FIBS IN THE NET WITH BARTON AND HARTE
A Report for FIBS by Lee Hazell 09 May 2003
Hello and welcome to the programme. When the Fishery Policy Review went before EXCO, Councillors thought things needed to be made clearer to the public about what was going to happen. Director of Fisheries, John Barton and Economic Advisor, Michael Hart came in to answer a few questions that might be asked by people.
JB: All three papers of the Fisheries Policy Review have gone to EXCO and all three have essentially been approved. And, the paper we are talking about here, which is a change in the way the licensing system works and the way that access to the fishery is granted. And,. the fisheries management system – that was agreed in broad principle, that we would change to a system where, based on fishery rights, rather than the short to medium term licences which we have at the moment. That was agreed on the broad principles but there is still a huge amount of detail to work through. And, Councillors felt that though there had already been a full period of consultation, particularly with the fishing industry, there perhaps ought to be a bit more information put out about some of the major changes. They really are taking place, in what really is the fundamental sector of the economy. And, if there’s any more feedback, that would be welcome. There is going to be a special EXCO on the 22nd of May to take a look at some of the detailed issues as well. If there any comments or views that people would like to make before that, either to us or to councillors themselves, then that would be welcome.
LH: It takes us back to the old question – why change things?
JB: We’ve had a succession of fisheries policies over the years, largely dealing with the system that has short to medium term licenses. In the current system, for instance, people compete for points to do certain things and whoever gets the most points gets the highest priority in the licence allocation. That’s developed over the years. We’ve done things like trying to get people involved in different aspects of the fishery through giving points for things like the level of investment in fishing vessels and getting into marketing, processing – that type of thing.
But you can only go so far in doing it with that system. You have to ratchet up the amount of money people have to invest in vessels and various other things. It has limits as to how far that can go. Or, if you try to get a diversity of fishing businesses out there then it’s difficult to compare one bit to another bid. So, the current system is tendered to push everyone down very much the same route. So everyone looks the same in what they are doing in their fishing businesses. And, really, in changing to a rights based system where it changes the whole economics of the industry and it means they can make a lot of the decisions themselves as to what they think is best for their business. It means they can diversify in different ways and people can be involved more in the catching end of things.
Other folks can get into processing, marketing or other areas of the fishery. Yet, they can still remain in the fishery because their involvement in the fishery isn’t in jeopardy. There’s not going to be the risk of losing a licence or having some sort of change in policy, which means they are suddenly out of the fishery. They can really invest for the long term. The comparison is like if you had a short-term licence for operating a farm or for owning land or doing something with land, then probably the amount you would invest in improving the business or doing whatever would probably be rather limited.
If you thought you would probably lose it suddenly next year or two years’ time or something like that. You probably would take out of it what you could but you would have no prospect of getting benefits long into the future. This means that people can make serious long-term investments. And, some of the investments in the fishery do involve huge sums of money, in that if you are looking at building a new fishing vessel – that sort of thing, you are looking at quite a long-term investment, if you are getting into processing or marketing or those sort of things.
LH: Can anyone own Falkland fishing rights?
JB: Not necessarily and there is, perhaps, no great change being proposed in the new system compared to where we are in the current system. At the moment, there is still an on-going debate on that and we are still looking at some of the legal issues there. Councillors have expressed a preference that the ownership of rights should be limited to people with Falklands status but there are some other options as well that are being looked at. The legality of the issue does need to be looked at as well. For instance, with the current fisheries policy, in order to be considered for some of the long-term licences and that sort of thing, or at least the prospect of getting a high priority, companies have to be set up where the shareholders are limited to Falkland residents. And, for the purposes of current policy, the definition of Falkland resident is someone who appears on the electoral roll. So, there are limitations in that regard.
LH Will that change anything for the Chinese, Taiwanese and Korean vessels? Will that change anything for them?
JB: That aspect of it won’t greatly change immediately. That comes into it a bit in the difference between some of the fisheries, obviously, in the Loligo fishery, that is where local interest has developed into a high degree at the moment. That is where you see the majority of the Falkland registered vessels – vessels and companies which are owned by joint ventures between Falkland businesses and predominately Spanish businesses or other EU businesses. That’s developed to a high degree there. It’s in the Illex industry where things haven’t developed so far and so you still have the big fleets of Taiwanese, Japanese vessels operating there and that is likely to continue for some time, even as we move into the new system. But I think that in the new system it will give the local fishing companies the ability and power to develop further. And, in time, I think that you will see changes there as well. Certainly jigging for Illex is a specialised activity. It’s very much a time-limited activity, unlike trawling which can carry on year-round, so I think the companies will start to get extra benefits from that particular fishery but whether we see a fleet of Falkland registered jiggers may be quite far off.
MH: What we are trying to do is encourage the foreign fishing boats to become part of the Falkland Islands fishing industry, rather than just come here and fish and sail away, we are trying to get them to work more closely with Falkland Islands fishing companies. Our new proposed policy is that the foreign boats will only have a short-term licence fro, the Government. In effect, they might bet a one to five-year licence. We are going to say to them if they want a long-term licence to fish in the Falklands, you need to be in an enduring partnership with a Falkland Islands company. Otherwise their licence is going to be around for a year or so. We are hoping that the foreign companies will come along to a local partner and say it’s good to go into business with you and work closely with you in a genuine joint venture. And, in that way they can have a long-term share in the Falkland Islands fishery rather than just an annual licence at the moment. That means the Falkland Islands partner will have a much greater say in the business relationship. Once they have their long-term rights, they can have control over the partnership. At the moment, the boats just come in, pay their money to FIG and sail away again. The local company has much more power in the business relationship with these foreign companies. As John says, it will take several years for them to probably work out those relationships.
LH: You don’t think it will deter foreign boats from fishing here?
MK I don’t think so. No. We are very careful to try and get the balance right between not driving our foreign partners away, or foreign fishing vessels away, but trying to provide enough incentives for them to actually start talking to the local companies and going into much more genuine business relationships where the benefits – more of the benefits start to flow to the Falkland Islands, rather than flowing to the Koreans or Taiwanese. It’s a bit of a juggling act. Particularly with Illex, it’s difficult to get that balance right. We would hope – though we won’t know it till we try it – that we got that balance right.
LH: Does this mean that fishing companies will get rich?
MH: At the moment, Falkland Islands fishing companies may get about 15% of the total value of the fisheries stocks including Illex. And, we are hoping by this new policy that 25 to 30 to 50 or 60% of the fisheries in 10 or 15 years’ time. If that’s getting rich then they will but what it means is that instead of the money going into overseas people’s pockets, it will go into the pockets of Falkland Islanders. If that makes them rich then that’s the consequence of actually taking control of your own resources and doing things for yourself.
LH: What about licence fees? Will anything extra be charged for these?
JB: there is potentially a bit of debate about that. Over the years, obviously, licence fees – or at least since the fishery started – have really been the mainstay of Falkland Islands Government for quite a number of years. That of course, has made an awful lot of developments and improved infrastructure, improved quality of life and all sorts of things to come along in those years. There has been a high level of revenue that has come in from fishing licences.
There is an issue in changing from short-term licences to giving long-term access rights or property rights as whether anything additional is charged for that. In that situation it’s intended that the system would work that once people are in that system they have got the security of having very long-term rights. They could be virtually permanent, they could be permanent or it also gives them the option to trade those rights if they want, so they can either – if there’s a willing seller and willing buyer – some fishing companies could actually acquire more rights.
And, if they want to, get out of a particular fishery or particular area of the fishery, a particular species if they are no longer interested in that. They would be able to sell their rights and potentially use the money for other businesses in the Falklands, which would obviously be a good thing as well. So, if there is an issue in doing that, as to whether anything extra is charged for that. I think there are a number of different views on that. One view is that because we already charge fairly high licence fees you wouldn’t need to actually charge anything additional. And, if it’s seen, in the future, for instance if you start to capture more value from the fish, then ultimately there will still be an annual licence fee. So if things seem to be phenomenally profitable, either the money might come in through the tax system, licence fees could be put up, for example.
There could be no additional charge. The other option is to make some sort of charge. That has its difficulties because it’s actually quite difficult because you are looking at asking what value these rights might have in whatever period of time. I mean, some people might decide to sell and if they decide to sell, could sell within a year. Other people might sell in ten, twenty years time or whatever. We would ask what value those would have if that happens. It’s difficult but you could do that. There would be options, for instance, to invite bids for the rights. But that is at odds at the moment from where we are on how rights would be allocated and have some complications with it. Actually, setting the value of the rights would be quite difficult.
There is a third option as well. That is, simply, if and when companies who are initially allocated the rights sell those rights, and if they sell them at whatever value, there is some system then that some share of that value might return to the Government for wider use. Ultimately, if there is some charge made that may have some benefits because it means that companies aren’t immediately faced with a high cost up front as they are going into the new policy. They are not suddenly burdened with debts if they have to buy the rights. At some stage, if they sell, they will still get some value from them. And, the Government might get some value from those rights as well. That also solves the problem of how you set the value of the rights if there is any benefit in them.
That is still going to be a fairly significant debate and there are options for going in either direction, really.
LH: With the value of the rights, obviously a value is going to have to be set on these otherwise fishing companies can basically charge what they like if people are interested in buying the rights.
JB: One of the issues that comes up in all of this is if someone doesn’t fish or someone does whatever, is the revenue which the Falkland Islands Government currently gets from licence fees – is that still reasonably guaranteed. The Answer is yes. It will always be the original right holder who has to pay the equivalent of the Annual licence fee, which is essentially what Government gets now in terms of most of its revenue. If someone just decides that they are not going to fish in a particular year – they haven’t got a vessel or for whatever reason – they would still have to pay the actual licence fee or equivalent thereof according to their level of right holding that they have and they would still be paying that. And, obviously, if someone decides to sell their rights then they would need to have a happy deal with someone who wants to buy those rights basically. Hopefully, they will be sufficiently valuable enough and interesting enough that people will want to buy them. But they still have to get an agreed price. If someone is beginning to think about selling then presumably they want to get out of that particular fishery, they might have other ideas about what they want to do with the money they are going to realise from that sale. If they hold out for an amount the rights aren’t worth and don’t get anyone to buy it, they will still be paying the annual licence fee to the Government. It’s just a commercial transaction and will just have to find a happy way of dealing with that.
MH: It’s a little bit like having a bank loan on your Shogun. When you pay the bank loan by selling the vehicle and the price is set too high, no one is going to want to buy it. It will sit in your driveway and you will pay a big fat bank loan. That’s no real incentive for companies to set their price on the rights too high. They will set them at whatever people will pay for them. At the end of the day, you have got to make money from fishing. The rights are only worth the profits in the fishery. If there are no profits in the fishery, the rights aren’t worth very much. If you have a really profitable fishery, then the rights are worth more. That’s the way of the world. But if people are greedy, they won’t sell their rights and the Shogun will be in the driveway being unused.
LH: it seems that maybe this policy will reduce Government’s ability to intervene in the fishery. Is this going to make it more difficult to achieve conservation objectives?
JB: It certainly changes quite radically the way things happen in the fishery at the moment. I mean, that is mainly in relation to the way companies operate. And, if you compare it to other business activities like farming or retail outlets or whatever, certainly in fisheries at the moment, the Government has quite a lot of ability to intervene, influence. It looks at licence applications twice a year. OK, there are a lot of companies out there that have five-year licences, so they are pretty secure. But nonetheless, a lot of folk feel they can be running their business quite happily but they still have this uncertainty that if Government really doesn’t like what they are doing, that could be the end of their business and they may have invested considerable sums.
With changes in this, and it’s a new system, very little of that will happen. There are issues about whether we do retain some ability to intervene if things really go pear shaped. There is a bit of debate about that. But none of that really affects the conservation of resources. That will still remain a core Government responsibility. It also has to do with the way business are operated and that sort of thing. But the ability for Government to set whatever the conservation targets are, to do the research, to meet those targets and that sort of thing – that still remains very much something that Government can do, much as it does now.
Again, in changing the whole legislation, which is happening, I think that there are a number of areas where legislation and certain conservation issues are required. Current legislation does focus very much on the fishing activity. It doesn’t go too much into some of the ancillary conservation issues that have come along during the time this current ordinance has been in place. Since then we have had long-lining, we’ve had a lot of issues to deal with. We have issues to do with seabirds and waste at sea and all those sort of things. In going into new legislation, we actually do have the opportunity to strengthen some of those things in a number of areas in the fishery which could be cleaner and greener without imposing undue burdens on the fishing companies. So, I think those things need to be looked at and debated as the new legislation comes along.
Also, I think one of the other big changes in this new policy is that as fishing companies become right holders, they will then have an awful lot more interest in how fishing and the fishery operates, the science behind it and that sort of thing. The new ordinance, I think, will give the option for fishing companies to become a lot more involved in that process. But none of that should ultimately detract from the basic ability to set realistic conservation objectives and achieve that. It shouldn’t interfere with the conservation management for the fishery to any extent.
MH: There are three reasons why the system of conservation actually improves in a fishery. The first one is you’ve got longer term rights. If you have the right for a year, you are going to catch as many fish as you can because you’ve got no long-term interest in the fishery. But if you’ve got a 15 year or longer interest in the fishery, you are going to take care of those fish because you are going to come back next year and catch more. If you’ve got a licence for a year, you are not going to be as careful as you would if you had one for 10 years or something like that. It’s like a hire car. If you drive a hire car in the UK, you might thrash it a bit but if you’ve got your own car and have it for a longer period of time, you look after it.
The second reason is, really, the value of the rights depends on fish being in the ocean. If there is no fish there in 10 years’ time, your rights aren’t going to be worth anything in 10 years’ time. It comes down to a vested interest in making sure the value of the rights stay by making sure there are fish in the sea to catch.
The third reason, really, is that if the Falkland Islanders have much more say and far greater power in the fishery, rather than just Toothfish and Loligo, and start to catch things like Skates and Ray and a bit of Illex, then you’ve got Falkland Islands looking after their own rights and their own resources. This is very different than a Taiwanese skipper or even Spanish skipper sailing all the way over here with a Spanish company or Taiwanese company, saying that it’s not their country but somewhere else, a foreign country and I think if it’s your own country you take more care than if it is not your country.
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