Seafood business opportunities
Speech delivered by
Einar K. Guðfinnsson,Minister of Fisheries of Iceland
Ladies and gentlemen.
It’s a great pleasure for me to join you at this conference here today. I will discuss how we in Iceland have made the fisheries sector more profitable. Furthermore I will discuss the urgent need for a better management of shared stocks which will, when achieved, open multiple opportunities in the fisheries business, and thirdly I want to mention the possibilities of adding further value to our products. I consider that these three issues, the competitiveness of the fisheries sector, better management of resources and better use of our limited catch are fundamental when we reflect on seafood business opportunities.
In Iceland we have developed a fisheries management system with individual transferable quotas (ITQ). The quotas represent shares in the total allowable catch and are allocated to fishing vessels.
The management has three pillars. The general individual transferable quota system (ITQ), where permanent quota shares and annual catch quotas are divisible and transferable to other fishing vessels. Secondly the small vessels ITQ, and thirdly there are regional policy instruments.
In the general ITQ individual fishing enterprises may not control more than the equivalent of 12% of the value of the total quotas allocated for all species and 12% to 35% for individual species. In the small vessels ITQ no one will be allowed to control more than the equivalent of 6% of the value of the total quotas allocated for all species and 6% to 9% for individual species.
This is very important. We want to ensure that ownership in Icelandic fisheries is not limited to few. The fish stocks are our most important natural resource. In this regard we have had success. The distribution of holdings in Icelandic fisheries is wider than in most of the other sectors. At same time we have seen large and effective companies in the fishing sector emerge which have been able to establish themselves in other countries. That is also important.
The Minister of Fisheries has the mandate to allocate up to 12 thousand tons of cod equivalent quotas to use for special purposes. These 12 thousand tons are normally less than 3% of the total quota allocations. They are basically intended to serve as shock absorbers and as regional policy instruments. From my point of view, it is important that the extent of these shock absorbers and other special measures remain limited compared to the total operations of the industry. They are important and even more than that in some fishing communities. However all special allocations interfere with the internal functioning of the industry and affect the competitive positions of the operators. Serious internal distortions in the industry would undermine the legislation, surveillance and control. Therefore they should remain limited and well defined.
We believe we have a dynamic fishing sector in general and at the same timeit does contribute to the positive development of regional communities. Our fishing industry by and large operates in the regional areas. However we should always bear in mind that there are limits to which we can place burdens on the fisheries sector in such a way that it ceases to be profitable. It is acknowledged that our fisheries policies do play a role in a progressive regional policy. We are however aware of that the fishing deserves and needs to be a vigorous and competitive industry. Otherwise they will in the long run loose in the difficult competition for people and capital. People want a good income and a good life. The prerequisite for that is a thriving industry, which plays a major role in the local communities. It is for this reason thatwe try to ensure that this goes hand in hand and we try not to sacrifice the profitability in this sector. This is obviously a difficult policy to conduct. And we have not always succeeded. On the contrary. But this has been and still remains our main policy objective.
Part of our fisheries policy is a special preferential treatment of long-line fishery where the line has been baited onshore and the vessels land their catches daily. This is a controversial issue, but plays an important part in conducting a regional policy without sacrificing economic efficiency. Normally these extra allocations can be expected to fit in under the 12 thousand tons ceiling of the Minister’s mandate but this is not required by the law. These extra allocations are generally favoring the smallest vessels and thus also the smaller fishing communities.
The small vessels regime is now identical to the one for the larger vessels. There is however an important exception. The smaller vessels can only use long-line or hand-line. There is full transferability of fishing rights between the small vessels but it is not possible to transfer quotas from the small boats to the larger vessels. The smaller vessels can buy quotas from the bigger ones, but not vice versa. We should in this context remember that the smaller vessels in Icelandhave been seen as playing an important role for the smaller fishing communities. That is the main reason for how generously we have deliberately increased their fishing rights, quotas. We have been able to develop a fisheries policy for the smaller vessels that is both profitable and efficient. The most efficient of them bring more than a thousand tons ashore every year. They are often only manned by two persons in addition to those that bait their hooks on land. I think this is a good example of how we can combine economic efficiency in fisheries with participation in a regional policy.
The Icelandic fisheries management system was certainly controversial when it was established and has been one of the main contested issues of most parliamentary elections since 1984 in one way or another. Its main asset is certainly its economic efficiency. From my point of view transferable fishing rights areabsolutely fundamental to any efficient fisheries management scheme, regardless of whether it is an effort based system or a quota system. The transferability is a driver for economic efficiency. But it can also have other impacts such as negative ones for smaller fishing communities. That should be acknowledged and not be overlooked. However these impacts should be mitigated by other targeted measures such as limited regional measures, promotion the use of certain gear, or a specific management system for parts of the fleet, along the lines that we have done in Iceland. That certainly does not solve every problem everywhere. But that methodology will most probably do better in combining efficiency with regional policy, than an approch which sacrifices any goal of efficiency.
The fisheries management system has evolved significantly since it was first introduced in 1984. The changes that have been made to the Act reflect lessons – often hard lessons - learned from experience and the outcome of an active and frequently tense debate within the fishing sector and among the general public. We consider that we have progressed positively and that the objective of developing a profitable sector that competes successfully with other sectors in Iceland and foreign fisheries sectors has been maintained and strengthened. Stability for the fishing sector is of course very important, not least political stability. The fisheries sector is in competition with other sectors and the role of the government is is to improve its working environment in every possible way and make sure that everyone is aware of changes ahead.
Icelandic fishing vessels have in recent years caught between 1.7 and 2.1 million tons of fish in the oceans around the island and in the high seas. This catch is normally between 2% and 2,5% of the total catch of wild fish in the world’s oceans. The market value of the seafood production of Iceland is around 2 billion US dollars. Cod and cod products create normally about 40% of the total value of seafood and is the single most important species. The fisheries sector is the single most important exporting industry in Iceland contributing 60% of the exports of merchandise and 40% of the exports of goods and services combined.
Iceland was number 12 on the list of world’s main fisheries countries in 2003 with 2, 2% of the world catch in tons. Norway is number 10 with 2,8% of the total world catch. Iceland and Norway are the only Western European countries at top 15 list from FAO.
If we take a look at the value of exports and imports 2003 in US-dollars, by the largest exporters of marine products. Norway is number three and Iceland number thirteen. But netto, export versus import, Norway is number one and Iceland seven, both way ahead of other Western European countries. One of the reasons is a responsible management of fisheries.
Among the things that undermine responsible management of fisheries, and thereby the well-being of the people who depend on fisheries for their livelihood, are Illegal, Unreported and Unregulated fisheries, usually refered to as IUU fisheries.
I am happy to note that Iceland and Norway have worked together to fight against IUU fisheries and had some success although we still have much to do. In Iceland, we have been pleased to note the initiative that Norway has taken on this issue in international fora, including the use of port state jurisdiction as a tool against IUU fisheries. Iceland will work with Norway and others to develop this approach further.
Through regional co-operation we have taken part in forming measures that close the ports to fishing vessels that engage in IUU fisheries and to all vessels that support and supply them. We are already starting to see this co-operation bear fruit.
Last year the Icelandic Coast Guard spotted a cargo vessel accepting transshipments at sea from a fishing vessel that was fishing illegally for redfish in the IrmingerSea outside Icelandic jurisdiction. Information on the cargo vessel was distributed through our regional network and the result was that the vessel’s attempts to unload its illegally-taken products in European ports were all unsuccessful. In the end, the vessel had to go all the way to Africa to unload.
This is not only inconvenient for the IUU operators but also costly. At the beginning of this year, Iceland declared that we are going to step up our anti-IUU efforts and put increased emphasis on creating more of these costly inconveniences for IUU operators. The Coast Guard will increase its surveillance efforts in the area where the IUU problem is greatest, giving us increased information not only on the illegal fishing vessels but also on those who supply and support them. This information will be used in efforts to prevent IUU fishing. The aim is to make it more difficult, and thereby more expensive, for the IUU operators to get oil and other necessary supplies in addition to making it difficult and costly to get their products to the marketplace.
One of our new initiatives is to send letters to those who are involved in the fisheries sector in various countries to point out what vessels have been formally identified as IUU vessels and encourage them not to do any business with the vessel’s operators. In all, almost thousand such letters have now been sent from the Icelandic Ministry of Fisheries. The IUU operators need much the same service as legal operators do. Legitimate and reputable companies do naturally not want to be connected with these illegal activities and our letters are intended to raise their awareness of the IUU problem and encourage them to make sure that they are not directly or indirectly involved themselves.
The bottom line is that IUU fishing is a business, albeit an illegal business. While the financial rewards remain high and the risks low, the business will continue. If we are successful in lowering the financial gains and increasing the risks, we will prevent these illegal activities. Failure to do so will undermine our efforts to manage our fisheries in a responsible and sustainable manner.
The sustainability of fisheries is of outmost importance for the fisheries sector. Unsustainable practices will both have negative ecological consequences in the decline of fish stocks and negative social and economic consequences as there will be less fish to utilize.
Fish stocks that are confined only within the jurisdiction of one state are the management responsibility of that state. However, where the stocks also are straddling outside national jurisdiction there is a need and duty for co-operation on the fisheries management. The absence of responsible management measures can be disastrous, as we have seen ourselves for example in the collapse of the Atlanto-Scandian herring stock more than 35 years ago.
We know what to avoid and we know the way to avoid it. For joint fish stocks we need to have a management agreement in place between the coastal states and the states that fish for the stock on the high seas. However, this has often been difficult to achieve.
I would like to take the blue whiting stock in the North-East Atlantic as an example. We had many years of unsuccessful discussions on management measures. At the same time as we were failing to reach an agreement on the management, we were fishing far beyond what can be considered sustainable. Had this situation continued, we would almost certainly have seen the blue whiting stock collapse. Everyone would have lost if it had come to that. One can defend what one sees as a fair claim for a share in the fisheries but we all have much to lose by not reaching an agreement and much to gain by reaching an agreement.
This is why I was pleased when we finally managed to settle our differences and sign a coastal state agreement on the management of blue whiting late last year. I believe Iceland got a lower share of the blue whiting fishery than was reasonable, but our interests in having an agreement in place and preventing the stock from collapsing weighed enough for us to accept our share according to the agreement.
Recognizing the importance of having agreements in place is such that it was a grave disappointment that Norway chose to break up the stable agreement we had for herring fisheries for a number of years. We already know from experience what happens if we over fish from the Atlanto-Scandian herring stock. We have watched it collapse and although it has recovered greatly over the years since the collapse it has not yet fully reached its potential.
Norway, as the main stakeholder in the stock, has the most to lose if the stock collapses again. In spite of this, it is Norway that is initiating a process in which the herring fishing nations will now for the second year in a row fish much more that is sensible. It is hard to see how a larger share of a declining stock is preferable to a stable share of a growing stock. I’m sure Norway feels it should rightfully have a higher share of the herring stock than it has under the previous agreement. However, the same can be said forIceland and probably other parties. One must always weigh the benefits of breaking up a management regime against the costs of having no management in place. The outcome of that equation does not look good when it comes to Atlanto-Scandian herring.
The blue whiting process teaches us at least two lessons in this context. Firstly, it can take a long time to get an agreement on the management of straddling fish stocks. This would appear to be particularly difficult in cases like the herring where most of the parties to the negotiations see no reason to change the prior agreement while one party claims it can not accept that agreement. Secondly, during this sometimes long period when no agreement is in place there can be a serious overexploitation of the fish stock.
The development since Norway unilaterally increased its fishing last year seems to indicate that we are headed in the direction of overexploiting the herring stock, perhaps to the extent the blue whiting was overexploited before. When adding the fact that reaching an agreement can take a long time, it is obvious that we are facing a very serious situation. I do not for a moment think that Norway wants such a situation, but urgent action must be taken to prevent the herring stock from declining. After having reached an agreement ten years ago on the management of Atlanto-Scandian herring, it would bear bad testament to our ability to manage fisheries in a responsible way is now fail in taking care of the stock.
Perhaps a third lesson we can learn from the blue whiting process can give us hope. We have seen that we can reach agreements if there is sufficient will to do so.
Responsible management ensures the long-term conservation of the fish stocks and their sustainable use by the fisheries sector. The stability that comes with having an agreement in place also means that we can further develop the fisheries and increase the value of the products. I’m confident that the blue whiting agreement will result in an increased proportion of the catches we allocated for direct human consumption.