Topic 6Community Fisheries Management

Part 1

NotesBy

Ragnar Arnason

Coastal Fisheries Policy and Planning Course, 28/01/08 – 8/02/08, Apia, Samoa

Secretariat of the Pacific Community

OrganizationOrganization

I.I. BackgroundBackground

II.II. Community Fishing RightsCommunity Fishing Rights1.1. Co-management and community management Co-management and community management 2.2. What are community fishing rights and why might they work?What are community fishing rights and why might they work?3.3. Community fishing rights around the worldCommunity fishing rights around the world

III.III. Community Fisheries management as a bargaining gameCommunity Fisheries management as a bargaining game

IV.IV. Community Fishing Rights: Design PrinciplesCommunity Fishing Rights: Design Principles1.1. AssumptionsAssumptions2.2. Propositions: Design principlesPropositions: Design principles

V.V. Community Fishing Rights: Practical implementationCommunity Fishing Rights: Practical implementation

I. BackgroundI. Background

The Fisheries ProblemThe Fisheries Problem

• Fisheries are subject to well known Fisheries are subject to well known problems of economic inefficiencyproblems of economic inefficiency

– The common property problemThe common property problem excessive excessive fishing effort, fleets and no net benefitsfishing effort, fleets and no net benefits

Fisheries management is needed Fisheries management is needed !!

• Research has determined two classes of Research has determined two classes of management methods that can workmanagement methods that can work

(i) Property rights regimes (widely applied)(i) Property rights regimes (widely applied)(ii) Taxes (apparently not been applied)(ii) Taxes (apparently not been applied)

Key Property Rights SystemsKey Property Rights Systems

1.1. Sole ownershipSole ownership

2.2. TURFsTURFs

3.3. IQs and ITQsIQs and ITQs

4.4. Community rightsCommunity rights

Note: First three are Note: First three are individual rightsindividual rights but the but the fourth is a fourth is a collective rightcollective right

ExperienceExperience• Sole ownership is extremely rare – but Sole ownership is extremely rare – but

works!works!• TURFs more common - work!TURFs more common - work!• IQs fairly common - work to a degreeIQs fairly common - work to a degree• ITQs becoming increasingly common ITQs becoming increasingly common (over (over

10% of the global catch is taken under ITQs)10% of the global catch is taken under ITQs) - work! - work!

So, basically, individual property rights work!So, basically, individual property rights work!

Unfortunately:Unfortunately:Individual property rights cannot be Individual property rights cannot be

applied to all fisheriesapplied to all fisheries

• Sole ownershipSole ownership– Socio-political problemsSocio-political problems

• TURFsTURFs– Technical problems (exclusivity)Technical problems (exclusivity)

• ITQsITQs– Technical problems (enforcement)Technical problems (enforcement)– Socio-political problemsSocio-political problems

Therefore attention has beenTherefore attention has been drawn to drawn to

collective property rightscollective property rights

Community fishing rightsCommunity fishing rights

in particular.....in particular.....

II. Community Fishing RightsII. Community Fishing Rights

What areWhat arecommunity fishing rights?community fishing rights?

• Fishing rights granted collectively to a Fishing rights granted collectively to a group of agentsgroup of agents

• These rights constitute a property rightThese rights constitute a property right• It gives the group the authority toIt gives the group the authority to– Defend these rights against outsidersDefend these rights against outsiders– Conduct internal fisheries managementConduct internal fisheries management

Note 1: Limited community rights imply co-managementNote 1: Limited community rights imply co-managementNote 2: Community fishing rights Note 2: Community fishing rights do notdo not constitute a constitute a

fisheries management systemfisheries management system

Government/community power sharingGovernment/community power sharing10

0%

100%

Co-management

Self-management

Government Community

Forms of co-managementForms of co-management• Information flow• Communication (two way exhanges)

• Consultation (listen to advice)

• Cooperation (joint effort)

• Partnership (formalized joint effort)

Another common diagramAnother common diagram

Community Fishing rights: Community Fishing rights: RationaleRationale

1.1. Enhances economic efficiency in fishingEnhances economic efficiency in fishing– Fisheries managementFisheries management– EnforcementEnforcement

2.2. Socio-politically more appropriateSocio-politically more appropriate– More in accordance with tradition - naturalMore in accordance with tradition - natural– More fair - communities can control their own More fair - communities can control their own

destinydestiny3.3. Politically expedientPolitically expedient– Relieves the government of a difficult problemRelieves the government of a difficult problem

Why should community fishing rights Why should community fishing rights promote efficiency?promote efficiency?

1.1. In fisheries managementIn fisheries management– Better informationBetter information– More appropriate incentivesMore appropriate incentives

2.2. In fisheries enforcementIn fisheries enforcement– Better informationBetter information– More appropriate incentivesMore appropriate incentives– More powerful sanctionsMore powerful sanctions

Community fishing rights in the worldCommunity fishing rights in the world(Based i.a. on Willmann 2000 & Wilen et al 2007)(Based i.a. on Willmann 2000 & Wilen et al 2007)

• Widely found around the world • Both in large scale and small scale fisheries– More common in small scale, inshore fisheries

• More common in inland than ocean fisheries• Global importance in marine fisheries not great– Important in Japan, Chile & some Pacific islands

• Usually based on TURFS (in some form)– Area, bays, lagoons, fish aggregating devices, artificial reefs...

• Sometimes based on community catch quotas– Collective quota rights

Community fishing rights in the world Community fishing rights in the world (….cont.)(….cont.)

• Turf-based community rights:– Japan inshore fisheries, Pacific island lagoon/reef

fisheries

• Community rights based on catch quotas:– Europe’s POs (including Shetland’s), Alaska’s

community development quotas

• Community rights based on both catch quotas and TURFs – Chilean inshore fisheries

Community fishing rights in the world Community fishing rights in the world (….cont.)(….cont.)

• Usually the community property rights are not very high quality– Not long lasting, not very exclusive, not very secure

• Usually a degree of co-management with government (rather than pure self-management)– Power sharing, consultation, information etc.

• Why not more common?– National governments have usurped power– Communities are undermined by technological progress– Transaction costs (difficult to organize and run)– Have not been very successful?

The experienceThe experience

1.1. Empirical:Empirical:– Lots of evidence – But poorly organized and Lots of evidence – But poorly organized and

analysedanalysed– Primarily anthropological and social evidence Primarily anthropological and social evidence

(not very hard data)(not very hard data)– Mixed outcomes – some fairly good, some Mixed outcomes – some fairly good, some

worse worse (Note: Tend (Note: Tend notnot to observe the really bad ones) to observe the really bad ones)

2.2. Experimental Experimental (in the laboratory)(in the laboratory)::– Mixed outcomesMixed outcomes

Outcomes of community fisheries Outcomes of community fisheries management seem to depend very much management seem to depend very much

on the particular situationon the particular situation

So:So:

Why?

III. III. Community Fisheries Management as Community Fisheries Management as

a Bargaining Gamea Bargaining Game

Analytic Framework:Assumptions

A-1 The community consists of a finite number of members, I. (May vary over time)

A-2 Community members differ w.r.t.(i) Utility functions (preferences)(ii) Opportunity sets (abilities)

A-3 Each member is only concerned with his own utility

Assumptions (cont.)Assumptions (cont.)

A-4 The fisheries policy consists of allocating The fisheries policy consists of allocating harvesting rights and/or benefits to harvesting rights and/or benefits to membersmembers

A-5A-5 The community decides and enforces The community decides and enforces fisheries policyfisheries policy

PropositionPropositionMembers of the fishing community will generally Members of the fishing community will generally

disagree about the optimal fisheries policy.disagree about the optimal fisheries policy.

Implications:Implications: Members find themselves playing a game.Members find themselves playing a game.This game is a This game is a positive sumpositive sum bargainingbargaining game gameHow the game is played depends on the rulesHow the game is played depends on the rules

• They are not identical (different fishers (benefit functions) and other types of community members)

They will generally want different fisheries policies

Crucial to adopt the appropriate Crucial to adopt the appropriate

community design community design !!

So:So:

…….to facilitate a good outcome.to facilitate a good outcome

IV. Design PrinciplesIV. Design Principles

Conditions that contribute to efficient Conditions that contribute to efficient community fisheries managementcommunity fisheries management

High quality property rightHigh quality property right

1.1. SecuritySecurity2.2. ExclusivityExclusivity3.3. PermanencePermanence4.4. TransferabilityTransferability

Property rights attributes Property rights attributes [0,1][0,1]

High quality High quality Each attribute close to Each attribute close to 11

Perfect and actual property rightsPerfect and actual property rights

Actual property right

SecuritySecurity

ExclusivityExclusivity

PermanencePermanence

TransferabilityTransferability

Perfect property right

TheoremTheoremThe lower the value of the property right The lower the value of the property right

the less efficient is the associated the less efficient is the associated economic activityeconomic activity

Efficiency

1

1 Quality ofproperty right

Community property rights should Community property rights should be as high quality as possible!be as high quality as possible!

Closed ShopClosed Shop

Note 1. Necessary but not sufficientNote 1. Necessary but not sufficient

Note 2. Does not exclude new membershipNote 2. Does not exclude new membership

The community must be able to restrict new The community must be able to restrict new entryentry

.....otherwise, the common property problem .....otherwise, the common property problem simply re-emergessimply re-emerges

Closed ShopClosed Shop

TheoremTheoremIf new members can join the community, If new members can join the community, they will do so whenever the community they will do so whenever the community

income exceeds the alternativeincome exceeds the alternative

Community must be able to Community must be able to control new entrycontrol new entry

Inclusive membershipInclusive membership

This means:This means:1.1. No outsiders at the beginningNo outsiders at the beginning2.2. No-one can leave to become an No-one can leave to become an

independent operator in the fisheryindependent operator in the fishery

(I.e. n(I.e. no-one can operate outside the o-one can operate outside the community rules)community rules)

TheoremTheoremIf community management is successful, If community management is successful,

individual fishers will benefit from individual fishers will benefit from opting-out of the group rule opting-out of the group rule

- provided they can do so with impunity- provided they can do so with impunity

Fisheries communities should be Fisheries communities should be inclusiveinclusive

Homogeneous membershipHomogeneous membership

TheoremTheoremIf fishing community members are not If fishing community members are not

identical, bargaining identical, bargaining will notwill not lead to the lead to the most efficient fisherymost efficient fishery

- unless (perhaps) benefits are transferable- unless (perhaps) benefits are transferable

1.1. The composition of the fisheries community The composition of the fisheries community should be as homogeneous as possibleshould be as homogeneous as possible

2.2. I should only include fishermen – not other I should only include fishermen – not other professions or interestsprofessions or interests

3.3. It should preferably only include owners of It should preferably only include owners of fishing capital – not fishing labourfishing capital – not fishing labour

This implies:This implies:

Pay-offs as sharesPay-offs as shares

TheoremTheoremIf fishing community members receive benefits If fishing community members receive benefits

that are increasing in aggregate benefitsthat are increasing in aggregate benefits

(1) The bargaining solution is efficient!(1) The bargaining solution is efficient! (2) The competitive solution is efficient!(2) The competitive solution is efficient!

If at all possible, the fishing community should If at all possible, the fishing community should be set up so that each member’s benefits are an be set up so that each member’s benefits are an increasing function of aggregate benefitsincreasing function of aggregate benefits

This suggestsThis suggests

(1) Limited companies have this property(1) Limited companies have this property

(2) Within-community ITQs have this propety(2) Within-community ITQs have this propety

NoteNote

Fishing CommunityFishing Community Practical design guidancePractical design guidance

- Summary -- Summary -

1.1. The community rights should be as high quality The community rights should be as high quality as possibleas possible

2.2. The community must be able to restrict entryThe community must be able to restrict entry3.3. The community should be inclusive – i.e. include The community should be inclusive – i.e. include

all fishers in the areaall fishers in the area4.4. The community should have as homogeneous The community should have as homogeneous

membership as possiblemembership as possible5.5. Each member’s pay-off should be increasing in Each member’s pay-off should be increasing in

the aggregate pay-offthe aggregate pay-off

V.V.Practical ImplementationPractical Implementation

Certain key itemsCertain key items

• Build political support• Legislation• Negotiation• Information• Technical guidance• Decision making framework• Right of veto• Access to expertise• Access to temporary funding (GFRF?)• Evolution of relationship (turn back?)

Political support

Legislation

Negotiation

Contract

Implementationplan

Rights and obli-gations of parties

Basic FlowchartBasic Flowchart(Community management unit from scratch)(Community management unit from scratch)

Political support

Legislation

Negotiation

Contract

Implementationplan

Rights and obli-gations of parties

Basic FlowchartBasic Flowchart(Community management in the South Pacific)(Community management in the South Pacific)

Very high

Sometimes

Considerable

Some

Step 1Build Political Support

• Form proposal • Consultation– Government (by levels), community leaders, fishers,

fisheries authorities etc.)– Key decision makers

• Revise proposal• Reach agreement (Plan of Action)

Step 2Legislation(or equivalent)

• Legal framework for community fishing rights– Important to do it well– Basis for everything that follows

• Content– Government grants certain rights to

communities on certain conditions

Step 3Negotiation(or equivalent)

• Negotiation with “interested” communities• May have to generate interest• This leads to a contract containing the following– Rights and obligations of the community– Rights and obligations of the government (fishery authority)

– Development of an implementation plan– Financing plan

Rights and obligations of community

• TURFS / Quotas• Quality of these rights• Rules for membership • Rules for decision-making• Consultation obligations

Rights and obligations of government

• Many possibilities– Rights of consultation– Rights to veto certain plans– Obligation to provide expertise– Obligation to provide finance– Obligation to provide training – Obligation to provide other assistance

Implementation plan• Essentially just another plan• Can be very complicated• Normally developed in close cooperation

between the community, authorities and experts

• A few general rules apply– Information needs to be provided– Training needs to be supplied– The financing aspects need to be dealt with

Evolution and dynamics

• The contract and the management structure may need to be adjusted over time.

• Provisions to meet this eventuality should be built into the contract– Be careful not to diminish the property right in

this way.

EndEnd

Analytical AppendixAnalytical Appendix

Analytic Framework:Assumptions

A-1 The community fishing right is perfect(Permanent, secure, exclusive)

A-2 The community consists of a finite number of members, I. (May vary over time)

A-3 Community members differ w.r.t.(i) Utility functions(ii) Opportunity sets (abilities)

A-4 Each member is only concerned with his own utility

Assumptions (cont.)

A-5 The fisheries situation is:

A-6 Each member has full information about the fisheries situation

1

( ) ( )I

i

x G x q i

( ( ), ; )q i x i , i=1,2,...I

q(i), x s.t. (q(i),x,i)>0

Assumptions (cont.)

A-7 The fisheries policy consists of allocating harvesting rights to members

A-8 The community decides and enforces fisheries policy

A-9 Community members have perfect property rights over their own harvests

A-10 Community bargaining is over fisheries policy and compensations

A-11 Transactions costs are zero

Types of members(1) Fishers

Maximize U(z(i);i) s.t. pq(i)-C(q(i),x;i)w z(i)

(2) Fishing industry customersMaximize U(z(i);i) s.t. sq(i)-C(q(i);i)w z(i)

(3) Conservationists Maximize U(z(i),q(i),x;i) s.t. y(i)w z(i)

Comprehensive benefit (indirect utility) function

(q(l),q(i),x;l), l=1,2,...I

Propositions

P-1 Members of the fishing community will generally disagree about the optimal fisheries policy.

Implications: Members find themselves playing a game.This game is a bargaining game (A.8)This game is a positive sum game (A-5)How the game is played depends on the rules

Propositions (cont.)

P-2 (Closed shop) To achieve the optimal fisheries policy, the community must be able to restrict new membership

Note 1. Necessary but not sufficient

Note 2. Does not exclude new membership

Propositions (cont.)

P-3 Without side payments, the Nash bargaining solution will generally not be the optimal fisheries policy

(1) (1) ( (1);1) ( (1);2) ( (1);1) ( (1);2)

q qMax q Q q Max q Q q

Implication: To achieve efficiency, community management must involve a compensation scheme.

Note: This problem is avoided under strong private property rights

Propositions (cont.)

P-4 (Compensation) For the optimal fisheries policy there exists a compensation scheme which will make everyone at least as well off as before.

Implication: With a compensation scheme, the optimal fisheries policy can be a solution to the bargaining game

Propositions (cont.)

(1) (1) ( ( (1));1) ( ( (1));2) ( (1);1) ( (1);2)

q qMax q q Max q Q q

P-5 If all members of the community receive benefits which are monotonically increasing in aggregate benefits then the Nash bargaining solution is efficient.

Propositions (cont.)

P-5 Implications:

1. If every member has a share in total benefits the optimal fisheries policy will be the Nash equilibrium.

2. If only those with shares in the fishery decide the choice will be the optimal fisheries policy

3. If every member has sufficiently strong rights he can the adequate compensation is guaranteed.Veto rights?

Propositions

P-6 Voting is unlikely to lead to an efficient fisheries policy unless perhaps if votes can be traded.

Any voting rule just allocates threat-points to players

END