Glenn Simmons, Hugh Whittaker, and Nigel Haworth: We’re catching fish but not value: why the QMS needs reforming
OPINION: The quota management system (QMS) has failed.
Introduced in 1986 it was hailed as a promising innovation that would revolutionise fisheries management, balancing stewardship, certainty of returns, and incentives to invest in businesses with value creating business models.
Three decades on, the fishing industry is still dominated by cost-driven business models that focus on producing raw material, mostly for value-added reprocessing in Asia, allowing foreign businesses to capture most of the value, rather than us.
One business model relies on old foreign charter vessels (FCVs) using migrant labour, while another has seen New Zealand fishermen become disenfranchised price-takers to an oligopoly of quota owners. Both are underpinned by dumping and misreporting – hardly models of improved stewardship or innovation the QMS was established to incentivise.
In its March Industry Insights, Westpac pointed out that in the late 1990s the industry projected $2 billion a year in exports, but fell far short. Instead, the contribution to GDP "peaked at $940 million in 2003, and has fallen 16 per cent since then".
In real terms, total 2015 exports by value were below the 2002 peak, and employment has fallen by 26 per cent. In 2015, over a quarter of seafood exports were low value frozen fish. Unsurprisingly, Westpac argues that the industry must capture more value and move away from producing generic whitefish commodities.
Following our exposure of the plight of exploited Indonesian migrant fishing crew in 2011 and the subsequent Ministerial Inquiry, the government followed through with major policy reforms to stamp out human rights abuses on board FCVs.
But the underlying production-led, cost minimisation models remained. And with such models, and increasingly thin margins, non-compliance is still an issue.
Our recent reconstruction of marine catches highlighted high levels of misreporting and dumping. A disturbing feature is the extent to which fishers must break the law to survive. Repeated compliance operations (such as Trios, Turn-Up, and Horse) since the early 1990s have also shown that the QMS has not led to better reporting, nor has the industry innovated to move up the value chain with new business models.
Unless the Ministry for Primary Industries (MPI) properly addresses misreporting and dumping, its ability to manage and regulate fisheries will continue to be questioned, and public disquiet will only grow, which will also compromise New Zealand's international reputation.
Yet if MPI simply takes a strict compliance approach, including increased observer coverage and fleet-wide industry ("independent") electronic monitoring, it will only address the symptoms and not the underlying causes.
A perverse outcome will be a contraction of the industry, particularly in the inshore sector, where the number of small inshore fishers will continue to decline. This is likely to result in uncaught quota, and increased dominance by large players. Ultimately, it will lead to low-cost FCVs along with migrant labour catching inshore fish – worlds away from the outcome anticipated from the QMS
Last year MPI embarked upon a review of the fisheries management system. The problem is, this review is firmly focused on the system we currently have. Essential elements that go to the core of the industry's predicament are explicitly excluded.
To fix the QMS, a much more comprehensive review is necessary, one that looks at other countries' successful alternatives, especially how they deal with by-catch, waste, high-grading, misreporting, and transparency. A Productivity Commission investigation is needed focusing on the sustainability of fish stocks and how industry can de-commoditise finfish exports to move away from being a cost centre to China's whitefish reprocessing sector.
And perhaps it's time for the creation of a stand-alone government agency for fisheries, with stronger oversight by ministers and the government's oversight agencies.
Together these would help us understand what has gone wrong and why, and how the QMS should be reformed. Such reform must incentivise new business models, high-value products and the use of bycatch mitigation technologies to ensure full but sustainable utilisation.
Protecting harvesting rights at the expense of incentivising the right business models will see a continuation of the post-2003 decline, together with misreporting, dumping and the waste of what is, in essence, a public resource. It is vitally important that we get it right, sooner rather than later.
Dr Glenn Simmons, research fellow, New Zealand Asia Institute (NZAI), University of Auckland Business School; Professor Hugh Whittaker, Professor in the Economy and Business of Japan, School of Interdisciplinary Studies, University of Oxford (formerly NZAI); Professor Nigel Haworth, Management and International Business, University of Auckland Business School.
- The Dominion Post