fiji’s fisheries: their contribution to development and their future

Marine Policy, Vol. 23, No. 6, pp. 571}585, 1999( 1999 Elsevier Science Ltd. All rights reserved

Printed in Great Britain0308-597X/99 $*see front matter

PII: S0308-597X(98)00044-X

Fiji’s fisheries: theircontribution todevelopment andtheir future

Colin Hunt

The marine resources and 5shing sectors of Fiji

The Republic of Fiji is a member of the South Paci"c Forum, the ForumFisheries Agency (FFA), the South Paci"c Commission, the South Paci"cRegional Environment Programme and the South Paci"c Applied Geo-science Commission. Fiji's canned "sh exports qualify for preferentialaccess to European Community markets.

The country comprises 844 islands scattered in the western Paci"cbetween 177 and 1873 west and 15 to 203 south. The total land area isapproximately 18,333 km2; the two main islands are Viti Levu and VanuaLevu, the former being the location of the capital, Suva, at the south-eastern end of the island and of the Nadi international airport, and Fiji'sExclusive Economic Zone (EEZ) has an area of some 1.26 million km2.

Like most other coastal states, Fiji exercises its sovereignty over theo!shore resources in its EEZ by granting access only to licensed "shingvessels or vessels covered by speci"c treaties or agreements. Fiji's neigh-bours to the north are in the path of abundant skipjack resources and theybene"t from these through access fees paid by distant water tuna #eets thatsupply the tuna markets of Asia. In contrast, Fiji exploits its less abundantbut nevertheless very valuable tuna resources mainly through vessels thatare licensed in Fiji and supply Fiji processors.1

The customary tenure over inshore waters of Paci"c islands is inmarked contrast to the control the state exercises in most Western coun-tries. In Fiji, the inshore marine resources are particularly stronglyheld under such arrangements. Moreover, the laws of Fiji recognise thecustomary rights to "sh in traditional "shing grounds (qoliqoli) andallow the owners of customary rights to dictate the issue of "shing licences,within delineated customary areas, by the Fisheries Division of theGovernment.

The industrial fisheries of Fiji have hadmixed fortunes. The fresh fish exportindustry has grown rapidly in import-ance so that fisheries is now the thirdmost valuable export industry; its posit-ive effect on the economy is mainly inthe increase in the purchase of goodsand services, such as air freight. Thepresent ‘hands off ’ policy by govern-ment in the fresh fish export industryshould continue until the industry ma-tures. In the longer run, ad valorem roy-alties should be considered as a meanof capturing resource rents. The gov-ernment-owned export cannery hasbeen in financial decline, and the main-tenance of the social benefits of re-gional employment generated by thecannery has come at a high cost to gov-ernment coffers. The future of the can-nery, now leased to a private operator,is clouded by the uncertainty of the con-tinuity of concessional access to Euro-pean markets beyond the year 2000.The main task faced by government isthe management of fisheries and fishstocks. The management of the inshorefisheriesd vital to the needs of a largeproportion of the population d needsadditional resources. The capabilityfor management of the industrial fishe-ries, necessary to maximise long termpublic benefits, would be enhanced byfull cost recovery through a user pays

continued on page 572

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The recognition of customary tenure means that there are restraints oncommercial "shing in inshore waters and royalty payments must be paidby the pole-and-line "shery for the bait used to catch the skipjack tunathat supply the PAFCO cannery on the island of Levuka. The royalty ofF$10 per night's bait "shing earned F$26000 for the customary owners in1995 [1]. However, concerns have been mounting among coastal popula-tions and in the important tourist industry over the e!ects of bait "shingon the abundance of reef "sh. The di$culties of access to bait is just one ofmany problems faced by the cannery, dealt with in later sections.

The economic and social importance of 5shing in Fiji

At 760 000 Fiji has the largest population of the South Paci"c Islandcountries (apart from Papua New Guinea) of which 40% is urbanised. Itsgross domestic product per capita is the highest of Paci"c island countries;and, internationally, Fiji ranks 46th out of 175 in the human developmentindex [2].

While there is still a heavy reliance on sugar for foreign exchange, theeconomy is diversi"ed, with signi"cant contributions from the manufac-turing sector. Fishery products which include fresh as well as processed"sh (at F$136 million), is the most important export sector after sugar(F$270 million) and garments (F$203 million) [3; 1, p. 4]. The contributionof "shing to GDP has increased steadily and it is now some 2.5% of thetotal [4].

The export value of "sh, as a component of "shery products, increasedsharply from F$48 million in 1993 to F$70 million in 1995 [5]. However,the recent contribution of "sh to exports has tended to plateau as a resultof the El Nin8 o that shifted tuna stocks eastward. But the value of "shing ismuch more than its "nancial value. Fish catches that do not enter marketsbut are consumed directly or that do enter local markets but may notbe recorded are major contributors to the economy. Yet another part ofthe Fiji "shing industry, aside from the industrial, the subsistence and theartisanal* and one that is potentially very important* is the aquacul-ture sector. We now deal with the contributions of the subsistence andindustrial "sheries in some depth.

Subsistence and household income

Half the households in the coastal villages of the main island, Viti Levu,have at least one member who goes "shing. Of these "shing households,two-thirds are subsistence and a third artisanal; the numbers engaged inlarger commercial-scale "shing from villages is very small [6]. As well assupplying villages, artisanal "shers also supply the "sh markets of Suvaand other urban centres.

The estimated weekly income to artisanal "shing households is F$34[6, p. 3]. However, to obtain a more comprehensive picture of the eco-nomic importance of coastal "shing, a value can be attributed to subsis-tence and artisanal "shing on Viti Levu is estimated. The application ofa value of F$3.75 per kg to the total annual catch of "sh for subsistence(3500 t) and sale by village households (6200 t) in Viti Levu [6, p. 3]suggests a total value of subsistence and artisanal catch of someF$37.5 million.

To obtain a countrywide valuation of household "shing, estimates needto be made of total national catch. The Fisheries Division estimates

continued from page 571policy. This article is based on a paperpresented to the Fiji Update seminar,held at the National Centre for Develop-ment Studies, the Australian NationalUniversity, Canberra, on 19 June 1998.The author wishes to thank Mr KrishnaSwamy, Senior Fisheries Officer in theFiji Fisheries Division, and Mr GrahameSouthwick, Managing Director of the FijiFish Company Ltd, for their generousprovision of information for the prep-aration of this paper; and Mr JoeliVeitayaki, Coordinator of the Ocean Re-sources Management Programme, Uni-versity of the South Pacific, for helpfulcomments. Any errors or omissions arethe author’s responsibility, however.(( 1999 Elsevier Science Ltd. All rightsreserved

KeywordsNFisheries and nationaldevelopment; Economic and financialimportance; Employment; Subsistence;Management

Colin Hunt is at The National ResearchInstitute, P.O. Box 5854, Boroko, NCD,Papua, New Guinea. Tel.: 675 3260300;fax: 675 3260213; e-mail: [email protected]

1Fiji also receives limited benefits distrib-uted under the one multilateral fishing ar-rangement in place in the western Pacific:the Treaty on Fisheries between the Gov-ernments of Certain Island States and theUnited States Government.

Fiji+s xsheries: development, economics and sustainability: C Hunt

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domestic supply for the whole country at some 23 000 t. At an averageprice of F$3.75 a total value of domestic "shing of some F$86 million isderived [4, p. 6]. This valuation shows that "shing has a much greaterimportance than the narrow o$cial statistics and o$cial analyses of theFiji economy suggest; see for example, Economic Insights [7] wheresubsistence from "shing for 1994 is valued at only F$30 million.

We now turn to the consideration of the importance of industrial"shing. The two major and disparate sectors are canning and fresh "shexport.

Employment

In the region as a whole, 10,300 Paci"c Islanders are employed directly ontuna vessels or in tuna processing plants [8]. Four percent of all employ-ment for women in the region is found in canneries. An estimate of totalemployment (direct plus indirect) in the industry in the region is between21 000 and 31 000, representing 6}8% of all employment [8, p. 17].

Fiji has a relatively abundant supply of skilled labour. Education levelsremain relatively high and Indian migrants, who earlier supplied labour,now form an entrepreneurial class. The presence of skilled managers andoperators reduces the costs of setting up enterprises compared with otherPaci"c Island countries where expensive expatriates would need to behired. However, outmigration of Indo Fijians has been high since thecoups of 1987. This has led to skill shortages in many areas includingbusiness services. The labour force is quite heavily unionised and thisextends to the canning industry, but striking was criminalised in 1987.

The PAFCO cannery at Levuka, on the island of Ovalau, is 98%-owned by the Fiji government, and employs between 700 and 1000workers* a large proportion being women on the processing lines. Thecannery is the major source of employment for Ovalau and the adjacentislands in the Lomaiviti group. Workers on Ovalau have been able to tapcredit facilities for home building and small business establishments andthe company may make deductions from wages for loan repayments,communal obligations or school fees. The level of employment under thenew management by the private "sh processor Bumble Bee is unknownbut is expected to be similar.

Under previous arrangements, when the government managed the can-nery it also owned and controlled the Ika #eet of pole and line vessels,employing a total of about 145 crew at the peak of the season and 50 in theo! season. But the productivity of this #eet was low and it has beendisbanded under Bumble Bee management. A side e!ect of this is the endto the con#ict between customary marine tenure holders and the pole-and-line vessels over bait "shing in inshore waters. Tuna for the cannerywill now be sourced from local longlining and imports from Pago Pago.

The sashimi export industry is also an important employer of bothskilled and unskilled labour. Fiji Fish Company Ltd, the largest operator,takes supply from 33 longline vessels based in Suva. Twelve of these areowned by Fiji Fish (the balance being joint ventures or on contract),crewed by 400 Fijians, and six of the vessels are captained by Fijians. Theshore establishment of Fiji Fish employs another 100 in processing andadministration [9]. In 1997 there were another six vessels under Fijiownership, supplying other exporters, that would have similar crew re-quirements. Another 35 longliners under foreign #ags in 1997 but operat-ing out of Suva carried crews of mixed nationality.


573

The FFA2 [9, p. 13] takes account of an estimated 340 Fijians employedon foreign vessels based in Fiji in estimating the direct employment inindustrial "shing and canning in Fiji to be 1550. While wages in the"sheries-related sectors have tended to be relatively low in comparison toother sectors, incentive payments raise the real level of wages available tocrew and skippers of longline vessels. In addition to this direct employ-ment there are jobs generated in other industries and the public service.While the backward economic linkages of the "shing industry are notori-ously weak there are nevertheless substantial requirements for servicesgenerated by the sashimi export industry. Fiji Fish Company Ltd, thelargest integrated3 exporter, spends some F$16 million a year on airfreight, fuel, cartons, repairs and maintenance and wages. Estimates of thejob multiplier in this industry vary from one to four.

The availability of trained technicians in "shing and associated indus-tries a!ects the e$ciency of an industry. The Fiji Institute of Technologymaintains a marine training program at its School of Marine Studies.Legislation is said to be a model for other nations and it has beenproposed that Fiji becomes a regional training centre for the "shingindustry [10]. However, the School was mainly involved in teachingmarine skills in general, rather than those that relate particularly to"sheries, and it has had di$culties with sta! turnover and in attractingsuitable sta!. The Fiji Institute of Technology (FIT) also trains techni-cians, welders and other skilled mechanics often employed in the "sheriessector or in engineering "rms that service the sector.

Industrial "sheries require a high level of management. It has beensuggested that the poor "nancial performance of the PAFCO cannery andits associated "shing arm suggest that management has been wanting [11].In contrast, the sashimi export "rm Fiji Fish Company Ltd has demon-strated a high level of e$ciency in catching and processing. The resultingpool of skilled labour generated by Fiji Fish is an important ingredient inthe expansion of the industry.

It is Fiji government policy to remove any discrimination againstwomen in employment and to enhance training opportunities for women[12]. Paid maternity leave is available and education levels for females arecatching up to those for males.

The 5nancial implications of the 5sh canning industry

The, PAFCO cannery whose product is mainly exported, was established byC. Itoh in 1974 but after making heavy losses it was taken over bythe Fiji government in 1987. It is 98% owned by government, and 2%by villages on the island of Ovalau and private investors. While the canneryis a major employer and generates valuable foreign exchange, keeping it inoperation has proved to be a severe drain on scarce government funds.

PAFCO receives preferential access to European markets under theLomeH agreement, and has managed to meet the most stringent qualitystandards required by UK importers and indeed has received a &dolphinfree' premium in the market. The access beyond year 2000 to this market,where the preference against other imported canned "sh is some 24%, isuncertain. Other assistance to PAFCO has been in the form of substantialdevelopment investment from the Australian and Fiji governments. More-over, the company enjoyed a completely tax free and import duty statusand on the Fiji market its product is protected against competition by animport duty of 35% [13]. However, several adverse factors have combined

2FFA [9, Table 2, p. 13] estimates thatthere is a total of 1053 Pacific Island crewon foreign fishing vessels in the Pacific.Japan, Korea and Taiwan have legal limitsto the number of foreign crew that can becarried. The United States has no suchlimits out of its own EEZ, but it (like Asiancountries) prohibits foreigners from becom-ing officers. Because of a lower level ofattrition between contracts and ‘less diffi-culties in port’ agents prefer Chinese,Filipino and Indonesian crew, to PacificIslanders [9, p. 7].3Fiji Fish Company Ltd integrates catching,processing and marketing.


574

Figure 1. The financial performanceof PAFCO, F$ millions.

Source: Ministry of Finance and Economic Development.

to deny "nancial success to PAFCO. These included labour strikes andcyclone damage. The Forum Fisheries Agency [20] concluded, however,that a decrease in pro"tability of PAFCO was due to a combination ofweak management, deteriorating prices, low labour productivity andshortages of "sh.

In 1994, PAFCO had the misfortune of being merged with Ika, a gov-ernment-owned "shing company that had supplied the cannery since 1975.The productivity and the level of landings of Ika had been in steady declinefor some years4* the cannery has been forced to import much of its tunasupplies * and it had required major "nancial injections by the Fijigovernment to remain solvent. Moreover, sea transport costs to Europefaced by PAFCO are very much higher than those faced by the cannery'smain Thai and Filipino competitors and additional handling and freightcosts are incurred by the need to tranship at Suva.

The "nancial records of PAFCO have not been available for publicscrutiny for some time because the government has been seeking a privateoperator to buy or manage the cannery [12]. However, the scale of directgovernment "nancial transfers to the PAFCO can be gleaned from o$cialdocuments.

While operating pro"ts were negative in the early 1990s, net worthseems to have recovered in 1994. This improvement in net worth, despitethe losses, was not explained in the 1995 budget papers that indicated thatonly $F1.5 million was appropriated for support to PAFCO in 1994 [14].Neither is the di!erence explained by the injection of Australian develop-ment aid that would have added to the value of assets. There must havebeen a capital injection or a debt remission of approximately $F14 millionto achieve a reduction in liabilities of $F10.3 in a year when losses were$F3.7 [14, Table 9.1, p. 83; Table 9.2, p. 85]. Figure 1 summarises thetrends in PAFCO's "nancial performance in the early 1990s.

Since 1994, large cash infusions by government have continued.Documented transfers amounted to F$10 million in 1996, and F$10million in 1997 [3, p. 45].

The 5nancial implications of fresh 5sh exports

The growth in the number of active short-trip5 longline vessels that "sh forthe fresh "sh market, and their catch, has been rapid and Fiji now boasts

4Financial assistance to Ika from the Fijigovernment amounted to F$6.3 million be-tween 1976 and 1993 [11, p. 17].5The term ‘short-trip longline’ is used todifferentiate this type of fishing from‘freezer longlining’. In the former case,vessels return frequently to home ports tounload chilled tuna; in the latter case, lar-ger vessels are based in ports outside theregion and deliver frozen tuna directly tomarkets in Asia.


575

Figure 2. Value of canned fish andfresh fish exports, Fiji, F$ millions.

Source: Fiji Fisheries Division and Ministry of National Planning.

the largest number of short-trip longliners of any FFA member country.6Of the 53 longline vessels operating in 1997, 35 were foreign #aggedvessels, 10 were 30% Fiji-owned and the balance were under joint ventureand registered in a number of countries [15].

The growth of fresh "sh exports mirrors the growth in the number ofshort trip longliners.

Figure 2 shows that fresh "sh export, in marked contrast to canned "shexport, has grown to become a major industry.

The sashimi export industry is in complete contrast to the canningindustry, not only in its growth, but also in respect of ownership, manage-ment, pro"tability and government involvement. The private operatorsand owners have received very little direct government support and haveinstalled their own infrastructure such as wharfage and processing plants.

It is very important to recognise that it is the indirect support given bygovernment to the sashimi export industry, rather than direct support,that has been substantial. The indirect support began with the devaluationof the F$ after the coup in 1987. The resulting price advantage gave FijiFish the impetus it needed to begin building up its #eet from one longlinerin 1987 to 33 vessels in 1998 (12 owned by Fiji Fish and 21 on contract)supplying tuna for fresh export. The fact that Fiji is an air transport hubfor the western Paci"c has been an important enabling factor in thedevelopment of fresh "sh exports. The absence of regular air services toJapan and other markets has often been a constraint on the developmentof fresh "sh exports from other Paci"c Island countries.

The tax regime in Fiji continues to be very favourable to "shers and "shexporters and is another means of government indirect support. Forexample, there is no export tax on "sh or "shery products (a 5% tax on thelanded market value of the catch of foreign "shing vessels taken in Fijiwaters, is not enforced). In addition VAT incurred by "sh exporters isrefunded. Moreover, all inputs are duty free, including for foreign vesselsunder contract to local "sh processors, and there is a duty rebate on fuel of13c/l. There is also encouragement for the builders of "shing vessels in theform of a 55% investment allowance for vessels worth more than F$25 000[13, pp. 3, 13]. Since the emergence of the industry fresh "sh exportershave lobbied for a range of other government concessions, the details ofwhich are unavailable.

6In recent years large numbers of Chineseand particularly Taiwanese short-triplongliners have been based in the Pacificislands but many of these moved intoIndonesian waters or into the Indian Oceanfishery on the cessation of their fishingagreements [27].


576

Table 1. The tax system of Fiji

(1) Based on a VAT with a single rate and no exemptions.(2) Excise levied on petroleum products, alcohol and tobacco.(3) No export duties.(4) Tariffs for industry protection at low average rates (revenue function to be taken by the VAT).(5) An administratively simple income tax, on a PAYE basis, with a moderate top marginal rate

and with exemptions limited to(i) A dependants allowance,(ii) Those below a reasonable income threshold.(6) Company income tax at a moderate to low rate, with depreciation and other non-cash expenditure

provisions uniform across all sectors and an absence of incentive schemes [5, p. 20].

Source: Ministry of Finance.

The low tax regime is in sympathy with the overall philosophy pertain-ing to the government's revenue system aimed at attracting investmentand which favours exporters. Details of the current revenue system are inTable 1.

Another means of indirect assistance to the fresh "sh export industry isthrough concessional "shing licence fees and dock and mooring fees. Thegovernment's 1997 income from licensing "shing vessels was F$17 300augmented by a "shing gear charge of F$17 500. The government'sgreatest source of revenue in the sector is from ice making, which remainssigni"cant at F$270000 but this is an area of activity being devolved toprivate enterprise [1, p. 7].

The most important means by which the government encourages the"shing industry, however, is through its failure to collect resource rents.Resource rents are the pro"ts over and above a reasonable level of returnto labour, capital, management and risk, available to "shing operations.As in the case of other natural resources, such as timber from naturalforests and minerals, resource rents from a "shery can be substantial. Thisis likely to be so when catch rates relative to "shing e!ort are maintained,through the control of "shing e!ort (for example by regulating the numberof "shing licences issued), as in the case of the Fiji tuna export "shery.

In theory, the most e$cient method of tapping into resource rents andone that does not deter investors, is to charge a royalty that varies with thelevel of pro"t above normal pro"t. However, this requires knowing thepro"ts of "shing companies. The next best option is an ad valorem royalty;that is a royalty set as a percentage of the market value by weight of the"sh catch.

What the ad valorem royalty ignores is the e!ect of the cost of "shing onthe level of resource rent, but, being proportional to the price received forthe commodity, it is a reasonable proxy for rent. An advantage of thead valorem royalty over a uniform "xed royalty, is that it does not a!ectthe decision to "sh.

The &access fee' commonly imposed on distant water #eets by manyPaci"c island nations for access to tuna stocks is, in fact, an ad valoremroyalty, based on the estimated landed price times weight of catch.

The collection of an ad valorem royalty Fiji would entail the monitoringof the value and the volume of tuna landings by vessels. But this could bedone without great extra cost because all vessels land their chilled tunacatch in Suva and are presently required to provide log sheets andunloading catch returns under their "shing licences.

In the absence of a resource rent tax, all rents have been left with the"shing companies. The "shing companies in enjoying pro"ts above nor-mal pro"ts have been able to invest and have achieved an expansion oftheir #eets and infrastructure. An argument can be mounted that the


577

Figure 3. Number of longline vessels,fish catch and catch per unit of effort,Fiji.

Source: Fiji Fisheries Division, South Pacific Commission.

expansion of the "shing industry, through its own investment, has beenmore rapid than it would have been if government had "rst appropriatedresource rents and then invested in government-owned infrastructure onbehalf of the industry.

A counter argument says that equity is an issue and that the publicshould receive rents, via a resource rent tax, from the exploitation of thepublic resource.

What participants in this debate should be aware of, however, is thesubstantial level of risk in the industry. There is a high failure rate amonglongline vessels to generate pro"ts [4, p. 5]. And high management skillsare required in catching, processing, transport and in meeting the exactingrequirements of the Japanese sashimi markets [17]. These are two ex-planations for the fact that there are few domestically-owned sashimiexport ventures in the Paci"c islands even though tuna is plentiful.

The continuing success of the industry, an increase in air freight capacityto North America and Korea (both markets for sashimi) and the fact thatcatches of albacore and yellow"n tuna were still only 65% of TotalAllowable Catch in the Fiji EEZ, prompted the government to issuesanother 60 longline licences [4]. There were 53 vessels operating in Fijiwaters in 1997 prior to the issues of the additional licences, but how manyactive vessels will result from the rise in the number of licences permittedremains to be seen. Nevertheless, the move is one that could diversifyindustry ownership presently concentrated in a few hands.

A detailed analysis of the bene"ts of the fresh "sh export industry to Fiji,such as have been undertaken for Palau and Marshall Islands [18, 19] hasnot been attempted. However, a limited analysis is shown in Table 2 of themajor classes of cash expenditures for 1997 by the Fiji Fish Company Ltd.These indicate that by far the largest cash expenditure is on air freight,much of it to the Fijian carrier Air Paci"c. The extra marginal costs to theairline of carrying large and regular quantities of fresh "sh are low; themarginal bene"ts of this business are therefore likely to be high. Otherinternational carriers would also be major but unspeci"ed bene"ciaries.The annual expenditure by Fiji Fish Company Ltd on fuel, mainly for"shing vessels, wages (for vessel crews and shore based establishments) andfor repairs and maintenance and packing supplies is also shown in Table 2.

In summary then, the incentives provided by government have beena major factor in the growth of sashimi exports from Fiji, but this has


578

Table 2. Breakdown of financial benefits toFiji of the Fiji Fish Company Ltd, 1997

Financial benefit F$, Millions

Air freight 9.6Fuel 3.0Wages 1.2Repairs and maintenance 0.48Cartons 0.48

Source: Fiji Fish Company Ltd.

meant that the "nancial bene"ts have #owed largely to the national air-line and the private sector, rather than to the Fisheries Division or toconsolidated revenue. The raising of royalties or taxes in the short term toincrease the net bene"ts to the government would, however, be at the riskof reducing the bene"ts to the private sector and therefore the industry'sgrowth in the short and medium term.

Alternative models of exploitation of tuna for sashimiexport markets

In the case of Palau and the Marshall Islands, foreign companies wereinvolved under licence in exploiting tuna resources. Because they portrayalternative ways in which Paci"c Island countries can exploit their stocks,these models are now analysed in some detail.

The Palau case

Two established foreign short-trip longline companies operated in Palaufrom 1992 to 1994. The vessels were totally foreign-owned and crewed.Chilled tuna was air freighted to Japan, mainly on privately charteredaircraft, transhipping in Guam or Saipan for Tokyo. The companiescontributed substantial capital and took the business risk, while Palauprovided the tuna resource.

Direct taxation (by government) comprised about 10% of the positivecash #ow from these operations while spending by the companies onservices, wages to Palauans and to foreign workers, and indirect taxes,made up the balance of the #ow of "nancial bene"ts to government andprivate sectors. In estimating the bene"ts from expenditure on fuel andbait, allowance was made for the fact that these items are imported.

In 1994, government revenues were increased substantially by the im-position of a tax of 12.5 cents per kg of exported tuna, in addition to theexisting 4% gross revenue tax, and wages paid to alien workers becameonly a 50% (instead of a 100%) tax deduction.

Figure 4 shows the reported breakdown of the $US 3.1 million of totalbene"ts, and Table 3 presents the total as a percentage of catch value forthe 1992}1994 period.

As a percentage of catch value, the bene"ts from the arrangementcompare favorably with the 3}4% generally earned from the licensing offoreign vessels [18, p. 10].7

In attempting to measure the economic e!ect of "shing enterprises, thenon-"nancial costs and bene"ts or intangibles need to be considered* inthe case of Palau they are summarised in Table 4.

The Marshall Islands case

In 1994 there were two main foreign longline "shing "rms operating. Theyused the Majuro Fish Base, a substantial facility designed to supportlongliners and run by a government/private joint venture. Large-scale"shing began in 1993, and the breakdown of $US3 million of bene"tsreceived in 1994 is shown below. As in the case of Palau, net bene"ts arecalculated by subtracting import costs [19].

Unlike the Palau case, where air freight was by private charter, thelargest "nancial bene"t to the Marshall Islands was what accrued to thegovernment airline carrying sashimi tuna to Honolulu, Guam and Saipan(see Figure 5) These air freight charges can be almost entirely a net bene"t

7This percentage may have increased inthe intervening years.


579

Figure 4. Breakdown of the benefitsto Palau of foreign longline com-panies, 1993, US$, thousands.

Source: Forum Fisheries Agency.

Figure 5. Breakdown of benefits oflongline fishing companies to MarshallIslands, 1994, US$, thousands.

Source: Forum Fisheries Agency.

Table 3. Analysis of the benefits to Palau of foreign longline companies, 1992`1994

Benefits Year 1992 Year 1993 Year 1994a

Number of vessels n.a.b 225 225Company gross revenues from tuna fishing($US m.)

36.0 60.0 60.0

Total direct benefit to Palau ($US m.) 2.1 3.1 4.7Benefits as a % of catch value 5.8 5.1 7.8

a Estimated.b Not available.Source: Forum Fisheries Agency.

Table 4. Intangible benefits and costs to Palau of foreign longline companies

Benefits other than financial benefitsTraining of Palauans

Costs other than financial costsHarbour congestion possibly affecting local longlinersFishing fees foregone from foreign longline freezer fleetsPollution of Malakal HarbourSocial costsa

a The social costs associated with significant concentrations of crew of fishing vessels in port.


580

because marginal cost increases are limited to increased fuel costs onscheduled #ights. Freight in excess of the capacity of the governmentairline was arranged through government/private air charters.

Other bene"ts were generated by the "shing companies through rentingo$ce space and employing about 80 Marshallese at the Majuro Fish Base.

While the Fish Base represented a substantial investment, it was notproviding an e$cient service to exporters and a new arrangement wasbeing considered whereby one of the "shing companies would take overthe lease and invest a further $US6 million to service the #eet of 120vessels. The Base was expected to generate substantial pro"ts for theprivate company and signi"cant lease payments to government.

The structure of the sources of bene"ts was very di!erent between thetwo cases. While the dominant source of bene"t in the Marshall Islandswas spending on air freight, bene"ts in Palau were highly diversi"ed.

Table 5 summarises the bene"ts of longline operations to the MarshallIslands in 1994 and 1995 and expresses them as a percentage of value ofexported "sh. Table 6 describes the intangible bene"ts and costs of thearrangement.

The main conclusion from this analysis is that various ownershiparrangements in short-trip longlining can be pro"table, for a variety ofreasons, for the host country. These bene"ts may accrue mainly to theprivate sector, as in the case of Fiji and to a lesser extent Palau, or mainlyto government (or publicly owned facilities) as in the case of MarshallIslands.

Where foreign-owned "shing companies are involved, as in the case ofthe Palau and Marshall Islands* rather than joint ventures and domesticownership as in Fiji* local employment may be relatively less, but thereare still various other means by which governments can capture bene"ts.But where there are concentrations of large numbers of vessels, social andenvironmental costs may need to be addressed.

The main conclusions from analysis of short-trip longlining and ofdi!erent models adopted in the three Paci"c Island countries are asfollows:

1. Capital scarcity, high costs and a de"cient skill-base may place re-straints on the emergence and pro"tability of locally-based and owned

Table 5. Analysis of the benefits of foreign longline companies to Marshall Islands, 1994 and1995

Benefit Year 1994 Year 1995a

Number of vessels 75 120Company revenues from fishing ($US m.) 30.9 49.4Total direct benefit to Marshall Islands ($US m.) 2.9 7.6Benefits as a % of catch value 9.2 15.4

a Estimated.Source: Forum Fisheries Agency.

Table 6. Intangible benefits and costs of foreign fishing companies to Marshall Islands

Benefits other than financial benefitsTraining of Marshallese

Costs other than financial costsHarbour congestion possibly affecting local longlinersPollution of Majuro LagoonSocial costs


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short-trip longline ventures. Such ventures may be successful, however,given su$cient incentives, capital, tuna stocks, favourable markets,transport infrastructure and a high level of "nancial, marketing andtechnical expertise.

2. Joint ventures may overcome capital restraints by facilitating directforeign investment in vessels and/or shore infrastructure. Economies ofscale may enable the transfer of greater economic bene"ts to the hostcountry. Skill and technology transfer to local personnel may be a fea-ture of such ventures.

3. Foreign "shing companies may confer a range of economic bene"ts onboth government and private sectors in host countries. They tend togenerate high volumes of product through large #eets and may invest inshore infrastructure. However, under these arrangements, which essen-tially involve payment of fees for access to EEZs, local employment andskill and technology transfers may be limited, and competition for both"sh stocks and services may adversely a!ect the viability of locallyowned ventures.

4. Social and environmental costs may result from the local basing oflarge longline #eets. And host nations need to be aware that other costs,in the form of political tensions and instability, may emerge through theconcentration of lobbying power in the hands of large foreign "rms.

Fisheries development

The indirect assistance by the government to the Fiji "shing sector,through a regime of low taxes and charges on the export "sheries and thecannery has been discussed above.

The other important area of government assistance is through researchand development assistance to the sub-sectors that show commercialpromise. With the aim of increasing economic growth and employment,the Fiji government in 1997 embarked on an ambitious programme ofdevelopment in agriculture, forestry and "sheries through the CommodityDevelopment Framework (CDF). Under the CDF, F$18.5 million hasbeen allocated to the targeted commodities, and existing Fisheries Divis-ion sta! have been re-deployed to those areas [1, p. 2]. Given thecommercial potential of the commodities identi"ed and the progressalready being made [1] this investment would appear to be cost-e!ective.However, it should borne in mind that the failure rate of "sheries develop-ment projects is notoriously high in the Paci"c region, and in Fiji [20].

Development initiatives include mariculture, where low technologymethods of culture of pearl oyster, seaweed, giant clam, trochus andbe( che-de-mer show promise. There is a heavy demand by longline vesselsfor milk-"sh for live bait; this programme has the potential for increasingthe e$ciency of longline "shing, reducing bait imports and at the sametime providing cash income for local bait producers. The freshwateraquaculture programme includes the development of tilapia farms forboth domestic markets and export.

Fisheries management

The main role of the Fisheries Division is to control the e!ort applied torenewable marine resources so that "sh stocks will continue to make animportant contribution to the diet of the population, to cash income andto the growth of the national economy.


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To conserve vital inshore stocks, the Fisheries Division implements areaclosures and bans on gill netting for reef "sh and transfers the pressurefrom heavily "shed reef and deep water species to lightly "shed pelagicspecies through the deployment of "sh aggregating devices. The limita-tions to the commercial exploitation of reef "sh and deep slope stocks needto be emphasised. The valuable deep water snapper stocks were exploitedcommercially in the 1980s but a decline in catch prompted the relocationof "shermen to the pelagic "shery that has far more commercial potential[21].

Given the extensive inshore "shing activity, and the limits on sta$ng inthe Fisheries Division, the holders of customary "shing rights must be-come increasingly important partners in inshore "sheries management inrural areas. The co-management model is unlikely to work in the peri-urban areas, however, where customary tenure is weak and motorised"shing and netting are common. There, policing and enforcement by theFisheries Division must be the basis for management.

The Fisheries Division is, by necessity, regionalised* sta! number 109* but to be e!ective, in its vital role of managing stocks and developingcommercial options, it must be adequately resourced. There are sugges-tions that a lack of funds is hampering the control of unlicensed "shing,illegal "shing such as dynamite "shing, "shing using poisons and the saleof undersized and protected species [20, 1]. Several industries, includingthe export coral industry, appear to need careful assessment of theiropportunity costs, given the contribution of coral and "sh to the country'simportant tourism industry.

The revenues generated by the Fisheries Division in 1997 (F$0.31million) compared unfavourably with the Division's operational costs in1997 (F2.22 million) [1, Table 3, p. 6; Table 4, p. 7].

In the case of management of the o!shore "sheries, the Minister respon-sible is required to determine the Total Allowable Catch (TAC) for every"shery in the EEZ. The TACs determined for the main tuna species in thelongline "shery are all above actual catches. This, and the fact that catchrates have improved, has prompted the issue of additional licences in thelongline "shery. In 1997, 79 longline vessels were licensed, compared with37 in 1994 [1, p. 3].

Figure 3 shows the number of longline vessels operating, their catch andhow the catch per unit of e!ort has shown an upward trend.

It must be said that guesswork is probably the main input into theestimation of TACs for tuna. Tuna is a migratory, straddling stock thatrequires a co-operative approach to management [22]. However, in theabsence of regional management plans for the tuna [23], each Paci"cIsland country is bound to try to maximise the bene"ts from the schoolsthat swim through its waters. But despite the steady increase in thenumber of longline vessels in the Fijian EEZ, localised depletion oftuna stocks have not occurred and in fact the catch per unit of e!ortfor all species in the Fiji longline "shery has increased over the period1990}1996.

Fiji's "sheries managers will be well aware that this improvement is dueto factors such as better management and the adoption of new technology.The Fisheries Division is also aware that reliance on the regulation of thenumber of vessels to control "shing e!ort, in the face of an increasing catchper vessel, is fraught with danger. Catch returns and log sheets of licensedvessels are therefore monitored closely for any trends in catch per unit ofe!ort and in total catches [4].


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Conclusions

A major issue in the Fiji "shing industry is the maintenance of the longterm supply of "sh, an important dietary component * through subsis-tence and artisanal "shing* to a large proportion of the population. Thiscan only be accomplished through the management of inshore "sh stocks.Tourism-related employment, such as in diving and game "shing, is alsodependent on the maintenance of "sh stocks and "sh habitats. It issuggested that an increase in "nancial and human resources are a pre-requisite for improved management.

The social bene"ts of the PAFCO cannery cannot be denied, but thesehave come at a considerable cost to government. The involvement ofprivate enterprise in the management of the cannery is a "rst step instaunching the hemorrhaging of scarce government funds while hopefullyretaining the employment bene"ts.

The Fijian model of a largely domesticated catching, processing andfresh "sh export industry has developed because of its entrepreneurial skillbase and favourable air transport links. A low tax policy has been in#uen-tial in encouraging private investment. While the industry still has thecapacity to expand, the concessional policy should continue. Once theeconomically e$cient yield has been reached the industry can be con-sidered to have matured. At that stage, the introduction of an ad valoremroyalty should be contemplated in order to spread the bene"ts of theindustry more evenly through the community. However, the introductionof more licences will not necessarily overcome the problem of concentra-tion of the industry in a few hands; a barrier to successful processing andexporting is the requirement for a very high level of management.

The extension of the user pays policy to full cost recovery * through"shing licences fees and other appropriate charges * would enable thestrengthening of the Fisheries Division in the vital monitoring, policing andmanagement tasks necessary for "sheries maintenance and development. Atthe same time such a policy would reduce the call on consolidated revenue.

The control of e!ort in the fresh tuna export industry is presently beingaccomplished through the limitation of vessel numbers. This policy shouldcontinue because it is very unlikely that output based controls, such ascatch quotas, can be made to work in such a multispecies "shery (severalspecies of "sh, target and non-target, are caught simultaneously in long-lining) [23, 26]. However, as the Fisheries Division acknowledges, allow-ances must be made for increasing e$ciency in #eets if vessel numbers areto be the basis of e!ort control [4].

A factor outside the control of Fiji that a!ects the viability and manage-ment of Fiji's tuna "shery is the intensity of tuna "shing e!ort by othercountries in the western and southern Paci"c and on adjacent high seas. Inthe absence of a regional plan for the main tuna species targeted bylongliners the long-term abundance of tuna in Fijian waters is uncertain.

References

[1] Fiji Fisheries Division, Annual Re-port, 1997, Ministry of Agriculture,Fisheries and Forests, Suva, 1997,Table 8, p. 11.

[2] UNDP, Human Development Re-port, 1997, Oxford University Press,New York, 1997.

[3] Ministry of Finance and Ministryof National Planning, Supplement to the1998 Budget Address, Ministry of Fi-nance and Economic Development,Suva, 1997, Table 6, p. 72.


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[4] Fiji Fisheries Division, Annual Re-port, 1996, Ministry of Agriculture,Fisheries and Forests, Suva, 1996.Figure 6, p. 21.

[5] Ministry of Finance, Revenue Sup-plement to the 1998 Budget Address,Ministry of Finance, Suva, 1997, Table1.3, p. 11.

[6] F J Rawlinson, A Survey of the Sub-sistence and Artisanal Fisheries in RuralAreas of <iti ¸evu, Australian Councilfor International Agricultural Re-search, Canberra, 1995.

[7] Economic Insights, ¹he Economyof Fiji: Supporting Private Investment,AusAID, Canberra, 1995, Table A.3,p. 87.

[8] Forum Fisheries Agency, ¹he Im-portance of ¹una to Paci,c Island Coun-tries, FFA Report No 97/15, FFA,Honiara, 1997, Table 6, p. 14.

[9] Forum Fisheries Agency, Employ-ment of Paci,c Islanders AboardForeign Fishing <essels, FFA ReportNo 97/11, FFA, Honiara, 1997, p. 1.

[10] T Kearsey, and S Tukuafu, Devel-opment of a Regional Maritime ¹rainingProgramme 2 Final Report, ForumSecretariat, Suva, 1993.

[11] Forum Fisheries Agency, ¹unaIndustry Development Study CountryPro,les: Fiji, FFA Report No 95/35,FFA, Honiara, 1995.

[12] Ministry of Finance and Eco-nomic Development, Supplement to the1996 Budget Address, Ministry of

Finance and Economic Development,Suva, 1995.

[13] J Ah Koy, Budget Address, 1998,Ministry of Finance, Suva, 1998, Ap-pendix 1, p. 3.

[14] Ministry of Finance and Eco-nomic Development, Supplement to the1996 Budget Address, Ministry of Fi-nance and Economic Development,Suva, 1995, Table 9.3, p. 87.

[15] Forum Fisheries Agency, ¹ripNotes to Accompany Crewing Study:<anuatu, Solomon Islands, Kiribati,Marshall Islands, Federated States ofMicronesia, Guam, American Samoa andFiji, FFA Report No 97/12, FFA,Honiara, 1997, p. 1.

[16] Ministry of National Planning,Development Strategy for Fiji: policiesand programmes for sustainable growth,Ministry of National Planning, Suva,1977.

[17] ESCAP, Promoting Exports ofFish and Fishery Products in SelectedIsland Developing Countries of theESCAP Region, United Nations, NewYork, 1996.

[18] Forum Fisheries Agency, &An eco-nomic appraisal of the bene"ts to Palaufrom foreign owned, locally based "sh-ing companies,' FFA Report No. 93/58,FFA, Honiara, 1993.

[19] Forum Fisheries Agency, &An eco-nomic assessment of the value to Re-public of the Marshall Islands of thelocally based longline industry,' FFAReport No. 94/29, FFA, Honiara, 1994.

[20] J Veitayaki, Fisheries Develop-ment in Fiji: the quest for sustainability,Institute of Paci"c Studies/The OceanResources Management Programme,The University of the South Paci"c,Suva, 1995.

[21] Forum Fisheries Agency, &FijiFisheries Resource Pro"les,' FFA Re-port 94/4, FFA, Honiara, 1994.

[22] C Hunt, &Cooperative approachesto marine resource management in theSouth Paci"c.' In P Larmour, ed., ¹heGovernance of Common Property in thePaci,c region, Paci"c Policy Paper No.19, National Centre for DevelopmentStudies/Resource Management in AsiaPaci"c, Australian National University,1996, pp 145}164.

[23] C Hunt, &Management of theSouth Paci"c tuna "shery,'Marine Pol-icy, Vol 21, No 2, 1987, pp 155}171.

[24] Fiji Fisheries Division, AnnualReport, 1995. Ministry of Agriculture,Fisheries and Forests, Suva, 1995.

[25] South Paci"c Commission, ¹unaFishery >earbook, 1996, South Paci"cCommission, Noumea, 1997.

[26] D Squires, H Campbell, C D Cun-ningham, C Dewees, R Q Grafton,S F Herrick, J Kirkley, S Pascoe, K Sal-vanes, B Shallard, B Turris, N Vester-gaard, &Individual transferable quotasin a multispecies "shery,'Marine Policy,Vol 22, No 2, 1988, pp 135}159.

[27] Forum Fisheries Agency, Recentdevelopments in the Western and Cen-tral Paci"c,' FFA Report No 97/29,FFA, Honiara.


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fiji’s fisheries: their contribution to development and their future

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