 Given the problems with open access resources and the effectiveness of modern fishing technology, there are few fisheries, if any, which will not be both biologically over-exploited and unprofitable unless they are managed effectively. For a fishery to be economically efficient requires setting correct management targets which are enforced effectively and delivered in a least-cost and incentive-compatible manner. An efficient outcome is important because it protects fish stocks and guarantees sustainability, and because it ensures resources will be correctly allocated to the fishery. That is, the cost of fishing at a given harvest level is minimised. Inefficient fisheries suffer low profits and excessive boat capital or fishing capacity, with the outcome of ‘too many boats chasing too few fish’.
Part of the solution to over-fishing and unprofitable fisheries is to adopt the right target level of effort, or catch, in the fishery. The correct target maximises profits regardless of changes in prices and the costs of fishing.
Another important part of the solution is to use an instrument that gives industry a stake in protecting the future of the fishery to achieve the target. In other words, maximising economic efficiency requires catch and effort levels to be set appropriately and industry to have an effective property right to the harvest which removes the incentive for a wasteful and inefficient ‘race to fish’.
This report is part of a Fisheries Research Development Corporation (FRDC) project on the Development of methods and information to support the assessment of economic performance in Commonwealth fisheries. The project included two workshops and a number of presentations at the Australian Fisheries Management Authority (AFMA), the Australian Bureau of Agricultural and Resource Economics (ABARE), resource assessment groups (RAGs) and fisheries management meetings, along with specific implementation of efficiency measures in the northern prawn fishery, south east trawl fishery and the eastern tuna and billfish fishery. The northern prawn fishery has subsequently adopted maximum economic yield (MEY) as its target, and AFMA has now moved to provide economic efficiency measures, including MEY and other productivity indicators, for all of its fisheries where possible.
The principal underlying the definition of economic efficiency used in this project is maximum economic yield (MEY). MEY is an effort or catch level that maximises the present value of current and future profits in the fishery, consistent with AFMA’s mandate to conduct fishery management in a manner which maximises benefits to the Australian community. This target changes with changes in the price of fish and the cost of fishing but, if appropriately set, will always imply that fishery profits are maximised. When the price of fish decreases or the cost of fishing increases, the target calls for larger fish stocks and less fishing effort. When the price of fish increases or the cost of fishing decreases it is appropriate to fish more intensively, with larger effort or catch levels. MEY generally involves fish stocks which are larger than stocks at maximum sustainable yield (MSY). In this sense, MEY is more ‘conservationist’ than MSY.
For MEY to hold, vessel efficiency must be maximised. In other words, vessels must use the right amount and combination of inputs, including vessel capital, to minimise the cost of harvest at the MEY catch level. This will generally require fishery control instruments to encourage autonomous adjustment and allow fishers to freely combine inputs such as gear, engine size, crew and bait in proportions to minimise costs.
MEY estimates in this project are applied to the Commonwealth managed northern prawn fishery (NPF) and the south east trawl fishery (SETF). In almost all cases, current stock levels are much smaller than stock levels at MEY, implying substantial losses in sustainable profits in the fishery. The NPF has now moved to a MEY target, and the SETF will move to a MEY-based target as part of the Commonwealth Fisheries Harvest Strategy Policy (Commonwealth of Australia 2007). Model results for the SETF also calculate optimal current total allowable catch (TAC) values as a transition to MEY. This generally requires considerable cuts in current harvests of most important species.
Vessel-level efficiency studies have also been undertaken for the NPF and the SETF. The NPF introduced a MEY target but the instrument used in the fishery (input controls) still generates considerable efficiency losses. In the SETF the individual transferable quota (ITQ) instrument is rights-based and easily transferable (requirements to ensure vessel-level efficiency), but the target is not appropriate. Until recently, TAC was generally set far larger than MEY in this fishery, and in many cases TAC is far from binding. The efficiency studies in all cases show these fisheries are over capitalised. The recent structural adjustment package will partly address this concern, but only if the reduction in fishing capacity is accompanied by targets and policies that guarantee economic efficiency.
Finally, the project developed alternative performance indicators, in particular productivity indexes and profit decompositions. Productivity measures are a basic indicator of the ratio of output to inputs. Often this measure is stock adjusted in a fishery to account for changes in abundance. Holding stock and inputs constant, an increase in output indicates an increase in productivity. If output falls under the same conditions, productivity falls. Profit decompositions, on the other hand, decompose profits into various components: for example, output, inputs and productivity. Profit decompositions allow the effects of changes in, for example, fuel prices, on profits to be determined. In this report profit decompositions are applied to both the SETF and the eastern tuna and billfish fishery.
The suite of performance indicators used in this project — MEY, vessel-level efficiency, productivity indexes and profit decompositions — provide AFMA with the required tools to measure and report fishery efficiency and economic performance. The indicators which would be appropriate for each AFMA managed fishery are also determined. Where the data allows indicators are being used to give a complete picture of fishery performance. In almost all cases, profit decompositions and basic index numbers will provide a benchmark of performance. |
