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INDUSTRY GETS BEHIND NEW FISHERIES LEGISLATION

June 2005

Falklands fishing companies have voiced their support for one of the most potentially significant pieces of legislation to the fishery, and to the economy as a whole.

If enacted, the Fisheries (Conservation and Management) Bill 2005, which has been released for public consultation, will give legislative effect to a major review of fisheries policy including the introduction of property rights. Additionally the Bill provides the first comprehensive update of fisheries legislation since the introduction of the 1986 Ordinance.

The publication of the Bill is the culmination of a lengthy process, which began with consultation on a review of fisheries policy in 2002. Falklands fishing companies played an integral role in the consultation.

The most significant outcome of the policy review, and which is fully reflected in the Bill, was the decision to introduce property rights to the fishery. Director of Fisheries, John Barton, explained that this represents a "major change" from the current system of non-transferable variable duration licenses, "…to a system based on long term (up to twenty-five years) individual transferable rights owned by Falkland Islanders."

The proposed fishery system, if approved, should provide new impetus to expand and develop the domestic fisheries sector and Mr Barton described the benefits. "Firstly, overall economic performance of the fisheries sector is expected to be enhanced, because fishing businesses have increased security of access to the resource and flexibility in the way they decide to structure activities to take advantage of business activities.

"Secondly, diversification should occur in the industry as companies have greater choice as to whether they invest in vessels or in value-added activities such as processing and marketing. Thirdly, seafood companies should invest more in research and development because long-term rights mean that they will benefit from investments that have longer pay-off periods.

"Fourthly, international competitiveness should also increase as any poorly performing companies sell rights to better performing companies. No longer will they be forced to stay in a fishery, unable to exit without losing everything. Fifthly, as the profitability of the domestic seafood sector increases, government income from personal and corporation tax and resource rents should increase."

Penguin News contacted a number of fishing companies to gauge their enthusiasm about the Fisheries Bill and the respondents were all keen to have the Bill made law.

Drew Irving of Argos Limited said his company is "most definitely" in favour of the new legislation as "…it will help maximise the income from the fishery for the Falklands, not just the local companies." He said the law will enable the industry to, "use the fishing effort we have in the most efficient manner."

Mr Irvine added, "We will make more profit which in turn will mean that we pay more to FIG in tax, which will benefit everyone in the community. More profitable companies will be able to buy out less profitable ones, which will benefit the company and also increase the FIG tax take. This is all good news at a time when FIG are struggling to balance the books."

Red Back Consultants Limited's Tom Blake described the Bill as "a complex piece of legislation" but he commended the "good process of consultation" leading up to the drafting of the legislation and said he was fully in favour of the principles of the new policy.

He listed a number of benefits the legislation would provide: "Increased security through twenty-five year rights which will allow companies to adopt long term strategies which may take several years to produce returns. The rights can be put up as security for borrowing which means Falklands companies will have more assets against which to borrow for investment. The new policy will allow Falklands companies to work together whereas the previous policy did not encourage co-operation. There will be greater flexibility in the system due to the fact that catch entitlements and rights can be traded."

Beauchene Fishing's Cheryl Roberts said the implementation of the fishery policy would be "beneficial to all". She explained that among its many advantages were the property rights, "…which give greater opportunity for dialogue between the government and the industry."

Stuart Wallace described the Bill as "key" to building a broader based economy that can weather occasional setbacks. "Recent budget uncertainties have highlighted the critical importance to our economy of implementing this legislation without further delay. Fishing is our most significant international trade by far and it has great potential to make an even greater contribution. This Bill when implemented establishes the foundation which will facilitate this development."

Mr Wallace said the Bill allows better management of the fishery with regard to conservation and will allow entry by newcomers "since rights will be tradeable". He said government income from licence fees has the potential to increase, "due to the flexibility the new system will make possible in the rational use of vessels," and added, "The new system will provide industry with essential security and flexibility, permitting rational development and growth, increasing international competitiveness and enhancing overall economic performance."

A number of Falklands companies have very significant investments at risk in the Falklands fishery established over many years and Mr Wallace said the companies involved are relying on the timely implementation of this Bill, "…in order to take forward significant investment and business decisions which are important, not just for the companies concerned but for the Falklands economy generally."

The greater security will, Mr Wallace said, "…enable more investment in the industry by local companies, in vessels and onshore. This brings new money in, project investments, taxation, purchases, payment for services and increasing employment opportunities." He added, "We have all seen how vulnerable we can be to heavy dependence on direct government income. We must build a broader based economy that can weather such occasional setbacks. This Fisheries Bill is key to that in the fishery sector."

Hamish Wylie of Seafish (Falklands) Limited said the current fishing policy has long since achieved all it is able to, and "stagnated" the industry in recent years. "Worse still, it has been divisive and stopped companies working together, resulting in an inefficient and less profitable fishery." He said the very promise of the new policy has resulted in greater co-operation between companies "for the collective good of the industry".

"Over the next few years we should see the development of a local fishing industry and support services that will be as recognisable for what it is here, as it is anywhere else in the world." He said the Bill will enable companies to borrow significant sums of money, "secured against future income and the value of our vessels. Currently we cannot guarantee any lender an income of more than a year, and in a world of surplus fishing capacity, our vessels lose any value as soon as they lose access to fish."

With this money, Mr Wylie said, "…we will be able to invest in a whole manner of support services that will bring more of the value of the fishery onto the Islands and increase control and profitability. Locally-owned vessels spend significant sums in Punta Arenas for simple goods and services that could be provided here. With the advent of a containerised reefer container service to the Islands, investment in a fish terminal for the sorting and re-exporting of various species of fish direct to customers becomes possible."

The introduction of the fishing policy will also present a number of challenges, the Director of Fisheries said. "The Falklands fishery has always been managed using fishing effort limitation as opposed to catch limitation. As with systems based around property rights elsewhere, the Bill provides for the use of Individual Transferable Quotas (ITQs). In the Falklands the ITQ will refer to a proportion of the total allowable effort rather than a proportion of the total catch.

"The property rights system entails significant change to the operating environment for the private sector. It also entails significant change in the administration of the fishery, particularly in relation to the process of creating, awarding and administering property rights.

"The new system does not alter the Falkland Islands Government's powers to manage the fishery to achieve conservation targets, if anything these provisions are strengthened. Similarly, the new system does not alter the government's ability to raise revenue from the fishery."

Property rights are not necessarily a panacea for fisheries development, Mr Barton said, but current fisheries policy (or what might be more appropriately described as license allocation policy) has "served well". "However, current policy has run its course and was in need of major revision and development, the property rights route seemed apt at this point. A number of features of property rights systems had been identified as desirable from previous policy reviews."

The Bill represents the first major reform and modernisation of the law relating to fisheries resources and fisheries management since the introduction of the 1986 Ordinance, Mr Barton said. "There have been significant developments in fisheries in the Falkland Islands in the intervening nineteen years together with a number of developments at an international level. The Bill provides for updating the law to reflect these developments."

First published in the Penguin News on 10 June 2005, and reproduced with the kind permission of the Editor

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