Changes in Fleet Capacity and Ownership of Harvesting Rights in Australia’s Northern Prawn Fishery, A.E. Jarrett

Pro-Fish Pty. Ltd.
8 Harwood Close, Cairns QLD 4870, Australia
<[email protected]>

1. INTRODUCTION

Australia’s Northern Prawn Fishery (NPF) covers approximately 800 000km² of ocean with waters extending to the edge of the Australian Fishing Zone (AFZ)[75]. The NPF was established by the late 1960s when the Federal Government called for expressions of interest for fishing companies to establish shore-based processing factories at strategic points between Cape York and Darwin in Northern Territory, and to operate fleets in the fishery as part of its policy to develop Northern Australia.

Four joint Australian/Japanese ventures and three Australian-owned companies were granted permits for the fishery. Joint venture companies were allowed initially to operate foreign trawlers on the condition that they were to be phased out and replaced with Australian-built trawlers. By 1970, 228 Australian-owned and 24 foreign-owned trawlers were operating in the NPF and processing plants had been established at Darwin, Groote Eylandt, Katherine and Karumba. At this time the majority of the catch was made up of banana prawns (Penaeus merguiensis and Penaeus indicus). The annual gross value of production of the NPF ranges between $A100 million and $A150 million.

The Australian trawlers were ‘wet’ boats, which held product on-board on ice or in refrigerated tanks, and returned to port once or twice a week to unload at shore-based processing establishments. Joint venture companies employed foreign refrigerated mother ships to handle catches from trawlers. Some were carrier ships and transported product to shore bases for processing; others processed prawns on board for export.

The fishery expanded beyond the Southern Gulf of Carpentaria during the 1960s with the first banana prawns caught in Joseph Bonaparte Gulf off the western coast of northern Australia in 1967. While there is no formal documentation of the number of boats fishing in the NPF in the mid to late 1960s, records exist which indicate that at least 65 boats landed product in 1968. Between 1968 and 1970 receivals of prawns from the NPF by Australian processing establishments doubled to 3500t.

A typical trawler in the Northern Prawn Fishery

During the 1960s, fishing gear was limited to a single otter-trawl net towed off the stern, but by the early 1970s most vessels were towing double rigs, known as twin gear, with one net towed from a boom on each side of the vessel, which dramatically improved prawn catches.

The remote location of the fishery meant that larger, purpose-built trawlers with considerable freezer capacity were needed to replace the existing wet boats (those that held prawns in ice or chilled brine only) if the fishery were to expand. The first Australian freezer vessels entered the fishery in 1970 and by the end of the 1970s more than 120 new freezer vessels had been built. These vessels, ranged in length from about 20 to 30m and were the most technologically advanced trawlers of the time, having the latest electronic fish-finding equipment, lazy-line winches[76], snap freezers, prawn-sorting conveyors, Kort nozzles and controlled-pitch propellers. By the mid 1980s no wet boats remained in the fishery.

The arrival of the freezer boats caused the fishery to expand and tiger prawns (Penaeus esculentus and Penaeus semisulcatus) became an increasingly important part of the catch. The freezer boats spent most of the year committed to the Northern Prawn Fishery. Prior to the introduction of freezer boats in the fishery, vessels spent only 11% of their available fishing year in the NPF.

Interest in the fishery escalated in 1974 when, as a result of huge monsoonal rains, in excess of 12 500t of banana prawns were caught. The exceptional season, coupled with the ‘open door’ policy (no limit on the number of licences) of the government of the day, plus increasing industry interest, resulted in vessel numbers and fishing effort rising rapidly over the next couple of years. In the 1980s all Australian/Japanese joint ventures ceased operations in the NPF and many Australian-owned companies were operating fleets of up to 14 trawlers. At this time the fishery was an open-access fishery with no input - or output-controls in place and large catches of both banana and tiger prawns were being recorded.

Limited-entry was introduced into the NPF in 1977 through a three-year moratorium on licences and new trawlers entering the fishery. This was part of an interim management plan when the first formal advisory committee NORPAC (Northern Prawn Advisory Council, made up of industry, scientists and managers) was formed in 1977 to provide advice to government on management of the Northern Prawn Fishery. Up until 1988, when jurisdiction for management of the NPF passed to the Federal Government, the fishery was jointly managed by the Federal, Queensland, Western Australian and the Northern Territory governments.

The 1977 moratorium was introduced as a result of the concerns of industry members of NORPAC that the lack of restrictions on trawler numbers and the resultant increasing fishing effort were having a negative impact on prawn stocks. The effect of the limited-entry policy was to provide the participants in the fishery with exclusive commercial access to the NPF. This was the first step in the establishment of property-rights in the NPF. Licences issued under the limited-entry policy remained the only access-rights in the fishery until 1984.

2. THE NATURE OF THE HARVESTING-RIGHT

Despite the agreed moratorium on new vessels accessing the fishery, liberal entry-criteria resulted in a total of 292 licences being issued, compared with the 145 trawlers which had fished the year before. The limited-entry policy also failed to control fishing-effort as licences were transferable and a liberal boat-replacement policy allowed licences attached to small trawlers to be transferred to larger purpose-built trawlers committed to the NPF, thus resulting in considerable expansion of fishing-capacity.

The expanding effort and capacity in the fishery was further exacerbated by a decision taken in 1980 to allow boats below the size that attracted a ship-building subsidy to be replaced with ‘subsidy size’ trawlers[77] with no penalty. Trawlers over the ‘subsidy size’ could be replaced on a one-for-one basis. This decision was taken as a concession to small-boat owners whose trawlers had not qualified for the ship-building subsidy. This proved to be retrograde step as it resulted in wide-scale boat-replacement and substantial increases in vessel size and capacity to the detriment of the biological and economic sustainability of the fishery. Between July 1977 and June 1982, 117 trawlers were built under the ship-building subsidy scheme.

As a result of the failure of the limited-entry policy to control the expansion of fishing capacity and effort, an industry/government working group was established in 1981 to review management arrangements in the NPF. The working group considered a number of options for addressing the over-exploitation of prawn stocks and over-capacity in the fishery. These included, but were not limited to: the proposal to measure and control the fishing-capacity of each trawler by a unitisation scheme based on hull size and main engine horsepower; the possible introduction of a buy-back scheme; a more stringent boat-replacement policy; and area-closures to protect prawn stocks.

Following two years of discussion and negotiation on the proposals, the NPF ‘unitisation’ scheme was introduced in 1984 with each trawler being allocated a B-class unit (the right to fish in the NPF) and a number of A-class units (a rating based on the underdeck tonnage and main engine horsepower of each trawler). It was through this scheme that individual transferable harvesting-rights were allocated in the fishery, however the units were not incorporated into a management plan until the first NPF Management Plan was legislated in 1985. Additional units, known as C-class units were granted in 1986. While these units also represented the right to fish in the NPF, vessels to which C-class units were allocated were restricted to fishing only in the Joseph Bonaparte Gulf (see Figure 1).

Figure 1. Australia’s Northern Prawn Fishery

As a result of agreement by industry at the time that the minimum size of trawler to qualify for the ship-building subsidy was 375 A-class units, all trawlers that measured less than 375 A-class units were allocated a minimum of 375 A-class units. This concession was provided on equity grounds because of the number of operators who had already taken advantage of the ship-building subsidy to significantly upgrade to boats of ‘subsidy size’. The concessional units (the difference between the number of A-class units determined by the hull size and engine horsepower rating of each small trawler, and the minimum allocation of 375 units) were called “suspense” A-class units. The total number of B-class units issued was determined by the number of licences which had been issued as at 1984.

Transferability of A-class units allowed fishers to use any size boat they chose, provided that each boat had a B-class or C-class unit attached to it. The requisite number of A-class units was attached to each boat corresponding to its size and the existing total pool of A-class units did not increase. NPF units quickly achieved a market value and financial institutions began accepting the units as collateral against loans. This resulted in units being accepted as the ‘currency’ and the property-rights in the fishery. While all units could be transferred by sale there was no provision for leasing of units under the Fisheries Act 1952 in place at the time.

The Australian Fisheries Service (AFS), the federal government department charged with managing the NPF, was responsible for issuing licences and maintaining ownership records. This was confined to maintaining records of licence - and vessel-ownership prior to the introduction of the unitisation system. From 1985 to 1994 the provisions of the NPF Management Plans in effect at the time required the AFS to keep a formal register known as the Central Boat Unit Register (CBUR).

The Central Boat Unit Register recorded:

i. the name and address of every unit-holder;

ii. the number and type of A-class units available to be allocated, or that had been allocated, to each unit-holder

iii. the serial number of each B-class or C-class unit allocated to each unit-holder in relation to each boat to which units were assigned:

(a) the name and distinguishing number (registration) of the boat
(b) the dimensions specified for the purpose of measuring the vessel for unitisation
(c) the number of hull units,

iv. the type of engine installed in the boat

v. the number of engine-power units

vi. the applicable number of A-class units

vii. the serial numbers of the B-class and C-class units and

viii. any other fishing entitlements.

The Statutory Fishing Rights established under the Fisheries Management Act 1991 are considered to have more security than the rights which existed under the Fisheries Act 1952. The rights established under the 1991 Act are a form of property-rights established by statute, have a life of at least ten years, are automatically ‘rolled over’ if the NPF management plan is revoked and a new plan is implemented in the fishery, and compensation may be payable by the federal government if the rights are acquired on unjust terms. It is worth noting that the rights issued under the 1952 Act were issued for a period of 12 months, were renewable at the discretion of the government/Minister, had no on-going tenure and there was no provision for compensation.

The grant of Statutory Fishing Rights based on A - and B-class units under the Fisheries Management Act 1991 has firmly entrenched the fishing-rights allocated under the NPF unitisation scheme as the ‘currency’ and property-rights in the NPF. This is accepted and recognised by industry, AFMA, other stakeholders and most importantly, by financial institutions, which accept NPF units as security against collateral for loans.

The Fisheries Management Act 1991 requires the AFMA to maintain a formal register of Statutory Fishing Rights on which is recorded:

i. the name of the person to whom the fishing right is granted
ii. a description of the fishing right
iii. the period (if any) for which the fishing right is granted
iv. the managed fishery in relation to which the fishing right is granted
v. the conditions (if any) of the fishing right and
vi. such other particulars (if any) as are prescribed.

The Fisheries Management Act 1991 also provides for additional interests to be registered. This may be relevant where a financial institution or a loan guarantor requires their interest in the SFRs to be registered. As the 1991 Act also makes provision for the leasing of SFRs, the interests of both lessors and lessees can be included in the register. Where the AFMA has established that an instrument (document) exists verifying the existence of the interest, the AFMA must, on application, register any claim of interest by entering in the register the names of the persons and the particulars of the interest involved.

A - and B-class Statutory Fishing Rights are easily transferable, by either sale or lease upon application to AFMA. Provided there is no impediment the transfers are effected on application and are recorded on the Statutory Fishing Rights Register. Transfers of NPF Statutory Fishing Rights may be subject to other State or Federal government imposts such as capital gains tax or stamp duty, however these imposts are not regulated by the AFMA.

3. MEASUREMENT OF FLEET-CAPACITY

3.1 Characterizing fleet-capacity

The primary purpose of the unitisation system was to measure and control fishing capacity in the fishery. The unitisation system resulted in each trawler licensed for the NPF being allocated a B - or C-class unit representing the trawler’s right to access the fishery, and a quantum of A-class units based on a combination of hull size and engine power determined through an agreed formula which was later incorporated in the NPF Management Plan 1985 and subsequent Plans:

Number of A-class units = Length (m) × Breadth (m) × Depth (m) × 0.2120141 HP

where: the linear dimensions are measured in metres.

In total 133 269 A-class units, 292 B-class units and 10 C-class units were granted under the unitisation scheme. All A-class and B-class units were, and remain the “currency” in the fishery today.

Provided that the total number of A-class units in the fishery was not exceeded, individual trawlers were not restricted in size and vessel replacement was encouraged as a result of the introduction of the Government’s ship-building subsidy which[78] was designed to maintain a viable Australian ship-building industry and to assist Australian ship-builders to compete internationally. The average age of the fishing vessels when unitisation was introduced was approximately seven years.

The majority of operators at the time were towing four otter-trawl nets, commonly referred to as ‘quad gear’, made up of two nets towed on either side of a ‘sled’ or ‘skid’ from a boom on each side of the boat. However some operators were still towing two or three nets. Many operators were also towing a ‘try’ net, which was a small net (having a headline length of about 2-3 fathoms) used as a sampling device to help them find, and then remain on, locations of high prawn-density without losing valuable fishing-time by shooting and hauling-up their main gear.

3.2 Changes in fleet-capacity arising from the introduction of transferable property-rights

The NPF fleet has undergone major decreases in fishing-capacity since unitisation was introduced. This has been reflected through a significant reduction in A-, B - and C-class units. As the total number of units has been restricted through legislation since the first NPF Management Plan was introduced in 1985, no increase has, or could, occur in the total numbers of these rights. This reduction in fleet-capacity can be contributed to a number of factors including:

i. stringent restrictions requiring licence - and unit-forfeiture upon boat-replacement

ii. the existence of the NPF Voluntary Adjustment Scheme (i.e. a buy-back scheme) and

iii. the NPF restructuring scheme in place from 1990 which culminated in the compulsory surrender of 30.76% of all A-class units in April 1993.

A buy-back scheme known as the Voluntary Adjustment Scheme (VAS) was implemented in 1985 to remove the excess capacity/units in response to concerns about the viability of the resource. Under this scheme, units were voluntarily sold to the VAS, and then cancelled (so they could not re-enter the fishery). The operation of the VAS was the responsibility of the Northern Prawn Fishery Adjustment Scheme Committee (VAS Committee).

The scheme was initially funded by a $A3 million Government grant and levies paid by unit-holders in the fishery. At this time, a ‘user pays’ policy was imposed by the Commonwealth government, requiring industry to pay levies for management of the fishery. These NPF levies were calculated based on the number of A-class units held, although initially vessels rated under-375 units paid levy at half the rate of those vessels over-375 units. The implementation of the buy-back scheme required industry levies to be increased substantially to repay the VAS loan.

From the commencement of the VAS scheme in 1985 to September 1986, a total of 12 380 A-class units were purchased by the VAS. A total of 25 B-class units were also surrendered during this time but they had no value and did not attract a premium price under the scheme. The price paid (under VAS) for A-class units was initially $A100 per unit, but by the end of 1986 this had risen to approximately $A400 per unit. The impact of the VAS on unit-prices is further explored in Section 4.3.

By 1986 a serious decline in brown tiger prawn stocks in the western Gulf of Carpentaria was evident, indicating recruitment over-fishing. Scientists from CSIRO recommended a reduction in fishing effort of 25% to overcome this over-fishing. Falling export prices for prawns further exacerbated the economic problems resulting from poor catches. To address these issues it was agreed in 1987 to reduce the number of A-class units in the fishery to 70 000 by 1990 through the buy-back scheme.

Operators were encouraged to remove trawlers from the fishery: a premium was paid by the VAS if B-class or C-class units were forfeited and cancelled as part of the unit package sold to the buy-back scheme. To facilitate the redeployment of trawlers leaving the NPF, an industry-registered company was established (the NPF Trading Corporation) whose role was to assist the VAS Committee in buying units, and assist with the re-sale of trawlers withdrawn from the fishery by identifying potential markets for those trawlers. By the end of 1989, 45 B-class units, 2 C-class units and 20 810 A-class units had been sold to the buy-back scheme.

The reduction-target of 70 000 A-class units set by NORMAC in 1987 was not reached by 1990, and stock-depletion and low vessel-profitability were ongoing problems. In 1990, NORMAC (the management advisory committee which replaced NORPAC) agreed to a further reduction in A-class units with a target of 50 000 A-class units by the beginning of the 1993 prawn season. This was to be achieved by an accelerated buy-back scheme funded through by a $A5.0 million grant and a $A40.0 million government-guaranteed loan to be repaid by industry. In return for providing the loan guarantee the government required a guaranteed outcome that the accelerated restructuring would achieve its target. It was agreed that if the target of 50 000 A-class units was not reached through the buy-back scheme, a compulsory surrender and cancellation of A-class units would take place in April 1993 to reduce the fishery to 50 000 A-class units. The target of 50 000 A-class units was subsequently revised to 53 844 units following agreement by industry that a concession be provided for vessels under-375 A-class units which exempted ‘suspense units’ from compulsory surrender.

In the accelerated restructuring programme, A-class units were purchased by the VAS at $A450 per unit. However, to encourage operators to withdraw trawlers from the fishery, an additional $A500 per A-class unit was paid, provided that the B-class unit to which the A-class units were attached was surrendered to the VAS and subsequently cancelled. A total of 27 863 A-class units and 44 B-class units were purchased through the buy-back scheme between 1990 and 1992.

At the end of 1992, the target for reduction to 53 844 A-class units was not reached, and on 1 April 1993, 30.76 % of the remaining Active A-class units were compulsorily surrendered and cancelled in accordance with the surrender provisions contained in the NPF Management Plan. The compulsory surrender of units resulted in a reduction in the number of active fishing vessels from 171 in 1992, to 124 in 1993, although 137 B-class units remained in the fishery in 1993.

By regulation, a trawler is not able to fish unless the requisite number of A-class units are attached to the vessel at all times, thus concession-holders who did not have enough units to meet their surrender obligations withdrew from the fishery, selling or leasing their residual units to others remaining in the fishery. Most concession-holders who remained in the fishery either bought or leased units to cover their surrender provisions from those who were leaving the fishery. However some concession-holders replaced their engines with lower horsepower-rated ones in order to free up A-class units to cover their surrender requirements and remain in the fishery. Some company operators reduced their fleet size and used the units previously allocated to vessels which were removed from the fishery, to cover their surrender provisions. Table 1 indicates the reductions in the size of the NPF fleet since unitisation was introduced.

Table 1. Changes in the NPF fleet size (numbers of A-, B - and C class units) (1985 – 2000)

Relevant information before 1985 is unavailable. The data presented are only indicative averages.

Year	A-class units	B-class/C-class
1985	128 000	292
1986	120 000	267
1987	117 000	264
1988	110 000	240
1989	104 550	218
1990	96 000	212
1991	77 300	174
1992	68 800	174
1993	53 800	137
1994	53 800	137
1995	53 800	136
1996	53 800	134
1997	53 800	132
1998	53 800	132
1999	53 800	132
2000	53 800	132

Since the conclusion of the NPF restructuring programme in April 1993 there have been minimal changes in the size and overall capacity of the NPF fleet up to 1999. There are currently 53 844 A-class fishing - rights and 132 B-class fishing-rights in the NPF. However, there has been considerable redistribution of fishing-capacity within the fleet. The existence of individual harvesting - rights has allowed operators to buy, sell and lease units from within the existing pool on an ‘as needs’ basis so as to maximise their individual catching-capacity. By transferring the rights between themselves, operators have been able to upgrade their vessels and engines, or vary their fleet structures to optimise their individual fishing operations. The changes within the fleet structure are further explored under Section 4.

The lifting of the boat-replacement policy restrictions (no forfeiture of additional units or licences) at the end of 1992 allowed operators to build new trawlers without penalty, provided that they held the requisite number of A-class fishing rights required by the formula in the NPF Management Plan. This resulted in the replacement of a number of older trawlers with new trawlers. With innovations in vessel - and engine-designs, technological changes and clever manipulation of the unitisation rules, trawlers built in recent years have more fishing power than most of the older designed and constructed trawlers in the NPF, and yet are rated as having considerably less A-class units (fewer hull - and engine-units).

While the overall fishing-capacity of the fleet (numbers of A - and B-class fishing-rights) has not increased, the effective fishing effort (catching capacity) of the fleet has increased substantially. This is a common occurrence in input-controlled fisheries where new technology, more efficient fishing gear and increased knowledge of fishers contributes to the effective fishing-effort actually exerted, a factor known as ‘effort creep’. Increases in effective fishing-effort, and the flaws in the existing unitisation system, have resulted in agreement to move from the existing unitisation system to a gear-based system of management in order to provide a better measure of fishing-effort and a more flexible system when further reductions are required to balance effort and sustainability. The new system was due for implementation in the NPF in July 2000 and is expected to result in further reductions in fleet-capacity as vessels are withdrawn from the fishery to enable operators to transfer gear to the remaining vessels[79].

3.3 Consequences of changes in fleet-capacity

The reduction in the size of the NPF fleet since 1985 has resulted in both social and economic changes. There has been a significant reduction in the numbers of large company operations since unitisation was introduced in the NPF. The low catches and the poor economic climate which prevailed during the 1980s caused many large companies to withdraw from the NPF. Many of them sold their licences to the VAS. The reduction in the numbers of private operators in the NPF is disproportionately fewer than the reduction in company operations (see Section 4).

Many of the large companies operating in the NPF were also responsible for establishing the shore - side support base for the fishery, including unloading facilities and processing plant built in the late 1960s and early 1970s in Darwin, Groote Eyelandt, Karumba, Normanton, Cairns and Townsville (Figure 1). The withdrawal of these company operations, coupled with the overall reduction in trawlers operating in the NPF, and the move to processing - and value-adding activities on-board trawlers (rather than on-shore) has brought about the financial demise and subsequent closure of the majority of the shore-based facilities. This had significant impacts in terms of loss of employment and revenue to the regional economies.

A Northern Prawn trawler goes bananas (Fenneropenaeus spp.)

Over time the reduction in the size of the NPF fleet was accompanied by a significant reduction in the number of crew engaged in the fishery. The majority of trawlers carry between 4 and 7 crew. There has been no economic analysis undertaken of the ‘flow on’ effects of the reduction in fleet size since 1985, however it is estimated that there are approximately 800 - 1000 fewer positions available for crew in the NPF today, compared to 1985.

In contrast to the negative impacts of fleet-reduction, the positive economic benefits to operators remaining in the fishery, and to local economies, which benefit from increased business generated from a profitable fishing industry, have been significant. With fewer operators sharing the total catch as a result of fleet-reduction in the NPF, those remaining in the fishery have become more profitable. This has been particularly evident in relation to the restructuring programme which culminated in the compulsory surrender of units in 1993. The catch per unit effort (CPUE) per trawler, and the profitability of those trawlers remaining in the fishery has increased substantially, although total catches in fishery have not increased.

Since the mid-1990s the profitability of the NPF fleet has also been influenced beneficially by external economic factors such as high prawn-prices, low interest-rates, favourable foreign currency exchange-rates and lower fuel-prices in recent years. However the same levels of individual profits per trawler would not exist with a larger fleet size. Trends in the profitability of the NPF fleet between 1985 and 1998 are indicated in Table 2.

Table 2. Estimated financial performance of the Northern Prawn Fishery between 1985 and 1998 (financial performance per trawler averaged over the total fleet, expressed in $A)

Receipts a	1985-86 b	1986-87 b	1989-90	1991-92	1993-94	1995-96	1997-98
	746400	640600	448050	592940	964350	947890	1120350
Costs a
Administration	na	na	42150	30940	31580	50430	9720
Crew costs	na	na	109000	149870	255970	239040	299250
Freight and marketing	na	na		17220	24030	17130	15980
Food	na	na	1790
Fuel	na	na	94370	113220	140250	122560	134150
Insurance	na	na	20320	21670	30650	31660	37790
Interest paid	26500	25100	41910	28590	11450	17080	27310
Licence fee and levies b	na	na	30950	41500	45320	52270	56830
Packaging	na	na	17690	10400	13900	15780	14370
Repairs and maintenance	na	na	79180	112640	185260	206290	174950
Other costs	na	na	23180	19790	31850	29680	38440
Total cash costs	594900	484300	460540	545830	770260	781920	808790
Boat cash income a	na	na	-12490	47110	194090	165970	311560
Less depreciation c	53300	58600	44920	28400	55320	56470	55250
Total costs	648200	542900	505460	574230	825580	838390	864040
Financial performance a
Boat profit			-57410	18710	138770	109500	256310
Plus interest, leasing, rent	26500	25100		43070	13800	29240	33580
Profit at full equity	71700	72600	-15500	61780	152570	138740	289890
Capital (excluding licences)	589700	671300	755860	574940	898980	985950	1064300
Capital (including licences)	na	na	na	na	2153180	3492320	3729380
Rate of return to boat capital d	15.0 %	12.0 %	-2.1 %	10.7 %	17.0 %	14.1 %	27.0 %
Rate of return to full equity e					7.1 %	4.0 %	8.0 %

^a All figures are adjusted for relative standard errors ^d Excluding value of licence
^b Results are for vessels rated at 375-or-more A-class units ^e Including value of licence
^c Depreciation adjusted for profit and loss on capital item sold na not available

4.1 Status prior to programme

As indicated in Section 2, the only rights which existed in the NPF prior to the introduction of the unitisation scheme were fishing vessel licences issued under the limited-entry scheme. With the introduction of unitisation, each trawler which was licensed to fish in the NPF was allocated a B-class[80] unit and a number of A-class units (as described in Section 3.2). In the cases where there was no particular vessel attached to a licence, the allocation was based on the licence details (boat length and engine horsepower) applicable to be previous boat to which the licence was attached. As a result, it is assumed the ownership structure of the fleet immediately after the allocation of individual transferable rights through the unitisation system was the same as the structure of the fleet prior to the allocation[81].

4.2 Restrictions of transfer of ownership

From the time A-, B - and C-class units were allocated they were, and remain, fully transferable, either between existing operators who wish to upgrade their vessels or engines, or increase their fleet size; or to new entrants in the fishery either as a total package, (with or without a vessel) or in smaller packages of A-class units. The only restriction on transferability was that 100 A-class units had to be maintained on a licence package in order to retain the B-class unit to which the A-class units were allocated. If the A-class units was reduced below 100 A-class units, the B-class unit attached to the package was cancelled. This restriction was introduced so as to deter operators from stripping licence-packages and creating unattached (or ‘limbo’) B-class units. This restriction remains in place today.

When the Fisheries Management Act 1991 was implemented, the leasing of units was approved under provisions of the NPF Management Plan 1995. Leasing can occur between existing operators to upgrade vessels or engines, or to bring vessels into the fishery, provided that the requisite A - and B-class fishing-rights are leased in accordance with the provisions in the Plan.

4.3 Prices received

All A-, B - and C-class units issued under the unitisation scheme were granted free of charge, but as the units were tradable from the date of issue, they quickly developed a market value. There is no formal register of prices paid in the commercial market place due to the confidential nature of this information, however, anecdotal evidence of average prices paid in the commercial market-place has been provided by boat/licence brokers and is shown in Table 3. A price as low as $A50 per A-class unit was paid on the open market in 1985, which included the price of the B-class unit. The highest price paid for B-class units ($A100 000) was reached on the open market during the years (1987-92) that the two-for-one boat-replacement policy was in effect (as described in Section 3.2). This was due to the demand for B-class units to meet the forfeiture provisions of that policy when trawlers were replaced and upgraded.

Price structures are on record for the years that the NPF Voluntary Adjustment Scheme was in place. The VAS set the floor-price for units sold on the open market and in some cases, units which could have been sold to the VAS were sold in the commercial market place for higher than the VAS paid. However the poor catches and low prices which prevailed in the mid to late 1980s meant that commercial markets for units were limited, and the VAS was successful in removing a large number of units.

Table 3. Indicative prices ($A) paid by the VAS and the commercial market-place for A-, B - and C - class units from 1985 to 2000

Year	VAS A-class Units	B-class purchased	VAS B-class Units	Market A-class Units	B-class purchased	Market B-class Units
1985	100-200	yes	0	50-100	yes	not available
1986	250-425	yes	0	250-300	yes	0-50 000
1987	280-450	yes	0-20 000	535-600	yes	0-100 000
1988	450	yes	0-20 000	600	yes	0-100 000
1989	450	yes	0-20 000	600 - 1265	yes	0-100 000
1990	450-950	yes	0	1200-1300	yes	0
1991	450-950	yes	0	1350	yes	0
1992	450-950	yes	0	2000-2300	yes	0
1993	VAS Closed	VAS Closed	VAS Closed	2300-2500	yes	0
1994				3250-3500	yes	0
1995				4000	no/yes	0
1996				4500-5500	yes	0
1997				6000	yes	0
1998				6000	no/yes	0
1999				6250	yes	0
2000				6500	yes	0

While the specific price paid by the VAS Committee for any unit purchased under the VAS was considered confidential, typical prices paid from the beginning of the VAS in 1985 to its conclusion in 1989, ranged from $A100 to $A450 per A-class unit. Prices paid for B-class and C-class units from 1985 to 1989 ranged from nothing upto $A20 000. In the accelerated restructuring programme from 1990 to 1992, an additional $A500 per A-class unit was paid, provided that the B-class unit to which the A-class units were attached was surrendered to the VAS, and thus subsequently cancelled.

The effectiveness of the VAS (as a mechanism for removing units from the fishery) was reduced when it was agreed that if the target of 50 000 A-class units was not achieved by the end of 1992 there would be a compulsory surrender of units to meet any shortfall. The pending compulsory surrender of units in 1993 stimulated the commercial market as operators traded units between each other to accumulate additional A-class units to allow them to meet their compulsory surrender requirements and maintain a certain fleet size. The demand for units drove the commercial market price well above the price paid by the VAS, and few units were sold to the scheme in 1991-92 and so it was stopped in 1992.

The agreement to implement a new system of management in the NPF, based on gear, further stimulated the commercial market for A-class units during the late 1990s. The gear-based system will replace the existing unitisation system, which has become ineffective as advances in technology, including innovations in trawler design and engine configurations, have resulted in the unitisation being manipulated in many instances. The inability of legislators to enforce the rules on boat-size and engine-horsepower, practically and cost-effectively (particularly at sea), has resulted in considerable uncontrolled ‘effort creep’[82], and over-fishing of both species of tiger prawns in the NPF.

B-class fishing-rights will continue to exist under the new system, and the transition to gear-units will be based on the existing A-class fishing-rights. However, in order to reduce the effective effort in the fishery, the total amount of gear which will be allocated is to be reduced by approximately 15% compared to that which was being towed in 1997. This has already caused a renewed demand for A-class units as operators have now purchased units to offset the impact of the new gear-unit and effort-reduction package. This package was due to be implemented in July 2000, and the demand for units has kept A-class unit prices at a premium. B-class units have not generally attracted a specific value (see Table 3) in recent years as the focus of management measures, particularly restructuring programmes, have been targeted at A-class fishing rights. It is anticipated B-class rights will continue to have little value under the gear-units system.

There is a clear trend in that the various management arrangements introduced into the NPF over time have influenced both the demand for, and the price of, fishing-rights units. This has been particularly so during periods of restructuring, when considerable trading occurred as operators responded to such programmes by either buying or selling units. Table 2 indicates how the introduction of various management measures such as the VAS, the compulsory surrender of units in 1993, and the pending gear-unit system have influenced the price of NPF fishing-rights.

4.4 Effectiveness of regulations governing ownership of rights

Because NPF fishing-rights have generally been freely transferable and tradable since their initial allocation there have been no regulatory constraints on ownership of these rights. The rights can be owned or leased by individuals, companies, corporations and trusts. They can be transferred and traded at any time under the provisions of the NPF Management Plan 1999.

A temporary restriction on the formal transfer of NPF fishing-rights occurred from December 1992 to end March 1993 when a period of non-transferability was imposed to allow the AFS to consolidate the unit register as a result of the compulsory reduction. During this period it is understood that certain private contractual agreements were entered into, whereby operators transferred units but with the transfers to take effect only following the implementation of the compulsory reduction on 1 April 1993, at which time the non-transferability period was lifted.

A second temporary restriction on the formal transfer of NPF fishing rights was imposed on 15 December 1999 to allow the Australian Fisheries Management Authority to consolidate the SFR register in preparation for the transition from A-class SFRs to gear SFRs due to occur in July 2000. It is understood that private contracts to transfer the ownership of units have been entered into during this period and that those transactions will be formalised when the formal period of non-transferability is lifted in July 2000.

4.5 Affects of programme

Considerable changes have occurred in ownership of NPF fishing-rights in the 15 years (1984-99) since their initial allocation. There are a number of factors which have contributed to these changes including (See also Sections 3.2 and 4.2):

i. commercial decisions taken by operators to upgrade their vessels in size or engine capacity, increase or reduce the number of vessels owned, leave the fishery and sell their units to existing operators or new entrants

ii. boat-replacement restrictions

iii. the existence of the NPF Voluntary Adjustment Scheme (VAS buy-back scheme)

iv. the NPF restructuring scheme in place from 1990 to 1993, including the compulsory surrender of 30.76% of all A-class units in April 1993 and

v. the pending transition to a new system of management based on gear, including a reduction in the gear allocated compared to that towed in 1997

However there is no evidence that suggests that there has been any long-term transfer of ownership from any one sector of the fleet to another, e.g. from private operators (i.e. owners of one or two vessels in the NPF) to companies[83]. There are no definable ongoing trends to indicate a concentration of ownership of either A-, B - or C-class fishing-rights in any one sector of the fleet, and the distribution of the fishing-rights between the various sectors of the fleet has remained relatively balanced over time. Neither is there any evidence of an ongoing trend of concentration of rights on either a geographical or regional basis, although the fleet is spread over a wide geographical area with vessels based in various parts of Western Australia, Northern Territory and Queensland.

The only definable trend has been a significant reduction in the number and size of large fishing companies over time (see also Section 4.3.). Poor catches and economic down-turns in the 1980s resulted in large companies withdrawing their equity from the fishery. Between 1985 and the end of 1990 a large number of companies withdrew from the fishery, and either sold their licences to private operators or to the buy-back scheme.

Alternatively, companies have reduced the size of their fleets to offset the compulsory-surrender provisions in 1993, by withdrawing vessels from the fishery and using their excess units to meet the forfeiture requirements on the remaining vessels. As a result, many of the fishing-rights held by those companies which have either withdrawn from the fishery or reduced their fleet sizes, have not been transferred to another sector of the industry. Table 4 shows indicative variances in ownership of NPF fishing-rights between private operators and companies since 1985.

Table 4. Numbers of licence-units owned by companies or private operators within the NPF fleet from 1985 to 2000

These data are indicative only. Averaged to account for daily variations in the Central Boat Unit Register.

Year	Company		Private		Total
	B/C-class	A-class	B/C-class	A-class	B/C-class	A-class
1985	154	67 000	138	61 000	292	128 000
1986*	116	53 000	151	66 000	267	120 000
1987	na	na	na	na	264	117 000
1988	106	na	134	na	240	110 000
1989	84	48 000	134	56 500	218	104 550
1990	74	39 000	138	57 000	212	96 000
1991	57	30 500	117	46 800	174	77 300
1992	59	24 800	115	44 000	174	68 800
1993**	57	24 800	80	29 000	137	53 800
1994	57	24 800	80	29 000	137	53 800
1995	59	25 000	77	28 800	136	53 800
1996	53	23 000	81	30 800	134	53 800
1997	57	21 800	75	32 000	132	53 800
1998	58	22 000	74	31 800	132	53 800
1999	48	20 000	83	33 800	132	53 800
2000	58	24 800	74	29 000	132	53 800

* A total of 133 269 A-class units and 302 B - or C-class units were granted by 1986 though this figure was subsequently reduced by sales to the VAS in the same year.

** The compulsory surrender of units in 1993 resulted in a total of 53 844 A-class units and 137 B-class units.

na = not available

5.1 Reduction in fleet capacity

The allocation of individual transferable fishing-rights has been a highly successful management strategy in the NPF. While there is some argument as to the extent that the unitisation scheme itself has been successful in controlling effective fishing-effort (See Jarrett 2001), the scheme has been a useful and successful tool for controlling and reducing fishing-capacity. A number of management measures have been implemented in the NPF which have been based on the unitisation scheme and which have successfully reduced fishing-capacity to various degrees (as described in Section 3.2).

Between 1984 - 2000, almost 80 000 A-class rights and 170 B - or C-class units were taken out of the fishery. This represents a reduction in A-class units of approximately 60%, and a reduction in B - and C-class units (vessel licences) of approximately 56%. This fleet-reduction exercise in the NPF is considered to be one of the largest and most successful examples in the world.

The allocation of fishing-rights through the unitisation system has also been successful in establishing an accepted and legally defensible form of fishing property-rights which previously did not exist in the NPF. The A - and B-class units allocated under the Fisheries Act 1952 were the subject of a legal challenge in 1993. In this case, the Full Bench of the Federal Court of Australia accepted that the NPF fishing-rights (A - and B-class units) were property-rights. These rights were automatically rolled over when the Fisheries Management Act 1991 replaced the 1952 Act, at which time the rights became A - and B-class Statutory Fishing Rights (SFRs) - a form of property-rights established by statute. The NPF Statutory Fishing Rights have a life of at least ten years; are automatically ‘rolled over’ if the NPF management plan is revoked and a new plan is implemented in the fishery, and compensation may be payable by the federal government if the rights are acquired on unjust terms.

The security of the NPF property-rights has allowed managers to implement management measures to reduce fleet-capacity from time to time in a legally defensible manner without bringing about a diminution of the relative value (share of the fishery) of the existing fishing-rights. Without these rights it is doubtful that measures in the NPF to reduce fleet-capacity could be as successful as they have been.

6. ACKNOWLEDGEMENTS

P. Pownall, SPC Consultants, Canberra

F. Meany, Consultant, Canberra

Graeme Stewart & Associates, Boat-brokers, Perth

Efrem Gamba, Director/Shareholder, Austfish Pty. Ltd., Australia

David Carter, CEO, Newfishing Australia, Fremantle, Western Australia

Ian Hopkins, Markwell Marine, Cairns, Australia

Map of the Northern Prawn Fishery by courtesy of the Australian Fisheries Management Authority

7. LITERATURE CITED

ABARE - (Australian Bureau of Agricultural and Resource Economics) Fisheries Surveys Reports “Estimated financial performance of boats in the northern prawn fishery” 1985-86, 1986-87, 1989-1990, 1991-1992, 1993-1994, 1995-1996 and 1997-1998.

Australian Fisheries Magazine, November 1993. ‘NPF Restructuring - lessons for the future’ AFS pp3.

Jarrett, A.E., 2001. Initial Allocation of Unitisation (Boat/Engine Units) as Harvesting Rights in Australia’s Northern Prawn Fishery. In: Shotton, R. (Ed.) Case studies on the allocation of transferable quota rights in fisheries. FAO Fish. Tech. Pap. No. 411. FAO, Rome.

Northern Prawn Fishery Central Boat Unit Registers 1985, 1986, 1988, 1990, 1992, 1993, 1994, 1996, 1997, 1998, 1999 and 2000

Pownall, P.C., (Ed.) 1994. Australia’s Northern Prawn Fishery: the first 25 years. NPF 25, 179pp.

Taylor, B., 1992. “Northern Prawn Fishery Information Notes” Special collated issue No.16 (February 192) pp3-12.

Appendix I. Current Management Arrangements in Australia’s Northern Prawn Fishery (1 January 2000)

Australia’s Northern Prawn Fishery (NPF) covers approximately 800 000km² of ocean with waters extending to the edge of the Australian Fishing Zone (AFZ). The Northern Prawn Fishery is Australia’s most valuable Commonwealth fishery managed by the Australian Fisheries Management Authority (AFMA), a statutory authority appointed by the Federal Government to manage Federal fisheries on its behalf.

The target commercial prawns catch includes: white banana (Penaeus merguiensis), Indian banana (Penaeus indicus), brown tiger (Penaeus esculentus), grooved tiger (Penaeus semisulcatus), giant tiger (Penaeus monodon), blue endeavour (Metapenaeus endeavour), red endeavour (Metapenaeus ensis), western king (Penaeus latisulcatus) and red spot king (Penaeus longistylus).

The NPF is managed under the Northern Prawn Fishery Management Plan (1995, with subsequenty up-dates). The fishery is a limited-entry, input-controlled fishery. The current inputs regulated under the Plan are: the number of boats that may fish in the fishery, the size of each boat used for fishing and its main engine horsepower.

Entry to the fishery is through the holding of Statutory Fishing Rights (SFRs) which under the Fisheries Management Act 1991 are recognised as being a form of property-right created by statute. The Northern Prawn Fishery Management Plan 1999 provides for the granting of two Classes of SFRs being: A-class and B-class SFRs. The former are based on the vessel size and engine power of the participating boat, and may be further divided into the categories of “active”, “surplus” and “suspense” on the basis of their historical and current status. B-class SFRs limit the number of boats in the NPF.

Under the Plan, a boat used by a concession-holder to operate in the fishery must be nominated against one B-class SFR, and against a threshold number of A-class SFRs (which is known as the “applicable number of Class A SFRs”) which is calculated from the sum of the underdeck hull volume and the maximum continuous rated main engine power expressed in kilowatts. The Plan limits the total number of B-class SFRs to 133, and the total number of A-class SFRs to 53 844. All SFRs in the fishery are fully transferable and may be bought, sold or leased.

The Plan provides the objectives to be pursued in managing the fishery, the measures by which the objectives will be pursued, and the performance criteria by which management of the fishery can be assessed. The objectives in the Plan parallel the AFMA’s legislative objectives as set out in Section 3 of the Fisheries Management Act 1991 and include (but are not limited to) objectives relating to ecologically sustainable development of fish resources, the precautionary principle, and the economic efficiency of the fishery.

The Plan also provides for the making of fishery ‘Directions’ that prohibit holders or operators from specified activities. Directions are a flexible management tool currently used in the NPF to establish:

i. permanent closures of trawling around nursery areas and sensitive habitats

ii. seasonal-closures that are used to prevent over-fishing of small-sized prawns, protect spawning prawns, and more recently to reduce fishing-effort,

iii. bans on daylight trawling, to protect tiger prawns in the tiger prawn season

iv. bans on vessel movements in sensitive areas and times, to prevent disturbance to banana prawn aggregations

v. requirements to have fishing-gear sealed for compliance purposes

vi. specific areas and times that are exempt to closures, for the purpose of permitting gear-trials

vii. limits on bycatch, determined under Memorandums of Understanding between the Commonwealth and States and

viii. gear-restrictions limiting operators to single or dual net-rigs and specifying the dimensions for try-nets (small sampling nets).