Fishing rights in Iceland: the why, the how, the outcomes, the politics…
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Presentation given at Tenure & Fishing Rights 2015 by Kristján Skarphéðinsson
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Fishing rights in Iceland: the why, the how, the outcomes, the politics…
- 1. Kristján Skarphéðinsson Permanent Secretary, Ministry of Industries and Innovation , Iceland FAO Global Forum on UserRights2015 . Siem Reap,Cambodia ; March 23-27th 2015 Fishing rights in Iceland: the why, the how, the outcomes,the politics...
- 2. Pillars of economic activities in 2013: Share of Iceland´s export earnings Fisheries 26.5% Aluminium 21.0% Tourism 26.8% Source: Statistics Iceland 800.000 tonnes 1,3 million tonnes 1million
- 3. Photo by courtesy of Þröstur Njálsson
- 5. The glorious days: The more the better...
- 6. Snapshot of the Icelandic fisheries today
- 8. Modern fishing fleet to meet diverse demands…
- 10. Some background to the story of fishing rights…
- 11. 1901: 3 miles 1952: 4 miles 1958: 12 miles 1972: 50 miles 1975: 200 miles Expansion of the Icelandic EEZ
- 12. The “why” of fishing rights for the Icelandic fisheries management
- 13. “The Black Report” 1975 and more… • Max 500 thousand tonnes of demersals • Limit total fleet effort • Protect juvenile fish • Ensure MSY
- 14. What did they do? INPUT CONTROLS • Fixed number of days at sea… • Effort directed to other species than cod… • Fishing gear limitations…
- 15. More bad news in 1979 and 1983… • Efforts limits are not working • The cod stock continues to go down UNLESS DRASTIC LIMITING MEASURES ARE TAKEN IMMEDIATELY
- 16. How fishing rights came about…
- 17. Later that year…”To hell with the quota system”
- 18. So to the outcome and development of the ITQ system…
- 19. Cod 1984-2013: Advise, Decision, Landings 0 50 100 150 200 250 300 350 400 450 Landings Advise Decision Tonnesx1000 Year
- 20. There are approx. 85.000 landings registered in the system every year 50 Ports of landings in Iceland send electronic data daily to the Directorate of Fisheries
- 21. Temporary and Permanent Area Closures Open for haddock and flatfish Oct-Feb Open for saithe 20-08hrs Melsekkur: Open 1 Feb–15Apr Open for flatfish in winter Closed for bottom trawl Small fish sorting device Closed for long-line Closed for long-line with restrictions Closed for bottom-trawl Small fish sorting-device Closed for long-line Closed for bottom-trawl Closed for long-line Closed for lobster trawl E.G 01/JS 02 breytt Closed for bottom trawl Permanently closed (grey) April, 2-3 weeks closures during spawning
- 22. So, what is the outcome of the system in Iceland?
- 23. 0% 2% 4% 6% 8% 10% 12% 14% Proportion of labour market Year Employment in fisheries 1991-2013 Source: Statistics Iceland
- 24. Oil use by fishing vessels vs value of fish exports 0 50 100 150 200 250 300 350 0 50 100 150 200 250 300 ISKmillion tonnes Oil use Value of exported marine product at price 2013 (r-axis) Source: Statistics Iceland
- 25. 460 $303 236 $720 Total catch Export value, adjusted 1981 2013 2013 Tons x 1000 Million USD 1981 Cod catch and export value 1981 vs 2013 Source: Statistics Iceland
- 26. Canned products made from cod liver: Smoked liver and liver paté Fish skin transformed to leather Liver oil used for Omega-3 and capsules Natural fish stock for food processing Caviar from roe Enzimes from intestines used for medical products Fisk skin tranformed to collagen Heads and bones dried and exported Cosmetics made from enzymes from inner organs. Fish skin as medical device
- 27. Some macroeconomics related to our fisheries…
- 28. 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 0% 5% 10% 15% 20% 25% 30% 35% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Thousandtonnes Cod catch (r-axis) EBITDA (%) EBITDA average (%) Quita system adopted Assignment of quota allowed 15% 7% Earnings of Icelandic fisheries companies, EBITDA Source: Statistics Iceland 22%
- 29. Finally: To the politics of they system…
- 30. Catch share of the ten largest quota holders 24% 32% 47% 52% 1992 1999 2004 2014 Source: Directorate of Fisheries
- 31. Direct public charges imposed on fisheries companies 0 5 10 15 20 25 30 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ISKbllion Paid income tax Paid social security fee Other fees Fishing fee Source: Directorate of Internal Revenue
- 32. By courtesy of Arctic Photo, Reykjavik, Iceland New High North horizion... By courtesy of Arctic Photo Ltd, Reykjavik, Iceland The debate ahead…The stormy debate ahead....
- 33. By courtesy of Arctic Photo, Reykjavik, Iceland New High North horizion... By courtesy of Arctic Photo Ltd, Reykjavik, Iceland Thank you for your kind attention
Notes de l'éditeur
- Ladies and gentlemen It gives me great pleasure to be addressing you here today. To talk about fish has always come naturally to Icelanders, be it fish to capture, fish to export or fish to enjoy as food. Our story , right from the settlement of Iceland in the 9th century has been interwoven with fish and other living marine resources usually in the form of how we could catch a bit more. Even if fisheries are still economically very important, our economy has diversified very significantly in recent decades and new sectors have evolved. Fishing and fish processing have become integrated into the economy as never before with many of the larger companies listed on the Icelandic Stock Exchange. But before we come to the fisheries issues let me give you a snapshot of the main pillars of the Icelandic economy as it is today.
- These are the three pillars of the Icelandic economy that is generating foreign currency: Aluminium production making use of Iceland´s ample sources of hydroelectric and geothermal electricity, our rich fishing grounds that I will talk about in greater detail and then the newcomer, tourism that over the last few years has reached a scale that we have never seen before. In economic terms tourism is becoming the number one foreign currency generating industry. So, almost a million tonnes of aluminium, over one million tonnes of fish and about one million tourists per year. That is quite a bit for a nation that counts only 330 thousand people.
- And then to fisheries. I will be talking a bit about sophisticated, high tech fisheries. Therefore, this picture taken last month of a fishing vessel coming to harbor in the West Fjords in Iceland is a good reminder that fishing still is a close affair with the forces of nature. And it is not true that the fishermen on board don’t get seasick. They do. In this talk I will try to give you a brief account of the Icelandic fisheries management system, how it came about, how it has evolved and the current political debates about its future. I will also try to give you some data on how our fisheries have evolved from a biological, economic and social viewpoints.
- But first, a taste of the past. This picture shows what a typical fishing boat looked like. We used these open boats for centuries even long after foreigners fishing in our waters had been using large decked vessels powered by sail. Up to the second World War Iceland was one of the poorest countries in Europe.
- But then came modernity. The first trawler bought by Icelanders arrived in 1905. That was a real turning point in the history of fisheries in Iceland. And we did embrace these efficient fishing machines. With no catch limits in place, more was better- the sky was the limit. What we did not know then but what we know now is that unrestrained fishing was bound to cause trouble. But before going there let me give you Snapshot of the Icelandic fisheries today.
- In 2013 we caught some 1.3 million tonnes of fish around the island with an export value of 1.7 billion Euros. Fisheries and fish processing represent some 10 percent of GDP but it generates 26.5% of the foreign currency earnings. If the service and technology sectors supporting the fisheries are also taken into account the sector might contribute almost 27% to the GDP. So, today, fisheries in Iceland are sustainable, efficient and highly profitable. But the best news is that generally the fish stocks are in a healthy condition.
- Over the years fishing fleets in Iceland have evolved in various ways to become fairly specialized to deal efficiently with harvesting their allocated quota shares. The “small boats” shown there have been designed by local companies underlining improved processing of the catch as well as better working conditions for the crews.
- Computerized vision technology has become the method of choice for cutting of whole fish or fish fillets into precisely weighted portions for consumer packs or restaurants. This technology has been a key in creating more value added products from the traditional raw materials.
- Foreigners had been sending vesses to fish in Icelandic waters from the early 15 th century. Over time these vessels got bigger and better at fishing efficiently. Being a poor nation Iceland had no opportunity to buy such vessels for themselves. So, the notion of foreigners “stealing our fish“ became fixed in the national mindset. That led to a movement early on to get exclusive rights to fish in our coastal waters. This struggle of Icelanders culminated in the “cod wars” in the latter part of the 20th century, where the main opponent was Great Britain that responded to Iceland´s expansion of her EEZ by fishing under the protection of the British Navy. On this picture you can see the expansion of our EEZ all the way to 200 miles in 1975. Then the 200 mile limit was adopted by UNCLOS in 1982. And, of course, behind every expansion shown on the map here there is history of struggle and conflict.
- Then to fishing rights and how they came about in Iceland. The answer to that question is short: Out of pure necessity. Having driven the foreigners out of our waters, after winning the “cod wars” , we now could catch all the fish that they had been catching PLUS the fish we had been catching ourselves. So, these were happy times for Iceland. Big plans were laid down by ambitious politicians. New modern stern trawlers were bought “for every fjord” around the island. We also expanded our harbors, built new processing plants and developed new markets abroad. The future looked bright. Until 1977 fishing was free for all. Just buy a boat and start fishing. As much as you liked and as much as you could.
- In 1975 the Marine Research Institute issued a famous report on the state of the cod stock, “The Black Report”. That was only the first in a succession of reports sending a clear message: Maximum catch of demersal fish: 500 thousand tonnes Limit total fleet effort Protect juvenile fish Ensure Maximum Sustainable Yield
- These reports were taken seriously. The Parliament introduced a system for restraining the fishing effort, mainly by limiting days at sea, measures that today we know as “input controls”: Fixed number of days at sea… Effort directed to other species than cod… Fishing gear limitations…
- But soon more bad news came. The imposed effort limits were not working. The industry had been quick to learn how to increase the fishing efficiency within this framework. Fishing was driven by fierce competition on the fishing grounds. To catch the most the fastest was the name of the game. As an example, 70% of the cod was caught in a period of three months in the summer, often leading to very poor yields and poor quality. Luckily we quickly came to realize that such a system simply did not work. We now know that input controls generally yield disappointing outcomes: Poor biological results and uniformly very poor economic results. .
- So, the need for a better system was clear. A real national debate emerged on how to design a system that would lead to optimum use of the fish stocks. Meetings were held, the newspapers were full or articles -very lively exchange of ideas. Who should get quota shares ? The vessel owners? The fish processors? The communities around the island? or A combination of these? One group wanted to divide the catch share between all Icelanders listed in the National Registry as of January 1st 1984. Split it equally between Icelanders and then they could fish their quota themselves, lease it or sell it. In the end it was decided to distribute the TAC between all Icelandic in operation in 1981,1982 and 1983. Calculate the average and give each vessel its share for the year 1984. Parliament decided that those who had “invested their own money in fishing vessels” should get a quota share and that this arrangement would only be for one year to see how it would turn out. This was fine, but one group, the small vessel owners absolutely rejected such a system which they stamped as being bureaucratic and unethical as it compromised the manliness and free spirit of the fishermen. Most of them settled for competitive fishing under a Total Allowable Catch limit. This is a brief account of how it all began.
- During the first year in operating the system the complaints began. Here are some of the headlines from 1984: One says: “To hell with the quota system” Another: “ Restrictions cause widespread unemployment” “Foundation of the quota system is broken” Yet, the most significant headline is the piece on the right which says: “ The Ministry of Fisheries has authorized 169 transfers of catch quotas between vessels”. Why was that? The quotas in the original allocation had been firmly tied to each vessel, with no provision for transfer. But the sensibility of allowing transfers soon emerged. Why should an owner of, say three vessels not be allowed to transfer the quota from one vessel to another as that would clearly save money in fuel, fishing gears etc.? So, the foundations for transferability of the quotas were laid down already during the first year of operating the new system.
- Soon, fishing quotas began to acquire a price. Not by trading quotas, which was illegal, but by trading vessels with a quota allocation. Suddenly, old and worn out vessels started to fetch very high prices that in no way represented the true value of the ship itself. This led Parliament to change the law in 1990 to allow trading of these quotas between vessels. And in fact there were very limited restrictions on this quota trade. You could lease a quota for one year or you could buy a “permanent” quota, i.e. a share in the future catches. And soon a real quota market emerged where you could buy and sell quotas in the different fish species. Many problems came up in the initial phases, such as “high grading” and “black landings” which underlined the need to develop an infrastructure of tight controls. So, the next few slides show what it took to develop a control framework for the system.
- In this respect I want to mention three issues: First. Total catches would be based on scientific advise. Here you see the annual proposals from the Marine Reseach Institute by the green line. The blue line then shows what the Minister of Fisheries decided and the red line represents the actual landings each year. With time the difference between the advise, the decisions and the actual landings have become almost insignificant. This shows two things: Scientific advise was being taken seriously and the landing controls were working. One can even say that one of the greatest achivements in Icelandic fisheries management is the undisputed support for science based decisions of fishing quotas.
- Second. A set of agreed landing places was established, in all 50 ports around the island that send landings data directly to the Directorate of Fisheries. The openness of the data builds very powerful deterrents against misconduct. Or more correctly, it makes it very risky as the fines are heavy.
- Third. Various techical protection measures were put in place. This map shows the system of temporary and permanent closures of the Icelandic fishing grounds. Not shown here specifically, is the general ban of trawling gears within 12 miles from the shore. But before coming to the next Chapter on the outcomes of the system I want to underline that we have not solved all the problems – and probably never will. When the economic incentives are strong the actors will always try to “drill holes“ in the system and bypass the rules. So, it is a constant battle.
- The first evidence of the drive for better economy in fisheries was fewer fishing vessels and fewer processing plants as a result of mergers and aquisitions in the sector. This, coupled with more use of automation had the consequence shown here: Fewer people working in fishing and processing as evidenced by the share of the Icelandic workforce involved in fishing and fish processing going down from some 12 % to 5.3% today. However, new jobs were also created in the industrie´s support sector, such as in information technology and engineering.
- And fewer, more efficient vessels not having to race for the fish as before, simply meant less fuel use. Yet, the total value of exported marine products increased significantly as shown here with the red line.
- So, from 1981 to 2013 the cod catch went down by 50% but the total value more than doubled.
- Then to byproducts. More and more of the cod and other fish are being practically fully utilized. Some 50.000 tons of fish heads that used to be thrown away or processed to fishmeal are now dried and exported as human food. Today the utilization rate for Icelandic cod comes close to 95%.
- Now I would like to take some macroeconomic facts related to our fisheries sector before coming to the most difficult part of this story, i.e. the POLITICS.
- First, here comes what I like to call the main Health Certificate for the fisheries companies the so-called EBIDTA profiles ( which stands for Earnings Before Interest, Taxes, Depreciation and Amortization) . It shows how the EBITDA went from only 7% before 1984 and then rose to 15% and then to 22%. And this happened despite the fact, (shown in the blue graph at the bottom) that over this period the cod catch was generally going down.
- Then I come to the most tricky part of my presentation. The politics of the system. But then I am not a politician which is probably an advantage when trying to describe the scene to outsiders as I am trying to do here. First let me say this: In the beginning of the quota system the sector was in a poor state, actually in a very poor state both biologically and economically. Then the discussion was about what system could reverse that bad situation: Would the fish stocks recover? Would the companies survive or even make profits? Would jobs be maintained? As the quota system developed, many of the regions around the country clearly benefited and became stronger. But then many smaller communities lost their quotas leaving them with few options. And fingers were pointed at the system. This led the Parliament to apply some special measures of assistance such as distributing a small share of the total quota as “community quotas” to those worst affected as well as various other measures. Then as the system stabilized, the fish stocks recovered and the catch quotas fetched ever higher prices and profits started soaring the discussion changed: Why are WE excluded from the system? Why has MY community lost most of their traditional fishing rights? Cases were tested in the national Courts of Law and even sent to the UN Human Rights Committee to have their opinion on the legal and moral questions of establishing such a system. Despite all these debates Icelanders seem to agree on one thing regarding the fisheries management system: That the system works very effectively in restraining the fisheries to sustainable levels and thereby keeping the fish stocks in a healthy state, and that it is providing very good economic results. But the discussion is going on and I will now show you two slides that are part of this discussion.
- The law says that no single company can hold more than 12% share of the quota Icelandic quota. Yet, the fact is that quota holdings have concentrated into ever bigger companies that are “veritcally integrated” , i.e. they control the whole value chain for the fish: The catching, processing and marketing. The industry says that vertical integration is necessary to minimize cost and maximize the value. The critics say that these companies have become far too powerful in the land.
- This is the second slide, showing the direct public charges imposed on fisheries companies which amounts to around 10% of the export value (272 Ikr billion in 2013). The industry maintains that they are already paying their dues to society even to the point that many smaller companies are at a breaking point. The critics say that the sector is making so much money that they should be paying much more to the public coffers. What is the RIGHT, the BEARABLE or the FAIR amount in that debate is of course a delicate political question.
- The politcal process is now striving to resolve the main issues regarding the fisheries framework in Iceland. Bills have been presented to the Parliament over the last few years attempting to make the consiliatory proposal that would be palatable to most of the political parties. That has proven difficult and our Minister has just postponed a new bill he intended to present to Parliament. What it will involve is difficult to say, but three issues are on the table: The law will make clear that the fishing rights are the property of the State. Fishing quotas will be in the form of time-bound contracts between the State and individual companies. The State will collect a fee for leasing the contracts. Then Parliament will have to decide on timeframes for the contracts, the timeframe within which the State has to decide if it will renew contracts or revoke them. Moreover, the issue of special community quotas, that already make up 5.3% of the total quotas, will have to be agreed upon. But hopefully, the Icelandic Parliament we will in due course decide on these issues because for Iceland as it is of utmost importance that the debate is led to a sucessful conclusion. So, ladies and gentlemen, I am sure that I will have all the answers for you at the next “UserRights“ Conference!
- Thank you for your kind attention.