of the management process. Science-industry co-operation often extends to the provision of vessels for research surveys, to the conduct of complementary industry surveys, fishing programs to establish biomass trend indexes, habitat mapping, and the provision of improved catch and effort data from the industry. This all will reduce what are otherwise expensive survey costs.
3.3 Socio-economic and research analysis
The setting of a socially beneficial fisheries policy is as much an economic as a biological problem. In general, with respect to the strength and influence of the two research functions, most countries make substantial investments in understanding what controls their living marine resources through natural science research. They invest far less in research on the human dimension that would produce sustainable use practices. Accordingly, the capacity of this function within management agencies can be relatively low, but none-the-less important.
This situation is often reflected in the lack of available economic data for analyses and because of insufficient resources, difficulties are usually encountered collecting it. In most fishery management jurisdictions a voluntary disclosure policy is followed. But, this brings poor results when seeking commercial information from fishermen and the fishing industry who often perceive the provision of such information as a 'lose-win' affair rather than a win-win one.
Among the basic economic information that needs that must be continuously collected and regularly tabulated are:
i. costs and earnings of enterprisesThese important data will only be provided if disclosure is mandatory. The data are inputs for the analysis and modelling required to evaluate alternative fisheries management measures and provide operational advice for setting TACs, evaluating biological measures (area closures, mesh size, etc.) and determining rent and cost recovery levels.
ii. the asset and liability structure (balance sheets) of the fisheries companies
iii. the industrial structure (ownership, vertical and horizontal integration of the fishing industry, labour, and other contracts, etc.)
iv. commodity flows
v. input and output prices
vi. fishing effort and the use of inputs by fishery and fleet segments and the nature of the fishing fleet and processing capital.
ITQs systems create new demands for socio-economic analysis because of the need to understand and evaluate the changes to how the fishery operates that adoption of a property-rights management approach brings. Security of access allows the restructuring of the harvest sector; security of supply permits similar changes in the processing and marketing chain. ITQs unlock the forces of efficiency that rationalise excess capacity and disrupt the status quo. Effects include loss of employment, changes in income levels and population losses in fishing communities. Changes due to efficiency and improved productivity are not always welcome in the fishery and political pressure to mitigate these impacts may grow, especially when obvious discrepancies arise between those who have access to public resources and those who are excluded. The long history of fishery resources as common property gives political and cultural weight to this resistance.
The skills required in this function include those of fisheries economists, econometricians, mathematical modellers, accountants, computer scientists, sociologists and legal experts.
3.4 Operational planning
This function develops annual harvest plans for fisheries. The plans apply to one or more stocks and the licence holders who have access to them. Some jurisdictions without ITQs use fishery plans in their management system. Developing plans on a meaningful scale can provide a forum for dialogue and negotiation between licence holders, researchers and the resource managers. This is especially needed where the fisheries are diverse and geographically distributed.
Where fishing plans are used with ITQs, they translate the annual TAC/TACC into quotas for the respective participants for the fishing season. They also provide an efficient way to fine tune other management measures such as gear restrictions, fish size, biologically-based closed areas etc., and to engage licence holders in the selection of other appropriate measures of self-control. Feedback to the strategic planning function is used to secure needed changes to the regulatory or policy framework. Operational plans should identify sensitive or vulnerable issues that have to be addressed through targeted enforcement activities.
The operational planning function plays an important role in the introduction of ITQ systems if the policy and legal framework provide for a phased fishery by fishery approach to change. The formation of relatively homogenous groups with exclusive access to specific stocks, or with fixed allocations in shared stocks, creates conditions that are favourable for stronger access rights. When fisheries are organised to this point, the licence holders themselves often seek individual quotas. The licensed participants in such a fishery are often able to agree on a formula for the initial allocation or negotiate individual shares without undue administrative intervention. This is satisfactory provided that the interests of all eligible rights holders are considered.
There is a need for fishing plans in mature ITQ systems as the planning process facilitates collective action on management. They can also help launch other measures such as resource enhancement initiatives that require co-ordinated action. The use of ocean space is intensifying and competing user effects are become an increasingly consideration in planning the operations of fisheries. This can result in demands for the control of competing uses to protect fisheries or the restriction of fisheries in certain areas to permit the activities of other uses. New processes in coastal zone and or, ocean use management are now evolving. Horizontally integrated planning bodies are likely to emerge to resolve such use conflicts. Planning should occur on an ecosystem basis though practical administrative considerations, including political and jurisdictional boundaries, will influence or define these areas. Annual fishing plans will have to fit into this structure and will probably do so through a nested approach by which species plans are incorporated into the fisheries sector level and are combined with plans from other users (aquaculture, seafloor cable or pipeline routing activities, areas protected for the conservation of bio-diversity, etc.).
Fishery operational planning should be supported by a secretariat. Each individual fishery requires the support of a fisheries manager. This might occupy a person part-time for a small fishery or full-time for a complex fishery. The fishery manager will co-ordinate the inputs from research, enforcement, the fishing industry and other user groups to develop the operational fishing plan. The fishery manager is also responsible for securing approval of any plan and of the regulations needed to implement it.
3.5 Management of fishing entitlements
Most fishery licensing systems are designed to perform simple administrative tasks such as recording the ownership of licences and vessels, and maintaining data on the physical characteristics of the vessels, etc. However, property rights registry systems require more functionality and rigour.
A quota registry must convert the annual TAC/TACC to an annual catch limit by weight (kilograms or tonnes) for the individual right-holders. The registry must be connected to the catch monitoring system in order to track the use of quotas held and support in-season leasing and long term sales of quota by right-holders. The registry must also accommodate suspensions or penalties imposed against a licence. If the ITQs are long term and secure they may serve as collateral in capital markets. They may also have a high standing in the adjudication of civil matters where property is involved.
If rents or cost recovery are a feature of the programme, the registry will play an important revenue collection service. In order to support these functions the registry must be dynamic and be interconnected with information systems used to support other management functions.
The costs of building, maintaining and operating the information systems needed for a registry can vary significantly depending on the complexity of the situation. A single species fishery with few participants can be simple to handle. However, a system that must support a multi-species fisheries with full property rights that also serves to register encumbrances for purposes of security and supports active in-season and permanent quota trading, will require a sophisticated computerized system that may cost millions of dollars to develop and use.
The skills required to operate a registry are administrative and commercial. They include computer scientists, information managers and individuals with a comprehensive understanding of the workings of the fishery.
3.6 Catch effort monitoring
Monitoring and data collection are often the weak link in catch managed fisheries. In global or 'olympic' quota systems, catches are often estimated based on sampling, on partial reports or other catch projections. Fleet quotas can be deemed caught and the fishery closed on the basis of these estimates. This is not the typical case in ITQ systems where the individual must have the confidence that he will be able to catch to his quota or otherwise dispose of the uncaught quota to another fisher. A poorly monitored ITQ has no integrity, the declared quota would never be caught. Further, there would be no incentive to buy quota to cover one's operations if the catch were, in effect, unrestricted.
ITQ systems require rigorous record-keeping and mandatory reporting and disclosure rules. Trip-by-trip monitoring is also adviseable. This includes requirements to report departures from ports for fishing, reporting the time of vessel arrival before landing of the catch following a fishing trip, and other information on fishing activities. This is particularly necessary where larger and more sophisticated vessels are involved. In most circumstances, dockside verification of landings by an independent party third party is also advised. Monitoring costs will depend on the size of the fleet and the number and distribution of landing ports. Industry behaviour (time of landing, port chosen, etc.) will also affect these costs. A direct form of cost recovery for the monitoring service can have a significant effect in restraining the costs for these activities.
High-grading and discarding is often identified as a problem in ITQ systems, particularly in multi-species fisheries. The problem should be approached with a combination of penalties and incentives to minimize the practice. A general prohibition against discarding of any species at sea simplifies monitoring and a prosecution should occur when discarding is detected. This combined with high penalties for violators will help insure that all of the catch is landed so it can be monitored and be debited against the annual catch quotas. Flexible trading rules to allow fishers to lease or purchase quota to match actual catch reduces the need to discard and will encourage compliance with the management plan. End of year 'overcatch' and carryover rules for uncaught quota will also minimise the incentive to discard to match landed catches to the portfolio of quota that is owned.
Some fisheries require the use of at-sea observers to deter discarding. This has to be considered particularly in multi-species fisheries with difficult by-catch problems. Observer coverage might be required for a specific time of year or throughout the year in some fisheries. Some at-sea monitoring requirements can be aided by new technologies. Satellite tracking can locate vessels in real time and can be particularly useful where fishing areas have to be monitored, e.g. when they have been closed. Increasingly, new computer and communication technologies permit information to be maintained in electronic logs while vessels are fishing and allow these data to be transmitted in real time so facilitating monitoring of the fishery and fishing operations.
The monitoring function must record data on catches against quota that is held. This information must be tracked through the quota registry. The institutional skills required for the monitoring function include the ability to identify the various species of fish in the catch and the capacity to produce the reports required by the monitoring system. Marine observers, particularly at-sea monitors, can perform the dual roles of serving as biological technicians who sample the catch for information needed in assessments as well as recording details of fishing operations, such as bycatches and discards.
Many fisheries jurisdictions use a game approach to enforcement. In an ITQ system, there is a need to target and deter the activity of illegitimate fishers, or poachers, who have no access rights. There is also a requirement to focus efforts on illegal activity by right-holders. This includes enforcing rules against discarding, fishing in closed areas, enforcing gear restrictions and other technical measures. The increased use of information technology and satellite tracking can reduce costs and increase effectiveness in this regard, especially for some at-sea needs.
The most important enforcement task is to insure that fish landings do not occur outside of specified monitoring channels and that no collusion occurs between fishers, fish buyers and monitors to undermine the integrity of the system. Because of the importance of catch reports there is usually a need to re-focus enforcement resources away from technical measures to this task. More sophisticated investigative methods are required. This means that skill in audits and commercial crime detection should be added to the enforcement team. Joint action between fishery enforcement, Coast Guard, police, defence forces, and tax authorities are needed for some investigations.
Violators must be judged by appropriate tribunals and penalized if found guilty. Specialized administrative tribunals established for the fishery sector which follow the rule of law can be used to adjudicate certain offences by right holders. They can be more effective because of their understanding of the fishery law and the speed with which they can operate. Otherwise regular court systems are used to assess guilt and apply penalties. Offences by non-right holders may have to be adjudicated by the regular court system. Tickets, fines and surrender of quota can be effective deterrents for many offences and for encouraging compliance with reporting requirements. The overall effectiveness of enforcement is reliant on the deterrent effect of meaningful penalties for transgressions, so more serious offences such as large scale fraud should attract heavy fines or even complete forfeit of vessels and quota. Industry self-interest in protecting property can be enhanced by awareness and participation in the judicial process.
4. COSTS AND BENEFITS OF EFFICIENT MANAGEMENT
The cost of operating a fisheries management system varies considerably from country to country. An efficient, low costs system would be 5% (or less) of the ex-vessel value of the fishery, a high cost system could reach 15% of its value. So the management costs for a $100 million fishery could range from $5 to $15 million. The distribution of these costs over the seven management functions is also highly variable among countries and over time. The following distribution is provided as a general guide intended only to relate the relative complexity of the functions:
Strategic policy planning
< 5% of the ex-vessel value
Fishery operational planning
Socio-economic research and analysis
Resource research and analysis
Catch and effort monitoring
Protection and enforcement
Although the potential benefits of good management far exceed the costs, even at the 15% level, the objective is to implement the most cost-effective management. A relatively concentrated fishery will have lower management costs. However, there are many influences that tend to increase costs. Existing management systems are often well established and withdrawing existing services and paying off the associated staff with the introduction of a new management regime is not easy. A complex political environment with national and provincial interests adds to costs. New methods and systems have to be developed to support management functions. These conditions tend to increase the costs of introducing an ITQ system. In the longer term, as industry is restructured and systems mature management costs can be reduced.
Most of the initial revenues for management is likely to come from public funds. Thus, it is reasonable that these management costs be recovered from industry. This practice should be introduced as soon as it is feasible. User charges are most effective if they can be used to ration or otherwise discipline the use of the services demanded. The obvious risk of using this approach is that some management functions will be under-subscribed if users are required to pay for them.
There are a number of ways to collect revenues. User charges can be applied at the point they are incurred or be billed on an annual basis. Management costs can be levied through a fee collected through licence charges. (A licence fee can also be used to recover rent.) The experience in jurisdictions where the responsibility and costs of an ITQ management system have been transferred to fishing industries is that the value of effective management is increasingly recognized and industry comes to regard good management as an investment.
5. AN EXAMPLE OF AN ITQ IMPLEMENTATION
This example describes the introduction of a new ITQ system for a fleet following the approval of a policy framework. The system must be applied to all major species targeted by the fleet or the fishing pressure will shift from the managed stocks to those other species that are of most commercial value. The ITQ system for other fleets and fisheries can be put in place over a longer time period. The first consideration is the definition of the boundaries of ITQ and the species to be included.
The second consideration is the definition of the criteria for the initial allocation of the quota. The eligibility rules must be clearly defined and be decisive. The sharing formula for species traditionally exploited is usually based on historical performance within fleets, following an initial allocation amongst fleets that is based on policy considerations. The reference period for historical performance should be short enough to reflect the most recent situation. For developing fisheries on under-exploited species where the historical performance may be less relevant, other criteria such as investment in the industry, or vessel characteristics, need to be defined. A fair formula needs to be developed that can deal with irregular participation by vessels during the reference period relevant to the calculation of historical performance such as using the best 4 years of a 5 year reference period.
Although management measures such as mesh size regulations and closed areas should become less important following the implementation of ITQs, existing regulations of this type should be maintained for at least a few years. However, rules which encourage the discarding of small fish should not be retained. Vessels should be allowed, or required, to land undersized fish that would be debited at some discounted rate, from their quota.
A final point is the need to review other laws or regulations that may interfere with or affect the implementation of ITQs. Points of potential concern are: appeal procedures for those who feel that their cases are mishandled by the administration accounting procedures in relation to the trading of quotas taxation of quota as a property rights to enforce the ITQ system and access to information on fishing practices. It may be necessary to enact new laws and, or, regulations to resolve conflicts of an administrative nature.
Fisheries management is an expensive activity but one that is essential for the sustainability of fisheries. Introduction of an ITQ system has implications for all seven fishery management functions. Introducing a new management regime takes time and setting the policy framework to support secure access rights in fisheries can take several years. Reaching agreement on individual shares and implementing ITQs in a specific fishery can add a year to the process. Introducing new monitoring regimes and developing sophisticated information systems to support ITQ management can also take one to two years. Thus, it can take up to five years to introduce a new fisheries management system. However, once the basic infrastructure is in place new fisheries can be introduced to ITQ management more quickly.
The third consideration is the allocation process itself. An Allocation Committee needs to be formed to oversee the one-time task of preparing and actually performing the allocation. The allocation of quota shares must be transparent and all industry participants in the fishery must be treated justly. The Committee should include representatives of government, the right-holders (vessel owners and fishermen) and be supported by technical experts. The process involves the following steps:
i. information gathering on historical performance and other selected criteriaTransferability, or leasing of quota to others, is considered an important part of an ITQ system. Therefore, the restrictions on transferability should be minimal. Also, some degree of under- and over-runs of fishermen's quota holdings should be allowed. However, given the complications of administering adjustments to address bycatch imbalances between species, such arrangements could be phased in at a later date.
ii. publishing of the criteria and consultation
iii. initial allocation and feedback from right-holders and
iv. final allocation.
One of the main differences between management regimes relates to the responsibility for the management functions. Regulatory systems are by their nature, command and control systems with the regulator accepting most of the responsibility for management. Rights based systems rely on enlightened self-interest to a greater degree. Right-holders who have a greater vested interest in the resource are motivated to take more responsibility for management. This has a significant impact not only on the ability to recover costs but also on the responsibility for performing the functions. In most ITQ systems management functions are enhanced through increased participation of right-holders. This is particularly the case in operational planning, in the research functions, and through the creation of new private sector delivery options for the registry and monitoring functions. There is also greater tendency to comply with the rules and increased support for the enforcement function to protect valuable access rights.
7. LITERATURE CITED
Christy, F. 2000. Common Property Rights: An Alternative to ITQs. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 118-135. FAO, Rome.
Crothers, S. 2000. Administration of Enforcement Mechanisms for Rights-Based Fisheries Management Systems. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 89-94. FAO, Rome.
Edwards, M. 2000. The Administration of Fisheries Managed by Property Rights. In: Use of Property Rights in Fisheries Management, FAO Fisheries Technical Paper 404/1, pp. 75-88. FAO, Rome.
Australian Fisheries Management Authority
P.O. Box 7051, Canberra, ACT 2601, Australia
Legal planning for the use of property rights is a function of the legal system that applies in the relevant country. Major considerations are:
i. Is the country a federation or a unitary state?This paper discusses the Commonwealth of Australia model and experience, while that experience is derived from a federation with a written constitution and detailed fisheries legislation, it will nevertheless have some general application.
ii. Does it have a written or unwritten constitution?
iii. What is the nature of its fisheries legislation - merely an outline or prescriptive?
At common law the right of the public to fish in the sea has been established for many centuries. The right to fish includes the right to take away fish. There is no absolute property in living fish; in their natural state they are regarded as being in the same position as wild animals and not goods or chattels. The Crown was not the owner of fish in the sea except in England in respect of whales and sturgeons taken in certain places. The general position therefore was that, until reduced to possession, no title in them was acquired.
All had access to fisheries with the result that no one had a right that had any value as property. This common law position was applicable both in countries in which British common law applied and was the position under Australian common law.
At first the steps to overturn the common law were tentative with much fisheries legislation providing that licences to fish would be granted on request. Such rights held little value as property but over time more restrictive provisions to protect the stocks were introduced, which started to give licences some value. In the Commonwealth sphere the first restricted entry fishery dates back to 1963. However, outside of restricted fisheries, licences continued to be granted merely on application until 1985 when a freeze on further fishing licences was imposed.
The effect of fisheries legislation is to overturn the common law and to deprive the general public of its rights to exploitation. What was formerly in the public domain was converted, with the passage of fisheries management legislation, into the exclusive but controlled preserve1 of those who hold licences under that legislation.
1 Harper v Minister for Sea Fisheries (1989) 168 CLR 314 at 325.As the rights to this preserve gained value, fisheries managers had to begin to take into account that licences were being regarded by industry as property. In many cases managers tended to deny the existence of such property rights and I remember instructions in the Commonwealth sphere not to use the term lest its use might give to fishing licences characteristics which they might otherwise not have.
Even when the Fisheries Management Act 1991 was introduced and came into effect there was still a reluctance to use the term property notwithstanding that the legislation provided for secure long-term access rights. I can only put this down to fears of misinterpretation, managers having one view of what property rights meant and industry having another.
While fishers and fisheries managers were coming to terms with the new emphasis on property rights, a new element came into the equation with first the High Court Mabo2 decision and the subsequent passage of the Native Title Act 1993. Henceforth there was a new form of property rights based on indigenous rights to be considered in management decisions.
2 Mabo v The State of Queensland (No.2)(1992) 175 CLR 1.Coming to terms with the different aspirations of various stakeholders is the fisheries management challenge of today.
2. THE COMMONWEALTH APPROACH TO MANAGING FISHERIES USING PROPERTY RIGHTS
The Australian Fisheries Management Authority (AFMA) is the Commonwealth statutory authority with responsibility for managing fisheries on behalf of the Commonwealth. To those unfamiliar with the Australian federal system, a brief outline is given in Appendix 1 of this paper.
The Fisheries Administration Act 1991 and the Fisheries Management Act 1991 establish a comprehensive regime under which fisheries may be managed using property rights. At one extreme such a right may be a short-term, non-transferable permit, while at the other it may be a long-term, secure and transferable right, which, even when the management plan under which it was created ceases, may continue as an option in the event of a subsequent management plan being determined for that fishery.
Under the Fisheries Administration Act 1991, AFMA has functions which, among others, include:
i. to devise management regimes in relation to Australian fisheries3. AFMA OBJECTIVES
ii. to consult and co-operate with the industry and members of the public generally in relation to its activities
iii. as provided by an associated law (the Fisheries Management Act 1991)(a) establish and allocate fishing rights
(b) establish and maintain a register of fishing rights
(c) undertake functions relating to plans of management and
(d) such other functions as are conferred under the Management Act.
The Management Act provides that AFMA must either pursue or take account of the following objectives in carrying out its functions:
i. efficient and cost-effective fisheries managementDetails of the AFMAs objectives are listed in Appendix 2.
ii. management consistent with the principles of ecologically sustainable development and the exercise of the precautionary principle
iii.. maximising economic efficiency
iv. accountability to the fishing industry and to the Australian community
v. achieve government targets in relation to the recovery of the costs of AFMA
vi. ensure that the living resources of the AFZ are not endangered by over-exploitation
vii. achieve optimum utilisation of the living resources of the AFZ and
viii. implement measures adopted in pursuit of above objectives, and not inconsistent with the preservation, conservation and protection of all species of whales.
Recent amendments to the Management Act to enable Australia to ratify the United Nations Fishstocks Agreement include a further objective of:
ix. ensuring that management measures in the AFZ implement Australias obligations under international agreements.Although these objectives must all be pursued, the Courts have recognised that in some circumstances it will be appropriate to weight certain objectives, so long as all are considered in the making of the management arrangement.
There is another aspect however to the pursuit of the objectives: that considerations of fairness and equity do have a role and there is a legal duty to treat persons fairly in the exercise of discretionary powers which has been described as subject to the requirements of good management, discrimination between one group ... and another does not arise; to ensure that there are no favourites and sacrificial victims.3
3 Regina v IRC (1983)AC 617, at 651.4. PROPERTY RIGHTS UNDER THE FISHERIES MANAGEMENT ACT 1991
The Management Act provides for two types of property rights which may be classified as short term and long term.
The short term right is a permit granted under Section 32 of the Management Act for periods of up to 5 years. The long term rights are statutory fishing rights (SFRs) under Section 22 which are created under management plans determined under Section 17.
Although the AFMA is moving towards, and is required by legislation to determine management plans for all fisheries, it has for several years managed a number of fisheries under a permit system with an administrative form of property rights. Although not specifically recognised in the legislation, it has been accepted by Courts and Tribunals and as commercial reality by industry and financiers. AFMA and industry accept that these are basically interim arrangements pending the determination of management plans and the granting of SFRs.
5. NATURE OF STATUTORY FISHING RIGHTS
Section 21 of the Fisheries Management Act provides for a wide variety of statutory fishing rights under a plan of management which include:
i. a right to take a particular quantity of fish, or to take a particular quantity of fish of a particular species or type, or a proportion of the fishing capacity, from, or from a particular area in, a managed fisheryDetails of the types of SFRs are given in Appendix 3.
ii. a right to engage in fishing in a managed fishery at a particular time or times, on a particular number of days, during a particular number of weeks or months, or in accordance with any combination of the above, during a particular period or periods
iii. a right to use a boat or particular type of boat or boat of a certain power or particular equipment in a managed fishery for purposes stated in a plan of management and
iv. any other right in respect of fishing in a managed fishery.
The section also provides that SFRs may need to be held in combinations before fishing can take place and a specific right need not be referrable to an amount of gear, or fish that can be taken, using a single right.
The Act also provides that:
i. the right is subject to obligations imposed under a management planThere are various features of SFRs:
ii. the fishing right will cease to have effect if the plan of management for
iii. the fishery is revoked (but note discussion of SFRs options below) the fishing right may be cancelled under the Act
iv. no compensation is payable if the right is cancelled, ceases to have effect or ceases to apply to a fishery (acquisition of property is discussed in Section 7 below) and
v. the right may have a specified life or otherwise remains in effect for the duration of the plan under which it was created.
i. They are provided for under management plans. Section 20 of the Management Act provides that a management plan may be amended or revoked provided that the same procedures as used in determining the plan are followed. This means that SFRs are susceptible to change should a management plan be varied. An example of this was in the Northern Prawn Fishery in which the management plan has been amended to substitute SFRs based on gear for SFRs based on boat size and engine power.Appendix 4 describes the nature of SFRs granted under Management Plans.
ii. Should a management plan be revoked then the Management Act also provides that those who held rights under the revoked plan will receive preferential treatment in the granting of SFRs under a subsequent Plan.
iii. Where the subsequent plan is the same, or substantially the same as the former plan of management, the former holder will be granted an option to acquire SFRs with the same proportional share in the fishery as held under the former plan.
iv. Where the new plan has some features in common with the former plan, the former holding must be taken into account in any subsequent allocations under the new plan.
6. THE REGISTER
Details of SFRs are recorded in a statutory Register which also records third party interests. The Register is merely a record of third party interests and does not give that interest any effect or validity that it does not otherwise have. Any transactions relative to an SFR must involve all parties with a recorded interest in that right. Where a third party has an interest in an SFR it is the responsibility of that party to ensure their interests are protected by recording that interest in the Register.
AFMA does not recognise interests unless recorded in the Register.
7. WHAT ARE PROPERTY RIGHTS?
The literature refers to property rights in terms of strong and weak and refers to strong rights as generally having the characteristics of being:
i. long termWeak rights may have none of these characteristics yet still be regarded as property and be worth fighting for.
ii. capable of precise definition
iv. secure both from an owners and potential mortgagees point of view
v. part of an overall management regime and
vi. having an exclusivity from those that do not hold the right.
7.2 How fisheries managers view property rights
Fisheries managers are generally not interested in strong or weak property rights as such but in how the holding of such property rights will modify a fishers behaviour so that goals of fisheries management may be achieved.
It is generally agreed that poorly-managed fisheries tend towards the undesirable states of resource over harvesting and economic inefficiency. It is also generally accepted that lack of effective property rights in fisheries is the underlying source of these conservation and economic difficulties.
Managers are interested, however, if the property right becomes so strong that it inhibits the ability to change management arrangements in response to resource conservation requirements. Managers may also need to become interested if rights develop a separate identity as a form of general property rather than as a specific form of property linked to fishing.
7.3 The fishers perspective
Fishers have a different perspective. To them property rights mean an asset that is safe from the whim of managerial or political changes, that can be used and relied on, and upon which long term decision-making can be based.
There is, perhaps, an increasing subset of property rights in Commonwealth fisheries becoming increasingly noticeable because they are being held by investors. No longer is the fishing right being seen solely as a right with which to fish but as a store of wealth for which personal fishing is only one option. The right is available for short, or long term lease, and depending on the level of management levies, may simply be held dormant for capital gain. Financial institutions have a similar perspective to fishers so that loans made to fishers are made on the basis of the security of property rights so that the loans have a maximum protection.
7.4 The Courts perspective
Ultimately it is left to the Courts to decide what are property rights and what is the nature of those rights. Past Court decisions are a guide as to how Courts may consider a particular case before them but unless the case is specifically on the point at issue, past decisions might be distinguished from the one at hand. Even when the point at issue may appear to have been the subject of an earlier Court decision, a different composition of the Court might yield a different result.
Generally the Courts take a more pragmatic view of property rights with a concept of property that is broad and probably includes any valuable right or interest that has a reasonable degree of stability and ascertainably. Assignability is not a necessary characteristic of property rights but the capacity to be assumed by other parties is an indicator that an interest is property.
Within this position however, the Courts have recognised that rights may be subject to the statute under which they were created and accordingly under that statute may be diminished or varied, the extent to which this is possible depending on the provisions of the statute. For example, the Management Act specifically empowers the AFMA to vary conditions on fishing concessions, and such variations could enhance or diminish the value of that right. As referred to in Section 5 above on the discussion of the nature of SFRs, the management plans under which they are created are subject to amendment, which, in the example of the Northern Prawn Fishery, will alter the nature of the SFR.
The Court has rejected the view that a right that is wholly a creature of Commonwealth law is, in all cases, inherently susceptible to modification or diminution by a later Commonwealth Act.4
4 Commonwealth v WMC Resources Ltd (1998) 194 CLR 1.7.5 Indigenous perspective
The indigenous population have a different perspective. To them there is no distinction between land and sea and land including the sea extends as far as the eye can see and ownership rights indicate individual and group responsibility for maintaining and looking after the land and its resources.
7.6 Legal considerations
Apart from general considerations of compliance with legislation in the context of litigation, the question of the nature of fishing rights is relevant to a provision of the Constitution that relates to the acquisition of property. Claims under the Native Title Act 1993 and the ongoing litigation about the nature of native title offshore are also relevant.
7.7 The constitutional position
Section 51(xxxi) of the Constitution of the Commonwealth provides:
51 The Parliament shall....... have power to make laws.......with respect to:-An example of how the Courts consider this provision was provided when a compulsory reduction of fishing capacity occurred in the Northern Prawn Fishery in 1993. The fishery was managed under a system of boat and hull units with a person being unable to fish unless a boat unit and the number of hull units appropriate to the size of the nominated boat were held. Under the compulsory reduction scheme, the number of hull units in the fishery was reduced by approximately one-third which meant that many operators were faced with the choice, if they wanted to remain in the fishery, of purchasing hull units to have the requisite number for the nominated boat, or alternatively, to sell out of the fishery.(xxxi) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws.
The scheme was challenged and in Minister for Primary Industries and Energy v Davey5 the Court was able to assume that hull units issued under the Northern Prawn Fishery Management Plan made under the Fisheries Act 1952 were property for the purposes of s.51(xxxi) so the Court did not have to specifically address the issue. However statements by their Honours indicated that they would probably have taken that view had it been necessary to decide the issue whether units were property.
5 (1993) 119 CLR 108.The Full Court of the Federal Court held that this extinction of rights did not constitute an acquisition of property within the meaning of s.51(xxxi) because:
i. the extinction did not confer any proprietary right or equivalent benefit on any person (it affected all fishers the same way, even though some were in a better position to survive than others), and it did not confer any proprietary benefit on the Commonwealth and8. NATIVE TITLE
ii. the NPF Plan provided that units were issued subject to the Plan which was defined as meaning the plan as amended from time to time, so that extinction by means of an amendment to the Plan was something to which units were inherently liable.
In Mabo the High Court of Australia:
i. rejected the doctrine that Australia was terra nullius at the time of European settlementThe response of the Government was to pass the Native Title Act 1993, which was intended to give statutory recognition to native title and at the same time to provide a mechanism for the establishment of native title.
ii. held that the common law of Australia recognises a form of native title that reflects the entitlement of the indigenous inhabitants of Australia in accordance with their laws and customs, to their traditional lands and
iii. held that native title is extinguished by valid government acts that are inconsistent with the continued existence of native title rights and interests.
The existence of native title offshore was not specifically recognised in the Mabo decision nor in the subsequent Native Title Act although this Act does provide a process in relation to acts in offshore places. In the absence of specific recognition it has been left to the Court to decide the nature and extent of offshore native title.
In Yarmirr and others v The Northern Territory and others6 (known as the Croker Island Case) a single judge of the Federal Court held.
i. native title exists in relation to the sea and seabed within the claim areaThe Croker Island decision has been appealed by both sides. For its part, the Commonwealth took, among other grounds, the view that the Court erred in recognising native title offshore. The native title claimants took the view that the Court, among other things, failed to take account of prior commercial activity in the area by the ancestors of the claimants and Macassan traders.
ii. the native title rights and interests do not confer possession or occupation, use and enjoyment of the sea and sea-bed within the claimed area to the exclusion of all others and
iii. the native title rights and interests that the Court considers to be of importance are the rights and interests of the common law holders, in accordance with and subject to their traditional law and customs toa) fish, hunt and gather within the claimed area for the purpose of satisfying their personal, domestic or non-commercial communal needs including for the purposes of observing traditional, cultural, ritual and spiritual laws and customs andiv. the native title rights and interests of the common law holders in relation to the sea and sea-bed within the claimed area may be affected by rights and interests in relation to the sea and sea-bed within the claimed area validly granted or which may exist or which may hereafter exist pursuant to the laws of the Commonwealth or the Northern Territory (e.g. fisheries laws).
b) have access to the sea and sea-bed within the claimed area for all or any of the following purposes:· to exercise all or any of the rights and interests referred to above
· to travel through or within the claimed area;
· to visit and protect places within the claimed area which are of cultural or spiritual importance and
· to safeguard the cultural and spiritual knowledge of the common law holders.6 (1998) 156 ALR 370.
The Full Court of the Federal Court has heard argument and a decision may be handed down before the end of 1999. As the test case for offshore native title it seems likely that the Croker Island case will ultimately be decided by the High Court.
9. WHY DO COMMERCIAL FISHERS LITIGATE AGAINST MANAGEMENT ARRANGEMENTS?
One thing that can be said without doubt is that litigation is always expensive and even when a case is heard before a Court in which costs are awarded against the loser, the winner is certain to be out of pocket. In tribunals where each party carries their own costs, costs can still reach crippling levels and I am aware of one Administrative Appeals Tribunal Case where costs are estimated at some A$750 000. And this is in a matter where, on paper, the right would be described as weak.
The primary reason for litigation is that fishing rights are valuable property worth fighting for. They may be valuable and tradeable in themselves or there may be the expectation that the holding of a right now, which on paper may be weak, may fulfil the requirements for the granting of a stronger right at a later date. There may also be other reasons for litigation such as defending a particular lifestyle, which has intangible benefits.
10. WHAT IS LEGAL PLANNING?
10.1 A process
Legal planning is a process that ensures that management arrangements comply with the requirements of fisheries and other relevant legislation such as environmental, regulatory impact and native title. In regard to property rights the major aspect of legal planning is to ensure that the management arrangements do not result in an acquisition of property within the Constitutional sense. Legal planning should also ensure that management arrangements are fair and equitable.
10.2 Why do we need legal planning?
Legal planning is needed simply to minimise the chance of a successful legal challenge, which although it may be brought by an individual, may have the potential to bring down complex management arrangements with resulting chaos in the fishery.
The AFMA spends considerable sums each year in the defence of management arrangements and averages approximately 8-10 cases per year before the Administrative Appeals Tribunal. However, even though the record of the AFMA has been good, the existence of litigation casts uncertainty over management arrangements until they are resolved. An Administral Appeals Tribunal case, at best, is unlikely to be concluded in under six months and generally takes 12-18 months to be resolved.
10.3 How has emergence of property rights affected managers?
The major impact of property rights has been to impose greater discipline. Management systems now have to be planned with an eye to potential legal challenge in which the courts will scrutinise the arrangements and strike down those which are contrary to the legislation or that do not meet requirements of fairness and equity.
The most celebrated example of this was the case of Austral Fisheries v Minister for Primary Industries and Energy7 in which the Federal Court struck down the allocation provisions in the South East Trawl (ITQ) Management Plan 1991 because it found that the allocation formula was irrational and capricious. In that case allocations were partly based on a formula under which the proportions of total catch taken each year by an operator over a period were averaged regardless of total catch for any year. This meant that a person who took for example 50% of the catch in a year when total catch was 100 units was treated more favourably than a person who took 25% of the catch when the total catch was 1000 units.
7 (1992) 37 FCR 463.The Austral Fisheries case was a tragedy attributable to faulty planning on the part of management and the decision resulted in chaos in the fishery and mistrust of managers, which persisted for several years. The tragedy lay in that management felt compelled by politically imposed time constraints to push the plan through with little time for industry comment on the final proposals.
10.4 How does the AFMA undertake legal planning?
10.4.1 Legal advice
Perhaps the first step is to recognize that lawyers cannot be avoided. If they are not involved in the development of management arrangements then the likelihood is increased that those arrangements will be challenged and lawyers will definitely be involved at the end.
The AFMA has adopted the practise of seeking legal advice at all stages of the development of management arrangements. The AFMA has in-house lawyers who provide advice. However advice is sought also from external sources and from specialists in particular fields such as administrative and constitutional law. In the Northern Prawn Fishery amendments referred to previously, advice was sought in-house, from the Australian Government Solicitor, from a private solicitor and from a Queens' Counsel.
10.4.2 Allocation issues
The allocation process with management arrangements involving property rights is crucial because any dissatisfaction is likely to trigger a legal challenge.
Establishing well-defined, divisible, secure and transferable fishing concessions is a major factor in the pursuit of AFMAs ecologically sustainable development, economic efficiency and cost-effective management objectives. However, it is recognised that continually changing the method of allocating fishing concessions will weaken them and make effective fisheries management difficult. Accordingly, AFMA has taken the approach that the fishing concessions that exist in a fishery at the time that the new management arrangements are proposed, are the ones that will be considered in any new allocation required by the move from old management regime to another.
Therefore AFMAs approach to allocation of new fishing concessions is to ensure that:
i. such changes are consistent with, and support the pursuit of, AFMAs legislative objectives andAn innovation by AFMA has been the establishment of independent Allocation Advisory Panels (AAPs) Under Section 7 of the Fisheries Administration Act 1991 AFMA has the mandate to establish and allocate fishing concessions. In accordance with this function, the AFMA Board is responsible for determining the nature and amount of access permitted to a fishery. However, with the exception of Division 4A of Part 3, AFMAs supporting legislation, regulations and objectives provide no specific guidance on the allocation of fishing concessions. Of course, allocation decisions are subject to general administrative law principles such as fairness, natural justice, etc.
ii. any differential economic impacts of allocations on individual fishing concession holders are minimised unless they are justifiable with respect to AFMAs objectives.
Evidence exists which suggests that operators will have greater confidence in allocation outcomes where they result from an independent assessment of the fishery and individual's circumstances. A central principle in the development of an allocation system which is, and is seen to be, fair and credible is receipt by the AFMA Board of advice which has been based on an independent assessment. To achieve this, both the recommended basis of the allocation and any exceptions that must be highlighted are undertaken at arms-length from the AFMA management and the AFMA Board.
Independent Allocation Advisory Panels (AAPs) have been established in relation to Commonwealth fisheries to provide advice to the AFMA Board on the most appropriate allocation system within a defined fishery, or between defined fisheries. An AAP is advisory in nature and ultimate decisions are made by the AFMA Board.
Panels have been established for a number of fisheries and typically membership comprises:
i. a retired judge as chairmanAn important component in determining the most appropriate allocation system in a particular fishery is the consultative processes which are undertaken with operators and others with an interest in the fishery. While the level of consultation may vary according to the fishery or specific circumstances, as a general rule the AAP consults widely with relevant parties and any persons or organisations with appropriate knowledge, experience or expertise. Where necessary, the AAP obtains advice or input from relevant legal, economics or statistics experts.
ii. an economist and
iii. an industry member without any connection to the particuliar fishery.
To date the AFMA has used AAPs process to advise on allocation decisions in the Northern Prawn Fishery, Eastern Tuna and Billfish Fishery, Southern Shark Fishery, Bass Strait Scallop Fishery and the South East (Non-Trawl) Fishery. The approach has not prevented all appeals, but it has generally been well received by both managers and industry.
10.4.3 The role of management
Legal planning and the use of AAPs are only one aspect of the development of management arrangements. The arrangements are the responsibility of fisheries managers, with lawyers and AAPs being only additional tools to ensure the soundness of those arrangements.
As a general rule the AFMA has adopted a partnership approach and recognizes that a variety of people have an involvement or interest in the sustainable management of Commonwealth fisheries and in the marine resources and environment which sustain them. Co-operation is embodied in the partnership approach and the AFMA actively involves a range of interested parties, including fisheries managers, scientists, fishing operators, environmental/conservation and recreational fishing interests, the post-harvest sector and other interested stakeholders, in the process of developing and implementing fisheries management arrangements. Central to the partnership approach is the establishment and operation of Management Advisory Committees (MACs) or Consultative Committees (CCs) for each major Commonwealth fishery.
MACs and CCs are AFMA's main point of contact with stakeholder groups in each fishery and play a vital role in helping AFMA to fulfill its legislative functions and effectively pursue its objectives. MACs and CCs also provide advice to AFMA on issues such as fisheries management arrangements, research, compliance and management costs.
AFMA also consults with the Australian Seafood Industry Council (ASIC) which is declared under legislation as the representative industry body for Commonwealth fisheries. During the year, ASIC was consulted on the development and review of AFMA's Corporate Plan. A Liaison Committee, comprising ASIC, AFMA and the Fisheries and Aquaculture Branch (FAB) of the Department of Primary Industry and Energy (DPIE), meet on a quarterly basis to discuss broad policy and operational issues.
Managers and fishers have a common interest in stable management arrangements that achieve the goals of resource sustainability and economic efficiency. It appears that such goals are more likely to be achieved in a system in which fishers have effective property rights, but the introduction of such systems is likely, at best, to be unsettling, and, at worst, to result in chaos unless adequate planning has accompanied the change. Even challenges which are successfully defended will further delay implementation of new management arrangements, to the detriment of all.
The aim of management must be to take industry along with it in granting property rights and, recognising that change cannot please everyone, ensure that arrangements are legally sound and will withstand concerted challenge. However, any property right by definition implies some exclusivity and those excluded are unlikely to accept any allocation system that is not seen to be fair and equitable.
The Australian Federal System and jurisdictional matters
Australia is a federation in which the states and the central government (the Commonwealth) share responsibilities for fisheries management. Unlike some other areas of government activity there need not be any overlap between the responsibilities of each level of government. The states (and the Northern Territory) have management responsibility from the low-water mark out to 3 nautical miles while the Commonwealth has responsibility from 3 miles to the outer limit of the Australian EEZ. But, by arrangement, the Commonwealth and States may exchange responsibilities so that in some cases the Commonwealth may manage fisheries under Commonwealth law into the low-water mark while in other cases a State may manage a fishery extending out into the EEZ. It makes sense that a fishery occurring in waters of both a State and the Commonwealth be managed by that State, while migratory species and straddling stocks be managed by the Commonwealth. The Australian Fisheries Management Authority is the Commonwealth statutory authority charged with the Commonwealths fisheries management responsibilities.
The particular relevance of the federal system to acquisition of property issues is that the provision of the Constitution only relates to the Commonwealth and its agencies. State Constitutions do not have similar provisions and although some States may have laws which have a similar effect, these do not have the same force as a Constitutional guarantee.
The Management Act provides:
3(1) The following objectives must be pursued by the Minister in the administration of this Act and by AFMA in the performance of its functions:a) implementing efficient and cost-effective fisheries management on behalf of the Commonwealth; and(2) In addition to the objectives mentioned in subsection (1), or in section 78 of this Act, the Minister, AFMA and Joint Authorities are to have regard to the objectives of:
b) ensuring that the exploitation of fisheries resources and the carrying on of any related activities are conducted in a manner consistent with the principles of ecologically sustainable development and the exercise of the precautionary principle, in particular the need to have regard to the impact of fishing activities on non-target species and the long term sustainability of the marine environment; and
c) maximising economic efficiency in the exploitation of fisheries resources; and
d) ensuring accountability to the fishing industry and to the Australian community in AFMA's management of fisheries resources; and
e) achieving government targets in relation to the recovery of the costs of AFMA.a) ensuring, through proper conservation and management measures, that the living resources of the AFZ are not endangered by over-exploitation; and
b) achieving the optimum utilisation of the living resources of the AFZ; but must ensure, as far as practicable, that measures adopted in pursuit of those objectives must not be inconsistent with the preservation, conservation and protection of all species of whales.
Nature of statutory fishing rights
Section 21 of the Fisheries Management Act 1991 provides:
21(1) For the purposes of this Act, each of the following rights is a separate statutory fishing right:(a) a right to take a particular quantity of fish, or to take a particular quantity of fish of a particular species or type, from, or from a particular area, in a managed fishery;
(b) a right to a particular proportion of the fishing capacity that is permitted, by or under a plan of management, for, or for a part of, a managed fishery;
(c) a right to engage in fishing in a managed fishery at a particular time or times, on a particular number of days, during a particular number of weeks or months, or in accordance with any combination of the above, during a particular period or periods;
(d) a right to use a boat in a managed fishery for purposes stated in a plan of management;
(e) a right to use particular fishing equipment in a managed fishery;
(f) a right to use, in a managed fishery, fishing equipment that is of a particular kind, of a particular size or of a particular quantity or is a combination of any of the above;
(g) a right to use a particular type of boat in a managed fishery;
(h) a right to use a boat of a particular size or having a particular engine power, or of a particular size and having a particular engine power, in a managed fishery;
(i) other right in respect of fishing in a managed fishery.
Types of statutory fishing rights (SFRs) granted or to be granted
i. Great Australian Bight Trawl Fishery - the right is for use of a boat for trawling in the area of the fishery.In addition to these fisheries, the AFMA has in draft a Bass Strait Management Plan in which the right will be a right to take a proportion of the TAC.
ii. Southern Bluefin Tuna - the right is to take a proportion of an annual total allowable catch (TAC).
iii. Northern Prawn Fishery - a combination of two rights is required, one right is to use a boat in the fishery and the other is the right to use the requisite number of hull/engine power units applicable to the size of the boat. The management plan for this fishery has been amended to replace the hull/engine power units with gear rights under which each right is a right to use a specified length of net headrope in the fishery.
iv. South East Trawl Fishery - rights in this fishery are currently being granted. Rights are again a combination with a boat SFR which allows access to the fishery and the right to take non-quota species and quota rights which allow the take of a proportion of the TAC of quota species.
Ministry of Fisheries
PO Box 1020, Wellington, New Zealand
This presentation reviews1 some of the issues that arise in the implementation and operation of transferable quota systems and includes surprises, regrets, experiences and lessons. I draw largely on New Zealands experience, but introduce some information from other jurisdictions. New Zealand is a useful model to examine because the system of transferable property rights is comprehensive and includes most major fisheries.
1 The view expressed in this paper do not necessarily reflect those of the Ministry of Fisheries, New Zealand.Experience gained through the observation of other regimes might lead administrators to take a different approach to some issues initially, but whatever the approach it needs to be tailored to the nature of the fishery, the social and economic characteristics of the region, and the objectives determined for fishery management. The implementation of a conceptually ideal regime is likely to be impeded by fiscal, political, management and practical issues.
Fisheries managers try to achieve a range of biological, economic and social objectives including:
i. the greatest sustainable yields from fishery resourcesNew Zealand has a clear legislated purpose - to provide for efficient utilisation, constrained by ensuring sustainability - consistent with our Treaty and international obligations. These objectives are augmented by inclusion of environmental principles and the precautionary approach.
ii. maintenance of a healthy associated aquatic environments
iii. optimising economic return and efficiency in commercial fisheries and
iv. provision for good social and cultural outcomes.
Property rights features such as perpetuity, security, exclusivity, and transferability increase the value of the right and influence behaviours that might be expected from the owner including positive husbandry, incentives to invest and improve return and compliance with obligations. These features also increase economic and social benefits by allowing for industry rationalisation, while providing returns, increase economic efficiency.
Fishery property rights can be attenuated for a variety of reasons - these can be grouped into two categories - those related to achieving sustainability and those concerned with utilisation or allocative issues (Table 1).
Table 1: Factors that attenuate property rights
Minimum quota holdings
Methods and gear
i. selling the concept2. SELLING THE CONCEPT
iv. administrative services
v. catch against quota
vii. social and economic objectives
viii. integrating rights and
ix. rents and costs of management.
Fishery managers considering introducing a property rights based system must first sell the concept. Successful implementation of an amended management system will be assisted by a good understanding and acceptance by those affected. The discussion and consultation process needs to include all individuals and groups with a stake in the management of fisheries. Fishery stakeholders include:
i. vessel ownersSupport for the implementation of the scheme from the fishing industry will be facilitated by drawing on information from jurisdictions that have implemented transferable quota schemes. Fishery participants have generally enjoyed increased profitability by being able to maximise the value of product landed, because of the security of access. Balance sheets are enhanced by the capital asset which also provides financial security for borrowing for vessel improvements, etc. For some, the advantage of being able to sell out with a return is the most important feature - and it also rationalises fishing capacity. There are some exceptions to the expectation that fishers will be better off - the most successful and innovative fishers under a competitive regime may benefit less, unless the fishery is in dire trouble.
iv. fishing communities
v. fishery managers
vi. environmental groups
vii. recreational fishers and
viii. indigenous fishers.
The benefits of Individual Transferable Quota - ITQ - type regimes, as seen by the fishing industry include:
i. reduced competition and ability to spread effort over the entire year with consequent market advantages
ii. predictability of income and reduced economic risk
iii. retirement security through ownership of an asset
iv. benefits for resource conservation and
v. revenue maximisation by optimising labour and gear configurations.
For commercial fishers, the advantages may be offset by features of the implementation or operation of a property rights based system, e.g.:
From an administrator's perspective, ITQs were derived to address common fisheries management issues that other sorts of regimes had failed to address including the race for fish, stock depletion and over-capitalisation. Depending on the effectiveness of the incumbent regime, a government should be interested in addressing those concerns and achieving greater benefits including those of:
i. increased efficiency and economic returnSome of these outcomes may be achieved by alternative measures, but all can be achieved by transferable catch entitlement regimes.
ii. encouragement for investment
iii. better controls to ensure sustainability - ITQs help restrain catch within limits
iv. the longer term advantages of the incentive to improve stock husbandry
v. prospects for improved voluntary compliance
vi. incentives for collective action provided by the allocation of rights and
vii. the ability to explicitly provide for non-commercial stakeholders.
General economic circumstances may assist in achieving co-operation. ITQs were implemented in New Zealand because the domestic inshore fishery had reached a crisis with many species severely depleted, substantial fleet over-capitalisation and declining economic performance. Even though most fishers acknowledged the crisis it took perseverance through 2-3 years of intensive consultation by fishery administrators through working committees, public meetings, publications and articles to gain a reasonable consensus. Agreement within the government was assisted because the economic philosophy of the Quota Management System (QMS) was consistent with the governments public sector reform. Industry consensus was also assisted because an ITQ like system had been tried through the enterprise allocations in the deepwater species. This gave companies some experience with the benefits of owning quotas. But such consultations can be lengthy - reaching agreement on the long term management framework for the surf clam and quahog fishery on the United States Atlantic coast took 12 years.
There are considerable benefits in developing the proposed regime in conjunction with stakeholders. They must be fully involved and obtain partial, if not, total ownership. The advantages of doing this include:
i. better understanding of intent3. SUSTAINABILITY
ii. assistance with resolving issues
iii. higher levels of voluntary compliance and
iv. lower costs (for government and industry).
3.1 Operational elements
The issue of sustainability includes the following sub-topics:
i. species to include3.2 Species to include
ii. definition of management areas
iii. setting catch-limits
iv. adjustment assistance
v. other sustainability objectives and
vi. what should be reported.
A fundamental question is which species to include or exclude. New Zealand initially included 27 species which represented 83% by weight of commercial finfish taken in 1985. This total has subsequently increased to 40 species. The inclusion of economically important stocks and single species target fisheries is relatively obvious. However costs and administrative complexity rise for species that are components of a mixed fishery.
Economic issues arise in issuing quota for less important species taken, because of the high monitoring and enforcement costs, and of difficulties due to species variability and low profitability. However, it can be difficult to ensure sustainability of species outside quota. And there is a need to record accurate catch information - this has proved to be an advantage of the QMS as it enables analysis of likely yields in the absence of a fishery-independent stock assessment. This has been evident in recent introductions to quota management in New Zealand. As the catch data for species outside the QMS were poor - setting initial catch-limits was speculative.
This section examines one of the categories of species that administrators might consider for inclusion in a transferable quota system. Short lived, highly variable species provide a dilemma. They are difficult to set catch-limits for, because there is usually minimal relationship between catch and subsequent recruitment to the fishery. This calls into question the benefits of their introduction into the system. Arrow squid is an example in New Zealand. Catch has not been constrained by TACs set well in excess of harvests in most years. But fishermen have had some of the benefits of ITQs - allocation of an asset, security of access and reduced competition, and they have not sought the exclusion of the species.
Other examples in New Zealand are red cod and flatfish - both relatively short lived and fast growing. Their catch-limits were set initially at the highest recorded catch and most have not been altered. In retrospect, catch has been controlled to a great extent by the economics of fishing for these relatively low value species and the constraint of quota for other bycatch species in their catch mix. However, the high quotas have created problems through fishers attempting to take all the quota they own of these species and thereby taking other species in excess of the quota.
On balance, the benefits of inclusion in the QMS seem to have outweighed the disadvantages, but a restricted access regime for low value, low volume species without sustainability concerns may be adequate, provided disincentives are applied for catching associated quota species. Recent New Zealand legislation has introduced the ability to adjust TACs upward in-season. This allows more realistic long term TACs to be set, as upward adjustment can take into account the appearance of good year-classes.
3.3 Definition of management areas
The determination of management areas has economic and biological implications for managers and industry. A greater level of sub-division than is necessary increases administrative cost, particularly those associated with reporting and monitoring. However, it is important for resource sustainability to attempt to spatially manage different stocks of species, where this can be done. It is probably better to err on the conservative side for at least two reasons:
i. the prevention of serial depletion in very large QMAs which can have socio-economic as well as biological impacts and3.4 Catch-limits
ii. it is relatively easy to combine areas, but contentious with industry to sub-divide. As industry becomes more organised and acts collectively, voluntary subdivisions can be developed.
It is critical that initial catch-limits are set carefully as they are one of most contentious issues in a quota management system. To achieve both biological and economic goals, catch-limits must be set prudently to avoid stock depletion. New Zealands early exploitation of orange roughy fisheries provides an example of inadequate information due to insufficient research, overestimation of yield for a newly discovered offshore species and a subsequent slow management response to better information.
A related issue is the need to protect the government from liability for compensation for decisions on catch-limits and related issues necessary for sustainability, including protection of the environment. It is important that these decisions are not constrained by financial or litigatious considerations - without precluding review on reasonableness and fairness grounds.
Some of the features of New Zealand's catch-limit setting process that work well include:
i. an open and transparent stock assessment and TAC setting process with participation by all stakeholders that produces better science and increased acceptance of the outcomesAlthough consultation on TAC setting in New Zealand is still noisy and contentious, observation over time does suggest a change in industry's approach - from consistent lobbying for increases and absolute opposition to any decrease - to a more responsible approach reflecting the husbandry incentives. The change in attitude is most evident in fisheries where industry is closely involved in management planning. In several recent circumstances industry has supported conservative action as part of the implementation of strategies and decision-rules in these plans.
ii. specific environmental principles in the legislation that aid prudent TAC decisions and
iii. working with industry on a programme to adjust catch-limits in situations of limited information using additional industry-funded research and monitoring.
Output controls are not the only mechanism that can ensure sustainability. The western Australian rock lobster fishery successfully uses effort-control in the form of pot limits to control harvests. Other mechanisms may work well for particular circumstances - such as territorial use rights, or TURFs, for sessile species.
3.5 Adjustment assistance
ITQs are often implemented because of resource depletion. This may raise related financial implementation issues by the mid-1980s. The primary stimuli for changes infisheries management in New Zealand were the depletion most inshore fisheries and overcapitalisation of the industry. This resulted in the need to rationalise catch-capacity upon the introduction of the QMS. In New Zealand major reductions in catch of up to 83% for some stocks were necessary. They were achieved by government purchase of initial allocations of quota at a fixed price - initially by voluntary sales by the industry. The goal was to ensure a reduction in catch that could not be eroded (for example by increased capacity of vessels if a vessel buyback scheme were implemented). The mechanism was effective and enabled individuals to decide to remain in the fishery near to historical levels of catch, sell out or restructure their operations. In circumstances where voluntary quota reductions were insufficient, pro rata administrative reductions were made across all quota holders. In the course of this restructuring in 1986 the government paid out about $NZ62 million (8% of the annual value of production of the fishery at that time!).
3.6 Other sustainability objectives
Although catch-limits can be successfully employed to ensure sustainable harvests of commercially sought species - in most cases further controls will be necessary to ensure the sustainability of future harvests. They may include:
i. gear restrictions to reduce environmental degradationThese issues need to be considered prior to allocation of quota and the establishment of management areas. For example, closures or reserves may be useful mechanisms to address some of these issues - but the exclusion of areas following establishment is contentious, it can adversely affect confidence and may be expensive for government.
ii. mechanisms to minimise incidental catch of non-target species including rare and endangered species of mammals, birds, fish, invertebrates
iii. mechanisms to ensure sustainability of catch for stocks not in the quota system and
iv. protection of juvenile fish and spawning and nursery areas.
Another output-control mechanism that works effectively is the imposition, supported by a high level of observer coverage of a limit on total sea lion incidental mortality in the New Zealand squid fishery. This is similar to the individual dolphin mortality limits applied in the eastern Pacific tuna fishery.
3.7 Reporting requirements
Reported information is the lynchpin of a quota system. Reporting requirements need to be carefully determined to fulfil management objectives, including those of enforcement, monitoring and biological information needs. Important components are likely to be areas, species taken, fishing methods, position and time of deployment plus other information needed for catch and effort analysis.
New Zealand is currently suffering the consequences of not requiring the reporting of all species taken, including those species outside the quota system. This information is critical in setting catch-limits where directed-research is prohibitively expensive. The burden of comprehensive reporting can be eased through user-friendly reporting mechanisms, whether paper based or, increasingly, electronic. These mechanisms should be evaluated carefully together with industry.
It is crucial that sufficient investment be made to establish adequate monitoring and enforcement programmes that have the confidence of industry. These programmes underpin the success of the scheme because non-compliance affects the attainment of biological, economic and social objectives. The enforcement arm of the management agency will also need to amend its function and possibly its structure. Iceland, for example, set up a specific enforcement agency, with registered weigh-stations in every harbour.
In a well-developed property rights based system the enforcement agency may have a more complex role than an open access regime with input controls because of the additional constraints on fishers, and the complexity monitoring data. Enforcement difficulty increases with the geographic extent of the fishery, with larger numbers of fishing units, with the number of landing or sale points and with high-value markets for unprocessed products.
In New Zealand the quota management system (QMS) focuses on monitoring product flow, surveillance and targeted investigations, audit and enforcement operations to collect evidence where offences are detected. The approach taken was the same that other agencies use in cross-referencing catch-landing reports with licensed fish receivers, processors and distributors. This is analogous to the registered dealers who have the exclusive right to purchase fish, common in ITQ programmes. This enables enforcement to be largely land-based using accounting and auditing techniques. A similar shift to an emphasis on shoreside monitoring took place with the implementation of transferable quota in the surf clam and quahog programme on the United States Atlantic coast.
Although the enforcement agency will have a changed role, in regimes where input controls are complex or difficult to enforce they are important for the efficacy of the regime, through compliance can be difficult and expensive. It is difficult to compare the relative costs of enforcement in open access management relative to ITQ regimes without careful comparison of the effort applied and the degree of compliance.
ITQs can facilitate self-compliance because fishers have an enhanced long term interest in the state of the resource. Compliance with the enforcement regime will be enhanced by fairness as well as equity and involvement of affected stakeholders in programme design. If the objectives of the regime are understood there will be a higher degree of compliance.
5. ADMINISTRATIVE SERVICES
5.1 Setting the framework
This section considers some of the issues needed in the implementation of an administrative system. A rights-based framework will involve more complex administrative and greater monitoring, which will need to be designed carefully to keep costs at tolerable levels.
5.2 Establishing the rules
To implement the operational framework needed for a transferable quota system, additional rules will need to be prescribed and the government will need funds to build the amended systems. Recent experience in New Zealand suggests that the benefits of specifying these rules as standards and specifications rather than a prescriptive legislation or regulations. The resulting flexibility reduces unnecessary costs to the government and industry from making minor adjustments as well as better providing for outsourcing of functions by government where appropriate.
5.3 Components of administration
The design of the administrative system needed to support a rights-based regime will depend on the features of the system, but there are common core components (Figure 1).
In the New Zealand model, the central component of the administrative system is the record of the participants in a fishery authorised by a license or permit. This registry can be expanded to provide for registration of the vessels they use. Assuming the management system focuses on limiting catch to control total harvest, the registry can be linked to the system which records fishers' catch. The application of catch-limits at a collective level will require reporting mechanisms.
Transitional mechanisms will be needed for allocation of the entitlement. In order to limit catch by individual fishers to control total harvest, the registry can be linked to the system that records fishers' catches and matches them to the entitlement held, triggering enforcement action if necessary. The integrity of this system will require the tracking of fish, from catch at sea, to landing point, and, as required, to a licensed receiver, processor, distributor, exporter or point of sale. This will require a comprehensive documentation system, and is a substantial cost in the administration of a property rights based system.
The registry of the entitlements can be extended to record transfers of quota between fishers, and mechanisms to administer constraints such as limits on aggregation, caveats or suspensions. These elements of the system will need to be integrated to respond to management decisions to amend TACs, for example. Revenue management forms a further functional group linked to quota holdings, catch and transactions undertaken.
Figure 1: Components of quota system.
5.4 Staff and resources
The staff, budget and other resources involved in setting up a quota management system are highly dependent on the current regime and the system that is being implemented. Some points that arise from the New Zealand experience of implementing ITQs are discussed below.
Enforcement: The numbers of staff in the enforcement area (about 100) did not change despite the substantial increase in the scope and nature of their activities. This was achieved by restructuring their function dramatically - from a high level of contact with the fishing industry and a focus on reporting and regulatory issues - to a more centralised agency with a focus on audit, investigation, surveillance and use of information systems with a focus on fraud and serious offences while retaining capacity for direct enforcement activity against black-marketing and poaching.5.5 Organisational design
Administrative services: The number of staff involved in administrative servicing and information technology increased markedly from less than ten to around 80 due to the increased complexity of the systems. Staff numbers remained at those levels until 1995 when a centralisation of staff reduced levels by 15%. One reason for continuing high staff-levels is the need to service an increasingly unstable computer system, overdue for replacement, with consequent high overhead cost per transaction. The number of staff needed for the implementation of a similar administrative system today would be dramatically reduced by technology not available in the mid-1980s.
Research: Staff levels in research also increased, although not markedly. However, the focus of research altered significantly from a large proportion of pure research to a more direct service to the needs of a system that supported the setting of commercial catch-limits.
With the changes in organisation design from an input-based, or restricted access system, there will be an increase in complexity of administration and other major changes for the management agency to accommodate the change in its focus. Retraining is likely to be necessary along with redeployment of enforcement staff.
The establishment of quota management in New Zealand coincided with a period of public sector restructuring that separated functional components of organisations. This lead to the separation of policy, management and compliance from administration and research. This specialisation avoided potential conflicts of interest but has generally worked well with perhaps some issues of co-ordination between parts of the agency.
There is certainly value in separating management decisions on catch-limits, made on the basis of social, economic and biological considerations, from the science-based yield assessments which should be developed objectively in isolation from their commercial implications. The separation of the administration section in New Zealand has aided outsourcing of this function.
5.6 Input controls
ITQs are usually considered because current management is not achieving objectives. One would expect that with the implementation of ITQs, New Zealand would have found some input controls dating back decades to be largely irrelevant. But, some issues addressing allocation between sectors and environmental effects of fishing, for example, still need to be addressed. However, almost no regulatory input controls have been revoked. Iceland has experienced a similar problem with its bureaucratic process and regulations are not reduced under an ITQ system.
These regulations add to the cost of enforcement. Surprisingly, in New Zealand it is the industry that has resisted recent attempts at rationalisation of some input-control regulations. This appears to be because they are associated with the social structure of the industry and sunk-investment related to those controls. I believed that the incentives of cost recovery along with the rationalisation of management controls in fisheries plans may provide a long term solution. However, a better approach might be to revoke unnecessary input-controls simultaneously with the implementation of ITQs.
5.7 Catch against quota - multispecies fisheries
The basis of ITQ regimes is that catch should balance quota held and, therefore not exceed in total the sustainability limit. This is straightforward in single-species target fisheries. However in mixed-species fisheries, the ratio of quota held may not match species taken due to a range of factors such as variability in the marine ecosystem and poor quota portfolio selection. Other factors include changes in the abundance, rates of productivity and distribution of species.
The degree of unpredictability in catch can lead to overfishing, highgrading and dumping. Some suggest this means ITQs are not useable in mixed species fisheries. Thus, it is important to be pragmatic, and therefore flexible.
The regime in New Zealand includes a number of features to recognise the unpredictability in catch. These are:
i. retrospective monthly balancing with civil penaltiesOther regimes have applied similar measures to provide for flexibility in mixed species fisheries. In the Alaskan halibut and sablefish fisheries overage and underage is allowed, adjustment of the next years allocation, and there are graduated penalties for overcatch. Iceland allows 20% underfishing and 5% overage fishing without penalty.
ii. an annual right to carry forward up to a 10% deficit or surplus
iii. quota transfers augmented by registered leases and 'fishing on behalf' arrangements
iv. catch outside quota could be surrendered to government for no financial return, but are not dumped and
v. bycatch trade-off schemes.
Dumping of quota species is prohibited in New Zealand, except for certain circumstances of fish waste from processing at sea, discarding diseased fish, dumping to protect the safety of the vessel, or where required by regulations of undersize fish. Under quota management systems fishery operators have incentives to maximise returns where there are price differentials for size or quality of fish, or dump fish in order to continue fishing for a preferred species - high grading. This phenomenon is difficult to detect or prove. Some initial problems in New Zealand appear to have been reduced by high-profile enforcement and discussions with industry. Fishermen have expressed genuine concern about the damage to the resource (and their property right) and prefer to address the problem by improving handling and fishing techniques.
Reduced discards have been observed after the implementation of tradeable quota in other fisheries, such as the surf clam and ocean quahog programme and the Alaskan halibut and sablefish fisheries. One explanation is that the industry has a greater ability to time and target a catch of higher value. Conversely, Iceland has an ongoing problem with overcatch of TAC and discards at sea in its cod fishery. Governments, including New Zealand, have also established industry-funded observer programmes that can be used to help address problems.
To provide for trading, New Zealand allows a multiplicity of mechansims including trading of quota, leasing, sub-leases, and arrangements to fish against others' quota. These have created high administrative complexity and costs. It is hoped this will be resolved with the implementation of the Annual Catch Entitlement (ACE) concept. This will separate the quota share right in perpetuity from the entitlement to take catch annually. At the beginning of each fishing year, each tonne of quota owned permits one tonne of ACE for that species, valid for that year and freely transferable. This is analagous to the cage tags system used for annual allocations in the surf clam and ocean quahog programme on the United States Atlantic coast and the yearly quota coupons used for South Atlantic wreckfish. The rationale is to increase willingness to vary the TAC by separating the catch entitlement from the long term quota right.
By the early 1990s, through various additions directed at creating a flexible but workable system, New Zealand had created a very complex and expensive set of administrative systems, including civil and criminal penalties. Trading of quota, probably the best mechanism to aid balancing, was impeded by:
i. a lack of transparency in the marketTwo reviews have been undertaken to resolve these issues and the main solutions are as follows:
ii. an unwillingness to trade because of potential later exposure to prosecution and
iii. relatively high transaction charges for trading.
i. monthly retrospective balancing regime with modest civil penaltiesThe key solutions of the ACE concept are facilitating transferability of catch entitlement with minimal restraint and reliance on civil disincentives. The new administrative and monitoring computer system, although yet to be implemented, is hoped to provide a simpler and more permissive regime that will encourage trading and resolve the remaining over and under catch issues.
ii. suspension of the permit for non-payment of ACE (beyond a minimum)
iii. end of the year additional, and higher, civil penalty for any outstanding overcatch
iv. 10% carryforward for uncaught ACE is provided
v. industry funded and
vi. public catch and ACE register aids trading by establishing who has available catching rights.
Although multispecies fisheries create problems, these exist any regime where catch of a species is limited. ITQs highlight the problem by accurately recording catch by individuals. There is arguably a better way to manage these problems by providing for transferability and flexibility.
5.8 Quota busting
Quota busting is a problem for ITQ fisheries, and is evident in some high-value fisheries in New Zealand. The need to monitor catch of each quota holder adds to the difficulty for enforcement. The approach taken in New Zealand has been to cross-reference catch-landing reports from returns submitted by licensed fish receivers. Where discrepancies occur, investigations are done. Thus, enforcement is largely land-based using accounting and auditing techniques. The perception is that this has been largely successful assisted by flexibility in the balancing regime and a reasonable degree of industry support. In many, but not all rights-based regimes, catch-limits are exceeded less frequently after implementation of transferable quota regimes.
The key administrative component of managing catch is the database that records catch against quota for individual fishermen. The system must have a high degree of accuracy with errors minimised because the data forms the basis for enforcement. Major under-reporting or failure of the administrative system has not been an issue in New Zealand, but maintenance of an aging administrative computer has increased costs in recent years.
Underfishing was substantial in the early years of the QMS. There are a range of potential reasons, but it was most likely due to the constraining effect of possessing insufficient ITQ for another species in the catch mix. There has been much less under-catch in recent years as fishers developed improved strategies to take quota.
6.1 Basis for allocation
An initial and critical issue to administrators and fishers is the basis for allocation of the right. The most common approach is to allocate quota to those who have reported catch-history over a qualifying period. Other approaches include equal allocation, lotteries, priority ranking and auctions. In 1986 New Zealand used the average of the best two of three catch-history years so that all participants fished under the same conditions, and to take into account periods when a fisher may have been disadvantaged by illness or vessel repair, etc. While this is a common strategy, if one allows fishers to choose their best year, the total catch histories will exceed the average yield in any year and will need to be prorated.
For the 1986 introductions, New Zealand also allowed appeals on initial allocations, which were heard by a statutory authority. With the potential to get increased allocation of a valuable property rights, the cases developed to support appeals were varied and in some cases imaginative. Retrospectively, a number of faults in the process were identified:
i. difficulty of applying commitment and dependence criteriaIf appeals are considered appropriate, any increase in allocations should be achieved by prorating all quota within the catch-limit; this introduced peer pressure for all to make claims. In recent introductions, the process has given limited time to appeal, and the grounds limited only to issues over-reported catch, rather than commitment and dependence on the fishery.
ii. the statutory authority was expensive
iii. large number of appeals took years to hear
iv. fisheries administrators were tied up as expert witnesses
v. substantial inflation of some catch-limits and
vi. nullified government expenditure in buying out catch-history prior to allocation
The most common approach is to allocate quota to fishers, individuals or companies, who have reported their catch-history. However, there are reasons to recognise that others are involved in the fishery. This has been a particular issue in some United States fisheries. Allocations can also be made to skippers, crew or processors involved in the fishery, or communities rather than individuals. For example crew, often on catch-based remuneration, who have risked lives and incomes, although perhaps not their capital, could be considered to be disenfranchised by allocations to the permit or license holder or vessel owner.
Community quota can mitigate some unwanted effects of rationalisation - by ensuring local small scale fishermen have access to quota that can only be transferred within the community, or used for revenue generation. A potential foregone economic benefit from not allowing fuel rationalisation needs to be balanced against the benefits of providing economic activity for a community with potentially few alternatives.
6.3 Criteria period
One rule that needs to be set early after a decision to implement transferable quotas is the period that determines eligibility for allocations. This needs to be retrospective to avoid stimulating new entrants or additional fishing effort in an attempt to gain increased allocation. This activity was evident in New Zealand prior to the declaration of catch-history years in the mid 1980s and also prior to a moratorium on entry to non-QMS species and the declaring of the catch-history years that would be used for future introductions in 1992. An effective moratorium on entry during the planning period is commonly used to address these issues.
Once the decision is made to implement, the period between the catch-history period and allocation should be minimised. New Zealand now has the problem that because of the implementation of a 1992 moratorium on entry and declaration of catch-history years new introductions now mean using 8-year old catch data. Even with restricted access, the fisheries have changed over that period. However, any indication of an intent to change the criteria years will raise issues of equity and speculative entry.
A related issue is whether quota should be issued in perpetuity as in New Zealand, which appears to be the exception to the rule. In the United States and Iceland, the allocation is of indefinite duration, and subject to government revocation. However, none have been significantly altered.
An approach to providing administrative flexibility, while providing sufficient security for investment has been suggested in New South Wales which is the drop through system. Entitlements would be offered for a lengthy, but finite period. Prior to expiration, they could be exchanged for a new entitlement that may confer a slightly different set of rights and obligations.
Sunset periods have also been considered, and were used temporarily in the rock lobster fishery in New Zealand. However, the concern, as with revocable allocation, is that the husbandry incentives may be affected along with a distortion of economic activity that might be planned with an allocation in perpetuity. Their use as collateral by financial institutions may also be inhibited.
6.5 Payment for allocation
Another issue that arises during the period allocation is whether fishers should receive their allocation of access to a common property resource for free. Options to be considered include a partial charge for allocations, or a tender. Although these have been widely discussed - the only one implemented was a limited tender in Chile. These mechanisms will no doubt be unpopular with fishers who consider, they have a right of continuing access which may be legally supportable. Charges for access may also cause unwanted social effects through precluding access by smaller fishers who do not have access to capital.
Charging for access may threaten support for implementation of ITQs. Other options to consider, at least to prevent windfall gain, is a tax to recover some of the gain created by allocation. Resource rentals were intended to fulfil this purpose in New Zealand.
6.6 Transitional gains
One further issue to consider is whether to limit or tax the first transfer after the initial allocation in order to recover some of the transitional gains. This issue arises where initial allocations of what is regarded as a public resource, provided without charge, are quickly sold for capital gains. The initial holder gets a windfall profit and successive owners have reduced net benefits because their gross income is offset by the price paid for quota. This could be perceived as inequitable if the taxpayer funded compensation for a reduction in catch-history-based allocations for economic or sustainability purposes.
However, well developed property rights systems provide for the operation of a market and thereby efficient use of resources. Constraining transferability can impede achievement of efficiency. Side effects of a transitional gains charge might include preventing operation of the market - with less efficient operators remaining in the fishery. Any such charge needs to be considered with the related issues of any charge for allocations, ongoing resource rental, and capital gains tax if part of the financial regime in that country.
6.7 Proportional quota
When a quota is allocated a decision needs to be made as to whether it is proportional or fixed. Most other jurisdictions, sensibly, issued quota adjusted in proportion to the TAC. When New Zealand implemented ITQs in 1986, quotas were issued to fishers as a fixed tonnage. If the commercial catch-limit needed to be reduced, the government was to enter the market and purchase quota from fishers. Conversely, if the commercial catch-limit increased, the government was able to sell the additional quota. In 1990, the government acknowledged the problems of fixed tonnage quotas and amended the regime to proportional quotas, spurred by the high potential cost of large reductions needed in some relatively new deep water fisheries. This was a fraught and difficult process. The outcome was that government determined to compensate industry by effectively using the funds created by resource rental payment to compensate fishers for catch-limit reductions over a five year transition period.
With fixed tonnage quotas, as the government compensates owners for quota reductions, the taxpayer takes the risk of ill considered management decisions. This gives poor incentives for industry to support responsible and sustainable decisions, but security for industry from compulsory adjustments.
Theoretically, proportional quota provides better incentives for resource husbandry and development of fisheries, as well as keeping government out of the quota market. If fishers know that their quota may be reduced through imprudent catch-limits, they will support more cautious management. As New Zealands industry has matured in an ITQ environment they favour stability of access over fluctuations. Similarly, why develop and explore fisheries when government accrues gains? New Zealand's enhanced scallop fishery provides a good example of the poor development incentives over the period when the government attempted to obtain a proportion of the benefit from enhancement.
7. SOCIAL AND ECONOMIC OBJECTIVES
7.1 Implications for efficiency
There is little doubt that transferable quotas can increase economic efficiency and (at least Iceland and New Zealand) report increased profitability. Many jurisdictions report increases in landed prices of fish. However, some of the social and structural changes to the fishing industry may make governments cautious about the implementation of rights-based management. In New Zealand, unfortunately, not much research has been undertaken on the social and economic impacts of transferable quotas as their implementation can result in changes in the number of vessels, employment and consequent impact on fishing communities.
Transferable quota programmes tend to reduce the number of vessels in the fishery. Table 2 shows some data from different jurisdictions. New Zealand appears to be an exception with minimal changes in the number and size of vessels operating in the zone. An increase in the size of vessels has been reported in Iceland and the Netherlands.
Table 2: The effect of transferable quotas on numbers of vessels
% change in number of vessels
Time period (years)
Iceland (decked vessels)
These changes can effect communities dependent on fishing. In the surf clams and ocean quahogs fisheries more of the smaller operators sold out and there was a decline of small fishing settlements. In Iceland, small fishing communities lost a greater relative share of quota, increasing financial problems and unemployment.
One of the key outcomes sought from transferable quota programmes is to reduce overcapitalisation and excess effort. However their implementation has different effects in fisheries with excess harvesting, and processing capacity. Where there are excess vessels, transferable quotas may lead to a lower number of vessels with crew loosing jobs, but crew on the remaining vessels may increase their periods of employment significantly. Where there is excess processing capacity, processors may require fewer workers, but processing is spread over a longer time
In both these cases, although some may perceive the outcome as negative, over-investment in labour and capital is addressed, consumers may benefit from a substantially longer period with fresh supply, and there are decreased costs and increased profitability for the fishing industry, which is of benefit to the nation. However, mechanisms can be implemented to mitigate some of these effects, to seek outcomes sought by the administrators.
7.2 Restrictions on transfer or trade of entitlements
Variations on completely transferable quota can be considered for economic, social and administrative objectives. With some exceptions discussed below, the New Zealand government has generally taken the position that its obligation is to provide a framework that provides for the achievement of efficiency and generally avoids mechanisms that act as subsidies or protection and interfere with the operation of the market. However there are reasons to modify this approach.
Although transferability is important for operation of system and some economic benefits, other jurisdictions have restricted transferability to preventing loss of quota to regions or fishery dependent coastal communities, to types of fishers, such as owner operators, or preclude transfers to absentee owners, or even outside certain vessel classes.
In the Alaskan Pacific halibut and sablefish fisheries opportunity for quota lease/transfer was limited to achieve social objectives by restricting transfer across vessel sizes and capacities. Norway has a policy designed to retain its purse seine fleet in its historical base in the north. It operates by discouraging transfer of quota shares to the south by removing a proportion of the quota if there is such a transfer. Other regimes have tried to keep quota in fishing communities. In the Alaskan halibut and sablefish fisheries the owners are required to be on board vessels (with exceptions for corporate owners). Iceland addresses this issue by requiring owners to fish at least half of their quota every two years
One mechanism to address concerns about the impact of ITQ rationalisation on small quota holdings is to allocate some quota initially to a fishing community and prevent its trading away. An interesting example of this is the case of the Chatham Islands, 400 miles east of New Zealand, isolated, and dependent on government financial assistance. They had poorly developed fisheries at the time of the catch-history years and therefore received low initial allocations, with a subsequent allocation by government held by an authority that can only lease to Chatham Islands residents. They have regularly lobbied for further allocations however, all quota for the area is held by other quota holders who will not relinquish it. In retrospect it may have been better to compromise.
An allocation of a larger non-tradeable community quota initially would have provided ongoing income, it may have provided a basis for a higher degree of economic self-sufficiency and been more cost effective for government. In these regards, administrators need to consider objectives and balance potential costs and benefits for transferable quota systems that can be used to achieve social goals such preserving traditional fishing patterns, and providing independence and a more secure future for coastal fishing communities.
7.3 Aggregation limits
Aggregation limits constrain the total amount of entitlement that may be held by any entity; it is generally fishery specific - thereby limiting the rationalisation that may take place through efficiency and market forces. The purpose is to address social issues caused by loss of quota to owner operators and small fishing communities and to avoid risk of market domination.
An example of the latter is the United States surf clam and ocean quahog fishery, in which independent harvesters had problems finding markets as buyer-processors gained dominance in some areas. Some countries have regulated aggregation limits, while other have relied on non-fisheries commercial law such as federal antitrust laws in the United States. New Zealand started with a maximum limit of 20% of a species in any QMA, except rock lobster and paua (10%), and some deepwater species (35%). These limits were later increased to 45% for some deepwater and midwater species. The Alaskan halibut and sablefish fisheries have a limit of 0.5-1.0% by area
Substantial accumulation has occurred in some fisheries following implementation of transferable quotas as Table 3 shows. Iceland only recently set aggregation limits. Over ten years of their programme the amount of quota owned by their 24 biggest firms increased from 25% to 50%.
Table 3: Changes in the number of quota holders with the implementation of transferable quotas
% change in number of quota holders
7.4 Foreign ownership
A limit on foreign involvement in domestic fisheries is a common restriction, generally controlled by specifying a maximum level of foreign ownership/control. Such limits are introduced with the intention to retain domestic control and prevent profits from being expropriated by foreign nations. This has the disadvantage of denying access to investment capital and are contrary to the global trend to liberalise direct foreign investment.
In New Zealand there is a legislated maximum on foreign ownership or control of quota-owning entities of 24.9%, with discretion to move to a maximum of 40% based on performance criteria and Ministerial approval. It has proved difficult to ensure compliance with this provision, because of the need for access to detailed information on financial and corporate structure. The fisheries management agency in New Zealand will transfer this responsibility to the government agency concerned with foreign investment in the economy overall. Other jurisdictions that have considered this transition have doubts about the effectiveness of a centralised agency.
7.5 New entrants and high quota prices
A disadvantage of transferable quota systems relative to open access regimes is lack of access to new entrants because of the high cost of quota. New entrants may lack capital or collateral to obtain finance to purchase quota. Mechanisms exist to facilitate entry if this is considered a problem. A side effect of deciding to tax the economic rent created by allocation of quota is to lower the cost of quota. A central registry of quota holdings may assist by giving financial institutions more confidence in the security of the asset, and therefore be more likely to lend quota for purchases. A direct approach would be for the government to purchase quota for this purpose. If the government determines that quota needs to be obtained from existing participants, a compulsory zero revenue auction2 to obtain a portion of the total quota offers a mechanism to ensure there is quota available for purchase with less adverse affects on the quota market than compulsory acquisition.
2 After initial allocation of quota the Government could take back some percentage of the allocation every year for sale in an auction. Quota holders may get their quota back, but only if their bid is the highest. Revenue is returned to the holders of the auctioned quota shares7.6 Data collection
The economic and social issues discussed above will present real challenges for the management agency. One problem in decision-making in this regard is the lack of data collected before and after implementation on the socio-economic status of the industry. New Zealand has a poor record in collecting quantitative data for this purpose. Better data would aid planning, evaluation and management decisions.
8. INTEGRATING RIGHTS
8.1 Indigenous rights
The allocation of ITQ gave the government in New Zealand the tools to effectively manage commercial fishers and provide a framework for achieving economic efficiency. However, New Zealand has found, to its cost, that the lack of integration with other rights has caused significant problems. But ITQs do provide a mechanism for settling indigenous claims and involving non-commercial stakeholders in the regime. Ideally, one should consider implementing a rights-based system across all extractive users at the start, at least by specifying or defining the relative extent of access. In theory, there is no need to limit allocation to extractive users. Some biologically sensitive areas could be protected, or set aside for non-extractive use.
In New Zealand, the Treaty of Waitangi, signed in 1840 with the indigenous people, Mâori, guaranteed Mâori ongoing access to their fisheries resources, and included a concept called rangatiratanga - synonymous with management or ownership. However, ITQ was allocated in 1986 for 27 species despite those obligations, and the government found itself injuncted in 1987 and prevented from introducing further species into the scheme. In the legal action Mâori sought to define their claims to commercial fisheries. The court ordered that the process of implementing ITQs to cease until those rights were finally resolved.
This moratorium extended until 1989 when a negotiated settlement and legislation by government led to the purchase for Mâori of 10% of all quota at a cost of $NZ10 million. Having to buy back ITQ which had been allocated free of charge only a few years previously does not appear to have been sound planning. Commercial access issues were not finally resolved until the Treaty of Waitangi Fisheries Claim Settlement Act 1992 in which the government purchased 50% of the Sealords Company for Mâori and agreed that Mâori should be provided 20% of all new species introduced to the quota system. This remains a contentious issue today as fishers with a long standing permits based on access rights argue that compensation should be paid if their potentially (free) ITQ allocation is reduced to provide the allocation for Mâori. The impact of these events is that Mâori directly and through a statutory authority own or control more than 50% of commercial fishing quota. Clearly it would be preferable to deal with these issues when establishing the right - it is expensive and divisive to deal with them later.
The government is making progress in better integrating non-commercial fishing rights with commercial quota. In New Zealand, legislative mechanisms now recognise Mâori Treaty rights and provide for a large measure of autonomy in the management of areas that will be designated as important for customary, non-commercial use. In addition a specific provision is made within the total catch for non-commercial fishers and other fishing mortality prior to setting commercial catch-limits. Similarly, the Alaskan halibut fishery TAC includes allowances for commercial, sport, subsistence, treaty and bycatch mortality.
8.2 Recreational fishers
Recreational fishing is currently controlled by bag limits and gear restrictions in New Zealand. Their interests are also protected by a large number of inshore fishery closures. In some fisheries where recreational catch is significant there exist difficult allocation issues. New Zealand is now examining how to better specify recreational rights, and create mechanisms that will provide recreational fishers with the tools and incentives to better organise and assume more responsibility for managing the spatial and allocative issues that arise with commercial fishers.
However, future attempts to incorporate recreational fishers into the quota system will face difficulties. It is difficult to quantify their harvests accurately, but increasing harvests in some important inshore fisheries are affecting commercial allocated quota and sustainability. Making provision within a total catch-limit is contentious where it affects on existing catch-limits and raises issued in efficiency and equity allocating between interests. It is difficult for a government to determine where the maximum net benefit in a fishery occurs. Studies to quantify non-commercial benefits are expensive.
There is long-term potential to extend the quota system to encompass a quantitative recreational right and allow quota markets to determine maximum net benefit - but initially there is a need to specify the amount of, and to control harvests. Our experience would suggest benefits in establishing rights across all sectors in parallel.
8.3 Sector conflict
New Zealand has recently introduced a dispute-resolution process in legislation to address spatial conflict issues that arise, particularly between commercial and recreational fishers. Its purpose is to reduce unnecessary regulation and lobbying of decision makers over allocative issues by prescribing a process that requires sector groups to attempt to resolve their differences, facilitated by the Ministry. If the parties are unsuccessful and there is a significant issue, the Minister may appoint a Commissioner to decide. The Minister may or may not accept his decision, but may not significantly adversely affect the rights of either party.
8.4 Integrating aquaculture with wild-catch fisheries
Aquaculture has a close relationship to wild fisheries management through market sales and broodstock, and it also needs certainty of tenure of site access. However, the major issues relate to the allocation and use of space in the coastal/inshore environment. There are often issues of imperfect integration with other statutory regimes. There is considerable benefit in attempting to resolve these issues simultaneously with the implementation of ITQs, or risk having to subsequently resolve allocation of space with coastal fisheries, non-commercial and non-extractive users and other community users of coastal space. New Zealand is in the early stages of finding a solution. An optimal solution would be to create a framework that provides for a better integration between the aquaculture and wild-harvest right. This framework should include mechanisms that allow the rights holders, to provide for the optimal use of space. However, this will be difficult because of the intense interest of other users of the coastal space and the overlapping jurisdictions between statutory authorities.
9. RENTS AND COSTS OF MANAGEMENT
9.1 Basis for levies
In no area is the lobbying of the fishing industry more focused and intense than that regarding the question of resource rentals and cost recovery. Is the taxpayer due a return from ongoing use of common property resource? Is the Crown entitled to a return for the cost of implementing a better management scheme? It is accepted in the literature as justifiable to capture reasonable additional rents generated under transferable quota type regimes, above the costs of management. There are precedents for this in the allocation of other resources by governments.
In New Zealand resource rentals, as initially imposed did not separate these rationales. Their intent was to provide for a return to the owner, by extracting surplus value from quota and to cover management costs. They were initially set low with the stated intent of increasing until the annual traded value of quota approached zero. Government had the right to vary price by up to 20% a year. Rentals were charged on quota held to discourage quota purchase for speculation and encourage catching of quota.
The resource rentals failed to reach these objectives because of vigorous and successful industry resistance. Adjustments were also impeded by the lack of information on profitability in the industry and it was difficult to determine an appropriate charge. The industry asserted that their operations were unprofitable over some periods of recession and unfavourable exchange rate movement. However, quota prices have remained high. The rentals recovered, between $NZ17 and $NZ23 million, fell well short of even the costs of management and were never directed to fisheries management as first intended. If rents were returned to fisheries management, they might well provide better incentives for efficient operation than if directed to the Treasury.
In retrospect, the New Zealand industry probably did well out of the initial quota allocations and transfers. Other administrators might consider a more rigorous regime if this is the mechanism used to obtain a return for the allocation and use of common property rights. However, the exercise is likely to incur high transaction costs. It may be satisfactory only to accept the gains from general taxation, or capital gains tax on quota transactions. The collection of excessive rent could destroy incentives to invest and improve the return from harvesting and processing.
However, in New Zealand the argument about the basis for, and extent, of resource rentals was eventually determined by rights of the indigenous people, Mâori - legal rulings cast doubt over the right of government to claim ownership of fisheries resources and therefore the right to extract a resource rent. Resource rentals were abolished, but the Act allowed recovery of the costs of management.
9.2 Cost recovery
Aside from the issue of resource rents, it is accepted as justifiable to charge the fishing industry an appropriate share of the costs for management, including administration, enforcement and research. Despite this, the only existing cost recovery regimes that recover a substantial proportion of costs are in New Zealand and Australia. However, transferable quota programmes in the United States now have mandate to recover up to 3% ex-vessel landing value of IFQ fisheries for administration and enforcement, and 0.5% of the value of quota transfer for registry operations. Iceland has a monitoring fee of 0.4% of value of quota. Australian policy requires 90% recovery of attributable management costs. In New Zealand the total revenue received from cost recovery since 1994 has been about 2.5% of export value of fisheries products.
A number of difficulties have arisen from the New Zealand experience with cost recovery and a book could be written on the related complex, contentious and vexatious issues over the last five years alone! Cost recovery has created problems of economic viability for some marginal fishers as charges affect small players disproportionally. Charges are applied on the basis of transaction costs where possible - so that costs accrue to those responsible for creating them. Other costs are levied on the basis of the amount of quota held, or landed value for species outside the quota system. The cost of annual applications for renewal of fishing permits is negligible to a large company, but along with other charges is significant for a low-volume owner-operator. These cost recovery issues add to the economic advantages that accrue to large vertically integrated operations and provide another force for rationalisation.
Contentious policy debates have occurred over the relative Crown and industry contribution to some costs of fisheries management. The industry strongly objects to the application of the avoidable cost principle3. This was not helped in the situation that the Ministry is a sole provider of services; as it does not face competition over cost of supply of service.
3 Costs which arise because of the existence of a commercial fishery should be recovered from the industrySince implementation of cost recovery, the industry has suggested they should have greater say in how services are provided. This has led to considerable friction as the government has wanted to control the administrative system to ensure management outcomes, but has been hamstrung in being flexible because of unnecessarily prescriptive legislation and an antiquated computer system that is expensive to change. The recent transfer to industry of responsibility for day to day administration of the quota system may resolve these problems.
Industry argue that they already pay general taxation for policing to protect personal and property rights and that cost recovery for some enforcement functions is double taxation. Government has argued that action against poachers and black market operators in commercial fisheries directly enhances the value of the quota holders right. Another difficulty is under-recovery and over-recovery. These problems are exacerbated by that fact that the government financial cycle is 3 months out of phase with start of fishing year and supply of services.
Underlying many of the problems is that industry objects to paying increased charges without a real ability to influence the level or the services provided. Overall, cost recovery has significantly increased the administrative load on Ministry for reporting and accountability systems - now an appreciable component of costs.
A recent review of the basis for charging, along with the potential for contestibility in the provision of services, may lower costs to industry, and ease the contention in this issue. However, there have been benefits, other than fiscal, including:
i. increased transparency and accountability for Ministry operations with pressure for cost effectivenessOverall, we believe robust cost recovery should be established from the start of rights-based systems - it has significantly changed the incentives and consequent behaviour of the commercial fishing industry.
ii. more focussed discussions on Ministry function and
iii. industry interest in taking over responsibilities to control costs.
10. FURTHER DEVELOPMENT OF THE REGIME
10.1 Stimulus for change
Some issues that may arise in the implementation of revised administrative systems managed by transferable quotas may spill over into the ongoing administration of the system. They may need adjustment with experience of their application in the circumstances of particular fisheries. In other areas, progress is only likely following the implementation of a rights-based scheme, which provides the framework and incentives for change. Once a transferable right has been allocated further progress is likely through increased co-operation by the entitlements holders to achieve benefits through collective action.
10.2 Increasing responsibility
Over time, rights based management provides for change in the relative roles of government and industry. Property rights provide incentives for rights-holders to develop collective arrangements. By 1997, 21 industry stakeholder organisations had formed and were looking to assure fisheries management responsibilities to a greater or lesser degree. This has been particularly evident in the development of management plans for species where the Ministry has worked collaboratively with quota holders and other stakeholders. These initiatives will become an increasing focus with recent legislation aimed at supporting their development.
There is typically a high level of government involvement initially in the administrative systems because industry is usually not sufficiently organised, or has not developed responsibility and collective organization. Over time, government can look to relinquish administration of all elements of the quota system and devolve roles that are not part of its core business. Core business includes ensuring sustainability and maintaining the integrity of rights-based system. Industry will increasingly want a greater role in exerting more control over their own destiny and to reduce costs.
The cost-recovery regime in New Zealand has had other important ramifications. It has significantly changed the incentives and consequent behaviour of the commercial fishing industry. Prior to cost recovery, they lobbied for increased research and compliance and had limited incentive to reduce the complexity of QMS administration. They often sought the addition of complex and expensive elements to the administrative system.
Cost-recovery has been an important stimulus for change. After government transferred almost full management costs to industry, industry lobbying changed emphasis from complaining about provision of services, to seeking to provide parts of services directly in an attempt to lower costs. This has led to a careful examination of the functions that is necessary for government to be involved in, and the identification of functions that might be better undertaking outside government.
Because of the public sector reform in New Zealand, and the pressures arising from cost recovery, legislation has recently been amended to allow provision of services by agencies outside the Ministry. Until recently around 80 staff were involved in administration of the QMS in New Zealand. Three months ago that entire function was outsourced by way of management contract to the industry. The government has retained a small core of staff to set standards and specifications and monitor the function. This happened because the government acknowledged its core competency was not managing an administrative system, and the industry wished to have direct control over the function to achieve cost and service efficiencies.
10.4 Research contestability
Industry has paid 75% of costs for research in recent years. Both the government and the industry have sought cost efficiencies and in 1995 research was split from the fisheries management agency which then purchased the research under contract at around $NZ216 million/yr. More recently, contestability has been effected, although constrained by the size of New Zealand to offer sufficient qualified competitors in many areas. The lowering of research costs is also limited by the extra transaction costs of contracting and monitoring contestability. However, quota owning companies are now beginning to contract directly with research providers, with the Ministry responsible for monitoring.
10.5 Relinquishing enforcement
There is potential to relinquish elements of the compliance role, previously considered a core government responsibility. This can be achieved by shifting to an outcome-based system for some controls (excepting roles such as arrest, search, seizure, etc.), with the government monitoring performance of industry systems. If there is failure, those responsible can be fired. The outsourcing of government roles suggests building a system with this above evolution in mind. The objective should be to build a flexible agency so that incentives are created by allocation of rights to start to change the industry. The agency could change administrative procedures and approaches to assure greater degree of self regulation.
The experience of New Zealand and other states with transferable quotas suggests they are not a total, or the only solution, and may not be suitable for some fisheries. But lessons can be learned from where these regimes have been implemented, and problems can be avoided, or at least anticipated. It is important at the outset to spend time working through, and being clear about, the particular biological, economic and social objectives, as there are many trade-offs between achieving often conflicting objectives. Economic objectives may not be met if stocks decline because of imprudent catch-limits or inadequate compliance to deal with illegal activity; husbandry incentives may not develop if the right allocated can be substantially altered; economic objectives may not be met if transferability is excessively impeded.
However, transferable quota regimes, with appropriate modifications, can accommodate a number of social, economic and biological issues that have been mentioned as disadvantages. It is preferable to get the key components of the regime right at the beginning - it is more difficult and potentially destabilising to make changes later. An early common understanding of issues, and commitment to the programme, with fishing industry and other stakeholders is critical.
New Zealand's experience supports the view that secure property rights and cost recovery can change the incentives and consequent behaviour of the fishing industry. Over time, there is a greater degree of convergence between government and industry objectives for fisheries, enabling the government to transfer responsibility to industry and divest functions that are arguably better undertaken outside the bureaucracy. The most recent reforms in New Zealand, not yet implemented, are directed at facilitating this progression. The next steps are aimed at better integration of recreational and aquaculture rights with the quota system and developing the co-management concept. No doubt, progress will be fraught with difficulties as it has been over the last decade.
New Zealand Ministry of Fisheries
PO Box 1020, Wellington, New Zealand
< [email protected]>
This presentation is about the issue of fisheries compliance in the context of fisheries management. It outlines the basic theory of compliance behaviour, spells out the key elements of a compliance strategy and suggests ways to create and implement such a strategy. To illustrate the practice, I draw on some recent experiences in New Zealand in building a compliance strategy to support our pioneering and successful quota management system.
But I want to start with a story dating back to the mid-seventies when I was a young fishery officer carrying out frontline enforcement duties. In those days, I spent a lot of my time leaping on and off boats around the rugged coasts of the Chatham Islands catching bad guys. It came as a rude shock when I was summoned to Wellington, our capital city, to do a stint at head office and help set up our 200-mile Exclusive Economic Zone.
One day my boss called me to his office and during the course of our meeting, he declared in the frankest possible terms Stan, there is one thing I want you to remember and remember well; biologists f*** fisheries. At the time I didnt really understand what he meant, but looking back I can see it was a lament about the general direction of world-wide fisheries management. He was talking about a preoccupation with fish to the exclusion of the fishers.
2. COMPLIANCE AND FISHERIES MANAGEMENT
It has been my experience over 25 years that many of the individuals and agencies involved in fisheries management are narrowly focused on fisheries science, research agendas, and the biological challenges facing fisheries management. Unfortunately, they rarely give serious consideration to the human dimension of managing fisheries.
The first point I want to make is that effective fisheries management is really about managing people. It is about influencing the behaviour of the people who have access to the fishery to help achieve societys sustainability and allocation goals for its fisheries. Put simply, the most brilliantly designed management system will fail on the water unless the fishers working with it endorse the spirit of the system and are prepared to obey the rules that support it.
I am not suggesting that we neglect biological and other problems - or the need to safeguard and enhance the fisheries resource - that is our common raison dêtre. What I am saying is that the success - or otherwise - of a fisheries management regime depends on achieving the highest possible levels of compliance with the rules that underpin it. And I speak here from personal experience.
In New Zealand fisheries management, we have found that more than just enforcement is needed to achieve high levels of compliance. You must have the fisheries stakeholders with you, especially the fishers whose behaviour on the water is critical to achieving compliance and therefore your wider fisheries management goals.
This brings me to my second point - that people are far more likely to accept and participate in a system when they see it as having legitimacy in terms of outcome and process. The way to achieve this buy-in, or legitimacy, is through stakeholder participation in the development and operation of the whole fisheries management system. To work in practice, the rules of the management system and the services that support that system must be developed and operated in collaboration with the regulated community and other stakeholders.
In the New Zealand context, fisheries stakeholders include Mâori, commercial fishers, recreationalists, environmentalists and the general public. Our strategy over the past 15 years has been to forge strong working relationships with all fisheries stakeholders. Emphasis has been given to the relationship with those who have the rights to harvest fish - the rights holders. It is the rights holders who have the incentive to protect the resource - their asset.
We have encouraged rights holders to participate in all fisheries management processes, including fisheries planning, research and compliance strategy development and the delivery of fisheries services such as operating the quota registry. We have found this strategy has achieved high levels of voluntary compliance.
My over-arching message is that achieving optimal levels of compliance is not possible without the legitimacy of the fisheries management system, its associated compliance regime and the services that support it. Legitimacy can only be achieved through meaningful stakeholder participation in the design and implementation of fisheries policies.
3. COMPLIANCE - THE THEORY
In my view, a major challenge for the 21st century will be the ecologically sustainable use of our oceans. To meet this challenge policy-makers will need to seek innovative ways to influence the behaviour of those who have access to fisheries.
The literature outlines two basic analytical frameworks that are available to influence behaviour to achieve high levels of compliance with the rules. These are:
i. instrumental andThe instrumental perspective argues that people are driven by self-interest alone and that compliance is determined by the certainty and severity of punishment in the event of violation of the rules. This is the big stick model, sometimes called the deterrence approach. It is a feature of most centralised government fish management regimes, especially those that are open access systems. Regimes of this kind tend to be ineffective due to the low level of support by the regulated community and the high costs of enforcement in achieving an effective deterrent.
The normative perspective, on the other hand, stresses the morality and internalises social norms of individuals. It also includes a deterrent component. It is founded on a belief that people will comply with rules they believe are fair and reasonable, and that are being administered in a fair and reasonable manner.
The normative model is often called the voluntary compliance approach as is the centrepiece of traditional community-based management systems and, more recently, rights-based co-management systems. Many of these fisheries management systems have endured in so-called developing countries over many centuries. Regrettably, many have collapsed due to such factors as the rise of the nation-state and over-capacity of the worlds fishing fleet. Some might argue that the heat of the commercial blowtorch was just too much for them. But such systems can provide contemporary fisheries policy-makers with a useful template.
4. COMPLIANCE BEHAVIOUR
The aim of a compliance strategy is to have people obey the rules that underpin the management system, which is why we need to think deeply about the human factor. What causes one group of fishers to obey rules and regulations - and another group to break them?
If we look first at the individual fisher, we know that four key motivators operate here. The first, the amount of illegal gain or benefit, is the amount of cold hard cash that can be earned from breaking a rule. It is this lucrative illegal gain that usually tempts fishers to fish illegally, though sometimes it happens inadvertently or because of ignorance.
The second motivator, the expected penalty, seeks to deter individuals from breaking a rule. Policy-makers have long believed a big enough stick will offset the illegal gain and remove the incentive to break the rule. Experience tells us that this is rarely the case. Government cannot afford the costs of an adequate enforcement capacity and most courts are not willing to hand out sanctions seen as overly severe. The net result is that the deterrent model inevitably fails.
Moral obligation, the third motivator, is based on a person believing that complying with the rules is the right thing to do. An individuals moral obligation to comply is the result of interwoven forces. There is the individuals moral development and standards of personal morality, and then their perceptions of how just the rules are and what level of integrity their administration has. In other words - and this is a key point - the moral obligation to comply is based on an individuals perceptions of the fairness and appropriateness of the law and its institutions. This is a key factor to keep in mind when formulating and implementing a compliance regime.
The fourth motivator, social influence, recognises that most peoples behaviour is influenced by their peers and the people who matter to them. Social influence or peer pressure in fisheries is often manifested in forms of verbal and physical abuse, such as fist fights and destruction of gear and vessels. A good example of this is the lobster fishery of Massachusetts (USA), in which strong forms of social influence called self enforcement make up most of the enforcement in the fishery. Clearly, social influence and moral obligation are closely linked.
5. AGGREGATE COMPLIANCE BEHAVIOUR
Fishers are no different to other individuals in society when it comes to complying with rules. There are different behaviours among individuals and individuals' behaviour can differ depending on the circumstances. These different levels of compliance behaviour reflect variations in the size and nature of the four motivators of compliance behaviour. Some will invest in methods to avoid detection; others feel a stronger moral obligation to comply with the rules even when it is costly to do so. But we do know that in any typical population of fishers, a hard core of about 5-10% tends to break the rules chronically and flagrantly, even if the fisheries management system has the highest level of legitimacy.
Motivated by the short-term financial gains from illegal fishing, they are untouched by moral obligations and social influences. Only by changing the economic incentives, reducing the potential illegal gains, increasing detection rates, or by boosting the expected penalty can we hope to control this section of the regulated community. The only control mechanism for this hard core group is hard core enforcement.
For the other 90%, it is possible to put down the big stick and design a system in which people willingly co-operate. That is a strategy of maximising voluntary compliance.
This raises my earlier point - in order to be successful, a fisheries management system must have legitimacy.
Legitimacy operates on three levels:
i. It starts with agreement on what a society wants to achieve from the use of its fisheries - that is, the vision and goals - and on the best management system to support this.If stakeholders do not see that system as giving them a fair go, they will turn their back on it.
ii. It extends to the strategies, rules and services that support the goal.
iii. Last, it extends to the integrity of the agencies that administer the system.
6. COMPLIANCE STRATEGY DEVELOPMENT
Based on what we know about compliance behaviour theory, how should policy-makers set up a framework of rules that fishers in the real world will obey?
Before getting into the detail it will be useful to consider the context.
In respect of New Zealands commercial fisheries, the goal is one of economic efficiency within the constraints of ecological sustainability and our Treaty of Waitangi and international obligations. This goal led to the development of the Quota Management System (QMS), the individual transferable quota based fisheries management system for commercial fisheries introduced in New Zealand in the mid 1980s.
Central to the success of the QMS was stakeholder involvement, especially from the commercial sector, in setting the goals and supporting the compliance regime for the system. When we began thinking about how best to achieve compliance under the QMS it soon became clear that a fresh approach was needed. We found that in a fast-changing operational environment affected by major shifts in technology, demographics, economics and regulatory policy, the old long-range planning approach driven by historical factors was outdated. We spent a lot of time thinking hard about what could be rather than focussing on what is. We came to realise that in a changing world any process for developing and implementing the compliance strategy needed to be tightly integrated in development and implementation of the QMS.
We came to the conclusion that the three building blocks of a compliance strategy to support the QMS should be:
i. a dynamic strategic architecture for planning and implementing the compliance regimeTo help set about imagining and building a future fisheries compliance strategy, we came to use the term strategic architecture. We found it a useful way to envisage things not yet created and to construct a blueprint for turning them into reality. To do this, we used a strategic planning model similar to that developed by Hamel and Prahalad1 based on figuring out where you want to be 10 or 15 years from now, then setting goals and strategies to get there. The cornerstone of this exciting and dynamic planning process is involving people at all levels in envisaging the future and in the early identification of potential problems and proposing creative solutions. It involves fresh and different ways of thinking about, and developing effective, fisheries management and supporting compliance strategies.
ii. long-term compliance goals supported by strategies with measurable milestones and
iii. extensive and meaningful participation by stakeholders in every part of the fisheries management system and supporting compliance strategy development, and where appropriate, its implementation.
1 Hamel, G. and C.K. Prahalad 1994. Competing for the Future. Harvard Business School. Harvard, 327 pp.This approach encourages stakeholders and our organisation to develop a strategic mind-set.
A strategic mind-set is a continuing process involving constantly studying trends and resolving fisheries management and compliance problems in the context of our goals.
This goal setting and systems development process took several years to reach a point of consensus. Added momentum was lent by the serious sustainability and profitability problems in the inshore fisheries and a rapidly developing deepwater fishery. In summary, we spent a lot of time and effort building legitimacy for the new system.
7. NEW ZEALANDS COMPLIANCE STRATEGY - A FRAMEWORK
When designing the compliance strategy for our rights-based approach to fisheries management, we thought hard about practical ways to get fishers to follow the rules voluntarily. In theoretical terms we started the evolution from the traditional instrumental to the normative approach. Our strategic objective was to achieve optimal levels of compliance. This objective is achieved through the two mutually supporting goals of:
i. maximising voluntary compliance andSpecific strategies with associated milestones and work programmes to support these goals include:
ii. creating effective deterrence.
i. maintaining good working relationships with fisheries stakeholders8. THE QMS COMPLIANCE REGIME - A RISK-BASED APPROACH
ii. collaborating with fisheries stakeholders to develop fisheries policies, rules and supporting compliance services
iii. imposing the lowest possible business compliance costs on the regulated community
iv. ensuring that fisheries laws are administered and enforced fairly and cost-effectively
v. working with fisheries stakeholders to identify compliance risks and developing compliance strategies, systems and service specifications to manage those risks
vi. supporting the co-management of fisheries with fisheries rights-owners who can be held accountable for meeting the duties and obligations associated with their rights and
vii. delivering criminal enforcement services that inform fisheries stakeholders of their legal obligations and the consequences of not meeting them, and apprehend and when appropriate prosecute those operating outside the law.
From a compliance perspective, the QMS has not been as big a problem as was originally expected. This is essentially due to the systems legitimacy and our risk-based approach to establishing an effective deterrent to illegal activity.
When developing the QMS, a risk-based approach was taken in establishing the compliance regime (i.e. the rules and services to support those rules). First we analysed the potential risks of foreign vessels illegally fishing inside the New Zealand Exclusive Economic Zone. Here we saw the need for a traditional compliance approach of criminal laws and monitoring and surveillance relating to the specific risks and hard line enforcement. Monitoring, surveillance and enforcement services are delivered by New Zealand Defence Forces and the Ministry of Fisheries.
Second, we thought about the serious problem of local non-rights owners illegally taking (poaching) fish and selling it on the black market. The issue of haves and have-nots remains a serious challenge for any property rights-based regime. We acknowledged the need to develop an enforcement capacity to detect poaching and black market operations that often include other kinds of criminal offenses, such as dealing in drugs and stolen property. As these activities are driven by people operating completely outside the system we had little alternative to traditional hard line enforcement, backed up by a range of strong penalties including high monetary fines, forfeiture of property and imprisonment. The support of the commercial sector and the general public is critical to the success of this strategy.
Third, we looked at the compliance risks relating to our traditional fisheries rules. The QMS is complemented by a range of effort/input controls such as size limits, time and area closures and gear restrictions. Here, we decided on the traditional compliance approach, however, an emphasis is placed on the rules relating to sustainability and not on the rules relating to allocation. It was in the complex areas of mis-reporting driven by quota busting and high grading/dumping that we took a completely new tack.
An important point we kept in mind was that the commercial fisheries sector are part of the countrys business taxation system and are required to keep detailed business records. We designed a fisheries record and return system that was consistent with the business record/tax system. In essence, if you are defrauding the fisheries system, you are defrauding the tax system. And we know the old story that it was the IRS, not the FBI, that finally caught Al Capone.
9. DOCUMENTARY PRODUCT FLOW SYSTEM
The fisheries record and return system is known as the documentary product flow system. It creates a paper trail relating to the movement of fish and fish products through the marketing chain. The aim of the system is to provide valuable fisheries management information and allow for the detection of mis-reporting/quota busting. The system tracks all paperwork associated with the flow of fish and related financial transactions from harvester to first point of sale and to other dealers and retailers.
Quota owners have to authorise harvesters to catch fish against their quota, keep business records, submit monthly catch-against-quota returns and register the purchase and sale of quota. Harvesters must have permits to land their fish at designated New Zealand ports, keep records of catch, fishing effort and landings and submit monthly returns. The main control point in this system is the first point of sale of the fish from the harvester. This first point of sale, or fish receiver, must be licensed, keep business records, submit monthly purchase and sale returns.
Dealers in fish and retailers (second or subsequent points of sale) are required to purchase fish only from licensed fish receivers and keep business records. The compliance monitoring system is based on carefully matching the catch and landing returns supplied by harvesters, the returns of fish purchases and sales by licensed fish receivers, and the catch against quota returns and quota trading documentation supplied by quota owners. The compliance monitoring system also includes a satellite-based vessel monitoring system, an observer programme, a licensed fish receiver system audit programme and a harvester/licensed fish receiver/dealer fish inspection programme.
A multi disciplinary enforcement capacity to detect fraud underpins the QMS documentary product flow system. This includes surveillance, inspection, intelligence/information analysis, forensic accounting, investigation, legal and prosecution competencies.
10. OFFENCES AND PENALTIES
Despite the high level of legitimacy the QMS enjoys with all stakeholders and particularly the commercial sector, we have learned that there will always be a small percentage of people who try to beat the system. The aim of New Zealands deterrence strategy is to make it clear to people that if they cheat:
i. there is a reasonable chance of getting caughtThe maximum penalty open to the New Zealand courts for each breach of a serious fisheries law is a fine of $NZ250 000, the forfeiture of property used in committing the offence (e.g. vessels, gear, cars, etc), and the forfeiture of illegal fish and quota. In practice, most monetary penalties have been relatively low, however, the true penalty has been the forfeiture of the vessel and quota. We have found that the potential loss of vessels and quota has, along with tough enforcement action, been the primary factor in establishing an effective deterrent.
ii. there is a high probability of being successfully prosecuted and
iii. the costs of cheating outweigh the benefits.
11. QMS COMPLIANCE SERVICE DELIVERY
The most important factors that determine how QMS compliance services are delivered are effectiveness, efficiency and the strategy to devolve responsibilities and hold rights-owners accountable for the services that underpin their rights. The three constraints to this approach are (a) the maintenance of service quality standards; (b) limiting the risks to the systems integrity; and (c) constitutional arrangements limiting the contracting out and devolution of the coercive state enforcement powers such as stopping, searching, seizing property, arresting culprits, etc. The Ministry of Fisheries future core compliance role will be based around managing these constraints.
The Ministry provides services relating to developing rules within the QMS framework. This rule development is carried out in consultation with all fisheries stakeholders including the commercial sector. Quota owners are now starting to act collectively by establishing quota owner associations, with the objective of taking a more active role in the rule making process by developing their own fisheries management plans.
Education services designed to promote high levels of understanding and acceptance of fisheries rules is an important part of our compliance strategy. All education services targeted at the commercial sector are now determined by the industry and delivered by the private sector.
The central component of the QMS compliance regime is the suite of compliance monitoring systems. When we set up the QMS in the mid 1980s, the Ministry designed, built and operated all compliance monitoring systems. In 1997 the industry took responsibility for the direct purchase of a licensed fish receiver systems audit programme. In 1999, a company owned by quota holders took over the responsibility for running large parts of the compliance monitoring systems. The industry now operates the quota and vessel registries and the catch balance against quota registry and the catch, effort and landing reporting systems.
Other parts of the compliance monitoring system are still operated by the Ministry. These include a satellite based vessel monitoring system and the observer programme.
The Ministry still has the statutory role of delivering criminal law enforcement services. These services require the use of the coercive enforcement power of the state for their effective and efficient delivery.
The single biggest influence on the way all fisheries services are designed and delivered has been our policy of cost recovery. The commercial sector pays the full cost of all the compliance services from which they benefit.
12. ORGANISATIONAL ISSUES
Since the time of the introduction of the QMS the Ministry has been in a state of constant change. At that time, we predicted there would be three phases to this change process. I still think this will be the case, but it has taken a lot longer than I then thought.
The first phase was to build the infrastructure to support the QMS. The first task was to develop new and productive working relationships with the commercial sector; it has been the most difficult to maintain. We had to focus fisheries research on stock assessments to establish robust total allowable commercial catch limits - the basis for the size of total individual quota.
Building a compliance monitoring capacity from scratch was a huge job. It included the design, build and operation of a complex computer system supported by approximately 80 people. Our enforcement capacity had to be transformed. We built on our existing surveillance and inspection competencies and recruited intelligence and analysts, forensic accounting, fraud investigation and legal prosecution skills. This was done within existing budget levels and as a result more than 50% of enforcement staff were made redundant and replaced by people with other required skills. This infrastructural development phase was a 10 year (1985-95) period of growth for the Ministry.
The second phase started with the introduction of the cost recovery policy in 1994-95. This policy provided for the Government to recover from the commercial sector the full costs of fisheries services such as research, compliance monitoring, and enforcement, that were the result of the commercial sector activities or requirements. The focus of this period has, and will be, the cost-effective delivery of fisheries services.
Other changes have included establishing a stand-alone Ministry of Fisheries (previously the Ministry of Agriculture and Fisheries), contracting out all fisheries research, devolving or contracting out of many non-core government compliance services and quota owners taking collective action in respect of fisheries management rule-making through the development of their own fisheries plans. I predict this second phase still has another five years to run.
The third phase of the predicted change is just starting. It is anticipated that quota-owner organisations will focus on efficient resource use (rather than the present focus of efficient fisheries service delivery) with the aim of maximising profits and quota value. The Ministrys long-term role will centre on ensuring ecological sustainability, satisfying the requirements of the Crowns Treaty of Waitangi and international obligations, ensuring efficient use of fisheries resources and maintaining the integrity of the fisheries management system.
13. CONCLUSION AND FUTURE DEVELOPMENT
The beginning of a new century seems an appropriate moment to look at the way fisheries management agencies worldwide run their businesses. As you can probably tell from what I have said today, I am proud of our achievements in New Zealand. In truth, our successes with the QMS have been due and in part to good luck; in part to good management. And the process is an evolving one.
I am not suggesting that the strategies we have developed to support our rights-based fisheries management system should be picked up and directly applied in other countries. But I would like to think some of the core principles we have successfully used over the past 15 years could be investigated by other fisheries management agencies. Here, I am talking about properly integrating compliance into all fisheries management processes and maximising stakeholder participation in every aspect of fisheries management.
When I look around the world, there are few legal frameworks and institutional arrangements that are likely to result in high levels of compliance. Is this the root cause of the collapse of many of the worlds fisheries? If so, the challenge for the new century is to start looking at ways to turn that around.
New Zealand Seafood Industry Council
Private Bag 24-901, Wellington, New Zealand
The management of the world's fisheries has reached a turning point. Government-centred management of fisheries resources is, by and large, a failure (Jentoft et al. 1998, McGoodwin 1990, Sharp 1997, Townsend 1995). Behind its failure is ignorance or denial by regulatory agencies of the importance of property rights. Compounding the failure is their reluctance to acknowledge the potential of fishers to manage fisheries resources under decentralised or devolved management regimes.
New Zealand's fisheries management system is arguably an exception. In 1986 New Zealand was one of the first countries to adopt a comprehensive property rights-based quota management system (QMS) in which catch limits for each fish stock are set by government and allocated to fishers through individual transferable quotas (ITQs). An ITQ is a perpetual harvest right. It permits the holder to catch a proportion of the total allowable commercial catch for a fish stock. ITQs can be bought, sold or leased in the same way that property is bought, sold or leased.
The government has also implemented far-reaching reforms that provide for:
i. devolution of fisheries management functions to rights-holder associations andThe government, customary Mâori, recreational and commercial fishers and other stakeholders have worked together to meet many challenges in the rights-based management of New Zealand's fisheries. The way in which government, fishers and other interest groups choose to do so in the future will determine whether New Zealand remains at the forefront of international fisheries policy and management.
ii. approval of fisheries management plans developed by representative and accountable rights-holder associations.
This paper argues that successful fisheries management is dependent on stakeholder participation. It explores in the New Zealand context the role and importance of participation by rights-holders in property rights-based fisheries management. First, a case study of New Zealand's southern scallop fishery demonstrates how property rights systems can provide incentives for rights-holders to develop sophisticated governance and management institutions in order to exercise collective responsibility for fisheries management. The subsequent three sections build on the southern scallop fishery case study by:
i. placing the southern scallop fishery within the historical context of New Zealand's fishery management systems2. NEW ZEALAND'S SOUTHERN SCALLOP FISHERY: A MODEL FOR RIGHTS-HOLDER PARTICIPATION IN FISHERIES MANAGEMENT
ii. describing from a social and institutional perspective why fisher-based management is a logical extension of rights-based fisheries management and emphasising the necessity and benefit of involving rights-holders in fisheries management and
iii. exploring the implications of the southern scallop fishery model for the evolution of rights-based management in New Zealand, in particular the changing role of government and fishers in fisheries management.
2.1 Incentive for devolution
The allocation of individual transferable quota in New Zealand's commercial fisheries provides a strong incentive for the devolution of fisheries management to fisheries rights-holders organisations. Scott (1993) argues, in particular, that the allocation of ITQ overcomes many of the obstacles to devolved management approaches:
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. Compared to the old scattered voluntary inshore groups, this new type will have access to information, will indeed produce it itself. It need not be homogenous, for its distributional problems will be largely resolved by the prior distribution of ITQs.These characteristics are well illustrated in the management of New Zealand's southern scallop fishery. The material in the following section is drawn from Harte et al. 1998.
2.2 Background of the southern scallop fishery
The southern scallop fishery is located at the top of New Zealand's South Island. A fleet of up to 70 scallop vessels ranging in length from 12 to 20 m utilises as much as 850 km2 of seabed during annual harvests. Scallop beds are located within two large relatively sheltered bays as well as the area of New Zealand known as the Marlborough Sounds. Fishing is carried out on a seasonal basis between August and December.
Annual yields in scallop fisheries vary considerably between years. The southern scallop fishery is no exception and annual catches have ranged from a high of 1246t (meat-weight) in 1975 to zero six years later in 1981 and 1982. A enhancement programme has supplemented yields of scallops in the southern scallop fishery over recent years. In some years as much as 80% of the stock available is estimated to be of seeded origin.
By world and New Zealand standards this fishery is of minor stature. Nonetheless, industry participation in the management of this fishery is highly developed. Industry investment in the enhancement of the fishery has reached 20% of the total landed value of scallops taken. Just as significantly, it is one of the few fisheries where industry has invested in self-governance, including the employment of officials and inspectors to develop and enforce management rules.
The southern scallop fishery operates under the quota management system which controls the level of commercial catch. Catch limits are set by the government for each fish stock. Fishers acquire individual transferable rights to harvest fish by purchasing or leasing quota from the government. There are approximately 38 quota holders in the scallop fishery and quota trades for around $NZ60 000/t. Annual value of the catch is approximately $NZ20 million.
The main factors behind the establishment of Challenger Scallop Enhancement Company (CSEC) in 1994 were the ability to manage the fishery privately under the QMS in order to capture benefits and minimise free-riding by non-quota fishers, and significantly, to establish an ownership structure for collective capital investments in the management of the fishery. For example, the quota owners wished to collectively purchase (at a cost of about $NZ1 million) a vessel purpose-designed for enhancement activities including spat collection and reseeding of scallop beds.
Nonetheless, the CSEC is not a sole owner of the southern scallop fishery. Fisheries laws in New Zealand prevent the aggregation of quota within any individual fishery into the hands of one individual. The CSEC has, however, instigated civil contracts and regulations for fishers who might otherwise not pay levies.
2.3 Management and decision sharing arrangements in the southern scallop fishery
The Challenger Scallop Enhancement Company records its relationship with government through two agreements:
i. an enhancement plan approved by the government that sets objectives for enhancement specifications for where to seed and maximum seeding densities, and reporting audit requirements andThere is provision in this latter agreement for the Ministry to approve specifications and standards for research and to audit the data collection and analysis process. Further, the CSEC must consult with recreational fishers, customary Mâori fishers and environmental interests before providing to the Minister a set of annual harvest recommendations based on the information collected. These recommendations aim at reducing conflicts with recreational fishers over local depletion and access problems.
ii. an agreement with the New Zealand Ministry of Fisheries (the Ministry) to provide information that the Ministry examines to determine whether the company's activities result in sustainable outcomes for the fishery and conservation of the wider aquatic environment.
The Challenger Scallop Enhancement Company records its relationship with all southern scallop industry participants including the quota owner, lessees, and vessel skippers through a civil contract administered by the CSEC outlining the harvest rules and agreed damages that must be paid in the event of non-compliance. Contract provisions are agreed by consensus at the general meeting of the company.
Although the company's annual harvesting plan relies on some government regulation, the CSEC is steadily reducing the need for direct government involvement. For example, the CSEC sets the total allowable commercial catch for the scallop fishery at an arbitrary level and manages lower actual catches each year by getting quota owners to lease a defined percentage of their quota to the CSEC. The company holds these rights in trust not to be fished unless scallop availability warrants the release of some or all of the quota.
The main research programme carried out by the CSEC (done according to standards approved by the Ministry), and to meet the governments information requirements for the scallop fishery, is an annual abundance survey of stocks. The CSEC has improved the precision of this survey at least three fold since taking over responsibility from government for information delivery, as a result of standards demanded by the shareholders and fishers. The company needs the information for its business plan and to set levies, as well as to provide the scallop fleet with accurate data about the location of scallops. The CSEC runs it own geographic information system for this purpose. In addition, the company commissions independent researchers to provide information on the possible environmental impacts of its scallop harvesting and the company's enhancement activities.
CSEC is still going through a period of development that incurs high transactions costs. Nevertheless the company has found that, despite the reporting obligations and information requirements, devolved management with its targeted management framework is still more cost effective for the company than having centralised government directing the management role.
2.4 Compliance and enforcement in the southern scallop fishery
Within the compliance and enforcement framework, the fishery distinguishes between:
i. sanctions that are applied to individual industry participants (e.g. vessel operators) for non-compliance with rules, whether they be regulations or contract rules andThe former sanction is specified in law or in the CSEC contract with scallop fishery participants. The latter sanctions are more complex. Ultimately, the government has the power to assume management of southern scallop fishery in its entirety or in part. For example, in the event of gross mismanagement by the company, the government can impose a total allowable commercial catch reduction or area closure.
ii. sanctions that apply to the CSEC for failing to provide reports to government to an agreed standard, or for failing to ensure compliance with agreed management rules.
Fisheries management activities are funded according to a business plan that is agreed to at the CSEC's general meeting and is aligned with principles set out in its agreement with government. The matter of performance is therefore an organisational issue that is audited by the shareholders in line with government requirements. The CSEC operates in all respects like a government regulatory agency, the difference being its approach. Rights-holder management in the southern scallop fishery works in principle and practice, the key factor being clear specification of responsibilities that can be independently audited.
2.5 Managing competing fisheries in the southern scallop fishery
A one challenge to co-management in the southern scallop fishery, and inshore fisheries in general, is the competition between users for fisheries resources. At the moment commercial quota rights-holders or permit-holders (permits qualify people for ITQ) have a right to fish almost anywhere in the relevant fisheries management area. Current solutions available under fisheries legislation for dealing with conflict, such as individual area closures, are extremely blunt and almost always result in win-lose or lose-lose outcomes. Moreover, they fail to provide any incentive for co-operation and usually result in an intensification of antagonistic relationships between government and fishers and between stakeholder groups.
The CSEC is turning its attention to resolving conflicts with other fishers (such as dredge oysters and fish trawling) operating in its fisheries management area. It has taken steps to rationalise harvesting between scallop dredging and oyster dredging because oyster dredging kills baby scallops, and has structured its involvement to ensure that it makes appropriate economic trade-offs between these fisheries. The CSEC is seeking to manage its fishery area and its productive capacity by integrating the management of various fisheries.
The success of the management arrangements in New Zealand's southern scallop fishery has been a catalyst for recent ground-breaking fisheries reforms that for the first time enable devolution and decentralisation to be a genuine alternative to centralised control by government. The corporate management regime and the institutional arrangements between fisheries put in place by the CSEC provide a blueprint for the wider devolution of responsibility for fisheries management to fishers in New Zealand and world-wide.
3. THE EVOLUTION OF FISHERIES MANAGEMENT IN NEW ZEALAND
3.1 Different fishers, different management regimes
Although this paper focuses on the property rights framework for commercial fisheries management, it is beneficial to briefly characterise the separate management systems that exist for commercial, customary Mâori and recreational fisheries.
i. Commercial marine fisheries operate for the most part under an individual transferable quota system. The quota management system covers 85% of New Zealand's commercial fish landings and reduces the impacts that commercial fishers may have on one another and limits their stock depletion effects. The remaining 15% of landings are regulated by a restricted entry permit system with a mix of input controls and catch limits.The existence of four different management regimes ranging in character from near open access to near private management creates a far from equitable basis for moving to a devolved fisheries management regime across all fisheries. In particular, recreational fisheries and many iwi and hapu lack the financial, technical and human resources to participate effectively in the decentralised or devolved management of fisheries. Without these resources, recreational fishers and customary stakeholder roles in policy formulation, development of harvesting rules, monitoring and enforcement, will default automatically to the government. Recent initiatives by the government and recreational and customary fishers are starting to address these issues but there is a long way to go before these groups reach an equal footing with commercial fishers.
ii. Marine aquaculture fisheries operate as occupiers of small areas of seabed granted under the Resource Management Act 1991 and associated legislation and are licensed to harvest marine resources under fisheries legislation.
iii. Indigenous customary marine fisheries have a territorial use rights-based fisheries management regime. Territorial rights are held by particular iwi (tribe) or hapu (subtribe) occupying adjoining land, and have rules (rahui, taiapure) developed by the owners and observed by them.
iv. Recreational marine fisheries operate as open access fisheries subject to lightly enforced regulations. Recreational regulations include daily bag limits, minimum fish sizes, method and gear restrictions, closed areas and closed seasons. Rights to the recreational fisheries are held in common.
Near parity in funding, and compatible rights-based management systems, would do much to foster collective rights holder-based management approaches that focus on:
i. the common interest that all fishers have in fishery resources3.2 Commercial fisheries management in New Zealand 1908 - 1999
ii. creating and empowering representative bodies for all fishery stakeholders
iii. negotiation and trade between fishers based on win-win solutions
iv. developing and implementing binding agreements between fishers and
v. the feasibility of binding newcomers to existing fisheries management arrangements.
Although commercial fisheries have 15 years of experience of rights-based management since the introduction of the QMS in 1986, opportunities for devolved and/or decentralised management of commercial fisheries are a recent feature of New Zealand's fisheries policy. The southern scallop fishery represents potentially the start of a new chapter in the history of the country's fisheries. This section describes three previous phases of commercial fisheries management in New Zealand and aims at demonstrating why the concept of decentralisation and devolution has become a practical management option only with the maturing of the rights-based quota management system. A more detailed description of the history of New Zealand's fishery management can be found in Batstone and Sharp (1999), Sharp (1997) and Gaffney (1997).
3.3 Limited entry 1908 - 1963
Fisheries management has its legislative origins in the Oyster Fisheries Act 1866 and the Fisheries Act 1908. The 1908 Act provided statutory authority until 1983 for regulations aimed at the purpose of biological protection of the resources. During this period most fisheries were largely a small inshore domestic industry. Overexploitation of inshore stocks led to the introduction of a limited entry management system in the late 1930s.
A Royal Commission examination of the fisheries in the late 1950s concluded that the regulatory environment was detrimental to the development of the fisheries in that there was little or no technological advancement, no competition among fishers, and that a range of resources were not being exploited.
3.4 Regulated open entry 1963 - 1986
In 1963 the system of limited entry was dropped in favour of open entry development under a permit system. The system provided for a range of regulatory measures restricting gear, the size of harvests and the areas where fishing could occur. Economic ends, rather than conservation, shaped the management of the fisheries. The government sought to encourage investment in the fishing industry through investment incentives, capital grants, allowances and tax breaks.
However, the government's desire to facilitate economic gain was unfocused and its policies encouraged the natural tendency of commercial activity towards overcapitalisation. Citing economic and biological objectives, the government took measures to correct this beginning in the late 1970s when a moratorium was placed on issuing of new fishing permits. The moratoria and regulatory environment compromised economic efficiency. Restricting new entrants dampened competitive pressures. Restrictions on inputs, such as boat size and net size and activity merely increased the cost of fishing.
These measures never got to the heart of the problem. Fishers were left with a common access stock and no constraints on how much fish they could catch. A significant and unintended effect of the regulatory environment was to encourage investment in extracting as much fish as was commercially profitable, when and where fishers could fish, using allowable fishing techniques.
3.5 Evolution of a property rights-based system 1978 - 1999
The government expanded the range of fish and stocks under national control by declaring a 200-mile exclusive economic zone (EEZ) in 1978. Deep-sea fisheries were previously exploited by foreign operators with few controls placed on their harvest. The government had to develop policies to manage the fish resource of a large and unfamiliar area. Initially, the EEZ and inshore fisheries were managed separately. Subsequently, the government applied a policy of limited domestic expansion, joint venture arrangements and licensing access of foreign fleets in the zone beyond the 12 miles limit.
In 1983 the government introduced an economically oriented management system based on individual transferable quota for seven species in the new 200-mile zone. This quota management system served later as a model for inshore stocks, and its existence offshore made it easier to persuade fishers of the effectiveness of such a system.
Also in 1983 the government passed the first new Fisheries Act since 1908. The Act introduced the concept of fisheries management plans. And, significantly, for the first time in New Zealand fishing history, the government gave legislative recognition not only to biological objectives but to the goal of encouraging an optimal return from the fisheries. However, the Act did not address the fundamental question of how these biological and economic goals could be linked.
The potential for the advancement of both goals was provided by a 1986 amendment to the 1983 Act. The amendment recognised economic goals more comprehensively by introducing the quota management system for 21 inshore species and providing for its broader application to the offshore fisheries. The offshore fisheries quota granted in 1983 were transformed, along with the newly introduced individual transferable quota, to tradeable entitlements in perpetuity.
The seven founding aims of the quota management system (Luxton 1997) were to:
i. rebuild inshore fisheries where requiredIn 1990 individual transferable quota were changed from a specified tonnage of a total allowable commercial catch, which could be repurchased by government, to a proportion of the total allowable commercial catch that varies as the total allowable commercial catch varies. The change reflected the reality that the process of government buying and selling quota to change levels of total allowable commercial catch was cumbersome and costly.
ii. ensure that catches were limited to levels that can be sustained over the long term
iii. ensure that catches were harvested efficiently with maximum benefit to the industry and to New Zealand
iv. allocate catch entitlements equitably based on an individual permit-holder's commitment to the fishery
v. integrate management of inshore and offshore fisheries
vi. develop a management system that can be applied both nationally and regionally and
vii. enhance the recreational fishery.
There is recognition that the quota management system has played a significant role in improving the biological status of the fisheries resource and commercial return to fishers (Annala 1996). Further discussion of New Zealand's quota management system can be found in Clark et al. (1988), Dewees (1989), Memon and Cullen (1992), and Sissenwine and Mace (1992).
Today there are over 250 fish stocks present in New Zealand's QMS covering 40 species (out of 100 species caught commercially). This represents over 85% of the total fish catch in the EEZ. Owners of individual transferable quota have a large incentive to invest resources in promoting the sustainability of their fishery because any lowering of catch limits reduces the value of their investment in the fishery. As Jentoft et al. (1998) suggest, the private nature of QMS rights has given a more accurate indication of who the users are than under previous management regimes. Importantly, a clearly defined set of holders of exclusive rights makes it easier to assign responsibility for devolved and, or, decentralised management of a fishery.
New Zealand's quota owners and leasees are responding to the productive incentive structures of the quota management system and increasingly following the example of the southern scallop fishery by organising themselves into management associations based on functional and, or, territorial communities. Depending on the fishery, these associations have a number of purposes but, at this stage, they appear to have several key functions:
i. to facilitate the collection of funds to finance fisheries management activities such as research or stock enhancement and to manage the delivery of such services4. FISHERIES MANAGEMENT AND INSTITUTIONS AS SOCIAL CONSTRUCTIONS
ii. to make fisheries management rules and to impose sanctions on non-compliance by company shareholders
iii. to represent the interests of shareholders in government processes that involve consultation such as determining (government required) fisheries management services and the setting of total allowable commercial catches and
iv. to defend harvesting rights against erosion of the quality of their rights and to promote the expansion and development of management rights.
4.1 Institutional background
Property rights are only one management dimension, albeit an important one, for facilitating sustainable fisheries. Developing appropriate institutions and practices for the management of fisheries requires an understanding of the many dimensions of fishing. These include biological processes, harvesting practices, and the social and institutional factors that help shape environmental and economic outcomes.
4.2 The nature of fisheries management
Fisheries management will always have multiple objectives and require flexibility in the way stakeholders are engaged in day-to-day fisheries administration. Fisheries management must be about people. Little can be done about natural causes of change in reproduction, growth and mortality of fish. It is fishers who are subject to, and must live with the consequences of management measures. This fisher-centred nature of fisheries management has several implications for decision-making and consultation (Jentoft and McCay 1995):
i. There are no simple technical fixes to management problems. What looks good on paper may not work in practice. What is efficient at the macro level may not be useful at the local level. What makes biological sense may be unwise in cultural and economic terms.4.3 Fisheries policy, ambiguity and uncertainty
ii. Fisheries management is a political issue that must respect and provide avenues for expressing and resolving conflicting interests, values and world views. Current fisheries management, where there is a disparity between commercing and customary and recreational fishers interests, tends to divide stakeholder groups, resulting in conflicts with the government. This forces government into the role of referee and arbitror of disputes. Stakeholders almost always agree on the need for sustainable management of fisheries, but will at times disagree on its form and means.
iii. The knowledge required for fisheries management is multi-faceted. Biological knowledge must be matched by socio-economic understanding. Fish harvesting is the focus of management efforts, it is only one of many causes of variation in fish abundance and fishing behaviour. Therefore it is hard to predict the outcomes of management efforts on natural and social environments.
iv. Fisheries management is heavily dependent on the cooperation of commercial fishers. As the stakeholder generally harvesting the greatest share of the fisheries resource, and who are most affected by regulation, industry is traditionally consulted before political decisions are made. The complexity of fisheries management also 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. In other words, the success of fishery management depends on the nature of the response from fishers.
Addressing the different dimensions of fisheries management would be difficult enough even if fisheries managers had a reasonable degree of certainty about the likely biological, social and economic outcomes of management actions. Unfortunately, diverse and complex biological systems complicate fisheries management problems while differing fishing practices and varied social and institutional factors compound the problem. As a consequence, uncertainty rather than certainty is the norm in all but the most trivial of fisheries issues. Making effective policy decisions in the face of uncertainty requires that policy-makers focus not just on the bio-physical environment, but also on the institutions and processes that form the policy environment in which the sustainability issue is debated and initiatives are developed.
The problems created by such ambiguity are heightened by the need for policy-makers to be accountable to the public. Policy is judged by its performance in the 'real world'. Few people are willing to accept uncertainty as an excuse for failed policy. It is expected that analysts and decision-makers will already have factored in relevant considerations. But eventual policy outcomes are influenced by a multitude of factors, many of them uncertain or indeterminate.
Therefore, although policy-makers ought to provide for the utilisation of fisheries resources while ensuring sustainability is the legislated goal for the management of New Zealand's fisheries resources, putting these concepts into practice is difficult and contentious. A recent review of fisheries management in New Zealand commissioned by the government (Hartevelt 1998:31) noted:
Fisheries management remains controversial. Opinions as to the specific aims of management, and how various concerns should be ranked, vary between stakeholders. Consequently, disputes between fisher rights-holders and Government, between rights-holders, and between rights-holders and other stakeholders, characterise fisheries management.Without an understanding of the social dimension of fisheries management, government is unlikely to structure policy to promote fisheries management in a way that is ecologically sound, socially acceptable and politically supported. For example, many individuals and organisations are unconvinced by the economic and environmental arguments and still distrust the government's motives for recent reform of fisheries management that were intended to devolve more responsibility to fisheries rights-holders. As a result these groups are reluctant to be involved in the policy development process. Thus, paradoxically an attempt to remedy one aspect of a fisheries issue may, if it ignores the social context of the issue, reduce the likelihood of achieving its desired outcome.
When dealing with fisheries problems policy-makers often introduce both particular social meanings of sustainability (such as obligations to future generations) and particular policy models with which to analyse sustainable management problems (such as property-rights approaches to fisheries management problems). These policy models often abstract the problem analysis from the social context in which it occurs, yet policy-makers rarely examine the dependency of the analysis on the original social context. This means that policy recommendations are often divorced from the social and institutional dimensions of the original problem.
The imposition of meanings and models on fisheries by experts and related institutions in turn creates a social threat to the fishery stakeholders, and thus may intensify fisheries management problems. This tends to avoid the constructive, self-critical development of processes that foster broad-based discourse about meanings and approaches relevant to sustainable fisheries management. For example, many of the social anxieties and tensions associated with fisheries issues tend to be represented by policy-makers as symptoms of ignorance, irrationality or naïve expectations of sustainable management of fisheries. This approach denigrates and marginalises many individuals and groups with an interest in the sustainable management of fisheries. It may further enhance their feelings of being threatened by institutions that do not respect their identity, rationales and standing with respect to the issue in question. Without the support of rights-holders it is unlikely sustainable fisheries management can be achieved.
4.4 A social and institutional approach to fisheries management
Greater acceptance by policy-makers of a social and institutional approach to fisheries management could break a long tradition of issue polarisation. It encourages a greater awareness of the need to understand the social contexts in which the challenges of utilising fisheries sustainably are debated. In practice this means adopting a more open participatory process for deciding appropriate policy action. The knowledge held by all stakeholders needs to be recognised as an essential element of sustainable management of fisheries. Most pressing fisheries problems cannot be solved by an abstract biological model or in government offices, only through real-world trial and error. The process of fisheries management necessarily involves many diverse participants whose status as stakeholders is derived from having knowledge relevant to the problems being studied, being part of the problem, and, or, being an individual or community affected by the wider implications of fisheries management.
Rights-based fisheries management is more than defining and enforcing rights and responsibilities. It is also about establishing institutions and management approaches that establish communicative and collaborative processes that:
i. contribute to widely supported sustainability measures4.5 Degrees of participation: lessons from New Zealand
ii. identify who participates and in what way
iii. establish how debate is to be structured
iv. consider how conflicts of interest are to be addressed and
v. establish mechanisms for reaching agreement between fisheries management collaborators.
A range of participatory arrangements between government and stakeholders should be available to be adapted to address, explicitly or implicitly, the social and institutional dimensions of fisheries management. The spectrum of arrangements includes (Sen and Neilsen 1996).
i. Instructive: there is only minimal exchange of information between government and stakeholders. Mechanisms exist for dialogue with stakeholders and interest groups, but the reality itself tends to be government informing stakeholders on the decisions it plans to make.In New Zealand, participatory processes range from instructive to collaborative. Underpinning participation is a legal and/or policy requirement for the Minister responsible for fisheries, or for officials from the Ministry of Fisheries, to consult with persons or organisations that are considered to be representative of those interested in the utilisation of fisheries resources while ensuring sustainability. Commercial, customary Mâori and recreational fishers and environmental organisations all qualify as representative. The form of consultation is not specified in the Act and is determined by the Ministry of Fisheries and implemented according to the Ministry's administrative processes.
ii. Co-operative: mechanisms exist for the government to consult with stakeholders regarding management options available, but all decisions are made by government.
iii. Collaborative: government and stakeholders co-operate as partners in decision-making.
iv. Advisory: stakeholders advise government of decisions to be taken and government, as appropriate, endorses such decisions.
v. Informative: government has delegated authority for decision-making to stakeholders who are then responsible for informing government about such decisions.
At the instructive level, there is consultation on the nature and extent of fisheries services to be provided each year by the Ministry of Fisheries. These services include:
i. the management of fisheries resources, fishing and fish farmingConsultations about the nature and extent of fisheries services have become detailed, prolonged and often acrimonious. Consultation has not improved the quality of fisheries service provided nor has it reduced compliance costs for industry. A recent Primary Production Select Committee (1998) report on fisheries cost-recovery stated:
ii. the enforcement of the provisions relating to fisheries resources, fishing and fish farming and
iii. research relating to fisheries resources, fishing and fish farming.
We concur with the view that the consultation process has not achieved its aims, despite the effort the ministry has put into providing information to stakeholders. Consultation requires having an open mind during the consultation process, but, as budgets are linked to the Governments appropriations process, the ability to change initial proposals through consultation is constrained.The Select Committee went on to recommend that the focus of consultation should be in the context of management outcomes: This should lead to an improvement in the understanding of all parties about the strategic direction of fisheries management and how strategic goals are to be attained. Responding to the Select Committee, commercial rights-holders and the government are working together to improve the quality of consultation over the nature and extent of fishery services.
An example of stakeholder participation at the co-operative level is the review of sustainability measures and other management controls for the next fishing year. Sustainability measures include the government's setting of TACs, area closures, and fishing method restrictions. Over a period of six months, starting 1 April, there are meetings, briefings, submissions, discussions, reviews, proposals and counter-proposals before management controls, such as TAC and total allowable commercial catch become effective from October. The final advisory paper for sustainability measures for the 1998-99 fishing year ran to over 800 pages. Several hundred supplementary pages were produced before the Minister made a final decision on the measures to be implemented. The outcome of six months of extensive, detailed and costly consultations are often measures only slightly changed from one year to the next.
The Ministry of Fisheries operates two research-related consultation processes that are good examples of stakeholder participation at the collaborative level. These non-statutory processes are linked to the consultation processes described previously about the nature of fisheries services and sustainability measures. The process is structured around research planning groups. Some of the groups focus on individual species or species groups and others focus on general issues such as recreational fishing, marine environmental research and socio-economic research. Each group discusses, evaluates, and makes recommendations about, research activities. Membership of the groups includes Ministry of Fisheries staff, research providers, environmental organisations, customary Mâori, recreational and commercial fishing interests.
The second research-related consultation process focuses on stock assessment working groups. The main task of these groups is to estimate the level of sustainable harvest for each fish stock and to determine whether or not the current TACs and total allowable commercial catches are sustainable. The groups assemble the information available and prepare a fishery assessment for each stock in the quota management system. If new information indicates a change in the stock status and a need to change harvest levels, this is referred to the fishery assessment plenary for consideration and consultation. If further research is required, this is referred to the research planning groups. The outcome of the fishery assessment plenary is an advice paper to the Minister and Ministry of Fisheries and forms the basis for adjusting harvest levels through the sustainability measures process described previously. The stock assessment recommendations are augmented during consultations on sustainability measures by social, economic, cultural and environmental considerations.
Research planning and stock assessment consultations tend to be less contentious than consultation about sustainability measures and the nature and extent of fisheries services. Moreover, they are characterised by a significant degree of collaboration between Ministry of Fisheries staff, fishing sector representatives and other interests. Although the success of these consultations deserves more detailed analysis, several general observations can be made (Harte 1999):
i. Analyses of research needs and the health of fish stocks have both clear purposes that are not disputed by participants.The southern scallop fishery is an example of stakeholder participation operating at the advisory level. There is little doubt that the success of fisheries management practices measured in terms of stakeholder support, fisher compliance and economic and ecological outcome increases as participation moves from the instructive to the collaborative level. This is not to say that consultation at other levels is not effective or appropriate for particular fishery management purposes. Few stakeholders, for example, believe that they should be consulting on strategic and business plans of the Ministry of Fisheries at the advisory or even collaborative level since many of the Ministry's functions are statutory functions or associated with criminal compliance. In this instance informative consultation is appropriate.
ii. They are based on scientific assessment or the need for scientific assessment and hence tend to be objective, independent and free of stakeholder bias. All stakeholders have a commitment to the scientific basis of fisheries management.
iii. Participants in both processes tend to be experts, or well versed, in the science of fisheries management. They share similar backgrounds and training and hence have a common understanding of issues being debated and the range of solutions available.
iv. The outcomes of both consultation processes are subject to further consultation. Disputes between stakeholders can be put off to a subsequent stage of consultation. For example, issues or positions that do not find general support in the stock assessment working groups or at the stock assessment plenary can be raised again during consultation on sustainability measures. Because the Minister makes the final decisions on sustainability and nature and extent of services both processes tend to be political and subject to lobbying by all stakeholders.
Nevertheless, if the intention is to influence fisher behaviour to secure positive management outcomes, the New Zealand experience demonstrates that stakeholder participation is best at the collaborative level or a higher consultative form. Stakeholders, especially fishers, possess knowledge based on experience that can add to fisheries science and produce more effective solutions to fisheries management challenges. Also, rights-holders' participation enhances the legitimacy of a management regime. Compliance is enhanced because fishers are more knowledgeable about, and more committed to, management measures they have had a say in developing.
5. CO-MANAGING FISHERIES: THE FUTURE FOR NEW ZEALAND
Although New Zealand's fisheries management system has successfully devolved management responsibility to rights-holders in the southern scallop fishery, it has yet to fulfil its potential to provide profitable and sustainable fisheries (Harte and Bess, in review). There needs to be a change in attitude towards fisheries management by many in government, some ITQ owners and other fishery stakeholders if the potential of New Zealand's marine resources is to be realised. Although many ITQ owners are critical of government, not many are prepared, like the CSEC, to take on additional responsibility for the management of fisheries.
Nevertheless, the success of the southern scallop fishery, and other fisheries with more limited assumption of management functions such as the rock lobster fishery, has increased awareness that the management of New Zealand's fishery resources needs to move away from a centralised regime. To facilitate an increasingly positive relationship between property rights-holders and government, that leads to mutually beneficial outcomes, the government must devolve additional rights, responsibility and authority for fisheries management to resource users and local and regional communities.
Advocates of less government control and more resource users' say in management alternatives believe co-management is the model with the greatest likelihood of resolving fisheries problems. Jentoft et al. (1998 p426) wrote:
It [co-management] is a social system that changes the nature of the game, the relationships between players and what each of them strives for. Co-management means an ongoing collaborative and communicative process, where resource users and other actors are in an entrepreneurial and creative role.5.1 Co-management and the reshaping of government's role
The government's role in co-management is to define power-sharing and decision-making arrangements through legislative and policy instruments. Only government can legally establish and defend user-rights and security of tenure (Pomeroy and Berkes 1997). In addition, the government may address issues beyond the scope of stakeholder arrangements to support the sustainability of stakeholder organisations. It may also undertake a co-ordinating role to enable various parties in a co-managed fisheries environment to interact.
The New Zealand Fisheries Act 1996 outlines the role of government in New Zealand as providing for the utilisation of fisheries resources while ensuring sustainability. In practice this means:
i. establishing the rules and regulations that enable successful and sustainable fishing activity5.2 Co-management and devolution of management roles to fisher associations
ii. ensuring that fisheries harvesting rights are clear, appropriate and enforceable
iii. transferring management responsibilities to fisheries rights-holders
iv. co-ordinating the collection and provision of information to fisheries stakeholders
v. ensuring the effectiveness of management frameworks and systems, including: (a) setting standards for fisheries management plans, (b) monitoring and auditing the performance of fisheries management plans, and
vi. prosecuting offenders who break the law.
Pomeroy and Berkes (1997) emphasise that unless government and its officials can be convinced of the desire and ability of fishers to manage themselves, little progress can be made on devolution and co-management. New Zealand's fishers have a responsibility to demonstrate a high level of organisational and management ability. The role of commercial, recreational and customary rights-holder groups in fisheries management is to develop management frameworks that provide for, and deliver, the utilisation of fishery resources while ensuring sustainability.
In the near future, rights-holders and the Ministry of Fisheries see rights-holder associations becoming increasingly responsible for developing fisheries plans that:
i. set management objectives and performance measuresAfter developing a fisheries plan, rights-holders associations must implement them by:
ii. specify rules for management and governance
iii. define necessary services including (a) research (b) administration (c) monitoring and compliance and (d) establishing funding arrangements.
i. managing decision-making processesAll rights-holders, stakeholders, government officials and scientists will need to continue to work together to evaluate fisheries management performance. The government needs assurance that such management systems provide for sustainability, and rights-holders need a clear framework in which to formulate the details of sustainable harvesting and management practices. This approach will increase innovation, reduce conflict between alternative stakeholder groups, reduce transactions costs and provide for the utilisation of fisheries resources while ensuring sustainability.
ii. purchasing research services
iii. administering access
iv. monitoring fishing activity
v. providing information and, or, education services
vi. enforcing non-criminal rules and
vii. collecting levies to fund management activities.
Other stakeholders, such as environmental groups and coastal communities, also have a major role in fisheries co-management decision-making in:
i. determining the government's social, cultural, environmental and economic goals for the fisheriesRights-holder groups and government should jointly decide how to devolute decision-making based on the capabilities of rights-holder associations to handle management functions. Commercial fishers are already a long way to achieving this capacity in New Zealand, closely followed by some iwi and more distantly by recreational fishers.
ii. setting the environmental and other performance standards for managing the fisheries and
iii. evaluating how well fisheries rights-holders meet the goals for sustainability set by the government.
Effective stakeholder participation in the management of New Zealand's fisheries will result from consultation, property rights and, as the success of the southern scallop fishery demonstrates, effective institutions. Fisheries management based on property rights provides the incentives for creating these institutions.
Most fisheries issues will not find resolution in scientists' computers or in policy-makers' offices. They will be solved by the collective actions of fishers who are willing to listen and learn and are ready to change in response to the management needs of fisheries.
Despite the challenges ahead, the New Zealand seafood industry has confidence in the future. At every challenge the property rights-based fisheries management system has emerged stronger and better specified. The door is opening for co-management, devolution and the decentralisation of fisheries management to rights-holder associations. It remains to be seen how far it opens and who is prepared to pass through it. At best many rights-holders will seize the opportunities offered at worse rights-holders must ensure the door is not slammed shut by those who wish to protect their own standing conferred by a centralised management regime.
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