Sector Workshop Blog Archive

New Zealand's Cooperative Harvesting Program

All the way from New Zealand, Mike Arbuckle from the World Bank is here to tell us about the fishing practices there. Before working at the World Bank, Mike managed New Zealand's national fishery, and before that headed up a collaborative fishing group there, the Challenger Scallop Enhancement Company. His powerpoint presentation is here. Download CLIMLI.ppt

He tells us that what he's heard so far today gives him a little bit of cause for concern. He believes you can't focus on the details without first thinking hard about the process of forming and running collaboratives.

He tells about the World Bank's process -- the WB tries to find countries to fund that demonstrate a thorough commitment to sustainable harvesting. The World Bank has started to look at and think about international "best practices" models for fish harvesting. The problem is, the history of fisheries management has been one of failure, not one of success. Iceland, Mauritania, Namibia, Japan, New Zealand pop out as some successes.

The conventional approach to fisheries management has emphasized physical restrictions, and focused on biological targets. Fishermen have poorly defined rights. Success is measured in fish landings.

The conventional approach has ignored "resource rent". We need incentives that don't result in excess capacity and overfishing.

Mike endorses a "wealth based" alternative, measuring not just human income, but also natural assets. You want to unlock the inherent wealth of the asset of a fish stock. Macro-economics become a main focus: developing countries that have re-invested rents domestically have succeeded in growing their economies and alleviating proverty. This permits governments to oversee and inform, but not control, private sector endeavors. (That's a better role for government, Mike thinks.)

There's a difference between a role where government is instructive, but fishermen participate in the methods and means and implementation of standards, and a role where government is expected to set all the rules and enforcement, as well as the limitations and restrictions.

How do you ensure compliance? People make choices about whether or not to follow a rule. They weigh the prospect for economic gain, the personal moral obligation, the risk of economic loss (which is the product of the chance of being caught, and the costs imposed if you get caught) and the social pressure. Old models have tended to make the costs imposed if you get caught really high, while the chances of getting caught were small. A better model is to raise the risk of being caught (by good dockside monitoring), and reduce the costs imposed. An even better model is to increase the social pressures to conform.

He summarizes the history of the exploition of the New Zealand fishery -- I'm missing lots, though.

New Zealand has a big fishery -- very big, per capita. There have traditionally been a discrepancy between the right numbers for government's targets and industry's targets -- this is starting to change, since 1996 when they instituted resource rents. (compared to previous regimes -- no access controls, and science based managment = species restrictions).

The role of government is reflected in the New Zealand fisheries law: the use of the fisheries is intended to empower economic, social, and cultural well-being of the people. Resource rent is at the center of the management, and all the incentives are aligned to the government goal. Any solution has to seem and feel fair, or your population won't buy into it. The right to catch each year is allocated as a proportional interest in the amount of fish that can sustainably be taken each year. They're allocated in perpetuity. There's an incentive to conserve stocks, to ensure there are fish in the future to recover business capital costs. Fishermen pay the full costs of management, and want to get a good service for their money. The right to fish can be invested in, traded, and monetized.

There are 20+ industry run fisheries management companies (FMCs). They're supported by the Seafood Industry Council, which provides services (catch registries, research advice, monitoring) to the management companies.

Case Study: the Challenger Scallop Management Company. It was hard and agonizing to set up. It manages a scallop fishery at the top end of New Zealand, and does the following things: asset management, enhancement, research and monitoring, harvest and quality management (public health), negotiating access, and defense of quota rights. 3000 hectares under management -- all the rest of New Zealand's fishery put together (??).

Under this model, the company provides and contracts for services traditionally provided by the government -- research, accounting and administration, vessel support, monitoring, managing the fishery etc. There's a memorandum of understanding between the company and the government -- after all, government has a responsibility to citizens, and can't abrogate that to a private party. So the memorandum of understanding protects both government and the scallop company.

Details of the Scallop Company: Unlisted limited liability company; (in New Zealand law, CEO has a fiduciary duty, and is personally liable for, the protection of minority shareholders); shares are exclusively available to quota owners. One $1 share per quota owner. Voting is proportional to quota owners' share of the TAC. There's a 10 member board, and 10% shareholding can appoint 1 director. I missed the way shareholders set catch limitations -- please fill me in on this point!

The Company levies a tax on members, and, by member vote, spends the proceeds based on a business plan approved by members. This includes the promulgation of fishing rules, with consultation with government, research and recreational groups. The rules cover harvesting limitations (e.g. a 4 day week, honoring food safety closures, reporting system, season start and end), bond and penalty requirements, penalties for breaches, review procedures, areas, and special powers that can be exercised by the Company (e.g. access to information, powers traditionally held by the state). Areas are closed on a rotating basis; the compliance officer must check to make sure members are actually complying. (The number one mechanism of enforcement -- members rat on one another, because they've come to trust and rely on the Company and its management).

Parties to the contract: quota owners, permit holder, boat captains ("master"), processors (who withhold payment to boat owners, and pass this 'penalty' on to the captain), Company. (Government?) New Zealand court wouldn't enforce a penalty, so instead they are 'agreed damages' for not complying with the contract.

Mike reminds us that these organizations are hard to set up and hard to run, and require a lot of attention to the principles underlying the organization as well as its details. But the Scallop Company is now accepted by the fishing community as part of the fabric of their industry. It's been around for more than 10 years. Mike's been trying to use it as a model to groups around the world since moving to the World Bank.

Q: Are there tax consequences to members of the Scallop Company? A: the company is revenue neutral, so although it's not a nonprofit, there isn't much of a tax implication for members from being part of it. Mike thinks that having a corporate structure is important, because the objective of the members is to maximize the profits from the fishery. The accountability of the Scallop Company to its members is what sets it apart from government -- you can fire us if we don't do a good job helping you maximize your profits.

Q: (Joe Sullivan) this is a question about the wealth-based management approach: does it fairly allocate the rents to those who should get it? In the Pacific, there's a transfer of wealth -- people collecting rents are not necessarily those working the fishery. There's social disruption in the change of regimes.
A: There's no such thing as non-allocation of wealth. The first issue is to do it thoughtfully. Open access fisheries first need to acknowledge and capture the wealth held in the fishery. First, create the wealth. The consequence of good fisheries management means you have to move some people out of the fishery -- which is hard, but important. But if you can create wealth, that wealth can be reinvested: you grow the pie. Once you create the wealth, you want to think about how it's allocated. Principles: it should be in the country, if possible. It should be fair, and perceived as fair, by those with an interest (social, cultural, economic) in the fishery. The biggest challenge in developing countries is the lack of government structures to enforce these regimes, and the corruption in those governments.

Q: Tell us about costs. A: Costs don't mean anything except by comparison. In our case, you need to compare our regime to the government regime -- the previous manager of the fishery. For example, when government ran it, the research component (taxed to vessel owners) cost $200,000 for a sample with 100 data points. When we ran it, that cost dropped to $50,000 for 400 data points -- at least partly because we had access to vessels and more resources.

Q: How do you change the culture, and overcome resistance to an innovative solution like this?
A: you need to educate and communicate with stakeholders like crazy. You don't do it once, you do it every year, because legislators leave office and new people come in. You need to manage the media, and help disseminate your story (if a vessel goes and fishes in a recreational area, the media went wild, and you need to contact representatives to go tell the company's story). New frameworks in a company aren't the only thing you need to create -- you need to also restructure the bureaucratic regime (and the mindset) in the governmental regulatory body, at the same time. Change is hard.

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